Laying a Foundation For Check Fraud Prevention

The movie Catch Me If You Can, which features the life story of Frank Abagnale, a master con artist and fraud expert, could not have been released at a more opportune time. The fears of the American public have somewhat dwindled since September 11th, but the fear of identity theft and check fraud has begun to escalate. It seems as though we all know someone who has had his or her identity stolen.

Even though the film spans the '60s, and seems like a long forgotten past, it is still quite possible that con artists could get away with a series of similar crimes today. According to cbsnews.com, it is estimated that every 79 seconds a thief steals someone's identity.

Amcrin Corp., a provider of corporate and public criminal investigation systems, states that there is no single data source where an investigator can go to discover whether or not the same suspect is associated with multiple cases of fraud. Many Americans are under the belief that there exists a database network that houses all check and credit information, notifying authorities that a fraudulent check has been cashed. However, much to the chagrin of the American check-writer, there is not. In fact, there are even instances within the same bank system where each branch uses multiple internal databases to record check fraud.

The primary difficulty is that fraud information is not shared from corporation to corporation, bank to bank, or retailer to retailer. And the same is true across industries. Limitations in the sharing of fraud information have made it nearly impossible to track, investigate or catch these criminals.

Herein lies the problem; those committing check fraud are aware that data is kept in private data warehouses within companies and across industries, and they capitalize on that knowledge each day. In addition, technology that was created to prevent fraudulent crimes is more commonly used to commit them. Abagnale may have manually altered counterfeit checks, but today Internet-savvy criminals can print their very own "original" on real check stock and with Magnetic Ink Character Recognition (MICR) ink.

During a recent speech at Jonathan's Club in Los Angeles, Abagnale said, "Today, 60 percent of all transactions are still paid by check. The check is king...what many Americans don't understand is that many of those checks are no good."

Finding and implementing a solution to stop the $15 billion lost to check fraud each year is not simple. A national alliance spanning all U.S. industries is essential to catching fraudulent criminals. Yet, a national campaign is not in place.

So is it realistic to think that a national check fraud database will eventually surface? According to James Hudson, vice president of business development for Amcrin, that should be the banking industry's goal. But considering well-funded government entities such as the Immigration and Naturalization Service (INS) and the Central Intelligence Agency (CIA) don't share information, what chance do banks stand?

A good starting point for individual companies is to adopt internal information case management systems. Housing a system to manage workload and data for loss prevention, corporate security, compliance and anti-money laundering is vitally important. Internal databases will provide the capability to identify patterns and profile areas requiring further analysis. It is the foundation that must be laid in order to facilitate the formation of a future national database.

Once internal systems are in place, across all the various financial services industries involved in check processing, a national fraud detection system will be a more viable option and can be set in place more easily. All in all, the best solutions are those that manage the internal investigation and have the ability to pass information securely to a national database.

Abagnale said it best. "If you believe you have a foolproof system, you have failed to take into consideration the creativity of fools...there are no criminals looking for a challenge. They are only looking for opportunities."

Bryan Viau is president of Loss Control Solutions, a knowledge-based provider of management software systems for financial institutions, including 29 of the top 100 U.S. banks. For more information on the company or its products, visit their Web site at www.losscontrolsolutions.com.