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Cheque Fraud: A new twist on an old con

February 7, 2009

Cheque Fraud: A new twist on an old con

Mogens Olesen thought he won a $500,000 lottery.

All the ninety-two year old widower had to do was pay a processing fee. Olesen sent $700. Then another $1,500.

But when the "lottery" folks asked for a third payment of $2,500, Olesen grew suspicious.

Olesen told the company that promised the lottery winnings that he couldn't afford to send more money. So the company told Olesen they would send him a cheque to cover all further fees. Still suspicious, Olesen asked his bank to examine the cheque. It was a fake and of course, so was the lottery.

Luckily, Olesen's bank was able to detect the fake cheque right away. Most cheque-clearing systems used by North American banks don't know, with 100% certainty, for months if a cheque is good.

That's because cheques have to physically travel between banks, branches and processing centres to be truly verified. Until the journey between the bank where the cheque is deposited and the paying bank is completed, there is no confirmation that a cheque is legitimate.

The depositing bank essentially credits the depositor with the funds while the cheque undergoes the "clearing" process.

It can take a long time for a bank to figure out a cheque is fake and conmen rely on those bank lag times in order to pull off their crime.

Turns out Olesen, living in North Carolina, was just one of the many seniors targeted by the latest kind of fake cheque fraud. A new twist on an old con. Olesen is one of thousands who were told they'd won a lottery, but had to pay fees in order to receive their prize. But this time fake checks were part of the equation. Victims were told to deposit the check and return the money. By the time the fake checks bounced, the crooks were long gone and the victims were on the hook for the money from the banks.

While Olesen lost a couple thousand dollars, others lose much more.

It's estimated that gangsters flood Canada and the United States with billions of dollars worth of fake checks, every year.

As Vancouver RCMP Staff Sergeant Tim Olmstead, who investigated the Mogens Olesen case, explains, check fraud schemes, operating out of Canada are a growing problem.

"Well, it's a huge problem and we actually have a fairly significant task force right out of this section [where] that's all they do is that type of mass marketing fraud," Olmstead told W-FIVE.

The RCMP, in fact, had the Burnaby, BC check fraud operation under surveillance and eventually caught the criminals red-handed. "As we entered the building, two of the suspects were actually in the process of stuffing so-called bait letters destined for Americans."

Three men were charged with 41 counts of operating a counterfeit check lottery scam. One, Michael Onesmus, was found guilty and sentenced to three and a half years in prison.

Banks Don't Help

Mike Fitzpatrick, from Vancouver, British Columbia was another victim of check fraud - and of delayed cheque-clearing by banks.

Like many of us, Fitzpatrick posted his resume online. A supposed British investor, James Moon, offered him work.

All Fitzpatrick had to do was set up a bank account in Vancouver to pay a client of Moon's, in China - and Moon would send Fitzpatrick cheques to cover the amounts.

Fitzpatrick received the checks from Moon, deposited them and waited until his bank told him they were "clear." Then he sent $26,000 to the customer in China. To his horror, Fitzpatrick discovered months later that those cheques were in fact fake and that HE was on the hook for the money.

"To be honest with you I was skeptical about the whole thing right up until the bank notified me that the cheque had cleared because I figured it if wasn't a real cheque then there's no way the bank would have cleared it," Fitzpatrick said.

W-FIVE confronted Mike Fitzpatrick's bank, the Royal Bank, about the lag time banks take to clear cheques.

Jay Stark, the Bank's Vice-President of the fraud department, told W-FIVE that "the customer remains responsible" even if the bank has given the cheque clearance. Stark also said the law allows a bank to come after a customer, up to six years later, for a bad cheque.

Stark promised to take up the issue of cheque clearance with the Canadian Banks Association (CBA) and the Canadian Payment Association (CPA).

However, any improvements to bank cheque-clearing systems will probably come too late for Fitzpatrick who has lost his car, his house and his marriage.

"I was absolutely crushed. First of all, I felt stupid because I had been sucked in by these con men. And then I just panicked, I had no idea what I was going to do, the bank told me I was on the hook for this huge amount of money which obviously I couldn't repay. I just didn't know what to do. I felt helpless," Fitzpatrick said.

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