OCC Warns National Banks on Risks
Posed by Scams Involving Fraudulent Bank Cashier’s Checks
WASHINGTON – The Office of
the Comptroller of the Currency issued guidance today warning of the
risks posed by scams involving fraudulent bank cashier’s checks and
describing steps national banks should take to protect themselves
and their customers.
A cashier’s check, which is issued
by a bank and sold to a consumer or other purchaser, represents a
direct obligation of the bank.
The guidance was issued in
response to a growing incidence of scams involving cashier’s
checks. In most of
these cases, individuals receive a cashier’s check and are asked to
deposit the check into their account, wait until funds become
available and then wire some part of the funds from their account to
a third party, often in a foreign country.
One common scam involves an
unexpected windfall.
The individual is told he has won a foreign lottery or is the
beneficiary of someone’s estate, and that the proceeds will be sent
to him once the taxes or fees are paid. A cashier’s check is
provided to cover those charges, and the individual is asked to
deposit the check and then wire the taxes once the check clears.
In another scam, an
individual sells something on the Internet and receives a cashier’s
check that is greater than the purchase price. The buyer tells the seller
to deposit the check and wire the excess once it clears, keeping
some amount to compensate for the time and expense involved.
Although funds represented by
the cashier’s check may be made available to the customer the next
business day, and funds availability may be referred to as a check
“clearing,” funds availability is not a determination that the check
is legitimate.
Fraudulent checks are very difficult to detect, and it may
take several weeks for a fraudulent check to be returned to the
customer’s bank. When
the check is returned, the bank reverses the deposit and withdraws
the funds from the customer’s account.
Funds availability is
governed by the Expedited Funds Availability Act and the Federal
Reserve’s Regulation CC, which generally require banks to make funds
available the next day in the case of a cashier’s check. The Uniform
Commercial Code addresses the ability of a bank to charge back
checks that are returned to it, including fraudulent checks.
Although the funds
represented by the check deposited into a customer’s account can be
removed from the account if the check is fraudulent, wire transfers
from the customer’s account are an instantaneous and non-reversible
transfer of funds.
The OCC recommended that
national banks review their procedures to ensure they have addressed
the risks posed by fraudulent cashier’s checks, and that they take
steps to make sure they accurately explain the status of deposited
cashier’s checks to customers in order to eliminate any
confusion.
“Without such information,
customers may conclude that a check has cleared solely because the
funds are available in the depositor’s account,” the guidance
states. “Tellers and
other relevant personnel should receive appropriate training or
other information to accomplish these objectives.”
Banks
should also consider training to ensure that relevant personnel are
aware of the increasing incidence of fraudulent cashier’s
checks. Tellers could
also be trained to examine large dollar checks more closely to
identify suspicious cashier’s checks, and to ask appropriate
questions when customers deposit such items.
OCC BULLETIN 2007-2 Guidance to National Banks Concerning Schemes Involving Fraudulent Cashier’s Checks
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The
Office of the Comptroller of the Currency was created by Congress to charter
national banks, to oversee a nationwide system of banking institutions, and to
assure that national banks are safe and sound, competitive and profitable, and
capable of serving the banking needs of their customers in the best possible
manner. OCC press releases and other
information are available at http://www.occ.gov. To receive OCC press releases and issuances
by email, subscribe at http://www.occ.gov/listserv.htm.