How does check fraud work? How does it happen?
December 5, 2021 9:13 PM Subscribe
Checked our bank account and someone had “cashed” a check for $30,000 on it. On our account was a picture of the check - right account numbers but not one of our checks. Wrong signature. The memo line said “home purchase.” We had enough money in the account to cover it because we are in the process of buying a house.
We called the bank, they put a dispute on it. It seems unlikely that WE are going to be on the hook for this. Is anyone? Did any money actually change hands?
Did someone walk into a branch with that fake check and a fake ID and a fake mustache and walk out with $30,000?
Or is the money going to be pulled back out of whatever account it was deposited into electronically?
Does someone have a giant stack of checking account numbers from when they hacked, say, the gas company (trying to think of businesses that might have our checking account number) and then some automated process monitors public records for when people go into contract on a house and then they do their thing? The “home purchase” thing seems too big to be a coincidence, but maybe it is.
Is the title company compromised? Why a check and not wire fraud?
How does this all work?
We called the bank, they put a dispute on it. It seems unlikely that WE are going to be on the hook for this. Is anyone? Did any money actually change hands?
Did someone walk into a branch with that fake check and a fake ID and a fake mustache and walk out with $30,000?
Or is the money going to be pulled back out of whatever account it was deposited into electronically?
Does someone have a giant stack of checking account numbers from when they hacked, say, the gas company (trying to think of businesses that might have our checking account number) and then some automated process monitors public records for when people go into contract on a house and then they do their thing? The “home purchase” thing seems too big to be a coincidence, but maybe it is.
Is the title company compromised? Why a check and not wire fraud?
How does this all work?
You should always assume your title company and realtor are compromised. These are small, non-techie businesses that handle enormous sums of money. You should assume that Elbonian hackers are reading every email to and from them, and can fake email from them as they see fit.
posted by Hatashran at 10:02 PM on December 5, 2021 [7 favorites]
posted by Hatashran at 10:02 PM on December 5, 2021 [7 favorites]
Re: do people monitor public records for when people go into contract on a house
Not an expert but from what I understand, yes, there are tons of scammers that try to seize exactly this opportunity. When we bought a condo a couple years ago we received lots of warnings about this, especially about scammers that try to reach you with fake account details to steal down-payment wire transfers.
If this isn't your first house then you know this already, but you're also about to be deluged by shady companies sending you deceptive mail that appears to be from your mortgage lender.
posted by equalpants at 10:24 PM on December 5, 2021 [5 favorites]
Not an expert but from what I understand, yes, there are tons of scammers that try to seize exactly this opportunity. When we bought a condo a couple years ago we received lots of warnings about this, especially about scammers that try to reach you with fake account details to steal down-payment wire transfers.
If this isn't your first house then you know this already, but you're also about to be deluged by shady companies sending you deceptive mail that appears to be from your mortgage lender.
posted by equalpants at 10:24 PM on December 5, 2021 [5 favorites]
Ditto @Hatashran, assume someone had compromised realtor, his broker, or the title company, and anywhere along the chain. It's just too much of a coincidence that they forge a check for "home purchase" just as you are shopping for a home, and gotten your account number to forge a check for. All this "photo deposit" makes things simple, but totally defeats the magnetic toner to print those weird font account and routing numbers with MICR that used to be difficult to fake.
Bank will likely not lose much money, as they have authority to reverse fund transfers, and something this large would have vast majority of it on hold anyway for a week. Some amount, maybe $500 to 1000 may be available immediately, and that'd likely be the amount they lost. Chances are someone bought off someone along the chain to only steal routing and account number every once in a while, then they generate a fake check, then use a mule to "deposit" the check, and transfer the available amount to yet another mule ("Please let me use your account to transfer some money to my cousin, you can keep 10% for helping me with this, I very much appreciate it."), who will forward it on to either another mule or the scammer's pickup person, probably via Venmo or Western Union.
In the future, I recommend setting up auto alerts on your accounts that is over a certain amount that pings your SMS immediately. Or open a new account just for home buying, to insulate your primary account(s).
posted by kschang at 3:14 AM on December 6, 2021 [5 favorites]
Bank will likely not lose much money, as they have authority to reverse fund transfers, and something this large would have vast majority of it on hold anyway for a week. Some amount, maybe $500 to 1000 may be available immediately, and that'd likely be the amount they lost. Chances are someone bought off someone along the chain to only steal routing and account number every once in a while, then they generate a fake check, then use a mule to "deposit" the check, and transfer the available amount to yet another mule ("Please let me use your account to transfer some money to my cousin, you can keep 10% for helping me with this, I very much appreciate it."), who will forward it on to either another mule or the scammer's pickup person, probably via Venmo or Western Union.
In the future, I recommend setting up auto alerts on your accounts that is over a certain amount that pings your SMS immediately. Or open a new account just for home buying, to insulate your primary account(s).
posted by kschang at 3:14 AM on December 6, 2021 [5 favorites]
I work in finance and can testify that there is a big push to minimize the use of checks whenever possible as they are very suspectible to fraud, as you've unfortunately found out.
Most of the cases I have seen are when scammers grab a check, alter the payee or amount, and cash it via a mobile or ATM deposit. In my country, fraudulent checks have very short periods of recourse (ie the amount of time you can guarantee a return of funds) if you discover the fraud - sometimes just 24 hours after it is cashed, depending on what was changed. Once the check clears, they etransfer the money overseas where it is much harder to pursue. Occasionally some of the funds get clawed back, or in certain cases where the bank did not hold the funds properly or committed some other error, they refund the money and take a loss.
In your case, since the entire check was fraudulent and it just had your account number attached, you're almost certainly in the clear. You can ask your bank to open a new account, but then you'll need to update all of the direct deposits and automated debits you have.
posted by fortitude25 at 4:11 AM on December 6, 2021 [3 favorites]
Most of the cases I have seen are when scammers grab a check, alter the payee or amount, and cash it via a mobile or ATM deposit. In my country, fraudulent checks have very short periods of recourse (ie the amount of time you can guarantee a return of funds) if you discover the fraud - sometimes just 24 hours after it is cashed, depending on what was changed. Once the check clears, they etransfer the money overseas where it is much harder to pursue. Occasionally some of the funds get clawed back, or in certain cases where the bank did not hold the funds properly or committed some other error, they refund the money and take a loss.
In your case, since the entire check was fraudulent and it just had your account number attached, you're almost certainly in the clear. You can ask your bank to open a new account, but then you'll need to update all of the direct deposits and automated debits you have.
posted by fortitude25 at 4:11 AM on December 6, 2021 [3 favorites]
This thread is closed to new comments.
If it was a "snapshot" smart phone deposit I imagine that it would be pretty easy to digitally alter.
As to where they get their information to account numbers and other personal information....its all out there in the webs.:(
posted by tipsyBumblebee at 9:50 PM on December 5, 2021