Cheque fraud

Cheque fraud is where a fake cheque is presented to a business in payment of goods and/or services. In online orders paid by cheque through the mail, payment will be by a cheque with no funds in the account or a fake cheque from a foreign bank.

How does this work?

Frauds involving cheques include:

• Presenting lost, stolen or counterfeit cheques including from foreign banks
• Fraudulently cashing cheques made out to another person
• 'Bounced' cheques because of insufficient funds in the account
• Inadequate cheque clearance procedures
• Using unauthorised business cheques
• Internal fraudster using legitimate corporate cheques

How do I protect myself?

Keep track of your cheques by using them in sequence from the beginning of the book and keeping your chequebook in a safe place. Watch for cheques missing out of sequence such as one cheque being removed from the end of the new book.

Other steps you can take include ensuring:

• Blank cheques are not pre-signed
  Ensure cheques are made payable to a business or individual. Never write cheques to cash or bearer.
• Transaction details are recorded on the relevant cheque stub
• There are sufficient funds in your account to meet the cheque on presentation.
• Review bank statement each month and conduct a full reconciliation of cheques.
  Do not leave cheque books easily accessible to staff which provides opportunity to the internal fraudster.

When you receive a cheque

Keep cheques you receive safe and bank them promptly. You can also make a request to the bank for special clearance.

Avoid cheque fraud by making sure:

• Confirm the cheques validity
• Cheques payable to a third party are properly endorsed by the payee
• Cheque endorsement is in order
• There are no alterations to the cheque
• The cheque has the correct date
• Figures match the writing
• The signature is included
  If the cheque is from a foreign bank, check its legitimacy by contacting the bank directly or through your financial institute.

When receiving a cheque from a person overseas, be aware that the cheque needs to be cleared by your local bank as well as the overseas bank prior to the funds being cleared. This means that it may take up to 6 weeks to confirm payment for an order. Subsequently, if the Australian bank grants you access to the funds from the cheque, but the overseas bank states the cheque is fraudulent or stolen, then the Australian bank recovers the funds from your account.

Where did the cheque come from?

As the cheque may have arrived from a foreign country, you may not be familiar with the layout of cheques from that bank. Because a cheque looks official does not mean that it is legitimate as they are easy to manufacture.

If the cheque is payment for an especially large order from a new customer or a person who has previously only purchased smaller amounts, be particularly careful due to the potential for fraud. Whether the cheque value is large or small, ensure the cheque has cleared from both your local and the international bank prior to sending the goods. If the cheque bounces, you carry the loss.

Whilst it may be very tempting to complete the large order with the cheque from the foreign bank, consider the effects on your business if the cheque bounces, you no longer have the goods and must make a refund to your bank.

A variation on cheque fraud is the sender in a foreign country sends the cheque in payment of the order. The sum of the cheque is significantly more than the value of the order and shipping. The customer asks the balance to be sent to them via a money transfer agent. When the seller cashes the cheque, it is cleared by their local bank and forwarded to the foreign bank to be honoured.

The seller sends the goods and pays for the shipping as proceeds from the cheque. They then send the balance of the funds to the purchaser via money transfer agent as requested. The foreign bank bounces the cheque as fake or stolen and the seller loses the goods, shipping and value of the refund. The cybercriminal ends up with possession of the goods and cash from the refund.