In a world where businesses must be careful about taking cash (because of the obligation to report cash over $10,000.00) and personal checks (which may bounce or be stopped), a cashier’s check was always considered a safe alternative. A cashier’s check is drawn on a financial institution directly, so a dealer does not have to worry whether the person giving the check has sufficient funds in an account to make it good.
Unfortunately, companies are now learning that cashier’s checks are not the safe haven that they always thought. Some banks in the mid-Atlantic area have issued warnings about a dramatic upsurge of counterfeit cashier’s checks being used to make purchases. Here are some things to consider:
Know your customer. Businesses are mandated by the FTC Red Flag Rule to know their customers in credit transactions. However, in a “cash” transaction involving a cashier’s check, it is also important. It is always critical that the business knows the customer with whom it is dealing. Go through the Red Flags procedure in every transaction to ensure that the customer is not misrepresenting his or her identity.
Carefully look at the financial instrument. Does it look like other instruments you have received drawn on financial institutions? Are there any misspellings? Does the bank information look complete and correct?
To whom is the check made? The cashier’s check may be made to the dealership. Usually, it is made to the customer who is looking to sign it over to the dealer. If it is made payable to some other person or entity, that is a warning signal.
Verify the check. The best protection is to contact the bank issuing the check to verify it.
Our firm is ready to help you answer questions like these. We can help you implement methods of financial verification while minimizing your exposure to the costly penalties associated with violating these laws. For more information, call Bellavia Blatt PC at 631-224-7000.