chapter 6 check fraud final

Teller Education

Monroe Bank, Retail Administration Teller Education Last Updated: January 31, 2011

Chapter 6: Check Fraud, Scams & Schemes

Teller Education

Chapter 6

Check Fraud, Scams & Schemes Table of Contents

Learning Objectives ....................................................................................................................................... 2

Key Terminology ........................................................................................................................................... 3

21st Century Check Fraud, Scams & Schemes ............................................................................................... 4

The Mask of Deception ................................................................................................................................. 4

Case Study of a Split-Deposit Scam: The Shot that Really Stung ................................................................. 5

Stolen or Forged Checks ............................................................................................................................... 6

Altered Checks ............................................................................................................................................. 6

Spot Light on Check Security Features ................................................................................................. 7

Types of Alterations ............................................................................................................................ 8

Altered Figures .................................................................................................................................... 8

Altered Figures and Words ................................................................................................................. 8

Altered Payee ....................................................................................................................................... 8

Altered Endorsements ........................................................................................................................ 9

Checklist to Avoid Cashing an Altered Check .................................................................................... 9

Customer Checklist to Reduce Check Alterations ............................................................................. 9

21st Century Check Fraud Scams ................................................................................................................. 10

Fraud Prevention Absolutes........................................................................................................................ 12

Know Scam Tactics ...................................................................................................................................... 12

How do I ask the customer about a suspect check? ................................................................................... 13

Basics of Counterfeit Checks ....................................................................................................................... 14

Example of Counterfeit Official Check ........................................................................................... 14

Tips for Detecting Counterfeit Checks: .......................................................................................... 14

Check Fraud & 21st Century Scams ............................................................................................................. 15

Example of Mystery Shopper Scam ........................................................................................................... 15

Mystery Shopper Scam: The Shopping Corner, Inc............................................................................. 17

Customer Service Evaluation Tool ................................................................................................. 17

Why is the Mystery Shopper Scam Successful? ............................................................................. 17

Canadian Lottery Scams .............................................................................................................................. 18

Example of Canadian Lottery Scam Letter ..................................................................................... 19

Example of Canadian Lottery Counterfeit Check ........................................................................... 20

Work from Home Scams ........................................................................................................................... 21

Example of Work from Home Scam ............................................................................................... 22

Nigerian 419 Letters .................................................................................................................................... 23

Other Forms of the Nigerian 419 Letters ....................................................................................... 24

Social Engineering .......................................................................................................................... 24

Internet Auction Scams ............................................................................................................................... 25

Counterfeit Traveler’s Checks ..................................................................................................................... 26

Back of Counterfeit Traveler’s Check .......................................................................................................... 26

Why is this Traveler’s Check Counterfeit? .................................................................................................. 26

The American Express Smudge Test .............................................................................................. 27

Money Order Fraud .................................................................................................................................... 28

Other Red Flags of Money Order Fraud ......................................................................................... 28

United State Postal Service Money Orders ................................................................................................. 29

Check Fraud: United States Government Checks ....................................................................................... 30

Check Deception ......................................................................................................................................... 30

Check Kitting: The Flow of Deception ..................................................................................................... 31

Kitting Scenario : Personal Bank Accounts ............................................................................... 31

Kitting Scenario: Sole Proprietorship Accounts ............................................................................. 32

Non-Checks ................................................................................................................................................. 33

Chapter 6: Check Fraud, Scams & Schemes Monroe Bank Teller Education Last Updated: January 31, 2011

http://intranet/RO/Test Training Resources/Teller Training Manual/Working Source Folder Chapter

Storyboards/Chapter 6 Check Fraud Final.docx Page 2 of 36

Chapter 6

Learning Objectives

You will be able to identify the common patterns of check fraud scams

You will be able to identify some of the more common check fraud scams

o Lottery Scam

o Mystery Shopper Scam

o Split-Deposit Scam

You will be able to identify counterfeit official checks and their security features

o Money Orders

o Postal Money Orders

o Travelers Checks

o US Government Checks

You will understand other forms of potential check fraud:

o Writing checks on closed accounts

o Writing checks on accounts with non-sufficient funds

o How to detect “non-checks”

You will be able to identify check kitting schemes and know how to handle them

You will learn how to gain information from the customer about suspect checks and

what questions to ask.

