“Cheque It” before you Cash It

by the Financial Intelligence Unit 26.FEB.10

You want to start a business that will be a huge attraction and you can already imagine the profits; or times are really hard and you don’t know where your next dollar is coming from and then you receive a cheque in the mail from someone who may have contacted you online or someone you may never have met, sending you that much needed money but… BEWARE!{{more}}

If you are advertising for an investor for your revolutionary business venture or selling something over the Internet or through the classifieds, you may be targeted by a cheque overpayment scam. You might receive an offer from a potential buyer or investor which you accept. You receive a cheque, but it is for more money than you asked for. The scammer will then give you an excuse for the overpayment and ask you to refund the excess amount-usually through an online banking transfer or a wire transfer (such as Western Union or Money Gram) or transfer to another bank account in another country, in the hope that you do this before you discover that their cheque has bounced and you have lost the money you paid into their account.

Offers that involve transferring money for someone you don’t know are nearly always a scam, as stated on “SCAMwatch”, a website run by the Australian Competition and Consumer Commission (ACCC). They could also be laundering money, by putting the money through a series of bank accounts to hide its original source, which is usually illegal. You may be asked to transfer money for somebody using your own bank account or a bank account that you set up for this purpose.

The site further states that some scammers actually do send money, but this money might come from organised crime or from the proceeds of other scams. The scammer may even let you keep a small percentage of the total transferred, but may then ask you why you have not transferred some money that you did not receive, pressuring you to make up for the ‘missing payment’ out of your own pocket.

If you agree to transfer money in this way, the possibility exists that you are being used to cover someone else’s tracks, and if the authorities follow the money trail from a crime that the person scamming you was involved in, it could lead straight to your bank account.

Signs that it could be a scam-you receive an offer that involves you receiving and sending money electronically or the offer requests your account details so that money can be sent to your account. The scammer may also say that they need an account in the country so that they can conduct their business, the name on the cheque does not match the name of the company or individual you are supposedly dealing with. Additionally, you may be given instructions to deposit a cheque into your account and promptly wire part of those funds back to the sender or to another specified company or contact. The Better Business Bureau in Ottawa warns on their website that you should not be fooled by a phone call. Just because you’ve spoken to the scammer over the phone, it doesn’t mean they’re not trying to rip you off.

While the cheque may initially be deposited into the victim’s bank account-leading to a false sense of security-the fake cheque will ultimately be discovered within a couple weeks and the bank will take the funds out of the account. The victim of the scam is out whatever money they sent to the scammers and will be responsible for paying the bank back if their account is overdrawn.

Banks must also be diligent and ensure that they comply with all procedures set out for clearing these cheques from international and unknown corporate senders.

If you have any doubt about a ‘cleared’ cheque, don’t spend the money until you’re certain that your bank has collected the money it needs. You can call your bank and ask whether or not they are 100% certain the cheque is good, and if there is any risk in using the money. Always remember to “cheque it” before you cash it!