The odds are it’s a laser check, and that’s just what forgers want. Just about every company in America, no matter how big or small, has moved from a matrix printer to a laser printer to disperse payroll and accounts payable checks. It’s faster, it’s cleaner, and it’s more efficient. With a laser printer, these companies can buy blank check paper, lay it in the cassette, and actually print the entire check—the company logo, the bank’s logo, the routing numbers, the account number, even the signature.
Now a laser printer is a non-impact printer—in other words, there’s no ink put into the paper. A matrix printer shoots ink into the paper. A jet printer puts ink into the paper. A typewriter puts ink into the paper via the ribbon. With a laser printer, toner is applied to the paper by heat, so the toner is sitting on top of the paper. Which is why we call it non-impact printing.
Years ago, when criminals stole, say, a thirty-thousand-dollar check made out to a construction company, they would bring it to a forger and explain that they wanted the forger to get rid of the payee name, so they could type in a new name and cash the check. Fine, the forger said, it’ll be done in two weeks. The criminal was aghast. Two weeks? The forger said, hey, you’re asking me to move ink off of paper. He had to extract the ink using bleaches, solvents, acetones, hydrochlorides, polarized chemicals, non-polarized chemicals. He had to take each letter, and do it slowly, or else the check would become abrasive and you’d notice it.
With today’s laser checks, criminals have devised a new methodology. They take a piece of Scotch tape—the gray, cloudy kind that doesn’t rip the paper when you peel it off—and put it over the dollar amount and over the payee name. They use a fingernail to rub it down hard over the check, and then lift the tape off. The dollar amount and the name and the address will come off on the tape. The toner attaches to the Scotch tape and gets pulled from the fiber of the paper. If there’s any laser toner residue left over, a little high-polymer plastic eraser will take care of that. Sometimes forgers use dental picks, razor blades, or dry ice to remove the toner, but Scotch tape works quite nicely.
People are shocked when I tell them this, and then they go back and try it and sure enough that’s what happens. So any idiot can take a strip of tape and remove the nine dollars off a check and type in nine thousand or ninety thousand.
And that’s what the forger collecting the mail does. He uses tape to remove the payee’s name and address, and of course, the amount. He types in his name and the amount he wants, and deposits it at the bank. Sixty days later, the construction company that was supposed to get the check calls the payer and says that it hasn’t gotten its money. The payer calls the bank, but it’s too late. The money is long gone.
It’s that simple, because we make it that simple.
REVENGE OF THE SCIENCE GEEK
Forgers must have all had chemistry sets as kids, because another thing they love to do is to chemically alter checks. It used to be that the only chemical banks had to worry about was bleach. If banks used bleach-sensitive paper, they’d be protected. Today no forger uses bleach. Instead, all sorts of simple chemicals, like acetone, are used to modify checks. What’s the product of choice from which to get acetone? Nail polish remover. It’s 99 percent acetone.
If someone mails me a check today for nine dollars, but they’re a Fortune 500 company and I know that they have a bit more than that in the bank, I do a little chemistry experiment. I take that check, put Scotch tape over the signature of the controller, put tape on the back of the check where the signature would be on the front, lay that check in a cake pan, take some nail polish—no other ingredient—and pour that bottle of nail polish over the check. In a matter of seconds, everything that was put there by a typewriter, laser printer, jet printer, matrix printer, ballpoint pen, or flair pen is off the check. Because acetone removes anything that’s not a base ink. So the company’s logo, the bank name, the check number, and the borders of the check will stay. But anything that’s typed on or printed on by a laser printer disappears within fifteen minutes. It’s called washing the check.
I take the check and dry it with a blow-dryer. I remove the Scotch tape which prevented the acetone from getting into the controller’s signature. What’s left is a nice dry blank check signed by the controller of a Fortune 500 company. I call the bank that the check is drawn on, and ask, “Would this account clear a check for twenty-thousand dollars?” “Oh, sure, the funds are available,” I’m told. I stick the check in the typewriter, fill it out for twenty-thousand dollars, go down to the bank, they check the signature, and they give me the money.
A couple of years ago, four thieves cruised around the more prosperous neighborhoods in South Bend, Ind., as well as communities just over the border in Michigan, looking for mailboxes that had their flags up. The guy riding in the passenger seat opened the boxes and sifted through the outgoing mail. When he found someone who had paid their telephone bill or electric bill, he removed those checks from their envelopes and took them. The thieves washed them in nail polish remover, blow-dried them, filled in new names and much higher amounts, and cashed them at local banks. This mailbox caper goes on every day all over the country, usually near the last day of the month when the odds are best of finding checks. Since people generally leave outgoing mail in their mailbox before heading to work, criminals will steal checks in the morning, wash them, and cash them by the afternoon. A lot of the check washers are drug addicts. The same chemicals that they use to cook their drugs, they use to wash checks.
