That's why many distributors consider visible (or "overt") security features essential. Such features include bleedthrough numbering, warning bands, prismatic foil, step-and-repeat backgrounds, prismatic printing and holograms. (For more information about these and other features, visit DMIA's members-only, online Solution Center at www.DMIA.org. The site includes a mini-web called "Document Security.") By combining features and understanding clients' needs, distributors can set up layers of defense against fraud.
Consultation Yields Clients
End users who have experienced fraud make it a priority to find distributors who secure documents. But forward-thinking distributors don't sell only to customers who have been duped; they seek and remedy problems before they occur. Many businesses are still in the dark when it comes to document security. Consultation can lead to new clients.
Robert Elliott, president of Graphics Exchange Inc., a distributorship in Falston, Md., called the state treasurer's office in Maryland a few years ago. "I just wanted to ask them if they thought their checks were secure," Elliott says. The question intrigued the head of administration, who wanted to use the state office's new laser printer to handle a check run. Elliott pointed out that laser printers severely reduce the effectiveness of microprinted lines, and he was invited to analyze the state's check security. "In those situations, it's important to act as a consultant instead of a guy who just wants to sell something," Elliott says. "Instead of immediately talking about what I could provide, I just sat back for a while and listened."
The state's head of administration wanted a distinctive, laser-printed, 4-color 81ˇ2 x 11-inch check that included a perfed section detailing the state's direct deposit program. "And he told me, 'I don't want any wasted security features,'" Elliott says. Elliott knew the Uniform Commercial Code, a comprehensive law governing commercial transactions, says companies can be held liable for check fraud if they don't show "ordinary care" in trying to prevent it. Basically, business owners must be able to show they've taken reasonable actions to safeguard their companies' checks. This includes, but is not limited to, adding security features. Elliott often tells customers that their checks aren't secure unless they "can stand in court, look at the judge and say, 'I did everything I could to make the checks safe,'" he says. "Most people don't realize that, unless they can do that, check fraud [might be] their own fault."
Many distributors who sell security documents also encourage clients to review their bank statements as soon as they arrive, notify their banks immediately when a fraudulent check is discovered, store checks in a secure environment, divide responsibilities for check functions among employees, institute controls over their accounts payable and payroll functions, and conduct regular audits of their check control duties. (See "7 Tips for Selling Security" on page 76.) Coupled with security features, these business practices can minimize a company's liability.
Elliott supplied the Maryland state treasurer with 4.5 million checks on chemically reactive paper that stains brown when tampered with, a step-and-repeat image on the back, warning notification on the face and a custom image of a cloud that partially hides an image of the state flag. The client reordered another 4.5 million checks, and Graphics Exchange got orders for annual reports and other commercial printing projects.
When pitching security projects, Elliott suggests as many overt features as possible. He says criminals are less likely to forge documents that have visible deterrents, and people who verify the documents' validity are more likely to recognize fraud. "What good is it when a person catches fraud after the fact?" he says.
Preventing a Serious Prolem
According to the National Check Fraud Center, check fraud is among the fastest-growing problems affecting the nation's financial system, producing an estimated annual loss of $12 billion. Total check fraud perpetrated against commercial bank accounts reached $4.3 billion in 2001, almost twice the $2.2 billion in 1999, according to the 2002 ABA Deposit Account Fraud Survey Report, published by the American Bankers Association.
Every day, disgruntled employees steal and alter checks, scalpers duplicate event tickets, and shoppers change the value of gift certificates. Armed with increasingly better color copiers and desktop publishing systems, millions of "point-and-click" criminals now have access to technology that replicates documents quickly and easily. And they're striking on multiple fronts: In May 2002, the Federal Deposit Insurance Corporation (FDIC) published a special alert when the Denver County Vital Statistics Office reported missing 2,000 blank Colorado birth certificates, 305 City and County of Denver death certificates, and an electronic copy of the city and county's seal. In June 2002, the FDIC published another alert after counterfeit cashier's checks were drawn on eight financial institutions in Illinois, Florida, Massachusetts, Tennessee and California.
That's why distributors concentrate on providing remedies before fraud occurs. One remedy is telling customers about positive pay, a cash management service that allows a company to send an electronic file to its bank to list checks issued. The bank matches the checks (as they are cleared through the item processing area) to the file. The bank tells the company the number and amount of each check as it appears. The service is designed to catch checks the company didn't issue, but have been drawn from its account. Positive pay also can alert businesses to incorrect amounts for checks that have been altered. If fraud is found, the bank will return the check unpaid, and the counterfeiter can be caught. In June 2003, Pittsburgh-based Mellon Financial Corporation said it had prevented more than $1.6 million in potential check fraud during the first 18 months of its new positive pay system. (Its largest confirmed altered payee item totaled more than $745,000, and the average detection was nearly $60,000.)
Another remedy distributors recommend is informing customers that negotiable documents should be kept in secure areas. Boxes should remain sealed until ready for use, and mechanical signing equipment should be kept in secure areas away from blank checks. Distributors shipping security documents shouldn't label cartons with words such as "checks," "gift certificates" or other terms that may tempt thieves. It's also a good idea to secure cartons with security tape, which customers should check for tampering when cartons arrive.
