PERF Study: Best Practices in Selling Security Features

Distributors have long recommended basic security features to their clients looking to secure their checks and other valuable documents. In today's environment, however, many distributors go much farther. By truly understanding document security issues, they do more than sell features. They become consultants to their end customers' businesses, customizing recommendations for specific needs; analyzing security readiness and updating customers' document security as needed; and using their knowledge to pitch and win new accounts.

Not only does this put distributors on a new playing field, but adding security features brings larger jobs and higher profit margins. By analyzing their customers' current level of security readiness and making recommendations based on individual need, they can turn a $1,000 order into a $2,500 order, or more.

The first step is understanding the larger document security environment and the many areas of potential liability. In addition to the challenges presented by counterfeiting itself, there are complicating factors such as "holder in due course" and Check 21. (For more on this, see companion article, "Security Document Update.") By understanding these and other liability issues, you can help your customers understand which document security features are the most important to them.

Consider, for example, how your knowledge of each of the following three areas can be used to educate the end user and close the sale:

1. Physical security features. Many features, such as void pantographs, watermarks, and microprinting are widely available on off-the-shelf check stock (available at office supply stores) and are generally offered by the manufacturer at no extra charge. But higher end features, whether overt features such as holograms and prismatic printing, or covert features such as chemically reactive paper and UV light-sensitive ink and fibers, are high-value features and add much higher levels of security not breachable by the average counterfeiter. The value of the document and the level of counterfeiting threat will determine which and how many security features are necessary.

Before making recommendations, however, it is important to listen and analyze the customer's needs first. For example, when one distributor called on the state of Maryland, it discovered that the state treasurer's office was about to order new checks and wanted to use its new laser printer to handle the check run. The distributor immediately recognized the liability incurred by laser printing on inexpensive check stock, and after extensive consultation with the treasurer's office, he ended up with the account. Not only did he end up taking a 4.5 million check order, but the checks contained a lot more security features than the treasury office initially intended. This included chemically reactive paper, a step-and-repeat image on the back of the check, a warning notification on the face of the check, and a custom image of a cloud that partially hides an image of the state flag.

Playing consultant requires knowing more than just the most common security features, however. For very high-value documents, for example, you may need to recommend features such as intaglio printing (which creates a raised surface on the document that is nearly impossible to duplicate) or specialty processes like SICPA's Optically Verifiable Ink (OVI), which are available only on a restricted basis.

2. Secure design features. There are many other aspects of securing the document that you will want to encourage your clients to consider, as well. For example, thieves often add new payee names to legitimate checks by typing them in next to, above, or below the original name. Thus, something as simple as adding a string of asterisks above and after the authentic payee name can eliminate this risk. As another example, counterfeiters often put through counterfeit checks, even after the client has requested a stop payment (stop payment orders are typically enforced only for 180 days, after which the counterfeiter may successfully put through the check again). Therefore, you may want to suggest that customers print a statement on the face of the check declaring a date after which the check is no longer valid, such as "THIS CHECK EXPIRES AND IS VOID 90 DAYS AFTER ISSUE DATE."

In most cases, end users expect distributors to offer such expertise as part of the sale. But even if you do not charge for design consultation, it serves as a powerful tool in closing the sale or deepening the relationship with the end user customer. When customers value your expertise, in addition to your ability to take orders, the relationship goes beyond price.

It is also a powerful tool for winning new clients. In the case of Graphic Enterprises, the distributor's knowledge of document security won it a large chunk of business. First, the state of Maryland ordered 4.5 million checks. Then it followed up with another order for 4.5 million checks, plus orders for annual reports and other commercial printing projects.

For those who have developed sufficient expertise, design consultation can be a chargeable service, but it has to be presented properly. Dick Gray, president of Xtension Technologies, a distributorship with extensive experience in document security consulting, notes "If you are going in strictly to talk about security features on a document, you won't have luck charging for the time. But if you are going in to talk about the company's exposure to liability, both in the document's preprocessing, processing, and postprocessing, and where the customer has holes in their system, where the bank has holes, and where there are holes in the Federal Reserve system, all of a sudden, you can charge for this because not everybody knows those things."