You will learn about internet resources to help educate the customer about fraud

o Federal Trade Commission (FTC) website

o Fraud Watch International website

o Federal Bureau of Investigation (FBI) website


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Chapter 6 Key Terminology

Counterfeit Check: Counterfeit checks can take two forms: 1) genuine check stock with

falsified banking information or 2) redesigned checks containing valid account information and

forged signatures, allowing the criminal to deplete a valid account.

Altered Checks: Checks on which the original information has been changed, typically, to show

a larger numerical amount, written amount or altered payee.

Lottery Scams: A scheme designed by fraudsters to mail unsuspecting victims a large

counterfeit check with a letter that they have won the lottery. The victim must wire funds from

the cashed counterfeit check back to pay taxes and fees associated with the lottery.

Mystery Shopper Scams: A scheme designed to attract those looking for work with the lure of easy

money. In this scam, the victim receives a counterfeit check to cash at the bank and then must evaluate

a money services business by wiring the funds back to the fraudster. The victim is often asked to fill out

an mystery shop evaluation form to fax to the fraudster, giving the illusion of a real job as a mystery

shopper.

Nigerian (419) Scams: The Nigerian Advance Fee Scam, also known internationally as “419”

fraud after the section of the Nigerian penal code which addresses fraud schemes. The victim is

asked to provide up front or advance fees for various taxes, attorney fees, transaction fees or

bribes. There are many forms of the Nigerian s 419 scam, including: crude oil at below market

prices, inheritance from a long, lost relative and over paid contract transfers.

Internet Auction Scams: A scam that often preys upon sellers using sites such as EBay. The

seller will receive a counterfeit check or money order as payment for the posted item for sale,

however, the check is for more than the accepted price. The fraudsters (buyers) always have an

excuse for sending more than agreed upon and ask the seller to wire the extra funds back from

the cashed check.

Social Engineering: Social engineering is the act of manipulating people into performing

actions or divulging confidential information.


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21st Century Check Fraud, Scams & Schemes The Mask of Deception

Check fraud scams wear many different masks. In this chapter, we will discuss the most common ways that criminals mask their check fraud deceptions. What are reasons for check fraud?

Multi-Billion dollar industry leads to easy profit for the perpetrators

Relative ease of creating the scam and finding naive victims

Economic downturns and joblessness can lead to desperation for cash

Old fashioned Greed!

The tremendous cost of check fraud to banks makes it essential for employees to get involved in preventing check fraud and minimizing bank losses. As a part of this effort, employees should recognize the common types of check fraud they may encounter as well as understand the common patterns that exist.

Check Fraud

20 Billion in Losses per Year

25% Annual Growth Rate

Split-Deposit

Stolen or Forged

Altered

Fake Check Scams

Check Kiting

Deception


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A woman, age 33, comes into the bank to open a new checking account. As the seemingly normal event unfolds, the woman indicates that she is new to the area and has just started a nursing job at a local, well-known nursing home facility. Imagine that you are the Teller who assists the customer with a subsequent new account deposit with cash back in the amount of $2700. You observe the following details:

Professional nursing “scrubs” uniform

Nursing facility photo ID badge

Nursing facility payroll check of $3500

One day old state ID card issued by Indiana

There is only one issue with this bright, new customer: All of the above information was fake, including the counterfeit payroll check! The woman is actually a seasoned con-artist and walks out of the bank with $2700 from the deposited counterfeit check.

Now, that shot really stung!

Split-Deposit Scams

The split-deposit scam can be very difficult to detect because the criminal opens a new account

with the bank, often with cash, and later deposits worthless counterfeit checks with a request

for cash-back. True to their deceptive persona, the criminal’s façade can be extremely

convincing as illustrated in the below case study.

Case Study of a Split-Deposit Scam: The Shot that Really Stung

Why is this scam successful?

