Check Fraud in a Brave New World

By Sandy LeDuc
LeDuc and Sikowitz

While technology has never been necessary to commit fraud, the advances in printing and computing technology have made check fraud far easier for some to help themselves to other peoples’ money.

Check fraud includes:

• Forging a signature on an unauthorized check or endorsing an inappropriately procured check.
• Altering checks that have been appropriately authorized, written and signed. Alterations are made by erasing payee names and/or amounts with common household chemicals and replacing those fields with desired entries.
• Moving money between credit cards, loans and other cash accounts to take advantage of float time and new regulations which speed up crediting of funds. The perpetrator creates a temporary expansion of fund availability which they withdraw illegally.
• Counterfeiting uses very common technology such as high quality photocopiers, color printers, scanners, and software programs including desktop publishing to create checks for existing or completely fictitious accounts. This is a rapidly expanding problem as more and more people use computers.

With banks relying on technology to serve customers, the relationship with your bank branch simply does not exist any longer. Signature cards formerly stored in the branch now reside in a remote location and are accessed rarely, if ever. Check identifiers such as name and logo no longer need to conform to the legal name or registered trade or service marks in order to clear the account.

Someone, somewhere in the bank has done a cost benefit analysis comparing the cost of having human attention paid to these details with the anticipated fraud loss projections and cost of insurance premiums. With banking going to a national or global format and speed taking first priority, human attention couldn’t keep up even if it were cost effective.

On the plus side, technology has also provided some solutions to the problem of check fraud. Fraud prevention software is available through the bank that dovetails with banks’ other cash management products. These solutions stop the passing of fraudulent checks at the point of presentment—at the teller window or in the back room where banks process presentments from other institutions. The cost of these solutions is reasonable and equates of insurance for the depositor.

It is hard to say if the good guys are keeping up with the bad guys but technology is working for everyone.

Winter 2005 -Volume 15, Number 1

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