Schemes, Scams, Frauds.

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Counterfeiting of Money, Bank Cards and Other Financial Instruments

International criminal enterprises are increasingly using fictitious securities and negotiable instruments to defraud the government, individuals, corporations and financial institutions.

Advanced design, copying and publishing technology is enhancing the capability to produce high-quality counterfeit currency and financial instruments such as commercial checks, traveler's checks and money orders.

A new generation of fraudulent alteration or counterfeiting emerged when computerized colour laser copiers became capable of high-resolution copying, the modification of documents and even the creation of false documents without benefit of an original. They can easily produce documents whose quality is indistinguishable from that of authentic documents except by an expert.

Criminals have used these bogus instruments to obtain government benefits, underwrite loans, serve as insurance collateral, and defraud individual investors, pension funds and retirement accounts.

Funny Money

Because of vigorous anti-counterfeiting measures, the amount of counterfeit currency has dropped precipitously, with passed and seized counterfeit $100 bills falling from $126 million to $53 million between 1994 and 1997.

Also, the percentage of counterfeit U.S. currency passed in the United States, that was produced using inkjet color copiers, has jumped from 0.5% in 1995 to 43% in 1998. During the same period, the value of Canadian counterfeit bank notes passed and seized in Canada was $5.2 million. This was double that of the previous year, and primarily due to a large counterfeit operation producing $100's. A major investigation resulting in twelve arrests slowed the activity of this particular series of counterfeit banknotes.

In fiscal 2001, about 39 percent of the $47.5 million in seized counterfeit money that entered circulation in the United States was made using computers or scanners, said Jim Mackin, a Secret Service spokesman compared to less than 1 percent in 1995.

In 1996, approximately 65% of all counterfeit U.S. currency detected domestically was produced outside its borders.

The Federal Reserve System estimates that approximately $450 billion of U.S. currency circulates worldwide and that two-thirds of that currency circulates outside the country. As the demand for genuine U.S. currency grows overseas, so will the threat of counterfeiting by foreign organized crime groups.

Credit Card Fraud

Financial fraud crimes have become more prevalent in recent years as international criminals take advantage of the significantly greater personal and corporate financial information now available, and readily exploitable, through computer technology and access devices such as credit cards, debit cards and smart cards.

As a result, financial losses to American businesses from insurance and credit card fraud are increasing. Based on potential losses, major credit card issuers suffered fraud losses in excess of $2 billion in 1996, about one-third of which occurred because of international fraudulent activity. The Association of Certified Fraud Examiners estimates financial losses in the United States from fraud schemes by domestic and international criminals at more than $200 billion per year.

In 1998, the Canadian Bankers Association reported losses due to credit card frauds totaling over $142 million, with one half of those losses due to counterfeiting.

Take out a bill and examine the following aspects of the money you handle each and every day.

Canadian Currency Security Measures

Colour Change Patch (Optical Security Device)

Appears only on current series $20, $50, $100, $1000 notes.

No patch on $5 and $10 notes.

Look: Changes colour from gold to green when tilted.

Feel: Cannot be peeled off.

Green Dots (Planchettes)

Look: Small green dots that appear randomly on both sides of the note and glow (fluoresce) under ultraviolet light.

Feel: Will peel off if scratched.

Raised Ink ( Intaglio)

Look: Clarity and sharpness of images and printing.

Feel: The ink used on the numerals, portrait, coat of arms, broad bands and vignette of the Parliament Buildings feels thicker to the touch.

Counterfeit bank notes are usually surface printed which has no raised effect. Counterfeit bank notes, if produced by colour copiers, will be composed of yellow, magenta, cyan, and black toner dots. Toner will flake off the paper when scraped

Portrait

Look: Sharpness around eyes; fine lines in hair and face.

Feel: Raised ink feels thicker to the touch.

Micro Printing

In the background on the front of the note, the denomination numeral and the words "Bank of Canada Banque du Canada" are printed in extremely fine print requiring a magnifying glass to see.

Serial Number

Printed on back as a three letter with seven digit number. No two bills should have the same number. When photocopied many crooks overlook this fact and try to pass several identical bills at the same time.

Paper

A genuine note should not glow under ultraviolet light except where the tiny dots are located.

Colour/Tint

Colour is hard to match when forging, so use a known genuine next to suspect note for comparison.

What to do?

Keep notes. Take down particulars of individual, car etc. Notify police. Delay passer if possible to contact police. Write initials and date on the bill and give only to the police or government agency.

American Currency Security Measures

Portrait - The enlarged portraits are easier to recognize while the added detail is harder to duplicate. The portrait is now off-centre, providing room for a watermark and reducing wear and tear on the portrait.

Fine Line Printing Patterns - The fine lines printed behind the portrait and in the sky behind the building are difficult to replicate. Check that both sides are clear, not splotchy or composed of dots.

Watermark - A watermark identical to the portrait is visible from both sides when held up to the light. Because the watermark is in the paper, not printed on it, the watermark looks the same from the reverse side.

Colour Shifting Ink - The number in the front lower right corner looks green when viewed straight on but appears black when viewed at an angle.

Low vision feature - Large numeral on back easier for correct reading with poor vision. Machine readable by scanners for the blind.

Micro-printing - Extremely small printing is embedded in front bottom left numeral and at base of oval around portrait on the $20. On the $50 it appears in the side borders and in Grants collar. On the $100 it appears in the lower left corner numeral and in Franklin's coat.

Security Thread - A polymer thread embedded vertically within note at far left of portrait on $20's, far right on $50's and far left again on $100's will glow green on the $20's, yellow on the $50's and red on the $100's under ultraviolet light.

Serial Numbers - A combination of two letters followed by eight numbers then one letter appearing twice on the front of the note only.

