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Check cashing scams

Fraudulent checks and money orders are key elements in many other scams, such as auction/classified listing overpayment, lottery scams, inheritance scams, etc, and can be used in almost any scam when a « payment » to the victim is required to gain, regain or further solidify the victims’ trust and confidence in the scheme. A variant of these comes right to the point; the scammer contacts the victim, offering to send them a check that for some reason they cannot cash or deposit themselves, if the victim will cash it and send them a portion of the money. The victim is told to keep a portion of the check’s amount (sometimes up to 50%) for their trouble. Many people, even those aware of traditional 419 scams, will fall for this because the person contacting them isn’t asking for money, and in fact it’s just the opposite; the scammer appears to be sending the victim money, and when the victim deposits the check, the funds usually show up, convincing the victim that the check, and the deal, are real.

The scam hinges on a U.S. law concerning checks; when an account holder presents a check for deposit or to cash, the bank must make the funds available to the account holder within 1-5 business days, regardless of how long it actually takes for the check to clear and funds to be transferred from the issuing bank[4]. The check clearing process normally takes 7-10 days and can in fact take up to a month when dealing with foreign banks. The time between the funds appearing as available to the account holder and the check clearing is known as the « float », during which time the bank could technically be said to have floated a loan to the account holder to be covered with the funds from the bank clearing the check.

The check given to the victim is counterfeit; however that may not become apparent until days or weeks after the victim has seen the funds made available in their account and sent money to the scammer. With a piece of software like QuickBooks, pre-printed check stock and the correct banking information, the scammer can easily print a check that is absolutely genuine-looking, and may even clear the paying account if the account information is accurate and the funds are available; however, whether it clears or not, it will eventually become apparent either to the bank or the account holder that the check is a forgery. This can be as little as 3 days after the funds are available if the bank supposedly covering the check discovers the check information is invalid, or it could take months for a business or individual to notice the fraudulent draft on their account. Regardless of the amount of time involved, once the cashing bank is alerted that the check is fraudulent, the money the victim has wired (and the scammer the money was wired to) are long gone. The bank then turns to the victim to recover the money, removing from their account the amount of the check. In most cases, this puts victims in debt to their banks, and some victims have even been prosecuted for fraud in the scammer’s stead, the argument being that the victim « should have known better » than to participate in such a scheme, and thus was a willing conspirator in the fraud.

Schemes based solely on check cashing will usually offer only a small part of the check’s total amount, with the assurance that many more checks will follow; if the victim buys in to the scam and cashes all the checks, the scammer can win big in a very short period of time. Other scams such as overpayment usually result in smaller payoffs for the scammer, but have a higher success rate as the scammer’s request seems more believable.

Some check-cashing scammers involve multiple victims at multiple stages of the scam. A victim in the U.S. or other « safe » country such as the U.K. or Canada (often the country in which the cashing victims reside) is sometimes approached with an offer to fill out checks sent to them by the scammer and mail them to other victims who will cash the check and wire the money to the scammer. The check mailer is usually promised a cut of the money from the scammer; this usually never occurs, and in fact the check mailer is often conned into paying for the production and shipping costs of the checks. The check information has either been stolen or fictionalized and the checks forged. The victim mailing the check is usually far easier to track (and prosecute) than the scammer, so when the checks turn up as fraudulent, the one mailing them usually ends up not only facing federal bank fraud and conspiracy charges, but liability for the full amount of the fraudulent checks. Because the check mailer is taking the fall, the scammer is even less likely to be caught, which makes it a popular variation of the scam for scammers in nations with tougher anti-fraud laws and better enforcement than that of Nigeria.

Source : wikipedia