Types of Check Fraud & How to Prevent It

Even in our digital technology era, many still prefer to pay by check or bankers draft. One reason for this is that people do not trust computer technology and have misconceptions about online banking. This is understandable because of the fact most of these people may be computer illiterate and what is unknown to human mind causes fear or rejection.

In this case however, fear is totally obsolete, for statistics show online banking is safer than checks. To protect yourself from check fraud we will show you some guidelines of necessary precaution you should take before you receive or send a check. Then it is your responsibility to inspect and analyze the check.

Check Scams: A Cheater’s Delight

Checks are broadly used to simplify transactions, which attracts many users. That turns this method into an attractive target for scammers.

The con man gets in contact with you once you receive their check. After you transfer it to the personal bank account, they give you instructions on where to send the money, depending on the scam variation.

Example: If someone sends you $500, and asks for whatever reason, $100 in return, you’ll think you have profited $400. After a few days, the fake check bounces back and the con man gets your $100.

After you send them money, you’ll never hear from them again. You may report the case, but it will be hard to recover your money.

In essence, check fraud is a confidence trick that reminds one of similar schemes — such as the pigeon drop or the advance fee scam. The victim thinks they’ve received money, but it’s a fake document.

Exposing The Scheme: How Check Scams Work

These scams work because counterfeit checks generally look like real checks, even to bank employees themselves. They are often printed with the names and addresses of legitimate financial institutions. They may even be genuine checks written on bank accounts belonging to victims of identity theft.

It can take weeks for a bank to figure out that the check is a fake. When done well, check scams yield high rewards at relatively low risk for the perpetrator. All that is needed is:

A Fake Check

How do these checks work and how are scammers able to trick our bank? These are the types of fake cheques:

  • Counterfeit Checks: Existence of counterfeit checks is supported by new technology. Thieves use printers, copiers and newest software to make clone checks with high resemblance to the original. Many times these are hard to be recognized as false even by experts.
  • Forged Checks: Properly issued by the bank of the account holder, however the check is not signed by the real account owner as it was stolen. The signature is then forged and checks are used as pleased.
  • Altered Checks: A real check is somehow obtained or intercepted. The fraudster then manipulates this existing check by changing the name, amounts, and/or credentials.
  • Paperhanging Checks: Expired checks connected to bank accounts which are not used anymore or have been closed, but checks still exist for this particular account.
  • Fake Identity Checks: An identity is stolen or made up with false documents. If a fraudster has personal documents and information, he can request a bank account to be opened in anyone’s name. Bankers, unknowingly accept these requests and open new accounts, giving scammers the opportunity to send fake checks to individuals or businesses in your name.
  • Kitted Checks: Check kiting happens when a check is submitted for a bank account that has insufficient funds to cover this check. A certain amount of time passes between when an individual submits a check as payment and when that individual’s bank can debit their account. Check kiting relies on the fact that it takes banks a hours or even days to determine if a check is bad. Simpler check kiting scams happen with a check from one bank, however more elaborate schemes involve checks from multiple financial institutions.

When dealing with expert con men, any of the giveaway signs are hard to notice.

The Target

Millions of people use checks each day, which is good news for scammers. They want to be where the money flows to get the best reward.

Anyone that is able to cash-in a check is a potential target, be it a business or an individual.

The Hook

Because it’s a confidence trick, the scammer has to disguise the scheme to prevent suspicions. Mind that the con men may adapt their scheme to any context.

What context? They could disguise it as a freelance application, a lottery fee, an online service, or a product.

It’s not enough to send the victim a check. The excuse must be well laid out and reasonable so that the victim falls for it.

Examples Of Check Scams

Any activity involving checks as a payment method may lead to a scam. What follows are some examples of how con men could commit check fraud.

Fake Buyers

Businesses are the primary targets of check fraud professionals – especially by organized rings of criminals. Here is how this scam may unfold:

Check in Your Mailbox

You receive a check in your mailbox out of the blue, accompanied with a tempting offer. You have been choosen to advertise a well known brand and all you have to do is put up some stickers on your car and drive around. In case you are interested, you already have a check enclosed that you can cash in right away.

Money from the check may actually initially show up in the your bank account. This happens because banks sometimes “lend” the money as they await for a check or payment to clear in the system.

Using a variety of ploys, you are asked to send some of the money to their account, often by wire transfer or a gift card. In our case we might be asked to pay for the “starter kit” and advertising stickers that were included. The check eventually bounces, and we now have already paid the scammers for the “starting kit”.

Overpaid Check

Someone buys the product you sell using a check. But they pay more than the asking price, “accidentally” or invent different excuses the transfered amount is more than the required amount. They request money to rebalance. Their check will bounce nad you will be left without the amount you have “refunded”.

You might even be threatened with a bad review, because you don’t want to return them the overpaid money they have “accidentaly” written to your name.

Prize Fees

You “won the lottery”! They’ve sent you the receipt, and you need to pay your taxes and fees. It’s the law they say.

