Cheap and easy: counterfeiting in the '90s - includes related article

Internal Auditor, Feb, 1992 by Ren Carroll, LeClair Mike, John Robertson

UNTIL JUST A FEW YEARS AGO, counterfeiters and forgers belonged to a small circle of highly skilled (albeit dishonest) craftsmen. Perpetrators had to be exceptional artists and platemakers, with access to a high-quality printing press and special paper.

In today's high-tech environments, counterfeiters have acquired a new, more democratic profile. High-quality forgeries can now be produced by almost anybody, and at a rapidly decreasing cost.

As a result, many organizations are finding that their exposures to this type of fraud have increased dramatically. Protective measures do exist, however, and most internal auditors are in a position to help their organizations diminish risks by ensuring that effective deterrents and controls are in place.

Cheap and Easy Counterfeiting

Counterfeiters of the past had to consider several downside problems. First, the limited number of counterfeiters with the right skills and access to the right equipment made it easier for police to track down culprits when a fraud was committed. Therefore, the odds that the perpetrator would be apprehended were fairly favorable.

In addition, to make the tremendous time and effort involved in counterfeiting pay off, documents usually had to be high denomination currency, or securities such as stocks, bonds, and certificates of deposit. Such documents obviously attract attention, increasing the counterfeiter's risks of detection. This factor, plus the specialized nature and skill requirements of counterfeiting, made this type of crime comparatively rare.

Several technological developments have spawned dramatic changes. Almost anyone has access to easy-to-use (but technically sophisticated) tools that can de adapted to dishonest purposes.

For example, the basic, plainpaper copier, found in every office, has been used in a number of frauds, often the "copy of an invoice" type. The "photocopy of an invoice" fraud is textbook material today. All internal auditors know that any payments supported by a copy invoice must be investigated in detail at any audit. The problem is that, nowadays, distinguishing a copy from an original isn't always that simple. With the equipment easily (and often affordably) available today, an amateur can produce forged documents that only an expert can detect as counterfeit.

How It's Done

Today's counterfeiter can work alone, often in his own home, with equipment that would not appear out of place there. No extraordinary training or skills are required.

Personal Computer, Scanner

and Laser Printer

Anyone with a reasonably good job can probably acquire a personal computer, an electronic scanner, desktop publishing and graphics software, and a laser printer. The total cost would probably be less than $10,000.

With this equipment, plus a little practice and ingenuity, convincing forgeries can be produced. Three years ago an article in Forbes Magazine outlined, in considerable detail, how to produce nearly perfect counterfeit checks, almost certain to pass any bank's scrutiny.

Two years ago the Phoenix, Arizona, area was reportedly hit by a flood of fake checks. The checks were produced by putting corporate logos onto check stock paper using a desktop publishing system.

The risk is not limited to checks. Many organizations today are printing their own documentation on laser printers, rather than keeping large inventories of printed forms. This makes it very difficult to discern a valid company form from a forgery. All kinds of documents can be reproduced: purchase orders, delivery receipts, requisitions--the list is probably endless. (Add expense account receipts from other companies.)

The main weakness of current desktop publishing systems has been that they cannot, for the most part, print in different colors. Of course, color laser printers exist; but, at least for now, they are still relatively expensive.

Laser Color Copiers

If the possibilities inherent in desktop publishing systems seem alarming, the potential of laser color copiers may be even more so. At its current state of development, the laser color copier can handle up to 163 different colors and shades, and reproduce copies with a resolution about half as good as a good printing press. That may not sound impressive, but it is almost impossible to spot the difference with the naked eye. The color laser copier can produce very high quality pictures on varying thicknesses of paper, ranging from the very thin paper used in multi-part forms, to thin card stock. The laser color copier has already spawned numerous frauds, most (but not all) involving currency or checks.

Even four years ago, a Canon color copier was used in St. Catherines, Ontario, to produce over $24,000 of Canadian $50 and $100 bills. Ironically, the culprit was caught because a check for payment of the machine bounced. When the machine was repossessed, technicians servicing the machine found several $50 bills under a box of copier paper and reported it to the police.

Welfare checks, believed to have been forged on color copiers, have been appearing for over two years, according to the manager of corporate security for a major Canadian bank.