At First National Bank, we want to ensure that your confidential information is always kept private. To help you properly protect yourself, we provide information to keep you informed of the latest schemes and scams.
Many consumers have become victims of scams involving a fraudulent cashier's check. A cashier's check is a check that is issued by a bank, and sold to its customer or another purchaser, that is a direct obligation of the bank. Cashier's checks are viewed as relatively risk-free instruments and, therefore, are often used as a trusted form of payment to consumers for goods and services.
However, cashier's checks lately have become an attractive vehicle for fraud when used for payments to consumers. Although the amount of a cashier's check quickly becomes "available" for withdrawal by the consumer after the consumer deposits the checks, these funds do not belong to the consumer if the check proves to be fraudulent. It may take weeks to discover that a cashier's check is fraudulent. In the meantime, the consumer may have irrevocably wired the funds to a scam artist or otherwise used the funds—only to find out later, when the fraud is detected, that the consumer owes the bank the full amount of the cashier's check that had been deposited.
There are steps you can take to help prevent becoming a victim. Although this advisory focuses on cashier's checks, you may find the information useful if you transact business using other official instruments, such as money orders and official checks.
Each scam involving a fraudulent cashier's check may be different, but some of the more common scenarios are:
Selling goods—You sell goods in the marketplace, for example, over the internet. A buyer sends you a cashier's check for the price that you have agreed on, and you ship the goods to the buyer. The cashier's check turns out to be fraudulent.
Excess of purchase price—This scenario is similar to the one described above. However, the buyer sends you a cashier's check for more than the purchase price and asks you to wire some or all of the excess to a third party, often in a foreign country. The buyer may explain that this procedure allows the buyer to satisfy its obligations to you and the third party with a single check. The cashier's check turns out to be fraudulent.
Unexpected windfall—You receive a letter informing you that you have the right to receive a substantial sum of money. For example, the letter may state that you have won a foreign lottery or are the beneficiary of someone's estate. The letter will state that you have to pay a processing/transfer tax or fee before you receive the money, but a cashier's check is enclosed to cover that fee. The letter will ask you to deposit the cashier's check into your account and wire the fee to a third party, often in a foreign country. The cashier's check turns out to be fraudulent.
Mystery shopping—You receive a letter informing you that you have been chosen to act as a mystery shopper. The letter includes a cashier's check and you are told to deposit the check into your account. You are told to use a portion of the funds to purchase merchandise at designated stores, transfer a portion of the funds to a third party using a designated wire service company, and keep the remainder. The cashier's check turns out to be fraudulent.
Scams also may involve other types of checks. For example, the fraudulent check may appear to be written on the account of a real person or company or be written on an account that contains insufficient funds to cover the check. Other scams involve fraudulent postal service money orders of fraudulent money orders that appear to have been issued by a bank.
The result of these scams is that the fraudulent check will be returned unpaid and unfortunately you will be responsible for the check. The money will be deducted for the amount of the check from your account. You will lose either the goods that you sold, the money that you sent to the third party, or both!
A cashier's check is a check issued by a bank and payable to a specific person. Because a cashier's check is issued by a bank itself, the cashier's check is paid by funds of the bank and not the depositor. Therefore, if an item is genuine, there is very little risk that the instrument will be returned.
Sometimes, however, a cashier's check is not genuine, and if you unknowingly accept a fraudulent cashier's check in exchange for goods or services, you will likely be the one who suffers the financial loss.
It can be very difficult for either you or us to tell. When you deposit a check into your account, we are generally required by law to make the funds available within a specific period of time (usually, one business day for a cashier's check or other official instrument). This is true even if the check has not yet cleared through the banking system. Therefore, even if the funds have been made available in your account, you cannot be certain that the check has cleared or is "good."
We also may not be able to determine that the check is fraudulent when you deposit it. Rather, we may learn of the problem only when the check is returned unpaid by the other bank—which may take a couple of weeks or more. Scammers try to make the item look genuine, which will delay discovery of the fraud. Once the item has been returned unpaid, we generally will reverse the deposit to your account and collect the amount of the deposit from you.
