Fake Check Alert: Protect Your Small Business

You might think that most scammers target individuals like you and me. However, some focus on small businesses with fake checks. If you’re a business owner, keep reading this guide to learn how fake check scams work and why it is targeting small businesses.

How Does the Fake Check Scam Work

Scammers target small businesses by pretending to be legitimate customers. They contact them to purchase products or services, place large orders, or request urgent services.

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Typically, they exchange a few emails or messages on social media with employees or business owners to gain their trust. Some of these scammers often make unusual requests in cases reported online. However, their victims tend ignore these red flags, blinded by the amount offered.

After a few messages, they’ll confirm the order and send a fake check for payment, usually much higher than the agreed price.

They tell victims to deposit the check through a mobile banking app or directly into their bank account. They may even write “for mobile deposit” on the check because they know a bank employee would spot it as fake and refuse to cash it.

As soon as the amount clears, small business owners typically start buying the tools or ingredients needed for the order and start working on it.

After a while, scammers will try to cancel the order, claiming a mistake was made. A typical response from a business owner would be to refuse the cancellation and explain that the ingredients and tools have already been purchased. However, this is precisely what scammers are hoping for. It’s an opportunity for them to request a partial refund.

With no other option available left, small business owners would typically agree to a partial refund.

The Main Issue

Because of how check-clearing works and depending on the bank’s policy, the deposited amount may initially be credited to the depositor’s account, allowing them to see or access some or all of the funds. So, a small business owner might think the check is valid and may end up sending the “extra” money back or forwarding it to a third-party account.

After a few days, the bank detects the check is fake. The funds that showed up in the business’s account are taken back. The issue is that when the bank detects the fake check, the business owner has probably already sent the money to the scammer.

In the end, the business owner loses the money sent to the scammer and faces bank fees for the bounced check. Your bank may also close or freeze your account, and could badly hurt your credit score. This can be a big financial hit, especially for small businesses with limited cash flow.

⇒ Long Story Short

In a fake check scam, scammers send a fake check to small businesses, then partially cancel the order and ask for some of their money back, hoping you’ll send it before the check bounces.

Red Flags

The scam seems believable because the fake customer acts politely and convincingly shows interest in the products or services they claim to want. But, here are some of the major red flags that are commonly known in fake check scams:

1. Overpayment

Any business owner should be wary of customers who pay more than the agreed price and ask for the excess to be refunded. This is a common scam tactic that were also used in the Check In The Mail Scam.

2. Photo of the Check as Proof

Scammers might send you a “photo of the check” to make it look real. Check the photo closely for signs of fakes, like strange fonts, old bank logos, or spelling errors.

3. Large or Unusual Orders

This scam often involves large orders with little interest in details or customization. Scammers use these big orders to make the deal seem real. Who would turn down an order of a few thousand dollars?

How to Avoid Falling Victim to The Fake Check Scam

Wait for Checks to Clear

Do not assume a check is valid until it fully clears your bank. Even if funds appear in your account, they might not be legitimate.

Call the bank and ask if the check you received is real. Read them the tracking number and they can tell you if it’s valid.

Be Cautious of Overpayments

If a customer overpays and asks you to refund the extra amount, it’s a warning sign that something might be wrong. Scammers often use this tactic to trick victims into sending them money.

Use Secure Payment Methods

Use secure payment methods, such as credit cards or electronic transfers, which offer better fraud protection and quicker payment confirmation.

Verify Customer Details

Check new customers carefully. Look them up online and try to build a profile. Before doing business, search their name with terms like “scam” or “complaint” to see what others say about them. If they mention a business they work for, check if the customer is legitimately working for them. Scammers may often use fake company names or information to try and deceive businesses. Hence, it’s a reasonable precaution to verify the legitimacy of a large order.

Educate Your Staff

Training your staff about common scams is crucial. It helps them spot red flags and avoid mistakes, protecting the business from potentially major financial losses.

What to Do if You’ve Been Scammed?

Contact Your Bank Immediately

Tell your bank right away if you realize you’ve been scammed. They can help freeze your account and, if possible, reverse transactions.

Report the Scam

Warn your family and friends about this scam to prevent them from falling victim.

File a report with the appropriate authorities. Report scammers and any suspicious activity to the Federal Trade, and the FBI Internet Complaint Center by using the pages below:

• Report to the FTC
• Report to the FBI Internet Complaints Center

Review Security Measures

Look at how the scam happened and update your internal procedures. Improve customer verification steps, train staff to spot scams, and consider using better fraud protection tools.

Use the experience to improve your payment procedures, customer checks, and staff training to avoid future scams.

How to Protect Yourself More

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Feel free to explore additional articles on related fraud. Last but not least, if you had any bad experiences, make sure to use the comments section below to expose the scammers!