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Articles
Security Documents
On Guard!
Security documents help protect your
clients in duels against fraud.
BY SUSAN KEEN
Reprinted with permission from a 1996 issue of FORM Magazine.
General Financial Supply Inc., a manufacturer in Nevada, Iowa, sends packets to
distributors containing sample checks and security features to show end users. Recently,
one of its sample cashier's checks was fraudulently cashed despite security features,
including a colored background and pantograph. The check also had three 1/8-inch punch
holes above the signature line to designate it as a sample. The person who cashed the
check placed data processing labels over the front and back of the punch holes, made the
check out for $8,000 and cashed it in a Philadelphia bank.
"The altering of the check was so obvious. Who would accept that check?" says
Stan Klarenbeek, vice president of sales and marketing for General Financial Supply.
"We take it for granted that other people understand printing, but we need a better
understanding of how end users think and what they know. You can use all the
sophistication you want, but until the public knows what security features are and how to
recognize them, they're not going to work."
Herein lies the problem, say many industry pros. As cases of fraud become more
prevalent and publicized, printing manufacturers and paper suppliers have responded by
developing several features to combat fraud. Distributors also have jumped on the
bandwagon and are promoting document security. However, several industry pros say this is
where the line of defense breaks down. End users either don't recognize the value of
security documents or don't know how to verify that a document is legitimate.
Educating the public has been one of Rich Wahlberg's goals. Wahlberg, CFC, president of
Innovative Business Systems, Tinley Park, Ill., and seven other distributors hold seminars
about security documents for end users. They mail brochures promoting the seminars to
clients and prospects. During the 2-hour seminars, which are held at a Holiday Inn
Express, the distributors present information about fraud cases and provide details about
security features and liability for fraudulent documents.
Last spring, the distributors conducted two seminars for financial institutions,
encouraging them to add security features to their documents and train employees to
diligently check for security features in documents that pass through their banks.
Wahlberg also recently held a seminar for a local chapter of the American Records
Management Association, and he approached a local bar association about conducting one.
Wahlberg admits the response to the seminars and security features has been somewhat
discouraging. When he asked middle managers of financial institutions if they would like
him to hold a seminar for tellers, they declined. At the beginning of the seminar for
ARMA, he asked the 45 attendees how many were familiar with the Uniform Commercial Code
regulations addressing fraudulent document liability. Only two people raised their hands.
The UCC regulations place responsibility for forgery losses partially on bank customers,
rather than solely on the banks. Companies must show due diligence, or ordinary care, in
trying to combat fraud. One way to do this is by adding security features to negotiable
documents.
But Wahlberg isn't giving up. He and the other distributors he teams with are revamping
their seminars and marketing strategy. Wahlberg says the seminars are usually successful,
once he has an audience's attention. "Those who attend leave with a better
understanding of security features and their importance," he says. "And many of
the talks with attendees have materialized into orders."
Mark Staley would tell Wahlberg and other distributors that persistence pays. Staley,
president of Conmar Systems in Peachtree City, Ga., has delivered his message about
security documents through a dual direct mail and telemarketing campaign. Staley mailed
3,000 credit unions a package including a cover letter, a 2-color glossy brochure and
check samples with security features. The brochure covered statistics about fraud,
information about negligence and liability, and applications for security features. Conmar
also employs a telemarketer who makes follow-up calls to the credit unions. She asks if
they received the mailing and offers to mail the package if they did not or if they
misplaced it. She also reiterates the importance of adding security features to negotiable
documents. Staley says the telemarketer receives about two orders a day.
Selecting Your Weapons
According to Wahlberg, a candidate for security features is "any document that can
be altered for gain." These include, but are not limited to, checks and financial
forms, sporting and event tickets, gift certificates, licenses, titles of ownership,
warranties, diplomas, educational transcripts and legal documents. Depending upon the
application, there are several overt and hidden security features that end users can
incorporate in their documents for protection.
With the proliferation of fraud, made easier in a high-tech world by laser printers,
scanners and the like, it is more important than ever that documents be secure. Industry
pros agree that the more security features a document has, the better it is protected
against fraud and the better the end user is protected against liability in cases of
fraud. But no document can realistically incorporate every feature available. Distributors
need to choose among features depending upon the customer's need and the application.
One of the most common applications for security features is checks. "The factor
that is most important when choosing security features [for checks] is knowing how much at
risk an account is," says Karen Schenck, check fraud specialist for the John H.
Harland Co., Decatur, Ga., whose division, the J. William Co., sells through distributors.
"Most criminals choose high activity accounts where a fraudulent check could easily
pass through and get lost."