Because the fraudster seems to be depositing a legitimate check and only asking for a small

amount back compared to the deposited amount, banking staff often assume the transaction is

harmless. In the above instance, a new account exception hold of 7 days (See Funds

Availability policy) would have prevented access to the funds, thus, allowing the bank time to

determine that the payroll check was a counterfeit.

In all split-deposit cases, the transaction should be handled as if the entire check was being

cashed, therefore, with a strong attention to recourse and exercise of sound judgment. Again,

due the high risk of fraud associated with new accounts, it is important to utilize the new

account exception hold of 7 days.


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Stolen or Forged Checks

Criminals may steal checks and attempt to negotiate them fraudulently with, potentially, hundreds of tactics to commit this type of fraud. One tactic is to present a falsified identification card when attempting to cash a check. The avenues for this deception of many, below are a few to examine:

For the frauds described above, careful scrutiny of the identification and the customer’s manner may raise your suspicion. If you have any reason to suspect a check has been stolen, you should tell the customer that cashing the check requires supervisory approval. This provides you and your supervisor with the opportunity to discuss the situation and take appropriate action. Sometimes the customer may give away his or her criminal intent by simply walking out of the office.

Altered Checks An altered check is completely authentic, but one on which a criminal has changed the amount, the payee name, or other critical information. For example, a criminal may change a carelessly filled out numerical amount from $4 to $400 and the amount written in words from four to four hundred. (Checks that have empty space at the end of the amount line are likely targets for these frauds.) Criminals may also be able to alter the payee name on the check (Ink removing chemicals can be used to erase a name and insert a new one.) If a Teller notices two colors of ink or two styles of handwriting on a check, this can be an indication of fraudulent alteration. Always check with a Supervisor in such instances. To help combat check fraud, check producing companies are finding new paths in check design and technology. While the new features are not 100% effective in preventing all sources of fraud, they are helpful (See next page for check security features).

• Criminal steals check from the mail

• Criminal obtains fake ID to cash the check or purchase goods & services

Customer mails a check to pay a bill

• Criminal steals a box of checks from the mail

• Criminal obtains fake ID to cash the checks or purchase goods & services

New box of checks mailed to customer


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Chemically Sensitive Paper

Stains or spots may appear if a fraud perpetrator uses chemicals to alter handwritten information on checks.

Micro Printing A line of type normally too small to photocopy or duplicate clearly.

Spot Light on Check Security Features (Source: Deluxe Corporation)

While not 100% effective in the fight against check fraud, Deluxe incorporates proven security features in checks to help minimize fraud losses. These features help deter alterations and help banking staff to identify possible fraud.

Erasure Protection

Intended to reveal a white spot if someone tries to erase the printing on the check, this feature is an effective indicator that can be used to detect alternations.

Padlock Icon

This symbol indicates that security features present in the check are described in the Warning Box on the back.

Security Screen

The words "Original Document" printed lightly so checks are more difficult to duplicate.

Check Design

Intricate patterns, designs and colors which make it more difficult to alter the check.


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Types of Alterations Most altered checks are on-us checks, not foreign. Why is that the case? The criminal assumes that the teller is more likely to question a foreign check, while the account balance information for an on-us check can be more easily obtained. There are four common types of alterations: 1. Altered figures 2. Altered figures and words 3. Altered payee 4. Altered endorsement

Altered Figures When only the figure amount is altered, the person passing the check is hoping the teller will not look too closely at it.

A $10 check could be changed to $40. A careful teller will notice that the amount written in words reads “ten”.

A check that simple reads 50 in the numeric field can be changed easily to $500

Always check the written amount to see that it matches!

Altered Figures and Words Because most people look at the figures first, a crook is not likely to change the amount written in words without changing the figures. The words should be identical to the numbers, and if they do not agree, checks should be refused or returned. However, sometimes a crook gets lucky and gets a check that is not too difficult to alter in both spaces on the check.

For example, if the space for writing is not completely filled in by the maker, “one” dollar may become “one hundred” dollars or “four” may become “ninety-four.”

Altered Payee Businesses usually deposit their checks, so any check that is payable to a business and is presented for cash should be suspect. Crooks know this:

Watch for last names starting with “co” or “corp” which could have been changed, for example, “Frazier Co.” may be changed to “Frazier Collier.”


