Protecting Customers from Fake Cashier's Checks


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Protecting Customers from
Fake Cashier's Checks
by Mary Beth Guard

Customers are falling victim to an insidious cashier's check scam that preys on individuals selling big ticket items via classified ads or the Internet. Now, customers are questioning whether financial institutions are going far enough to protect them. Some victims have banded together to fight this crime and have launched informational Web sites.

BankersOnline received an email from one of the victims' groups. We share it with you below.

One of the thoughts that occurred to us was that customers may be unwittingly misled about whether the check is good or not by confusing that with when the funds are available. Make sure your frontline employees understand the difference. And if you want a quick lesson in how this type of misunderstanding can occur, revisit the true tale of Patrick Combs and the $95,093.35 junk mail check.

Are you on top of the latest news on counterfeit instruments? You should be! And the BOL Alerts & Counterfeits page makes it easy. It works! Here's a success story we received on 1/31/03:

I wanted to let you know of a success story with respect to a Counterfeit Cashier's check. A customer wanted to deposit a Cashier's Check for $17,000 and wanted immediate cash-back. The teller checked the BOL Alert/Counterfeit list and saw the name of the bank on the item was listed. Her supervisor contacted the bank and found that the item was indeed a forgery! (Upon being told the item was a forgery, the customer told the supervisor that he had been sent the Cashier's Check from someone in Nigeria!) Way to go BOL!!!

Text of email message from Shawn and Jeff Mosch,
Scam Victims United
I am sure that you have heard stories of the Nigerian 419 scams or advance fees fraud, but have you heard about the Nigerian Counterfeit Cashier's Check Scam? How are they different . . . in the 419 scams the person that becomes the victim to the scam willingly enters into an agreement with a person that is claiming have a large amount of money that they are willing to share with them for a little "help." In the counterfeit cashier's check scam the victims are average people selling items on the internet on auction websites. They are not entering into an agreement to make large profit, just to sell merchandise that they no longer want or need.

It starts when people from overseas posing as potential buyers of large items for sale on the internet, such as cars, ask the seller of the item if they can have an associate of theirs in the United States mail them a cashier's check for the amount of the item plus transportation overseas in order to expedite the process. They ask that once the check has cleared the bank, the seller withdraw the amount that is for transportation, and wire it to the buyer so he can schedule the shipment of the item.

When these cashier's checks are deposited into the accounts of the sellers and they ask their banks to verify for them when the check will be clear and good, so that they can safely remove the funds needed, they are not given accurate information by the banks. Some are told that the check will be good in 24 hours, and some are told that the check is guaranteed good, so they should have no worries about the using the funds. Feeling safely assured the bank customer goes through with the transaction. Then, days later, when the checks are found to be counterfeit the banks are holding their customer responsible for the entire amount of the check, even though the bank had already assured them that the funds were good.

My husband and I are victims of this scam, and we started a message group and website at http://www.geocities.com/scamvictimsunited/ to help spread the word to others. In just a few months the membership of the group has grown very quickly. The biggest problem is that the victims of this scam have no where to turn to. There is no agency or department that will take our information and investigate the scam. The FBI has told us our situation is too small for them to look into and the Secret Service just puts our info "on file" but no one is trying to track these people down. The people running these scams need to be brought to justice! Let's just think for a minute . . . where do you think all that money is going to and what is it buying?

I do feel that our fight has had a few victories. I have been contacted by people who have found our site in time to realize that the deal that they were entering into was a scam, and it saved them thousands of dollars. We have also worked with Western Union and I know that they have started blocking the names and addresses of know scammers so that if another person tries to wire that same person money the transaction will not go through. But these are just baby steps.

There needs to be laws that hold the banks responsible for releasing the funds from these checks before they verify that the check is good, and then telling the customer that the check is good only to find out days later that it is not. If they know it takes 10 days for the check to clear they should have to tell the customer that, and if they do not they are the ones that should be out the money. Also, banks are issued warnings from the FDIC when cashier's checks are stolen from other banks, yet they do nothing to increase the security measures that they take when handling a cashier's check.

Below is a list of recommendations that we presented to our Senator's office to help protect others from this scam.

Counterfeit Cashier's Check Scam - Ideas for Consumer Protection
We are asking our government to take measures to protect banking customers from this type of unfair and deceptive business practice. The banking system is failing to verify these checks and allowing counterfeit cashier's checks to pass into the system which impedes the national interest of the United States because it finances crime, undermines the integrity of the international financial system, impedes the international fight against corruption and drug trafficking, terrorism and distorts economics. United States banks are frequently used by other countries to receive large funds from unsuspecting Americans because the banks often fail to screen, monitor and check the transactions for their customers.

Our recommendations for improved customer protection from counterfeit cashier's checks include:

Requiring banks to give full disclosure of the true time period for check clearance to the customer
Multiple security watermarks on all cashier's checks to make them more difficult to counterfeit
Require that funds cannot be released until verified as good by the bank, unless the customer signs a release
Hold financial institutions liable for any monetary loss due to the customers reliance on false, inaccurate or misleading statements by bank and their employees
Mandatory holding periods on all checks of a substantial amount, unless the customer signs a release
Setting a time period, such as 30 days, in which by law all banks must verify the funds are good on all cashier's checks. Any issues with the check after this time period are the responsibility of the bank.
Creating an agency or department of the government that will investigate counterfeit cashier's check scams and oversee that the banks are following the laws that may be created in relation to cashier's checks

These items will help to ensure good business practices, customer financial safety, and reduce the use of counterfeit checks as a means of fraud. If financial institutions understand that they will be help totally liable for any monetary losses due to false or misleading statements or neglect to follow the above described check clearing and verification process the financial institutions will take measures to protect themselves from this type of loss, thus protecting the customer, the financial system, and reducing the criminal activity of producing counterfeit cashier's checks. Our financial institutions are our last defense against this type of fraud, so it is important that these customer protection laws be created to ensure that they are working with and for their customers in order to reduce such activity.

Please, help us get our message about this scam and the lack of protection that the current banking laws provide for the people who become the victims of this crime. The public needs to know that cashier's checks are not any safer than personal checks.

First published on BankersOnline.com 02/03/03

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