The Art of the Steal (5 page)

There are a number of ways to detect a hot check, but many people who cash checks fail to know the easiest one of all. Ninety percent of hot checks are numbered in check sequence between 101 and 200. A check numbered 118 would represent an account about three weeks old. A check number of 1315 suggests an account that’s about three years old. Hence, many retailers over the years have become very leery of cashing so-called new account checks with numbers less than 200.

To circumvent this, bad check passers, when they set up accounts, try to obtain the highest possible check number they can get. This is usually done by asking the new accounts department to start their checks with a sequence number like 800. In many cases, they are denied. Most banks use a standard starter number of 101 for new checking accounts. Unfortunately, in recent years many new accounts departments have become very lax and, to oblige customers, will let them start their account with any number they request. Or they don’t pay attention to unusual reorder activity, even though criminals reorder checks every twenty or thirty days so they can get a higher sequence number. If all else fails, a criminal can buy checks through the mail, requesting any sequence number he wants.

For this reason, you can’t depend on the check number alone, but it’s a good tip-off for when you should use discretion. If you get a low-numbered check, that would be the time to ask for additional identification, to call the bank if it’s a large purchase, or to use a check verification company to guarantee the check. Remember: 90 percent of worthless checks are numbered between 101 and 200.

WHAT CAN BE DONE?

Over twenty years ago, a technique was developed that is referred to in banking as “date coding.” A date code is a tiny three-digit or four-digit number that appears on the front of a check to indicate when the account was opened. For example, the number 879 would mean that this checking account was opened in August of 1979. This coding is done automatically by the check printer. No matter how many checks a customer orders or reorders, this number will always appear on the face of the check. The date code helps you determine the stability and credibility of the person writing the check. Even checks ordered through the mail from a catalogue will have a date code on them if it’s required by the state where the person lives.

I recommend that all institutions date code checks. And I recommend that retailers teach employees how to read date codes on checks. The date code is sometimes found above the signature line or above the “pay to the order” provision, but most commonly next to the customer’s name. The older the date code, the more established the person who has written the checks.

THOSE HANDY DEPOSIT SLIPS

I was speaking one day with a new acquaintance, and I asked him for a business card so I could stay in touch. After fumbling around in his pockets, he could only come up with a deposit slip from his personal checking account. He handed it to me with a smile. I smiled back and told him, “I’m the last person you want to give this to.”

Deposit slips seem harmless enough. That’s why most people write grocery lists on them, hand them out as business cards, or simply discard them when they run out of checks. But a deposit slip is actually an exceedingly valuable slip of paper. To a forger, a deposit slip is worth ten times more than a blank check.

The slips are used in a common scam called “less cash deposit” or “split deposit.” After obtaining a blank deposit slip, the criminal will write a forged check to the person named on the deposit slip. He’ll then proceed to the bank listed on the front of the deposit slip, and deposit a check in the amount of, say, six hundred dollars. In the line “less cash received,” he’ll write three hundred dollars back. The teller, especially a busy one, will think, Why should I bother to ask for ID? The person is obviously a customer of our bank and has enough funds in the account to cover the check. Plus, he’s depositing more than he’s withdrawing. She hands over the cash and the check writer drives away three hundred dollars richer. The bank is stuck with a worthless check. Less cash deposit scams occur more than two thousand times a day at drive-up windows of banks, savings and loan institutions, and credit unions.

WHAT TO DO

I advise tellers to pay very close attention to less cash deposits. Anytime you return more than twenty-five dollars to anyone you don’t know, ask for identification. Deposit slips also have date codes on them. Look at them, because they can give you an idea of the stability and credibility of the account. And I tell everyone, don’t give out blank deposit slips at the bar instead of business cards, or leave them in the grocery store cart.

STOP PAYMENT START-UPS

Many companies and municipalities have been burned by stale-dated stop payment orders. In these cases, dishonest recipients receive a check, then tell the issuer that it never arrived. So the company will place a stop payment order on the check and issue a new one. The second check is immediately cashed. The original check is saved for a rainy day, which usually comes about six months later.

Shrewd con artists know that stop payments at most banks are good for only 180 days. After that, they expire. At that point, they have to be renewed for another 180 days. The trouble is, few companies bother to renew them. The con artist will patiently bide his time for 181 days before negotiating the second check, which will pay almost every time.

WHAT TO DO

A little extra investment on the part of the company can easily prevent this scam. Put an extended stop payment period on the check, like 999 days. The bank’s limit for a stop payment period needs to be a three-digit number, and 999 fits as easily as 180. Even the most patient con artist doesn’t have that much patience. At most banks, stop payments cost between a dollar and two dollars a month. Many companies have dozens or even hundreds of stop payment orders in effect at any one time. Although the cost can add up, the exposure for loss is far greater.

FORGERY: HOURS OF FUN

Now, let’s take a look at forgery. Forgery has increased considerably since 1975. The major reason for this is technology.

Twenty-five years ago, it used to take me twelve weeks to create a check. A truly sophisticated forger needed a four-color printing press that cost a quarter of a million dollars. Today, I can create a check with a laptop computer, a laser printer, and a scanner in my hotel room in twelve minutes. The
New York Times
once calculated that a forger can buy everything he needs for about five thousand dollars. Of course, it doesn’t cost him anything. He pays by check.

A number of years ago, a business writer submitted an article to
Forbes
magazine, and the editors printed it, paid him, and also sent him a check in the amount of $333.33 to cover his expenses. The writer lived in a one-bedroom apartment in Boston, and he owned an old Apple computer, a printer, and a scanner. As an experiment, and with the blessings of his editors, he decided to try to demonstrate how easily he could transform that meager check into some real money. So he laid the check on the scanner and brought it up on the screen. Once it was on the screen, he could do anything he wanted to it.

