| There are several ways check fraud is done. It usually | | | | merchant is part of the fraud scheme. |
| means purchasing goods or services and paying with | | | | Generally banks examine check fraud events case to |
| the check that was been stolen from the owner and | | | | case, but in most cases if the customer is innocent |
| counterfeited or manipulated. Usually thieves steal the | | | | and just a victim of check theft, he/she is refunded. |
| check from the owner, counterfeit owner’s | | | | However if the merchant accepts fraudulent check or |
| signature and try to use the check for fraudulent | | | | check for inflated amount, the merchant is unlikely to |
| purposes. Generally criminals focus on merchants that | | | | get the goods back and he/she is obliged to refund the |
| trade with high-value goods, such as cars. In fact such | | | | cash. However after 2007 merchants can be sure |
| merchants must be more cautious about accepting | | | | that they do not have liability to refund fraudulent cash, |
| checks or banker’s drafts, since they can be stolen | | | | if it is not claimed within six working days, unless |
| or counterfeited and merchants may lose a lot from | | | | merchant is part of the fraud scheme. |
| fraudulent transaction. However as practice shows, | | | | Despite these changes, banking industry continues to |
| such merchant are often deceived due to their | | | | recommend merchants to be cautious about accepting |
| negligence. | | | | checks; however it seems that these |
| Criminals often pursue following tactics: they make | | | | recommendations and actual deeds deeply contradict |
| purchase at the merchant’s store and make a | | | | to each other. On one hand, in the previous scheme |
| payment through the check or banker’s draft that | | | | merchants were heavily discriminated, since they were |
| is of the higher amount than the goods purchased. | | | | the ones who bore all the risk and check owners |
| Criminals assure merchant that the check or | | | | were the ones, who were not subject to financial loss, |
| banker’s draft will be cleared and ask him/her to | | | | despite the possibility that checks could be stolen due |
| transfer excess funds either to their account or to the | | | | to owner’s negligence. The new scheme offers |
| account of the third person. In fact such a conduct | | | | quite a good solution for merchants: if the funds are |
| should be alarming for the merchant and should raise a | | | | not claimed in time, then check owner loses them. At |
| concern that it can be a scam, however in many | | | | the first sight founds fair! |
| cases such fraudulent conduct turns to be successful. | | | | But let us now analyze this situation more deeply. In |
| In these cases it is extremely difficult to track | | | | fact new measures raise moral hazard problem: if |
| fraudulent checks in the clearance system. Although | | | | merchant knows that after six days fraudulent cash |
| banks try to do their best to tackle this kind of fraud, | | | | will become his/hers, he/she will have less incentive to |
| but owner of the check very often does not realize | | | | control and refrain from suspicious operations, since |
| that one of the checks from his/her checkbook has | | | | there is high possibility of retaining these funds. Now let |
| been stolen and moreover money has been | | | | us imagine situation, when a merchant and a thief can |
| withdrawn from the account using the missing check. | | | | find it beneficial to cooperate and can even agree to |
| Sometimes it takes weeks or even month before the | | | | divide proceeds from the fraud. Why not? Before |
| fraudulent cash is claimed back. | | | | stealing checks, thieves often gather some information |
| Since 2007 the banking system through the Check | | | | about habits of a victim. If the thief is sure that the |
| and Credit Clearing Company is amending the ways | | | | person he stole a check from with the high probability |
| by which checks are processed. The new system | | | | will not check his/her bank statement within six days, |
| involves the following: in case the fraudulent check is | | | | then the whole operation can turn out to be quite |
| used, merchant retains funds if they are not claimed | | | | beneficial. This may give rise to the wave of fake |
| within six working days with the exception, when | | | | transactions, where merchants will be involved. |
| merchant voluntarily agrees to give them back, or the | | | | |