Banking Department Urges Caution when Cashing Cashier's Checks from People You Don't Know

From the Pennsylvania Department of Banking

There have been an increasing number of Pennsylvanias reporting that they are being defrauded by counterfeit cashier's checks.

In general, the fraud unfolds like this: A consumer is part of a fairly large financial transaction with someone who generally says that they live outside of the United States. The types of transactions that have been reported include payments for large items purchased through online auctions, deposits for apartments, and fees for nanny services, for example.

The so-called "buyer" sends an official-looking cashier's check to pay for the service. The consumer, then, takes the check to the bank and cashes it.

There are two ways the scam can unfold: In the first, the buyer sends a check for well over the amount of the purchase (with some excuse about why) and asks the consumer to immediately refund the difference once they've cashed the check. In the second, the buyer waits a day or two (but only a very short time) and makes some excuse for canceling the transaction and asks the consumer to wire all of the money back.

A similar scam suggests that the consumer has "won" a lottery or other prize, but must send some of the proceeds of the check back for some specific reason, like processing or taxes.

The counterfeit cashier's checks are such good reproductions that they're difficult to spot, even by experienced financial professionals. Despite the fact that the consumer's bank cashes the check, it will not be honored when the bank presents it to the "issuing" institution for payment. The bank then, requires the consumer to return the funds.

The problem is that, by the time the fraudulent check works its way through the banking system (which can sometimes take more than 30 days), the con-artist has already taken the consumer's money.

You can protect yourself by:

  • understanding that when cashing a cashier's check, even though the bank has provided you with the money, you are responsible for the funds until your bank has received the proceeds from the institution which originally issued the check
  • being cautious of transactions with people you don't know purchasing items via cashier's checks
  • avoid any situation where someone pays more than the purchase price of an item and demands that the extra money be returned
  • being suspect of any cashier's check that just shows up in the mail, especially if it has a "congratulations" letter attached
  • holding any funds provided by cashier's check from someone you don't know for 30 - 45 days before using those funds, especially when you have any sense that the transaction is out of the ordinary.

If you believe that you've been the victim of this type of scam, please call the Pennsylvania Attorney General's office at (800) 441-2555, the U.S. Secret Service at (202) 406-5850, or the Pennsylvania Department of Banking at (800) PA BANKS.