When we're little, we don't have to be concerned with "grown-up" issues like check fraud. Many children only think about checks when a relative gives them one and they get to cash it or deposit it to a savings account. Unfortunately, we can't stay young forever. Soon enough, we are forced to confront some harsh realities that involve counterfeiters and defrauders.
According to the 2012 AFP Payments Fraud and Control Survey, checks remain the payment type most vulnerable to fraud attacks, with 62 percent of respondents incurring incidence of fraud and 26 percent of respondents indicating they have been hit by frequent check fraud attacks. While there may not be a simple solution to erase the problem completely, there are precautions companies can take to protect themselves.
Here, Christian Simko, director of product marketing & communications, Relyco, Dover, N.H., shared his thoughts on this growing problem.
Print Professional (PP): Has check fraud declined, remained stable or increased over the last year?
Christian Simko (CS): You would think check fraud would be in decline [because] the use of paper checks is declining. But from what we're hearing and [based on] the demands from our customers, it seems that check fraud has been increasing. The state of the economy is probably the major factor in the increase of check fraud. Other reasons why check fraud may be increasing are that checks are harder to tamper with and that there are better ways of detecting fraud. So, it may also be a case of a rise in fraud detection rather than a rise in actual fraud.
PP: How can defrauders tamper with checks? What are some popular tactics?
CS: There are many ways to tamper with a check, and the success of those actions can be tied to how secure or unsecure the check is. Popular tactics are photocopying/scanning and changing information on the check by rubbing the toner off. Probably the most
effective tactic is the theft of blank check stock by employees who then attempt to write their own checks. In that case, it is very tough to detect fraud. Security cannot just stop with features on the check—you must practice secure processes for storing and writing checks.
PP: How do your ordering procedures protect against check fraud? Do you sell uncontrolled check stock?
CS: We sell blank check stock and take great precautions to ensure proper delivery. Sales opportunities must be properly qualified to understand the application. In some cases, we also request proof of identity. When we ship blank checks, they are packaged in unmarked, sealed boxes. Each sales representative here then calls the customer to verify delivery.
PP: Are there high costs associated with security features for checks? How do you produce a secure and aesthetically pleasing check while keeping costs reasonable?
CS: Relyco offers a full line of secure check stock from low-end to high-end. In the qualification process, we find out what's important to our customers and match a check to their needs. Our lowest-end check has 11 combined security features (the recommended amount is seven). Producing a secure check at a reasonable cost is about combining different security features.
PP: What type of influence is technology having on check security? For example, is void pantograph still effective? Are there other features that are becoming more effective as a result of new technology?
CS: Void pantograph is still very effective at reducing fraud associated with photocopying a check. Other features such as solvent-reactive color spotting, thermochromic heat-reactive ink and enhanced toner adhesion can help reduce some of the most common fraud tactics.
PP: Are there any challenges or misconceptions
associated with producing low- or high-security checks?
CS: The challenges are keeping costs low to produce a highly secure check and making sure the combination of security features works in a laser print application. Each laser MICR printer is slightly different and the check stock should be properly tested to ensure everything works correctly. As for misconceptions, every check is vulnerable to some type of fraud regardless of security features. It all depends on how good the person is at check fraud.
PP: When building a security plan, what questions should distributors ask clients to determine the most suitable option(s)?
CS: Deterring check fraud is not just about buying secure checks. You need to look at the whole process of storing, printing and distributing checks. We suggest a secure printing system that includes password protected/role-based check printing and signing software and a secure (lockable tray and print engine) MICR printer. As for distribution, you need to select a secure check envelope or a pressure seal application to ensure the secure delivery of your checks.
PP: Based on your experience, do you have any predictions for the check market sector and the rate of check fraud? Where do you see things in the next five years?
CS: The use of paper checks will continue to decline. The government has already phased out, or is in the process of phasing out, paper checks in favor of electronic payment methods. The private sector will follow suit. We have many customers transitioning now from paper to electronic payroll and Accounts Payable methods. Obviously, we believe this will naturally lead to a decline in check fraud. While there are security issues with electronic payment methods, the likelihood of fraud and theft is not as great and it can be more easily controlled and tracked if something does occur. The major trend over the next five years will be the transition to electronic payments and paycards.