Fake Check Scams :

1. Fake Check Scams: How to Protect and Help the Consumers You Serve Consumer Federation of America 2010

2. How Fake Check Scams Work Victim is convinced by fraudster to accept a realistic-looking check or money order and deposit or cash it Fraudster instructs the victim to wire a portion of the funds somewhere Funds can’t be recalled once picked up Scam takes advantage of consumer’s ability to access funds before counterfeit is discovered Consumer is liable for loss, but financial institution may lose money if consumer unable to repay Losses generally range from $3,000 - $4,000

3. Types of Fake Check Scams • Work-At-Home • Victim “hired” to process payments from U.S. customers for a foreign company • Receives checks or money orders, sends money to “employer” minus % as salary/commission Or • Victim “hired” to conduct “mystery shopping” • Receives check or money order, instructed to make a small purchase or test a money transfer

4. Types of Fake Check Scams • Foreign Business Offers • Scammer claims to be business person or government official/dignitary of a foreign country • Offers to make victim partner in lucrative business deal • Victim receives check or money order, instructed to send money to pay legal or other fees • Bogus Grants • Scammer claims victim selected to receive grant, sends check or money order for part • Victim instructed to send money for processing or other fees

5. Types of Fake Check Scams • Sudden Riches • Scammer claims that victim has won lottery or sweepstakes • Victim receives check or money order as advance, instructed to send money for “fees” and “taxes” • Sweetheart Scams • Fraudster poses as a romantic interest online • After rapport is built, scammer asks victim to cash checks or money orders

6. Types of Fake Check Scams • Overpayments • Scammer claims to want to buy item victim is selling in print, online classifieds or auction • Victim receives check or money order for more than selling price • Victim instructed to send excess funds to someone for “shipping” or other reasons • Rental Schemes • Concept similar to overpayments • May target hotels and inns for extended stays

7. Victims of Fake Check Scams • ANYONE can be victim • A pitch to lure every type of person • Person who is unemployed or wants to make extra money working at home • Retiree thrilled to win sweepstakes or get grant • Someone selling a car or offering a sublet online • Business person attracted to promise of lucrative deal • Trusting person willing to help a new “friend” • Fake check scams are equal opportunity crime!

8. The Perpetrators • Most fake check scammers located in foreign countries • Often part of large, close-knit immigrant communities • Operate in small groups or “cells” • Use similar techniques, wording in letters and emails • Use false IDs to make it harder to identify and track them • Take advantage of difficulty pursuing law enforcement actions across borders

9. Counterfeits are Easy to Produce • Increased availability of resources • Print shops or software programs • Materials • Check stock • MICR Ink • Versatile counterfeiting options • Business or personal checks • Cashier’s Checks or Official Checks • Money Orders • Traveler’s Checks or Gift Checks

10. Counterfeits may be Hard to Detect • Quality has substantially improved – it is difficult to detect counterfeits simply by looking at them • Names of real companies or individuals often used in order to make them look legitimate • Valid account number or routing number not sufficient to verify item • Telephone number printed on item may be scammer’s

11. Verifying Checks and Money Orders • To verify authenticity, call the maker • Use phone books, directory assistance, or Internet to find valid phone number • Speak to someone in accounting department • But be aware of limitations • Verifying account exists and sufficient funds not enough if stolen account # used • Scammers may use authentic checks/money orders and counterfeit repeatedly • Maker may be reluctant to provide information because of privacy concerns

12. Verification Resources • Certain types of checks and money orders can be verified by contacting the issuers: • American Express Travelers and Gift Cheques • Visa Travelers Cheques • MoneyGram money orders • Western Union money orders • Postal money orders • U.S. Treasury checks

13. Item Processing

14. Consumers Don’t Understand the Process How long does it take a check or money order to clear? The teller said that the funds are available – that means that the check or money order has cleared, right? It can take 10 days or longer for it to “clear”– but under Reg CC, the funds must be made available quickly NO!

15. How Money is Sent to the Scammers • Scammers instruct victims to cash or deposit checks, send funds via money transfer services • Western Union, MoneyGram are largest, have the most physical locations worldwide • Money can be sent and received through agent locations • Cash required to send funds from agent locations, debit cards sometimes also accepted • Credit, debit cards may be used to send funds by telephone or online • In most cases, recipients receive funds in cash

16. Sending & Receiving a Money Transfer Go to agent location, fill out send form Provide form, money and ID to agent Agent verifies ID Agent enters send form into system Sender receives receipt and copy of form To Send: Go to agent, fill out receive form Present form and ID to agent Agent verifies ID Agent locates transfer from info on form Payee receives money To Receive:

17. Western Union Transaction Process • Cash required (debit cards OK at some U.S. locations) • Amount may be limited by laws in send and pay countries • Sender ID required for amounts of $1000 or more USD, country laws may apply • Payee must present ID for payment • ID requirements: current, government-issued photo ID • If payee does not have ID, test question may be allowed for transactions under certain $ limits depending on country law where payment is received and WU policy • If destination is U.S., payee can pick up at any WU location in expected pay state or adjacent state • If sent to Canada or other country outside U.S., payee can pick up at any WU location in that country • In some U.S. and foreign locations, money transfer control # required to pick up funds

18. MoneyGram Transaction Process • Cash required • Amount may be limited by laws in send and pay country • Sender ID required for amounts of $900 or more USD, country laws may apply • Payee must present ID for payment • ID requirements: current drivers license, state ID, passport, military identification and/or alien ID • If payee does not have ID, test question allowed for transactions less than $900 USD, country laws may apply • Payee can pick up at any MoneyGram location in destination country or state (bordering state).

