Recently, a fraudulent "life hack" went viral on TikTok, promoting a “free money hack.” In reality this scam was simply check fraud, exploiting standard banking procedures that allow a portion of deposited checks to be withdrawn before the check fully clears.

The scam involves the following steps:

1. A person deposits a high-value check, often fake or fraudulent, into an ATM.
2. They withdraw as much money as possible before the check fails to clear.
3. Once the check bounces, the person walks away with cash, leaving the financial institution (in this case , JPMorgan Chase) to absorb the loss.

Following the incident at Chase, the company released the following statement to the media: “Regardless of what you see online, depositing a fraudulent check and withdrawing the funds from your account is fraud, plain and simple.” 

This check fraud scam has resulted in criminal investigations, with some participants facing felony charges. While financial professionals recognize this scam's red flags, many account holders, particularly younger ones, may not. Chase officials reported it would review individual incidents and report them to law enforcement authorities.

How Financial Institutions Can Get Ahead of these Scams

1. Raise financial literacy: Inadequate financial literacy is a growing problem. Account holders with limited knowledge of financial systems are more susceptible to engaging with these fraud scams. Financial Institutions should prioritize educational campaigns that teach customers to recognize scams. Offering resources such as webinars, blog posts, and social media updates can help bridge this knowledge gap.
2. Leverage social media: Since false information and bad advice can spread rapidly through platforms like TikTok, financial institutions can use these same platforms to counteract misinformation. Engaging, informative posts about how check fraud works, how it harms both individuals and financial institutions, and how to avoid it can resonate with customers, particularly younger audiences.
3. Identify red flags: Focus on equipping account holders with knowledge of the warning signs of fraud. Alerts, newsletters, and even personalized messages based on transaction history can help protect them from inadvertently participating in these schemes.
4. Partnership for prevention: Proactively partnering with third-party fraud prevention solutions providers, other institutions and law enforcement, financial institutions can enable faster detection of widespread fraud attempts. Collaboration across the industry can prevent these schemes from spreading further.
5.  Combat misinformation: As this scam demonstrates, fraud can be unintentionally spread by those who lack an understanding of its consequences. Financial institutions can be at the forefront of debunking harmful misinformation, explaining how seemingly harmless actions can lead to severe legal and financial consequences.

Through education, financial institutions can protect themselves and their account holders from fraudulent schemes that cost both parties time, money, and trust. They can also enhance  relationships while protecting themselves from potential future fraud.