On guard – a bank fraud alert

By Susan Vaughn - August 23, 2007

Almost everyone has received them in their mailbox or e-mail account: the tantalizing and oh-so-believable personalized letters saying "you have won" a big sweepstakes or lottery, or "you have been selected" as a mystery shopper.

The notices are addressed personally and the sender may have a recognizable and legitimate name, such as Bank of America, Microsoft, Yahoo or UK National Lottery. They are often from foreign countries, usually Canada or Nigeria. The letters are usually well written, although poor grammar may be one clue to their lack of legitimacy.

For example, a letter from "Global Solutions Inc." sent to a Vineyard Haven resident in June included the following statement: "...we strongly advice [sic] you to keep your winnings and ticket number personal and confidential." The letter promised the recipient $70,000 award money and included a check for $3,550 that is allegedly for a "non-residence tax." In the meantime, the consumer is asked to wire "tax funds" to the scam artist. He may have deposited and used the funds from the check to find out later the check was fraudulent.

The letters often include specific information such as winning numbers, winning dollar amounts, and even names and phone numbers of contact people one must call in order to receive the promised funds. Or they ask the recipient to send a check or cash or they ask for bank account information.

Such requests are some of the main tip-offs that the letter or e-mail is a scam, one of several kinds that have increased considerably on the Vineyard in the last six months, according to officers at Dukes County Bank. In the banking business, the check scams are called "cashier's check fraud."

"There has been an unusually high level of such fraudulent activities this year, partly due to the success scamsters have had on the Island," said Christopher A. Wells, president and chief executive officer of Dukes County Savings Bank. Once the scam artists start having success in a particular area, they start targeting that zip code, he said.

Bradford P. Egan, executive vice president for lending, said the fraud schemes used to be a rarity, and the bank saw only one or two a year; now they are one or two a week either as inquiries from customers or situations at the bank.

"It's a relatively significant increase," Mr. Egan said, especially noticeable during the last six months.

Direct mail is the most common means of scamming, but online scams as the result of "phishing," or copying official company web sites, are also becoming more common. Selling goods on the Internet can also result in fraudulent payments.

Other money scams that have become troublesome on the Vineyard are stolen checks, and fraudulent checks sent for a summer house or car rentals, the bank officers said. In those cases, the nonexistent tenant or renter usually sends a check for an amount more than is required for a deposit, then asks the leasing agent to return the difference.

"That's happening a lot here because people are used to getting rental checks," Mr. Wells said.

The two bank officers and their colleague, compliance officer Rachel A. Dinning, outlined several of the fraud schemes for The Times in an effort to educate the public on how to spot the scams.

Dukes County Bank also has sent fraud alert letters along with an FBI fraud alert to all of its customers. The officers report that other Island banks are seeing the same kind of activity.

All types of people of all ages are victims of the scams, the officers said. The scammers send out bulk mailings, and wherever they get hits, they'll do more, the officers said.

"They'll target anyone they can target," Ms. Dinning said. "The customers don't know they've been taken," until it's too late. Ten out of 10 people spend the money before the check has cleared, she said. Of course, the counterfeit check never clears, and the customer is the loser.

A cashier's check, which a windfall scam recipient is asked to send as a "fee," cannot be recovered because the scammer asks to have the check wired, which requires no clearing time, the officers said. The scammer receives the check, and cashes it immediately at the destination site.

"A lot of it is not understanding the banking system," Ms. Dinning said. "It takes time for a check to clear, and that's where the losses come in."

Even though funds from a check deposited in a bank account may be "available" to the recipient in one day for a cashier's check, the bank check clearing procedures can take up to 10 days, Mr. Wells said. The scammers know where the clearing systems are and how they work, he said. The bank where the bad check is deposited may only learn of the problem when another bank returns the check unpaid, which could take two weeks or more.

The counterfeit checks, usually labeled as a "cashier's check" or "official check," look very official because they are often copies of a stolen legitimate check. The officers showed with an example that all counterfeit checks have something wrong on them, such as an inserted date in a different font, which bank employees are able to spot.

That is one reason that Dukes County Bank has instructed its tellers to ask a customer where he or she got a check that looks like a sweepstakes or other suspicious check, Mr. Egan said. It may be uncomfortable for the teller to do so, he said, but it could save the customer thousands of dollars.

Other clues to a scam letter are the pleas to keep the correspondence confidential until the claim is processed, or even more direct, "do not tell your bank."

Check thefts

Check stealing also has increased on the Vineyard during the past year, and the pace picks up in the summer, Mr. Wells said. Checks may be stolen easily from a person's mailbox or doorstep, where they might have been left for several days if the resident is away.

Another scheme involves theft of check or debit cards using portable scanners to reproduce the cards, Mr. Wells said. The scammers then go on spending sprees with the cards, often at electronics and jewelry stores, piling up huge bills. A recent use of this method occurred at TJ Maxx stores.

"It's too easy to get the equipment to reproduce cards," Mr. Wells said. However, if a bank data breach occurs, the customers are responsible to return the funds. The banks also have to pick up costs, such as reissuing the check cards, he said.

Mr. Egan listed some of the signs to alert people if they get a check in the mail: Alert number one: the check is labeled "official." Number two: the sender asks the recipient to send money before getting the payout. Number three: "keep this confidential."

A large amount of money offered or the alleged fee is also a tip-off, Mr. Egan said. Because the limit on a federal availability policy is $5,000, the mail scams often ask for less than that, perhaps around $3,000. Even big companies are getting scammed, he said.

The banks and local police can do little about the fraud schemes, the officers said. Mr. Egan said he reported some of the scams to state police, who referred him to the state attorney general's office, which has a consumer complaint hotline. It is difficult to catch up to the criminals because they are usually based in other countries, the officers said.

The best solution is educating the public about the scams, Ms. Dinning said. She advises people not to be offended if a bank teller asks them where they got a check.

"We try to accommodate the customer as best we can," Mr. Wells said, but in the end the ultimate responsibility is with the account holder.