Counterfeit on Delivery

We are all familiar with the term cash on delivery, more commonly referred to as COD. Cash on delivery is a rudimentary concept to understand. Merchandise is ordered by phone, Internet, email or fax, and the purchaser tenders cash upon delivery. Because of the impractical nature of tendering cash for almost all of today's business dealings, collect on delivery has become a more accurate description of the transaction. The tenet of the transaction is protection for both buyer and seller, who often have no established or recurring business relationship. The seller knows he will be paid or the merchandise will be returned. The buyer receives their product without advancing funds that may be difficult to retrieve if a dispute arises. In a world that has a never-ending shortage of people up to no good, some individuals are seizing the opportunity to turn COD into counterfeit on delivery.

The concept of COD seems almost arcane in the 21st century where money is electronically transferred instantaneously; but the same technology that has made the other side of the globe as close as the local shopping mall has also heightened the suspicion of a buyer and seller. In today's competitive economic environment no one wants to lose a sale, so all methods of payment become an option. In the United States, both Federal Express and United Parcel Service, the two goliaths of shipping, offer COD service, providing both buyer and seller with a trusted middleman. In a nutshell, the seller ships with the courier service of their choice and the driver delivering the product collects the payment. The seller designates the type of instrument to collect, and, while it could be a personal check; a cashier's check or money order is universally the instrument of choice.

Many of those victimized are small business owners who sell a specialty or niche product

The way the scheme works is more or less the crime of theft by deception. The buyer contacts a seller and they negotiate a deal. Sellers usually require some proof that the purchaser is a legitimate business and are provided with some phony documentation, generally documents for a limited liability company. Any further concern the seller has is usually tempered by the fact that a physical address for delivery is provided, making the seller comfortable that they are dealing with a brick and mortar location. Upon delivery, the courier driver accepts payment and hands over the shipment, usually inspected by the buyer on the spot. Several days later the seller receives the bad news from his bank that the payment has been returned because the instrument is counterfeit. While the courier driver is required to verify the payment amount — and that the item is made out correctly — they can hardly be expected to spot a counterfeit instrument. Chances are most employees of the bank the counterfeit is drawn on would be unable to recognize the instrument as counterfeit without closer inspection — or maybe, not at all.

Now you may be saying that the individual(s) perpetrating the scam must be easy to catch, after all there is a physical location and an eyewitness, the courier driver, who is within several feet of the recipient. Easier said than done; and the fraudsters are fully aware of it. Some of the common denominators associated with the fraud are the amount, which is generally only several thousand dollars and the distance, intentionally chosen to cross multiple state lines. Many of those victimized are small business owners who sell a specialty or niche product, one that cannot be purchased in many local markets, making a request from across the country a typical occurrence. This creates a logistical problem for the seller who cannot just hop in their car and race over to confront the buyer.

When the victim's initial anger subsides, they quickly realize that the civil and criminal remedies available may be more trouble than they are worth. A civil suit costs money with no guarantee of collection, especially with the people who committed the crime, who usually fall into the lower socio-economic rung of society. Criminal action, especially across state lines with the small amounts involved can be a difficult and frustrating process — if you can even find someone to take the case. Finally, adding insult to injury, the seller may incur the suspicion of their bank, which will rightfully want to determine if their customer is involved in an attempted fraud. Since the deposited monetary instrument may very well become available funds prior to the item being returned, this could cause the account to become overdrawn, presenting a potential loss for the bank should their customer fail to make good on the overdraft.

A civil suit costs money with no guarantee of collection

Although the seller may feel powerless and chalk it up to experience, the bank used in connection with the scheme certainly can get involved because in most cases the bank has a closer geographic presence to the delivery site than the victim. We all know, however, that all too often the bank's position becomes one of apathy since its entire decision-making process is predicated on its own monetary loss. While the perpetrators probably are not aware of this, nor would they probably care, a suspicious activity report (SAR) is generally not filed since the dollar threshold and reporting requirements are normally not met. The irony of this is that the perpetrators have probably pulled this stunt multiple times before; and multiple SAR filings in the aggregate may rise to a substantial sum — a sum that may trigger the interest of law enforcement.

If the bank does decide to prosecute, what begins as the proverbial slam-dunk quickly degenerates into a house of mirrors. Like a script from the American television show White Collar that chronicles the exploits of two sophisticated con-men, the culprits create a web of obfuscation to impede and frustrate. Wherever the shipment was delivered, you can be sure that the recipient is nowhere to be found. Fraudsters intentionally use a business that may have absentee ownership, such as a laundromat, where anyone can feign being the owner or on-site manager for a short period easily misleading the courier. A social club is another location of choice, often occupied by a revolving door of neighborhood characters. If the authorities do show up, the real owner, sometimes acting in concert, sometimes out of fear, or sometimes just turning a blind eye, claims complete ignorance of the matter. Sometimes the owner may actually be just as surprised themselves.

Another method is the use of a house that is vacant or where the owners are at work during the day. The culprits wait in their car down the road and upon arrival of the courier pursue one of two options. In some instances they quickly pull up to the house pretending they just arrived back from the bank with their payment and act relieved they did not miss the delivery. In other cases they retrieve the delivery receipt left at the door picking up the item later in the day at the courier's field office.

In many situations though, the swindlers will simply use the house or apartment of someone who participates in the same way as the above described business owner, playing the percentages that no one will ever investigate. The participant is either fooled or coerced into helping, with financial gain often being a motivating factor to become a fall guy.

Charles Falciglia, CAMS, Suffern, New York, USA,

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