We had a customer deposit a counterfeit cashier check. We did not place a hold on the funds. The customer wired $20,000 out of the country. This check wound up being a part of a middle eastern scam ring. He was selling a card the buyer gave him a check for $30,000 more than the purchase price and asked him to wire $20,000 and he got to keep $10,000 for his trouble (typical scam). The member called after depositing the check to see if the funds were available and we said yes they were available, he took that to mean that funds were guaranteed and proceeded to spend the money. Now the check was returned, the customer is claiming he is not liable because we did not hold the funds. Isn't the customer liable and don't we have the right to collect from him? He is threating to sue, so we have a case to stand on?

Regulation CC does not require a bank to hold funds. As far as I'm concerned the customer is liable for the funds.

Is there anything in the "small print" of the terms and conditions of your checking accounts?

I agree, you have a right to charge an unpaid item back to the depositor, and especially so if it wasn't deposited in good faith.

So what are we to do if we want to CYA?

"Yes, sir, those funds are available for you to withdraw, but we cannot guarantee the checks you deposited are any good, and they might come back to bite you in the . . ."

This is getting to be quite a popular scam. I've heard of three separate instances just today! Usually, these victims are selling a car over the internet. We should all keep our eyes open for this type of situation.

A teller in one of our branches CAUGHT a counterfeit Cashier's Check that a customer wanted to deposit. The customer wanted to deposit the check to their savings account and get cash-back.

The teller reviewed the list of reported stolen/counterfeit checks (I think the one on BOL!) and noticed the check was from a bank on the report. Her supervisor called the bank and found it was, indeed, counterfeit.

The customer told us he had been sent the check from someone in Nigeria!

Jweber, join the club! We are in the middle of a situation that is almost exactly as you have described. Customer deposited counterfeit item, asked if the funds were available which they were because no hold was placed, sent money to Nigeria, check came back, suing bank for telling him the check cleared. If you would like to private message me or e-mail me at tammerman@bankcnb.com I would be happy to discuss this with you further "offline". One word of advise would be to get your bank's legal council up to speed on this, because your customer will most likey come after the deep pockets of the bank and I am sure their lawyer is licking his chops over this one!

Unless you put a large item exception hold on this check, it would have been a next-day item if the customer had deposited it correctly. Credit approval or not it would have been available.

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Unless you put a large item exception hold on this check, it would have been a next-day item if the customer had deposited it correctly. Credit approval or not it would have been available.

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This is where Reg CC gets a little sticky - IMHO.

Technically the item deposited does not even come under Reg CC jurisdiction for a Next Day item becauase it's not really drawn on a bank - it only LOOKS like it's drawn on a Bank.

So the real heart of the issue is - who's responsibility is it to determine if a Cashier's Check is legit or forged?

Oooh - idea for non-interest fee income - We'll charge a fee to call the issuing bank to determine if your Cashier's Check is real or fake. (Yeah - a customer could do it themselves, but would they really?) I think a lobby sign announcing such a fee would give folks some reason to pause.....

I see a huge training opportunity here.

Why not ask the depositor what he plans on doing with the funds? Not only will this help you uncover answers such as 'I'm wiring the funds to the individual who bought my car,' but it is also a means of uncovering sales opportunities. From a relationship building standpoint, this may give you a chance to cross sell loans, investments, CD's, etc. in the case of legitimate transactions.

In a lot of cases with these scams, the customer is "warned" by the con artist not to disclose to anyone what they are doing. The scammer tells them that people will try to talk them out of it if they find out about this golden opprotunity. We directly warned one customer that they were being scammed, even showed them articles about the scam, and they later went through with it anyway. The bad guys smooth talked them into it.

Ouch.

I hope you weren't left holding the bag on that one.

ALL I CAN SAY IS "OWWWWW" SORRY

Small community banks may have a low enough volume of deposited cashier's checks to identify them all and have someone calling the issuing bank every day.

