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 Technology News | October 2007 
Fake-Check Schemes Grow In Sophistication
 David Colker - Los Angeles Times
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It was Fred Tracomm's lucky day. Two checks came in the mail to a Chicago office - one for $4,000 and the other for $4,000.50. Both were made out to Fred.
But Tracomm wasn't expecting any checks. In fact, he doesn't exist.
The checks were part of a fake-check scheme, a rapidly growing scam that federal authorities believe mostly originates in ground zero for so much of the fraud plaguing the Internet: Nigeria. The U.S. Postal Inspection Service announced this month that it had seized $2.1 billion worth of the fake checks this year through joint operations in Nigeria and other countries.
The Postal Inspection Service also established a website, with the financial support of several banking institutions, to educate the public about the scams. It's at www.fakechecks.org.
The feds had an easy time seizing Fred's checks. That's because the scammer had inadvertently sent them directly to the Midwest office of the Federal Trade Commission, which for years has been getting advertising mailers addressed to Fed Tracomm.
"We get junk mail like everyone else," said Steven Baker, director of the FTC office. "So, we're on mailing lists that get passed around and sold. Somewhere along the way, someone added an 'r' to the name."
Thus was born Fred, who was instructed in a letter accompanying the checks to deposit them and then notify the sender by e-mail. Fred was to wire a portion of the money back to the sender and keep the rest.
The checks were counterfeits but looked disturbingly real.
"You can buy check stock at any big office supply store," said Renee Focht, an inspector with the Postal Inspection Service's Los Angeles division, headquartered in Pasadena. "They use sophisticated printers to print the checks, and sometimes even embed security features in them, making them seem more legitimate."
Banks usually make funds available from a company or certified check before the check actually clears.
"People think that when funds are available, it means the check is good," Focht said. But later, when the check bounces, the bank wants the money back. All of it, not just the portion the victim was told to keep.
These fake-check scams mark a shift away from the traditional advance-fee Nigerian scams in which a potential victim would be contacted and told that he or she was owed a huge amount of money. Or perhaps the dictator of a country had died and a silent partner was needed to get his secret fortune out of the country. The most imaginative version lures victims with online ads featuring pictures of cute puppies that somehow got stuck in West Africa and are in need of good homes.
The intended scam victim would be asked to pay a fee to cover expenses, and the money would start rolling in or the puppy would be delivered to their loving arms. Except that would never happen.
The advance fee scams are still around, but they seem almost quaint.
"The dead dictator is dead," Baker said.
Fake-check scams, which took up the baton, have a distinct advantage.
"People get a check - a physical piece of paper - in their hands, so it seems more real," Focht said. They are told to wire a substantial portion back to cover taxes, customs fees or other matters.
Usually, the scheme is more detailed than the simple note addressed to Fred. Potential victims are told that they won a sweepstakes somewhere in the world or are perhaps getting a grant to be used to further their education.
One of the more common schemes involves foreign companies looking for people willing to deposit funds for them in U.S. accounts.
A recent example, provided by the Postal Inspection Service, involved e-mails supposedly sent from Teikoku Oil & Gas Co. in Tokyo. The firm needed "representatives" who could handle funds to be paid out to U.S. or Canadian customers.
Teikoku does exist. It has put a notice on its website saying it has nothing to do with the e-mails and that they are false.
Another widespread variation on the scam is from the supposed owner of Susan Art World in London. The e-mails - and in some cases ads placed on Craigslist and other online venues - go into detail about the wonderful life Susan has with her husband, children and cats. And she just loves to paint, obligingly including images of her creations. But "customers in America always offer to pay me with U.S. postal money orders" that she has a hard time cashing.
In exchange for cashing the postal orders, she offers a 15% commission.
If the nature of the offer wasn't enough to identify this as a fake-check scheme, there is also the fact that in various copies of the e-mails, the name of the husband and the number of cats varies. Not to mention that the paintings of children, geishas and landscapes would have a tough time passing muster at a sidewalk sale.
The seizing of fake checks in the Postal Inspection Service joint operation was mostly done in Nigeria by that country's law enforcement agencies. "The government of Nigeria recognizes that it has what could politely be called an image problem," said Douglas Bem, a postal inspector in Washington.
Bem said the joint operation had developed ways of identifying suspicious envelopes. He declined to say what they were looking for. But there were little or no restrictions in opening the envelopes in Nigeria.
"Here in the U.S.," Bem said, "we would need a court order."
The eight-month international operation resulted in 60 arrests in the Netherlands and 16 in Nigeria - small numbers, considering the scope of the problem.
"We are not deluding ourselves into thinking we have stopped the flow of fake checks into this country," Bem said. "The investigations in Nigeria by the Economic and Financial Crimes Commission are continuing."
The name of that agency might sound familiar.
An e-mail from the EFCC hyping its investigative efforts is popping up all over the Web.
The message says that $322 million of ill-gotten gains had been recovered.
Then, in the middle of the e-mail, comes this: "Your name was given to us by one of the fraudsters in our jail house, that he collected money from by tricks."
"Our action now is to refund back money to foreigners who lost money to these thiefs [sic]. We are paying back from the money we recovered."
It's yet another scam. Chances are, Fred got the same e-mail.
david.colker@latimes.com |
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