Fraud
FRAUD

NOTES FROM THE ALWAYS LOVEABLE, UNDOUBTEDLY INFAMOUS AND NOW HONORABLE, Frank Abagnale

   Despite continuous efforts to stop it, check fraud is on the increase, according to Frank W. Abagnale, a recognized authority, on the subjects of forgery, embezzlement and secure documents.
   Abagnale, subject of the 2003 movie Catch Me if You Can, cites Comptroller Office reports that say that more than 1.2 million fraudulent checks are written every day­more than 13 per second.
   Forgery is safer for the culprit than armed robbery and similar violent crimes, with potential big payoffs, so no drop-off is expected any time soon. So, merchants that accept checks have to be ever mindful of the fraud risks.
   According to the American Bankers Association, only about $800 million of the fraudulent checks are forged bank checks, meaning the rest are fake corporate and government checks.
   In the movie, Abagnale (played by Leonardo DiCaprio) is seen using an old typewriter and correction fluid to forge checks. A keen eye might have spotted those forgeries because the printing or ink might have been a little different than on good checks. However, sometimes those who cashed the checks were too impressed by the uniform (airline pilot, doctor, etc.) and didn't give the check a second look.
   Abagnale, was caught, convicted and eventually worked for the government in its attempts to apprehend forgers has lectured to and consulted with hundreds of financial institutions, corporations and government agencies around the world.
   Abagnale has been associated with the FBI for over 25 years. He lectures extensively at the FBI Academy and for the field offices of the Federal Bureau of Investigation. More than 14,000 financial institutions, corporations and law enforcement agencies use his fraud prevention programs.
   In these lectures, he's pointed out that it's much easier today to forge a check than it was 35 years ago when Abagnale himself was forging checks. Rather than trying to find an old typewriter with the right type size and trying to steal the right check stock, today's laser printers and widely available papers and inks makes it relatively easy for even an amateur to forge checks that don't contain security features (water marks, etc.) These bad checks can either be made from scratch or can be altered checks that were otherwise good. The altered checks might have the amount or payee or some other item changed.
   Another typical alteration is the routing number at the bottom of the check. By changing the routing number to a different Federal Reserve Bank, the forger can skip town before the bad check is ever noticed.
   The routing number and the rest of the MICR (Magnetic Ink Character Recognition) line use special magnetic ink in order to be easily read by sorting machines. But even these inks and printers that can use traditional and magnetic ink, are readily available.
   Many financial industry experts who spoke at the Bank Administration Institute's Retail Delivery Conference at the end of 2003 said that the Check 21 legislation that goes into effect Oct. 28, 2004 will help deter some of this fraud because it will allow merchants, banks and anyone else accepting checks to immediately convert checks to an image to start the clearing process (if they have the necessary technology). The quicker the process can start, the quicker the clearing financial institution can spot a potential problem, so the more likely the forger is stopped or caught, or so the pundits say.
   Abagnale, however, disputes that notion, saying in a white paper on the subject, that image capture devices aren't effective in fighting fraud because the resolution isn't good enough. Though the risk of converting checks of less than $400 is relatively small, according to Abagnale, larger checks could pose considerable risk.
   Abagnale believes that punishment for fraud and recovery of stolen funds are so rare, prevention is the only viable course of action.
   The following are some check fraud prevention tips from Abagnale and the payment experts. Some of this advice can also help prevent the acceptance of fraudulent payment cards:

  • Establish a check acceptance policy detailing acceptable forms of ID, required information and dollar limits and make no exceptions to the policy. Fraud artists are skilled at creating hassles or confusion that can leave businesses stuck with a bad check.
  • When accepting a check, make sure a name, address and phone number are printed on the check and the written and numeral amounts correspond.
  • Pay attention to the "feel" of the check; most check paper has the same weight and texture.
  • Watch the check-writer sign the check and have the customer print the name below, if the signature is illegible.
  • Compare the signatures, photo and physical description of the ID with that of the check writer.
  • Check the driver's license, which should be smooth all over with no ridges that indicate an alteration or modification. Verify that the ID is still valid.
  • Ninety percent of returned checks have low check numbers (100 to 500). While low check numbers indicate a recently opened account and a potentially more risky check, particularly for business or dba ("doing business as") checks, that is not always the case.
  • More useful information on the check is the account's opening date (month and year), usually indicated by four numbers to the side of the account holder's name and address.
  • Don't accept second-party or third-party checks.
  • The four-digits following the magnetic ink character recognition (MICR) number at the bottom of the check should match the four-digit number at the top right hand of the check.
  • All checks, except government checks, should have a perforation along one side of the check.
  • You can try calling the financial institution to confirm if funds are available, but there is no guarantee that the check will clear.