For more info see: U.S. Secret Service, Federal Reserve Bank Moneyfactory

You Could Be On the Hook for Check Fraud in the U.S!    By Les C. Cseh

Did you know that the UCC (Uniform Commercial Code) regulations place responsibility for forgery losses partially on bank customers, rather than solely on the banks? But in addition to this exposure, there can be significant expenses and lost time investigating the crime, not to mention damage to your credibility and reputation.

Your only defense is to show that you have taken due diligence. One way to demonstrate this is by implementing careful practices regarding your checks. Another is to use checks with well implemented security features.

How Bad Is the Problem?

The problem is so serious that the banks don't like to reveal the extent of the problem. Estimates range from hundreds of millions to $10 billion dollars annually.

In 1991, the FBI tracked over 26,000 cases, but this is just the tip of the iceberg, because the FBI mostly focuses on cases where the amount exceeds $100,000. Just one example comes from The Green Sheet (a publication to the Financial Services Industry), reporting an incident where a family had allegedly stolen more than $1 million from area merchants since 1993 by writing checks on closed and non-existent accounts at 11 financial institutions in Indiana and Chicago under 25 different names.

In just 4 years, Northern Trust Bank has detected more than $3 million dollars worth of counterfeit checks.

What Kinds of Things Do Criminals Look For?

It is an endless list, but here are some of the types of things that someone looking to counterfeit or tamper might look for:

	High volume bank accounts where a fraudulent check can easily slip through.
	Checks that are easy to reproduce using a color copier.
	Checks that are easy to tamper with.
	Easy access to checkbook or check stock.

What Can You Do To Protect Yourself?

Reduce the chance of someone counterfeiting or altering your checks, as well as reducing your liability when it occurs.

Be aware that is is impossible to prevent fraud. But you can significantly minimize the risk using a two-prong approach. It is critical that good procedures related to your check processing are put in place, and that you use a check that is difficult to counterfeit or alter.

	Reconcile your bank statement promptly. Now that bank statements are available online, you can do this as frequently as you feel is necessary for your situation.
	Restrict access to your checkbook/check stock. Ensure that only trusted staff that need access have it.
	Audit your checks. However, this can be difficult because often checks are removed from the bottom or middle of the book or stack.
	Use a custom design. While this isn't an affordable option for many businesses, look into it. The next best thing is to ensure that your check supplier uses comprehensive security features. Remember though that a custom design is not a substitute for security features.
	Advise your bank branches' officials of the security features in your checks .. in person or in writing (and keep a copy of the letter on file!).
	If you issue a large number of checks, particularly with a low amount (eg. rebate checks), open a separate account and alert the bank staff of an upper limit for that account.

Don't take unnecessary chances. The more security you have through procedures and choice of check form, the less likely that someone will tamper with your checks.

Check Security Features

There are numerous security features available today, with new ones coming available all the time. While it would not be practical to include all the features on a single check form, the more security features your check has, the better you are protected against fraud and liability.

The best approach is to combine "overt" and "covert" features. The overt approach makes it clear to anyone looking at the check what features you have implemented, with the effect of deterring criminals and providing bank staff and your staff with an easy method of identifying tampering. Covert features are deliberately hidden to surprise and fool most would-be tamperers.

Tamper Detection and Prevention

A common approach to fraud is to alter the amount or other information on the check by erasing or using various chemicals. Some inks used on backgrounds and some papers react to these chemicals by disappearing, fading or staining in a very obvious way.

Laser printer toner is notoriously easy to remove. Some check papers are treated so that toner fuses much better to the paper. This goes by names such as "toner grip" or "toner fuse".

Beating The Color Copier

The most recent wave of fraud was brought on by the color copier. They can do such a good job, that security features beyond the copier's abilities have been developed. These include:

	One of the most recent and exciting features uses thermochromic ink, such as TouchGuard TM used by ASAP. The ink changes color when rubbed or breathed on, and reappears when you stop. This requires no special equipment to check, and the color change characteristic cannot be reproduced using color copiers or inkjet printers.
	Flourescence is something that color copiers cannot reproduce. Secure checks may include some printing using flourescent ink, and/or have flourescent fibers woven into the paper. While some banks have UV lights which can be used to detect that the check does not glow, many banks do not, nor do tellers typically check for this.
	Visible fibers are also used for the same purpose. A close examination of a copied check will reveal that the fibers are only copies.
	Depending on the type, watermarks can be viewed from one or both sides of the form when held up to light at a 45 degree angle, something that cannot be photocopied or scanned and is very difficult to duplicate.
	A void pantograph is a special way of printing a message in the background that is not obvious to the naked eye. Because of the resolution used on many copiers, this printed message becomes very obvious when copied.
	Microprinting is a technique where signature lines or borders are printed using such tiny text that it looks like a line, but magnified you can see the text. The text is so small, however, that current copiers cannot reproduce the text.

Warnings

Several types of warnings can be used to discourage criminals and to raise alarms that something is wrong.

	A message such as "The face of this check is blue and contains the security features listed on the back" is very effective.
	A padlock symbol indicates that your check contains the minimum set of security features standardized by the Financial Stationers Association.
	The "MP" symbol is used to indicate that elements of the check have been micro-printed.

Les C. Cseh is the owner of ASAP Checks, Forms & Supplies, a check printer operating out of Alexandria Bay, NY and Perth Road, Ontario. He has been involved in financial documents since 1985, and had participated in ANS X9B standards work. He can be reached at info@asapchecks.com and at 888-85-CHECK. In addition to a variety of secure checks, the ASAP web site  www.asapchecks.com  offers a non-commercial section related to check processing issues called the MICR Repository.

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