Fraud is on the rise.
The Federal Trade Commission says it received 2.8 million fraud reports last year totaling more than $5.8 billion in losses, a 70 percent increase from 2020.
In each case, the fraudster’s goal is to get an unsuspecting individual to send or transfer money to them.
One tried and tested method is the fake check scam. The scam works because it exploits a loophole in banking policy.
By law, banks are required to make a portion of the deposit “available” to customers within two or three days.
However, it may take a bank upwards of three weeks to verify and “clear” the check. Essentially, the bank is “lending” the customer the money until it can determine a check’s authenticity
Scammers are taking advantage of that timeline to steal cash from unsuspecting victims.
That’s what happened to Andre Khatchaturian, a Boston-area photographer and editor, this spring.
“It was a mother of a child. That’s what the scammer was posing to be,” Khatchaturin recalls. “It seemed it was a simple job.”
He says he was contacted by woman who wanted him to edit a music video for his daughter. She sent him all the files he needed and he got the job done.
The bill was $300 but the woman send Khatchaturian a check for $3,000.
“She apologized and says ‘Oh, I’m so sorry. I sent you 3000. Can you send me the difference back?” he recounted.
Khatchaturian deposited the $3,000 check. After the funds posted to his account, he electronically transferred the $2700 in overpayment back to the woman.
“The check she sent me bounced. That’s when I realized I’ve been scammed,” said the Southie resident.
25 Investigates heard from other victims of check fraud who lost money when fake checks they unwittingly deposited bounced after posting. We wanted to understand how checks that have already cleared ended up bouncing. We went to the Federal Trade Commission (FTC)for answers.
“Banks have to make deposited funds available quickly,” said Kati Daffan, Assistant Director in the Division of Marketing Practices at the FTC. “So the check may clear, but later once it’s all untangled that this was a scam, the bank will tell you that that was not a legitimate check. And then they will expect the consumer to hold the bag.”
Once a fraudulent check is deposited, the scammer will get the victim to send all or part of the funds back to them before the bank has time to realize the check is fake, usually as soon as the funds show up as “available” in the victim’s account.
There’s a common denominator in these types of scams, says John Breyault from the National Consumers League (NCL): If a stranger sends you a check and then asks for money back, it’s likely fraud.
“Unfortunately, it’s incredibly difficult to spot a fake check,” says Breyault. “The best thing to do if you get a check like these is, if you deposit it, wait at least a week, maybe two weeks before you do anything with that money. Somebody who wants you to do it before that time is just trying to scam you.”
Both experts say consumers should: be wary of strangers who overpay for an item or service; be careful wiring money to stranger; and immediately report check scams to your bank, police and FTC.
It was a hard and costly lesson for Khatchaturian. But one that he wants to share to prevent others from falling victim to scammers.
“Another mistake I feel like I made was I should have checked the address on the check because when I typed it, it’s like a widespread scam,” he said.
Months after the scam, he says his bank closed his case and he never got his money back.
NCL is urging congress to provide more protections to victims of check scams.
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