DDA: Banks: Start Outsmarting Check Fraud Criminals

Check fraud is a persistent thorn in the side of bankers. And while no one will own up to exactly how much money is being lost to check fraud, most experts agree it's a multi-billion dollar problem for U.S. bankers and their customers.

What makes check fraud a particularly troubling problem-and a potentially worsening one, experts note-is the rapid proliferation of relatively inexpensive hardware and software that allow crooks to generate near-perfect counterfeits of checks and identification documents needed to negotiate these checks. Before members at a Congressional panel last month, Charles L. Owens, chief of the FBI's financial crimes section, noted: "Today's computer technology has made the counterfeiting of checks relatively simple." He estimates that more than 1.2 million worthless checks are accepted for payment each day by U.S. banks and businesses, and that more than 50 percent of those items are the work of professional and organized crime groups.

Now banks are turning the tables on check fraudsters, deploying technology to help ferret out bogus checks, and, in some cases, creating new revenue opportunities in the process.

Take the case of ultra violet (UV) technology. Some banks are encouraging customers to use checks that have been coated with UV ink, which can then be read during the processing cycle using check reader/sorters equipped with special UV lights.

United States Check Co., Inc., of Washington, DC, came up with the idea and began shopping it around about a year ago. Now, NCR Corp., of Dayton, OH, is incorporating the technology into its medium-speed check transports, and a handful of banks have begun using UV checks in select applications, like payable through drafts, with an eye toward expanding usage.

The technology, observes Chase Manhattan Bank vp Chris Dowdell, is superior to most other methods of identifying bogus checks. "We have found that when you look at these documents, any alteration done in the UV field will show up from across the room on a (computer) screen," says Dowdell.

Banks interested in imaging checks also can save money using UV technology, since only those "snippets" of information coated with the ink need be captured, stored and sent to customers. In addition, says NCR avp Joe Kniceley, banks can tailor information captured to suit customer needs and realize a host of data mining opportunities using UV snippets.

-murphy tfn.com