Protecting Yourself from Cheque Fraud
While the use of cheques has been declining with the growing popularity of electronic and card payments, financial institutions in Canada still process nearly one billion cheques every year.
Cheque fraud can happen a few different ways. Criminals can steal cheques, create fraudulent cheques or change the name or amount of a legitimate cheque. In any case, there are a number of steps that you can take to protect yourself from cheque fraud.
- Keep your cheques in a secure location
- Review your monthly bank statement or regularly check your transactions through online or telephone banking. If you see transactions you didn’t do, notify your bank immediately and they will investigate.
- If you close your account, shred any unused cheques
- Consider electronic payments such as wire payments, direct deposit of payments, pre-authorized payments for bills or e-mail money transfers as they are more secure than cheques.
There are a number of security features built into cheques to help prevent fraud. Banks will try to detect fraudulent cheques, but it isn’t always possible to do so until it goes through the cheque clearing system. Here are some tips on how to spot a fraudulent cheque yourself:
How to Detect a Fraudulent Cheque
- Details about the security features that are built into cheques are usually printed on the back of the cheque and can include things such as watermarks and intricate designs that will disappear if the cheque is scanned or photocopied. The same is usually true with money orders issued by Canadian banks.
- If you have accepted a cheque as payment for something you are selling, know who you’re dealing with and whenever possible, make sure that the cheque, money order or bank draft has cleared and that the money has been confirmed before you release the item to the buyer. This should be negotiated up front when the buyer first make contact with you about the item. For a Canadian cheque drawn on a Canadian bank, this could take at least six business days. For international payment, it could be much longer. If you're uncomfortable about the transaction for any reason or if you are suspicious about anything, don't go through with it. Losing the sale is better than being out the item you were selling and the amount of the fraudulent cheque, money order or bank draft.
- For money orders and bank drafts, if you are suspicious, you can have your bank call the cheque writer's bank to ensure it is legitimate.
- Consider switching to electronic forms of payment such as wire transfers or e-mail money transfers, particularly if you don’t know the cheque writer. Electronic payment is more secure than cheques.
Remember, you are responsible for all the cheques deposited into your account. While your bank may provide you with provisional credit, giving you access to the funds right away when you deposit a cheque, the provisional credit will be removed from your account if the cheque is found to be fraudulent when it is processed. This could happen in a few days or significantly longer if the cheque is written on a foreign bank account. It is then your responsibility to get payment from the person or organization that owes you money.
- Make sure any cheques that you write or accept from others are properly dated and completed.
- Don't accept cheques showing any signs of alteration.
- Don't accept post-dated cheques and never agree to hold a cheque until a future date.
- Don't accept a cheque made out to another individual and then signed over to you.
- If you are selling something, don't accept cheques for an amount greater than the purchase price. This is a common scam known as an Overpayment Scam.
- Keep in mind that legitimate business cheques can sometimes be altered and used as a payment. Before accepting a business cheque, ask yourself if it makes sense that a cheque be drawn on a business account or that of a large corporation.
- Don't accept counter cheques (cheques with no preprinted information such as name, address, or account number).
Read more about cheques.