Cheque fraud can be described as ‘depositing of a fake or manipulated cheque'. Cheque frauds are increasingly common in many jurisdictions, and therefore, it is important to understand the various types of cheque frauds and how to avoid them. In this video, we will be discussing the various types of cheque frauds and also the preventive measures that one can take when facing such issues.
Different types of Cheque Fraud
1. Fake Cheques
In this type of fraud, the fraudsters create an authentic-looking cheque, usually by copying the details from an original cheque, and the unsuspecting victim ends up accepting such cheque without realizing that it is a fake one.
2. Cheque Manipulation
Is when the cheque is intentionally manipulated to change some of its details, such as the amount, date, or beneficiary details. The manipulation is done with the intention to defraud.
3. Magic Ink Technique
the fraudsters provide magic ink to write the cheque. This results in the written details disappearing off due to the constituency of the special type of ink used and thereby providing the opportunity for the fraudsters to fill in the cheque details by themselves, such as entering their desired amount.
4. Theft
It is a signed cheque that is stolen from the original beneficiary of the cheque, and the fraudster deposits the cheque and receives the payment.
Preventive Measures to Avoid Cheque Frauds
There are simple and effective preventive measures to ensure that you do not fall prey to cheque frauds.
1. Always examine a cheque clearly before receiving or signing one to ensure that the cheque is not tampered with, one can check for any overwriting or striking offs and also for the security features which are part of every cheque.
2. Never issue cheques to unknown entities or persons. Ensure to have proper written communication in place whether an agreement or otherwise regarding the cheque number. This discourages a potential fraudster to misuse the cheque.
3. Ensuring the physical safety of your cheque to avoid any potential theft or manipulation of the same.
4. Properly set-up security features with your bank, such as email and SMS notifications, including dual signatories for a cheque approval as an enhanced security feature.
5. Make it a habit to routinely check your monthly account statement and bank alert notifications to ensure that in case of fraud, you can take legal recourse immediately.
6. It is also good practice to rely on other types of banking transactions rather than cheques, especially if you're quite unfamiliar with the other party.
7. Always use your pen when signing a cheque to avoid the potential misuse of magic ink.
What to Do If You Fall Victim to Cheque Fraud?
If ever faced with a cheque fraud matter, one should take prompt steps, which include immediately notifying the bank and also proceeding to file a police complaint. As cheque frauds are increasingly common, one must exercise greater caution in this regard.
The UAE cabinet has also proposed a new change to the cheque law in the UAE, which will be implemented in 2022. In a welcome move, the new changes allow for directly filing for execution in instance if a cheque is not honored due to unavailable or insufficient funds.
Originally published 26 December 2021
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.