CASHIER CHECK FRAUD

Cashier鈥檚 checks have a reputation for being safe, and that鈥檚 what makes them perfect for scams. Whether you鈥檙e selling something online or in-person, cashier鈥檚 checks deserve extra attention. Get familiar with the most common red flags, and you鈥檒l significantly improve your chances of avoiding fraud.

Safety and Cashier鈥檚 Check Fraud

Why are cashier鈥檚 checks considered 鈥渟afe鈥? When they鈥檙e legitimate, they offer guaranteed funds: Recipients don鈥檛 have to worry about a personal check bouncing, and money from the check is usually available for spending within one business day (at least the first $5,000 should be available).

Unfortunately, cashier鈥檚 checks are much less safe than they used to be. If you don鈥檛 know and trust your buyer, you simply cannot assume that a cashier鈥檚 check is just as good as cash.

A Typical Cashier鈥檚 Check Scam

The most common cashier鈥檚 check scam goes something like this: A “buyer” wants to purchase a product and will use a cashier鈥檚 check. For whatever reason, the buyer has a check issued for an amount in excess of the purchase price. Still, the buyer wants the seller to “just go ahead” and deposit the check. Finally, the buyer requests that the seller return the excess money, typically in cash, by wire transfer, or via Western Union. The return payment might go directly back to the buyer or to a third party.

Note the key elements:

The buyer uses a cashier鈥檚 check or money order. They explain that this is their only option for payment.
The seller or recipient gets a check for more than they asked for.
The seller is supposed to send the extra money back to the buyer or to a 鈥渉elper.鈥
If you鈥檙e faced with a situation that looks anything like this, you鈥檙e almost certainly dealing with a thief.

Timing is essential: Don鈥檛 send any money or merchandise until you are 100 percent certain that the paying bank has actually sent the funds. This is often referred to as the time when the check 鈥渃lears,鈥 but that term can be confusing鈥攅ven for bank employees.

Funds from a cashier鈥檚 check will be available to you for withdrawal within one business day, but that doesn鈥檛 mean that the funds actually exist or that they moved to your bank. That process can take several business days or longer. The less you know about your buyer, the longer you should wait.

How cashier鈥檚 checks bounce: These scams work because everybody believes that cashier鈥檚 checks are safe. If the bank lets you take cash, the check must be good, right? Unfortunately, your bank assumes that the check will be good, but the responsibility for the deposit is ultimately yours.

If you use that money (to send it to a 鈥渟hipper,鈥 for example), you may have to replace the funds. Once your bank finds out that the check is bogus, the deposit will be reversed鈥攚hich could leave you with a negative account balance. With an empty bank account, you鈥檒l end up bouncing checks and missing other important payments. What鈥檚 more, victims of these scams can lose hundreds or thousands of dollars.

Protect Yourself

Take steps to protect yourself from fraud:

Never accept a check for more than you asked for.

If possible, go to the bank with whoever is paying you and watch them get the cashier’s check from a teller. Stand in line with them so there’s no “switcharoo.”
Verify funds on any check or money order you receive. This isn’t a foolproof tactic, but it’ll weed out some of the sloppier thieves.
Insist on other forms of payment that you know are more reliable (such as a wire transfer) but be careful about giving out your bank account information.
Only deal with local buyers on Craigslist and similar sites, and insist on cash payments if you can鈥檛 go to the bank together.
Inspect any check you receive, looking for signs that it鈥檚 a fake. Misspelled words and poor quality paper without any security features are common on fake checks.
If you must take a check for more than your asking price, inform the seller that you鈥檒l wait at least two weeks before sending any money or sending merchandise.
Speak with a bank manager when you deposit suspect checks. Explain the situation and your concerns, and ask when you can be 100 percent certain that the payment is good. Better yet, don鈥檛 accept suspect checks.
Step away from the situation before you accept a cashier鈥檚 check and trust your gut. With a fresh perspective, you may notice odd clues that indicate trouble.

Red Flags

Thieves are good at what they do, but they often give hints. Ask yourself if the situation makes sense.

For example, when buyers don鈥檛 ask typical questions or know much about the item you鈥檙e selling, why are they so eager to buy? It may turn out that they have no intention of using whatever you鈥檙e selling.

Why would a person you鈥檝e never met trust you with thousands of dollars? If they can contact you, they can surely give adequate instructions to have the bank issue a cashier鈥檚 check correctly. If the excessive amount was, in fact, the buyer鈥檚 fault, wouldn鈥檛 the buyer pay the $8 (or whatever) fee to have an accurate check printed instead of giving you鈥攁 complete stranger鈥攖he opportunity to steal the cash?

Finally, if they can come up with extra money, they can surely afford to pay a separate cashier鈥檚 check fee or write a different check to their 鈥渁gent鈥 or 鈥渁ssociate鈥 who you’re supposed to forward the money to.

More Examples

Cashier鈥檚 checks show up in numerous scams. Keep an eye out for any of the situations below. Con artists continue to change their approach over time, but these are some of the classics.

Money mule: You receive payments, and you鈥檙e supposed to deposit the payments to your account and forward the money to somebody else. Often advertised as a work-at-home check processing job, these schemes are usually problematic. In some cases, you鈥檙e laundering money for criminals. In other cases, the first few payments are fine, but eventually, you鈥檒l get a fake check (after they鈥檝e gained your trust) and you鈥檒l lose money.

Foreign wealth scams: Somebody you don鈥檛 know reaches out to you and asks for your help transferring a large sum of money out of a corrupt nation. In exchange, you can keep a tiny fraction of the transfer, which is more money than you make in a year. Of course, you鈥檒l have to send money to somebody else to complete the transfer.

Inheritance and lottery scams: You won! You鈥檙e about to receive a lot of money, but you鈥檒l need to pay a small amount for taxes or legal fees to 鈥渞elease鈥 the funds. It鈥檚 a small price to pay for the riches that are headed your way. Of course, they鈥檒l never materialize.

Property rental scam: Somebody is moving to your area for a new job. They鈥檇 like to pay the first and last month of rent, as well as the security deposit, with a cashier鈥檚 check. They have never actually seen the property. The day after you deposit the check, they say there was an issue with the job鈥攖hey鈥檙e not coming, so they don鈥檛 need the rental. You can keep the security deposit, but they鈥檇 like for you to return some of the rent. After you send the refund, you鈥檒l find that the check was a fake.

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