Remember the infamous Nigerian 419 scam? I wrote three years ago about how annoying it was to get these bogus offers practically every other day and expressed surprise that anyone would still fall for it now that it was well known. Thankfully I seem to have been dropped from the mailing lists and have not received any such offers for well over a year now, but it turns out that a variation of the scam using cashier’s checks has been used to defraud even fancy law firms for hundreds of thousands of dollars.
Cashier’s checks work like this. Banks take money from your account and issue a check in the bank’s name to whoever you name the recipient to be. Then you give that check to that person who deposits it in their bank. Since the check is issued by your bank and is drawn from their account and not from your private one, cashier’s checks are assumed to be almost as good as cash and the recipient’s bank usually accepts it as being good so that the recipient gets access to the money almost immediately.
I had assumed that once you deposit a cashier’s check in your account and are told that the check has ‘cleared’ (i.e., that the money is now available for your use), that meant that everything had gone smoothly. But I now discover that just because your bank tells you that you have the money to spend does not mean that they have verified that the check is good. If it turns out otherwise, they can demand repayment from you even if you have spent the money.
This is what happened to law firms who were scammed using bogus cashier’s checks. A client gave them a cashier’s check and asked them to wire him the remainder of the money after the firm had taken out its fee. They did so when their bank released the money into their account. When the bogus cashier’s check later bounced, the court ruled that the law firm had to repay their bank the amount of the check. The client had meanwhile disappeared.
This abuse of the cashier’s check system is worrisome since they are used widely for transactions as a secure means of payment. I have driven out of showrooms with a new car purchased using a cashier’s check. Cashier’s checks are also familiar to me since I have family all over the globe. Whenever there is a need to send money cheaply but securely to them, the preferred method is the cashier’s check. If they begin to be treated with suspicion, it is going to be a real nuisance.