You pay your fees, and the check is canceled at some point in the later days. At least you felt like a lottery winner for a few days.

Fake Lenders

Watch out for too-good-to-be-true and fake lenders. Institutions have strict conditions, and many people don’t qualify for loans that they want to get. Scammers, however, are more flexible. The hook? “We will give you money, no matter your credit score or history!”

They set high entry fees or make you pay upfront. You sign the contract, and they send you the check. Pay them the fee and watch how they disappear.

Personal Assistant

Someone qualified you to be their virtual assistant. They will send you a check, including your salary plus the “working capital.” Your job is to send the money in certain directions.

Mystery shoppers are a variation of it. The fraudster gives you a check if you test some products and pay for them. Once your bank finds about the fake check, you realize what happened.

Other Variations

A con man can chain multiple schemes to get even more money from you. Once you get the check, the scammer may use any of these as well:

  • Phishing: They tell you to use the money to purchase through their store, which is a phishing website. Now, they can steal your identity and use your bank account.
  • Advance Fee: “You need to pay to unlock the funds, or the cheque will bounce back after X days.” When they ask for fees, they ensure the payment method you use has no buyer protection.

Recognizing Cheque Scam Attempts

It’s hard to recognize a fake cheque. But it is easier to recognize someone who is trying to defraud you. Following are some signs to help you recognize a fake check scam attempt.

Does the Data Make Sense?

There are many revisions you can do to stay safe. But we use checks so often than these measures can be time-consuming and burdensome. You don’t need to do extensive analysis with every check you receive, just with those senders that you don’t know.

Do a basic data revision and direct your questions about the received check to the issuing bank and try to find out if something is fishy.

Observe the Check Owner’s Behavior

If you are in contact with the one who gave you the check, then put your alertness up a notch. When you get the check, the scammer will give you further instructions. They may ask you if you have done what was required, if you have cashed in the check already or sent the funds further.

You will hear variations of these questions. If you are suspicious, lie by telling you already claimed the cheque. Do they start flooding you with messages?

Once you try to cash-in the check, the scammer usually has a few days before your bank reveals the scam. They will rush you with direct questions impatiently.

Call your Bank

Let the bank employees research and call you back once they find clues. Do not deposit or cash your cheque until they verify it. If it’s fraudulent, tear the document apart and make it unusable.

If you’re impatient, you may as well try to claim it, but don’t use any of the money. Wait a few weeks to see if it bounces back. The fraudster will either make you hurry or give up on you.

Do nothing, and you won’t lose any money other than the amount on the check which was fake anyway.

Unusual Payment Methods

A legit professional will be flexible with the payment. As a buyer, avoid methods with high transaction fees or no money-back guarantee. Gift cards, cash, moneygram, western union and unknown online payment methods or wire transfer are red flags as well.

You can use an escrow service to ensure payment protection as well. With an escrow service included, if a party doesn’t follow the terms, you get your funds back.

What’s The Reach Out Method?

Scams don’t happen too often, but when they do, the effects may be devastating for the victims. They don’t appear randomly: they come from a source.

Scams catch victims off guard with intrusive, unexpected events. It’s always them reaching out to you, never the other way around. They come up as an opportunity you may see as luck but know nothing about it.

Question anybody approaching you for no reason, especially for business.

Signs Of A Bad Check

Following signs may indicate a bad check. A sign alone does not guarantee that a cheque is counterfeit, but the greater the number of signs, the greater the probability that the cheque is bad.

  • Check lacks perforations, patterns or rough edges.
  • Additions to the check have been written by hand.
  • A forged cheque often has no logo or has a faded/false bank logo.
  • The customer’s or bank’s address is missing.
  • There’s no check number at the upper right-hand corner.
  • Along the bottoms of the check a number called Magnetic Ink Character Recognition (MICR) is printed. If it’s missing or appears shiny, you might be dealing with a counterfeit. Real magnetic ink is dull and non glossy in appearance.
  • The check number doesn’t match the check number in the MICR line.
  • The check lacks an authorized signature.
  • Forged cheques are often lighter than the paper used for real cheques, thus you can compare the weight.
  • Forged cheques can also feel more slippery then real cheques

What You Can Do To Prevent Check Fraud

Some steps you can take to help prevent your check being forged or information added after you wrote the cheque:

  • Leave no gaps in your words.
  • Draw a line after the name, amount and else where empty space was left.
  • Use full and correct names for all the information.
  • Prohibit the transfer of cheques.
  • Never pre-sign cheques.
  • Keep your cheques, deposit slips, bank statements and cancelled cheques in a safe and sealed place.
  • Don’t leave your chequebook in the glove box of your vehicle, a large percentage of stolen cheque books are taken from cars.
  • If you close an account, destroy any remaining cheques relevant to that account unless you need them for tax purposes.
  • Never disclose your account number or any other personal informaion to people you do not know, especially on the phone.
  • Do not send checks from your mailbox. It’s a privileged place from which a criminal can come into possession of your check. The post office is the best place from where you can send your checks to pay your bills.
  • When you get your check order from the bank, make sure that all checks are present and that none are missing. Report missing checks to your bank immediately.

