Check Fraud Grows, but Banks and Printers Battle Back

A HIGH-TECHNOLOGY war has broken out, and the battleground is a little piece of paper that millions of people use as a means of payment: the check.

While forgers and other con artists are on the offensive, companies that sell devices to combat check fraud are mounting a spirited defense. In the middle are consumers and bankers who bear the costs.

Check fraud is ``a time bomb ready to explode,'' says one banker. New printing and reproduction technologies, such as personal computers with scanners, color copiers, and laser printers, are increasingly affordable and available to thieves.

Used for centuries as a means of payment, checks are ``by their very nature open to fraud,'' says Bruce Brett, chairman of the check-fraud task force at the American Bankers Association (ABA) and a vice president of Signet Bank in Vienna, Va.

But now the problem has escalated. ``Twenty-five years ago a four-color press cost $250,000, and it took 12 weeks to make a plate. Today it takes 12 minutes,'' says Frank Abagnale, who conducts seminars on document security for Standard Register Co., a business documents company in Dayton, Ohio. Mr. Abagnale was once convicted of forgery himself.

Using inexpensive personal computers and laser printers, as well as scanners and color copiers, forgers can change a check amount or the name of the payee, or even design and print their own, Abagnale says.

A sour economy makes more people contemplate fraud, says Dennis duNann, president of Electronic Transaction Corporation (ETC) of Bothell, Wash.

Check fraud is a ``significant and growing'' problem, says Thomas Gazda, a senior consultant in imaging technology and document security for Arthur D. Little Inc. in Cambridge, Mass. ``It is very difficult to get reliable figures,'' he adds. ``Based on what I know and what I've heard, in the last four or five years, it could be growing at a rate of 30 to 35 percent.''

Commercial banks in the United States lost $568 million from check fraud in 1991, the ABA reports. It plans a new survey in February to update the figures. Check fraud includes forgery and kiting (opening multiple accounts and using the time it takes for new transactions to clear to cash checks not backed up by funds).

SOME companies are marketing an arsenal of products and services designed to battle check fraud.

Standard Register, for example, offers secure check-writing machines, special papers that reveal the word ``void'' when reproduced, and checks printed in elaborate and hard-to-copy fonts. Security measures such as these can add two cents to a check that costs three cents to produce, Abagnale says.

ETC, a subsidiary of Deluxe Corporation, the nation's largest check printer, offers another approach. It helps businesses avoid being taken through an on-line data base of known checking-account abusers gathered from retailers and banks.

It costs only a penny for a subscriber to see if a customer is a ``known bad check writer,'' says Mr. duNann, co-founder of ETC. The possibility of losing check-cashing privileges at any of the 200 large retailers that verify checks through the network also puts pressure on an individual to clear up bad debts, he adds.

Document security is an ``area that offers well-above-average growth potential'' to Deluxe and Standard Register, says Martin McDevitt, a securities analyst for Cleary, Bull, Reiland & McDevitt Inc. in Milwaukee.

Check security measures would need to be used at bank windows and retail counters millions of times a day. ``The capability exists to put from one to 15 security features on a check,'' Gazda says. ``The question is: Will the customer pay for it? And will the features be used in a handling environment?''

``The way we do transactions does not allow enough time to verify a document,'' he says. ``Invariably, when checks are accepted people are waiting in line'' and do not want to spend more time while a teller scrutinizes each check for warning signs.

Security measures are effective only against ``people who don't have the gumption for it [check fraud],'' Gazda says. ``They're not hard-core enough to not worry about being caught.''

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