How to protect yourself and your family from check fraud
As part of our mission to provide competent legal assistance to the Fort Gordon Community, the Legal Assistance Office will publish a series of preventative law articles addresses a variety of scams that specifically target our military community. The first of this series addresses the receipt and issuance of fraudulent checks.
There is a growing problem which you should be aware of as our economy continues to struggle towards financial recovery. With the current job market and what can only be described as desperate attempts to secure a job through any available means, our servicemembers and their families is one of the most vulnerable population targeted by financial scams. This article discusses check fraud scams generally and preventative measures servicemembers and their families can take to protect themselves from the receipt and validation of fraudulent checks (specific case citation omitted from this article).
The advancement of computer technology and the use of social media make it increasingly easy for criminals to access financial and personal identifying information. In addition, criminals can take and use the information they steal to manipulate checks and make it increasingly difficult for innocent victims to differentiate a fraudulent check from a properly issued check.
Current state of the law: A bank may avoid its fraudulently obtained certification of a check as against persons who are not holders in due course. It is immaterial how the HIDC obtained the check if he/she certified the check. In other words, the bottom line is the person who endorses the check certifies the authenticity and is therefore required to repay the value of the check to the bank. (Citation: Am. Jr. 2d Banks S 597). The UCC, Check 21 and funds availability laws demand for deposit on accounts which accelerate deposits. Once a bank receives a properly endorsed check they are required to provide funds within 2 to 5 business days but in California funds availability laws demand a bank pay funds in as little as 1 day. Source and cost of fraudulent checks
Fraudulent checks enter the United States from foreign countries that cost an average $ 15,000 to 30,000 per year. The leading source of fraudulent checks are countries that provide outsourced labor to staff service-call centers and the customer service industries. Currently the Philippines, India, Nigeria, China and Canada are at the top of the list by the National Center for Fraud as the source of most of the fraudulent checks entering the U.S. economy that target individuals. Types of check fraud
Forgery: Where a person acting as an agent of an organization issues a check without proper authorization.
Counterfeiting and alteration: Using chemicals to erase information from a check and replacing that information with fraudulent information.
Paperhanging: Purposely writing checks on closed accounts, either their own or others, as well as reordering checks on closed accounts.
Check kiting: Opening accounts at two or more banks then floating a check between the banks. This particular scam has grown with changes in the law and increased competitive banking procedures. ‘Bad check’ signs to look for
(The following is a list of signs you should look to identify a bad (or fraudulent) check. The provided list is not exhaustive but these are the most readily identified signs of a bad check. The greater the number of signs, the more likely it is that the check is fraudulent.)
The check lacks perforations
The check number is either missing or does not change
The check number is low, from 101 to 400, on personal checks, or from 1001 and 1500 on business checks.
The type of font used to print the customer’s name looks different from the address print.
There is handwritten information on the check.
Pertinent information is missing, such as, the customer’s address, the name of the issuer, the payee name and the address of the issuing bank.
There are stains or discolorations on the check possibly caused by erasures or alterations.
The numbers printed on the bottom of the check, magnetic ink character recognition or MICR coding is shiny. Real MICR ink is dull and not glossy in appearance.
There are no MICR numbers on the check.
The name of the payee is type written when everything else was printed by a computer.
The word ‘VOID’ appears across the check.
Notations in the memo list ‘load’, ‘payroll’ or ‘dividend’ as the purpose of the payment. Most companies maintain separate accounts for each of these departments and would not be required to annotate this on the face of the check.
There is no authorization signature.
You did not provide any services for the payment issued by the check.
You did not enter a contest or lottery that the check references.
You did not request payment by check and the sender requests your direct deposit information via email as an alternate means of payment. (Do not send your information.)
The check and cashing instructions require complicated deposit and transfer procedures including the use of multiple financial services or institutions. Check validation
If you suspect that you received a ‘bad check’ you should attempt to validate the check’s authenticity before doing anything to it. Do not attempt to deposit the check before taking these steps and certainly do not endorse or sign the check. If all else fails inform your bank that you suspect the check is fraudulent. The current state of the law places the burden of validating a check on the individual not the bank. Therefore, if you receive a suspicious check you should:
• Call the issuer of the check.
• Contact the payor bank.
• Contact the payee bank.
• Contact the police and file a report.
• Contact the National Fraud Center and file a report, see: https://secure25. securewebsession.com/ ckfraud.org/repform.html Consumer precautions
Most of these precautions hinge on a common sense, logical approach which you can take to protect your family from check fraud scams. You should incorporate the following practices when conducting business with checks:
Make sure your checks are endorsed by your financial institution and incorporate security features that help combat counterfeiting and alteration.
Store your checks, deposit slips, bank statements and canceled checks in a secure and locked location. Never leave your checkbook in your vehicle or in the open.
Reconcile your bank statement within 30 days of receipt in order to detect any irregularities. Otherwise, you may become liable for any losses due to check fraud.
Never give your account number to people you do not know, especially over the telephone. Be particularly aware of unsolicited phone sales. Fraud artists can use your account without your authorization and you may end up being responsible.
Unless needed for tax purpose, destroy old canceled checks, account statements, deposit tickets, ATM receipts (they also frequently have your account number and worse yet, your account balance). The personal information on it may help someone impersonate you and take money from your account.
When you receive your check order, make sure all of the checks are there, and that none are missing. Report missing checks to your bank at once. Should you fail to receive your order by mail, alert your bank. Checks could have been stolen from mail box or lost in transient.
If your home is burglarized, check your supply of checks to determine if any have been stolen. Look closely, because thieves will sometimes take only one or two checks from the middle or back of the book. The longer it takes to detect any of your checks have been taken, the more time the criminal has to use them successfully.
If someone pays you with a cashier’s check, have them accompany you to the bank to cash it. If at all possible, only accept a check during normal business hours so you can verify whether it is legitimate. Make sure you obtain identification information from the individual.
Do not mail bills from your mailbox at night. It is a favorite location from which a criminal can gain possession of your check with the intent to defraud you. Criminals will remove a check from your mailbox and either endorse it using bogus identification, photocopy and cash it repeatedly, scan and alter the check, or chemically alter it. The Post Office is the best location from which to send your bill payment.
Limit the amount of personal information on your check. For example, do not include your Social Security, driver’s license or telephone numbers on your check. A criminal can use this information to literally steal your identity by applying for a credit card or loan in your name, or even open a new checking account.
Don’t leave blank spaces on the payee and amount lines.
The type of pen you use makes a difference. Most ballpoint and marker inks are dye based, meaning that the pigments are dissolved in the ink. But, based on ink security studies, gel pens, like the Uniball 207 uses gel ink that contains tiny particles of color that are trapped into the paper, making check washing a lot more difficult.
Don’t write your credit card number on the check.
Use your own pre-printed deposit slips, and make sure the account number on your slip is correct. Thieves occasionally alter deposit slips in the hope you won’t notice and the money goes into their account.
Don’t make a check payable to cash. If lost or stolen, the check can be cashed by anyone.
Never endorse a check until you are ready to cash or deposit it. The information can be altered if it is lost or stolen.
Note: I would like to acknowledge Charles Bruce, Director National Fraud Center for his invaluable contributions to this article. I would also like to acknowledge the state and federal law enforcement agencies who contributed to the statistical information cited herein. Finally, special thanks to our local financial institutions that provided great insight into the nature of the check frauds that target our Fort Gordon community.