Widespread Deposit slip and Refund scams

Pretoria : 13 April 2006

MEDIA STATEMENT ISSUED BY THE ADVOCATE GILBERT SWATS SOUTH AFRICAN BANKING INFORMATION CENTRE (SABRIC)

The South African Banking Information Centre (SABRIC) has warned the public of widespread deposit slip and refund scams which are targeted at retailers and service providers throughout South Africa.

SABRIC CEO, Advocate Gilbert Swats says the fraudsters have succeeded in swindling their victims and their main targets have been guesthouses, caterers, tyre companies and petshops in all provinces. He explains "the most common scam is what purports to be a cash purchase where the customer deposits the money into the retailer’s bank account and provides proof of payment. Usually the deposit is by way of a cheque, but the deposit slip is amended to reflect a cash deposit. The deposit is faxed to the dealer who releases goods to the customer. A few days later the deposited amount is reversed on the dealer’s bank account because the cheque was either stopped or found to be fraudulent."

Advocate Swats, says although it is a preferred business practice to secure payments for goods or services upfront and providing customers with banks details for deposits has become acceptable, there are risks associated with giving out business banking details to third parties.

Businesses are advised not to accept faxed deposit slips, but if they do so, not to release goods until the cheque clearance period has expired.

Swats says that a variance of the scam occurs when service providers are approached for a quotation, which is then accepted, and payment made into the provider’s bank account. A larger deposit is then made and the service provider informed that the deposit was made in error, for example, that two deposits were mixed up. A refund of the difference in the amount of the deposit and the quotation is sought. The request is accompanied with a very clear motivation as to why the refund needs to be done immediately. Unsuspecting service providers comply and make cash and cheque refunds or internet transfers. The deposit by the customer is then reversed when the bank dishonors the cheque because it was stopped or fraudulently drawn resulting in the service provider suffering financial loss.

Service providers should be wary of customers who insist to pay in advance for services or goods. When a larger deposit than required is made, a red flag should go up. Why would any person pay more than required? The service provider must insist on waiting for the clearance period for a cheque deposit to expire, even if the payment purports to be cash or an internet transfer before making a refund payment.

It is important for a retailer or service provider to understand the concept of uncleared effects of funds.

Banking clients must take extra care to ensure that any deposited funds are cleared before they transact against such deposits. The terminology used for internet banking sometimes differs slightly from that used on bank statements and retailers need to familiarize themselves with these terms. Any refund done via internet banking should only be done after the cheque clearance period has expired.

Issued by SABRIC
Contact: Gilbert Swats 011 847 3105
Susan Potgieter 011 847 3138