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Top Story:  In Digital Age, OCC Alerts Still Warn of Counterfeit Checks

06/11/2014

By Fleming Saunders
Public Affairs Operations

About once a week, “Alerts” appear in What’s New at the OCC. They warn of “Counterfeit Cashier’s Checks of So-and-So Bank, Center Town, America.” While cyber attacks, phishing, and viruses garner the headlines, old-fashioned hot checks still give headaches to bankers and regulators.

The alerts go out over the name of Ellen Warwick, Director for Enforcement and Compliance, and are delivered to the public through www.occ.gov. They also go to all national banks and thrifts as well as other regulators. Two dozen alerts were issued through April of this year, a sign that the problem is not going away anytime soon.

Criminals have used organization logos to commit schemes – very much like this letter that features OCC logos and information.

Criminals have used organization logos to commit schemes – very much like this letter that features OCC logos and information.

Says Warwick, “Each year, the prospect of getting free cash from a check dupes victims into sending some of the cash to the con artist. Working with banks, we get the word out nationwide, quickly shutting down many operations; but new ones always pop up. The banks find our Alerts to be a useful tool in notifying other financial institutions and the public of fraudulent schemes, which may aid the public in avoiding the schemes and suffering potential financial loss.”

The Special Supervision division helps expose the multitude of scams featured in OCC Alerts. Michelle Knott, a technical assistant in Special Supervision, tracks the all-too-common “mystery shopper” scam. The ruse plays off a legitimate industry that hires individuals to secretly evaluate the service of stores and other businesses. In this type of scam, a person receives a $1,500 cashier’s check in the mail written out to him or her. The “lucky” recipient is instructed to deposit the check at a bank and to use some of the cash to shop at well-known retail stores (“we’re not supposed to advertise the names,” laughs Knott).

Just like a legitimate mystery shopper, the individual is told to evaluate customer service at the store such as the “Smartness of the Cashier/Attendant.” The individual also evaluates the professionalism (and Smartness) of a wire transfer company by sending the remainder of the cash to the same person (crook) who mailed the phony check in the first place. The crooks typically promise that part of the proceeds will go to charity.

“By federal law,” says Knott, “the bank must accept the cashier’s check and offer immediate availability of funds up to $5,000. A bank teller looking for red flags will ask recipients if they know the senders. But often individuals say they expected the check because they received an e-mail notification about it.”

Since check clearing takes between two and 14 days, says Knott, “the crook takes the money and runs before the fraud is detected.” The individual who submitted the check to the bank is obligated by law to reimburse the bank for the loss. A small-town bank might get five or six customers bringing in phony checks. “The bank could also get hundreds of phone calls from worried consumers and other banks. That’s reputation risk, operation risk,” she says.

After being contacted by a besieged bank, Knott sends out an alert describing the name of the bank and the scam—including the name and e-mail address of the check issuer (con artist). It is easy to shut down phony e-mail addresses and phone numbers, says Knott, but “apprehending the criminals is impossible without law enforcement devoting an enormous amount of resources.” No sooner are old addresses and numbers disabled, the crooks turn up with new addresses and numbers elsewhere.

Knott warns that counterfeit checks can be sophisticated and misleading. The checks have realistic logos and coloring, and even thermal security “padlocks” or thumbprints. “Anybody can buy paper stock for a cashier’s check,” explains Knott. “It’s not like dollar bills, whose paper stock and security features are printable only by the government.”

Knott quotes a former check forger on how new technology makes scams easier. According to Frank Abagnale, “What I did in my youth [in the 1960s] is hundreds of times easier today. Technology breeds crime.” The onetime con artist (featured in the film Catch Me If You Can) now runs a financial fraud consultancy company and advises the Federal Bureau of Investigation.

Knott reminds victimized banks to file reports with police as well as suspicious activity reports with the Financial Crimes Enforcement Network. Consumers receiving counterfeit or fictitious items are advised to contact the Federal Trade Commission, Better Business Bureau, and the U.S. Postal Service. But Knott points out that “the whole fraud can be easily stopped at the mailbox level. If a check from a stranger offers you free money, contact the bank whose name appears on the check.”

“Scams have surged in recent months,” laments Knott, who works closely with the antifraud group of the National Consumer League. “Generally, they increase around the holidays when people need extra cash, and then wane. Now con artists find victims all year round.”

Fraudsters have used OCC logos in schemes

The “mystery shopper” scam is just one kind of check fraud—there are many others. Here’s an example of a fraudulent scam that targeted the OCC.

An OCC Alert on April 28, 2014, highlighted the scam. It involved a letter that was emblazoned URGENT EXTREMELY and appeared to be an official document from the U.S. government. It used a fictitious return address of the OCC’s Malaysian Office (the OCC has no Malaysian Office). According to the letter (or e-mail or fax), the recipient had $6,500,000 waiting to be transferred to his or her bank account from “KAF Investment Bank” in Malaysia. To release the money, the recipient was asked to send a mandatory 0.1% processing fee ($6,500 in this case) to cover the official-sounding Currency Capital Control Clearance fee.

Recipients of letters like this are often asked to also send a copy of their passport as well as personal data such as date of birth, Social Security number, address, and driver’s license number. Knott warns that this could set the victim up for future identity thefts. “Consumers should not simply trust a letter showing a government return address. They should verify the authenticity of the correspondence. Check the Internet for our OCC Alerts. If something sounds too good to be true, it probably is!”

Last Updated: 08/10/2014