Unless you’ve been bitten, most companies are unaware of the growing problems related to counterfeiting and illegal duplication of valuable documents.

Did you know that…

Statistics from the Association of Certified Fraud Examiners show that, on average, small businesses that fall victim to fraud will lose $190,000 – twice the amount lost by larger corporations.

According to Pricewaterhouse Coopers’ 2005 Global Economic Crime Survey, almost four-in-ten Canadian organizations surveyed did not report incidents of fraud to law enforcement agencies (2005).

Business cheque fraud is especially common, as 75 percent of all transactions between companies are done via cheque. In Canada, cheque fraud accounts for 40 percent of all fraud and, despite many businesses increasing security measures, fraud continues to grow by 25 percent a year.

Scam artists, reports Canada One, often exploit the close relationship between Canada and America. Business owners may cash a fraudulent cheque, but since it needs to be sent to the originating country to be verified, often times a month or more will pass before it is cleared.

It is reported that retailers lose $750 million through the illegal copying and mall-redemption of coupons, as well as an additional $700 million from altered or duplicated cash register receipts.

Unfortunately, these constantly rising statistics remain relatively unknown to the general public. Unless a company has been hit with a string of bad cheques or counterfeit gift certificates, most business owners remain unconcerned over this source of perplexity.

In recent years, this problem has expanded because of the availability of inexpensive, high-tech equipment. During this period, color copiers, flatbed scanners and desktop publishing software have become the counterfeiters’ tools of the trade. Today’s casual counterfeiter can get started in business with very little training and a capital investment of less than a thousand dollars. The target of these perpetrators is varied. Anything from cheques, birth certificates, drivers’ licenses and other forms of personal identification; to gift certificates, discount coupons and admission tickets; to other printed products that often are overlooked, such as prescription forms, product warranties, cash register receipts and even U.S. and Canadian currency.

Commercial cheques especially are susceptible to this problem. With an unprotected cheque, a person need merely whiteout the PAYEE and AMOUNT areas, scan in the unprotected
document and “overlay” a new payee and dollar amount. Then it’s just a matter of imaging the new counterfeit cheque on a color laser printer. Most any convenience store, retail location or bank branch will accept these documents without questioning their authenticity. Because of this problem, U.S. federal regulations require that companies exhibit “due diligence” when issuing cheques. In layman’s terms, what this means is that if a business doesn’t take proper precautions in the issuance of their cheques and if these documents were counterfeited and later cashed, the liability for this loss would be split between the issuer of the cheque (you) and the bank that cashed this bad cheque. This “shared” liability would be based on a formula of “comparative

negligence.” Although “due diligence” is not specifically regulated in Canada, Canadian courts make their rulings based on the same criteria as U.S. courts.

So how does a small business owner protect himself from this criminal element? Awareness is key. Business owners must be aware of the problem and have at least a basic knowledge of how
these lawbreakers work.

Others agree that to protect against this problem, the best offense is a good defense. Companies need to take a proactive approach by having their valuable documents protected with overt (obvious) security features.

A variety of counterfeiting deterrents can be used to fight this ever-growing problem. Experts agree that the idea here is to put just enough obstacles in front of the would-be counterfeiter such that this person will become frustrated and move to an easier target.

Counterfeit Deterrents:

Security Paper: The base paper stock can include a variety of features-visible and invisible fluorescent fibers; artificial and true watermarks; and chemical sensitivity to bleaches and ink eradicators.

Security Inks: Invisible ultraviolet (UV) and fluorescent inks; heat sensitive inks that change color or disappear at a specific trigger temperature. Hidden Image Technology: When copied, these background patterns form Image Technology messages that are detectable immediately on the duplicate (e.g. “VOID,” “COPY,” etc.).

Custom Borders and Microtype: These fine-line designs and minute lettering are difficult to reproduce off a scan of the original document.

Warning Bands: This overt warning line will discourage anyone who might attempt to counterfeit the protected document.

The preceding steps taken, the business owner should not neglect to train employees properly on what to look for and how to identify a counterfeit document. Similar to paying on an insurance policy, a decision to upgrade your document security should involve a comparison of cost of this effort as compared to any loss that might occur if these procedures are not implemented.