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Altered Endorsements This alteration is not as common because tellers are suspicious of cashing checks on second endorsements. For this scam to be successful, the criminal must falsify convincing identification as the final endorser of the check.

Teller Checklist to Avoid Cashing an Altered Check

Customer Checklist to Reduce Check Alterations Never write a check in pencil or with an erasable pen Put the name of the payee snugly against the words ‘Pay to the order of.’ Put the amount written in figures snugly against the dollar sign Draw a line filling in the blank spaces between the amount written in words and the

word “dollars” Spell out words like “company”, “corporation”, and “incorporated” Use the endorsement “for deposit only” as soon as a check is received

Always make sure that the amounts

written as figures and words agree

Look carefully at every check that comes

to your window and report any that

appear suspicious to your supervisor

Watch for check payees that could be

altered from business names

Watch out for customers who try to

distract you or make you hurry.

Be sure to positively identify the final

endorser.


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21st Century Check Fraud Scams Patterns of Deception

Connecting the Dots of Check Fraud Scams

School Days

In school, did you ever work on an

assignment where you had to connect dots to form a picture or shape? Perhaps you had a challenging puzzle at one time and were perplexed at finding a

common pattern? If you did, then understanding how to connect the dots of check fraud, scams and

schemes, now a global epidemic, will help you form a picture that reveals very common patterns, regardless of the specific scam type.

While the methods of 21st Century check fraud scams are many, they all have common patterns of deception when the dots are connected.

Sounds to good to be true: A letter from an unknown source will announce how to receive a large amount of money along with detailed instructions on how to redeem the funds.

Must wire funds back to the source: Detailed instructions tell the victim how to wire funds back to the source for payment of taxes, processing expense or fees.

Keep it quiet, don’t tell anyone: The letter will stress to not share the information with anyone, that confidentiality is essential to receive the funds.

Professional looking counterfeit check: Checks are extremely realistic and difficult to detect. Teller’s must initiate a conversation as to the check’s origin.


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Common Scams & Schemes

With scams now totaling multi-billion dollar proportions on a global scale, what are the

more common scams seen in today’s high tech environment? What Tellers should be

familiar with? What should Teller’s be prepared for?

1st Be informed of scam types and tactics 2nd Be observant and alert at the Teller line for indictors of scam activity 3rd Be ready to take action to prevent loss, both for the bank and customer

Scams

Lottery

Mystery Shopper

Work from

Home

Nigerian Letters

Internet Auctions


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Fraud Prevention Absolutes Know Scam Tactics

Teller Front Line Actions

Free is Free!

•No one pays for winning a lottery. Never!

• No one pays lottery taxes or fees by wiring funds in advance. Never!

If it Sounds to Good to be True, It Is!

•No one makes large sums of easy money from home or shopping. Never!

•No one wins a lottery they never entered. Never!

Beware of Strangers!

•Strangers will never offer you a share of a million dollars. Never!

•Strangers will never want to make you rich! Never!

Identify Fraud Threat

1Stop! Do

Not Proceed

2Seek

Supervisor Assistance

3


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Teller Questions?

How do I ask the customer about a suspect check?

Because today’s counterfeit checks look extremely realistic, Tellers must be proactive in conversations

with the customer as to the origin of the check. During this conversation, keep in mind that the

customer may not be aware they are actually a victim of a scam. Often times, the customer may truly

believe that the check is from a legitimate source.

Asking the Right Questions the Right Way?

Teller notes that the check is not typical for the customer's deposit

history pattern

"Ms. Jones, this is a pretty large check.

Did you win the lottery?"

"There are alot of scams today, did

you receive at letter with this check?"

"Did the letter ask you to wire money back to cover fees

or pay taxes?"

Teller notes a large difference between

the check amount and the account balance

"Mr. Jones, this is fairly large check, do you know who

sent it?"

"There are many scams today, we

want to help protect you ....."

"Do you know who sent the check and

did it come with any letters?"

Teller notes that the physical features of check seem suspect

"Ms. Jones, who sent this check to

you?"

"There are alot of scams today that ask you to wire money back...."

"Did you receive a letter with

instructions to wire back money?


