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The Light of Awareness Fraud is growing, but some end users are still in the dark. Distributors can boost their security document sales by pitching protection and education. BY DARIN PAINTER Larry Espinola sits in his office in Palm Desert, Calif., and looks at a check in his hands. Nine miles to the west grow the tall cacti of the Living Desert, a botanical park that in an average year receives 350 days of sunshine. But as Espinola looks at the check, which appears to include a void pantograph in the shape of a sunburst, he remembers a day of darkness. The check is a phony. On a Friday afternoon in 1995, an agricultural company with 2,000 employees fell victim to a counterfeiting scheme in which hundreds of bogus payroll checks, each written for between $295 and $300, were cashed. A bank teller did not realize that the pantograph on the face of the check, a rainbow image on its signature line and a watermark on its back were all duped. The criminals even created a perf to match the legitimate one. "[The check] wasn't perfect, but it was good enough to look like it wasn't a mistake," says Espinola, a partner at Printing Solutions, a distributorship in Palm Desert. Espinola, who hadn't supplied the initial checks, was asked to supply a new check that included more advanced security features. "Sometimes companies don't realize there's a problem until they get hit," he says. "But when they do, they make sure their checks are protected so [fraud] won't happen again. They wanted me to build one heck of a check." He began by using Boise Cascade's Check Protect paper, which features fluorescent fibers, a fluorescent artificial watermark, chemically reactive dyes, a brown stain "VOID" sign in six languages and Toner Grip, a surface treatment that yields greater toner adhesion to thwart forgery attempts. A 3/8 x 3-inch grid-patterned hologram appears in the top-middle of the check, showing three different messages ("ORIGINAL," "GENUINE" and "SECURE") when viewed at different angles. The check also includes a foil-stamped logo, bleed-through MICR numbering, a custom watermark on the front and warning bands. Since adding the features, the company has placed three reorders. A local water district manager who heard about the project switched to Printing Solutions and recently placed an order for 100,000 secured checks. Despite the advent of paperless technologies, such as online banking, direct deposit and check cards, fraud remains a major problem for businesses. Thus, security documents remain a major niche for distributors. As desktop publishing equipment becomes easier to use-a recent case in Alabama involved checks successfully altered and cashed by third graders-"point-and-click" criminals have efficient ways to create false documents. Still, some distributors say they can't believe how many customers react in a way that suggests, "What do you mean, document security?" "Sometimes the customer has to get burned one way or another before they realize how important all of this is," says Walter Theiss, a partner at Graphic Information Systems Inc., a distributorship in Cincinnati. A temporary employment service that Theiss supplies with invoices, time sheets, computer paper and memo pads didn't go for Theiss' suggestion to add security features to its checks. That is, until some of its checks were copied and cashed last year. Theiss says, "I remember hearing [a representative at the employment service] tell me, 'I haven't had a problem in the past, so I'm OK.'" Theiss now supplies the employment service with 500,000 checks per year printed on Appleton's DocuCheck paper, which features embedded security fibers. The checks also include a void pantograph on the face, bleed-through Arabic and MICR numbering, a microprinted signature line and warning bands. Theiss says the employment service is pleased with the result. "When you're talking about security, it's like telling people about smoking or driving too fast," he says. "Some people don't consider it a problem until they get caught." Securing New Clients End users who have experienced fraud make it a priority to find distributors who secure documents. But forward-thinking distributors don't sell only to customers who have been duped; they seek and remedy problems before they occur. Distributors agree that many businesses are still in the dark when it comes to document security. Successful sales pitches can lead to a vast spectrum of new clients. Robert Elliott, president of Graphics Exchange Inc., a distributorship in Falston, Md., picked up the phone three years ago and called the state treasurer's office in Maryland. "I just wanted to ask them if they thought their checks were secure," Elliott says. The question intrigued the head of administration, who wanted to use the state office's new laser printer to handle a check run. Elliott pointed out that laser printers severely reduce the effectiveness of microprinted lines and was invited to analyze the state's check security. "In those situations, it's important to act as a consultant instead of a guy who just wants to sell something," Elliott says. "Instead of immediately talking about what I could provide, I just sat back for a while and listened." Here's what the head of administration wanted: a distinctive, laser-printed, 