Cash The Check System
Cash the Check System is internet fraud and theft that involves scamming more than one person out of large amounts of money and goods in a single transaction. People who commit fraud have figured out that using counterfeit cashier's checks is the way to go because banks and other financial institutions often view them as "guaranteed funds" and will cash them immediately without asking twice about it. Scammers know this and take advantage of the system in order to score thousands of dollars worth of goods and cost these people their goods and a large amount of money in the process.
This type of internet fraud starts with a prospective "customer", i.e. the scammer, negotiates a large purchase with a wholesaler or Internet retailer, often for large sums of money between $50,000 and $200,000. The scammer agrees to pay in advance using a bank wire transfer, but after ordering their goods they will inform the retailer that something has gone wrong with the wire transfer or it seems impractical, and will send a cashier's check instead, which happens to be a counterfeit check. Often times the victim of this transaction will accept the cashier's check as a valid form of payment because as with banks, retailers view them as accurate and guaranteed funds.
This cashier's check is written on the account of an organization that is not involved in the scam. The victim cashes the check, which often clears due to the fact that the organization is an actual organization with the funds in their account, and so once it clears, the victim sends the goods. Meanwhile, the organization receives their bank statement and notices this withdrawal from their account, and requests a chargeback from the victim who cashed the check. Not only is the organization dealing with this issue, but the victim of the scam has lost not only a large amount of money but also the goods they sent.
Additionally, transactions are done in much the same way which involves a smaller negotiation, such as for a few thousand dollars worth of goods. The scammer will send a counterfeited cashier's check for more than the amount of the goods, claim they made an error and request the victim to wire them the difference, or extra funds. By this point, the bank has cashed their check, so the seller has no viable reason not to send back these funds, until a few weeks later when they realize the check has bounced and they not only lost money and goods, but are paying additional fees to their bank.
Protect yourself from scams like these by insisting you will only accept wire transfers or credit cards as payment. Wait until the payment is cleared by your bank before shipping out goods. Before you attempt to cash any type of cashier's check, ask the bank to verify the account number and make sure the check is legitimate, as well as seeing if their account has sufficient funds.