New Twists To An Old Scam
You know the tell-tale signs of this old scam; it starts when the checks arrive via overnight delivery. The branch deposits the checks and waits for them to clear the bank, only to have them returned as counterfeit. We've written four previous articles informing all offices of this scam so you can recognize it and shut it down, before sellers and agents suffer damages. But just when we think we've got the crooks out-smarted they try something new!
The counterfeit check scam has been attempted, literally hundreds of times, at our offices in nine different states. Warning signs we've seen in previous transactions are:
- Buyers' names are foreign, for example, "Zilei" and "Xainghong"
- Buyer makes a full-price/all-cash offer on an existing listing with a quick closing date
- Buyer makes the offer to purchase the property sight-unseen
- Buyer communicates with the agent via e-mail only — no phone number or address provided
- Agent sends the purchase contract to the buyer via e-mail
- The buyer signs the contract and returns it to the agent with a check made payable to the settlement for the full purchase price instead of the required deposit
- Buyer usually uses a cashier's or corporate check drawn on a Canadian bank
- Purchase price exceeds $700,000
- Buyer contacts our office after sending the funds and directs the settlement agent to wire transfer everything over and above the required deposit — instructing them to be sent back to a bank in China to purchase furniture for a new house
The people who have suffered most have been the sellers — losing valuable time on the market only to have their sales fall through.
As a result of the above scam we have directed our offices not to accept checks drawn on foreign banks for several reasons:
- Check has to go through a correspondent bank in the foreign country it is drawn on and they charge us processing fees
- We cannot verify with the foreign bank if the check is a valid issue
- It takes more than 30 days for a check to be returned and stamped "counterfeit" by the issuing bank — if it is returned at all!
This year, because we would no longer accept checks drawn from Canadian banks, the fraudsters started sending counterfeit checks drawn from domestic banks — such as Dover Federal Credit Union and Citibank. The good news is our offices were able to immediately confirm with the issuing bank the item was counterfeit and resign from the transaction.
Deana Coulter, with Chicago Title's La Jolla, Calif. office, recently opened one of these transactions and encountered one of the latest twists to the scam. The sale price for the property was $720,000 and the buyer contacted our offices for our wire transfer information.
Days later, the office was notified by the accounting department of a deposit to the trust account for which no matching receipt was posted in their system. Deana contacted the bank for evidence of the deposit only to find out the buyer sent a deposit of $450,000 (not the full purchase price, but still more than the required deposit) directly to the trust bank by mail.
The check that was deposited was drawn off the Royal Bank of Canada from the account of Intact Insurance Company — a party totally unrelated to the transaction. On the very same day Deana received an e-mail request from the buyer, "Qi Lee," instructing her to send a wire in the amount of $225,000 to his wife's attorney in Japan. He indicated in the message that he was in Japan going through a divorce and he and his soon-to-be ex-wife settled on that amount.
Deana responded that the check had not cleared the bank and if he wanted an immediate wire, he should put a stop payment on the check and send a wire transfer instead. Qi Lee responded he couldn't stop pay the check because it had already cleared his bank. He then sent the following e-mails as proof:
Date: Thur, 19 May, 2011 12:55:01 -0500
Subject: Account update
Please confirm if you have cleared the check issued to Chicago Title Escrow. - La Jolla, CA Office for $450,000.00USD
From: Hillary Brooks <firstname.lastname@example.org>
Date: Thur, 19 May, 2011 at 1:30 PM
Subject: Clear funds
ROYAL BANK OF CANADA
200 Bay Street, Toronto, Ontario M5J 2J5,
Attn: Qi Lee
We can only disclose this information to you because you are our customer, please forward this email to your escrow office. This is to confirm to you that the check of $450,000.00 (Four Hundred and Fifty Thousand US Dollars only) issued to Chicago Title Escrow . - La Jolla, CA Office has cleared our bank.
Payment of $450,000.00USD was credited today 19/05/2011 to Union Bank Account No:9101051077 with Ref Escrow No:73711004745-DC.
Deana and her accounting manager contacted the trust bank which confirmed the check that was direct deposited had been returned by the Royal Bank of Canada as counterfeit. Deana informed Qi Lee of the bank's notification. This was his response.
YOU ARE A F&%$#*% B#@%&$*, I CANCEL THE TRANSACTION THAT WAS WHY THE CHECK BOUNCE BECAUSE YOU WANTED TO RUN AWAY WITH MY MONEY B$%@*%*.
As a result of Deana's experience and expertise in the industry, she recognized the scam and took the extra steps necessary to shut it down. She also endured the offensive e-mails from the buyer and kept a professional demeanor. For all her efforts the Company has selected her as a Fraud Insights reward recipient and given her $1,000 as well as a letter of recognition.
In summary, the new twists are as follows:
- Deposit does not match the full purchase price, but is still more than the deposit required in the contract
- Check is sent directly to the trust bank for a direct deposit
- Buyer is going through a divorce and has reached a settlement agreement with his soon-to-be ex-spouse
This scum — I mean scam — has spread across the U.S. and has become epidemic. The Company has been unsuccessful persuading law enforcement to assist in shutting it down. You need to keep your guard up and look for the tell-tale signs shared in this story.
If a check is direct deposited at the bank, make sure to review a copy of it. If it is drawn from a foreign bank, ask the bank to reject the deposit and demand a wire transfer from the buyer.
Most importantly, share this story with your real estate agent customers, so they too can recognize the warning signs and stop the transaction before it reaches us.