Unfortunately, for most of us, the cost and inefficiency of doing this far outweighs the benefits. But the basic question is valid - how do we address this growing risk?

Greed is the bottom line. People actually think they can make $10K doing almost nothing, and it is your fault it happened.

We had an ex-employee fall victim to a similar scam and now we will be seeking a suit, judgment and lien on her home in order to recover funds.

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If you are going to run the credit risk of allowing a customer to draw funds on an uncleared cashier's check shouldn't you do this for the protection of your bank?

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It depends on the amount of the check in relation to the balance in the account.

At the very least, however, I do wish 20/20 or Primetime would do a story. They are usually balanced in their approach and could explain why a bank would make money from a "cashier's check" available - but the liability is still on the depositor.

You know - most Escrow and Title Companies refuse to accept a Cashier's Check to close a deal unless the check has been deposited for X number of days before. That has been their policy for quite a number of years. If you have to bring in $$ to close on the final day, you usually need to wire it.

Has anyone considered lobby sinage and/or stmt messages to reiterate to customers the risk of drawing against uncollected funds?

Before setting a threshold, we need to find out what is the median amount of these fraudulent items. I would suspect the amount is lower than $10,000.

My husband and I are victims of this scam, and we started a message group and website at http://www.geocities.com/scamvictimsunited/ to help spread the word to others. In just a few months the membership of the group has grown very quickly. The biggest problem is that the victims of this scam have no where to turn to. There is no agency or department that will take our information and investigate the scam. The FBI has told us our situation is too small for them to look into and the Secret Service just puts our info "on file" but no one is trying to track these people down. The people running these scams need to be brought to justice! Let's just think for a minute . . . where do you think all that money is going to and what is it buying?

I do feel that our fight has had a few victories. I have been contacted by people who have found our site in time to realize that the deal that they were entering into was a scam, and it saved them thousands of dollars. We have also worked with Western Union and I know that they have started blocking the names and addresses of know scammers so that if another person tries to wire that same person money the transaction will not go through. But these are just baby steps.

There needs to be laws that hold the banks responsible for releasing the funds from these checks before they verify that the check is good, and then telling the customer that the check is good only to find out days later that it is not. If they know it takes 10 days for the check to clear they should have to tell the customer that, and if they do not they are the ones that should be out the money. Also, banks are issued warnings from the FDIC when cashier's checks are stolen from other banks, yet they do nothing to increase the security measures that they take when handling a cashier's check.

Below is a list of recommendations that we presented to our Senator's office to help protect others from this scam.

Counterfeit Cashier's Check Scam - Ideas for Consumer Protection

We are asking our government to take measures to protect banking customers from this type of unfair and deceptive business practice. The banking system is failing to verify these checks and allowing counterfeit cashier's checks to pass into the system which impedes the national interest of the United States because it finances crime, undermines the integrity of the international financial system, impedes the international fight against corruption and drug trafficking, terrorism and distorts economics. United States banks are frequently used by other countries to receive large funds from unsuspecting Americans because the banks often fail to screen, monitor and check the transactions for their customers.

Our recommendations for improved customer protection from counterfeit cashier's checks include:

- Requiring banks to give full disclosure of the true time period for check clearance to the customer
- Multiple security watermarks on all cashier's checks to make them more difficult to counterfeit
- Require that funds cannot be released until verified as good by the bank, unless the customer signs a release
- Hold financial institutions liable for any monetary loss due to the customers reliance on false, inaccurate or misleading statements by bank and their employees
- Mandatory holding periods on all checks of a substantial amount, unless the customer signs a release
- Setting a time period, such as 30 days, in which by law all banks must verify the funds are good on all cashier's checks. Any issues with the check after this time period are the responsibility of the bank.
- Creating an agency or department of the government that will investigate counterfeit cashier's check scams and oversee that the banks are following the laws that may be created in relation to cashier's checks

These items will help to ensure good business practices, customer financial safety, and reduce the use of counterfeit checks as a means of fraud. If financial institutions understand that they will be help totally liable for any monetary losses due to false or misleading statements or neglect to follow the above described check clearing and verification process the financial institutions will take measures to protect themselves from this type of loss, thus protecting the customer, the financial system, and reducing the criminal activity of producing counterfeit cashier's checks. Our financial institutions are our last defense against this type of fraud, so it is important that these customer protection laws be created to ensure that they are working with and for their customers in order to reduce such activity.

