How t…

BANKING SMALL BUSINESS

How to Avoid Cashier's

Check Fraud: Examples
and Explanation

© The Balance, 2018

That "Safe" Payment Can Be Trouble

TA B L E O F C O N T E N T S EXPAND +

BY JUSTIN PRITCHARD
Updated January 28, 2020

Cashier’s checks have a reputation for being safe,

and that’s what makes them perfect for scams. [1] ​

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.

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Safety and Cashier’s Check Fraud

Why are cashier’s checks considered “safe”? When
they’re legitimate, they o!er 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). [2] ​

Important: 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.”

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If you’re facing a situation that looks anything like

this, you’re almost certainly dealing with a thief. [3] ​

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. [2] ​

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. [4] ​

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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.

Important: 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. [5] ​ [4] ​

Warning: 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 a!ord to pay a separate cashier’s check
fee or write a di!erent check to their “agent” or
“associate” who you're supposed to forward the

money to. [3] ​

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. [3] ​ [5] ​ [6] ​

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.

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