Mr. Abagnale was the subject of the best selling book, “Catch Me If You Can” and the author of “The Art of the Steal”. I shall review the second of the two, “The Art of the Stea”l, specifically, check fraud.The book starts out with a story of a young woman who had her identity stolen. Her social security number, address and phone number with her driver license were all used in the purchase of a new truck, several thousands in credit cards charges, and even a warrant for her arrest for marijuana.
Mr. Abagnale had passed over $2.5 million dollars in bad checks through out all fifty states and in twenty six countries, all before he was of age to drink. He had the “distinction” of becoming one of the most hunted criminals by the FBI.
His was caught by the French police when he was 21 and spent six months in a French prison, where he was extradited to Sweden and served another six months for forgery. Afterwards he was turned over to the authorities in the United States. He was sentenced to 10 years on each on seven counts of fraud and two years on an escape charge.
Upon being released after serving three years of his sentence he was granted parole and released. He secured meaningful employment, which he excelled in but was fired once the companies looked into his past. Unable to find work, Mr. Abagnale went to a bank and told them he could teach the employees how to detect fraud. That was the beginning of his new career that is now outlined in the above.
It is estimated that business lose over $400 billion dollars a year from fraud of one sort or another. One third of this is from embezzlement, employees stealing from employers. Of the 1474 arrests for forging in 1998 there were 122 convictions and of that only 26 were ever sent to jail.
Check fraud losses are estimated to exceed $20 billions a year. Visa and Mastercard losses are less than 10% of that. American banks and credit unions returned $27 million of bad checks. Mr. Abagnale sites several errors in the system from being able to open an account with a stolen drivers license to ordering your checks and having them mailed to your house. In every other country you must pick up your checks at the bank. While waiting for the checks to be printed the bank has run a background check, and credit bureau report, employment, etc. If you were required to pick up your check at the bank, it would stop the fraud. Deposit slips have your routing number and checking account number on them, along with your name and address. This information can be used to order more check but then when asked where to ship, the person can say a P.O. Box and ten days later they have your checks.
A few years ago a writer submitted an article to Forbes magazine and was given a check in the amount of $333.33. He put in on his computer scanner, found the fonts that matched the check; he removed the amount and typed in the new amount. He went to the stationary store and bought check paper and printed out his new check in the amount of $30,333.33, which he felt was more appropriate for his work. He deposited the check and was told there was a five-day wait period. He waited twelve and returned to bank and took out all but $100. He then submitted a new story to Forbes about check fraud. They printed the fake check on the cover! Scanning is one of the most popular forms of forgery and one of the most simple.
Another example is around tax season. You make out your tax return with your payment to the IRS. The return is put in the mailbox to be pick up and it is by the thieves. The IRS is changed to MRS and Smith is added. Your check in now gone and you still owe the IRS. Double taxation!
Almost all companies use laser printers to print checks. Criminals have devised a new method to get the ink out. They take a piece of grey Scotch tape and put it over the dollar amount, then rub with a thumbnail or hard sharp object. Lift off the tape and off comes the amount. This can be used to remove all laser printed information. I tried this at work on a check I had voided and it really works! A nine-dollar check could be changed to nine thousand dollars.
Another check scam that a criminal uses is to take payments out the mailbox, then put tape over the signature line, then put the check into nail polish remover. Any information that is typed on or is printed in laser will be washed away in 15 minutes. Blow-dry the check, remove the tape and they are left with a blank check with an authorized signature.
To stop check fraud Mr. Abagnale has the following suggestions:
Use a bank with Positive pay or Reverse Positive pay.
Maintain tight check security. Keep them under lock and key, restrict employee access and cleaning crew access. Examine new checks and keep checks in sealed boxes until needed.
Destroy all unused checks.
Use highly secure stock with at least seven security features. The best stock choices contain both overt safety features like watermarks and warning bands and covert features like micro printing and multi-chemical sensitivity.
When laser printing checks, issue multiple passwords to those responsible for check printing and use check paper with toner anchorage to permanently bond the toner ink to the check.
When typing checks use a 12 point font or larger. Forgers erase smaller type and replace it with larger type. Use fabric, single strike security ribbon, not self-correcting ribbons, which can be removed with tape.
Reconcile your checking account statement as soon as your receive it. Report errors to the bank immediately.
Separate responsibilities for handling checks. Reconciler should not be signers, and vice versa.
Use dual image numbering and inventory control numbers.
Use “void pantograph” which is printed in the background of a check.
Using the tools suggested by Mr. Abagnale, Imperial bank went from a $3 million dollar a year loss in check fraud to $120,000, a 96% decrease after just three years of using the new designed checks.
The Art of The Steal goes on to list 9 more chapters of cons, frauds, and scams. As the bookkeeper in a Star Valley business I want do protect my employer from fraud by following proper internal control procedures. Now if I could just control the petty cash! But wait, is it lunchtime?