According to Schenck, features that deter the most common types of fraud for the least
amount of money include background patterns, artificial watermarks, microprinting, the
padlock icon and warning bands. Many manufacturers charge a few dollars per thousand
checks for features such as warning bands and microprinted lines, both of which simply
require them to place a line of text on the document. While features such as artificial
watermarks generally cost more, manufacturers usually charge a flat fee, so they may be
cost-effective for longer runs.
Holograms, heat reactive ink and prismatic printing offer a higher level of security
for high-risk accounts, says Schenck. But they also cost more, she says. Staley believes
some "highly specialized" features, such as ultraviolet or fluorescent inks,
"add sizzle, but aren't necessary" on most business checks. According to
Schenck, they are better suited for high-risk accounts and official documents, such as
birth and death certificates, stocks and bonds, licenses, titles and diplomas. Roger Buck,
CFC, agrees. "There are undoubtedly some documents out there that are highly sought
after on the black market," says Buck, director of national account sales for
Continuous Forms and Checks Inc., a Peachtree City, Ga., manufacturer. "These require
more security features than your average business check."
For typical check applications, however, many manufacturers say a combination of three
or four paper-based and printed security features is your best bet. Some paper stocks have
safety features built in. These features include brown stains (a bleach reactive chemical
that reveals alteration by turning brown), chemical voids (the word "void"
appears when a bleaching agent is applied) and special fibers. Printed features include
pantographs, microprinting, screens, step-and-repeat backgrounds, prismatic printing and
warning bands.
Some security features require the recipient of the document be trained to look for
them. These include microprinting, safety fibers (fine colored threads distributed
throughout the surface of paper), planchettes (colored spots distributed throughout the
surface of paper) and watermarks. If heat reactive ink is used, recipients must hold the
document between their thumb and forefinger to verify. The ink changes color due to body
heat. If fluorescent ink is used, the recipient needs an external device such as a black
light to detect the printing.
The application dictates whether or not these features should be used. For instance,
fluorescent inks may be suited for gift certificates and event tickets, where a recipient
can easily check for the feature using a hand-held black light. But a bank probably won't
have black lights set up at every teller's station. Similarly, an opaque backing or
microprinting wouldn't be the best solution for a document that must be verified in a
setting with low lighting, such as a restaurant or bar.
Rules for the Duel
"Security features are one of the hottest products we sell right now," says
Staley. To have success in this burgeoning market, try the following:
- Be proactive in generating new solutions for your customers. John Stockmann, president
of Gallery Business Products in Wantagh, N.Y., sells checks printed on security paper with
void pantographs, microprinted signature lines and warning bands. But he also researches
less common security methods and tries to present clients with new ideas. For example,
several of his international customers include a Code 39 bar code next to the MICR line on
checks. The bar code includes the same information as the MICR line. Stockmann is
encouraging some clients in the United States to adopt this dual method of security. He
also is studying heat reactive ink.
- Don't underestimate the obvious. With so many security options available, don't overlook
a feature that may scare away would-be forgers and counterfeiters. Adding a warning band
that mentions what security features are included in the document may send a message to
criminals. "A warning band on a negotiable document is like a big, red club on a car
steering wheel," says Buck. "Adding a warning band makes it less likely for
someone to commit fraud. They'll choose an easier target."
- Encourage clients to keep banks informed. Gregg Roth, vice president of Peerless
Business Forms in Metuchen, N.J., recommends that his clients go to their banks, show
officials the security features they've added to checks and urge bank employees to inspect
their checks for the features when they are processed. This not only lets a bank know the
customer is taking a proactive stance against fraud, but it also may help protect the
customer should fraud occur. Wahlberg tells customers to send bank officers a letter
saying they've added security features to documents and explaining what those features are
and how to look for them. He tells clients to keep a copy of the letter to help prove due
diligence if fraud occurs.
- Actively market security features. QPS Data-Forms in Du Bois, Pa., added security
features such as bleed-through MICR numbering, a microprinted signature line, security
paper and a warning band to its own checks. It printed extra checks with the word
"sample" on them to show to customers. The company also sends customers and
prospects a letter each December recapping the state of the business printing industry. In
1995, the letter discussed check fraud and the importance of security features.
- Offer joint training with your customers. "The real void in the industry when it
comes to preventing fraud still falls on the shoulders of the people receiving the
documents--tellers in banks and cashiers in retail stores," says Klarenbeek. He
recommends that distributors team up with clients and help train document recipients.
Offer video training for companies and banks with multiple branches or those with high
employee turnover that need continual training. Some manufacturers provide videos on
security documents that you may be able to use.
- Shift your selling approach. "It's not a product-oriented sell," says Staley.
"You have to sell people on the liability aspect. Security features are like an
insurance policy. You don't absolutely need them, but you better have them."
Susan Keen is assistant managing editor of FORM magazine.
