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Give the "bounce" to counterfeit check schemes

Updated December 23, 2009

According to the Federal Trade Commission (the nationís consumer protection agency) counterfeit check scams are on the rise. The following information will help you protect yourself from becoming a victim of a counterfeit check scam.

Some scams involve sending you a letter informing you that you have won a foreign lottery. The letter will often include a cashierís check to cover the taxes and fees. To receive your winnings, the letter asks you to deposit the check and wire the money to the sender to pay the taxes and fees. The letter states that you are guaranteed to receive the prize when the company receives your payment.

Thereís just one catch: this is a scam. The check is counterfeit, even though it appears to be a legitimate cashierís check. If you were to deposit the check and wire the money, your bank would soon learn that the check was a fake. The money you wired canít be retrieved, and you are then responsible for the checks you deposit, even if you are unaware that they are fraudulent. Some fake checks can even fool bank tellers, as the scammers use high-quality printers and scanners to make the checks look real. Some fake checks contain authentic-looking watermarks and are printed with the names and addresses of legitimate financial institutions. Although the bank account and routing numbers listed on a counterfeit check may be real, the check may still be a fake. Fake checks come in many forms, from cashierís checks and money orders to corporate and personal checks. Other fraudulent check schemes include check overpayment scams, Internet auction scams, and secret shopper scams.

Check overpayment scams target consumers selling cars or other valuable items through classified ads or on-line auction sites. Unsuspecting sellers get stuck when scammers pass off fake cashierís checks, corporate checks or personal checks. One such scenario may involve a scam artist who replies to a classified ad or auction posting, offers to pay for the item with a check, and then comes up with a reason for writing the check for more than the purchase price. The scammer will ask the seller to wire back the difference after depositing the check. If the seller complies, the scammerís check will bounce, and the seller is left liable for the entire amount.

In secret shopper scams, the consumer, hired to be a secret shopper, is asked to evaluate the effectiveness of a money transfer service. The consumer is given a check, told to deposit it in his bank account, and withdraw the amount in cash. Then, the consumer is told to take the cash to the money transfer service specified and send the transfer to a person in a Canadian city. Then, the consumer is supposed to evaluate his experience. However, no one collects the evaluation. The secret shopper scenario is just a scam to get the consumerís money.

Con artists who use these schemes can easily avoid detection. When funds are sent through wire transfer services, the recipients can pick up the money at a variety of locations, and it is nearly impossible for the sender to identify or locate the recipient.

Under federal law, banks must make funds available to you from U.S. Treasury checks, official bank checks (cashierís checks, certified checks, and tellerís checks), and checks paid by government agencies at the opening of business the day after you deposit the check. For other checks, banks must make the first $100 available the day after you deposit the check. Remaining funds must be made available on the second day after the deposit if payable by a local bank, and within five days if drawn on distant banks.

However, just because funds are available on a deposited check doesnít mean the check is good. It is best not to rely on money from any type of check (cashier, business or personal check, or money order) unless you know and trust the person youíre dealing with or until the bank confirms that the check has cleared. Forgeries can take weeks to be discovered and untangled. Until the bank confirms that the funds from the check are valid, you are responsible for any funds you withdraw against that check.

The following tips will help you avoid a counterfeit check scam:

  • Throw away any offer that asks you to pay for a prize or a gift. If itís truly free or a real gift, you shouldnít have to pay for it.
  • Resist the urge to enter foreign lotteries. It is illegal to play a foreign lottery through the mail or the telephone, and most foreign lottery solicitations are phony.
  • Never wire money to strangers.
  • If you are selling something, donít accept a check for more than the selling price, no matter how tempting the offer or how convincing the story. Ask the buyer to re-write the check for the correct amount. If the buyer refuses to send the correct amount, return the check and do not send the merchandise.
  • As a seller, you can suggest an alternative way for the buyer to pay, such as an escrow service or on-line payment service. If the buyer insists on using a particular escrow or on-line service youíve never heard of, research the service. To learn more about escrow services and on-line payment systems, visit ftc.gov/onlineshopping.
  • If you accept payment by check, ask for a check drawn on a local bank, or a bank with a local branch. Then, make a personal visit to make sure the check is valid. If you cannot visit the bank, call the bank where the check was purchased and ask if it is valid. Get the bankís phone number from directory assistance or an Internet site that you know and trust, not from the check or the person who gave you the check.
  • If the buyer insists that you wire back funds, end the transaction immediately. Legitimate buyers donít pressure you to send money through wire transfer services. In addition, you have little recourse if thereís a problem with a wire transaction.

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