HOW BUYING TIME BUYS YOU MONEY
Often a forger needs to buy time to get away with passing fraudulent checks, and so he resorts to some other little modifications. First of all, every good forger alters the numbers along the bottom of the check. Inside a set of brackets is a nine-digit number. That’s the bank’s routing number, and it’s like a zip code. When you cash the check, that number allows the check to be sent back to the bank where your account is. The first two digits of that number signify the Federal Reserve Bank in your jurisdiction. For example, New York would be 02. There are twelve federal reserve banks scattered around the country; like a dozen eggs, there are a dozen banks. The numbers are assigned from east to west: for instance, 01 is Boston, 03 is Philadelphia, 08 is St. Louis, and 11 is Dallas.
Let’s say you have a company check from a bank in New York and the company is in New York. You can color-copy fifty of them. That’s quite simple. But if you start cashing them today at supermarkets in the New York area, by tomorrow the bank knows about it and the company will complain that these are forged checks. They call the police, and they send out a bulletin that you’re out there passing bad checks. How many places could you get to in a day? Ten? If you got on the New Jersey Turnpike with all its traffic, you wouldn’t get to the next exit.
But what if I drop the “0” and replace it with a “1”? When I cash the check, the clerk at the courtesy booth at the supermarket will look at the name of the bank and recognize that it’s a New York bank, so it’s a local check and he has no problem cashing it. But when the store deposits the check, by changing that number, just as if I had altered a zip code, I force that check to go all the way across the country to Hawaii to clear. When it gets to Hawaii, someone notices that the routing number is incorrect and puts a white strip called a Lundy strip across the bottom of the check over the old routing number and sends it back. But by the time that happens, two weeks will have passed. So I have fourteen days instead of one day to wander all over New York cashing bad checks. Forgers live on the theory that stall creates float and float equals profit.
WHAT TO DO
I always train people to know their Federal Reserve code numbers. If a teller in New York sees a New York check, that should have 02. If she sees 12, that tells her she’s looking at a forged check.
Any government check always has as its routing number, “000000518.” Forgers who forge government checks remove the first three zeroes and encode the check with the code of a bank in another state.
That way the computer treats the check as an ordinary business check, and routes it to a destination other than the U.S. Treasury.
IN ADDITION, BE SUSPICIOUS IF . . .
Most forged checks don’t have perforated edges. Real checks do. The only exception to this rule are United States Government Treasury checks. Forgers could create checks with perforated edges, but few bother as it’s expensive. When forgers buy check paper, they usually buy standard 81⁄2 x 11 sheets. They print out three checks on a sheet of paper and then cut them apart. When you’re handed one of their checks, there is no perforated edge anywhere on the check. It’s smooth on all four sides. That’s usually a dead giveaway that it’s a forgery.
Most forgers don’t use magnetic ink to do the routing numbers. It’s not because they aren’t able to. Anyone can go into an office supplies or computer store, and buy a magnetic ink cartridge for their printer. Forgers don’t do it because of the float. Meaning, if I put magnetic ink on the check and cashed it at a grocery store, the bank computers would read it overnight and reject it. But if I use regular blank ink, the computer in the clearing house can’t read it. The next day, the check will have a Lundy strip put over the routing number. They’ll reencode it with magnetic ink, but they’ll still use the routing number that I put on the check. It’ll still go to Hawaii, but now I’ve bought two more days. If you’re passing six- hundred-dollar checks and you’re doing ten a day, that’s twelve thousand dollars more profit.
DON’T KEEP IT SIMPLE, STUPID
One of the main reasons forgers are so successful today is because we give away so much information. Businesses commonly establish an M.D.A., or maximum dollar allowed amount, for their checks. That puts a cap on the amount a check can be written for. A company, for instance, might set up its checking account with instructions that checks are not to exceed $1,500. The bank will lock that into their software, and if a check comes in for $1,500.01, it will reject it. It’s a great feature, except many companies print those instructions right on every check: “Not valid over $1,500.” That tells every forger, if you’re going to forge this check, you better stay under $1,500. Why are you telling the forger how to defraud you?
Or a forger will pick up a check that says right on the face, “Two signatures required on checks over ten thousand dollars.” He’ll simply make sure he puts a second forged signature on the check.
Here’s another way that companies unwittingly assist criminals in robbing them. If you look at the annual report of any Fortune 500 company, on page two or three is the signature of the chairman of the board, the chief financial officer, the treasurer, the controller, all in camera-ready art. That’s where most forgers get their signatures for fraudulent checks, straight out of annual reports. A forger digitizes that signature, puts it on a check or letter of credit, and he’s in business. Your business.
When you prepare an annual report, put in a picture of the officer, put in the name of the officer, and put in the title of the officer. But don’t put in the signature. If you feel some obligation to show a signature, have an artist do a rendition of it rather than the true signature. If you do include the real signature, that signature is going to show up on a check that you won’t be happy paying.
Except on large checks, what’s remarkable is a forger doesn’t even need a signature anymore. On most checks, banks don’t bother looking at signatures, because everything is automated. Banks process 69 billion checks a year, and nobody really sees most of those checks. Banks practice “selective check inspection,” whereby they set a limit below which they will clear checks without examining their signatures. It’s rare nowadays for a major bank to look at any check for less than twenty-five thousand dollars. These checks whisk through a high-speed bank check sorter at a rate of two thousand items per minute, or forty checks a second. When the checks go down the sorter rails, they’re traveling at a speed in excess of four hundred miles an hour! The machines could do it quicker, but the checks would catch on fire.
