According to Ed Lindsey, a detective in the bunco-forgery division of the Los Angeles Police Department, "Fake checks are out of control." In California, the center of check counterfeiting activity, transactions involving fraudulent checks rose fivefold last year at Wells Fargo Bank alone. Now, before you begin to believe that this is just a California problem, you should know that Chemical Bank of New York reported a 50 percent increase in fraudulent checks last year, and the Minnesota Retailers Association reported that they believe the problem has reached epidemic proportions. The American Bankers Association says desktop publishing counterfeits are the number one crime problem facing banks. John McCullough of the Retailers Protection Association refers to the check creation product VersaCheck and asks, "How did this happen?" The proliferation of desktop publishing has created a new growth industry: the counterfeiting of virtually undetectable fraudulent checks. Banks and law enforcement officials say the cost to the economy could reach $1 billion this year.
While the problem is obvious for retailers, there may also be a problem for consumers, that may be even more dramatic. As checks are converted at the point-of-sale to ACH items, they will undergo the Modulus ten check of the account number and the Thomson file review of "real" bank transit and routing numbers. Even if they pass those tests and the check is drawn on an open account, these payments may still be debited from the account of a consumer who did not authorize the payment.
Check fraud is a problem that continues to defy resolution. Despite the advent of new technologies, products, and services designed to thwart check fraud, companies that write checks and banks that clear those items continue to lose massive sums of money to fraud.
Bankers are particularly troubled by an increased interest in desktop systems that are intended to be used by corporations to print checks in-house, complete with magnetic ink character recognition (MICR) lines. Desktop MICR printers can now be purchased for as little as $500.00.
Criminals are feeding their computers images of good checks drawn on good accounts. They change the date, the name of the payee, and sometimes the check number, and make dozens of copies of the fake check on a laser printer loaded with a magnetic ink cartridge and check paper that can be bought at most stationery stores. While it has taken nearly 28 years to get electronic checks to the marketplace (see timeline on page 11), consumers may find that crooks take much less time to find their bank accounts.
