NH Business Review Staff,
Arm yourself against fake cashier’s checks
Many of us grew up hearing “a cashier’s check is as good as cash,” and it has been true for decades. A cashier’s check, which is drawn by a bank on its own funds, cannot “bounce” or be returned for insufficient funds.
A cashier’s check has been and still is a trusted method to conveniently transfer sums of money that are often larger than you would want to carry or transfer in cash. A cashier’s check also is more acceptable to those on the receiving end that do not want a personal check.
Unfortunately, fraudsters are very good at finding and exploiting our trust by passing counterfeit cashier’s checks to unsuspecting individuals and businesses and tricking people out of large sums of money.
It works this way: An individual or business has some asset to sell, such as a car or a piece of equipment. It advertises the item in either a newspaper or on line, an offer is made, and a deal is struck. The item is sold for $12,000 in the form of a cashier’s check. Either the buyer arrives in person or, more typically, a cashier’s check arrives via mail. The deal is made – the seller takes the cashier’s check, the buyer takes the item — and the seller promptly heads to the bank and deposits the check.
A week later, the bank calls to say that the cashier’s check has been returned unpaid because it is counterfeit. The deposit has been reversed from the seller’s account, potentially leaving the seller with a negative balance and without the car or equipment. You have been defrauded.
There’s a variation on this scenario: The check the buyer used to pay for the item is for more than the agreed-upon price.
Say the buyer arrives with a cashier’s check for $15,000. He gives the seller the check and a believable story and asks for the seller to mail him a cashier’s check for the difference.
The seller deposits the $15,000 cashier’s check, goes back the next day and buys a cashier’s check for $3,000 to mail it as instructed. A week later, the $15,000 cashier’s check is returned unpaid because it is a counterfeit, and the seller now has a $15,000 loss.
Steady increase
Unfortunately, the trickster is often not caught, and individuals and businesses suffer the loss. That means that all of us — individuals, business and financial institutions — must change our behavior or risk being duped by a fraudster.
The number of counterfeit cashier’s checks deposited into banks has steadily increased in recent times. Much of this increase is attributed to the increase in private sales between individuals as facilitated by the Internet and on-line auctions.
There also are inexpensive software programs that allow someone with a computer, a scanner and a good quality printer to “create” a document that looks like a genuine check. Some counterfeits are doctored copies of genuine checks; other counterfeits are complete phonies. Even banks have trouble identifying genuine and counterfeit cashier’s checks.
The situation is further complicated by federal bank regulations. Regulation CC of the Expedited Funds Availability Act provides the maximum number of days that a bank can hold a deposited check before making the funds from a deposit available to the depositing customer. This rule was developed to prevent overly long holds that banks and others placed on deposited funds. Because of the misdeeds of a few, now all banks and financial institutions must adhere to the regulation, which does provide for certain exceptions, but generally a bank is required to make the funds deposited via cashier’s check “available” on the next business day after the day of the deposit if certain conditions are met.
Making the funds from a check “available” means that the funds can be conditionally accessed, but the checks are still subject to final clearing and charge-back if the item is not honored.
Unfortunately, the only way Regulation CC deals with the possibility of counterfeit cashier’s checks is in the exceptions to the availability schedules. This means that unless the bank places a longer exception hold on a deposited cashier’s check, all parties involved — the customer, the fraudster and the bank — know that the funds from that deposit will be available for withdrawal by the customer long before the bank knows whether the item will be returned or not. It can take up to 10 days from the time a check is deposited for it to be returned to the bank as unpaid.
Genuine cashier’s checks issued by a bank are as good as cash, but the counterfeit ones look like the real thing. Suspect that a cashier’s check could be counterfeit, and independently confirm its issuance before accepting it.
Susan LeDuc, a regulatory specialist at the Concord law firm of Gallagher, Callahan & Gartrell, works as a consultant to banks and financial service companies on a wide array of issues involving the New Hampshire, Massachusetts and federal regulatory processes.
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