Distributors can help customers battle check fraud through education and innovation.
Asked for the latest statistics concerning check fraud, Barbara Hurst, executive editor of the newsletter Bankers' Hotline, editor/moderator for BankersOnline.com, and president of Pennsylvania-based Hurst Associates—security and compliance training specialists—responded, "You can get as many guesstimates as there are experts guessing."
Hurst said it's a given within the industry that FBI and American Bankers Association (ABA) figures on the subject are "way, way low," since many losses are not reported but simply charged off.
However, she cited an in-depth study conducted approximately five years ago by U.S. News and World Report which found that financial institutions in the U.S. lose $12 billion a year in check fraud, while the retail industry overall loses double that for a total annual loss of $24 billion. "It's the most comprehensive information we have on this subject, and I've used these figures ever since, even though they, too, are probably low by now," said Hurst.
How is this possible with increasingly sophisticated security features being made available? According to Sandy Horner, president of DiversiForm Software Compatible Checks, Alex-andria, Va., several security features may be available, but the banking industry requires only three of these elements on a check to show due diligence. Horner also noted that banks are not investing enough time and money to train personnel. "Chances are that if you called a bank and asked someone to verify a microline space, he wouldn't know how to gauge it," said Horner.
Be that as it may, the printing industry continues to do its part to prevent the two types of fraudulent check activity—information alteration and counterfeiting (or duplicating) checks.
For instance, instead of the three requisite security features, DiversiForm's checks contain 10 security elements, including a warning band, the padlock icon, micro printing, a security pantograph, a reverse-side security screen and its related warning box, a void pantograph, additional micro printing, chemical-reactive printing and invisible fluorescent fibers for viewing under black light.
Another feature Horner mentioned is bleed-through MICR numbering, involving special dyes in the MICR ribbon that bleed through the paper making the number visible on the backside of the document. To alter a number, it would have to be completely removed.
Said Horner, "Ninety-nine percent of the manufacturers design their checks with similar security features, but these efforts are futile if bank employees don't look for them."
Horner stated that the most important thing distributors can offer their customers is a strong reminder to balance their bank statements each month.
"Banks provide a 90-day period from the date the statements are issued to report suspected fraud and have it investigated," she said. "After that, the bank will no longer assume the responsibility."
Horner pointed out that a $1,000 or even a $10,000 deficit probably wouldn't be missed by a company that neglected to balance its statements. It may take a significant amount to raise a red flag, but by then it could be too late. "As of that 91st day, the burden falls on the individual or company," she continued. "I can't stress enough how important it is to promptly and consistently review bank statements."
Despite repeated warnings, however, the reality is that bank statements will continue to go unbalanced, and so preventing fraudulent activity altogether continues to be a challenge to the printing industry.
Some of the most promising measures are those that occur well before check stock is even converted since, as Rick Ward, Business Document Manager for Appleton Paper's security products division observed, "Anything that is not intrinsically part of the paper, but sits on top of it, can be removed chemically or mechanically."
Crime, the Appleton, Wisconsin-based manufacturer believes, is best fought at the pulp stage of check stock production, subsequently layering a secure substrate and security printing. Supporting that strategy is the company's DocuCheck and DocuMark lines of security papers.
DocuCheck is primarily check stock featuring covert fibers, true watermarks, toner adhesion coatings and chemically-sensitive additives.
DocuMark, explained Ward, is a custom security paper stock used for secured documents by financial institutions, insurance companies and large corporations with much more to lose than an individual. This line offers more aggressive fraud-fighting elements that may be customized to meet specific needs.
"DocuMark contains forensic security features detectable by chemicals or machines in laboratories for results that are admissible in court to give full-proof evidence of fraudulent activity," noted Ward. These features include greater chemical sensitivity, custom watermarks and a higher percentage of overt and covert fibers.
"DocuMark is sold worldwide, but only to qualified manufacturers who are screened through the sales force," he continued.
Stay One Step Ahead
In order to keep ahead of crime, Appleton launched Techmark this past November. It is the latest and most effective line for authenticating and identifying documents in Appleton's hierarchy of security paper.
The unique, covert machine-readable security technologies puts TechMark in an entirely new class of machine-readable, intelligent paper which serves as an electronic storage device, explained Ward. "Not only can machines interrogate the paper to retrieve information," he continued, "but the paper can also be written to due to a magnetic thread embedded into the paper.
TechMark acts and looks like any paper. The product can be used with any press, copier or printer and is meeting various applications including vouchers, coupons, government documents, prescription pads and certificates of deposit.
For instance, consider the title to a car. Ward pointed out that despite special coatings and toner preservatives, the document is still fairly easy to alter. However, TechMark's magnetic thread contains static data bearing a unique identity baked into the thread that is scanned with a special reader.
The thread can also carry variable data, making it possible to change the odometer reading if a new owner should take over the title.
In another example, Ward said that some African universities are using TechMark to prevent alterations to transcripts which are at the crux of large overseas scholarship awards. World banks are also utilizing TechMark for financial documents worth millions of dollars to hinder alterations to maturity dates and interest rates.
TechMark's chief benefit is the storing of data, which is re-trieved only with a special reader device. "This application offers tremendous security control for corporations that have a lot to lose," said Ward.
"People tend to be sensitive to price where commodity checks are concerned," continued Ward, "but they'll spare no expense when it comes to other documents like passports and visas."
The upshot is that crime will continue to spur innovation within the printing industry, offering distributors value-added products to feed the bottom line while helping customers take a bite out of crime.
By Maggie DeWitt
- Places:
- Pennsylvania