4-color 8 1/2 x 11-inch check that included a perfed section detailing the state's direct deposit program. Elliott says, "And he told me, 'I don't want any wasted security features.'" Here's what Elliott thought: due diligence. He says, "I tell my customers that their checks aren't actually secure unless [the customers] can stand in court, look at the judge and say, 'I did everything I could to make the checks safe.' Most people don't realize that, unless they can do that, check fraud [might be] their own fault." The concept of due diligence began in 1990 when Articles 3 and 4 of the Uniform Commercial Code were revised. According to the code, companies can be held liable for fraudulent checks if those companies are negligent in preventing fraud. Before the revision, banks usually were held responsible, regardless of what a company did. Elliott supplied the state office with 4.5 million checks on chemically reactive paper that stains brown when tampered with, a step-and-repeat image on the back, warning notification on the face and a custom image of a cloud that partially hides an image of Maryland's state flag. The state office recently reordered another 4.5 million checks, and Graphics Exchange now designs its annual reports and other commercial printing projects. "Due diligence works wonders," Elliott says. "Sometimes it feels like I'm setting a casket down on the table and making [prospective clients] look at it. But people get the point, and that's what matters." When pitching security projects to prospective clients, Elliott says it's smart to suggest as many overt features as possible. He says the benefits are two-fold: criminals are less likely to dupe documents that have visible deterrents, and people who verify the documents' validity are more likely to recognize fraud. "What good is it when a person catches [fraud] after the fact?" he says. But because security features generally have become less expensive, some distributors advocate adding covert features to documents in order to provide layers of protection. Espinola, who never includes less than three security features on checks, says distributors should consider the customer's size, location and type of business before deciding which features to pitch. He says the risk of forgery should be balanced against added cost. For example, a 25-cent coupon probably doesn't need to include holograms or ink combinations, but birth certificates or Super Bowl tickets might warrant such protection. Analyzing these specifics, however, is a process done only after stepping into the light of new business. Espinola says, "You can't be afraid to walk through peoples' doors. Ask yourself what they are doing to protect themselves. If their products aren't secure, offer your services. Even if they haven't had any problems with fraud, that doesn't mean they're really safe." Teaching New Clients Distributors agree that it's their responsibility to educate end users on fraud trends and terminology. Rick Doss, owner/president of Data Flow Media Systems, a distributorship in Richardson, Texas, says many companies are hesitant to discuss security features because they don't understand them. "After you explain that the features don't cost too much, you have to be able to tell them what they are and what they can do," he says. Like many distributors, Doss shows prospective clients a portfolio supplied by his manufacturer that includes laminated samples of security documents. But he's had more success with a tool he created: a 14-inch sample check that includes 10 security features. Each feature is numbered in shaded circles from one to 10. The top of the sample includes corresponding numbers pointing out the features' definitions and advantages. "It's a touch-and-feel way to make customers aware of their options, which is better than having them just read about security," he says. Doss recently showed the enlarged sample check to a title company that prints 75,000 escrow checks each year. The company was impressed, and Doss now supplies it with checks printed on CheckProtect paper. "When you take the time to educate your customers," Doss says, "they think of you as a trustworthy and knowledgeable company." David Dick, account executive at Elite Forms Services Inc., a distributorship in Muncie, Ind., collects articles about document fraud in a presentation binder, which he shows prospective clients as an eye opener. Dick says, "Security problems generally aren't discussed. I mean, every once in a while, John down at ABC Company will play golf with Jack from down at the tool shop, and John will tell Jack about a box of ABC checks that were stolen and cashed. But John's not going to want to splatter the news all over town." The binder recently helped Dick secure a new client; he now supplies seven McDonald's franchises with 20,000 checks printed on DocuCheck paper. The checks include a void pantograph, bleed-through MICR numbering, consecutive numbering, warning bands and an artificial watermark on the back. (See sample on pg. 17.) Education doesn't have to stop when the sale is finalized. Theiss says it's a good idea to walk end users through proper procedures for storing their newly secured documents. "I once saw a construction company that kept their checks in a lunch pale that everyone had access to," he