Thanks to Libman Business Forms, Green Bay, Wis., for assistance.
Fighting Fire with Fire
Duplex Markets Program to Prevent Fraud
Check fraud is spreading like wild fire and costs banks hundreds of millions of dollars
annually. Unfortunately, many banks and firms are trying to battle the blaze after it has
raged. They include security features on negotiable documents to show that they took
reasonable measures to prevent fraud. They protect themselves against liability. One bank
in Chicago, however, is trying to stop the flames of fraud before they start. Northern
Trust Bank has detected more than $3 million in counterfeit checks since 1992 with the
help of a fraud prevention program developed by Backroom Enterprises Inc.
In June 1995, Sycamore, Ill.-based Duplex Products Inc. teamed up with BEI to market
the Check Fraud Prevention Program to financial institutions nationwide. It currently has
about 30 banks involved in the proactive program, which helps banks use their own
equipment and historical account data to detect fraud. For example, the program encourages
banks to use their computer systems to flag suspicious behavior. If a person makes a
sudden large deposit and the bank suspects the check is fraudulent, it can hold the check
while it investigates. The program also helps banks recognize patterns of criminal
behavior to single out suspicious checks before they are cashed. As part of a common scam,
for instance, criminals open accounts with a minimal amount of money. Then they wait a few
months before depositing a bogus check for a large sum of money. A couple business days
later, they withdraw the money, knowing banks are required to make cash available
promptly.
Duplex and BEI's roles are to act as consultants. As part of the program, they assess a
bank's exposure to fraud, then provide a 6-week installation and training program. The
program has the following five components:
- It utilizes a bank's internal demand deposit account (checking account) record-keeping
system to identify suspicious checks.
- It offers training to check inspectors (both tellers and behind-the-scenes employees who
clear checks). The program includes team incentives and rewards to employees so they share
in the program's success.
- It includes a structured reporting element so senior management is kept abreast of the
methods being used to detect fraud.
- It offers alternatives to the "positive pay" system for banks and companies
who don't have the capability to send register transmissions to banks on a timely basis.
- It includes an ongoing self-audit to provide periodic monitoring of the process.
Bruce Rasmussen, program manager for Duplex, says his company still advocates security
features, as long as they are used in conjunction with its prevention program. "It's
a one-two punch," he says. "Once you have checks with security features, you
have to know what to do with them." As part of that punch, Duplex encourages banks to
use it as their preferred print vendor. Rasmussen says using the same vendor and the same
security features consistently helps combat fraud. "We're beginning to see the signs
that the program is working. We're seeing detected checks," says Rasmussen.
"Unfortunately, it takes time."
Five Reasons Why Your Clients Should Secure Their Documents
Although the majority of Richard Bevan's clients are beginning to add security features
to their checks and other negotiable documents, some are still dragging their heels.
"Most people who say no to security features just don't like the idea of
change," says Bevan, owner of QPS Data-Forms in Du Bois, Pa. "They say they like
their checks just the way they are. They haven't been burned yet by fraud." Gambling
against fraud, however, is not a sound business strategy. If you have customers who are
reluctant to add security features, tell them the following:
- Security features may deter counterfeiters and forgers. "It's impossible to prevent
document fraud," says Rich Wahlberg, CFC, president of Innovative Business Systems,
Tinley Park, Ill. "But by adding security features to documents, you can deter it.
Chances are criminals will look for an easier target."
- They are difficult to duplicate. Covert features such as microprinting, artificial
watermarks and fluorescent ink are effective deterrents, offering strong protection
against copying and scanning. Keep in mind, however, that documents should include several
features for maximum effect.
- They enhance the image of documents. Every printed piece lends to the overall image of a
company. Overt printing techniques such as multicolor prismatic printing, holograms and
foil stamping not only help secure a document, but also enhance the appearance. Innovative
Business Systems sold a flour distribution company 2,500 accounts payable checks with the
company's logo foil stamped on them. Gift certificates, tickets and diplomas are ideal for
eye-pleasing security features.
- They help reduce the risk of liability in cases of fraud. "If someone wants to
forge a check or duplicate one, they will. But with security features, institutions are
able to show due diligence," says Mark Staley, president of Conmar Systems, Peachtree
City, Ga.
- The protection they provide is well worth the added cost. "Cost is not a
significant factor," says John Stockmann, president of Gallery Business Products in
Wantagh, N.Y. "A couple of my international customers have gotten hit by two or three
major forgeries for hundreds of thousands of dollars. Paying an extra $500 or so for
checks with security features isn't that big a deal for them." Stockmann estimates
that his clients pay approximately 10 percent more to add security features to their
checks.
Copyright © 1998 FORM Magazine. All Rights Reserved.
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