The public needs to know that cashier's checks are not any safer than personal checks.

Thank you,
Shawn and Jeff Mosch
There is strength in numbers. Scam Victims United
http://www.geocities.com/scamvictimsunited/

I am sorry that you had to find out about this scam the hard way. And I applaud your efforts to educate others, as well as the positive results of your efforts.

But I invite you to take a closer look at the above posts to see what banks are doing to put the brakes on this scam when they spot it. We are forced to balance our efforts in reducing fraud with complaince with federal funds availability rules. The Expidited Funds Availability Act is one of the most difficult to understand- even for a banker. And consumers, as well as frontline staff seldom distinguish between when funds are available and when a check has cleared.

All in all, there are a number of different solutions to this problem, and we need to seek out the ones that provide the maximum benefit with minimum disruption. Changing funds availability rules will not accomplish this, nor will holding banks liable for their customers' losses, as both would severly disrupt our payments systems.

I, too would love to see more agressive pursuit of the people that commit this fraud, but with terrorists taking up the bulk of our investigative resources, I cannot have any realistic hope that this will happen.

I believe that consumer education is our best weapon, as is the case with most fraud and deception. Sites such as this one and yours go a long way toward achieving that end, and I encourage you to continue to get the word out. If you are looking for additional resources, please check out the links at the bottom of the second column, under the Nigerian Fraud heading, on the Banker's Online Launch Pad.

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There needs to be laws that hold the banks responsible for releasing the funds from these checks before they verify that the check is good, and then telling the customer that the check is good only to find out days later that it is not. If they know it takes 10 days for the check to clear they should have to tell the customer that, and if they do not they are the ones that should be out the money. Also, banks are issued warnings from the FDIC when cashier's checks are stolen from other banks, yet they do nothing to increase the security measures that they take when handling a cashier's check.

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You must also understand that these checks represent a very small portion of the total transactions a bank handles every day. Federal law REQUIRES a bank to make a deposit from a "Cashier's Check" available the day after deposit. If banks had to start calling on every cashier's check that was deposited, service charges would have to go up to cover the costs. Would you accept a $10 charge for depositing a Casier's Check?

Banks are subject to criticism and penalties if they dare place holds for a longer period of time than allowed by the regulation.

If the law you proposes passes, then banks may simply refuse to accept Cashier's Checks for deposit. The alternative is an expensive and time consuming routine known as sending a check for colletion.

A very simply way to protect yourself is to call the bank that issued the Cashier's Check to see if it is a valid and authentic item.

Banks do not want to see their customers get ripped off, but we cannot oversee every transaction a customer may want to do. The best thing is to get a national news story about this scam with a warning to people that they need to confirm if a Cashier's Check is really authentic before accepting it on face value.

I've seen people really scruitinize a $100 bill, but not give a second thought of how easy it is to counterfeit a "Cashier's Check." Watermarks and security measures would only be good if the people receiving the check knew exactly what those security measures were supposed to be. I have seen counterfeit's that include so-called "security features." Requiring a uniform set of security features may also not solve the problem as it would simply be a matter of time before the fraudsters discoverd how to counterfeit the security measure, and again, is the general public really going to learn all about those security measures? We still have customers who write their PIN number on their ATM card!!!

If banks are supposed to instead accept liability for ensuring all of the proper watermarks and security measures are in place, the again - either the processing fee will increase, or the bank will simply refuse to accept the items for deposit.