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Websites, such as

www.freequickwire.com allow

criminals to create checks online,

further making check fraud

schemes simple and easy to

commit.

Basics of Counterfeit Checks Counterfeit checks can be copies of genuine checks or originally designed, fake checks. In a world of advanced computer software and printer technology, criminals can make excellent copies of genuine documents such as currency or checks. You should be particularly alert for signs of authenticity with the checks listed below. Frequent instances of fraudulent activity have occurred in transaction involving these types of checks:

Official Checks (Official Bank Checks, Postal Money Orders)

Traveler’s Checks

Government Checks

Example of Counterfeit Official Check

Tips for Detecting Counterfeit Checks:

Check to see if the routing number is valid and matches the drawee bank’s location. Criminals will change the MICR information to delay detection, allowing more time to commit the fraud.

Check the MICR number: Is it shiny or glossy? True MICR numbers are dull in appearance.

Look at the amount: Counterfeiters will often attempt to keep the check below the amount of $5000 so that it will not be subject to an exception hold. For checks over $5000, such as above, supervisor review is crucial.

http://en.wikipedia.org/wiki/Confidence_trick


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“Congratulations, you have been chosen to be become one of our valued Mystery Shoppers. Just cash the enclosed check of $4950 and wire back $4500 at Money Gram…..you keep $450 as your pay to evaluate a Money Gram employee!”

While this message in a bottle promises easy money to its victim, the cost of check fraud to U.S. consumers and business has surpassed 20 Billion per year with an annual growth rate of 25% according to the American Bankers Association.

Check Fraud & 21st Century Scams

Example of Mystery Shopper Scam

“The Shopping Corner, Inc.”

As the victim reads on, he or she is instructed how to complete the transaction as a Mystery Shopper, of course, which includes a trip to the bank with the enclosed counterfeit check (See page 17). The scam letter included a Mystery Shop “Evaluation Tool” to be completed about the Money Gram location with a fax number (See Page 18 ) to send the evaluation and MoneyGram receipt!


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Counterfeit Check: Mystery Shopper Scam

Why is this a Counterfeit Check?

The most damaging information are the circumstances that surround the check: An unsolicited letter with complete instructions on where to wire the funds after the

check is cashed at the bank. A statement of immediate urgency to wire the funds and fax the Money Gram form. A statement to keep the assignment confidential at all times which keeps family,

friends and bank employees from potential scam detection prior to cashing the check and wiring the funds.

Many counterfeit checks, due to sophisticated computer software and printers, appear completely legitimate and are extremely difficult to detect. In fact, professional counterfeiters will use quality, genuine check paper to further confuse their victims and evade detection. In the above example: The check paper is authentic, adding further detection barriers The routing number is authentic, but printed by the counterfeit operatives which

adds further detection barriers. Note that the fraction code also matches the routing number, very convincing to

the victim or Teller. The account number, printed bank information & logo and authorized signature

are all falsified. Missing padlock symbol on the front of the check Missing micro-printing on the border of the check


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Mystery Shopper Scam: The Shopping Corner, Inc.

Customer Service Evaluation Tool

Why is the Mystery Shopper Scam Successful?


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The Fraudster’s Shopping Bag

Tips from the Teller Line

Listen customer cues, for example, “I got a great new job getting paid to shop, can you believe that?”

Look for unusual deposit or check cashing patterns, for example, a sudden flow of larger checks given the customer’s history

Look for customer’s with a history Fresh Start, write-off or NSF history that bring in large checks to cash or to complete a split-deposit

Educate the customer about the scam and its prevalence

Seek supervisor assistance with helping a customer who is upset, not understanding or believing that the scam is real

Victim's Profile

Fraudster Methods


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Canadian Lottery Scams Moose, Bears and Counterfeit Artists

Example of Canadian Lottery Scam Letter

Congratulations!

You are the declared winner of De-

Lotto North American Sweepstakes

Lottery!

You are entitled to $125,000 US

Dollars! To get your money, you must

pay the taxes by MoneyGram or

Western Union directly to the tax

agent. Please do not use this check until

you call and keep this winning

CONFIDENTIAL until your claim has

been processed.