Selling a Unique System
Alfonso Guerra Jr., vice president of sales at Miami-based distributorship Printech, has sold document security systems to clients in Anguilla, Barbados, Ecuador, Chile, Trinidad and dozens of other countries. The company, which Guerra's father founded in 1981 as a distributorship selling commercial printing, forms and other business printing, develops and markets complete on-demand check printing systems with MICR technology.
"We're a small outfit that prides itself on being flexible and technology-focused," Guerra says. Some of Printech's competitors are large national firms and global financial companies, but "we've learned over the years to stay ahead of changes and technologies," he says. In the mid-1990s, as the company noticed stagnant growth for multipart forms, "we decided to specialize in the area we knew," Guerra says. "We knew checks and document security and value-added solutions."
Printech's system is composed of its proprietary, Windows-based CheckPlus® software; secure MICR laser printers; certified MICR toner cartridges; and security check stock that includes fluorescent fibers, watermarks, chemical reactivity, microprinting, warning bands and Toner Grip™ (a surface treatment that yields greater toner adhesion to thwart forgery attempts). It has installed the system for hundreds of clients in the financial, insurance, manufacturing and health care industries.
Printech's system processes data from companies' enterprise resource planning and financial applications and converts them to MICR-encoded laser checks, complete with signatures, bar codes and anti-fraud protection. It eliminates common forms-handling steps such as separating checks and signing them. The distributorship's clients can load checks on a folder/ sealer and convert them to outgoing self-mailers.
The software is segmented into three modules--CheckPlus® CFO, for firms and organizations printing payables and disbursement checks; CheckPlus® Financial, for banking clients; and CheckPlus® Ultra, which enables businesses to pay vendors electronically via the Automated Clearing House network. The software is compatible with existing applications and includes multiple levels of security, including encrypted databases, password protection and PIN codes.
Guerra says user benefits include elimination of preprinted checks, cost reduction, protection against check fraud, increased productivity, remote check printing, internal audit controls, automatic signature management and more control over the check-printing process. "The real advantage is peace of mind," he says. "Companies like to have a complete system that's guaranteed to perform." The system is geared for firms that generate checks often and on demand.
Darin Painter is managing editor of Print Solutions. Email him your comments at dpainter@PSDA.org.
Go Online for More
Visit Print Solutions' award-winning web site at www.printsolutionsmag.com and click on "Print Solutions Web Exclusives" for links to eight web sites with information and statistics about document security and check fraud.
7 Tips for Selling Security
Tell your customers about positive pay systems and that negotiable documents should be kept in secure areas where access is limited. Here are seven other tips:
1. Find out how documents will be distributed. Certain documents, such as immigration papers and stock certificates, require more extensive protection than others. The point of acceptance can determine what types of features you should incorporate. It's easy to add black lights to the entrance of an arena or nightclub, making fluorescent inks a popular feature on tickets or passes accepted in those settings. A retail operation issuing gift certificates can train all cashiers to look for certain features, but a manufacturer that issues rebate checks can't communicate the checks' features to every bank in the country.
2. Show instead of tell. Many small-business owners believe they're less likely to become fraud victims because they don't generate millions of dollars, but any company that issues checks is vulnerable unless it takes precautions. Shed light on the problem and its ramifications by circulating articles about fraud from local and national newspapers. Mention instances of fraud or fraud statistics in your company's newsletter and web site.
3. Visit local banks and help educate them. Different banks have different methods for checking security features. Survey ones in your area to get a good idea of what main features they look for, and let your clients know that many bank officials are willing to speak about document security trends and advantages. Also, help clients educate banks. Provide customers with a draft of a letter to send to their banks on their company letterhead. The letter can inform banks of what security features the end user's checks include. Aside from assisting banks in identifying fraudulent checks, it also could provide companies legal protection should fraud occur.
4. Add descriptions to warning bands. Although many checks include warning bands to alert tellers to features, most simply state the features included: "The back of this document contains an artificial watermark." In addition to the initial statement, it could provide instructions such as, "Hold at an angle to view." Some warning bands begin, "Warning: Do not cash this document if...."
5. Choose a trusted supplier. Manufacturers that specialize in security features often provide samples distributors can use. It's important to choose a vendor that has a large supply of paper with built-in features. Ask your manufacturer how or why a certain feature actually works and what disadvantages it has. Print Solutions' 2004 Buyers' Guide lists security feature providers on pages 188 and 189.
6. Get past purchasing. Purchasing agents aren't the best security document prospects. People near the top of organizations often are more concerned about their companies' fiscal health. Good targets include loss prevention managers, controllers, chief financial officers, auditors or legal teams, accountants and marketing managers.
7. Learn about stock holograms with custom elements. When a document's perceived value is high, consider stock holograms. Custom security holograms can be produced only on expensive, specialized and technologically advanced equipment. While those holograms are better-known, distributors also can offer stock holograms with custom elements, such as etched imprinting or thermal imprinting of logos or text. Because they can't be replicated by color copiers, computer scanning equipment or analog or digital printing, security holograms cause counterfeiters to seek easier targets.