says. He suggests that companies designate a manager responsible for keeping the documents under lock and key. "They need to know that they should treat [security documents] like their own wallets," he says. "These people fight battles every day. They don't want to wake up and think to themselves, 'How secure are my checks today?' Make them aware of potential problems, give them the education they need, and if things go well they'll move on to other problems. It's our job to give them peace of mind." To head toward better business in the security documents niche, try these tips: Check out more than checks. The applications for document security go far beyond paper money. Gift certificates, event passes, tickets, ID badges, college transcripts, licenses, membership cards, vouchers, hospital records and more can be protected with security features. Espinola recently supplied a video rental chain with 200,000 8 1/2 x 5 1/2-inch coupons with refracting foil. "It's a good idea to look for businesses that have a lot of people walking through the doors," Espinola says. "[They] have a tendency to be ripe for fraud." Review and suggest. Elliott reviews the success of his projects to make sure his clients' documents remain secure. When he called a national finance company and asked about its checks, a company official expressed interest in adding another security feature. Elliott says the company is likely to have thermochromatic ink on its 15 million accounts payable checks soon. "Sometimes customers want to start small and move up," he says. Choose a helpful supplier. Manufacturers that specialize in security features often provide samples that distributors can use to enhance sales pitches. Edward Scanlan, a partner at Scanlan Graphics Inc., a distributorship in Waltham, Mass., says it's important to choose a supplier that has a large supply of paper with built-in security features. "Price is an issue with customers," he says. "You can save customers between 20 and 25 percent if your supplier offers the right paper." Talk to the top. "Take your ideas to the people that would be responsible if something were to go wrong," Dick says. "As soon as you play on their [purse] strings and show them how those strings can be snatched open, that's a big difference." Instead of talking to purchasing agents concerned with price, distributors recommend talking to someone higher up the ladder more interested in protection. When dealing with large customers, Elliott suggests contacting auditors or legal teams. Other good targets are presidents, accountants, controllers, CFOs and marketing managers. Visit local banks. Different banks have different methods for checking security features. Survey ones in your area to get a good idea of what main features they look for, and let your clients know that many bank officials are willing to speak about document security trends and advantages. Use technology as a selling point. Dick explains to prospects that many people have access to scanning equipment and computers that can be used to alter documents. "When I explain and show them how anybody who's competent can take an unsecured document and make it look pretty real, it can open their eyes," he says. Educate yourself. Doss says he reads all the information sent to him by his supplier in order to keep up with new security features. "So much is made about educating the customer, but there has to be constant education on our side, too," he says. "We have a responsibility to stay informed, and our supplier takes the time to talk to me and to all of our employees." Impress customers on hold. Printing Solutions recently worked with a communications group to create a repeating on-hold telephone message that informs customers about ways the company solves security document problems. Speak with honesty. "I make sure my customers are secure, but I also make sure they don't go overboard," Elliott says. He recently supplied a government agency with 4 million checks that included Toner Grip, a void pantograph, a MICR line, warning bands, prismatic printing, an artificial watermark on the back and sequential Arabic numbering on the front. The customer wanted to include more Arabic numbering on the back. "Those numbers would have been unrelated to the ones on the front, and I explained that it was needless and would almost double the cost of production," Elliott says. The agency included the feature anyway, but Elliott says the customer appreciated his honesty. "Customers respect you when you tell them not to throw their money away." And remember: Security documents are meant to deter criminals; they shouldn't be promoted as forge-proof. Darin Painter is an assistant editor at FORM Magazine. Document Fraud: Inside the Numbers 2 Rank of check fraud on the FBI's 1996 list of most investigated activities. (Mortgage loans was No. 1.) 50 Percent of counterfeit check activity in 1996 that was driven by organized fraud groups, who generally have access to highly sophisticated forgery equipment. Source: FBI $615,000,000 The cost of check fraud to banks alone in 1995, more than 10 times the amount attributed to bank robbery that year. Source: The Federal Reserve $5,000 The estimated cost of new equipment needed to impressively counterfeit a document. Source: Consumer Bankers Association Back to Document Security