SilverLink - Fall 2008 - (Page 7)

RISK MANAGEMENT Property & Casualty Cashier’s Check Fraud The Latest Wrinkle by Kirk Johnson Just when you think you’ve heard it all, some clever thief comes up with a new scheme to invade your business and attack its hard-earned profits. A recent study from the Association of Certiﬁed Fraud Examiners (ACFE) shows that a typical organization loses a median estimated 5 percent of annual revenue to fraud. While the most common cause of business fraud is dishonest employees, a growing epidemic of cashier’s check fraud is affecting businesses at an alarming rate. Hardest hit are those doing business over the internet. the wire to the buyer. Sounds simple—no problem—right? Wrong. The problem is that this is a scam. The cashier’s check was counterfeit, although it looked authentic enough to fool the bank. By law, the bank must make the money available to the seller quickly, usually within a couple of business days. Because the seller is ultimately responsible for the validity of the check, when the bank ﬁnally discovers that the check is fraudulent—perhaps weeks later—it can (and does) reverse the seller’s deposit, subtracting the amount of the cashier’s check from the seller’s account. Meanwhile, the wire transfer has been sent to the “buyer” (thief) and the money is, sadly, long gone. Here’s how it works A large ticket item is placed for sale on the internet. A buyer offers to purchase the item and pays with a cashier’s check (sometimes provided by a third party who owes the buyer money). The seller receives the check and ﬁnds that it is written for more than the advertised price of the item. When asked, the buyer may give one or more reasons for the overpayment, including transportation charges, misunderstanding of terms, an accounting error, etc. The buyer then suggests that the seller deposit the check and simply wire the excess amount to the buyer (note: a wire transfer is an electronic, real-time vehicle that allows banks to transfer funds to each other in a timely and safe manner1). Often, a buyer will explain that he or she needs the money wired due to adverse circumstances (i.e., problems with the IRS, poor health or a family death). In a recent local case, multiple large-ticket items were sold. When the seller received the check, it was written for the correct amount. A short time later, the buyer called and cancelled one of the items, asking that the refund be wired to him. Is there any recourse? Fraud has many variations and thieves constantly invent new scams. Unfortunately, there is no form of insurance available to cover this type of loss. The best way to protect your identity and your assets from fraud is through education and self-awareness. Learn more about the types of scams being circulated and how to protect yourself from them. If you have questions about banking transactions, talk to your banker. The following steps are good guidelines for anyone doing business over the internet: 1. If you don’t know the buyer, be wary if he or she wishes to pay by cashier’s check instead of through a service like PayPal. If a deal seems too good to be true, it probably is. Ask yourself “Why would a person I’ve never met ask me to do this?” If you can’t come up with a reasonable explanation, you’re wise to ask more questions before taking action. If you receive a cashier’s check and are asked to return money by wire, always call the issuing bank to validate the cashier’s check. Do not call a telephone number provided by the buyer, because you’ll probably just be calling the Gotcha! In both of these cases, the seller, wishing to be paid, deposited the cashier’s check. When the seller’s bank veriﬁed the deposit, the funds were made available and the seller sent 2. 7 SILVERLINK — FALL 2008

Table of Contents Feed for the Digital Edition of SilverLink - Fall 2008

SilverLink - Fall 2008 Table of Contents Risk Management: Toto A Marriage Made to Last Cashier’s Check Fraud? Selection Validation Digital Tool Box When the Curtain Falls Lightning Strikes Increased Fuel Economy Employee Benefits: To Infinity & Beyond Securing Retiree Healthcare Private Client Services: Batter Up! Shaking Things Up STOLI Under Attack Client Spotlight: Bellevue University Internal Happenings: SilverStone Group Wellness Activities Group

SilverLink - Fall 2008

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