Double Cashed Checks

There is a growing trend in check fraud schemes. This particular scheme takes advantage of some of the newest technology in online banking. When a payee receives a check the payee uses their cell phone to deposit the check into their bank account. The check clears and the victim reconciles their bank account without any issues. Up to this point everything is legal and above board. The fraudster then sits on the check for about five months and then takes the original check to a checking cashing outlet and cashes the check. If the victim is properly reconciling their bank accounts they will notice this check cleared a second time. If the victim is lucky, and using positive pay, then their bank may refuse to pay the check a second time. Herein comes the legal issue. Since the check cashing store has an original check with a valid signature, unless the victim can prove the check cashing store knew the check had been previously deposited the check cashing store will be able to obtain a judgement for the amount of the check.

Once the victim has paid the check cashing store their only recourse is to sue the payee who cashed the check twice. It would be especially difficult to convince a prosecutor to file criminal charges against the payee unless the victim could show a history of double cashing checks because the payee is going to claim it was a mistake and they forgot they previously cashed the check. The payee will often offer a payment plan of a minimal amount per month with no interest to repay the money. Because of the claim that this was an error and an offer for restitution it would be all but impossible for the prosecutor to establish mens rea or intent for the crime.

Companies and individuals can adopt several internal controls to help to prevent this type of fraud. The most obvious internal control is to eliminate or at least reduce the number of checks the company sends out. Use online banking so if the check is cashed twice the liability for payment falls on the bank and not on the account holder. You should also consider using ACH or wire funds to make large payments. When purchasing items from retail merchants use credit cards to pay for the transactions. These internal controls can help to prevent double cashing check frauds.

About Dr.Bob

Dr. Minniti is the President and Owner of Minniti CPA, LLC. Dr. Minniti is a Certified Public Accountant, Certified Forensic Accountant, Certified Fraud Examiner, Certified Valuation Analyst, Certified in Financial Forensics, Master Analyst in Financial Forensics, Chartered Global Management Accountant, and is a licensed private investigator in the state of Arizona. Dr. Minniti received his doctoral degree in business administration from Walden University, received his MBA degree and Graduate Certificate in Accounting from DeVry University’s Keller Graduate School of Management, and received his Bachelor of Science in Business Administration degree from the University of Phoenix. Dr. Minniti teaches graduate and undergraduate courses in accounting, fraud examination, fraud criminology, ethics, forensic accounting, external audit, and internal audit, at DeVry University, Grand Canyon University, Northwestern University, and the University of Phoenix. He designed graduate and undergraduate courses for Grand Canyon University, Northwestern University, and Anthem College. He is a writer and public speaker. He has experience in forensic accounting, fraud examinations, financial audits, internal audits, compliance audits, real estate valuations, business valuations, internal control development, business continuation planning, risk management, financial forecasting, and Sarbanes-Oxley compliance work. Dr. Minniti is an instructor teaching continuing professional education classes for the American Institute of Certified Public Accountants, Compliance Online, CPE Link. AccountingEd, Global Compliance Panel, Clear Law Institute and various state CPA Societies.

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