Types of Fraud

Learn more about some of the different types of fraud to better protect yourself against them.

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Check Fraud

Check fraud can take on several forms. It involves manipulating checks or knowingly writing bad checks. Check fraud is not only detrimental to businesses, but individual consumers as well.

Here is some more information about check fraud and how to protect yourself.

Check fraud can take many forms

Check washing — erasing the correct information written on the check and rewriting a new amount.
Bad check writing — A check is written off of an account with no funds. The buyer takes possession of goods before the seller is aware that the check is no good. This is most common with online consumer to consumer buying/shopping.
Forgery — Perpetrator passes a "homemade" check that he/she manufactures and passes as a real check. Another form of forgery involves using legitimate checks of a victim as the thief's own. Yet another type of check forgery takes place when a perpetrator alters a check that has already been written to make the amount payable different than the victim intended.
Check fraud not only involves the loss incurred from the fraudulent check itself, it can have a huge negative impact on the victim's finances. If a thief takes more than the check was written for, the victim is likely to have an overdrawn account, or bounce other outstanding checks.

Check fraud is common when a stranger is making a purchase from an individual in person or online. The buyer can avoid this type of scheme by requiring a money order, cashier's check, or an online bill pay service.

Tips to avoid a fraudulent check

Use a gel pen, rather than a ballpoint on checks. Gel pens make check washing much more difficult.
Call the issuing institution listed on the check to verify the account is good.
Never leave out-going mail in an unlocked mailbox; take out-going mail that contains personal information/checks to the post office.
Check for security features listed on check.
Reconcile account statements often, making sure checks cleared for correct amount.
Immediately report any lost/stolen checks. If necessary, close that checking account and open one under a new number.
Destroy all cancelled checks and statements.
Never leave any blank space on the payee and amount lines.
Limit the amount of personal information printed on checks--never preprint Social Security number or driver's license number on the checks.

Each day, 175,000 fraudulent checks are presented (low-end), representing approximately $41 million in face value.

The Federal Trade Commission has put together an article to help understand check fraud, and some of the schemes used to carry it out:

Giving the Bounce to Counterfeit Check Scams

It's your lucky day! You just won a foreign lottery! The letter says so. And the cashier's check to cover the taxes and fees is included. All you have to do to get your winnings is deposit the check and wire the money to the sender to pay the taxes and fees. You're guaranteed that when they get your payment, you'll get your prize.

There's just one catch: this is a scam. The check is no good, even though it appears to be a legitimate cashier's check. The lottery angle is a trick to get you to wire money to someone you don't know. If you were to deposit the check and wire the money, your bank would soon learn that the check was a fake. And you're out the money because the money you wired can't be retrieved, and you're responsible for the checks you deposit — even though you don't know they're fake. This is just one example of a counterfeit check scam that could leave you scratching your head. The Federal Trade Commission, the nation's consumer protection agency, wants you to know that counterfeit check scams are on the rise. Some fake checks look so real that bank tellers are reporting being fooled. The scammers use high quality printers and scanners to make the checks look real. Some of the checks contain authentic-looking watermarks. These counterfeit checks are printed with the names and addresses of legitimate financial institutions. And even though the bank and account and routing numbers listed on a counterfeit check may be real, the check still can be a fake. These fakes come in many forms, from cashier's checks and money orders to corporate and personal checks. Could you be a victim? Not if you know how to recognize and report them.

Fake Checks: Variations on a Scheme

Counterfeit or fake checks are being used in a growing number of fraudulent schemes, including foreign lottery scams (as described above), check overpayment scams, Internet auction scams, and secret shopper scams.

Check overpayment scams target consumers selling cars or other valuable items through classified ads or online auction sites. Unsuspecting sellers get stuck when scammers pass off bogus cashier's checks, corporate checks, or personal checks. Here's how it happens:

A scam artist replies to a classified ad or auction posting, offers to pay for the item with a check, and then comes up with a reason for writing the check for more than the purchase price. The scammer asks the seller to wire back the difference after depositing the check. The seller does it, and later, when the scammer's check bounces, the seller is left liable for the entire amount.

In secret shopper scams, the consumer, hired to be a secret shopper, is asked to evaluate the effectiveness of a money transfer service. The consumer is given a check, told to deposit it in their bank account, and withdraw the amount in cash. Then, the consumer is told to take the cash to the money transfer service specified, and typically, send the transfer to a person in a Canadian city. Then, the consumer is supposed to evaluate their experience — but no one collects the evaluation. The secret shopper scenario is just a scam to get the consumer's money.

Con artists who use these schemes can easily avoid detection. When funds are sent through wire transfer services, the recipients can pick up the money at other locations within the same country; it is nearly impossible for the sender to identify or locate the recipient.

You and Your Bank — Who is Responsible for What?

Under federal law, banks must make funds available to you from U.S. Treasury checks, official bank checks (cashier's checks, certified checks, and teller's checks), and checks paid by government agencies at the opening of business the day after you deposit the check. For other checks, banks must similarly make the first $100 available the day after you deposit the check. Remaining funds must be made available on the second day after the deposit if payable by a local bank, and within five days if drawn on distant banks.

However, just because funds are available on a check you've deposited doesn't mean the check is good. It's best not to rely on money from any type of check (cashier, business or personal check, or money order) unless you know and trust the person you're dealing with or, better yet — until the bank confirms that the check has cleared. Forgeries can take weeks to be discovered and untangled. The bottom line is that until the bank confirms that the funds from the check have been deposited into your account, you are responsible for any funds you withdraw against that check.