19. Impact of Fake Check Scams • Amount of returned item debited from victim’s account • May cause overdraft, payments from account to bounce, fees • Account may be frozen or closed • May result in negative report about victim to databases for account abuses • If victim unable to cover loss, financial institution may try other legal means to collect, but not always successful • Some victims charged with check fraud

20. Responding to Consumers • Direct contact or indirect through social service agency, financial institution, family or others • Typical questions • – Is this a scam? May not be victim yet • – I lost money, can you help me? • Speak directly to consumer if possible, get facts, determine if fake check scam • Has consumer already sent the money?

21. Responding to Consumers • If consumer has not sent money: • Explain basics of how fake check scams work • Refer to www.fakechecks.org, provide educational materials • If check or money order already deposited or cashed, provide advice on dealing with situation • Complaint can provide victim with needed documentation

22. Responding to Consumers Resop • If consumer has sent money: • Suggest they contact money transfer service immediately • If you take complaint, explain what to expect • Encourage consumer to be on lookout for similar scams, warn others • Suggest consumer provide documentation to financial institution, ask to file fraud affidavit

23. Responding to Consumers • Other places to refer consumers: • Local postal inspector if check or money order sent by mail • Private courier if check or money order delivered by courier. • Complaint form for National Consumers League’s Fraud Center • Federal Trade Commission • Internet Crime Complaint Center if solicitation made online • PhoneBusters if money sent to Canada • State Attorney General’s office, other state and local agencies as appropriate

24. Resources for Law Enforcement • Information about registration of scam Web sites • www.samspade.org • Server IP address and location • http://whoisdomaintools.com • Information about registration of toll-free numbers • amer.bis.sms800.sms800HD@sykes.com • Help with scammers located in Canada • PhoneBusters, 888-495-8501(public number) • Corporal Louis Robertson • lrobertson@phonebusters.com (nonpublic)

25. Resources for Law Enforcement • FinCrime • www.fincrime.com • FTC Consumer Sentinel • https://register.consumersentinel.gov/ • Postal Inspection Service • 877-876-2455 • National Consumers League’s Fraud Center • www.fraud.org • Internet Crime Complaint Center (IC3) • www.ic3.gov

26. Western Union Record Search Requests U.S. subpoenas Custodian of Records Western Union Financial Services, Inc. 20 Corporate Hills Drive St. Charles, MO 63301 Tel: 636-866-0714 Canadian production orders and warrants Western Union Canada c/o Alan Aucoin, Esq. Blake, Cassels & Graydon, LLP 199 Bay Street, Suite 2800 Commerce Court West Toronto, Ontario M5L 1A9 Canada Tel: 416-863-2635 International requests Must be submitted through Network Agent(s)

27. MoneyGram Subpoena Contact Information U.S. subpoenas Mail original subpoena to:   MoneyGram International, Inc. Attn: Custodian of Records 1550 Utica Ave South M.S. GO2-1508 Minneapolis, MN 55416 Faxes to 763-549-7349 permitted, but original subpoena must still be mailed to address above Information will not be released until original subpoena received

28. MoneyGram Subpoena Contact Information UK requests May be sent via email to: UKpolicerequests@moneygram.com or fax to (44) 207-089-5414 Other international requests (other countries outside U.S.) Same address or fax number as for U.S. requests or by email to SUBPOENA@MoneyGram.com Only UK and other international requests allowed via fax or email without required mailed or hand delivered copy

29. Educate your Community • Include fake check scams in: • Presentations to consumers, businesses • Public service announcements, press interviews • Neighborhood alert systems, other communication channels in community • Partner with banks, credit unions, check cashing services • OH AG’s office supplies fake check flyers to banks, credit unions in state • Tellers hand to consumers when they make deposits, withdrawals over certain amount

30. Educate Businesses • Warn business customers that names may be used by fraudsters • Recommend services such as positive pay • Enlist businesses to help educate consumers in community • Partner in joint consumer education projects, programs • Educate businesses about risks of cashing checks and money orders, how to verify

31. Educational Resources Consumer Federation of America www.consumerfed.org/other/FakeCheckScams.asp National Consumers League www.fakechecks.org PhoneBusters www.phonebusters.com/english/index.html FBI Fraud Alert http://columbia.fbi.gov/fraudletter.htm

32. Educational Resources Fraud Alert: Fake Check Scams American Bankers Association/NCL brochure www.bankstuffers.com/brochures.php Giving the Bounce to Counterfeit Check Scams Federal Trade Commission www.ftc.gov/bcp/edu/pubs/consumer/credit/cre40.shtm Don’t be the Victim of a Fake Check Scam! Postal Inspection Service www.usps.com/cpim/ftp/notices/not174.pdf