3. Consulting on non-document-related security elements. Like document design, the ability to consult on document security beyond the document itself can be a critical differentiator. For example, if the client is not already using Positive Pay (in which the bank matches the number and amount of each check with a report generated by the end user's accounting department—see www.positivepay.net) or Reverse Positive Pay (where the end user does the reconciliation after the fact), the company should implement one or the other immediately. Distributors can also debrief the customer on their shipping and storage practices for secure documents, making sure they follow best industry practices to minimize risk.

Whether you can charge for sharing this information or not, it puts you in the position of being a true consultant. That can lead to less price sensitivity and long-term customer relationships, as well as the ability to win new accounts.

Covert or Overt?

When selling document security features, it's important to think "layering." End user customers should utilize multiple security features, including a combination of covert and overt features. One secure check produced by Printegra, Peachtree City, GA, for example, is printed on Copy Alert, a security check paper for software-compatible and custom checks. Overt features include a screened "Original Document" backer, a warning border, a security padlock icon, and Optical Deterrent Technology. Covert features include fluorescent fibers and bleach-reactive brown stain.

Although covert features contribute strongly to security, clients may be hesitant to spend money on features that the average person cannot see. After all, covert features are, by definition, not visible to the naked eye. Isn't the goal of document security to prevent documents from being duplicated or forged in the first place?

Features like chemically reactive paper are covert, but will generally foil a forgery attempt as soon as it gets started. But what about features like fluorescent fibers? How many tellers have black lights at their stations? And if the covert features are not mentioned on a warning band or elsewhere (such as the terms and conditions of coupons), how would tellers know to test for them even if they did?

For extremely high-value documents, such as certificates of authenticity, handlers may expect covert security features and look for them. But for high-volume documents like checks and coupons, it is not practical for employees to check every document for every potential feature. Thus, the value of these features may only become clear during a lawsuit.

So why include them at all? The answer is ordinary care. According to Uniform Commercial Code (UCC), if the recipient of a check has been defrauded, he can successfully bring suit against the account holder (end user) for the full value of the check if he can prove that the account holder did not show "ordinary care" in securing the check against fraud. In order to show ordinary care, the account holder must prove that the forged copy is substantially different from the original. The more security features built into the check which have not been duplicated by the forger, the more proof that the end user has taken ordinary care.

Thus, additional security features can pay themselves back if a customer finds itself in a legal battle over a fraudulent check drawn on its account.

Still, it's always better to prevent fraud than to litigate it later. So while covert security features are beneficial, many distributors focus more on overt features, such as bleedthrough numbering, warning bands, prismatic foil, step-and-repeat backgrounds, prismatic printing, and holograms that will deter the typical counterfeiter at the outset.

Best Practices in Security Features

Whether covert or overt, the more layers of security, the better. Some secure checks have a dozen or more security features. But not every end user customer can be sold on checks with the ultimate level of security. So what is the minimum level of security they should accept? Here are some best practices all end users should follow:

Use a basic security package. All checks should have a "basic security package" of a certain number of security features. These include watermarks, microprinting, and, for many industry experts, thermochromic ink. These features are inexpensive (some come at no additional cost) and are easily verifiable by anyone taking the check. Make sure to include at least one (typically using thermochromic inks) feature that goes beyond what is available in off-the-shelf check stock available from any office supply store.

Dave Wandling, vice president of marketing for The Flesh Company, which does approximately one-third of its business in checks, suggests that checks contain, at minimum, two or three security features in the paper itself—be they fluorescent fibers, watermarks, or chemical reactivity in the paper; and two or three in the printing. A guideline, he says, is to use the same level of security offered by your bank, and then do one better.

