Running a successful business is tough enough without throwing fraud into the mix. According to the Association of Certified Fraud Examiners, small businesses have a fraud rate of nearly 32%.
The Better Business Bureau is warning businesses to be suspicious of customers who send checks for amounts much greater than the product or service being purchased and advises them to become familiar with the signs of an overpayment scam to keep from being victimized.
Check overpayment scams are nothing new.
Businesses are contacted by an alleged buyer, who offers to pay for an item with a check. At the last minute, the buyer will often present a reason for having to write the check for more than the purchase price and request the seller to send or wire transfer the excess or place it on a prepaid credit card.
When the business’ financial institution attempts to withdraw funds on the original payment, the fraudster’s account is empty. The business or seller does not get paid, and the money wired is gone.
Restaurants are common targets of this scam. Via email or text, the restaurant is contacted by an individual who claims they need catering for an event. After giving the individual a price, the restaurant receives a check which is more than the agreed upon amount. They then receive a request to wire transfer the extra money to another vendor for the event — such as someone whom the customer claims is the photographer — or they may be asked to place the extra funds on a prepaid card. The “customer” is never heard from again. Meanwhile, the original check bounces, and the business is charged with a return check fee on top of the money wired to the third party.
“Overpayment scams can take form in various ways,” Mechele Agbayani Mills, President of BBB Serving Central East Texas said. “Regardless of the mode of attack or industry targeted, however, the end result is the same — the victim is charged with a return check fee — on top of the money wired to the third party.”
BBB offers businesses this advice on accepting checks from unknown parties:
- Know who you’re dealing with. In any transaction, independently confirm the buyer’s name, street address and telephone number.
- Never assume that the check is legitimate, even if it’s a cashier’s check. In some cases, it may take weeks for the financial institution to learn that it is counterfeit.
- Never accept a check for more than the purchase price of the product or service. Ask the buyer to write the check for the correct amount. If the buyer refuses to send the correct amount, it’s best not to do business with them.
- Keep in mind, you are the party who is ultimately liable to your financial institution. Be careful!
- Verify all checks, as well as certified checks, with the issuing financial institution. Get the financial institution’s phone number from directory assistance or an Internet site that you know to be reputable, never from the party who gave you the check.
- Educate your employees. As your company’s first line of defense, it’s important for employees to know the signs of an overpayment scam as well as about other scams which could affect your business.