If you are receiving a cheque you can minimize any risk associated with it with the following guidelines:

  • Ask the payer for an ID. Only take a drivers license, personal ID or passport, don’t take other ID confirmations as they are relatively easier to fake. Even then be cautions, these documents can also be forged.
  • If you are paid by a cashier’s check or bank draft, be accompanied with the payer to the bank attempt to cash it in when the payer is with you.
  • Compare the signature on the ID against the check signature.
  • Ask the person issuing the cheque to give you their home telephone number and maybe some sort of personal information, compare the number in your phone book and call the person at home.
  • Refuse checks written with a pencil or cheque with signs of being altered.
  • Be wary of accepting checks not signed in front of you or single checks not being torn out of the cheque book. Thiefs often steal just one or two checks to gain time before the owner of checks suspects them missing.
  • Don’t give change on checks (if the cheque is false and you already gave change, you were scammed).

People who are cashing checks end up losing funds when the banks realize the checks are false. That’s because people are held responsible for anything they deposit into their accounts.

The Bottom Line

Scammers will always invent new ways to approach victims to deceive them.

The next time you receive an unexpected check, investigate where it comes from. Know the sender, find answers to your questions, and ask your bank for help.

In a scam, the fraudster will try to put pressure on you so that you have less time to think about the situation. No matter how good the opportunity looks, reduce the risks first, take your time and inform yourself.

No tip will guarantee you full protection all of the time. But prevention will make scams more improbable and you can make payments and receive checks with confidence.

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concerned
concerned

My child paycheque has been lost and later when we reported to the Employer it was confirmed that the cheques has been cleqred. The employer showed us a copy of his bank statement where we found out that this cheque was cleared at ATM. The bank where the cheque was cashed even we reported the fraud said that they are not liable and refused to track the account where the cheque went to.
We would like to report a fraud and don’t know how and where do we report it.

Re
Re

I received a envelope with my full name,address,city and state on it. It was a check for 4,300 euros,and it was Dublin Italy…AIB was the name on it. The check had a piece of paper folded around it,UPS delivered it. My bank is confused,and so am I? Not sure if I should just open a account at walmart,and put it in there,leave it for a couple of months,see if there is any withdrawl,if so I know it’s a scam. I mean they can’t get nothing out except the check I put in there.Plus no checks,and no credit card,so they can’t… Read more »

fredrick
fredrick

hello, i receive a travelers cheque of 1500 dollars from a lady i met on craiglist and she ask me to follow d instruction on d check which i did write my name and sign on it as instructed and deposited it into my bank account and suppose money is for me to use and travel and meet her in carlifornia, she told me to call her when i cash d money which i did and she ask me to send her 1000 dollars via western union before i come to see her, pls i suspected fraud or stolen cheques,… Read more »

Yavor
Yavor

Hello i have a problem with cheque too.
I received cheque for 1.500 pounds from Unknown sender on the check is my name and my addres and that is all nothing more ?
And i try to clearence the cheque but after 20 days bank told me must to find the sender but i dont know who is 😀 so its very stupid joke for me!!
And now i will report the cheque to police beacouse really i dont expect money from no body.

CECE
CECE

I cashed my benifits cheque and put my boyfriends number which isn’t in the same city & the teller asked if I lived in the city of the number, I told her “no, it’s my cell”. Can I get into serious trouble for this (if she called the number she would certainly reach me!)? I hope not! I don’t have my own phone number 🙁

arriele26
arriele26

I was a victim of check fraud, I met a man thought he was the one he talked good, said all the right things, was nice to my kids, took us places. He asked could he deposit some checks into my account because he left his bank card at his home in Reno, NV, I did not think anything of it, I let him put the checks in there, four checks later and $3000 he is gone, and all the checks came back acc. does not exist. now I’m on checks systems and can not get a back acc.What do… Read more »

Renee
Renee

The same thing just happened to me! I just got a check from UPS, with no instruction, letter, or anything. Just a check.
The sender information gave ma an address in Ottawa, but when I tried to call the phone number, it was disconnected, and it was a New York number.
They had my name, and my address, and the thing that ets to me- my CELL number, not my home, my cell (which I don’t give out to ANYONE)
I want to know where these people got my information, and where it came from!

mary
mary

I had a same problem as the people above. Could you please tell me what to do in this situation, i already reported to the police, now I found myself with no money…

Shelly
Shelly

Oh my god, just seen the comment above. My partner is currently being questioned by police after he put a cheque in the bank for £2000 from an unknown sender. it came in the post with his name and address on the envolope. Turned out its fraudulent but we had no idea, guess we shouldn’t have cashed it but didn’t think there was anything illegal about cashing a cheque. silly i know but we thought it was worth a try even though we didn’t know who it was from. let me know when you see this post mark, would be… Read more »

mark
mark

my wife received a cheque in the post for £2.500 from a unknown person to us, they knew her full name and full address. why would this be sent?

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