Invisible ink stamps out check fraud Tellers request fingerprints of infrequent customers

$800 million problem

Industry officials in Md. still unsure about using idea

September 01, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

It might seem like fighting a tank with a pea shooter, but bankers across the country are trying to solve an $800 million problem with a $2.50 product.

In Texas, Nevada, Arizona and more than a dozen other states, bankers are fighting check fraud by equipping tellers with ink pads so they can affix the thumbprint of customers who aren't regular patrons of the bank to the backs of checks they cash.

Maryland bankers are considering the strategy, but haven't decided if they like it.

The idea has drawn remarkable interest because banks are losing millions each year to organized crime and gang members who steal checks or duplicate payroll checks and then cash them.

These methods cost banks $815 million in 1993 alone, more than 12 times what they lost in robberies, according to the latest American Bankers Association statistics.

And in Baltimore, banks and savings and loans lose several million dollars each year, industry officials and the Federal Bureau of Investigation say.

"This is a war for us," said Jerome W. Evans, executive vice president with First National Bank of Maryland.

He declined to disclose exact numbers, but he said First Maryland loses hundreds of thousands of dollars each year because of bogus checks.

"It is bank robberies that get all of the notoriety in this market but our check losses are two and three times the losses of people holding up our branches," Evans said. "It is a very significant issue for banks, and it has grown very substantially in the last two or three years."

Banks aren't the only ones who pay for check fraud. Consumers do too -- in the form of higher fees charged by banks, said William F. Gearin, head of Financial Institution Security Consulting Service, a Worcester, Mass., consulting firm.

"This is a serious problem, and it is going to get worse," he said. "What is really driving the statistics upward is counterfeit checks."

Although banks have long fought counterfeiters and rip-off artists, they have yet to come up with a foolproof way of stopping them. They've made some progress against robbers by hiring in-house security agents who monitor customers through closed-circuit television sets and by designing branches so tellers are located in the middle of the room instead of near the exits.


Baltimore-based International Security Inc. is even marketing a "persontrap" that with the push of a button locks the interior and exterior doors at the entrance of a bank to entrap a thief and form a bullet-proof glass cage.

This might help banks. But stopping check fraud is trickier than stopping robbers because computers and laser printers are used to create fake checks that look so authentic, bankers can easily be fooled.

Tellers are trained to look for altered or unusual checks and suspicious individuals, and some banks even monitor the payroll checks of the companies they do business with. Nevertheless, banks are easy prey for drug gangs and crime rings that enter the United States from Nigeria, Russia, Asia, Armenia and Mexico, experts say.

What makes breaking the criminal organizations so tough is that the checks they pass are small, ranging from $500 to $5,000, so they don't arouse suspicion.

Experts say members of the organizations steal checks from the mail, buy them from sources who work at banks or illegally obtain payroll checks from corporations such as Coca-Cola Co. and International Business Machines Corp., and then duplicate them.

The checks are then shipped overnight to others who fan out and cash the checks at branches throughout a city. Then they move to the next city, where another shipment of bogus checks awaits pickup.

High-tech crooks

"The old days of the con man going from fleabag hotel to fleabag hotel making up bogus checks, that's history," said Kevin L. Perkins, a supervisory special agent with the FBI in Baltimore. "With laser printers and very good photo copy machines, you can go to town with these things."

Keeping the organizations from hitting their towns is the aim of the bankers' ink-pad offensive.

Bankers hope that fingerprinting will at least deter check fraud by giving police enough evidence to catch people who write bad checks.

Banks using the pads say they require prints only from people who aren't regular customers. When the person presents the check, the teller dabs their thumb on a pad that contains an invisible ink, and then presses it against the back of the check.

If the customer doesn't want to give a print, the teller hands back the check without cashing it.

The results have been surprisingly successful, said Dawn Duplantier, communications director for the Texas Bankers Association, which began selling its member banks the pads last December. "I couldn't say we are anything less than incredibly pleased with the results of this program," she said.

Duplantier said 155 banks in the state are using the pads, and some institutions have erased check fraud altogether.

"Across the board in the first six months, we have had a 70 percent decrease," she said.

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