Check Cashing Scams: Read This Before You Cash That Check

One scam still making the rounds is the fake check scam. The way it generally works is this. You receive an authentic-looking check in the mail that appears to be from a real company. Along with the check, you receive instructions to deposit the check and transfer a portion of the money to someone else. A few days later your bank informs you that the check was counterfeit and you are now liable for the amount of money transferred out (usually thousands of dollars) and the bank fees for checks you had written that bounced.

FINRA recently issued an Investor Alert warning of two variations of the fake check scam – the mystery shopping scam and the modeling scam.

How the check cashing scams work

The mystery shopping scam starts with a listing on Craigslist or other similar website seeking “mystery shoppers.” Once you respond to the ad, you are told that you have been hired to evaluate the services of a money transfer company such as MoneyGram. You are sent a check that you deposit with instructions keep a few hundred dollars of the money as payment and wire the rest to another “mystery shopper.” Unfortunately for you, the check will turn out to be counterfeit and you will be on the hook for the amount of money you wired out of your account.

The modeling scam also begins with an internet ad, this time advertising for models. You will receive correspondence indicating you have been hired for a modeling job. You will receive a check that purports to be from the modeling agency, told to cash it, and wire a portion of it to the “film crew” or some other third party, and keep the balance as payment. Just like with the mystery shopper scam, the check will turn out to be fake and you will be on the hook, likely for thousands of dollars.

How to Protect yourself from becoming a victim to a fake check scam.

No legitimate company will ever overpay you and ask you to wire the difference to a third party.

Legitimate companies rarely send “unexpected” checks or checks that don’t clearly state why they were issued.

If you receive a check, obtain the company’s telephone number from directory assistance and call to verify the check. Do not call the number listed on the check.

Red flags of a fake check scam include typos on online postings or in emails and different company names on the online posting and the check you receive.

If you deposit a check, don’t wire or transfer any funds until the bank verifies that the check has cleared, a process that can take 10 days or longer.

For more information on where to turn if you are a victim of a fake check scam, read FINRA’s Investor Alert: Beware of Fake Check Scams.