Savvy scam artists take advantage of the sense of security banking customers feel around cashier’s checks and money orders, and they use fake money orders or cashier’s checks to steal money from victims. In most cases, by the time your financial institution realizes the cashier’s check or money order is fraudulent, your customer has likely spent the funds, putting their account in the red.
Your customer may end up suffering the loss, or they may just walk away, leaving your financial institution with a loss. Even if you can recoup some of the funds by pursuing collection activity, you still end up losing money your business needs to survive and thrive.
To protect your financial institution and your customers, you should be aware of the main types of cashier check and money order fraud. Here’s what you need to know.
Anatomy of a Scam
Cashier’s check and money order scams always tend to feature a few core elements:
- The person issuing the payment refuses to use another type of payment method. They insist on a money order or a cashier’s check.
- The payment is more than the recipient needs or is entitled to receive.
- The issuer requests the recipient to return some of the funds in cash, through a wire transfer, or with another secure method of payment.
Although these scams can be done with either cashier’s checks or money orders, they tend to involve cashier’s checks simply because cashier’s checks have higher limits. Money orders are issued by post offices, grocery stores, and other entities, while cashier’s checks are only issued by financial institutions. Money orders tend to be capped at about $700 to $1,000, but cashier’s checks are often for up to $5,000 or more, allowing the scam artist to potentially receive a larger sum of money.
Types of Cashier’s Check Scams
To lure in victims, scam artists use a variety of different lies. Some of the most popular scams that have emerged over the last few years include the following:
- Check Overpayment: With this scam, the thief contacts someone who is selling something over Craigslist, in a classified ad, or even at a rummage sale. They tell the seller that they can pay with a cashier’s check or a money order, but the check is over the sale price. To entice the buyer to accept the fake money order, the scam artist might even offer to pay a bit extra. The victim gives the “buyer” the change in cash or potentially even wires change to them. By the time the fake money order or cashier’s check is detected, the thief is long gone with the change and the for-sale item.
- Secret Shopper: This scam can take a few different forms, but usually, the scam involves offering a victim a job as a secret shopper who needs to review a wire transfer service. To help the “secret shopper” get started, the scam artist sends over a fraudulent cashier’s check, and they direct the shopper to deposit the check, keep some of the money for their payment, and wire the rest of the funds to a recipient. After sending the funds, the secret shopper should review the service. Of course, however, the scammer is not really interested in a review. Once they receive the wired funds, they disappear, and eventually, the victim realizes they have been duped when the check doesn’t clear.
- Foreign Lottery: The scam artists tells the victim that they have won a lottery. They can receive a giant cashier’s check, but they have to pay a few taxes or processing fees. If the victim believes the lies, they deposit the fake check, they withdraw funds for the “taxes” or “fees” and then dispatch those amounts. They may even start spending their winnings. Then, the cashier’s check proves to be fraudulent, the victim is left with an overdrawn bank account.
- Foreign Wealth Scam: Sometimes called the “Nigerian prince scam,” this heist starts with an email or a social media message from a prince who’s been rejected by their family, a scared diplomat, or another person who claims to be in danger in their current position. They need to escape, and they explain the reasons to their victim. First, however, they need to get some funds out of their country, and the victim is the only person who can help. Pretending to be a sympathetic character, the scam artist tells the victim that they will send a money order, and the victim should cash the money order and send some funds back in cash (usually through a wire transfer). In return for the favor, the victim gets to keep some of the money. Again, of course, the victim loses the funds they contribute when the bank realizes the cashier’s check is a fake.
- Money Mule: Often cast as a check processing work-at-home job, this cashier’s check scam can often be part of a larger money laundering operation. Basically, the victim gets a fake work-at-home job processing checks. They deposit the checks into their bank accounts, they send the cash to a recipient as instructed by their “boss”, and they keep some money as payment. Sometimes with this scam, the scam artist starts with real cashier’s checks, and then, after they establish trust with the victim, they issue a large fake cashier’s check.
Reverse Money Order Scams
In some cases, these scams work in reverse. They don’t rely on fake money orders or cashier’s checks. Instead, they focus on convincing the victim to send a money order or a cashier’s check to the scam artist. These scammers request money orders or cashier’s checks because the funds are verified, and they don’t have to worry about the victim issuing a stop payment as they can with personal checks
These money order scams take the following forms:
- Stranded Friends or Loved Ones: The scam artist pretends to be a friend or relative of the victim. They may hack the friend or relative’s email or social media accounts and send messages from there; they may make up a fake email account or social media profile that appears to be from the relative; or they may even just call the victim and pretend to be their loved one. They say they are stranded in another country, and they need money to get home. Sometimes, they may even pretend to be kidnapped and request a ransom.
- Romance Scams: Often perpetuated on widowed people or other victims perceived to be emotionally vulnerable, this scam requires the scam artist to create an emotional connection with the victim. Often, they start by creating a fake social media or online dating profile, and they spend a lot of time messaging the victim. Once the victim is emotionally attached, the scam artist requests a money order or cashier’s check. In some variations of this scam, the thief may obtain explicit photos from the victim, and then, they may blackmail them in exchange for not releasing the photos.
- Debt Collection: Pretending to be a debt collector or the Internal Revenue Service (IRS), the scam artist contacts the victim, threatens them about a fake debt, and requires them to send a cashier’s check or a money order to them.
These are the most common scams involving cashier’s checks or money orders. To protect your financial institution, you need to be aware of these scams, and you need to work on educating your customers, so they don’t fall victim and leave you holding the loss. At the same time, you also need quality fraud protection tools that identify red flags and automate the fraud detection process so that you can reduce fraud without increasing labor costs.
At SQN Banking Systems, we make fraud protection easy for our clients. To learn more and to get connected with the right tools for your financial institution, contact us today.