Scammers outsmarting banks and customers
By Laura Bruce • Bankrate.com

Computers, laser printers, magnetic ink and check-writing software have made it child's play for crooks to print realistic-looking phony checks.

But when it comes to cashing in on those phony checks, the more sophisticated scammers do their best to get you, the bank customer, to deposit the bogus check into your account and send them some of the money.

One of the recent scams involves fraudulent bonus checks that are issued when someone applies online for a nonexistent job. The applicant is offered a job for, say, $3,000 per month, and is promised a signing bonus or a paycheck upfront. The applicant receives a check for $20,000 with instructions to deposit it, keep $3,000 as payment and wire the rest to an eastern European country.

"They make it sound so enticing; you basically have nothing to do," says Gene Seitz, fraud expert with the Federal Deposit Insurance Corp. "It's a sales job, not a commission job. They see $20,000 and think, wow, this must be a great company. There's an element of trust."

Eventually, the financial institution realizes the check is fraudulent and goes after you, the depositor, says Susan Grant of the National Consumers League.

"So, now you owe your bank the money that you withdrew. Your bank can go after you to satisfy the debt. It can grab the money from your account. We've heard from consumers who are facing criminal charges brought by banks who think the person is part of a conspiracy."

Let's say you're not a conspirator; you're simply a bank customer who got duped. Assuming you can convince authorities of your innocence and disentangle yourself from the sticky legal mess, you still owe the bank whatever money you spent from the bogus check.

If you really can't afford to repay the bank, the institution will probably absorb the loss, but not without a fight.

Banks behind the criminal curve
Doug Winton, chief operating officer at Mercantile Bank in St. Petersburg, Fla., a bank that was victimized by this particular scam, says it's getting harder and harder for banks to stay ahead of the bad guys.

"We get hit all the time by crooks outsmarting our industry. There is a brighter element of criminal out there working on white-collar crime these days figuring out how to defraud banks. The banks generally wind up eating it. They take the hit."

While technology has made it easier for crooks to drum up phony checks, scammers have been trying to worm their way into legitimate bank accounts for years.

In one of the more popular versions of the moldy-oldie Nigerian bank scam, the potential victim receives an e-mail from someone trying to smuggle millions of dollars out of Nigeria. Luckily, they want to deposit the money in your bank account for safekeeping. Just provide your account information and you'll receive a handsome cut of the money for your trouble.

Send them the information they want and you'll see your account emptied instead of fattened. Plus, they'll take you for whatever fees, legal expenses and other bogus costs they can convince you to pay.

Never say never
How do people fall for these scams?

Les Henderson, author of Crimes of Persuasion, says it's easier than you think. Stupidity is not required.

Henderson fell for a scam years ago when he owned his own business.

"I was called as a retailer. 'Congratulations! You've won one of five prizes. Just cover shipping and handling.' They get you excited about the prize and then make you feel guilty: 'Help us stay in business by ordering some pens and coffee mugs.' It was overpriced junk. Then you get the prize, a gold watch that turns to tin the moment you put it on. I lost $200 to $300.

"People, in advance of being scammed," adds Henderson, "refuse to believe it will ever happen to them. It's entertaining to read about the foolishness of others."

Grant of the National Consumers League says scams take advantage of normal human nature.

"We would all like to believe we've won something or that this great opportunity has come our way or that we can easily make money somehow."

Of course, it's not normal for someone you don't know to mail you a check for $20,000. Tempting as it may be to deposit it and take a cut, eventually the financial institution will figure it out and sic its attorneys on you.

Most banks will allow regular customers to take some cash from a large deposit if there's money in their account to cover it. But if the customer then draws on the balance in the account the bank will expect the customer to come up with cash when the check bounces.

Even if the bank puts a hold on a check, it's not a guarantee the fraud will be discovered before the victim spends some cash.

"We'll take the money and wait 10 days to make sure it clears and it's not a fraudulent check. But sometimes a check may not reconcile with a bank account for 30 days," says Doug Winton of Mercantile Bank.

The National Consumers League has advice for avoiding job scams and Nigerian money scams.

Click here to see a Nigerian scam letter.

Click here to see an ad that was posted online for a nonexistent job. Most likely, the paid-up-front first month's salary would come out of a large bogus check.

For a look at a variety of scams and how they work, visit Les Henderson's Web site, Crimes of Persuasion.

-- Posted: July 3, 2002