The Office of Fair Trading (OFT) is warning consumers to steer clear of a new type of lottery scam which uses counterfeit cheques.

The scam begins with a letter arriving in the mail from a company calling itself the Australian Lottery Corporation, using an address in Victoria, British Columbia, Canada.

The letter states that the recipient has won $750,000. However, the victim is asked to first pay for taxes and insurance.

To lull the victim into a false sense of security, a $4,880 cheque personally made out to the recipient, and allegedly drawn on a reputable American bank, is also attached to the mailing.

The scammers claim this amount comes from the supposed winnings to cover these 'necessary payments' the consumer needs to make. Recipients are also asked to call an agent on a telephone number in North America for more information.

The cheque is in fact counterfeit but can take up to six weeks to work through the banking system. In the meantime, the consumer is at risk of being held liable for any funds they spend while waiting for the cheque to clear.

Experience from similar scams suggests that victims could lose thousands of pounds if they send off money to claim their supposed winnings.

Christine Wade, OFT Director of Consumer Regulation Enforcement, said: " Lottery scams have been around for a number of years. But the use of a counterfeit cheque is a worrying development.

"Scams are becoming increasingly more sophisticated and everyone needs to be on their guard."

The OFT said there are several warning signs consumers should be aware of if they receive a mailing or telephone call telling them they have won an international lottery. 

Most importantly, a person can't win a lottery that they never entered. In addition, legitimate lotteries don't ask winners to pay taxes, custom fees, insurance shipping or handling or any other fee before receiving their winnings.

People should also be aware that scam lotteries often ask them to send money upfront to the perpetrators by money transfer.

Anyone who is contacted about a lottery win and suspects it may be a scam can call Consumer Direct for clear, practical advice on 08454 04 05 06 or visit the scams area of the OFT website or the Consumer Direct website .