March is Fraud Prevention Month, an annual Government of Canada campaign that seeks to help people recognize, reject and report fraud. So to wrap up this important month, Credit Unions of Alberta wants to make you aware of the risks of cheque fraud.
What is cheque fraud?
One common type of fraud that can impact credit union members – especially older members who may rely more heavily on cheques – is cheque fraud. Although cheque use is declining this type of fraud persists as criminals can steal, create new or alter legitimate cheques.
There are three main types of cheque fraud to be aware of:
- Counterfeit: fake cheques, not written or authorized by legitimate account holder(s), are used to steal funds.
- Forgery: stolen cheques, signed by someone other than the account holder(s), are used to steal funds.
- Altered: legitimate cheques issued by account holder(s) are intercepted and altered to change the beneficiary or amount.
Some examples of a cheque fraud is when someone receives a cheque for an item they are selling online, mystery shopper scam, lottery scam or inheritance scam. The cheque is deposited into their bank account. Usually within 24 hours the fraudster will say they need the funds back and the victim can keep a small amount for inconvenience. They will request that the funds are sent back by a wire transfer, e-Transfer, money order or bitcoin. The individual sends the funds back and then realizes the original cheque was fraudulent and they are now out the funds.
In any cheque fraud scenario, the person who cashed the cheque will be held responsible by the financial institution to return the funds to them. When the fraudulent cheque is returned by the financial institution, the member’s account is debited, and the member is out of pocket the funds.
A twist on the above is cheque fraud through mobile remote deposit. Mobile Remote Deposit is a feature of online banking that allows your to take a picture of your cheque (front and back) to deposit it without physically bringing it to the bank. Fraudsters provide a picture of a cheque and although the online banking application will allow a member to take a picture of the picture and deposit it, the picture cannot be used as a legitimate cheque. The item will be returned, and the member will be responsible for the lost funds.
Once you have deposited a cheque, you should keep it in a secure location and then securely destroy it based on the timeframe recommended by your credit union. Typically, this is 90 days.
The best way to prevent cheque fraud is to:
- Be wary of accepting cheques from someone you don’t know or have only spoken to online, over chat or messaging apps.
- Do not spend or transfer money from any cheque you receive until the money has been cleared by the financial institution that the cheque is being drawn from. This can take up to 30 days.
- Where possible, use electronic payments like wire payments, e-Transfers, direct deposit, or pre-authorized payments instead.
- Keep your cheque book in a secure spot and do not leave it in a vehicle or purse/bag that is left open where it could be easily stolen.
- Discard used or voided cheques properly by shredding them so the personal information on the cheque cannot be copied.
- If you do rely on cheques, be sure to reconcile your cheque book against your statements as soon as possible and report any discrepancies to your credit union immediately.
- If you suspect your cheques are lost or have been stolen, notify your credit union immediately.
For further details on how to protect yourself or to understand your credit union’s policies around cheque fraud, contact your credit union directly. Find one near you.