What are the types of fraud done by bank cheque?

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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 article, 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:

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.

Cheque manipulation: In this type of fraud, the cheque is intentionally manipulated to change some of its details, such as the amount, date or the beneficiary details. The manipulation is done with the intention to defraud.

Magic ink technique: In this type of fraud, the fraudsters provide magic ink for the purpose of writing 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.

Theft: In such type of fraud, a signed cheque is stolen from the original beneficiary of the cheque, and the fraudster deposits the cheque and receives the payment.

Preventive measures that can be undertaken to avoid cheque frauds:

Thankfully there are mainly simple and effective preventive measures that one can take in order to ensure that they do not fall prey to cheque frauds. These include:

  • Always examine a cheque clearly before receiving or signing one in order to ensure that the cheque is not tampered with, one can check for any overwriting or striking off’s and also for the security features which are part of every cheque.
  • Never issue cheques to unknown entities or persons, and as far as possible ensure to have proper written communication in place whether an agreement or otherwise with reference to the cheque number. This discourages the potential opportunities for a fraudster to misuse the cheque.
  • Ensuring the physical safety of your cheque to avoid any potential theft or manipulation of the same.
  • Upscaling your security features with your bank, such as proper notifications and, where possible, including dual signatories for a cheque approval as an enhanced security feature.
  • Make it a habit to routinely check your monthly account statement and bank alert notifications in order to ensure that in case of fraud, you are able to take legal recourse immediately.
  • It is also a good practice to rely on banking transactions more than on cheque, especially when the other party is not well known to oneself.
  • Use your own pen always for signing a cheque in order to avoid potential misuse of magic ink.

If ever faced with a cheque fraud matter, one should ensure to take prompt steps, which includes immediately notifying the bank and also proceeding to file a police complaint. As cheque frauds are increasingly common, one must exercise even greater caution in this regard. The UAE cabinet has also proposed a new change to the cheque law in the UAE, which will be effected 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.

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