Last month, an organised crime ring thought to have netted up to £10m from counterfeit cheques produced using professional printing equipment, was uncovered by police.
Seven people belonging to what is believed to be one of the UK’s biggest counterfeit cheque crime groups were arrested after being found in possession of 100 50-page chequebooks with the potential to yield around £5m. They were suspected of having made up to £50,000 a week from the fake cheques over a lengthy time period, potentially gaining up to £10m before they were caught.
Recent figures suggest that these criminals were not alone; cheque fraud in the first half of 2012 rose by 9% compared to the same period in 2011, costing the UK economy around £17.9m (H1 2011: £16.4m).
In fact, the head of the Dedicated Cheque and Plastic Crime Unit (DCPCU) DCI Dave Carter believes that gang was just the tip of the iceberg, with many similar fraudsters operating across the UK.
He strongly suspects that the gang in question had bought their equipment and materials through the internet, and believes that the ease of access to high-quality printing equipment online is contributing to the increased circulation of counterfeit cheques.
"A decline in counterfeit cheque fraud in previous years ironically left a chink in the door, with criminals now combining old techniques with the specialist purchasing powers of the internet to really cash in on a general lack of public awareness of cheque security," says Carter.
Financial Fraud Action (FFA), a body dedicated to fraud prevention initiatives, adds: "The quality of the counterfeits that the organised criminal gangs committing these crimes are producing has improved markedly in quality. That is the cause of the increase in cheque crime."
Cheque usage has declined over the years to around 2.7m transactions a day, but 90% of all fraudulent cheques are detected during the clearing process, according to the DCPCU. In the first half of this year alone, £241.3m of attempted cheque fraud was spotted and stopped at the clearing stage, according to the FFA.
The majority of fraudulent materials, such as inks and papers, are detected as they effectively ‘jam’ the clearing process.
Front-end regulations increase security further: printers can only produce cheques if they are accredited by the Cheque & Credit Clearing Company (C&CCC). Unaccredited companies approaching print suppliers for materials used in cheque printing would ring alarm bells.
But while fraud prevention agencies can regulate the circulation of materials and equipment used in cheque printing in the UK, controlling overseas imports and access to kit via the internet is much harder.
Koen Heyndricx, business manager for security printing at Agfa, agrees that the internet is playing a big role in the uptick in cheque counterfeiting.
However, he adds: "The biggest problem today is that the guidelines for cheque printing are old fashioned; things have changed and certain criteria should be standardised.
"You can’t blame the suppliers; it is up to the government to make sure that these documents remain at a quality level that the mid- and low-range printers are not capable of."
Carter says: "No matter how tightly you regulate it, you can buy equipment and materials that are very similar from other countries over the internet."
And you don’t necessarily need a lot of materials to produce a lot of cheques: one teaspoonful of UV ink is enough to forge one million cheques.
Carter concludes: "Ultimately there is a genuinely regulated cheque production industry that spends a lot of time and effort getting themselves accredited to get cheque production business from the banks.
"So when others come along and produce counterfeit cheques it goes a long way to undermine cheques as a credible form of payment. And anything that undermines cheque use could undermine confidence in cheques as a whole, which could cause a problem for business."
BPIF chief executive Kathy Woodward argues to the contrary, and believes that the presence of fraudsters could advance the security cheque printing market.
"Specialist security sections are looking at how they can make cheque printing more secure and if anything it provides those printers with more specialist and secure products with a niche market," she says.
That said, there can be no doubt that cheque use is in terminal decline in the UK and Carter issues this stark warning: "I have no doubt that cheques will disappear completely because there are more secure methods of payment."
The fight against fraudsters is an ongoing battle and one that is doubtless being fuelled by the internet. The challenge facing cheque printers now is to evolve and capitalise on the advances forced upon the sector, or else lose the market altogether.
- On 17 and 18 October, the DCPCU and City of London Police found around 100 50-page counterfeit and genuine chequebooks during raids on 22 addresses in the UK
- Cheque fraud increased by 9% year-on-year in the first half of 2012, rising to £17.9m from £16.4m in 2011
- 90% of all fraudulent cheques are detected in the cheque clearing process. More than £240m of attempted cheque fraud was spotted and stopped during the clearing process in the first half of 2012
- Cheque usage is continuing to decline and there are now around 2.7m cheques transactions a day
- All accredited cheque printers must be certified to ISO 27001 and to C&CCC Audit Standard for Cheque Printers-Standard 55. They are required to print cheques in accordance with C&CCC Standard 3.1-Automated Processing of Vouchers (Debits) and C&CCC Standard 3.3 Automated Processing of Vouchers (Technical)
- One teaspoon of UV ink is enough to produce one million cheques
Managing director, Tall Group
"The work that the Credit & Cheque Clearing Company and other bodies within the payments council undertake is very successful. It is a constant battle and the industry is always looking for ways to improve the fraud prevention action that we take. No one can rest on their laurels and although the perpetuated fraud is limited in this country, it does still exist and you can never do enough. Going forward, there are some interesting technical developments coming down the track with regards to cheque security."
Managing director, Integrity Print
"The internet opens up a whole host of things, good and bad. The threat of fraudsters is not even on my radar, but I am sure that some people will go on the internet to find out how to produce what we produce. There are people out there who think they can make a quick buck, and if the internet is a channel that they can get the equipment and materials through, then they will use it. We cheque printers have all got the belt and braces of security systems and are doing the decent thing by ensuring we have the correct accreditation."
Communications director, SG World
"Considering the hoops we have to jump through to keep renewing our license it does surprise me that somebody can get to grips with security print and get started that quickly. They obviously don’t have the accreditation, but if the governing bodies that authorise printers to produce cheques are that stringent, I would have thought it would be just as strict in allowing anybody to buy and produce the materials. But the threat from counterfeiters is making the governing bodies stricter and printers more security conscious."