According to the National Consumer’s League, fake check scams are the most pervasive fraud in America, hitting virtually every demographic group with some variation of the same clever con.
The basic way it works is this: You get a check for a relatively large amount of money and are asked to refund or pass on a portion of the amount to the sender or a third party. By the time you find out that the check is fake, your money is long gone.
The scam works partly because of common misunderstandings about how banks clear checks. Financial institutions are required by federal law to give you credit for checks deposited in your account within a set number of days. The precise timing depends on whether the check issuer is local, national or international. Most consumers assume that when the bank (or credit union) makes the funds available, it has determined that the check is good. But that’s not the case. It can take weeks to discover a good forgery.
Here are the five most common ways that they do it, and the tip-offs that help you know it’s a scam:
Mystery Shopper – You’re looking for a job and answer an advertisement for mystery shoppers. The company sends you a check supposedly to cover the items you’ll be buying and to “test” Western Union’s services. You get to deduct your pay from the check and send the rest to a third party.
Sweepstakes – You have won an international lottery! Congratulations! Here’s a $20,000 check for just a portion of your winnings. To claim the additional hundreds of thousands of Euros or dollars that you’ve won, all you have to do is send a personal check for the taxes due on your winnings.
Account Manager – You’ve been hired as the account manager at a major international distributor. You can work at home. Your only responsibility is to handle remittances. You get checks, deposit them into your own account and pass them on, subtracting your fee. Your fee is substantial.
Overpayment – You are selling your car/puppy/chest-of-drawers and have placed an advertisement on the internet. You get contacted from somebody who just loves English Bull Terriers (or whatever you’re selling) and is desperate to pay full price. Just one problem. The buyer is from overseas; hasn’t yet opened a U.S. bank account; and can only pay with a third-party check — maybe even a paycheck. If you take that check and deposit it, you can pay yourself and just give them cash for the overpayment, right?
Grant – You get an official looking letter saying that you have won a $100,000 grant from the government or some foundation. But to claim the grant money, you need to send a “processing fee.”
The problem is that the original check you cashed at your financial institution is fake, and the amount credited to your account will eventually be reversed. See the whole article.