You got paid, but you can’t use the money yet — you can thank scammers for the added hassle. Here’s why

So you’re minding your business, finishing a job and expecting a bank draft to clear so you can pay your crew. You walk into your bank branch and are told there will be a five business day hold on the funds.

That was exactly the experience shared on Reddit (1) by someone who had just finished an exterior renovation contract and deposited a $22,000 bank draft only to be told the bank needed extra time to process it due to fraud concerns. The manager even suggested that “cash is king” because it avoids those holds altogether.

"Apparently Bank drafts & certified cheques are now useless and will be treated like personal cheques by all major Canadian banks and 'Cash is king' once again," Redditor user reheadlover69 said in a post.

It’s a frustrating story and it resonates with many business owners, buyers and sellers who think bank drafts or certified cheques are the safest way to transfer large sums of money. But reality is shifting because fraudsters are becoming more sophisticated. Paper instruments such as cheques and bank drafts are no longer the ironclad guarantee many people assume they are.

Fraud is rising and consumers feel the impact

Fraud and scam attempts are on the minds of Canadians and they’re not just isolated stories on Reddit. A 2024 FICO survey (2) reports that 83% of Canadians have received a text, email or phone call they believed was a scam and 44% say family or friends have been victims of a scam, up 5% from 2023. Many Canadians want banks to do more to detect and stop scams before they happen.

When it comes to payment fraud specifically, research from Payments Canada (3) found that 13% of Canadians experienced payment fraud in a six-month period, and among those incidents, money was lost in 59% of cases. Unauthorized transactions and impersonation scams are among the most common types.

Businesses aren’t immune either. Another Payments Canada (4) report found that one in five Canadian businesses experienced payment fraud recently, with a range of scam vectors including fraudulent cheques and online impersonation.

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Fake bank drafts are more common than you think

There’s solid evidence that the issue with fake bank drafts is real. In multiple recent Ontario cases, business owners lost six figures after accepting bank drafts that initially looked legitimate. In one instance (5), a company lost over $108,000 and were told the draft “looked like every other bank draft.” Even a teller said it was good, only for the funds to be reversed days later.

In a separate case (6), an Ontario business owner lost nearly $156,000 from a fake draft even after the bank inspected it. The bank later reversed the deposit when the draft was determined to be fraudulent.

These aren’t fringe events. Police in British Columbia have issued warnings (7) about counterfeit bank drafts used to buy vehicles and others have reported multiple fraud encounters in just one week involving fake drafts.

Why banks are cautious

Banks aren’t placing holds just to be difficult. They are responding to the reality that cheques and bank drafts can be forged or altered and that they may be liable if they release funds that turn out to be fake. Banks have the legal right to place holds while they verify an instrument’s authenticity, and those holds can stretch to five business days or longer, especially for larger amounts or when fraud risk is suspected.

Less than 1% of accounts generally have holds placed on deposits (8), but unusual patterns, large amounts compared to typical account activity, or anything that raises a red flag can trigger extra verification.

From the bank’s point of view that verification step protects both you and the institution from having funds reversed later, which happens when a draft turns out to be counterfeit or issued on insufficient funds.

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What banks are doing right

Banks have been investing in better fraud detection systems that look for suspicious activity as transactions occur. According to consumer surveys (9), 69% of Canadians want banks to step up real-time protections and alerts to help stop scams before they do harm.

Even though the cheque and draft system is older technology, banks are working with regulators and the Department of Finance (10) on ways to improve how and when funds become available and how to reduce the time needed for verification so legitimate payments clear faster.

What you can do to protect yourself

Here are some practical tips you can use to protect yourself:

Wait for clearance before spending

Bank drafts and certified cheques should be verified through the issuing bank before you pay out the funds or deliver goods. Even if a teller says it looks real, only the actual clearance process confirms legitimacy.

Verify independently

Never rely on phone numbers printed on the draft itself. Always independently look up the issuing bank’s contact information and ask them to verify the draft. Fraudsters may include fake contact information.

Consider electronic transfers

Wire transfers and Interac e-Transfers may have fees but are typically instantaneous and reduce the risk of counterfeit instruments.

Be extra cautious with high-value deals

If you’re selling equipment, vehicles or real estate privately, insist on secure payment methods where funds are confirmed before you release goods.

Use two-factor security and limit data sharing

Fraud reports show personal account takeover and unauthorized transactions often start with compromised credentials. Two-factor authentication and limited sharing of sensitive information can reduce your exposure.

Bottom line

The Reddit poster’s gut reaction that “cash is king” comes from real frustration. But the data shows that cash isn’t inherently safer and, in fact, payment fraud can occur with cash as well as other instruments.

Banks are taking fraud seriously and making changes that protect you, even if it means waiting a few business days to be sure a payment is real. By understanding the risk, using secure payment methods and adopting best practices, you can reduce your own vulnerability and keep more of your hard-earned money where it belongs: in your control.

Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Reddit (1); CMP (2, 9); Payments Canada (3, 4); CP24 (5, 6); CityNews Vancouver (7); Senate of Canada (8); Government of Canada (10)