What is Counterfeit Payment Fraud?

Today is your lucky day.  According to that surprise letter in the mail, you just won a lottery overseas and the best part of all, a cashier's check is included to verify the claim.  Since the check covers taxes and other necessary fees, all you're required to do is send in a processing fee of $50 to validate the check.  Once the lottery service receives the payment, you get to access to your winnings. 

But wait - there's a catch!  The prize winning lottery was a just a scam.  What appeared to be a legitimate cashier's check was actually a phony.  These are the key components of counterfeit check fraud.  The lottery angle is simply a ploy to convince you to deposit the fake check and wire your money to the fraudulent company.  Your bank soon learns that the check was counterfeit and the processing fee can't be retrieved because you have now have no way of tracing the perpetrator.  

The FTC (Federal Trade Commission) warns consumers that counterfeit check fraud is quickly on the rise.  Some of these checks appear so legitimate that several bank tellers have reported being tricked.  The con artists behind these scams use high-quality scanners and printers to create the fraudulent checks, often adding watermarks to give a sense of authenticity.  These checks are typically printed with the names and addresses of reputable financial institutions, easily fooling unsuspecting victims.  Even if the bank, account number and routing number are real, there is still a good possibility that the check is fake. 

Variations of Counterfeit Fraud

Counterfeit checks are being increasingly used in a number of fraudulent scams including those involving foreign lotteries, advanced-fee loans, online auctions and secret shopper kits. 

Advanced-fee scams: In this scenario, a con artist or fraudulent organization targets individuals actively seeking loans.  After sending in a hefty registration fee, the victim is sent a counterfeit check which purports as the actual loan.  When attempting to cash the check, the victim learns that they've been scammed with no way to recover the registration fee. 

Online auctions: This type of fraud involves a perpetrator who responds to a posting on an auction site and offers to purchase the item with a check.  In this instance, the scammer convinces the seller on why the check should be written for more than the actual purchase, convincing the seller to wire the remaining difference after depositing the money.  After complying, the counterfeit check bounces and more than likely, the seller is left to pay the full amount to their bank. 

Secret Shoppers:   In this scam, a consumer is hired by a fraudulent company as a secret shopper.  Typically, they are asked to test the efficiency of a particular money transfer service in which they are instructed to deposit a check into their bank account and withdraw the full amount in cash.  From there the mystery shopper is instructed to use the money transfer service again to forward the funds to a specific location.  The last part consists of evaluating the overall experience.  Unfortunately, no one reads or cares about the evaluation, and the check - you guessed it - counterfeit.