Secure Your Cheques: The Age-Old Business of Cheque Fraud

June 24, 2010 by · Leave a Comment 

When it comes to cheque fraud, one of the age-old problems is detecting the fakes from the legitimate cheques.

Cheque fraud has a long and colourful history in Canada, and it is one of the fastest growing segments of financial crime tied to organized crime. Commercial cheque fraud is estimated to cost North American banks $20 billion CAD each year. Two years ago, the RCMP broke a Montreal-based counterfeit cheque scheme worth $195 million.

Cheque scams often start with a lottery prize that comes in the form of a letter or email that comes from a bank or institution claiming to be associated with a legitimate business. In order to collect the lottery prize, the victim is asked to deposit a fake cheque and then wire the money back to cover an administration fee.

The scammer is hoping you will deposit the cheque and then withdraw the funds before the cheque is verified. The bad news is that you are liable for whatever you deposit into your account.

If you have withdrawn funds under the assumption that the cheque was good, you are on the hook up to six years later. Legally, you as the depositor are on the hook even if initially the bank cleared the cheque.

Although some financial institutions have cheque verification devices in their branches, in many cases, cheques have to travel between your branch, the bank, and its processing center before they are cleared. In the meantime, the bank which deposits the cheque credits you with funds until it bounces.

Cheque fraud takes three guides: counterfeit cheques that were never authorized or signed by the account holder, cheques with altered amounts, and cheques stolen from you.

Avoiding Cheque Fraud – Tips For Consumers and Businesses

  • To protect yourself from cheque theft and fraud, reduce the amount of paper in favour of electronic payments and pre-authorized payments.
  • Keep your cheques under lock and key.
  • Reduce the number of cheques you keep.
  • Only order one set at a time.
  • Don’t trash your cheques without shredding them first. Thieves pick through recycling and garbage bins.
  • Destroy unused cheques from accounts that are no longer active. Safeguard your cheques. And check your bank statements as soon as they appear. Use a cheque numbering system that is continuous when you re-order cheques to help you keep track of numbers.
  • If you receive a cheque, make sure that the payee name printed on the cheque is correct. Be on the lookout for unusual-looking signatures. Business cheques typically contain watermarks, holograms and have perforated edges.

Take these tips into account and you can protect yourself and your business from cheque fraud in Canada or anywhere else.