You Think Check Fraud Is Hard? Think Again!
Catch Me If You Can is, according to IMDB, “a true story about Frank Abagnale Jr. who, before his 19th birthday, successfully conned millions of dollars worth of checks…”
Must have been hard to pull that off, right? You would have to forge the signature, make sure you match the original check format and avoid any errors that would expose your fraud. Right?
A Closer Look
Let’s look at a typical company check validated with the bank.
Here’s an actual fraudulent check (with sensitive information redacted) accepted by the bank.
The fraudulent check is riddled with errors. It does not matter if the logo is missing. It does not matter if the company name is misspelled or if the address is incorrect. The signature does not have to remotely resemble the signature on file with the bank. Any generic check paper with generic security features would do just fine. The bank would go ahead and cash it.
Turns out, a fraudster only needs to get the bank name, the account number, and the routing number right. The account and routing numbers are printed using special MICR printers. These printers are available for as low as $200 on ebay. Blank Check Paper is available at stores for less than 10 cents apiece.
Over $2 billion worth of check fraud (see reference below) is committed every year. It is easy to see why.
Banks have a system called Positive Pay to address the problem of check fraud. Let’s look at an example of how positive pay works. Most companies today print their checks using MICR printers. The check printing system prints the payee name, the check amount, the check date, the bank account number, and the routing number on the blank check paper. As part of the Positive Pay system, the company sends these details over to the bank, typically, right after printing the check. When the actual physical check is presented to the bank, it will match the details up and reject checks that do not match.
Below is an example of a positive pay processing system that sends out files containing check details to the bank at regular intervals.
Companies that do not implement a positive pay system are open to attack by fraudsters. The positive pay system, implemented correctly, is very effective and can save a company hundreds of thousands of dollars every year.
$12 Billion Worth of Check Fraud
12 billion is a lot of money and according to the FBI that is the estimated cost of check fraud committed per year…
Special thanks to Ashiek Imamsha for fleshing out the design in great detail and leading the team to help deliver this for the company.