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Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
Chapter 6 Check Fraud Final
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Chapter 6 Check Fraud Final

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Instructional Design Example from Monroe Bank.

Instructional Design Example from Monroe Bank.

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  • 1. Teller EducationChapter 6: Check Fraud, Scams & Teller Education Schemes Monroe Bank, Retail Administration Teller Education Last Updated: January 31, 2011
  • 2. Chapter 6 Check Fraud, Scams & Schemes Table of ContentsLearning Objectives....................................................................................................................................... 2Key Terminology ........................................................................................................................................... 321st Century Check Fraud, Scams & Schemes ............................................................................................... 4The Mask of Deception ................................................................................................................................. 4Case Study of a Split-Deposit Scam: The Shot that Really Stung ................................................................. 5Stolen or Forged Checks ............................................................................................................................... 6Altered 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 ............................................................................. 921st Century Check Fraud Scams ................................................................................................................. 10Fraud Prevention Absolutes........................................................................................................................ 12Know Scam Tactics ...................................................................................................................................... 12How do I ask the customer about a suspect check? ................................................................................... 13Basics of Counterfeit Checks ....................................................................................................................... 14 Example of Counterfeit Official Check ........................................................................................... 14 Tips for Detecting Counterfeit Checks: .......................................................................................... 14Check Fraud & 21st Century Scams ............................................................................................................. 15Example 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? ............................................................................. 17Canadian Lottery Scams .............................................................................................................................. 18 Example of Canadian Lottery Scam Letter ..................................................................................... 19
  • 3. Example of Canadian Lottery Counterfeit Check ........................................................................... 20Work from Home Scams ........................................................................................................................... 21 Example of Work from Home Scam ............................................................................................... 22Nigerian 419 Letters.................................................................................................................................... 23 Other Forms of the Nigerian 419 Letters ....................................................................................... 24 Social Engineering .......................................................................................................................... 24Internet Auction Scams............................................................................................................................... 25Counterfeit Traveler’s Checks ..................................................................................................................... 26Back of Counterfeit Traveler’s Check .......................................................................................................... 26Why is this Traveler’s Check Counterfeit? .................................................................................................. 26 The American Express Smudge Test .............................................................................................. 27Money Order Fraud .................................................................................................................................... 28 Other Red Flags of Money Order Fraud ......................................................................................... 28United State Postal Service Money Orders................................................................................................. 29Check Fraud: United States Government Checks ....................................................................................... 30Check Deception ......................................................................................................................................... 30Check Kitting: The Flow of Deception..................................................................................................... 31 Kitting Scenario : Personal Bank Accounts ............................................................................... 31 Kitting Scenario: Sole Proprietorship Accounts ............................................................................. 32Non-Checks ................................................................................................................................................. 33
  • 4. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 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 http://intranet/RO/Test Training Resources/Teller Training Manual/Working Source Folder Chapter Storyboards/Chapter 6 Check Fraud Final.docx Page 2 of 36
  • 5. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Chapter 6 Key TerminologyCounterfeit Check: Counterfeit checks can take two forms: 1) genuine check stock withfalsified banking information or 2) redesigned checks containing valid account information andforged signatures, allowing the criminal to deplete a valid account.Altered Checks: Checks on which the original information has been changed, typically, to showa larger numerical amount, written amount or altered payee.Lottery Scams: A scheme designed by fraudsters to mail unsuspecting victims a largecounterfeit check with a letter that they have won the lottery. The victim must wire funds fromthe 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 easymoney. In this scam, the victim receives a counterfeit check to cash at the bank and then must evaluatea money services business by wiring the funds back to the fraudster. The victim is often asked to fill outan mystery shop evaluation form to fax to the fraudster, giving the illusion of a real job as a mysteryshopper.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 isasked to provide up front or advance fees for various taxes, attorney fees, transaction fees orbribes. There are many forms of the Nigerian s 419 scam, including: crude oil at below marketprices, 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. Theseller 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 anexcuse for sending more than agreed upon and ask the seller to wire the extra funds back fromthe cashed check.Social Engineering: Social engineering is the act of manipulating people into performingactions or divulging confidential information. Page 3 of 36
