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Anatomy of Check Fraud

All business professionals should be aware of the opportunities for check fraud being created by the advent and availability of electronic publishing, advanced scanning and color copiers available in the market today.

These new technologies are providing enormous alteration and duplication capabilities for fraud artists so it has become imperative for companies to become familiar with the techniques available to protect themselves against it and avoid becoming one more statistic.

Since new check printing technologies are now beginning to migrate from the US to many other parts of the world, we believe that this article is relevant no matter in what country of the world your business is located. You should first become aware that the problem exists and then learn about the steps available to protect your business against this type of crime.

Some Background Information
Check fraud is relatively low risk crime which can be highly lucrative. Recent estimates, according to Banking Automation News and National Association for Banking Securities, indicate annual losses in the US. To be in the US $10 billion range. It is estimated that there are over one million bad checks entering the banking system each day.

Since technology has made alteration and counterfeiting easy, the problem may continue to escalate as technology continues to grow.

It is in the best interest of company executives to make fraud prevention a high priority for the following reasons: (please keep in mind that some of these may apply in the US only and we present them for information and reference)

  1. Skyrocketing losses by banks due to forgery and counterfeiting have forced them to handle this issue more objectively by shifting the liability to the business community (the check issuers) for any fraudulent checks that are cashed. It has now become the responsibility of these check issuers to use the protective measures available in the market today to protect themselves against fraud and/or to show that ordinary care was taken to prevent it.
  2. Without preventative measures, a company becomes an attractive target for crime rings or individual fraud artists. Your company may be vulnerable now and not know it.
  3. Reputation is a company’s greatest asset and check fraud can create a negative impact on your company’s image. A loss of confidence by your customers can be embarrassing an painful, not to mention the costs involved to investigate the source of the criminal activity.

How to Protect Against Fraud
The key to protecting your companies against the check fraud game is to know the specific types of fraudulent scams prevalent in the crime world today.

There are four basic schemes that are popular with criminals:

  1. Theft and subsequent forgery of checks and sensitive documents
  2. Issuance of genuine checks to fictitious entities
  3. Alteration of legitimately issued checks and documents
  4. Duplicating or counterfeit printing of checks and valuable documents

Some Protective Measures
Now, here are some measures that you can take to protect your documents from being an easy target an simultaneously strengthen your company’s image:

  1. Rethink your process of ordering and storing checks. Be certain there are controls to eliminate risk of theft or duplication.
  2. Review your issuing process. Be certain it is accurate and efficient. Internal and external audits can be very effective in detecting patterns of fraudulent activity or potential risk areas.
  3. Reconcile your bank statements consistently and in a timely manner. It can be crucial in determining liability in the case of bad checks.
  4. Reevaluate your document’s security features and their effectiveness for your checks in order to avoid exposure to check fraud. While it is true that the more complicated your security features are the less likely a forger would tamper with them, you don’t have to have all or even most of the features available. A combination can be very effective and cost efficient. Intelligent combinations of features will deter sophisticated criminals and expose less-skilled thieves.

No system, program or feature is completely foolproof. However, taking measures in a vigilant manner will deter ill-intended activity and simultaneously strengthen your company’s image.

Although there is more to be learned and be aware of when it comes to protecting yourselves against check fraud, I hope that this information has been of value to all of you.

More Information
If you would like to find out more information about the latest security features available in the market today that can be incorporated on your checks, I invite you to e-mail us at or call Al Guerra at (305) 592-2838.

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