How to make sure a payment is actually received and will not bounce, using Paypal, Stripe or online banking respectively?

Question

I recently saw some social media posts about a scam going around targeting artists, where the scammer would pretend to commission art, overpay the artist, then ask for the overpaid amount to be refunded. After the victim does so, the original payment would “bounce”, and the victim is now out of pocket.

My question is, how do you know if money received (on e.g. Paypal, Stripe, online banking etc.) is actually received, and will not “bounce”? My understanding is that this type of balance is different from say, if the payment is actually complete and the sender later disputes it, which is another story. It sounds like in this type of scam the money isn’t actually there to begin with. Is there any indication we can find that suggests that this is shaky money?

In addition, I feel as if people who are not professionals in the financial field, such as myself, rarely think of the underlying things beneath the balance that appears to be in our accounts. I would appreciate if someone could explain some of the fundamentals not just in regards to this type of scams, but also when sending and receiving money in general, or point me to some further reads. Thank you so much!

Answer 1

You can't. That's what these scams hinge on. The whole point is that transactions that are fraudulent can be reversed. The way these scams are set up is that the victim sends their money willingly, while the money they received comes from sources obtained through fraud and which end up being reversed. As such, they're used to launder scammers' money, and are the one left holding the bag as the last point of trace of the fraudulent transaction.

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Some more points from the comments:

Funds on hold - deposited funds may be held unavailable for use for a short period of time. But them becoming available doesn't mean the transaction will never be reversed. The holds are usually short (up to a week), and usually not for the full amount. The holds are based on the bank's trust of the victim and whether they believe the victim will do something like that. Moreover, holds are usually partial (e.g.: the first $200 are available immediately, the rest is on hold).

How long after the deposit can it be reversed - months. In the US (and many other places) customers are given 60 days after statement to report irregularities. I.e.: the original owner may report that the check was stolen or the withdrawal was unauthorized up to 3 months later. The original bank then investigates, victim's bank investigates, and it will take some more time for the decision to reverse to happen. By that time the scammers are long gone. Victim, as I said, transferred the money on their own and willingly, and has no recourse.

Answer 2

The most essential point is to never send money to, or for, or to enable, someone who is supposed to be paying you. Legitimate finance never works that way.

There are two basic attack modes here. One is that checks and electronic transfers can bounce for lack of funds, or be canceled, or be made from a stolen account, and it can take a significant amount of time for to resolve that, during which your bank will display the funds as present but on hold. If a scammer can convince you to send money during this verification, and then cancel the deposit or have it fail, they have just stolen your money. Exactly how long it takes for a transaction to clear and become final depends in part on the kind of transaction and your own bank' rules, so you should talk to them about when you can count on a deposit being final, or as close to final as it's going to be -- assuming it was legal in the first place; see the next point.

The second attack vector is that they may be trying to use you to launder illegal funds. In this scenario, the deposit is real, but is made from a criminal's account. If they can get you to send that money somewhere else, they now have money that looks legitimate, and you have participated in a crime. Illegal payments can also be canceled, and even if they aren't, you can be prosecuted.

The third attack vector, of course, is identity theft.

If you refuse to send money or other valuables, and do not give them more information than us legitimately needed to pay you (see many web articles on identity theft), then the worst that can happen is that the money you receive is fairy gold and vanishes when sunlight hits it. They can get you to waste time, and postage, but if you are careful you can limit it to that.

If you are selling physical goods, there is a risk of those being stolen, but that is part of doing business by mail order; again there are articles on the web describing what you can do to protect yourself, and what to do if a payment bounces. But the majority of scammers want your money, not your product.

And finally, I will refer you to the many existing web articles on how to recognize a scam, the kinds of scams that are common (most are variance on a few simple themes), what information you should and shouldn't be willing to give people, and how to validate a business's identity. Remember that if it sounds too good to be true, it probably isn't true, and that if they're trying to rush you, it is probably because they don't want you to think about what they're asking you to do. And remember that on the internet, in mail, or even in person, you can never be certain that anybody is who they claim to be.

Answer 3

Answering the title question:

This depends on a payment method and a bank. Paypal can reverse charges even months after you receive it. Credit card payments can again be reversed even months after.

Banks - it depends on how it was received. Wire Transfers can't be easily reversed (they still can in rare cases). Cheques can bounce up to two months after.

Answering how to avoid the scam:

Never, ever send money forward. Always use the refund option on the payment method.

Answer 4

In addition to the other answers: even if the method by which you receive the money is itself irreversible, it does not mean that a judge cannot decide to force you to pay the money back, if it is deemed that the transaction was illegal (e.g. stolen identity).

The only limit would be those of the statute of limitations, but those times are measured in years (I would point to 5 years in my country).