Check Fraud

Check Fraud: Scams to Watch Out For

Recently, many consumers have become victims of scams involving fraudulent checks. Lately, checks have become an attractive vehicle for fraud when used for payments to consumers. Although the amount of a check quickly becomes “available” for withdrawal by the member after being deposited, these funds do not belong to the member if the check proves to be fraudulent. In the meantime, the member may have irrevocably wired the funds to a scam artist or otherwise used the funds – only to find out later, when the fraud is detected – that the member owes the full amount of the check that had been deposited.

Scams to Watch Out For:

Selling Goods Online

Exercise caution when selling goods online. If a buyer sends you a check for the price that you have agreed on, make sure that the check is not fraudulent before you ship the goods to the buyer. Otherwise, you could end up without your goods or payment.

Checks for Excess Funds

This scenario is similar to the one described above. However, the buyer sends you a check for more than the purchase price and asks you to wire some or all of the excess funds to a third party, often in a foreign country. The buyer may explain that this procedure allows them to satisfy their obligations to you and the third party with a single check. When the check turns out to be fraudulent, you are now out the money that you thought was "excess."

Unexpected Checks

You receive a letter informing you that you have the right to receive a substantial sum of money. For example, the letter may state that you have won a foreign lottery or are the beneficiary of someone’s estate. The letter will state that you have to pay a processing/transfer tax or fee before you receive the money, but a check will be enclosed to cover that fee. The letter will ask you to deposit the check into your account and wire the fee to a third party, often in a foreign country. When the check turns out to be fraudulent, you are now out that money.

Mystery Shopping

You receive a letter informing you that you have been chosen to act as a mystery shopper. The letter includes a check, and you are told to deposit the check into your account. You are told to use a portion of the funds to purchase gift cards at designated stores and then report back the gift card information. When the check turns out to be fraudulent and the scammers have already emptied the gift cards, you are then out that money.

Check Washing

Check Washing is a common form of fraud where fraudsters use chemicals to erase the ink on a check, allowing them to alter the amount or payee name before cashing it. One simple way to help protect yourself from Check Washing is to use gel pens when writing checks. Gel ink will absorb into the fibers of the check, making it much harder to wash away compared to ballpoint pen ink.

Reminder When Depositing Checks:

• When you sign the back of a check and deposit it, you become responsible for that check. The risk of the check bouncing or being bad is on you.  Federal law (Regulation CC) requires that all financial institutions make at least part of the amount you deposited available within a few days. However, you can run into trouble if you spend the money before the check is fully cleared. If you spend the funds from a bad check, you are responsible for paying the money back to the financial institution.
• In addition to being responsible for the dollar amount of the check, you may also be subject to processing fees assessed by your financial institution for checks which have been returned for NSF (Non-Sufficient Funds).
• Check holds are a temporary delay in making the funds in your checking account available after you deposit a check. Check holds can be placed for various reasons including checks for over $5,000, new account checks, redeposited checks, and suspicion of fraudulent checks.
• Always exhibit caution when dealing with checks, and stop in or call the Augusta Branch at (207) 623-3857 or the Winslow Branch at (207) 872-2636 if you have any questions or concerns.

Disclaimer: Any reference made in this blog to a specific product, process, or service does not constitute or imply an endorsement by Connected Credit Union of the product, process, or service, or its producer or provider.