How Bank Fraud Works

How to Recognize Bank Account Fraud


Types of Scams


Award scams


Government Grant Scam


Personal Scams


Job Scams


Sales and Service Scams


How to Protect Against Bank Account Fraud


Fraud Prevention Tips  




How Bank

Fraud Works






Generally, someone you don’t know approaches you with an opportunity to cash a check or deposit the funds into your bank account and then requests you to use a portion of that money for what appears to be a legitimate purpose.  Scammers count on you to believe that once you deposit or cash the check, you can hand over or wire a portion of the total without any concern because the check has “cleared” and therefore cannot be returned unpaid and the scammers check is a fake! 


When you cash or deposit any check, your bank forwards that check to the bank on which the check was written for payment. For most checks, payment occurs without a problem. However, if the paying bank discovers that a check is fraudulent, it will return the check to your bank without paying it. Your bank will then withdraw from your account the amount that was originally credited when you first deposited or cashed the check. It can take a period of time – even weeks– for a check to be discovered as fraudulent and returned to your bank. But, once it is returned, you are responsible for repaying the full amount of the original check and any related fees if your account went into overdraft when the check was returned




How to Recognize

Bank Account Fraud





A scammer’s goal is to distract you from taking the time to consider whether or not his check, money order, postal order or other item is real. The fraudster accomplishes this by offering you something believable enough to tempt you into immediately giving away money from your account before that check can be returned by the paying bank as fraudulent.


There are many variations of bank account fraud. These scams frequently target individuals who are looking for work opportunities, selling items, targeting the elderly or simply seeking to help someone in need.   Be alert and familiarize yourself with the most common scams so that you can easily spot attempts to commit bank account fraud.



Types of Scams:




award scams


Description of Scam: Congratulations – you’ve just won a foreign lottery. You receive a letter with a large-dollar check that you are asked to deposit into your personal checking account. However, you need to immediately wire a portion of the funds to a foreign account to cover various taxes and administrative fees.

Tips: Legitimate lotteries pay taxes directly to the government rather than being reimbursed from winners’ proceeds. It is against U.S. law to play a foreign lottery by mail or by telephone.


government grant scam


Description of Scam: A phone call from a “government agency” congratulates you on being awarded a free grant for paying your taxes on time. The caller asks for your checking account number so that the grant can be deposited and “one-time processing fees” automatically withdrawn.

Tips: Government agencies do not spontaneously award free grants. Typically, individuals must apply for government grants. Do not give your bank account information to individuals you do not know or whose legitimacy you have not verified – particularly anyone who has initiated a call to you.



personal scams


Online Romance / Dating / Friendship Scam


Description of Scam: A participant in an international online dating site begins communicating with you via Instant Messaging (IM). In the course of discussion, he mentions some personal financial difficulties that would be solved if he could just find a way to cash a U.S. check that he has been unable to cash.  The fraudster asks if you would wire the funds to an account where he can pick up the cash? The fraudster states the endorsed check will be mailed to you to deposit. 

Tips: If you are using an online dating site, be careful with individuals you’ve just met who want to immediately leave the site and move to personal email or Instant Messaging (IM) communication. Be particularly vigilant if the talk turns to personal financial problems that require your help. Never give personal financial information such as account numbers or credit card numbers. To learn more about dating and romance scams, visit the following link:


A Stranger in need


Description of Scam: Someone you don’t know well or just recently met tells you that he/she doesn’t have a bank account and the bank won’t cash her check. Could you deposit the check into your account and give her the cash?  The individual will give you $20 from the check for your help.

Tips: Always be suspicious of anyone who needs you to cash a check immediately on his or her behalf.  Remember that you will ultimately be responsible for the full amount of the check if it is returned unpaid by the bank on which it was written.





job scams



Work at Home / Work out of the Home Scam


Description of Scam: You respond to an email with a work-at-home employment offer. The employer sends a check with your first month’s salary and money to purchase the supplies you will need to complete the work. The employer asks you to deposit your paycheck but wire a portion of this first check to another account to cover the cost of your “one-time certification” and the training materials that will arrive in the coming weeks.

