Typically, a cashier’s check issued by a financial institution and payable to a specific person is considered to be a safe form of payment. However, they have recently become an attractive vehicle for scammers to counterfeit, and cause significant losses to unsuspecting consumers and financial institutions.
It can be difficult to determine if the check is fraudulent. Scammers do a good job of making a phony cashier’s check look genuine, which unfortunately delays discovery of the fraud.
A cashier’s check quickly becomes “available” for withdrawal after it has been deposited, however these funds do not belong to the depositor if the check proves to be fraudulent. In certain cases, the scam artist quickly wires out the funds to multiple banks, making recovery of the funds impossible. The depositor will have difficulty pursuing any legal action against the scammers, especially if they reside in a foreign country or have disguised their identities. It’s important to be aware of these activities because 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. Careful examination of a cashier’s check before making a deposit is your best defense.
Examples of Cashier’s Check Fraud Used by Scammers
- Unexpected Windfall – You receive a letter stating that you have the right to receive a substantial sum of money (i.e., you won a foreign lottery or are the beneficiary of someone’s estate). It will say that you have to pay a processing/transfer tax or fee before you receive the money, and a cashier’s check will be 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 stating that you have been chosen to act as a mystery shopper. The letter includes a cashier’s check that you are told to deposit into your account. You are instructed to use a portion of the funds to purchase merchandise at designated stores, transfer a portion to a third party using a designated wire service company, and keep the remainder. The cashier’s check turns out to be fraudulent.
- Selling Goods – You sell goods in the marketplace (i.e., 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.
The result of such scams is that the fraudulent check will be returned unpaid. The financial institution will then deduct the amount of the check from your account or otherwise seek repayment from you. You will lose either the goods that you sold, the money that you sent to the third party, or both.
Anytime you receive a cashier’s check, official check, or money order from a financial institution, and you believe that it could be counterfeit, contact the issuing financial institution to verify its authenticity. When contacting the financial institution, do not use the phone number provided on the check itself – it is probably associated with the person committing the fraud rather than the financial institution.