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Example of Canadian Lottery Counterfeit Check

Back of Counterfeit Check with Endorsement

Why is this a Counterfeit Check?

The routing number is that of bank owned by Key Bank which matches the fraction code as well, but was printed by the counterfeit operatives.

The account number has been falsified. The drawer name, signature and address have been falsified

The paper quality is genuine bank stock, very convincing.

The finishing touch is a phony hologram placed on the front of the check.


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Work from Home Scams

"Turn your Home Computer into a

Cash Machine! Get a computer

diskette FREE! Huge Selection of

Jobs! No experience needed! Start

earning money in days! Many

companies want to expand, but

don’t want to pay for office space.

You save them money by working in

the comfort of your home."

Modern Twist to Old Scams

With the new era of internet, email and cell phone technology, getting fraudulent communication out to a vast audience is inexpensive and easy. Despite this immense change in methodology, the victim profile remains largely the same.

Work-at-home fraudsters, such as the Nigerian 419 variety, often prey most heavily upon senior citizens, the disabled, mothers who want to stay at home with their children, people with low income, education and few job skills. Finally, greedy people who just want to get rich quick with little effort are also targets.

Work from Home Scam Patterns

Offer fast, easy money with little or no effort Large sums of income potential in just a few hours per day No education or training required Must wire or transfer funds back to the “employer” or other entity Usually involves a foreign official, organization or company


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Example of Work from Home Scam (Source: www.scamdex.com)

Dear Sir/Ms,

We are exporter’s base in Malaysia. We are major supplier of refractory,

heat and cold insulation materials. We export from Asia to Europe,

America, Canada and Australia. Our company was established in 1985

Here is a great opportunity for you to work from home or you’re present

Place of work and get paid weekly with little or no stress. It’s a job

With no emphasize on qualification, Sex, Age, Marital Status or Location

Within the UNITED STATES & CANADA .We are glad to offer you a job Position

in our company as a representative in the United States

of America & Canada.

We need someone to work for the company as a Representative/Book

Keeper/Customer Service in the U.S.A and CANADA, pending when the company

will be able to secure an office in your region, if you are interested in

transacting business with us we will be very glad.

The customer receives and verifies the products. After this has been done

the Customer has to pay for the products. About 90 percent of our

customers prefer to pay through Certified Cheques, Credit Card, Home

Equity line of Credit, E- trade account, based on the amount Involved. We

have decided to open this new job position for solving these

Problems.

YOUR TASKS ARE:

1. Receive payment from Customers

2. Monitoring Products and Information's from Customers.

3. You are entitled to ten percent on every Payment processed.

4. All issued payments to you after deduction of your percentage is to be

forwarded to the company.

For example you've got $60,000.You take your income: $6,000.00 Send to us:

$54,000.00. First month you will have 4-9 transactions on nothing less

than $30000-$60000.So you may calculate your income.* the average monthly

income is about $10000 * No form of investments from you. Payment of any

kind from you or upfront Payment.

This job may only take 1-3 hours per day. We understand it is unusual and

incredible job position. This job takes only 1-7 hours per week. You'll

have a lot of free time doing other job, you don't need to have an Office

for now, with time we may have one open for you base on your request,

you'll get good income and regular job. But this job is very challenging

and you should understand it and be Trustworthy.

We are looking only for the worker who will satisfy our requirements and


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Nigerian 419 Letters

An individual or company receives a letter or email from an alleged official representing a foreign government or agency.

An offer is made to transfer millions of dollars in “over invoiced contract” funds into your personal bank account. You receive numerous documents with official looking stamps, seals and logos testifying to the authenticity of the proposal.

Eventually you must provide up front or advance fees for various taxes, attorney fees, transaction fees or bribes to Nigerian government officials.

Example Nigerian 419 Letter

Lagos, Nigeria.

Attention: The President/CEO

Dear Sir,

Confidential Business Proposal

Having consulted with my colleagues and based on the information gathered from the Nigerian Chambers Of Commerce And Industry, I have the privilege to request for your assistance to

transfer the sum of $47,500,000.00 (forty seven million, five hundred thousand United States dollars) into your accounts. The above sum resulted from an over-invoiced contract, executed commissioned and paid for about five years (5) ago by a foreign contractor. This action was however intentional and since then the fund has been in a suspense account at The Central Bank Of Nigeria Apex Bank.