"Whatever bank it is drawn on, you should have the same security features, plus at least one more," he says. "This way, the bank can't come back and say that you don't have enough security because you have more than they do."

Wandling also suggests that distributors tell their customers to write the bank a letter, alerting them to the security features in their checks and that they expect the bank to look for them. Even if the bank doesn't do it, the customer has on record that they asked.

Use both covert and overt features. To be fully secure, documents should have both.

Indicate security features on the document itself. It is highly recommended that you mark the document with a warning band indicating its key security features. This is not only a warning to counterfeiters, but also an alert to the person taking the check of the features they can use to authenticate it.

This both protects against the taking of bad checks and provides protection in the case of a lawsuit. For example, in "Robert J. Triffin v. Pomerantz Staffing Services," the check issuer, Pomerantz Staffing Services, was not found liable for the value of the fraudulent check because printed on the face of each check was a warning: "THE BACK OF THIS CHECK HAS HEAT SENSITIVE INK TO CONFIRM AUTHENTICITY." In order to verify the check's authenticity, the person taking the check should have rubbed the back to activate the thermochromic ink. In this case, however, the employee either did not see the warning or ignored it, and even though rubbing the back of the check would clearly have alerted the employee to the fact that it was a fraudulent check, the employee did not take this reasonable step. As a result, Pomerantz was not held liable for the "value" of the check.

Recommend Positive Pay and Prompt Reconciliation. Recommend that the customer have the checks sorted through Positive Pay or Reverse Positive Pay and practice "prompt reconciliation" (for more on both practices, see many of the articles in the Document Security section of the DMIA website's Solutions Center). Although not related to the document itself, these are standard practices that, if they issue checks, all companies should implement.

Controlling Document Stock

Regardless of the type of document in question, one of the most important steps in securing it is having the document printed on a controlled stock. If the blank stock is readily available on the open market, then the document's security is compromised. All the counterfeiter has to do is add fake security features or fill in the blanks—literally.

"In my judgment, controlling the stock is the first and most important security feature," says Greg Litster, CEO of SafeChecks, Canoga Park, CA. "In order for your checks [or any other document] to be truly secure, you have to start with a stock that nobody else has access to."

Otherwise, once the counterfeiter gains access to the blank stock, all they need is Adobe Illustrator and a scanner to visually replicate the original. Litster cites a court case in which a man in Houston, TX, was cashing $50,000 per month in American Express checks. When the forger was caught, he was found with 150 different types of blank laser check stock from various makers.

"Some check manufacturers have some good security in the checks themselves—10 or 11 security features," says Litster. "But then they turn around and sell blank to 600 print brokers around the country, so everybody has access to it. What good is that?"

How Secure Is Your Ordering?

For this reason, distributors need to offer a secure ordering environment and work with manufacturers that also offer secure ordering and storage.

While many distributors (and manufacturers) do offer secure environments, many do not. Often, both manufacturers and distributors will merely take a business application and perform a new customer credit check. In fact, one manufacturer acknowledged that, at a company where he once worked, a counterfeiter walked in the door with a check and acted like a distributor and placed an order for one thousand of them. The manufacturer printed the checks, shipped them, and the "customer" never paid. By the time the manufacturer figured out that it had been scammed, the forger was long gone.

So how to weed out scam artists before you (and your end user customer) get taken? Asking for business license number or doing a credit check is a good start. This will discourage low-level counterfeiters, but more determined counterfeiters can provide a fake business identity as easily as they can create a fake check. This is why Xtension Technologies, Laguna Hills, CA, pays for a database of 16 million companies in the United States. This database contains key information, such as corporate executives and number of employees that allow the distributor to ask probing questions to verify authenticity.

Gray of Xtension Technologies will also ask questions not in the database—questions that tell him something personally—such as what accounting program the caller uses. The answer can tell him more than the caller realizes.

One of the challenges that the industry faces is that, even if individual distributors do an excellent job of controlling their ordering process, there may be hundreds of distributors working with each manufacturer. Each distributor may have multiple reps, some of whom may not always follow the rules.