Thus, if the check is under a designated amount, no human eye looks at the signature. If I scribble an “X” or write “Elvis Presley” on a one- thousand-dollar check, or don’t sign it at all, the check is still going to clear the bank as long as the funds are in the account. “Dateline,” during its report on check fraud, had no difficulty cashing small checks signed by “Porky Pig,” “Bugs Bunny,” “Attila the Hun,” and “Bill Clinton.”
On those checks, you can’t fault bank employees for missing suspicious signatures. But you can on higher amounts. At many institutions, there are rules for when someone from the site review area must verify signatures. At most community banks today, it’s $5,000. At most mid-sized banks, it’s $10,000. At the nation’s top fifty banks, it’s $15,000 to $25,000 before any human being in site review looks at that check. But here we run into another problem: there’s not much emphasis on training anymore. Years ago, for instance, every city used to have a chapter of the American Institute of Banking, which was the educational arm of the American Bankers Association. When banks started to merge and began to create multiple branches, however, bank managers said, “I don’t want to send my teller out to some training program that I’m not controlling, so I’ll train my own tellers.” A lot of banks teach the teller how to handle all the money in the window, but don’t tell them anything about how you recognize a counterfeit bill or how you recognize a fraudulent check. And smaller banks simply don’t have the resources to train their personnel. New hires get trained by whoever is standing at the next window. What that person doesn’t know, new tellers will never know.
DON’T GET YOUR WIRES CROSSED
When someone wants to forge a company’s check, one of the most promising ways that he gathers the pertinent information is by calling his victim and asking for it. When the company switchboard answers, he asks for the accounts receivable department. He tells them that he’s getting ready to wire the company some funds, and asks for the wiring instructions. He could call up any company in the world, and as soon as he says that he’s going to wire them some money, the company will tell him where it banks, on what street, in what city, what the account number is, and what the transit number is. What more could you ask for? What the forger is essentially asking is, how do I write drafts on your bank account? And you’re the one telling him. Ten years ago, you had to corner someone in the parking lot and bribe him to write down that information on a piece of paper. Now you can get it for free with a simple telephone call.
WHAT TO DO
Obviously, any company getting wires every day has to give out the information over the phone, in order to allow people to electronically transfer money to its accounts. But there’s a way to prevent this kind of fraud. All you have to do is open up what’s known as a non-negotiable incoming wire account to receive your wire transfers. So when people call up and ask for that information, that’s the account you give them. Funds that come into that account by wire can’t be withdrawn, can’t be taken out verbally, and can’t be taken out electronically. The only thing you can do is put money into the account. Those funds are held there until the end of the bank day, at which point they’re moved to the account that you write checks on.
THE BUCK STOPS WITH YOU—SO YOU’D
BETTER GET THE CHECK RIGHT
In the old days, the bank was entirely liable if it paid a forged check. At that point, companies would say, well, I don’t care about my checks. If somebody forges a check, I’ll catch it in my audit, take it down to the bank, and they’ll give me my money back. And if they don’t, I’ll find another bank to do business with.
Because of changes in the law, it doesn’t work that way anymore. If the bank can prove that you were negligent in any way, then they don’t owe you the money. Say you work in accounts payable and asked a clerk to cut you a check for $63,000 to pay an invoice. The clerk cut the check and then brought it to you. It was five o’clock, time to go home. You were going to mail it with some papers, but you say, oh, I’ll just do it tomorro
w. So you put it all in your out box and go home. The janitor comes in, takes the check, cashes it, and it clears the bank. You ask the bank for your money back. Forget about it. You were negligent in leaving the check lying there, and your negligence led to that forgery.
Due to the shift in liability, businesses need to make their checks more secure. There are an array of security features to do just that. I do a lot of check designing, and I advocate the use of a technique called layering, in which a number of features are added to the same check. Why? Because different protection features respond differently to fraud methods. By combining several features, attempting to circumvent one security feature can enhance the protection provided by another.
WHAT TO DO
First of all, you need to use a check that’s difficult to forge or alter. Too many companies just use that familiar green or blue basketweave check paper, because it’s the cheapest. The companies run it off on the laser printer and they have no controls at all on the paper.
To guard against forgers who use chemicals to alter checks, you need to order chemically sensitive paper. You have to ask the printer, If someone touches it with bleach or ink eradicators, what’s going to happen? Good paper stock is sensitive to at least nineteen chemicals—chemicals like bleach, acetone, solvents, and hydrochlorides. Whenever these are used to alter a check, the word “void” appears in the background of the paper in three languages, English, Spanish, and French. The word should just appear right from behind the paper as soon as you touch it with any of those substances. At the very minimum, the check should change color. It should go from a blue check to a green spot or a brown spot on the check.
So if someone is issued a check and tries to chemically alter the amount, he’s out of luck. He can’t go back to you and say, “Look I tried to forge your check and this void showed up all over.”
The Art of the Steal Page 5