Beware of Phony Buyer — Fake Cashier's Check Scams

BROKER RISK MANAGEMENT

WEEKLY PRACTICE TIP

Beware of Phony Buyer – Fake Cashier’s Check Scams

A fairly new variation on an old scam has surfaced in California aimed at defrauding real estate agents and/or attorneys.  It usually works like this, although there are several variations:

Agent receives an e-mail from a person, usually from Canada, China or another foreign country, purporting to want to buy one of their upper-priced listings, without ever having seen it in person.  In some cases, this comes through an inquiry from Realtor.com.  The “buyer” will state that they have several million cash in the bank and want to make an all cash offer with a quick close.  They will state that the information can be verified by either their attorney or their bank and will give a name and number to call to verify the funds.

If the agent calls that number, a co-conspirator, pretending to be the attorney or the bank, will indeed verify the funds are available.  All are very convincing.

The prospective buyer will also ask for the name of an attorney in the area as they need legal advice and want to deposit the purchase funds with the attorney.  If the agent gives the name of an attorney, that attorney will be contacted by the buyer using the agent’s name and stating that they are going to purchase an expensive property.  The attorney listens because an agent they know has given their name to the so-called buyer.

The prospective buyer will then state that they want the attorney to accept a cashier’s check for all or a large part of the purchase price to be deposited into the attorney’s trust account.  In a variation, if the attorney refuses, the real estate agent is asked to deposit the cashier’s check into their broker’s trust account.

An offer is written and ratified by this “very qualified buyer” who has already put up the cash to purchase.  The buyer then promptly cancels and immediately demands the return of the funds by wire — minus any amounts for attorney’s fees, or some amount to the brokerage for their trouble.  (“Wow, that was easy money!” one may think.)

Once the funds are wired to the purported buyer, the fraud is revealed when the original cashier’s check is bounced because it is a fake.

The trick of the cashier’s check fraud is that the attorney’s or broker’s bank will credit their account before the funds have actually arrived from the paying bank. This is because the FDIC requires banks to make cash available from cashier’s and certified checks in one to five days.  Therefore, it looks like the funds have cleared and everything is fine.  But, it can take weeks for the fraudulent check to get back to the bank where it was deposited.  Under the Uniform Commercial Code, a bank can charge back a fraudulent cashier’s check against the account into which it was deposited. 

Because this charge-back can take several weeks, the crooks have the money and disappear.  They may never have even been in Canada, or any other location they stated, having just set up an electronic “virtual presence” there.

Similar warnings are going out to attorneys.  Reportedly, several attorneys in California have been snared by this scam.  In those reported cases, the fraud was never completed because the attorneys decided not to rely on the telephone numbers provided and/or printed on the cashier’s checks, and called the bank directly, discovering the fraudulent cashier’s check scam.  It is unknown if there are cases where the scam worked, but the victim is too embarrassed to report it.

PRACTICE TIPS:

 1.  If it sound too good to be true, it almost always is.

2.  Don’t bite on the bait.  This is flat-out fraud.

3.  Report any such inquiry to your manager.

4.  The matter should be reported to law enforcement.  This will likely result in a FBI fraud investigation, but these criminals are very difficult to catch.

5.  There are many varieties of cashier’s check scams.  Never take a cashier’s check (“Guaranteed as good as cash” they will tell you), and in return give your own hard-earned money. 

6.  For more information on cashier’s check fraud, go to:

            http://banking.about.com/od/securityandsafety/a/cashierscheckfd.htm

DO NOT FORWARD TO CLIENTS.  This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents.  It may not be reproduced or distributed without the express written consent of Broker Risk Management.  The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.