Sign Here, Please!
How to Reduce Check Fraud and Forgery
By Jody Noerdlinger with Terry Davenport

Check fraud and forgery are two of the biggest security problems faced by banks. In fact, according to a recent Ernst & Young study reported by the National Check Fraud Center, over 500 million checks are forged annually, with losses totaling more than $10 billion, not counting those incurred by other types of document forgery.

Perhaps this sounds familiar. A man was asked to co-sign a promissory note for his sister. Although he feared the worst, he felt compelled to sign. A few years later, the sister defaulted on the loan, just as he figured she would. The brother was obligated on the note, but now he claims it's not his signature. A quick comparison with the handwriting on his signature card indicates that he appears to be telling the truth. Normally, this guy writes in a neat, legible hand. The writing on the loan document, however, is wobbly and faltering; it looks nothing like that on the signature card! So what's the deal? Who signed the note, and who pays the bill?

Read on, and you'll find out how cases like these are routinely solved by those who call themselves questioned, or forensic, document examiners. Terry Davenport, a questioned document examiner who operates a business called Graphic Detection, has been involved with numerous forgery and fraud cases throughout the United States and abroad. Terry's extensive experience has taught her many "tricks of the trade," and she's willing to explain what banks can do to reduce risk and catch crooks.

But first, exactly what is a questioned document examiner? He or she is a trained professional who investigates all manner of documents that are alleged to be forged:  medical records, checks, contracts, insurance policies, notarized signatures, you name it, created in just about any medium including fax, longhand, typewriter, computer printer, or copy machine.

And what sort of jobs are routine for someone in this profession? Here's an example of a fairly common occurrence. Using the tools of her trade, Ms. Davenport can take a look at a signature of dubious authenticity and tell whether it's been faxed while the document it appears in has not. How could such a thing happen? Well, let's say a wily con artist needs a particular signature that's only available on a fax. No problem! He or she will simply copy the faxed signature and paste it onto a typed contract or, perhaps, the board meeting minutes. However, characters in a fax are composed of little squares that, when viewed under magnification, resemble stair steps. Look at faxed writing with a common magnifying glass, and you can easily see this effect. A thorough examination reveals that the stairstepping effect is evident in the signature and missing elsewhere. In addition, an alert document examiner can tell it's not a bona fide signature by noting miniscule shadows, a slight misalignment, or "trash marks"--flecks of dried white-out, etc., reproduced from the copy machine glass. Ask Ms. Davenport; she recently solved a matter involving just such a document and saved her client lots of money to boot.

Or take "The Case of the Identical Signatures." In this instance, the client swore that someone had forged her name, cleaning out her checking account. According to the bank, however, it was an authentic signature and the customer was at fault. Enter the questioned document examiner who discovered that the indorsements had been traced. An individual never writes his name exactly the same way each time. But, in this case, out of approximately 100 checks there were, for example, six signatures identical to one another; 8 that were also duplicates; 12 exactly alike; and so forth, eventually proving that the questionable signature, though indistinguishable from the customer's, had indeed been forged. Consequently, the bank was able to satisfy the account holder's demands for restitution without incurring a lengthy and expensive law suit which it inevitably would have lost.

Perhaps one of the most audacious schemes that Ms. Davenport has encountered involved a check forgery ring operating with the help of a bank employee who had access to signature cards. The signatures and account information were made available to outside accomplices who would then go to branch banks in different cities, forging account holders' signatures and withdrawing funds. Luckily, the participants in the scheme were very careless. Ms. Davenport examined checks that had been cashed on an account held by Joe and Nancy Smith, but bore the signature of Susan Jones!

How can banks profit from the expertise and experience of a questioned document expert? Take note of these tips for reducing risk and catching crooks.

Always be sure to:

1. Check the spelling of signatures on personalized negotiable instruments. It's common for crooks to misspell the account holder's name, and certain names are very susceptible to such an error. For example, "Merritt" could be written "Merit," "Merrit," or "Meritt" by a crook who might have flunked spelling in school. A conscientious teller who is trained automatically to compare the printed name and the handwritten signature will immediately notice this discrepancy. To demonstrate the need for teller training in this area, Ms. Davenport reports that colleagues have seen checks that tellers accepted signed "U. Ben Taken," "Mickey Mouse," and "U.R. Stupid"!
2. Make signature cards do their job.
   • Most signature cards do not provide enough room for two or more names. Terry says that she's encountered illegible signatures on many cards simply because one account holder wrote in a loopy scrawl, obscuring the name of the other account holder. Anyone who attempts to verify the names will have difficulty making out which letters, loops, and curlicues belong to whom. Cards should allow plenty of room for multiple signatures. That's a simple solution to a common problem, but one that has caused banks trouble on more than one occasion.
   • Signature cards are seldom updated. It's difficult to accurately compare signatures that are written, say, 25 years apart. In 1974, at the age of 50, Mr. Smith was healthy and active. Today, at 75, he's suffered several strokes and his handwriting exhibits the tremors associated with deteriorating health. Since his signature card has never been updated to reflect the change in his handwriting, it's hard to tell whether the questionable $5,000 check signed in a shaky scribble is forged or not. Although questioned document specialists can distinguish among the tremors of bad health, alcoholism, and forgery, taking the time to update cards could help solve cases more easily, as well as ensure a customer that his or her bank is doing its job.
3. Take care not to damage a check that has been deemed forged. In what they assume is the best interests of the law, some banks will write or stamp "FORGED" in the biggest and boldest letters possible, right across the front of the check. Now, everyone knows this instrument is tainted, but, unfortunately, the evidence against the crook is tainted as well. Not even the best questioned document expert in the world can make out numbers or letters hidden by the incriminating label. Special lights can see through red ink, but not black or blue. Thus, instruct personnel in charge of forged items to mark them in an unobtrusive way, so that those who examine the documents can make the best possible use of the evidence.
4. Use only high quality copies of forged or fraudulent documents. Many times, Terry reports, questioned document examiners are given virtually illegible photocopies of checks. There are dark smudges or shadows left by the copy machine, the print is fuzzy, and often the text has been reduced so that it's impossible to make out the pertinent information. If you're not allowed to provide the original, do everything possible to preserve the quality of the copy, thereby increasing the chances that the forger can be identified.
5. Hold notaries to the high standards of their profession. Here comes Bill Jones, the richest, most influential guy in town. He's waving around the deed to some of his wife's property that she's consented to give him. He claims his wife has already signed it over, but she's busy at the hairdresser's today and isn't able to come in. All he needs is a notary's stamp. Bill's a great customer, so he gets his document notarized. A few years later, Bill and his wife divorce. She claims she's unaware of the "gift" she made her former husband. A questioned document specialist examines the signature and, low and behold, it's a fake. Bill took the liberty of signing for his wife without her knowledge. Who's held liable? The notary, yes, and quite possibly the bank he or she works for. A similar situation occurs when one signature on a mortgage is obtained outside the bank and notarized by a bank employee without requiring the presence of the signer. Avoid trouble! Don't allow your notaries to be put in a compromising position or intimidated by someone with unscrupulous motives, and always be sure to lock up stamps and to keep exacting records.

First published on bankinfo.com on 2/17/99