Cards And Unsecured Business

Battling the big bounce
Banks, businesses see increase in counterfeit checks
July 13, 2007

Bogus cashier’s and business checks are becoming big business for counterfeiters.

From July 2 to 5, more than 25 financial institutions contacted the Federal Deposit Insurance Corp. to report that counterfeit cashier’s checks bearing the bank’s name are in circulation. (See this week's Banking & Finance for a complete listing.)

The FDIC issued a special alert June 21 saying it has been receiving an increasing number of reports from financial institutions, businesses and consumers that counterfeit business checks are in circulation. The FDIC does not send individual alerts for counterfeit business checks because there are too many.


These reports are just the tip of the iceberg, because banks are not required to report counterfeit problems to the FDIC and most problems are handled in-house.

More than 2.7 million suspicious activity reports were filed by depository institutions to the Financial Crimes Enforcement Network from 1996 to 2006. In 2006, there were almost 600,000 suspicious activity reports, which is more than nine times the number of reports filed in 1996. Check fraud is the second most reported suspicious activity.

In Colorado, there were more than 40,000 suspicious activity reports filed with the FCEN from 1996 to 2006, which was among the top 20 nationwide.

There were eight times more suspicious activity reports filed in 2006 than there were in 1996 in Colorado.

Colorado Springs-based Peoples National Bank is seeing a rise in fake checks, said Debbie Ball, the bank’s director of operations and retail.

“Our people, by talking to customers and asking them a few questions, are usually catching them before they deposit them,” she said. “But there’s an awful lot of them out there because there are just more scams going on out there.”

The Colorado Springs Police Department, which handles counterfeit check scams locally, has not seen an increase in the number of cases, but that doesn’t mean it isn’t a problem, said Sgt. Randall Johnson, who supervises the financial crimes unit.

“Hardly a day goes by that a report or two of that nature doesn’t cross my desk,” he said.

The counterfeit checks are being used in connection with consumer scams. In many cases, counterfeit business or cashier’s checks are included with correspondences that describe an artificial purpose, and instruct the recipient to cash the check and send a portion of the money via wire transfer to a third party.

Scams that make use of counterfeit cashier’s or business checks typically involve bogus lotteries, sweepstakes or contests, and overpayment for merchandise — often purchased online.

In recent examples, counterfeit checks have displayed the names of well-known and recognizable businesses, according to the FDIC. In other examples, they have displayed the names of what appear to be small or nondescript businesses; but, the check has the routing number and account number used by a financial institution.

Many of the fraudulent checks have misspelled words, the wrong routing number or are missing information normally found on genuine cashier’s checks, Ball said.

“Cashiers checks are seen as being as good as cash, but that’s no longer the truth because now it’s so easy to make counterfeit checks,” she said.

The scam works because people assume that a cashier’s check is as good as money and criminals prey on that assumption, said Rebecca Clark, general council with Professional Bank Service.

Unfortunately, the victims of crimes that involve cashier’s checks rarely get their money back.

“Probably 100 percent of losses sustained locally never get any money back,” Johnson said. “It’s almost impossible for municipal jurisdictions to follow these cases because they are on an international scale.”

Peoples National Bank, which has branches in Colorado Springs, Monument and Leadville, has increased training for tellers about how to recognize counterfeit checks.

Employees attended a seminar conducted by Professional Bank Services Inc., a Kentucky-based company that has been providing consulting and educational services to the financial industry since 1978.

It was the first time Professional Bank Services had hosted a program about check fraud, Clark said.

“There are more and more counterfeit cashier’s checks out there. Criminals are always one step ahead and have found various ways to reinvent these scams and make them appear legitimate,” she said. “We saw this as a very prevalent topic and wanted to train bankers and teach them how to educate their customers.”

Bank trade agencies and the FDIC work with financial institutions to educate the public about scams. The FDIC will be launching a database later this year at www.fdic.gov which will allow bankers to quickly determine a check’s authenticity using modified search engines.

Information about counterfeit items, cyber-fraud incidents and other fraudulent activity should be forwarded to the FDIC’s Cyber-Fraud and Financial Crimes Section, 550 17th Street, N.W., Room F-4004, Washington, D.C. 20429, or e-mailed to alert@fdic.gov.

Sarah.Colwell@csbj.com

http://www.thepbj.com/