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Imagine walking down a street and being stopped by a stranger who asks you for a favor. This stranger says that they need cash but only possess a $40 check. They offer an exchange for the check if you have $30 in cash, saying you can keep the extra $10 when the check is cashed.

Do you believe you could trust this individual, and that the check was genuine?

Such a hypothetical scenario may sound obviously suspicious, but it’s the same type of interaction and agreement that people commonly enter into involving their own financial accounts. 

This is the second of a two-part article discussing how consumers interact with scammers. The first part was about folks who take calls and respond to text messages from scammers they believe are representatives from their financial institution. This second part delves into how some people strike up a relationship with individuals they really do not know and consequently expose their private information in the belief that there is a financial benefit.

Making Virtual Friends

There are no age requirements for the types of scams that consumers fall victim to, but financial institutions have noted tendencies. Young adults have a tendency to grow their personal networks through social media versus in-person interactions. Making new friends through TikTok, Instagram and Snapchat is a common occurrence.

Many new relationships created through social media not only start virtually, but remain so, with texting and chatting as the prevalent form of communication. This means that a future fraud victim (“consumer-victim”) rarely meets their future scammer in person (“scammer-friend”) and will have no way of tracking them down when something bad happens. Phone numbers and Instagram accounts can be cancelled easily, breaking the only means to connect.

Scammers masquerading as someone looking for friends may spend weeks or months engaging in light, fun interactions with connections they make. Their real purpose, unfortunately, is to gain the confidence of folks who can provide them with access to a checking account.

Giving Favors that Backfire

The reason for what happens next is a matter of debate between financial fraud professionals, but the action itself is very common and with predictable results. A consumer-victim deposits a check from their scammer-friend into their own bank account. Almost immediately, the consumer-victim withdraws funds at the request of the scammer-friend in the form of ATM withdrawals, Zelle transfers and debit card purchases of gift cards.

Within a week, the deposited check is revealed to be illegitimate. It’s either a real check that’s been stolen and washed (i.e., the details on the check have been altered), or a counterfeit. Regardless of why the check is bad, the withdrawals that the consumer-victim made often create an overdraft (a negative balance) in their account. This leaves the consumer-victim owing their financial institution the amount of that overdrawn balance.

And what happens to the scammer-friend? There might be some further conversation wherein the scammer-friend promises to contact the maker of the check to correct the problem. However, the scammer-friend never does correct the problem and shortly thereafter severs all contact with the consumer-victim.

Identifying Risk in the Request

Why would someone deposit a check into their own account from someone they hardly know? Consumer-victims who have been interviewed by financial fraud investigators commonly explain that they were “doing a favor for their new friend.” Consumer-victims report that their new friend had problems getting a checking account open but possessed a large check that needed to be deposited. For the courtesy of providing a place to deposit this check, the scammer-friend tells the consumer-victim they can keep a portion of the check for the inconvenience (e.g., “Let me deposit this $5,000 check, you provide me $4,000 of the proceeds through Zelle, and you can keep a $1,000 for yourself.”)

Are these consumer-victims just performing an act of kindness for a new friend? Some financial fraud professionals doubt that based on messaging found on the dark web and even social media sites like Telegram. Indications exist that in some instances, scammers are recruiting young adults to participate in some kind of scheme. These consumer-victims think they are helping the scam by converting what they know is a stolen check and will be rewarded financially by keeping some portion of the proceeds from the check. They are told this type of action has no risk, and no one really gets hurt because the maker of the check has insurance.

The consumer-victim is shocked to find out after funds have been sent to the scammer-friend that the check is no good at all and that they (the consumer) were the real target all along.

Being Your Own Best Defender

How will the overdraft in a consumer-victim’s account be corrected?

Not by the consumer-victim’s financial institution. It is not the responsibility of a financial institution to cover an overdraft for an account holder who willingly deposits a bad check into their account. If the victimized account holder has a joint owner on their accounts (a common arrangement with young adults and their parents), the joint owner may be surprised to see funds in their own account pledged to cover the overdraft, regardless of any knowledge they had about the bad check. If the consumer-victim has no way to cover the overdraft, their account is likely to be charged off as a bad debt and this will be a negative item reported on that person’s credit history for up to seven years. Further, the maker of the original check may pursue civil or criminal charges against anyone who illegitimately handled a check they issued.

What can a consumer do to avoid such scams and not become a victim?

• The best solution is to not become involved in such situations at all. If you make a new friend through social media who at some point asks you for a favor involving your financial accounts, provide a solid “no” as an answer. Don’t mix friendships with your own financial condition. If they insist, end the relationship. This is not a friendship; it’s a set up.
• Perhaps, you will end up depositing a check out of well-meaning generosity. Upon seeing the check, you may be able to recognize that it was not meant for your new friend. This can be for various reasons including: the payee’s name on the check is not your scammer-friend, the check looks physically altered, or the check is otherwise odd (such as a check from a business in a state that your friend does not live in and to which they have no obvious business relationship). Do not withdraw any funds at your scammer-friend’s request. Contact your financial institution and share the story – they will likely put the check on hold until it comes back bad.
• If you have a joint owner on your account, talk to them about the new friend you met on social media and explain that they are asking for the right to use your account. Keep in mind, the joint account owner will be as responsible as you for any bad amounts and they have the right to know what you are planning on doing with the account.
  

Ultimately, the same common sense that would keep you from exchanging cash for a check from an unknown person randomly met on the street should apply. A person who asks themselves what the harm is in making a new connection through social media and entertaining proposals made by these people to engage in such a financial transaction should understand that the harm can be significant to them personally and to their loved ones. There are better ways to make friends.