Cheque fraud is among the oldest and most common forms of financial crime. Even with the advent of electronic payment products, cheques still account for billions of payments each year, making them a prime target for criminals.
There are three main types of cheque fraud:
· Counterfeit - cheques not written or authorized by legitimate account holder
· Forged - Stolen cheque not signed by account holder
· Altered - an item that has been properly issued by the account holder but has been intercepted and the payee and/or the amount of the item have been altered
How you can protect yourself from fraud for items drawn on your account:
1. Reduce the use of cheques in favour of electronic payments such as wire payments, direct deposit and pre-authorized payments
2. Choose envelopes that make cheques hard to detect while in transit. This helps to minimize the risk of cheques being intercepted
3. Keep cheque stock in a secure location
4. Destroy unused cheques from closed accounts immediately
5. Checks and Balances - split responsibilities so that no one person is responsible for cheque issuance and reconciliation
6. Prompt account reconciliation - Reconcile your statements as soon as they are received. To speed things up, many clients see a significant advantage in products such as the CIBC FirstCaribbean Online banking platform When re-ordering cheques, use a continuous set of serial numbers
7. Order only one set of cheques per account
8. When laser-printing cheques, issue multiple passwords to those responsible for cheque printing and use cheque paper with toner anchorage to permanently bond toner ink into the paper
9. Use high quality cheques employing a reasonable mix of security features. Davis and Henderson meet all of CIBC's requirements for cheque printers
10. Report any old outstanding cheques and suspected fraud on your account immediately
Protect Yourself and Your Money
Counterfeit cheques continue to be one of the most common instruments used to commit fraud against businesses and individuals in the Caribbean. Before you deposit a cheque you weren’t expecting or send funds to an unknown recipient, here is what you should know:
How do Fake Cheque Scams Work?
There are several variations of the scam. It usually starts with someone offering to:
- Buy something you advertised for sale
- Pay you for goods or services
- Give you an “advance” on a sweepstakes or you’ve ‘won’
- Pay you for Mystery Shopping
Fraudsters issue you a cheque or money order (often from outside of the jurisdiction) worth more than the amount owed to you and instruct you to wire the excess funds back to them usually before the cheque clears. After you’ve sent the money, you find out that the cheque or money order is bogus resulting in a financial loss to you.
How to Protect Yourself
If you have any questions about whether or not a cheque is good, talk to your banker. Be sure to explain the source of the cheque/instrument, the reasons it was sent to you, and whether you are being asked to wire money back.
Don’t be fooled by the appearance of the cheque. Scam artists are using sophisticated technology to create counterfeit cheques that mirror the appearance of legitimate cheques. Some are counterfeit money orders, some are phony cashier’s cheques and others look like they are from legitimate business accounts. The companies whose names appear may be real, but someone has dummied up the cheques without their knowledge.
- Never ‘pay to play’. There is no legitimate reason for someone who is giving you money to ask you to wire money back or send you more than the exact amount —that’s a red flag that it’s a scam. If a stranger wants to pay you for something, insist on a cashier’s cheque or a wire transfer for the exact amount, preferably from a local bank or one with a local branch.
Verify the requestor and ensure the cheque has cleared*, before you wire or issue a cheque – Never use your own funds to do so. It is important to know who you are sending money to before you send it. Just because someone contacted you doesn’t mean they are a trusted source.
- Never give your financial details to someone you do not know or trust, especially if you met them online.
Report any suspected fraud to your bank immediately.
If you think someone is trying to pull a fake cheque scam, don’t deposit it—report it.
* Note: there may be instances where cheques are returned fraudulent after the ‘hold’ period/cheque has ‘cleared’.
Criminals want you to do their banking for them. If they earn your trust, they'll use your account to cash phony cheques, collect funds from other accounts, and move stolen money offshore. They use a variety of schemes to convince you that they're legitimate. Some will even give you money to earn your trust. By accepting and re-directing electronic deposits (such as wire transfers), you could be participating in a money-laundering scheme if those deposits were proceeds of a fraud or other criminal activity. The stories vary, but the results are the same: fraud and financial loss.
A criminal tells you you've won a lottery. But taxes need to be paid first. If you're unable to pay the fee on your own, you may be offered financing from a third party (who is involved in the scheme). You receive a cheque to cover the taxes and then wire the money to cover the taxes. Afterward, you learn that the original cheque was fraudulent and that you're responsible for the losses.
The criminal buys something from you and overpays for the item. After you refund the difference, you learn that the original payment was fraudulent and the charges have been reversed.
A job offer involves receiving funds into your bank account and then transferring a portion of the collected funds on to another account. After transferring the funds, you learn the original transaction has been reversed.
A criminal tells you they are a government official from another country, and that they need your help getting funds out of the country. You receive monies and then forward them. Like the above cases, the original deposit is fraudulent and you're liable for the amount forwarded.
A relative you never met has left you money in their will. But you need to pay service fees before receiving the funds. Like the other examples above, this scam can leave you on the hook for significant financial losses.
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