How to Avoid Cashier's Check Fraud: Examples and Explanation

That "Safe" Payment Can Be Trouble

© The Balance, 2018

 

Cashier’s checks have a reputation for being safe, and that’s what makes them perfect for scams. Whether you’re selling something online or in-person, cashier’s checks deserve extra attention. By familiarizing yourself with the most common red flags, you can significantly reduce the chances of losing money to fraud.

Safety and Cashier’s Check Fraud

Why are cashier’s checks considered “safe”? When they’re legitimate, they offer guaranteed funds: Recipients don’t 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’s checks are less safe than they used to be. If you don’t know and trust your buyer, you simply cannot assume that a cashier’s check is just as good as cash.

A Typical Cashier’s Check Scam

The most common cashier’s check scam goes something like this: A "buyer" wants to purchase a product with a cashier’s check or money order. For whatever reason, the buyer sends 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. That return payment might go directly back to the buyer or to a third party.

Note the key elements:

  1. The buyer uses a cashier’s check or money order. They may have several excuses for why those are their only options.
  2. The seller or recipient gets a check for more than they asked for.
  3. The seller is supposed to send the extra money back to the buyer or to a “helper.”

If you’re facing a situation that looks anything like this, you’re almost certainly dealing with a thief.

Timing is essential: Don’t send any money or merchandise until you are 100% certain that the paying bank has actually sent the funds. This is often referred to as the time when the check “clears,” but that term can be confusing — even for bank employees.

Funds from a cashier’s check are typically available for you to withdraw within one business day after you deposit the check. But that doesn’t mean that the funds actually exist or that the money 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’s checks bounce: These scams work because everybody believes that cashier’s 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 “shipper,” for example), you may have to replace the funds. Once your bank finds out that the check is bogus, the deposit will be reversed — which could leave you with a negative account balance. With an empty bank account, you’ll end up bouncing checks and missing other important payments. 

Victims of these scams can lose hundreds or thousands of dollars or more.

How to Protect Yourself

Take steps to protect yourself from fraud:

  1. Never accept a check for more than you asked for.
  2. 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."
  3. 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.
  4. 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.
  5. Only deal with local buyers on Craigslist and similar sites, and consider sticking to cash if you can’t go to the bank together.
  6. Inspect any check you receive, looking for signs that it’s a fake. Misspelled words and poor quality paper without any security features are common on fake checks.
  7. If you must take a check for more than your asking price, inform the seller that you’ll wait at least two weeks before sending any money or sending merchandise.
  8. 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’t accept suspect checks.

Step away from the situation before you accept a cashier’s check and trust your gut. With a fresh perspective, you may notice odd clues that indicate trouble.

Red Flags

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

For example, when buyers don’t ask typical questions or know much about the item you’re selling, why are they so eager to buy? It may turn out that they have no intention of using whatever you’re selling.

Why would a person you’ve never met trust you with thousands of dollars? If they can contact you, they can surely give adequate instructions to their bank and get a cashier’s check issued correctly. If the excessive amount was, in fact, the buyer’s fault, wouldn’t the buyer rather pay the $8 (or whatever) fee to have an accurate check printed instead of giving you — a complete stranger — the opportunity to steal the cash?

Finally, if they can come up with extra money, they can surely afford to pay a separate cashier’s check fee or write a different check to their “agent” or “associate” who you're supposed to forward the money to.

More Examples

Cashier’s 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’re supposed to deposit the payments to your bank account and then forward the money to somebody else. Often advertised as a work-at-home check processing job, these schemes are often problematic. In some cases, you’re laundering money for criminals. In other cases, the first few payments are fine, but eventually, you get a bad check (after they’ve gained your trust), and you end up losing money.

Foreign wealth scams: Somebody you don’t know reaches out to you and asks for 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’ll have to send money to somebody else to complete the transfer.

Inheritance and lottery scams: You won! You’re about to receive a lot of money, but you need to pay a small amount for taxes or legal fees to “release” the funds. It’s a small price to pay for the riches that are headed your way. Of course, they’ll never materialize.

Property rental scam: Somebody is moving to your area for a new job. They’d like to pay the first and last month of rent, as well as the security deposit, with a cashier’s check. They have never seen the property. Shortly after you deposit the check, they say something came up — they’re not moving to town anymore, so they don’t need the rental. They’re willing to let you keep the security deposit, but they’d like for you to return some of the rent. After you send the refund, you find that the check was a fake.

Sometimes cashier’s checks are fake, and they’re a favorite tool of con artists. Look for red flags, trust your gut, and speak with a bank manager before you send money or merchandise to somebody you don’t know and trust.

Article Sources

  1. Office of the Comptroller of the Currency. "Answers About Funds Availability," Accessed Dec. 5, 2019.

  2. Office of the Comptroller of the Currency. "Avoiding Cashier's Check Fraud," Accessed Dec. 5, 2019.