Scammers luring Americans with fake check schemes

By Paritosh Bansal
Thu Oct 11, 8:19 AM ET

NEW YORK (Reuters) - Patricia Soens paid more than $400,000 in processing and other fees to claim a European lottery prize she was told she had won. After realizing she had been conned, she killed herself.

Soens, 56, of Louisiana, fell victim to one of a growing number of scams that use fake checks and the promise of easy money to lure people.

The schemes, which range from fake lotteries to work-at-home offers, exploit the fact that banks have to provide funds from checks, money orders and other financial instruments before they actually clear.

Nearly one in five adult Americans admitted they or a family member have fallen victim to a financial scam of some sort, including fake check schemes, according to a survey by the U.S. Postal Inspection Service along with advocacy groups and companies such as Bank of America, Citigroup and American Express.

The total number of victims of the fake check schemes could run into millions, postal inspectors estimate. Victims typically lose between $3,000 and $4,000, according to an estimate by the non-profit National Consumers League.

"It's much bigger than people realize," said Chief Postal Inspector Alexander Lazaroff, whose office launched a crackdown this year with authorities in Canada, Europe and Africa. "The amount of loss is devastating to anybody."

OLD TRICKS, NEW TWIST

People have been falling for these types of scams for hundreds of years.

The first recorded incident -- a "prisoner scam" -- occurred as far back as 1588, said Peter Anaman, an Internet investigations manager at Covington & Burling in London.

The scammer would tell the victim he represented a rich prince who is in prison and ask for a loan, promising to pay it back after the prince was released.

"It worked at that time," Anaman said.

Now, fraudsters have become far more sophisticated. They have access to better technology, use checks and money orders that look real and can reach many more people through the Internet.

"These are old schemes with very new twists," Lazaroff said.

The latest scams include schemes such as overpayments for items people advertise on popular online classifieds and auction sites such as eBay and Craigslist and business offers from abroad, where a person is asked to help move large sums of money.

The mechanics of these scams are similar. In a typical lottery scheme, for instance, the scammer tells the victim that he or she has won a foreign lottery but must pay a processing or other fee to claim the prize.

To make it seem real, the victim is sent a check to cover the fee, asked to deposit it in his or her account and wire the money to a third party.

Funds from the check would show up in the victim's account usually within five days, but it can take weeks for the bank to discover the check is counterfeit. The victim is responsible for the loss and associated fees.

Sometimes, as in Soens case, the scammers find an easy victim.

Soens, who lived in New Orleans, had been displaced by Hurricane Katrina and was also dealing with an eye condition that had led to expensive medical treatment, according to her sister, Rebecca Woodworth. The supposed lottery prize of several million dollars would have set things straight.

"The cost of the medical procedures and medicine had a profound impact on her financial solvency," Woodworth said.

CRACKDOWN

The Postal Inspection Service, along with law enforcement agencies abroad, led a crackdown against scammers this year. Between January and August, they seized more than 540,000 fake checks with a face value of more than $2 billion and arrested 77 people in the Netherlands, Nigeria and Canada.

In a 21-day operation in Nigeria alone, which inspectors say has been a hub for such operations, officials seized more than 15,000 fake checks.

But every time they take down one operation, inspectors say, a new one pops up.

The number of fake checks being reported rose from an average of 593 per month in 2004 to 743 in 2006, according to FBI data. This year, the number rose to 803 per month.

The postal inspectors have formed a group called the Alliance for Consumer Fraud Awareness with about 20 financial institutions, consumer advocacy groups and businesses.

They have launched an anti-fraud campaign, which includes advertisements, direct mailing efforts and a Web site, Fakechecks.org.

Woodworth said Soens' accounts were empty two days before she killed herself last year.

"She thought she had been lucky. And when they started telling her she had to pay fees and processing costs and taxes, she went ahead and she did it," Woodworth said. "She did not get it."

source: http://news.yahoo.com/s/nm/20071011/us_nm/crime_checkfraud_dc