Counterfeit Cashier's Checks
Your depositor comes in with a $6,000 Cashier's check drawn on an out-of-state bank. The check is payable to him. He's just sold a bedroom set from an ad he ran in the newspaper, and the man wants to pick up the set in three days. The buyer only paid $3,000 for the bedroom furniture from your customer, but explained that a man owed him $6,000, so he had his debtor make out the check to your customer, as he doesn't have a bank account. Your customer will keep the $3,000 owed to him, and give the extra $3,000 in cash to the guy buying the bedroom furniture. Naturally, your customer wants to know how soon he can get the $3,000 cash out of his account so he get rid of the furniture and the overpayment.
Another good customer comes in who often sells jewelry on eBay. He also has a cashier's check payable to him for $4,500 for a diamond ring he sold for $2,500. He's supposed to send the ring along with a cashier's check from your bank, payable to his buyer, for the difference. He's going to need a $2,000 cashier's check tomorrow so he can finish the deal.
You explain that Cashier's checks are official checks and they are next-day-available at your financial institution. Your depositors are happy - and tell you they'll be back tomorrow. But after you take the deposits, just to be sure, you call the banks the checks are drawn on. Each financial institution you call will ask you who signed the check, and when advised of the name, they will more than likely inform you that it is an authorized signature. They may even tell you that "... of course the check is good - it's an official check on our bank."
The next day your depositors come in and one gets $3,000 cash, which he delivers to the buyer the next day when he picks up the furniture. The other gets his check for $2,000, payable to some dude far away, puts it and the ring in a package and heads off for the post office.
The Bad News
Now fast forward about four or five days when your return items people call you to tell you that both checks are on the way back - they're both counterfeits. Your depositors will be informed that their accounts will be debited for the returned items, which may mean they are both now overdrawn - and the bedroom furniture and the ring are both also gone.
The Really Bad News
Who will these customers blame? In more and more cases, the blame will be laid on the depository bank - you and your bank! It's unreasonable, to be sure. But this is the trend that is developing. You were the one that told them the checks were good. While cashier's checks are commonly considered by consumers to be the equivalent of cash, financial institutions and others who are aware of the scope of the problem are becoming much more cautious about when they make funds available. Whether the check is used to purchase something on the Internet, or delivered, or simply deposited into a fraudulent account, the counterfeit cashier's or official bank check problem has exploded. An Internet search engine, when asked for references for "Counterfeit Official Checks" comes up with over 31,000 hits.
Protecting the Depositor
The obvious cautions are being passed along to people who accept these checks. They are advised to be suspicious
- of offers from outside the United States (many are coming from Nigeria)
- if paid by Cashier's check
- if buyer sends more than the purchase price of the item
Protecting the Financial Institution
Initiating the scam is easy. We have many financial institutions that will sell cashier's checks to non-customers. Someone will purchase a small dollar check, take it home, scan it, change it, and print it on safety paper that can be purchased at any office supply store. The signature, of course, will look perfectly genuine. Experts suggest you examine the check closely for erasures, or alterations. Look for perforations - even bank checks are usually perforated on one side. Counterfeits are not. Look for typos and misspellings. Believe it or not, they are common!
Contact the financial institution on which the check is drawn for authentication. Don't use the name, location or phone numbers on the face of the check. They may be as phony as the check, and will connect you to the scam artists. When you have looked up the phone number of the financial institution and called them, make sure there are no outstanding claims for the check being lost, stolen or destroyed. If possible, ask to speak to the person who signed the check. In many cases the financial institution can provide information on the person purchasing the check, which will help in determining whether or not the check is good.
Check the list on BankersOnline to see if the financial institution the check is drawn on is listed there as being a victim of counterfeit official checks. Telephone numbers of contacts are also on there for quick verification.
Regulation CC generally requires the first $5,000 of a cashiers check deposited be available the day after deposit. The rest of the funds in the check must be available within 7 or 11 days, depending on whether the check is local or non-local. But these 7 and 11 day periods can be longer if the financial institution can show why a longer hold is reasonable.
Educate your customers - and your tellers
Include information about this problem in your training sessions and your branch meetings. Write pamphlets, put up signs, talk to your local newspaper and ask them to run an article. Get the word out that there are con artists that are making a very good living out of this particular fraud. Include in your information that even though the financial institutions are not liable for these losses, we are willing to assist in recovery and prevent the scam in any way possible - that we're doing all in our power to combat this crime. The best place to stop this fraud, however, is a really savvy front line. They can discover this scam more easily than anyone else... if they know about it.
Copyright © 2004 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 13, No. 12, 2/04
First published on 02/01/2004