Cheque overpayment scams

The Malta Financial Services Authority (MFSA) would like to inform the public about what appears to be a new type of 'cross-border' scam which is generally (but not exclusively) targeted at traders who might use the Internet to promote and sell their products and services on-line.

The scam is usually referred to as the "cheque overpayment scam" and, given its level of sophistication, traders and consumers are warned to exercise due caution when receiving payment by foreign cheques and bank drafts for on-line transactions or from unfamiliar sources. The MFSA is informed that these scams operate as follows, however there may be variations to the situation.

A "buyer" or his agent (who may be residing abroad) responds by e-mail to an advert or link on a Website, and offers to use a bank draft (a cheque drawn in a foreign bank) or a personal cheque (also drawn in a foreign bank) to pay for a product or service sold by a trader.

The cheque would generally be in a foreign currency and, to the untrained eye, it would look authentic - complete with watermarks or stamps. However, the amount on the cheque would be for more money than the trader would be expecting. The "buyer" may come up with rather convincing reasons on why the amount on the cheque is more than the purchase price. The "buyer" would ask the trader to deposit the cheque and send the difference using a person-to-person money transfer service, rather than through the banking system.

As the cheque is drawn in a foreign bank, the local bank would not normally make the amount on the cheque available before it is cleared (which may take up to 28 days). Unsuspecting traders, who may be under pressure from the "buyer", would not wait for the cheque to be cleared and remit the difference to the "buyers".

Little would the trader suspect that the cheque sent for clearing is counterfeit - hence "worthless" - with the consequence that the trader is left on the hook for any amounts sent to the "buyer". To add insult to injury, there might also be charges levied by the local and/or foreign bank for clearing the cheque. Of course, this would not happen if the trader waits until the cheque is cleared, although one may have to pay such clearing charges. At times it may not be easy to detect a counterfeit from a genuine cheque. Indeed some cheques are good enough to fool any unsuspecting bank clerk. Traders who came to the MFSA for guidance had thankfully taken the necessary action before remitting funds abroad or cashing in the cheque. There were others, however, who succumbed to pressure from the foreign "buyer" and remitted the difference without bothering to ask some very basic questions, such as why the amount on the cheque was higher than requested.

Traders, and consumers alike, can avoid falling victims of a 'cheque overpayment scam' by reading and understanding these golden rules:

1.) Never accept a cheque for more than your selling price, no matter what: Ask the buyer to write the cheque for the correct amount. If the buyer refuses to send the correct amount, return the cheque. Don't send the merchandise and withdraw the promise to provide the respective service.

2.) Know who you are dealing with: In any transaction, independently confirm the buyer's name, street address, and landline telephone number. If that person resides abroad, be extremely vigilant. An e-mail address is not sufficient proof of a person's residency or whereabouts. If you cannot confirm these details, consider alternative methods of payment.

3.) Consider an alternative method of payment: As a seller, you can suggest a bank transfer or another payment service, such as a reliable on-line payment service or point-to-point service through a licensed financial intermediary. If the buyer insists on using a particular payment service you've never heard of, exercise extreme caution. Visit its Website, and read its terms of agreement and privacy policy. If you have the slightest doubt about the service's reliability, which you cannot reliably confirm, don't use the service at all.

4.) If the buyer insists that you remit funds by a money transfer service (without supplying his bank account details) before the cheque is cleared, end the transaction immediately. Resist any pressure to "act now". If the buyer's offer is genuine now, it should remain genuine after the cheque is cleared. Therefore wait until the cheque is cleared, if you feel that receiving payment by a foreign cheque from someone you only know through e-mail is fine by you.

In essence, a trader should say no to a cheque for more than the selling price, no matter how tempting or convincing the story. The MFSA urges the public to be extremely cautious and to resist any pressure.

Traders and consumers are invited to contact the MFSA's consumer complaints manager for more information or clarification (Freephone 8007-4924, MFSA 2144-1155, e-mail: consumerinfo@mfsa.com.mt.)