Business Check exchange Scam

Monday, January 23, 2023 12:00AM

One scam that I have seen make a resurgance lately is the old check exchange scam. In this article I just wanted to give a brief of how the scam works and how you can prevent becoming a victom of it.

The Process

To start out with, the scammer will reach out to their victim, or the mark; and offer them an opportunity. Usually something like a job, a business contract too lucrative to turn down, or buying a listed item for more than the asking price.

Once they get the victim encticed, they’ll sometimes offer the most normal form of payment. Then they will backtrack on that or bounce the payment due to insufficient funds. Then they will either offer another distraction or go in for the scam payment.

If they go for the scam payment, they’ll offer a check for more than the agreed-upon amount, printed with a non-existent routing number and account number. Then they’ll say they either made a mistake and want you to send back a refund. Or tell you that you have to pay their courier. But instead of a courier, they will send a money mule to your house.

The catch is that the check will later bounce once the mark or victim sends their refund check or hands over their courier payment. Likely they will put an unsuspecting business’s name and address on the return address for the envelope, and sometimes the check.

And yes, I have been interrogated by police due to scammers using my business name and address on these checks before.

Bank processing, how it ties in

In the United States, banks have to make funds from deposited checks available to the account holder within a business day. Problem is, it sometimes takes longer to “clear.”

To abide by the law, in a lot of cases, banks will front you the money as a kind of loan so to speak, so they can take their time to process and clear the check.

If the check clears, the money will stay yours. If it bounces though, the bank will deduct their money back, and in a lot of cases an additional fee.

Plus there sometimes are legal liabilities when it comes to trying to deposit or cash a check, especially if you know said check is false.

How to avoid

When someone wants to buy or obtain an item you have listed on social media, or hire your service business for by-mail work, really check into them. Especially if they want to conduct the transaction in an unusual way.

And look for the red flags.

  1. Over-paying - This is the top one. The idea is to get you to front the money. And the most effective way to do this is to pay more up front.
  2. Unknown Courier - This is probably the one I’d list second. Only do by-mail business with trusted couriers. In the United States, that would be the USPS, UPS, Fedex, and DHL as far as I’m concerned.
  3. Constant backtracking - Especially when it comes to agreeing on payment-type, constant backtracking is a red flag.
  4. Out of a reasonable area for free items - Probably the last one. In one instance I listed an item for free and had someone living in Ecuador ask me if it was still available. Chances are they would have offered a check for it, and sent a money mule to my house, and collect a payment from me; and the check would have bounced after.

My real-life story

When I first started my business I had someone with a fake name email my business wanting me to do work on 10 laptops (A sizable contract for a starting-out IT business). The trick is that they were out of state and would have to mail them to me.

To make a long story short, they offered a number of legitimate payments, like PayPal, which I said I was okay with. Then they wanted to send a check for something like $800 or $1,200 over the agreed-upon amount, and then wanted me to give a check to the courier as they brought the laptops.

That was the red flag that clued me into blocking the sender immediately. The courier would likely show up with 10 junk laptops from an ewaste pile, collect my check, and the scammers check would have bounced; and I would have been bankrupt as a budding-business at the time.

Be safe out there.