Why do check scams work?

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419Eater is my life Joined: 30 May 2009 Posts: 298

I mean, I understand how they work. Scammer sends you a forged check that looks pretty real. I've received two of these forged checks, and they look a lot like the pay checks I used to get when I worked at KFC one summer during my teen years. But I digress....

So scammer sends you a fake check, for, say, $2000. You deposit the check. The bank tells you "Hey, it's a real check. Here's $2000!". You wire him most of the money via Western Union, and keep the rest, ostensibly as payment for some service.

Couple weeks later, the banks say "Oops. The check wasn't real. Sorry we told you it was and put the money in your account. Anyway, give us back the $2000 we gave you."

Well, of course, the poor victim is on the hook to repay the $2000.

But why?

The bank fucked up and honored the check. The bank said "Hey, it's cool. Here's the money." A few weeks later, why do they get to say "lol we skrewed up can we haz money back?"

I, of course, hate scams of all stripes. I hate this one more than most (not quite as much as a "419 victim recovery scam" or a hitlad). Genuine banks are complicit in the ripoff, but it's Joe Blow victim that ends up in deep fiduciary doo-doo or even facing criminal charges. Why? Because he deposited a check. The bank got fooled, the bank told this guy that the check was legit, and they get to take it out on an individual of less means?

I'm willing to listen to any sort of devil's advocate argument for why things are this way or why they should be. It just infuriates me.

Baiting Guru Joined: 08 Jul 2004 Posts: 11857 Location: UK

It boils down to the fact that the onus is on the account owner to verify that they are depositing real cheques with valid funds.

It will be in the small print at all financial institution when someone opens an account, that they, the depositor, are liable for any fraudulent deposits made by them, or words to that affect.

Posted: Fri Aug 14, 2009 7:30 pm

Banks in many countries are required to give provisional access to funds on depost within a few days. As SP said, that does not mean they make any assurances that the checks are good. Well done fakes will not usually be discovered until they go to a clearing house or the issuing bank. That process can take days, weeks, or months, especially for foreign checks.

Stolen or altered checks may not be discovered until the account holder notices a problem.

While that all may seem unfair to the victim of a check scam, consider that the vast majority of checks that are deposited are legitimate, and it would cause major cash flow problems for people and businesses if they had to wait for every check to be fully verified.

Check scams are effective because most people don't understand what it means when a check "clears", and they think the liability falls on the bank.

Here's a pretty good overview: click

419Eater is my life Joined: 30 May 2009 Posts: 298

luckey wrote:

Check scams are effective because most people don't understand what it means when a check "clears", and they think the liability falls on the bank.

My question, though, is: "Why doesn't it fall on the bank?" Why is Joe Victim on the hook for the bank's mistake?

Posted: Fri Aug 14, 2009 7:52 pm

^^Because if it did, banks wouldn't give you access to funds until checks are fully verified. Then Joe victim couldn't buy groceries and pay rent until weeks or months after he deposited his legitimate checks, like his paycheck.

Posted: Sat Aug 15, 2009 9:34 am

[quote="RayAdverb"]

luckey wrote:

My question, though, is: "Why doesn't it fall on the bank?" Why is Joe Victim on the hook for the bank's mistake?

It isn't the bank's mistake. As check paper and check printing software is easily bought in the US, the only one who can identify a fake is often the accountholder.

Posted: Sat Aug 15, 2009 1:47 pm

^^^ And to further complicate matters, check clearing involves physically moving the check from the bank where the recipient deposits it to the bank from which it was supposedly issued. This can take time - time the law won't allow the bank to wait before making the money available to the recipient.

The bank operates on the principle that they are loaning the recipient the money until the issuing bank and account-holder repay that loan. As it is an interest-free loan, the bank is not making any more money by the transaction than they would if the check were written on the same bank. They only do it because the law says they have to. Therefore, they cannot be held responsible.