Buyer fraud: How to identify suspicious collectors

This is the third article in our series about security threats facing galleries online. These articles will help you stay ahead of the curve when it comes to cybersecurity and fraud, giving you resources to protect yourself, your clients, and your business, and transact online with confidence.

Buyer fraud, also known as check fraud, has existed in online and offline marketplaces for over 20 years. This type of fraud appears to be more common on larger consumer goods or secondhand marketplaces, but art businesses have also been targeted.

The scam is quite simple: A scammer will overpay you for an item you’re selling using a fraudulent payment method, often a fake check. Let’s say they pay you $10,000 for an $8,000 item. The check will clear and they will ask for a refund of the $2,000 extra they paid you. You’ll refund the $2,000, and then several weeks later, the fake check will be discovered by your bank. The bank will remove the $10,000 from the fake check from your account, and the scammer will disappear with the $2,000 “refund” you gave them.

Here’s an example of how it might work with an art gallery:

The scammer searches for works for sale at the right price. Most often, the ideal price is somewhere between $1,000 USD and $20,000 USD, although higher and lower amounts are possible. They will also target artworks for sale using a method that allows them to contact the seller directly and offer a check or wire transfer, rather than methods that require a credit card or use a trusted third party, like an escrow service.

They will make a generous offer. Often, to speed things along (and to prevent their victim from asking too many questions), the scammer will agree to buy the artwork very quickly and without asking any questions or negotiating. Sometimes, they’ll even offer more than the asking price, apparently to secure the artwork faster.

They will overpay for the work. At this point, the scammer will send a payment for the artwork for an amount in excess of the agreed-on price. They might explain the discrepancy by saying that the extra funds are for incidental expenses like shipping or taxes, or they may simply claim they made an honest mistake. The payment will be made using a method vulnerable to being faked. Ways that fraudulent payments are made include:

• Checks. Both cashier’s checks and regular checks are used in this scam. Regular checks may be faked or stolen, while cashier's checks are usually counterfeit. In any case, fraudulent checks will often clear initially and the funds may be made available—but only temporarily. Eventually, after several weeks, the bank will notice the check is fraudulent and the funds will be withdrawn.
• Wire transfers. This could be a screenshot of a fake wire transfer confirmation page or a mocked-up email from a bank showing that a wire transfer has been confirmed. Sometimes, in rarer circumstances, scammers can send international wire transfers that will appear to clear before the initiating bank realizes that the account from which the money was drawn has insufficient funds, and the funds are withdrawn.

They’ll request a refund. After the scammer has sent payment, they will request a refund for the difference between the amount they paid and the agreed-upon price. If the funds they sent appear to have cleared, the victim will often send the refund immediately. If the funds have not yet cleared, the scammer will often brandish some kind of falsified payment confirmation and pressure the seller to issue a refund, promising that the money is on the way.

Once the scam is complete, the scammer will have defrauded their victim of the funds that were “refunded.” In some cases, the artwork can even be lost if it has already been sent and cannot be recovered.

How to avoid check scams

Selling your works through methods that take payment by credit card can avoid this scam entirely. If you are selling works online and you accept payment through wire transfers or checks, there are a few easy-to-spot warning signs:

• Offers that are too good to be true. Look out for buyers that want to purchase a work without asking the normal questions you might expect a collector to ask—for instance, about condition, provenance, shipping, or availability.
• Buyers that overpay. If a buyer overpays for a work, be cautious.
• The buyer claims to be unavailable. While international buyers are common for art businesses, beware of buyers that offer strange or unusual reasons for being unable to complete the transaction in person or to pay with cash or credit card.

We recommend that you always transact using methods that protect you and the buyer. If possible, list your works on Artsy with Buy Now and Make Offer.

How Artsy is dealing with these threats

Artsy strives to offer safe payment methods and to prevent our partners from receiving suspicious messages. Here’s how we work to protect you:

• We’re constantly improving our algorithm that identifies suspicious messages and prevents them from being delivered.
• We offer safe transaction methods with seller protection through Buy Now and Make Offer for partners in Europe, the U.K., and the U.S.
• We display a collector profile on each user you interact with, including whether or not they are an Artsy Confirmed Buyer (ACB) that has made a verified purchase on Artsy in the past.
• Our Trust and Safety team is always ready to help you review suspicious activity. If you see a suspicious inquiry, dismiss these inquiries through CMS and click “I don’t trust this inquiry” from the drop-down menu. Email trust@artsy.net to report suspicious users.