Scam Alert

There are a couple of financial scams that are again making the rounds and targeting nonprofits.  NPCC was in fact a target not too long ago.

In one version, a nonprofit receives a pledge from an unknown donor.  In a few days, it gets a  check larger than the originally stated amount.  It deposits the check, and in a few days it hears from the “donor” or his representative that he has made a mistake and requests that the excess amount be refunded.  In the meantime, the check appears to clear the bank and the organization writes a check, only to find that the original check has since bounced.  It is then out the amount it refunded, and possibly more if the “donor” uses the nonprofit’s account and routing numbers to deplete its account.

Often, these scams are perpetrated using checks that are “demand drafts”—electronic transfers of funds that can be accomplished without a signature (or, in some cases, an electronic signature).  The ease with which demand draft authorization can be set up (with no identification, other than an email address) makes them a favorite of scam artists around the globe.  “Qchex” is a legitimate company that seems to have become a favorite tool for this type of fraud.  Most fraudsters tend to operate overseas, although they may pretend to have a domestic presence through false addresses and banking information.

The scams take several forms.  In one version, a legitimate bank account is “hijacked” by obtaining the account number, and funds are transferred overseas using a Qchex or similar type account set up using that information.  In other scams, payments are made in excess, and the victims refund the excess amount before realizing that the original payment is drawn on a fictitious account or one without sufficient funds.  Sometimes these scams are combined.  

So, beware.  Never give your checking account and routing numbers to just anyone even if they tell you they want to wire you money.  If you need to do wire transfers, be absolutely certain you are working with someone you can trust.

If you receive correspondence indicating a pledge from an unknown donor and then a contribution greater than the pledge, do not deposit that contribution.  No good will come of it.  If you’re suspicious about a check, call the financial institution where it was drawn to ascertain whether it is valid.

This article originally appeared in the April 2006 issue of New York Nonprofits, the quarterly newsletter of the Nonprofit Coordinating Committee of New York (NPCC).  www.npccny.org