Credit Cards and Payroll Checks—Real or Fake?
HOW convenient they are! So small, so easy to carry. They fit so nicely into a man’s wallet or a woman’s purse. Without a cent in your pocket, you are able to purchase so many things. The use of a credit card is encouraged and advertised by airlines, steamship companies, hotels, and resorts the world over. People are advised: “Don’t leave home without it.” Some businesses would rather accept them than cash. Unlike cash, if they are stolen or lost, they can be replaced. It is your own personalized money, with your name and exclusive account number embossed across the front.
You know them as plastic money—credit and charge cards. In 1985 some banks introduced their own sophisticated, laser-created holograms, which appear to be three-dimensional, and other security features, ranging from special codes in the magnetic strip across the back to an invisible mark that shows up under ultraviolet light. All this as a deterrent to counterfeiting! It is estimated that over 600 million credit cards are in circulation around the globe.
It is thought that worldwide losses from various forms of credit-card fraud in the early 1990’s were at least one billion dollars. Of those various forms, counterfeiting is reported to be the fastest growing—at least 10 percent of the total losses.
In 1993, for example, counterfeiting cost member banks of one of the largest credit-card companies $133.8 million, a 75-percent increase over the previous year. Another leading credit-card company, international in size, also reported staggering losses due to counterfeiting. “That makes card counterfeiting a big problem not only for the banks, card companies and merchants who honour them but also for consumers around the world,” wrote one New Zealand newspaper. While legitimate cardholders are not responsible for the losses, the costs are inevitably passed on to the consumers.
What about the built-in security features that stood as a roadblock to counterfeiters—such as laser-created holograms and special coded magnetic strips? Within a year after these features were introduced, the first crude counterfeits began to appear. Shortly thereafter, all security features were copied or compromised. “You’ve always got to improve,” said one Hong Kong bank official. “The crooks are always trying to get ahead of you.”
Interestingly, half of all losses from card counterfeiting in the early 1990’s took place in Asia, according to experts, and nearly half of these were traced to Hong Kong. “Hong Kong is to counterfeit credit cards what Paris is to haute couture,” declared one expert. Others have accused Hong Kong of being the world capital of credit counterfeiting—“a crossroads of the ‘plastic triangle’ of credit card fraud that also includes Thailand, Malaysia and now southern China.” “Hong Kong police say local syndicates linked to Chinese organized crime triads engrave, emboss and encode fake cards using numbers provided by corrupt retailers. They then simply send the counterfeit cards overseas,” reported the New Zealand newspaper.
“A credit-card embossing machine, purchased [in Canada] by Asian gang members, is now being used to make fake credit cards. The machine prints 250 credit cards an hour, and police believe it has been used in a multi-million-dollar fraud,” reported Canada’s Globe & Mail newspaper. In the last few years, Hong Kong Chinese have been arrested using forged credit cards in at least 22 countries from Austria to Australia, including Guam, Malaysia, and Switzerland. Japanese credit cards are especially sought after, since they extend the highest spending limits to their users.
The surge in credit-card scams and counterfeiting means that “issuers are forced to spread around the cost of a growing amount of fraud,” said one Canadian banking official. And so it goes. A credit card may indeed be a convenience and a lifesaver when the user is without adequate cash. Remember, however, that all the counterfeiters need is your account number and card expiration date and they are in business. “It’s plastic money,” warned a regional security chief for American Express International, “but people have yet to treat it with the same prudence they do cash.”
“The system is riddled with weaknesses,” said one police superintendent. “And the villains have found every one. And boy, they have exploited them ruthlessly,” he said of counterfeiters.
Check Counterfeiting
With the coming of desktop printing that could virtually duplicate any paper currency flawlessly, what soon followed was inevitable. Forgers could now duplicate a wide range of documents: passports, birth certificates, immigration cards, stock certificates, purchase orders, drug prescriptions, and a host of others. But the greatest dividend would be reaped from the duplication of payroll checks.
The technique is remarkably simple. Once a payroll check from a large company with millions of dollars on deposit in local or statewide banks finds its way into the hands of a counterfeiter, he is in business. With his desktop printer, optical scanner, and other electronic equipment at his fingertips, he can alter the check to suit his own purpose—changing the date, deleting the payee’s name to that of his own, adding zeros to the dollar amount. He then prints the altered check on his own laser printer, using paper that he has purchased at the nearest stationery store in the same color as the check. Running off dozens or more forgeries at a time, he can cash them at any one of the bank’s branches in any city.
The proliferation of check counterfeiting by this simple and inexpensive means is so great, bank and law-enforcement officials say, that the cost to the economy could reach $1 billion. In a particularly brazen case, reported The New York Times, a Los Angeles-based gang roamed the country cashing thousands of fake payroll checks at banks, totaling more than $2 million. Industry analysts estimate that the total annual cost of check fraud is now $10 billion in the United States alone. “The No. 1 crime problem for financial institutions,” said an FBI official, “is counterfeit negotiable instruments, such as check fraud and money order fraud.”
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The greatest dividends come from the duplication of payroll checks