If you find yourself in this situation you ordinarily would have a remedy against the person who wrote the check. However, you will have great difficulty pursuing any remedy against these scammers, especially if they reside in a foreign country or have disguised their identities.
What steps should you take to protect yourself from becoming a victim of fraudulent cashier's check scams? Keep the following in mind:
Try to know the people with whom you do business. When possible, verify information about the buyer from an independent third party such as a telephone directory. Be cautious about accepting checks—even a cashier's check—from people that you do not know, especially since it may be difficult to pursue a remedy if the transaction goes wrong.
When you use the internet to sell goods and services, consider other options such as escrow services or online payment systems rather than payment by a cashier's check.
If you do accept a cashier's check for payment, never accept a check for more than the selling price if you are expected to pay the excess to someone else. Ask yourself why the buyer would be willing to trust you, who may be a perfect stranger, with funds that properly belong to a third party.
A cashier's check is less risky than other types of checks only if the item is genuine. If you can, ask for a cashier's check drawn on a bank with a branch in your area.
If you want to find out whether a check is genuine, call or visit the bank on which the check is written. That bank will be in a better position to tell you whether the check is one they issued and is genuine.
Know the difference between funds being available for withdrawal from your account and a check having finally cleared. We may be required by law to make funds available to you even if the check has not yet cleared. However, it could take several weeks to know if the check will clear or not.
Be wary of taking action before you can be sure that the payment you received is good.
Be suspicious if someone insists that you send funds by wire transfer or otherwise pressures you to act quickly before you know the payment you received is good.
If you receive a letter offering you a large sum of money for little effort other than sending a "processing" fee, remember, if something sounds too good to be true, it probably is.
Reject any offer that asks you to pay for a "prize" or "gift."
Save your documents—you may need this paperwork if something goes wrong.
To determine if you have been victimized by a fraudulent check scam, please follow these guidelines:
1. Don't give your account number and bank routing information to anyone you don't know. Give out your account information for transactions only if you are familiar with the company you are dealing with. And if you have not done business with a company before, give out account information only if you have initiated the transaction. Criminals may ask you for your bank account number and then withdraw money from your account by creating a demand draft (sometimes called a "remotely created check") or making an electronic transfer. They may also ask for your credit card number and other personal information. Don't fall for these scams and don't let yourself be pressured into "free trial offers." To be removed from telemarketing lists, sign up for the National Do Not Call Registry online or by calling, toll-free, 1-888-382-1222.
2. Review your monthly statement. Make sure all the checks, debits, automatic payments, and other withdrawals are ones you authorized. If you see a transaction you did not authorize, notify your bank immediately. If your bank has online banking, you don't have to wait until your bank statement comes—you can check your transactions at any time.
3. Notify your bank about any problems as soon as possible. The sooner you alert your bank to a problem, the sooner they can get it resolved. In some cases, your bank may require you to notify them in writing. Keep copies of any documents you give the bank until the problem is resolved. If you think the problem is a result of fraud, you should also contact your state attorney general.
4. Avoid Overdrafts. Checks are being processed more quickly these days, which means the money may be debited from your account sooner. Also, many stores and utility, insurance, and credit card companies will convert your check to an electronic payment, which also means the money will be debited from your account sooner. If you don't have enough money in your account when you write a check or authorize a debit, you could find yourself paying an overdraft fee.
5. Electronic Transactions. If you believe electronic transactions posted to your checking account are fraudulent transactions call your bank immediately. If your debit card, PIN or any access device has been lost or stolen, call your bank immediately. If you have electronic disputes such as the amount of the transaction is incorrect, the transactions posted twice, you cancelled the payment, the merchandise has been returned or similar type transactions, contact the merchant. You must first make all efforts to resolve the dispute with the merchant. If you find you cannot resolve the dispute with the merchant, contact your bank for further assistance.