By Jill Robisch, National Bank of Indianapolis

Nonprofit organizations, known for their mission-driven work and commitment to community welfare, are increasingly becoming targets of a sophisticated scam. This scam involves fraudulent donors sending counterfeit checks to nonprofits, only to follow up with a request to return a portion of the funds—before the organization realizes the check is bogus.

Here’s how the scam typically unfolds:

1. Initial Contact: The scam begins when a supposed donor reaches out to the nonprofit, often presenting themselves as a well-meaning individual or a representative of a company. They express a desire to make a substantial donation, often targeting smaller nonprofits that may be less equipped to verify the legitimacy of the funds.
2. The Fake Check: The donor sends a check for a significant amount, which the nonprofit deposits into its bank account. The check appears genuine, and the nonprofit, eager to put the funds to good use, may not immediately question its authenticity.
3. The Refund Request: After the check is deposited, the scammer contacts the nonprofit again, claiming that they accidentally overpaid or need a portion of the funds back for some reason—such as an emergency or to cover a different expense. They request that the nonprofit wire the excess funds back or send a separate check.
4. The Revelation: After the nonprofit sends the requested refund, the original check bounces, as it was fraudulent. The organization is left with a loss, not only of the funds they returned but also of any bank fees incurred.

How to Protect Your Nonprofit

To avoid falling victim to this scam, nonprofits should take the following precautions:

• Verify Donors: Before accepting large donations, especially from new or unknown donors, verify their identity and the legitimacy of the donation. Contact the donor directly using official channels, not through the contact information provided in suspicious emails or letters.
• Wait for Clearance: Do not refund any part of a donation until the check has fully cleared. Bank processing times can vary, and it’s essential to wait until the funds are confirmed as available in your account.
• Educate Your Team: Ensure that all staff and volunteers are aware of this scam and understand the importance of verifying checks and donations. Providing regular training on recognizing potential fraud can help protect your organization.
• Consult with Your Bank: Work closely with your bank to identify and mitigate risks. They can offer guidance on how to verify checks and may provide tools to help you spot fraudulent transactions.

Nonprofit organizations should remain vigilant against this type of fraud. By implementing strong financial controls and educating their teams, they can protect themselves from falling prey to these increasingly common scams.