To illustrate the problem, SafeCheck's Litster recently tried an experiment to see whether he could get access to a check stock with thermal security features offered by a manufacturer. He asked his brother to call a representative and order a blue check with the thermal-sensitive ink. Two weeks later, the check stock was in his hands.

This is why ProDocumentSolutions, which produces high-value secure documents like transcripts and certificates, requires its distributors to sign a chain of custody agreement that lays out the standards they must follow. This includes (but is not limited to) the fact that the distributor cannot, without written permission, sell any products with security features on the Internet; the distributor must at all times have a record of who he sold the documents to and how many were sold; and all end user customers must be legitimate business entities with a business license. The agreement also allows ProDocumentSolutions and law enforcement the right to audit customers at any time.

How does ProDocumentSolutions ensure that all distributors comply? "We don't," says Phillips. "But one thing we check regularly is that our documents aren't sold on the Internet, and if that does occur, we sever the relationship with that distributor."

Although ProDocumentSolutions implements its own standards, many manufacturers and distributors of high-value documents are implementing NASPO (North American Security Products Organization) standards. While it is unlikely that low-end documents, such as checks, will end up utilizing them, in the mid- and high-end market, such as transcripts and birth certificates, Phillips expects NASPO standards to become widespread.

"Eventually, the government will mandate that those types of documents be produced in a NASPO-certified manufacturing plant," he says.

The Ultimate in Control?

Another approach to thwart counterfeiting is to verify all transactions. SafeChecks, for example, has a stringent ordering process for all distributors and end user customers. For all new orders and orders with changes of address, it double-checks the information provided (bank account number, routing number, shipping address) against the customer's bank information. To make this verification, it contacts the bank by looking up the number in an industry-standard reference book, not by using the phone number provided by the customer. It will only ship checks to the customer address on file at the bank. If the bank won't verify, SafeChecks asks the customer to produce a bank statement.

Not only does SafeChecks verify orders, but it will not ship completely blank check stock. Even if a customer wants to print its own information on the check, SafeChecks will print a series of inventory control numbers and/or the company's logo on the back of the check, something that identifies the check as unique to that company before it goes out the door.

These procedures are time consuming, but they work. As far as SafeChecks is aware, none of its checks has ever been used in a scam.

In order to provide a secure document ordering environment, distributors should also work with manufacturers that also have secure environments. The Flesh Company, for example, starts with a secure paper from Appleton Papers, which is tightly controlled and requires reconciliation of every sheet ordered. At the end of the day, The Flesh Company shreds every piece of safety paper it runs and stamps "cancel" and "void" and punches holes in its samples. All of its composition computers are key locked and code locked, and only authorized people are allowed into the plant. All of the plant doors are locked and key fobbed to track access to the secure areas. When the manufacturer ships jobs, everything is sealed with security tape and there is no indication on the outside of the boxes as to what is contained inside.

Security: Not an Impossible Standard

Although understanding the larger security environment can be complex, when it comes to having secure documents, it may not be as hard as many distributors and their end user customers think.

Document security starts with the basic security features, both covert and overt; good design features; implementation of Positive Pay and prompt reconciliation practices; best practices in accounting and storage of documents; and working with a manufacturer that operates in a secure environment. "I would say that this combination is going to protect that customer to the greatest extent reasonably possible," Wandling says.

While many customers balk at paying more for such security, Litster emphasizes that this is more bark than bite. "Say you are ordering 500 checks. The cost differential between the average, off-the-shelf check stock and high-security check stock can be less than $100," he says. "At a 10,000 quantity, it is about $500. Show me the businessman who can't afford $100 to get a high-security check. And if someone is ordering 10,000 checks, that's a big company. Considering the time and cost of litigation, $500 dollars is not a high price to pay to make your documents secure."

The PERF Print Report is published by the Print Education & Research Foundation.