Clarke American Joins Check Security Movement

Clarke American, the third-largest check printer in the United States, has announced its participation in a growing industry movement to combat check fraud.

The San Antonio-based company is incorporating security features in its checks in response to voluntary fraud prevention guidelines recently issued by the Financial Stationers Association, a Washington-based trade group representing the check printing industry.

Clarke American's announcement follows those made by Atlanta-based John H. Harland Co., and Deluxe Corp., St. Paul, which introduced checks with added security features Jan. 1.

Fraudulent checks are a growing problem that has been worsened by the wide availability of desktop publishing equipment and laser printing technology.

According to a 1994 American Bankers Association survey, those devices have played a major role in the increase in check fraud for several years.

The survey indicated 1.3 million cases of check fraud in 1993, up about 135% from the 1991 fraud level.

In addition, the survey placed 1993 check losses at U.S. financial institutions at $815 million, a 43.5% increase from 1991's $568 million of losses.

Color copiers and chemical alteration of checks are other major contributors to the problem, said Philip Martin, Clarke American's marketing manager for security products.

Clarke American's security program is designed to address these methods of fraud. One of its security measures is ImageSafe technology, which is designed to detect altered or counterfeit checks.

ImageSafe uses a special type of ink to print an image or pattern on the back of a check. The image disappears when copied, scanned, or exposed to solvents or bleaches.

Other security measures the company may provide include a security background that distorts or disappears if a check is photocopied or scanned, safety paper that reveals whether writing on a check has been altered, a watermark that can be seen when held to light, and invisible fiber and ink technology.

Clarke American has also introduced "photo checks," which carry a digitized photo of the account holder on the face of the check, to confirm that the check is valid for payment.

Such checks mirror an effort in the credit card industry to use photo identification to prevent fraud.

The Financial Stationers Association guidelines recommend a number of similar check security features to all check printers in the United States and Canada.

One such feature is "microprinting," which uses tiny words and letters that appear to be a solid line but which can be read only with magnification. Laser printers and photocopy machines cannot produce or reproduce microprinting.

Clarke American uses microprinting on the checks' signature line and will begin using the distinctive "MP" icon to alert consumers to its presence.

Other FSA features designed to help authentication of checks include a padlock icon positioned to the right of the word "dollars" on the check's front, indicating the presence of security features.

A warning box and padlock at the bottom of the back of the check lists the security features on each check.

The prevention of fraud is a particularly important priority for banks with $5 billion or more of assets. According to the ABA survey, 73% of the institutions in this category expect their fraud loss exposure from counterfeiting to rise this year.

This group reported a median of 210 cases of fraud per year, compared to a median of four cases per year at community banks.

Check fraud losses in 1993 were connected most frequently to retail accounts, and most losses to paying banks came from on-us items with forged signatures.

Check fraud also has an operational effect. Most banks devote some back- office employees to check audit and investigation functions. One in four large banks spent more than $1 million in 1993 on such efforts.

Bankers are buoyed by the fact that check printers are moving to prevent check counterfeiting, but many concede that the best way to prevent check fraud may be to move more transactions to electronic media.

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