We are now ready to transfer the fund overseas and that is where you come in. It is important to inform you that as civil servants, we are forbidden to operate a foreign account; that is why we

require your assistance. The total sum will be shared as follows: 70% for us, 25% for you and 5% for local and international expenses incident to the transfer.

The transfer is risk free on both sides. I am an accountant with the Nigerian National Petroleum Corporation (NNPC). If you find this proposal acceptable, we shall require the following documents:

(a) your banker's name, telephone, account and fax numbers.

(b) your private telephone and fax numbers -- for confidentiality and easy communication.

(c) your letter-headed paper stamped and signed.

Alternatively we will furnish you with the text of what to type into your letter-headed paper, along with a breakdown explaining, comprehensively what we require of you. The business will take us thirty (30) working days to accomplish.

Please reply urgently.

Best regards

419 is a section Nigerian law that forbids

fraudulent activity, though rarely enforced

by the government.


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Other Forms of the Nigerian 419 Letters

Other forms of 419 schemes include cash on delivery (C.O.D.) methods. The most common forms of these fraudulent business proposals fall into six main categories:

1. Disbursement of money from wills 2. Contract fraud (C.O.D. of goods or services) 3. Purchase of real estate 4. Conversion of hard currency 5. Transfer of funds from over invoiced contracts 6. Sale of crude oil that is exceedingly below the market value

Social Engineering

The Art of Molding Victims

In Nigerian Letter scams, as with many, the criminal relies heavily upon what is termed “Social Engineering.” Social Engineering is the art of persuasion and gaining the victim’s trust. With

highly persuasive communication skills, the criminal has developed clever methods to mold the victim’s thinking, trust and decision-making.

“Social engineering is the act of

manipulating people into

performing actions or divulging

confidential information. While

similar to a confidence trick or

simple fraud, the term typically

applies to trickery or deception for

the purpose of information

gathering, fraud, or computer

system access; in most cases the

attacker never comes face-to-face

with the victim.”

Source: Wikipedia

http://www.ripoffreport.com/reports/0/176/RipOff0176882.htm

http://en.wikipedia.org/wiki/Fraud


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Internet Auction Scams

Sellers can be victims of fraud when buyers (fraudsters) send counterfeit checks or money orders as payment. The buyer (fraudster) sends a fake check or money order, typically, that

exceeds the cost of the item purchased. The so-called buyer (or the buyer's "agent") states that he made a mistake, or comes up with another reason for writing the check for more than the purchase price. In either case, the buyer asks you to wire back the difference after you deposit or cash the check. Later, the bank determines that the check is fraudulent, leaving the seller liable for the entire amount. The checks are totally counterfeit, but often good enough to fool Tellers and other banking staf

Example of EBay Scam Email

'Dear Seller,

Where is your bank? How far is your house from the bank? Kindly visit your bank as soon as

possible to have the check cashed and immediately you leave the bank, kindly visit Western Union

location to have the remainder of the money wire after you might have deducted the cost of your

item. Okay? Below is the name and address you will need for the wiring of the funds via western

union okay?

NAME - PATRICK RINGNALDA

ADDRESS -

270 VAN OSTERDESTRAAT

1073 T.V.AMSTERDAM

HOLLAND

After you might have transferred funds via western union a complete western union information

are needed for documentation:

Money Transfer Control Number (MTCN)

Senders full name and address

Exact amount of funds transferred after western union charges

should be sent to my e-mail address. [[email protected]]

http://www.freequickwire.com/


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Counterfeit Traveler’s Checks

Back of Counterfeit Traveler’s Check

Why is this Traveler’s Check Counterfeit?

According to the security features published by American Express, the above Travelers Check did not pass the “smudge test.” On authentic instruments, the denomination on the left side of the back of the check smudges with a moistened finger while the right side does not. The following page contains an exhibit that describes the smear test in more detail.


