One of the largest risks to U.S. banks as far as fraud loss goes is counterfeit check scam. These scams originated several years ago in Nigeria, where corruption and lack of law enforcement have created a safe haven for this type of activity. Organized crime groups in Nigeria employ hundreds of people who work long hours in public internet cafés scamming us citizens. These groups are pulling in millions of dollars annually from unsuspecting victims overseas.
Originally, these groups would contact their victims via letter or fax, then lure them to their country where they would kidnap them and hold them for ransom. Now with the availability of computers and internet access, things have become much easier.
Some of these groups have left Nigeria to work in other parts of the world, such as the UK and Canada. Many other foreign organized crime groups have also copied the scams originally developed by the Nigerians.
In addition to the danger of our customers receiving counterfeit checks as part of these scams, we also need to be aware of another very real threat. Personal and business customers who deal with individuals or companies located outside the U.S. are at risk of having their account information compromised and used to create counterfeit items that are sent to unsuspecting victims of these scams. If these items are paid by the bank and later found to be counterfeit – the bank takes the loss. Scammers who work in their mailroom and make photocopies of checks received from U.S. companies have infiltrated companies in Canada. These copies are used to create counterfeit checks used in the scams we are about to discuss.
While we will be discussing the most common types of these scams, there are no hard fast rules here. The scams are always evolving and we see new twists all of the time. Banks rely heavily on their front line people to be alert to unusual circumstances and to ask questions of their customers.
Please try to remember your bank is questioning the transaction, not you. Banks have seen a lot of fraud and they simply do not want you to become a victim.
Common Scenarios Where Customers Receive Counterfeit Checks
Nigerian 419 Scam: This is the original scam from which all the others have developed. This scam involves the victim receiving a letter, fax or email from someone claiming to be a high level government official from a foreign country, commonly Nigeria. Sometimes they claim to be the wife of a high-ranking government official that has died or been killed. The individual tells the victim that they have a large sum of money, often from a U.S. contract with their country, that they and their associates would like to invest in the United States. They seek the assistance of someone with a U.S. bank account to assist them to get the money into the country in exchange for a percentage of the money.
If the victim agrees to help, they will be asked to wire money to pay expenses or to bribe officials to release the money. If the victim does not have the money, they will often be sent a check that they are instructed to cash or deposit and then wire the money (usually via Western Union or Money Gram). Of course, the check is counterfeit, and comes back after the money has been wired. This scam can escalate to huge sums of money if the victim wires the “bribe money” from their own funds. This signals that the customer has money and can likely deposit a larger check without raising suspicion.
Inheritance Scam: This scam evolved from the original 419 scam and has many of the same characteristics. As in the 419 scam, the victim receives a letter, fax or email from someone overseas, but this time they are writing to inform the victim that a long lost relative has died or been killed. The departed relative has substantial assets in the foreign country that they have left to the only surviving heir, the victim.
From here the scam follows the 419 scenarios as attorney fees and such must be paid to claim the inheritance. If the victim does not have the means to pay the fees, they are put in touch with someone who will loan them the money. The loan comes in the form of a counterfeit check. Again, these scams have the potential to evolve into very large sums of money.
Internet Auction Scam: Everybody loves eBay, including the scammers! This scam evolved from the 419 scam, but because it involved lower dollar amounts and new technology had a much higher percentage of success for the scammer. In this scam, the victim places an item for sale on the internet (not necessarily on eBay, often on local classified websites). The winning bidder contacts them to arrange payment, but there is a catch. The buyer is overseas and shipping needs to be arranged. Payment is sent in the form of a counterfeit check for thousands of dollars in excess of the purchase price.
The buyer is asked to wire the excess money to the buyer’s shipper, who will arrange pickup of the item (they are often told that there is a little extra money for them to keep for their trouble to sweeten the deal). The money is wired before the check comes back, leaving the victim (or their bank) out the money.
Lottery Scam: This is now the most popular of the counterfeit check scams, probably because of the high level of success that the scammers have had with it. It is also very difficult to detect because the checks are usually lower dollar amounts (less than $3,000 in most cases).
The victim will receive a letter or email notification informing them that they have won a lottery or sweepstakes. They deposit the check and wire funds back. Again, the check is returned & the victim is out the money.
Jim Lyle is Vice President of Sales at Community Bank. Community Bank is a locally owned, independent bank that offers comprehensive financial services to regional businesses and residents. Mr. Lyle is located in Community Bank’s Washington Business Center office and can be reached at 724-223-8311.