  • 6. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 21st Century Check Fraud, Scams & Schemes The Mask of DeceptionCheck fraud scams wear many different masks. In this chapter, we will discuss the mostcommon ways that criminals mask their check fraud deceptions. What are reasons for checkfraud?  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 involvedin preventing check fraud and minimizing bank losses. As a part of this effort, employeesshould recognize the common types of check fraud they may encounter as well as understandthe common patterns that exist. Split- Deposit Stolen or Deception Forged Check Fraud 20 Billion in Losses per Year 25% Annual Growth Rate Check Altered Kiting Fake Check Scams Page 4 of 36
  • 7. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Split-Deposit ScamsThe split-deposit scam can be very difficult to detect because the criminal opens a new accountwith the bank, often with cash, and later deposits worthless counterfeit checks with a requestfor cash-back. True to their deceptive persona, the criminal’s façade can be extremelyconvincing as illustrated in the below case study. Case Study of a Split-Deposit Scam: The Shot that Really Stung 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! scam successful? Why is thisBecause the fraudster seems to be depositing a legitimate check and only asking for a smallamount back compared to the deposited amount, banking staff often assume the transaction isharmless. In the above instance, a new account exception hold of 7 days (See FundsAvailability policy) would have prevented access to the funds, thus, allowing the bank time todetermine that the payroll check was a counterfeit.In all split-deposit cases, the transaction should be handled as if the entire check was beingcashed, 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 newaccount exception hold of 7 days. Page 5 of 36
  • 8. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Stolen or Forged ChecksCriminals 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 falsifiedidentification card when attempting to cash a check. The avenues for this deception of many,below are a few to examine: Customer mails a • Criminal steals check from the mail • Criminal obtains fake ID to cash the check or check to pay a bill purchase goods & services New box of checks • Criminal steals a box of checks from the mail • Criminal obtains fake ID to cash the checks or mailed to customer purchase goods & servicesFor the frauds described above, careful scrutiny of the identification and the customer’smanner 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. Thisprovides you and your supervisor with the opportunity to discuss the situation and takeappropriate action. Sometimes the customer may give away his or her criminal intent by simplywalking out of the office. Altered ChecksAn 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 carelesslyfilled out numerical amount from $4 to $400 and the amount written in words from four to fourhundred. (Checks that have empty space at the end of the amount line are likely targets forthese frauds.) Criminals may also be able to alter the payee name on the check (Ink removingchemicals can be used to erase a name and insert a new one.) If a Teller notices two colors ofink 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 designand technology. While the new features are not 100% effective in preventing all sources offraud, they are helpful (See next page for check security features). Page 6 of 36
  • 9. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 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 ProtectionIntended to reveal a white spot if someone tries to erase the printing onthe check, this feature is an effective indicator that can be used to detectalternations.Padlock IconThis symbol indicates that security features present in the check are described in the WarningBox on the back. 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. 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. Page 7 of 36
  • 10. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Types of AlterationsMost altered checks are on-us checks, not foreign. Why is that the case? The criminal assumesthat the teller is more likely to question a foreign check, while the account balance informationfor 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 endorsementAltered FiguresWhen only the figure amount is altered, the person passing the check is hoping the teller willnot 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 WordsBecause most people look at the figures first, a crook is not likely to change the amount writtenin words without changing the figures. The words should be identical to the numbers, and ifthey do not agree, checks should be refused or returned. However, sometimes a crook getslucky 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 PayeeBusinesses usually deposit their checks, so any check that is payable to a business and ispresented 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.” Page 8 of 36
  • 11. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011Altered EndorsementsThis alteration is not as common because tellers are suspicious of cashing checks on secondendorsements. For this scam to be successful, the criminal must falsify convincing identificationas the final endorser of the check. Teller Checklist to Avoid Cashing an Altered Check  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.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 Page 9 of 36
  • 12. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 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 patternsof 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. Page 10 of 36
  • 13. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 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 Lottery Internet Mystery Auctions Shopper Scams Work Nigerian from Letters Home Page 11 of 36
  • 14. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Fraud Prevention Absolutes Know Scam Tactics Free is Free! If it Sounds to Good Beware of Strangers! •No one pays for winning a to be True, It Is! •Strangers will never offer lottery. Never! •No one makes large sums you a share of a million • No one pays lottery taxes of easy money from home dollars. Never! or fees by wiring funds in or shopping. Never! •Strangers will never want advance. Never! •No one wins a lottery they to make you rich! Never! never entered. Never! Teller Front Line Actions Identify Stop! Do Seek 1 Fraud Threat 2 Not Proceed 3 Supervisor Assistance Page 12 of 36
  • 15. Chapter 6: Check Fraud, Scams & Schemes Monroe Bank Teller Education Last Updated: January 31, 2011 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 Teller notes a large Teller notes that thecheck is not typical for difference between physical features ofthe customers deposit the check amount and check seem suspect history pattern the account balance "Ms. Jones, this is a "Mr. Jones, this is "Ms. Jones, who pretty large check. fairly large check, sent this check to Did you win the do you know who you?" lottery?" sent it?" "There are alot of "There are many "There are alot of scams today, did scams today, we scams today that you receive at letter want to help ask you to wire with this check?" protect you ....." money back...." "Did the letter ask "Do you know who "Did you receive a you to wire money sent the check and letter with back to cover fees did it come with any instructions to wire or pay taxes?" letters?" back money? Page 13 of 36
