Chapter 6 Check Fraud Final

Teller Education

Chapter 6: Check Fraud, Scams & Teller Education
Schemes

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

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

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


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.

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


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
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 this
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:

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 & services

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).

Page 6 of 36


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.

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


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

 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


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.

Page 10 of 36


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


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


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 the
check is not typical for difference between
physical features of
the customer's 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


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.
Websites, such as
Frequent instances of fraudulent activity have
www.freequickwire.com allow
occurred 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 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.

Page 14 of 36


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 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!

Page 15 of 36


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


Mystery Shopper Scam: The Shopping Corner, Inc.
Customer Service Evaluation Tool

Why is the Mystery Shopper Scam Successful?

Page 17 of 36


The Fraudster’s Shopping Bag

Victim's 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


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


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


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


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

Page 22 of 36


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 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

Page 23 of 36


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

Page 24 of 36


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. [patringnalda@yahoo.com]

Page 25 of 36


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


The American Express Smudge Test
(American Express, 2007)

Page 27 of 36


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


United State Postal Service Money Orders
Security Features

Page 29 of 36


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

Page 30 of 36


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
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


Kitting Scenario: Sole Proprietorship Accounts

Day 1
Joe wrties a $550 check from
his Chase personal account to
his Monroe Bank business
account , Joe's Painting
Service

Day 3 Later in Day 1...
Joe writes a $550 check
Joe writes another check from Joe's 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


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”

Page 33 of 36


Chapter 6 Review

Thank You for Your Participation!

Page 34 of 36

Chapter 6 Check Fraud Final

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