Scam involving cashier's checks is gaining steam

Abigail R. Safran was taken for more than $5,000 earlier this year in what appears to be a burgeoning scam involving counterfeit cashier's checks, but the Northeastern University student is balking at paying back the money because she says her bank bears some of the responsibility.

Safran deposited a $7,230 cashier's check at FleetBoston last June and the next day withdrew more than $5,100 and wired it to what she thought was a company preparing to ship furniture to a woman who was going to sublet her apartment.

It turned out to be an elaborate scam. The woman never showed up to sublet the apartment, the money disappeared, the cashier's check turned out to be counterfeit, and Fleet is now demanding that Safran reimburse it for the $5,100 she withdrew from her account.

''At this point, they can totally ruin my credit," Safran said. ''I honestly don't know what to do."

Safran is the latest victim in a scam that seems to be snowballing in size and sophistication. Banking industry officials say millions of dollars are being sucked out of consumer bank accounts and out of the country by scam artists operating largely from abroad.

Andy Adelman, a special agent with the US Secret Service in Boston, said so-called ''advance fee fraud" is on the rise, but he declined to provide information on how big a problem it is or whether the money might be going to terrorist networks. ''It's a popular scheme," he said. ''We're investigating a number of cases." Safran reported her case to the Secret Service and FBI.

Banks are well aware of the problem but are doing little to publicize it or to protect their customers. Federal law compels banks to release funds to customers quickly, but nothing prevents the institutions from posting signs or sending out letters warning their customers about the danger of counterfeit checks.

''Financial institutions should encourage their customers to verify the validity of official checks before releasing any merchandise, transferring funds to a third party, or spending any of the proceeds," said Michael J. Zamorski, a director at the Federal Deposit Insurance Corp., in a memo to bank executives last year about counterfeit cashier's checks.

Valrico State Bank in Valrico, Fla., posted a special alert on the FDIC website in February that counterfeit checks drawn upon the bank were in circulation. The alert gave the bank routing number on the counterfeit checks and offered tips on ways to identify them.

Yet when Safran walked into a Fleet branch on Huntington Avenue in June with a check that matched what was in the Valrico alert, Safran said the teller didn't bat an eye. Safran asked when the money would be available and the teller told her to check her account the next day.

Safran had received the check from a woman who identified herself as Michelle Smith. Smith had seen an ad Safran had posted on tosublet.com seeking someone willing to sublet her apartment for the summer. Smith e-mailed that she was out of the country traveling but would love to sublet the apartment.

The one catch was that she wanted to have some furniture delivered to the apartment prior to her arrival and wanted Safran to wire the money to a furniture company in Canada. Smith sent Safran a cashier's check for $7,230, enough for the furniture, the summer sublet, and any expenses associated with wiring the money.

In retrospect, Safran, a criminal justice major who is currently doing an internship at a Boston law firm, said it was stupid of her to wire the furniture money for someone she didn't know. But she was finishing school, her grandmother had just died, and what concerns she had were eased by the reassuring calls she received from a man who said he was Michelle Smith's brother, Peter.

On June 19, she sent an exasperated e-mail to Michelle Smith saying she had wired the $5,100 via Western Union. ''This has been such a pain I can't even tell you," Safran said. ''I guess I don't understand why you couldn't have wired it yourself. Because of this, I have been running all over Boston trying to get this done so your furniture arrives in time."

Glenda Peacock, vice president and security officer at Valrico State Bank, said the cashier's check used by the counterfeiters was first issued during a transaction in September 2002. The check somehow got lost and then early this year began popping up all over the world.

The value of the counterfeit checks has varied from thousands to millions of dollars. Peacock said the bank of a Saudi prince even inquired about funds availability for a check he had received worth $3 million. That counterfeit was caught in time, but many others, involving millions of dollars overall, weren't, she said.

''There's numerous banks out there having this same problem," Peacock said. ''I don't know if it has anything to do with terrorists, but it is very well organized."

Peacock said many of the scams appear to originate in Nigeria and the target is often a young person who is selling something on the Internet. A deal is struck where the buyer sends a check of greater value than what he or she is purchasing, with the balance to be wired back out of the country for some reason. Often there is a little extra cash for the seller for his trouble.

When a customer cashes a cashier's check, Peacock said her bank now routinely contacts the issuing bank to make sure the check is legitimate before releasing the funds. But she said bigger banks can't afford to take the time to do that.

George Owen, a spokesman for Bank of America, which purchased Fleet, said the bank was aware of the FDIC alert on counterfeit cashier's checks posted by Valrico State Bank. He said the bank is seeing more and more counterfeit checks and tries to make its tellers aware of such alerts. ''They did not check on this one, apparently," he said.

Bruce Spitzer, a spokesman for the Massachusetts Bankers Association, said 40 billion checks a year pass through the banking system and tellers cannot be expected to identify each problem check or issue a warning to individual customers.

''The onus is on consumers to make sure what they're depositing is a good check," Spitzer said. ''Ask your bank not whether the funds are available but whether the funds have been finally collected."

But Safran and her mother, who have spent hours and hours looking into the issue, think banks need to do a lot more. They say Fleet violated its own funds availability policy by releasing money to Safran on a Saturday (Fleet says proper procedures were followed). They also say the bank teller should have scrutinized the check more closely, looking for what in retrospect appear to be obvious flaws.

''I relied on my bank to protect me," Safran said. ''They should have protected me better."

Bruce Mohl can be reached at mohl@globe.com.