According to PayPoint, cases of unauthorised cheque fraud have risen by 24% in the last year, costing victims in the UK £5.6 million. This scam targets people selling something either online or offline, and can be devastating for those left out of pocket.
What is a cheque, and how do they work?
In 2021, 185 million cheques were signed, a huge drop in comparison to 2004 where people wrote 2.1 billion cheques. This form of payment has certainly gone out of style, thanks to apps that have made sending money a lot more simple. However, those who are unfamiliar with cheques and how they work might be particularly vulnerable to this scam as a result.
A cheque is a kind of form which requests that a bank pay money to someone else. A person wanting to send money to someone else fills in the cheque with their account number and sort code, along with the details of the person that they’re making the payment to, the amount to be paid, and their signature.
This cheque can then be given to the recipient, who can deposit the cheque with their bank or send it in to them by post, or scan it for deposit using an app. The bank will then pay the amount recorded on the cheque into the recipient’s account.
An important thing to note about cheques is that there’s a difference between when it is ‘paid in’, when it ‘clears’ and when it is ‘verified’. When a cheque is ‘paid in’, it means it has been deposited at the bank and they have started the process of collecting the money from the sender’s bank account. Eventually when this is complete, the cheque is ‘cleared’; this means that the money is now available in the recipient’s account.
Finally, there’s a verification stage, where the bank ensures that the cheque is legitimate. There can be a delay between a cheque clearing, meaning the funds are available in the recipients’ account, and the cheque being verified, meaning the cheque is proved not to be fraudulent. If the bank realises that a cheque is fake, it can reverse the deposit, and take the payment back from the recipient’s account - and it is this process that scammers exploit.
The fake cheque scam
This scam starts with the perpetrator finding an item that a victim is selling online. The scammer will get in touch with the victim and attempt to agree a price for the item, and once this is done, they’ll agree to make the purchase. Often they claim to be living overseas, and so can only make the payment for the item using a cheque.
Then, the scammer sends a cheque across to the victim for more than the amount they agreed on. The perpetrator might suggest that this is to cover shipping and any additional charges, or they might say that they made a mistake and accidentally overpaid. They request that when the cheque clears, the victim sends the overpayment, or any remaining funds back to them through a money transfer agent, along with the item.
The cheque clears, the money becomes available in the victim’s account, and the victim sends the overpayment and the item across as requested. However, in the verification stage after the money has cleared, the bank realises that the cheque is fraudulent. The payment into the recipient's account is reversed, and the perpetrator walks away with the money that the victim sent legitimately, and the item they were selling.
Think you could be a victim of the fake cheque scam?
If you think you could be a victim of the fake cheque scam, do not send across any money to the scammer. Retain a copy of any communication between you and the scammer, as well as any cheques that they have sent across, and discuss this with your bank. You should not send any item to a recipient until a cheque has been verified; otherwise, you could end up losing your item and your money.