  • 16. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Basics of Counterfeit ChecksCounterfeit checks can be copies of genuine checks or originally designed, fake checks. In aworld of advanced computer software and printer technology, criminals can make excellentcopies of genuine documents such as currency or checks. You should be particularly alert forsigns of authenticity with the checks listed below. Websites, such asFrequent instances of fraudulent activity have www.freequickwire.com allowoccurred in transaction involving these types of criminals to create checks online,checks: further making check fraud  Official Checks (Official Bank Checks, Postal schemes simple and easy to Money Orders) commit.  Traveler’s Checks  Government Checks Example of Counterfeit Official CheckTips 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. Page 14 of 36
  • 17. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Check Fraud & 21st Century Scams “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. 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 MysteryShopper, of course, which includes a trip to the bank with the enclosed counterfeit check (Seepage 17). The scam letter included a Mystery Shop “Evaluation Tool” to be completed aboutthe Money Gram location with a fax number (See Page 18 ) to send the evaluation andMoneyGram receipt! Page 15 of 36
  • 18. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 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 Page 16 of 36
  • 19. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Mystery Shopper Scam: The Shopping Corner, Inc. Customer Service Evaluation Tool Why is the Mystery Shopper Scam Successful? Page 17 of 36
  • 20. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 The Fraudster’s Shopping Bag Victims Fraudster Profile Methods 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 Page 18 of 36
  • 21. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Canadian Lottery Scams Moose, Bears and Counterfeit Artists 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. Example of Canadian Lottery Scam Letter Page 19 of 36
  • 22. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 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. Page 20 of 36
  • 23. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 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 Page 21 of 36
  • 24. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 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 Informations 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 youve 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. Youll have a lot of free time doing other job, you dont need to have an Office for now, with time we may have one open for you base on your request, youll 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 Page 22 of 36
  • 25. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 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. 419 is a section Nigerian law that forbids Attention: The President/CEO fraudulent activity, though rarely enforced Dear Sir, by the government. 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 bankers 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 Page 23 of 36
  • 26. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Other Forms of the Nigerian 419 LettersOther forms of 419 schemes include cash on delivery (C.O.D.) methods. The most commonforms 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 VictimsIn Nigerian Letter scams, as with many, the criminal relies heavily upon what is termed “SocialEngineering.” 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 Page 24 of 36
  • 27. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Internet Auction ScamsSellers can be victims of fraud when buyers (fraudsters) send counterfeit checks or moneyorders 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 buyers "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. [patringnalda@yahoo.com] Page 25 of 36
  • 28. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 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. Page 26 of 36
  • 29. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 The American Express Smudge Test (American Express, 2007) Page 27 of 36
  • 30. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Money Order Fraud Example of Counterfeit Money Orders Security Feature: Heat sensitive logo turns white then back to pink. Heat activated security feature did not turn white 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 Page 28 of 36
  • 31. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 United State Postal Service Money Orders Security Features Page 29 of 36
  • 32. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Check Fraud: United States Government Checks (Abagnale, 2009)Even United States Government checks are not safe from fraudulent enterprises and ambitions. Aspreviously mentioned, sophisticated computer software combined with superior color printers presentproblematic barriers to counterfeit detection and prevention. The below illustration from Frank WAbagnale’s website shows the security features found in and on US Government checks.Check DeceptionCertain checking activities may or may not have fraudulent intent. These activities requirespecial 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 Page 30 of 36
  • 33. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Check Kitting: The Flow of DeceptionCheck Kitting is the illusory practice of withdrawaling funds or writing checks on accounts thatconsist of, primarily, uncollected funds. The deceptive practice makes us of the 2-3 day floatperiod from when a check is deposited and when it processes thru the banking sytem (recall theFederal Reserve System from Chapter 5). Kitting Scenario : Personal Bank Accounts Float Period 1. Customer 2. Customer deposits check then makes 2 to 3 days from Chase similar account to withdrawal from Monroe Bank Monroe Bank checking account 5. Customer 3. Customer deposits check deposits check from Monroe from Credit Bank to Credit Union account to Union account Chase Account 4. Customer makes cash withdrawal from Chase for same amount 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. Page 31 of 36
  • 34. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Kitting Scenario: Sole Proprietorship Accounts Day 1 Joe wrties a $550 check from his Chase personal account to his Monroe Bank business account , Joes Painting Service Day 3 Later in Day 1... Joe writes a $550 check Joe writes another check from Joes Painting Service for $550 from Monore to his Monroe Bank Bank to his Chase account business account, to cover the 1st deception Handyman Services Later in Day 2... Next, Joe withdrawals $550 Joe is an Authorized from his Monroe Bank Signer on both business account, Handyman Services business 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. Page 32 of 36
  • 35. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Non-ChecksA typical situation in which check fraud may arise involves non-checks. At first glance, these areinstruments that appear to be negotiable, but that are not actually valid. What is the source fornon-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” Page 33 of 36
  • 36. Chapter 6: Check Fraud, Scams & SchemesMonroe Bank Teller EducationLast Updated: January 31, 2011 Chapter 6 Review Thank You for Your Participation! Page 34 of 36

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