He zoomed in on the amount box, locked on it, and removed the dollar amount of the check with his mouse. Then he went to the written legal amount of the check and deleted it. Then he asked the computer to identify the fonts. Back then, a home computer could match 122 fonts. Today, computers can match thousands of fonts. In just a few seconds, he was able to pretty closely match the font at the printer at the accounts payable department at
Forbes
magazine. Using that font, he typed in a new amount number. He put the machine on pause and went out to a stationary store. He asked for green basketweave check paper, which anyone can buy at Office Depot, and bought enough to serve his needs. He also picked up a mechanical number stamp and some red ink.

He went home with his supplies, took the white paper out of the printer, inserted the green basketweave paper, and printed out the new check. He forged the two signatures it required using two different pens. He needed the number stamp so he could reconstruct the ink of the check number in red. Using an Exacto knife, he cut the check out of the 81⁄2 x 11 sheet so he could bring it down to the appropriate size. Once he was finished, he ended up with a check for $3O,333.33, which he felt much better reflected the value of his services.

He deposited the check by opening up an account at Bank Boston. They told him there was a five-day hold period, and he said that was no problem. He didn’t return for twelve days, at which time he withdrew all but a hundred dollars. Sixty-two days later, an auditor at
Forbes
caught the forged check, but by then it was a little late. The writer then crafted a story for
Forbes
about check fraud, in which he revealed the details of his own little charade.
Forbes
put a picture of the fraudulent check on its cover.

This little caper is called scanning, and it’s one of the most popular forms of forgery and certainly the simplest. Scanning started to emerge as a problem in the early 1990s, and it has really caught on significantly in recent years.

In Springfield, Mass., a man changed a $3.00 refund check from L.L. Bean into one for $30,000. Then he changed a $2.39 bakery refund check for stale cinnamon buns to one for $15,552.39. In North Carolina, a well-dressed young man convinced an automobile dealer to accept a cashier’s check for $50,000 from Wachovia Bank, in exchange for a new Mercedes 300SC. It happened to be six in the evening, when the bank was closed, but the dealer was not about to turn away a nice piece of business. Little did he know that the cashier’s check had originally been made out for $5.00 and altered to $50,000, and that before the bank opened the next day the car would be two states away, with fake license plates and a new paint job.

DO YOUR BANKING WITH THE IRS

And sometimes, you don’t even need all that technology. For example, people always seem to require extra cash around tax time, and criminals are no exception. So they get it from you. Say you’ve had your tax returns prepared and, like most of us, you owe the IRS some additional money. For argument’s sake, let’s say it’s $1,500. You sign your return, insert a check made out to the IRS for $1,500, and drop it in the mail. As far as you’re concerned, that ends the pain for another twelve months.

Not quite. The pain actually just doubled. Your package was “lifted” while in transit to the IRS. Envelopes to the IRS are common targets because of where they’re going. The check was removed and the rest of the return trashed. With a few pen strokes, the thief easily altered the check so that it was made out to a Mrs. Smith, and deposited it into a fake account. All he did was change “IRS” to “MRS” and add “Smith” to the payee line. Not only did you lose the $1,500, but you still owe the IRS another $1,500, plus late charges. Talk about double taxation.

WHAT TO DO

The easy solution is to fill out the entire payee line. If you had written “Internal Revenue Service” instead of “IRS,” this scam would not have worked.

SURE, YOU CAN TRY THIS AT HOME

Today, forgers drive around in industrial parks where there are big office buildings, and look into those large mailboxes standing in the parking lot. They’ll tell you that five years ago, they used to have to fish into those mailboxes, sending a line down and yanking the mail out, but they don’t have to anymore. Today, they drive up at a little after five in the afternoon, and there’s so much mail stuffed inside that it’s literally flowing out of the box. They just reach out of the car window and scoop it up. Any reasonable quantity of mail will always contain at least one envelope with a window in it that says, “Pay to.” Inside is a check payable to a construction company or a public relations firm—it doesn’t really matter who it’s addressed to. It’s not going to them anymore.

The odds are it’s a laser check, and that’s just what forgers want. Just about every company in America, no matter how big or small, has moved from a matrix printer to a laser printer to disperse payroll and accounts payable checks. It’s faster, it’s cleaner, and it’s more efficient. With a laser printer, these companies can buy blank check paper, lay it in the cassette, and actually print the entire check—the company logo, the bank’s logo, the routing numbers, the account number, even the signature.

Now a laser printer is a non-impact printer—in other words, there’s no ink put into the paper. A matrix printer shoots ink into the paper. A jet printer puts ink into the paper. A typewriter puts ink into the paper via the ribbon. With a laser printer, toner is applied to the paper by heat, so the toner is sitting on top of the paper. Which is why we call it non-impact printing.

Years ago, when criminals stole, say, a thirty-thousand-dollar check made out to a construction company, they would bring it to a forger and explain that they wanted the forger to get rid of the payee name, so they could type in a new name and cash the check. Fine, the forger said, it’ll be done in two weeks. The criminal was aghast. Two weeks? The forger said, hey, you’re asking me to move ink off of paper. He had to extract the ink using bleaches, solvents, acetones, hydrochlorides, polarized chemicals, non-polarized chemicals. He had to take each letter, and do it slowly, or else the check would become abrasive and you’d notice it.