Cheque Fraud: A new twist on an old con

Michael Henneman* thought he won a $500,000 lottery.

All the recently laid off 59-yr old widower had to do was pay a processing fee.

Mr. Henneman didn't recall buying any lottery tickets (especially for a lottery in the UK, as he lived in the United States) but the email he received was confirming that he was in fact the winner of the auction...maybe someone else had one on his behalf? Anyways, this was the answer to Michael's prayers, he would be able to pay off his mounting debts.

Henneman sent $800. Then another $1,500.

But when the "lottery" people asked for a third payment of $2,500, Henneman grew suspicious.

Henneman told the company that promised the lottery winnings that he couldn't afford to send more money. So the company told Henneman they would send him a cheque to cover all further fees.

Still suspicious, Henneman asked his bank to examine the cheque.

It was a fake and of course, so was the lottery.

Luckily, Henneman's bank was able to detect the fake cheque right away. Most cheque-clearing systems used by North American banks don't know, with 100% certainty, for months if a cheque is good.

That's because cheques have to physically travel between banks, branches and processing centres to be truly verified. Until the journey between the bank where the cheque is deposited and the paying bank is completed, there is no confirmation that a cheque is legitimate.

The depositing bank essentially credits the depositor with the funds while the cheque undergoes the "clearing" process.

It can take a long time for a bank to figure out a cheque is fake and conmen rely on those bank lag times in order to pull off their crime.

Turns out that Michael Henneman, living in New York, was just one of the many people (mostly seniors or others on fixed budgets are the ones "hit" most) targeted by the latest version of fake cheque fraud. It's new twist on an old con. Henneman is one of thousands who were told they'd won a lottery, but had to pay fees in order to receive their prize. But this time fake checks were part of the equation. Victims were told to deposit the check and return the money. By the time the fake checks bounced, the crooks were long gone and the victims were on the hook for the money from the banks.

While Henneman lost a couple thousand dollars, others lose much, much more.

It's estimated that gangsters flood Canada and the United States with billions of dollars worth of fake checks, every single year.

As RCMP Staff Sargeant Tim Olmstead, who investigated the Michael Henneman case, explains, check fraud schemes, operating out of Canada are a growing problem.

"Well, it's a huge problem and we actually have a fairly significant task force right out of this section [where] that's all they do is that type of mass marketing fraud," Sargeant Olmstead says.

The RCMP, in fact, had the Burnaby, BC check fraud operation under surveillance and eventually caught the criminals red-handed. "As we entered the building, two of the suspects were actually in the process of stuffing so-called bait letters destined for Americans."

Three men were charged with 41 counts of operating a counterfeit check lottery scam. One person, Michael Onesmus, was found guilty and sentenced to three and a half years in prison.

Banks Don't Help

Daniel Fitzgerald*, from Vancouver, British Columbia was another victim of check fraud - and of delayed cheque-clearing by banks.

Like many of us, Fitzgerald posted his resume online. A supposed British investor, James Moon, offered him work.

All Fitzgerald had to do was set up a bank account in Vancouver to pay a client of Moon's, in China - and Moon would send Fitzgerald cheques to cover the amounts.

Fitzgerald received the cheques from Moon, deposited them and waited until his bank told him they were "clear." Then he sent $26,000 to the customer in China. To his horror, Fitzgerald discovered months later that those cheques were in fact fake and that HE was on the hook for the money.

"To be honest with you I was skeptical about the whole thing right up until the bank notified me that the cheque had cleared because I figured it if wasn't a real cheque then there's no way the bank would have cleared it," Fitzgerald said.

When contacting the bank used by Daniel Fitzgerald bank, the Royal Bank, about the lag time banks take to clear cheques.

Jay Stark, the Bank's Vice-President of the fraud department, said that "the customer remains responsible" even if the bank has given the cheque clearance. Stark also said the law allows a bank to come after a customer, up to six years later, for a bad cheque.

Stark promised to take up the issue of cheque clearance with the Canadian Banks Association (CBA) and the Canadian Payment Association (CPA).

However, any improvements to bank cheque-clearing systems will probably come too late for Daniel Fitzgerald who has lost his car, his house and his wife and kids.

"I was absolutely crushed. First of all, I felt stupid because I had been sucked in by these con men. And then I just panicked, I had no idea what I was going to do, the bank told me I was on the hook for this huge amount of money which obviously I couldn't repay. I just didn't know what to do. I felt helpless," Fitzgerald said.

Should banks be allowed to victimize the victims of crimes like these twice by forcing them to pay? They have already lost so much to the con men who's trickery they were fooled by, and then to again be taken advantage of by the banks and being forced to repay them for the losses the bank incurred, is that really fair? Should the banks be allowed to do that? As stated above, they may come after a person months after a cheque cleared there system... But is that the victims fault? Shouldn't that have been something on the banks end to help catch the fraud from the very beginning? shouldn't the bank have caught it much earlier and not allowed it to clear? Mr. Fitzgerld didn't send money to the scam artist until his cheque had cleared at the bank because he was suspicious of it... So the bank essentially helped the con in scamming him by allowing the cheque right? how was he at fault? why is he forced to pay the bank back? and don't the banks have insurance for these sort of things? (I'm sure they have insurance for robberies) or what about when defaulted loans? how do the banks balance there books? I'm pretty sure there's some sort of "bad debt" insurance? right?? so if they're being paid back in that way, and then harassing the already victimized.... How are the crooks and cons now?

THOUGHTS???

*Fictional names, Any resemblance to actual persons is strictly a coincidence