Fraud Alert - Beware if Someone Asks You to "Reissue" a Check09/05/2012 | Fall 2012 Newsletter
As part of our banking and finance practice, we have just become aware of a new scam that targets businesses that write checks.
The scam goes like this:
Assume you write a check to John Smith to pay a debt and you give it to him. The next day, he returns the original check, and says, “Would you please instead give me a new check payable to Mary Smith, my wife.” You take the original and give John a new check. The next month, your bank statement shows that both the check to John and the check to Mary were paid on your account.
How? Using a scanner or a smart phone, John electronically deposited his check before he returned the original, and asked you to reissue a new check.
Who is liable for the two checks?
A strong case can be made that you have to pay both of them.
The lesson to be learned?
Do not reissue a check, even if you get the original back, unless you first put a stop payment on the old check and then wait at least five business days. This does not guarantee that you will not have a problem, but it dramatically reduces the risk.