Tips: Offers to perform a minimal amount of work at home for a lot of money are typically scams. No legitimate work-at-home company sends its workers money in advance and asks them to send a portion to a third party via wire transfer. Do not accept any work-at-home opportunities that involve processing checks or electronic payments through your personal account.



Mystery Shopping Scam


Description of Scam: You answer an advertisement about an opportunity to earn money by being a mystery shopper (anonymously visiting businesses to evaluate their services). In a few days, you receive a package containing instructions and evaluation forms for your first mystery shopping assignment. You also receive a check that includes both your salary and the cash you will use in your mystery shopping assignment. You are instructed to deposit the check to your personal account and withdraw several hundred dollars to take to the local office of a well-known money transfer service.  You are asked to wire this money to another bank account so that you can evaluate the office’s customer service and/or quality of services for that particular company.


sales and service scams



Description of Scam: You are selling an item via an online auction. The winning bidder mails a cashier’s check for more than the final sales amount. The buyer indicates that this was a simple mistake. He/she asks you to go ahead and deposit the full amount but wire him the difference.

Tips: If you are selling an item or renting property, never accept a check for more than the purchase or rental amount. Scammers can make fraudulent cashier’s checks look authentic and rely upon unsuspecting sellers to trust that a cashier’s check must be legitimate. You can contact the bank on which a cashier’s check is drawn to verify its legitimacy or ask your own bank to help you.

Service Scam

Description of Scam: You receive a telephone call from what seems to be a legitimate company. There are problems with your account and the company simply needs to verify some information. The caller seems to already have information about you so you feel comfortable sharing additional information, such as your account number, to help the company correct the problems.  

Tips:  Be very suspicious of service calls that you did not initiate. If you are uncomfortable with a phone call that you did not initiate, ask for the purpose of the call and hang up. Then, contact the company using legitimate sources such as contact phone numbers found on the company’s web site or your account statements.





How to Protect Against
Bank Account Fraud


The best defense against bank account fraud is simple awareness and common sense. Some important points to keep in mind:

  • If it sounds too good to be true, it probably is too good to be true – Be Alert!


  • Be suspicious if you are asked to deposit or cash a check and immediately hand over or wire a portion of the funds;


  • Remember that you are responsible and liable for items you cash or deposit into your account. It may take time for a fraudulent check to be discovered and returned to your bank;


  • Never be shy about asking for verification or independently researching an individual, a company or a check;


  • Always ask your banker for assistance if you have any concerns about a check you are depositing or cashing;


Remember that a wire transfer is an immediate form of payment that can outpace the amount of time it takes to determine that a check is fraudulent. Once a scammer has picked up funds that you have wired in exchange for a check, the wire transfer cannot be reversed, even if fraud is involved;



  • Be wary of strangers who initiate a friendly conversation and eventually move to a discussion regarding a financial opportunity or need that requires you to deposit a check, wire money or share an account or credit card number. Consumers who live alone or have infrequent social contact can be especially vulnerable.


  • Never give personal information to a stranger who contacts you, whether by telephone, email, or other means.
  • This includes your social security number, bank account information, online banking credentials and credit or debit card numbers.


Never try to lead on a scammer with the intention of “catching” them or getting back at them. You may unintentionally provide the scammer with additional information that can be used to defraud you.




Fraud Prevention Tips:




  • Be very cautious when accepting or cashing checks from individuals or businesses you do not know well or with whom you’ve only interacted online.


  • Don’t accept payments for more than the total amount of a sale with the expectation that you send the buyer the difference.


  • Don’t accept jobs in which you are paid or receive commission for facilitating money transfers through your account.


  • Don’t accept work arrangements or sweepstakes proceeds that require you to deposit a check and send back a portion of the funds for training materials, taxes or fees.


Look for typos, discrepancies in how the banking website looks, and misspellings on checks and other documentation – they are red flags for potential fraud.







Last Updated: March 14, 2013