Protecting Yourself

Here's how to avoid a counterfeit check scam:

Throw away any offer that asks you to pay for a prize or a gift. If it's free or a gift, you shouldn't have to pay for it. Free is free.
Resist the urge to enter foreign lotteries. It's illegal to play a foreign lottery through the mail or the telephone, and most foreign lottery solicitations are phony.
Know who you're dealing with, and never wire money to strangers.
If you're selling something, don't accept a check for more than the selling price, no matter how tempting the offer or how convincing the story. Ask the buyer to write the check for the correct amount. If the buyer refuses to send the correct amount, return the check. Don't send the merchandise.
As a seller, you can suggest an alternative way for the buyer to pay, like an escrow service or online payment service. There may be a charge for an escrow service. If the buyer insists on using a particular escrow or online payment service you've never heard of, check it out. Visit its website, and read its terms of agreement and privacy policy. Call the customer service line. If there isn't one — or if you call and can't get answers about the service's reliability — don't use the service. To learn more about escrow services and online payment systems, visit ftc.gov.
If you accept payment by check, ask for a check drawn on a local bank, or a bank with a local branch. That way, you can make a personal visit to make sure the check is valid. If that's not possible, call the bank where the check was purchased, and ask if it is valid. Get the bank's phone number from directory assistance or an Internet site that you know and trust, not from the check or from the person who gave you the check.
If the buyer insists that you wire back funds, end the transaction immediately. Legitimate buyers don't pressure you to send money by wire transfer services. In addition, you have little recourse if there's a problem with a wire transaction.
Resist any pressure to "act now." If the buyer's offer is good now, it should be good after the check clears.

If You Think You're a Victim

If you think you've been targeted by a counterfeit check scam, report it to the following agencies:

The Federal Trade Commission: visit ftc.gov or call 1-877-FTC-HELP (1-877-382-4357).
The U.S. Postal Inspection Service: visit usps.com or call your local post office. The number is in the Blue Pages of your local telephone directory.
Your state or local consumer protection agencies: visit naag.org for a list of state Attorneys General, or check the Blue Pages of your local telephone directory for appropriate phone numbers.

For More Information

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

Telemarketing Fraud

Telemarketing fraud occurs when a thief misrepresents himself/herself to an individual over the phone. In these situations, the thief is typically looking to collect some type of personal account information from you.

Here are some valuable tips on how to avoid becoming a telemarketing fraud victim.

EXAMPLE: Individuals identifying themselves as U.S. Court employees have been contacting citizens by phone and advising them that they have been selected for jury duty. These individuals ask citizens to verify names and social security numbers and then ask for their credit card numbers. If the request is refused, citizens are then threatened with fines.

If you are age 60 or over, you may be a special target for people who sell bogus products and services by phone. When you send money or give financial information to someone you do not know personally, you increase your chances of becoming a victim of telemarketing fraud.

These are some warning signs you may hear from a fraudulent call; if you hear these or similar phrases from a telephone salesperson just say "NO THANK YOU" and hang up the phone!

"You must act now or the offer won't be good."
"You've won a free gift or prize." And then are asked to pay postage and handling or other charges.
"You must send money, give a credit card or account number, or have a check picked up by a courier." You will probably hear this before you've had a chance to really consider the offer.
"You don't need to check out the company with anyone" or "You don't need any written information regarding the company or transaction."
"You cannot afford to miss this 'high-profit, no risk' offer."

It is very difficult to get your money back if you've been cheated over the phone.

Here are some tips to help you avoid telemarketing fraud:

Don't buy from an unfamiliar company.
Always ask for and wait until you receive written material about any offer or charity. But beware- not everything that is written is true. Do some extra research if you have doubts.
Always check out unfamiliar companies with your local consumer protection agency, Better Business Bureau, State Attorney General, the National Fraud Information Center, or other watchdog groups.
Always obtain salesperson's name, business identity, telephone number, and address before conducting business.
Pay for services after they are delivered, rather than before.
Take your time making a decision. Legitimate companies will not pressure you into making a snap decision.
Do not pay for a "free prize."
Never respond to an offer you do not understand.

Never send money or give personal information to unfamiliar companies or unknown persons. If you have information about fraudulent activity or feel you have been a victim of fraud, report it to law enforcement.

Credit Card Fraud

Anyone with a credit card is a potential victim of fraud. There are numerous ways in which thieves can gain access to your credit card information.

Here are some ways to protect your credit accounts.

All credit card users are potential victims of fraud. A thief does not have to steal your card or rifle through your trash to get account numbers. Any time you use your card you are making your account number available to everyone who is involved in the transaction, from the sales clerk to the billing staff of the creditor.

Valuable tips to help protect you from credit card fraud

Never leave cards or receipts lying around.
Keep a record of card numbers, their expiration dates, and phone numbers of each creditor in a secure place.
Never give your account numbers over the phone, unless you are initiating a transaction with a reputable company.
Sign credit card, in ink, as soon as they arrive.
Save receipts to compare with your billing statements.
Closely monitor expiration dates on your credit cards. If the replacement card is not received prior to expiration, contact the card issuer.
Sign up for electronic account statements if available. You can reduce the risk of mail and/or trash-related theft.
Report lost or stolen credit cards immediately.
Cancel all inactive credit card accounts. Even if they are not used, those accounts appear on your credit report, which can be used by thieves.

If you suspect someone has used your card illegally, you must contact the issuer as soon as possible. The card will remain usable until the issuing institution is contacted and then blocks/cancels the card. Report compromised credit cards and account numbers immediately!

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