The Proliferation of Desktop Publishing Fuels Check Forgery Epidemic

Strategic Insights -

The rapid advancement of desktop publishing has led to a new growth industry: the counterfeiting of virtually undetectable fraudulent checks. This nefarious activity has been fueled by the widespread availability of inexpensive personal computers equipped with sophisticated graphics capabilities. According to experts, the cost of check forgery to the economy could reach $1 billion this year. The rise of check forgery has become a significant problem, with the American Bankers Association labeling it the No. 1 crime problem facing banks.

Key Takeaways:

  • The proliferation of desktop publishing has enabled the counterfeiting of virtually undetectable fraudulent checks, with the cost to the economy estimated to reach $1 billion this year.
  • Payroll check scams are just one of the myriad check fraud schemes plaguing not only banks but retailers, with an increasing number of criminals cashing counterfeit checks in supermarkets, department stores, and other retail establishments.
  • In California, transactions involving fraudulent checks rose fivefold last year at Wells Fargo Bank alone, while in New York State, Chemical Bank reports a 50 percent increase so far this year.
  • Individuals and gangs are involved in check counterfeiting, with some using software programs to create fake checks from real accounts, while others use accomplices in banks to obtain good checks for counterfeiting.
  • The Los Angeles-based gang that was recently busted had an accomplice in a California bank who made photocopies of checks from large companies, which were then passed by "mules" in return for 20 percent of the take.
  • Banks are fighting back by installing check-reading devices at cash registers, using electronic databases of bad accounts, and implementing new security features on checks.
  • Despite these efforts, the cat-and-mouse game between banks and check forgers continues, with each side attempting to stay one step ahead.

Statistics:

  • 64 billion checks are written every year, making it relatively easy for crooks to steal one as a template.
  • 1.8 percent of $500 million in sales by Ames Department Stores in 1991 was lost to check fraud, which it expects to cut by half by installing check-reading devices at all of its 3,200 cash registers.
  • In California, transactions involving fraudulent checks rose fivefold last year at Wells Fargo Bank alone.
  • In New York State, Chemical Bank reports a 50 percent increase in check counterfeiting so far this year.
  • The Los Angeles gang, busted recently, had an accomplice in a California bank who made photocopies of checks from large companies, which were then passed by "mules" in return for 20 percent of the take.
  • $26,000 was cashed by the gang in one day on the account of Pay Less Drug Stores, $50,000 from Swiss Dairy, and $18,000 from Hilton Hotels.

Sources:

  • The Los Angeles Times
  • The New York Times
  • The American Bankers Association
  • Wells Fargo Bank
  • Chemical Bank
  • Ames Department Stores
  • The Secret Service
  • The Los Angeles Police Department