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The American Express Smudge Test

(American Express, 2007)


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Heat activated

security

feature did not

turn white

Money Order Fraud Example of Counterfeit Money Orders

Security Feature: Heat sensitive logo turns white then back to pink.

Other Red Flags of Money Order Fraud

Customers who frequently cash money orders with no legitimate business reason

Customers who present money orders with a non-local address, often out of state

Customers who present money orders with numbers in perfect sequence and dated for

the same day


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United State Postal Service Money Orders

Security Features


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Check Fraud: United States Government Checks (Abagnale, 2009)

Even United States Government checks are not safe from fraudulent enterprises and ambitions. As

previously mentioned, sophisticated computer software combined with superior color printers present

problematic barriers to counterfeit detection and prevention. The below illustration from Frank W

Abagnale’s website shows the security features found in and on US Government checks.

Check Deception Certain checking activities may or may not have fraudulent intent. These activities require special attention and possibly special handling depending on bank policy:

Checks drawn on insufficient funds

Checks drawn on a closed accounts

Checks with an unauthorized signature

Checks drawn on a nonexistent accounts


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Check Kitting: The Flow of Deception Check Kitting is the illusory practice of withdrawaling funds or writing checks on accounts that consist of, primarily, uncollected funds. The deceptive practice makes us of the 2-3 day float period from when a check is deposited and when it processes thru the banking sytem (recall the Federal Reserve System from Chapter 5).

Kitting Scenario : Personal Bank Accounts

Float Period

2 to 3 days 2. Customer then makes

similar withdrawal from

Monroe Bank account

3. Customer deposits check

from Credit Union account to

Chase Account

4. Customer makes cash withdrawal

from Chase for same amount

5. Customer deposits check from Monroe Bank to Credit Union account

1. Customer deposits check

from Chase account to

Monroe Bank checking

From the Teller front line, if you notice that a customer is making consistent deposits with

his or her foreign checks into their Monroe Bank account followed by prompt withdrawals

in the same or similar amounts, it is important to alert your supervisor of the details.

Check Kiting may not always be at hand, however, such behavior could indicate a need for

further investigation.


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Kitting Scenario: Sole Proprietorship Accounts

How does Joe pull-off this successful scheme?

Joe understands the check’s float time: He has 2-3 days for each check to process.

Joe uses multiple account titles: By using multiple Sole Proprietorships listing him as an Authorized Signer, Joe is able to provide an additional barrier to detection by not being listed as the primary owner on an account.

Joe uses legitimate business practices: Joe understands that many business owners have multiple business names for legitimate reasons, thus, adding more barriers to detection.

Day 1

Joe wrties a $550 check from his Chase personal account to his Monroe Bank business account , Joe's Painting Service

Later in Day 1...

Joe writes a $550 check from Joe's Painting Service to his Monroe Bank business account, Handyman Services

Later in Day 2...

Next, Joe withdrawals $550 from his Monroe Bank business account, Handyman Services

Day 3

Joe writes another check for $550 from Monore Bank to his Chase account to cover the 1st deception

Joe is an Authorized

Signer on both

business accounts


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Non-Checks A typical situation in which check fraud may arise involves non-checks. At first glance, these are instruments that appear to be negotiable, but that are not actually valid. What is the source for non-checks?

Marketing mailings from groups or businesses include instruments that appear to be checks. Closer examination reveals, however, that these are not valid checks.

Knowledge true check features and details will enable you to clearly recognize when an item is not negotiable.

In addition, you should be sensitive to the fact that honest customers may present non-checks for cashing. They may have returned merchandise to a company and the company sent them a credit memo that mimics a check. The customer may mistake this item for a check and try to cash it.

When the person is a known and established customer, you will need to be especially sensitive to their feelings and be careful not to imply that you think he or she is a criminal.

Non-Check Example of Credit Voucher

No MICR number, including routing and account information

No Drawee listed on the item (bank the check is drawn on)

Language: “Non-Negotiable Not a Check”

Language: “Credit Voucher Return With Order”


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Chapter 6 Review

Thank You for Your Participation!

chapter 6 check fraud final

Documents

century check fraud

check alterations

suspect check

century scams

altered checks

home scams

check security features

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