Seven Common Check Fraud Scams
Learn how to help protect yourself from scams involving check fraud, which claim thousands of victims each year.
The Better Business Bureau recently released a report1 highlighting common check fraud scams. It found that the largest group of victims of fake check fraud are in their twenties and that small businesses, lawyers, and banks suffer significant losses due to this type of scheme.
Seven common check fraud scams include: mystery shopper check scams, law firm collection scams, check overpayment scams, car wrap scams, nanny or caregiver scams, sweepstakes and lotteries, and small business fraud.
1. Mystery shopper check scams are the most common, according to the BBB. Victims are contacted and offered a job as mystery shoppers at stores. Fake checks are often enclosed in the mail. The “shopper” is instructed to deposit the check before their mystery shopping trip and to wire a portion of it at a store like WalMart, supposedly to test the wire process and customer service at the store. The “shopper” can keep the remainder of the check as their fee. Of course, the check later bounces, leaving the victim responsible for the whole amount.
2. In the case of law firm collection scams, lawyers are contacted by individuals from different countries, claiming they are owed money by a business in the United States. Similar to the mystery shopper scam, the firm is instructed to deposit a fake check they receive from this supposed U.S. business and to wire a portion of it to the company that is “owed” the money.
3. “In overpayment scams, fraudsters contact people who are selling cars, boats, and other items over Craigslist or other websites and offer to buy their item," the BBB explains in its report. "They claim that a third party owes them money, and this third party will send a check to pay for the item. The victim gets a legitimate-looking check that is for more than the sale price. The fraudsters ask that the victim send them the difference through Western Union or MoneyGram. There is no real buyer -- it is just a fraud to get the victim to wire money."1
4. In a "car wrap" scam, fraudsters approach victims through email or social networks to "wrap" their cars with ads for various products (often energy drinks or beer) for a certain amount like $200 a month. Victims receive a counterfeit check, which they are told to deposit, and then to send money through Western Union or MoneyGram to the company that will supposedly wrap their cars.
5. In the nanny/caregiver scam, fraudsters advertise “jobs” for nannies, babysitters, caregivers for the elderly or disabled, housekeepers or tutors on Craigslist, at Care.com or at other job web sites. Those who are “hired” are told that they need to buy a wheelchair or other equipment for job purposes. Victims receive and deposit a fake check, and then wire money to a supposed third party to get the equipment needed for the job.
6. In the sweepstakes/lottery scam, victims are told they will get their prize if they deposit a check and wire a certain amount to cover associated fees.2
7. Small business fraud tends to come from counterfeit checks used to pay for goods and services.
The BBB wants you to know two things about check fraud scams, and to tell your friends and business contacts. The first is that having funds credited to a bank account does not mean a cashed check is valid. The second is that cashier's checks and postal money orders can be forged.
"A cashier’s check is a check guaranteed by a bank, drawn on the bank's own funds and signed by a cashier," it says. "Cashier's checks are treated as guaranteed funds because the bank itself, rather than the individual account holder, is responsible for paying the amount of the check. Cashier’s checks are commonly required for real estate and brokerage transactions. If a person deposits a cashier’s check, the person’s bank must credit the account by at least $5,000 the next day. The same holds true for postal money orders."1
The Federal Trade Commission, along with the American Bankers Association, has a helpful infographic3 with tips on how to spot a check fraud scam and what to do if you believe you've fallen victim. Precautions include contacting your bank before acting, not taking checks for more than your selling price, using an escrow or online payment service if you do online business, never sending money back to someone who sent you a check, and reporting attempted scams to the FTC.
If you have deposited a fake check into your bank account, the BBB provides contact info for the FTC, the Internet Crime Complaint Center, the U.S. Postal Inspection Service, Western Union, Moneygram, Green Dot, and the Canadian Anti-Fraud Centre, so you can report accordingly.4
2. This related Two Cents article describes lottery schemes more fully.
3. https://www.aba.com/Tools/Infographics/Pages/fake-check-scams.aspx
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of Zions Bancorporation, N.A. Member FDIC