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Counterfeit Scams Catch Unsuspecting Small Business Owners

By Julie King |

Brad Jones was pleased by the local and international attention generated by the website for his karate dojo in Newmarket, Ontario.

Having had inquiries from England and Cuba, he was not surprised when Quincy Williams inquired about kickboxing lessons for his daughter. However, things became fishy when an envelope postmarked from the Republique du Benin, Africa with a cashier's cheque for USD$3000 instead of the agreed CAN$349.

Jones' first reaction was to sit on the cheque, until he received another email from Williams apologizing for the error.

"Please accept my sincere apology for the mixed up in the amount on the check," wrote Williams. "Marcus Hilbert my client made out the check for the actual amount he owes me. Please cash the check and deduct $349.80. payment for 6 months Kickboxing Instructor from the check."

Saying that he was on important business in Russia, Williams asked for the money to be sent to his assistant, Macarthy Collins in Saint Petersburg. He then provided detailed locations for three Western Union outlets in Newmarket.

Little did Jones know that he was walking into a trap designed to rob him of $3000.

Counterfeit cashier cheques becoming a big problem

Like many people Jones considered a cashier's cheque to be as good as cash. With reassurances from Williams that he would wait until the money cleared the bank Jones decided to go ahead and cash it.

Because Jones had an excellent track record with his bank they were willing to give him the funds. However, he found the teller's comment "... but if it comes back you will be responsible" alarming.

"My understanding of a cashier's cheque is that it's cash. Period."

Fortunately for Jones, the teller offered to do some sleuthing on the FDIC website. It did not take long to find a special alert warning of counterfeit cashier's cheques from the Farmers State Bank. The routing numbers in the alert matched the numbers on the cheque Williams had sent. A call to the contact at Farmers State Bank confirmed that it was counterfeit.

"The counterfeit cheque was really good," said Jones. "The real one has an 'X' on the back, but you couldn't see until it was held to the light."

The counterfeit cheques got into circulation after a customer at the Farmers State Bank was scammed.

"One of our customer's was scammed to start with and that is how they could get a copy of our cheque," said a bank representative. "It was investigated by the FBI and we were told it was the Nigerian cheque scam. This has been going on with the bank for about 3 years now. There are other banks that have been done the same way."

Canada-US connection creates vulnerability

The need for cheques to be sent to the United States to clear makes Canadians particularly vulnerable to this scam.

The problem is that a Canadian bank may "clear" the funds after one month, while the cheque gets bounced around in the system south of the border. Savvy operators like Williams take advantage of this weakness by offering to wait for the funds to clear the recipient's bank.

Thinking that the funds are safe once they initially clear the bank, the victim then sends the operator the amount that was overpaid. It can take as much as six or even twelve months in extreme cases for the Canadian bank to learn that the cashier's cheque was counterfeit.

"If it's a United States bank we can notify them that day, the very day we receive it," said Kim Callahan, who takes care of bookkeeping at Farmers State Bank. "For a Canadian cheque we can't really look those ABA numbers up, because we don't have the capability to do that. Our correspondent does."

Callahan noted that cheques from Canada often end up with several stamps on the back from different banks, so it can take a while to send the counterfeit cheque back to the correct bank.

"They kind of toss around for a while sometimes. We've had some get as long as almost up to a year, which is really bad on the customer."

Fraud not Restricted to the Net

Barry Baxter, Officer in Charge of Counterfeit and Identity Fraud with the RCMP's Commercial Crime Branch in Ottawa, noted that this type of fraud is an off-shoot of telemarketing scams that told people they had won a lottery but had to pay fees to receive their prize. As people became more skeptical of that criminals switched to this newer form of fraud.

"Criminal groups are good at probing for weaknesses within the financial system and when they detect a weakness like that they exploit it as quick as they can," said Baxter. "It's online, it's telemarketing, in some cases fax related. So again, the criminal groups are probing for weaknesses and they will exploit any opportunity they have to victimize the public."

The FDIC website had twenty seven counterfeit cashier cheque alerts on its website for last month alone. The bottom line is that you can no longer assume that any cashier's cheque is good.

Baxter cautions business owners to be very careful, both with their personal and financial information as a whole and with the people they do business with.

"... if they're conducting commerce with people that they are not familiar with [they need] to exercise due diligence, to ask questions, to seek contact telephone numbers and also to be in contact with their own financial institutions to ensure they are not being defrauded."

"It's the old story that if it's too good to be true it's probably too good to be true," said Baxter.

Jones agrees.

"If it sounds fishy, it must be," said Jones. "An inquiry comes from I don't know where. A cheque shows up from Africa with a US bank and wants the money sent to Russia. It's just too weird."

"This guy could actually be here in Newmarket," said Jones. "He could be anywhere on the planet. You just don't know."

Jones considers himself lucky. By discovering that the cheque was counterfeit before it was cashed he saved himself at least $3000. Now he hopes that by sharing his story he can help get the word out to other business owners so that they don't become victims of a similar scam.

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