A handful of commercial banks across the country have been presented since mid-October with bogus cashier's checks supposedly drawn on an account with the Federal Reserve Bank of New York.
The New York Fed sent out a warning on Oct. 28 to financial institutions in the second Fed district that it will not honor cashier's checks drawn by an institution called "Central Dominion Trust."
The checks say they are drawn on Special Settlement Account 888013 at the New York Fed, and the back of the check states that Central Dominion Trust is a collection agent in agreement with the bank.
The Fed says the account does not exist and the bank has no relationship with Central Dominion Trust. A Fed spokesman said that no such "special settlement" accounts for commercial banks exist.
May Not Be a Crime
Thus far, no bank is known to have paid out on one of the checks, according to the New York Fed.
The Federal Bureau of Investigation, which is looking into the matter, said that those trying to pass off the fraudulent checks may not even be committing a crime. For one thing, those involved tried to set up an account at the New York Fed., said the FBI agent who is looking into the case. And because no bank has lost money, a case could be difficult to prosecute, the agent said.
The cashier's checks are not magnetically encoded. Automated check processing machines are rejecting
the checks, so banks have an opportunity to take a look at them.
The central bank's warning advised banks receiving such a check to immediately tell the FBI in Denver, where the first bogus checks surfaced, and to inform their depositor that the account does not exist.
The checks, which are written for amounts ranging from $200 to $7.5 million, have been drawn payable to a number of people and to corporations.
In all, about 30 fraudulent checks have surfaced, written for a total of about $19 million. The Fed said the first known checks were dated Oct. 15.
A source close to the investigation said the case was unusual both because of the wide range of check amounts and the diversity of corporations to which the checks were made payable.
The source said that counterfeit checks purporting to be drawn on accounts with the New York Fed are extremely rare. It is possible that fraudulent cashier's checks purporting to be drawn on accounts at other commercial banks also are circulating, the source said.
The FBI agent said the purpose of the scam was still unclear. All the banks known to have received the checks have put a temporary hold on funds until the checks were presented at the Fed, when they learned the checks were fraudulent.