Frank Abagnale was portrayed by Leonardo DiCaprio in the Steven Spielberg film, “Catch Me if You Can”, which was adapted from real life events, with substantial dramatization, taken from Mr. Abagnale’s early life. Last year I wrote about Frank Abagnale’s keynote address at Scaling New Heights 2014 which focused for the most part upon his ‘life history’ and the changes Mr. Abagnale has undergone since his early life as a ‘master check forger’, to prisoner oversees, to FBI Consultant, to family man and consulting expert on fraud. Most of that article centered on his role as husband and father and the differences that a strong parent-based family can make to children growing up in today’s society.
Mr. Abagnale was a keynote speaker again at this year's Scaling New Heights, but this time his presentation was a forerunner to his breakout sessions on crimes of fraud and fraudulent activities impacting small businesses. So in my ‘take away’ I will summarize various points from Mr. Abagnale’s presentations.
Even in this 'high tech world' of electronic banking, credit cards and such, check and identify fraud are some of the most serious financial crimes in America. Check fraud amounts to in excess of tens of billions of dollars each year, and identify theft totals around twenty-five billion dollars impacting almost 17-million victims.
Check fraud represents 45% off all payment fraud losses, even more than credit card, ACH fraud and wire fraud. More than 50% of businesses still issue checks in the United States, so it is doubtful that check fraud’s impact will change very soon. In 2014 the most prevalent method of check fraud consisted of physical alteration of the MICR line on checks. That is the encoded information at the bottom of the check which is scanned to identify both the issuing bank and checking account number of the issuing party (be that individual or business).
More than 50% of check fraud attempts arose out of physical alteration of the ‘Pay to the order of (name)’ or altered check amounts (in 37% of all cases). High security checks, such as those designed by Mr. Abagnale for Intuit, would have precluded these types of ‘alterations’ check fraud.
Beginning with the IBM Selectric Typewriter that offered self-correcting carbon ribbon, the carbon ink applied to checks was easily removed using a sticky tape, exactly like the lift-off tape included with the carbon ribbon. Even laser printers which use ‘toner’ create characters which can be easily removed using this lift-off method because the toner simply sits on the top of the paper (unlike old ‘fountain pen ink’ which sank into the paper.) Once the information is removed, a ‘signed’ check was waiting for the new information forgers wanted to post to the check. Very little was done to alter this form of fraud until ‘security characteristic checks’ began appearing on the market. Those committing check fraud became more adapt over time, and that trend still continues today.
Check fraud prevention now begins with ‘better checks’. High (truly high) security checks are a first line of defense designed to reduce check fraud that eliminates the ability to ‘lift’ information from printed checks so that they can then be reprinted with new information. Mr. Abagnale has designed checks with as many as 16 safety features that virtually eliminate the typical forms of check fraud. These safety features include a special controlled paper stock, toner anchorage, chemical sensitivity, copy void pantograph, chemical reactive ink, fluorescent ink, fluorescent fibers, microprinting, thermochromatic ink, fourdriner watermarks, high-resolution borders, prismatic printing, explicit warning bands, chemical wash detection, sequenced inventory control numbers and laid lines. Mr. Abagnale said of this type of check, “After years of designing checks for Fortune 500 companies and major banks, I designed these checks to allow individuals, and small businesses, to protect their checking accounts.”
Let’s take a more in-depth look at just a few of these security features. Most checks are printed using laser printers, to prevent laser checks from being altered, it is essential that the laser toner bond to the paper, this requires check stock with ‘toner anchorage’ (an invisible chemical coating applied to the check.) When a check treated with toner anchorage passes through a hot laser printer, the tone actually melds and bonds the toner, chemical coating and paper into a fixed image that cannot be scraped off or lifted from the check.
Another security feature is ‘Secure Seal’ image survivable barcode technology that involves an encrypted barcode on the face of every check containing critical information such as payee, check number, routing and bank account numbers and more. This information is read by optical character readers which should then be compared with the printed information on the check.
Never use check stock from a supplier who also supplies completely ‘blank’ check stock to purchasers. This is an invitation for fraud since almost anyone with a laser printer can then reproduce check information they see and capture onto the blank check stock.
Microprinting is printing so small that it appears to the naked eye as a solid line or pattern; however, when magnified a word or phrase appears such as your business name.
In summary –
- Use high security checks with overt and covert security features, including explicitly worded warning bands. Such security features will help prevent most kinds of check fraud.
- Run, don’t walk to any opportunity you have to hear Frank Abagnale speak on any topic he discusses, but especially ‘family’ or ‘fraud’.