Time for a Throwback... Way back. - WBA staff dusted off our past publications and found some gems for your enjoyment: 

According to the 1983 ABA Bank Insurance Survey, check fraud losses for that year totaled $184.1 million (with a note that "figures do not fully reflect industry status due to underreporting"). 

By 1988, the situation had worsened dramatically, with the survey reporting check fraud losses of $864.2 million! Interestingly, during that same period employee dishonesty losses actually dropped significantly from $636.8 million to $272.2 million. So what caused this explosion in counterfeit check losses?

The Problem of Desktop Forgery
In large part, affordable computers are beginning to create a new phenomenon – desktop forgery. For under $10,000 a would-be forger can purchase a complete desktop publishing system, including a PC, magnetic ink laser printer and a high-resolution scanner. From the privacy of his or her home, without accomplices, the check fraud artist can forge almost any printed document – including cashiers' checks, business checks, personal checks and bank notes. These documents can be produced so accurately as to be virtually undetectable. 

The most common desktop fraud scheme involves the con artist obtaining a legitimate document from a large corporation or bank. This could be a refund check, a purchase order or a purchased cashier's check. The forger can then use the computer to read, modify and reprint the check on real check paper – which is easily obtained from suppliers as check paper is not a restricted commodity. Normally, the forger targets companies or banks with large balances and a high volume of checks. The sheer volume of activity in the accounts can cause the counterfeit draws to go undetected until the account statement is reconciled, which may not occur for months. 

What Should Banks and Businesses Do?
According to a recent issue of Forbes, here are some precautions and inspection tips bankers and their customers can follow to protect themselves from computer counterfeits: 

  • Use color on important documents such as checks and purchase orders. Color is more difficult to accurately produce than black and white. 
  • Use nonstandard safety paper and restrict its availability to others. 
  • Check for perforations on at least one side of a check. 
  • Do routing numbers on checks reflect light? If they do, they probably weren't printed with magnetic ink. 
  • If you remit small refund or payment checks to strangers, move these payments through a checking account with a small balance to minimize loss potential. Keep a separate account for larger, established customers. 
  • Customers should examine and reconcile their account statements as soon as possible. 

Keep in mind that technologies such as desktop production and FAX transmission have implications for a variety of security situations - and can be used to fraudulently produce anything from phony hiring recommendations and college transcripts to fake expense account receipts, letters of credit and property records. 

Originally published in the February 1990 edition of the Wisconsin Banking Digest.