As online shopping continues to grow, consumers are relying more than ever on issuing payment for those transactions remotely. Despite the appeal and convenience, especially during a global pandemic, many transactions continue to be paid for with traditional checks, including cashier checks. The appeal of checks is due to the sense of security that the financial institution has cleared the funds for disbursement. However, with advanced technology in digital copying and document manipulation, checks are particularly prone to counterfeits and scams. The U.S. Federal Trade Commission (“FTC”) Consumer Sentinel Network database alone reported more than 27,000 counterfeit check scams with losses topping $28 million dollars in 2019. The FTC also provides that the median loss reported on a counterfeit check scam is about $1,988.
Counterfeit check scams are prevalent in a tough economy. The global pandemic has resulted in job losses, business closures, and financial uncertainty. Individuals struggling with financial hardship are particularly vulnerable to these schemes as they fall victim to get rich quick schemes. The sense of security checks provide is misleading as it may take weeks for a counterfeit check to be discovered, yet the funds are almost always immediately available. A “cleared” check does not equal a good check.
How to Spot Counterfeit Checks:
- Bank Logo and Address – A counterfeit check likely will not include a logo. If a logo is present, it will likely appear faded or pixilated due to the resizing and manipulation. A counterfeit check will often be missing an address; provide only a PO Box number or provide an incorrect zip code.
- Check Number – A counterfeit check likely will not include a check number on the top of the check or often times does not have the same check number listed on the Magnetic Ink Character Recognition (MICR) (bottom line).
- Routing Number – A routing number is nine digits and located on the MICR. A counterfeit check might not include a routing number or may include one with fewer, or more, than nine digits.
- Security Features – A check with a padlock icon or words like “Security Features” must include security descriptions on the back in small font. Typical security features include watermarks, patterns in the background, microprint lines, etc. If the check does not contain all of the security features listed on the description, the check is likely a counterfeit.
Common counterfeit schemes include: (1) mystery shopping – receiving a check and being told to buy gift cards and to send the gift card to the scammer; (2) sweepstakes – receiving a check and a requirement to send money to cover taxes, shipping and handling charges or processing fees; (3) overpayment – the scammer sends you a check for an amount more than charged and requests a refund of the balance. Regardless of the scheme the process is almost always the same: the scammer sends you a check and requests money be returned in some other way. Of course, the check the scammer sends is, ultimately, dishonored and charged back to the victim’s account.
If you have been denied payment because of a counterfeit check, or if your business has been victimized or if a bank has reversed a transaction because you unknowingly deposited a counterfeit check, contact us to determine if you have recourse against the bank or are eligible for recovery under your insurance policy. Contact Jose Espejo or Ron Lyons today.