Bad Checks and Bogus Cards
Financial fraud
In the simple scheme, a young employee takes his paycheck, which has been issued in a false name, buys a $19.95 ream of the same pink paper the check is printed on, goes to a copy shop, replaces the bond paper with the pink paper, makes 50 copies of the paycheck and then cashes them all that day. In the complex scheme, a bank teller faxes salary checks from companies with large payrolls to her associates. Using high-tech color scanners and computers, the associates copy and reproduce the payroll checks. Couriers then cash them. The simple scheme costs one company several thousand dollars; the complex scheme costs several companies millions.
Counterfeiting isn't just restricted to currency. Industry analysts estimate that the total annual cost of check fraud is now $10 billion in the United States. "The No. 1 crime problem for financial institutions," says Ronald Dick, chief of the financial institutional fraud unit at the FBI, "is counterfeit negotiable instruments, such as check fraud and money order fraud."
To blunt this form of counterfeiting, many experts advocate the use of high-tech security products such as CopyBan+ from Standard Register. When this feature is employed, the word "void" is printed into a background security pattern in multiple tones. If a document is copied or scanned, "void" appears, making the copy nonnegotiable.
Big losses. Credit card companies are also turning to high technology to help stem losses from counterfeiting. Individuals or organizations often obtain legitimate account numbers and then create fake plastic with those numbers on the cards' magnetic strip. Last year, for example, counterfeiting cost MasterCard's member banks $133.8 million, a 75 percent jump over the previous year, according to spokeswoman Nancy Elder. New technologies, however, are proving highly effective. Some credit card issuers are using neural networks--computer systems that "think"--to flag transactions that seem unusual for a particular account. Other companies are putting secret algorithms on their cards' magnetic strips to make counterfeiting more difficult.
And looking to the future, a handful of companies are already investigating next-generation security features such as biometrics, in which a transaction authorization could be linked to the scan of a fingerprint or retina. Plastic problem Credit-card fraud charge-offs
1989 $231 mil. 1990 $358 mil. 1991 $501 mil. 1992 $572 mil. 1993 $598 mil.
USN&WR--Basic data: American Bankers' Association
This story appears in the December 5, 1994 print edition of U.S. News & World Report.