Forged Applications
An offender will obtain identification and all pertinent information from stolen items, or create a fictitious person. The offender will use those items to apply for employment, a loan, a line of credit, or a credit card. Forged identification may also be used to open checking and savings accounts in a real business name and have all the statements mailed to a different address provided by the offender.
Note that if there is a case of identity theft for the purpose of applying for employment, loan, line of credit, or a credit card, or to open an account with your financial institution, you must file a Suspicious Activity Report (SAR). And, if any such transactions go through, you can supply the real person, the victim, with any information that has been used fraudulently. Caution should be taken when filing the SAR not to use the name of the real person as the subject of the report. If the imposters name is known, or any alias, that can be provided on page one of the SAR. The victim's name should only appear in the Narrative part of the report.
Authorization Note Withdrawal
An offender will attempt to withdraw funds from either checking or savings accounts, offering what appears to be a written note of authorization from the accountholder to do so. These frauds may be committed either in person or via the mail.
If "authorization notes" are used by the institution to accommodate special needs, they should be notarized by a notary other than a person employed by the institution - to prevent a forged withdrawal - as such notes are frequently forged. The accountholder and the financial institution should also prepare a written agreement identifying who may authorize such a transaction, and describe the particular circumstances where the use of an "authorization note" is appropriate.
The institution may also require a "hold harmless" agreement that places the financial responsibility for negotiating "authorization notes" on the accountholder. This forgery scheme is also one of the most successful styles of embezzlement by either employees or business partners.
Traveler's Check
These items present a particular problem. When most traveler's checks are lost or stolen, a signature sample accompanies the other negotiable items. Insistence that the check must be signed in an employee's presence - and that the person must furnish appropriate identification at the time of the transaction - will reduce losses, or at least furnish information for an investigation. By obtaining appropriate identification - and writing that information on the document - the company furnishing the checks will normally reimburse the financial institution for any loss.
Traveler's checks also contain security features much like currency, using special ink, shades, and water marks. Careful examination will almost always make it possible to detect counterfeits.
Money Order
An offender will normally obtain these by mail thefts and he/she will then attempt to impersonate the true owner and cash it.
Another common way in which an offender will benefit from a money order is by "raising" the amount on its face. "Raising" means to the altar an amount imprinted upon a document. As an example, an offender will alter the value by using a red or blue fine-line ballpoint pen. This will "blister" the back of the money order in a different manner than imprinting does. "Raising" is detected by visually examining the reverse of any money order or other imprinted item.
Most banking and government instruments that bear an imprinted amount will also display the name of the issuing institution or agency - imprinted on the same line - just prior to the written imprinted amount. Offenders frequently steal imprinters from other sources and use them to create forged payable instruments. Offenders will either break off the name insert preceding the amount, or they will ignore it - hoping that the institution's personnel will not recognize the insert's importance.
Warrant
Warrants are different than checks. Warrants are issued by a governmental agency or a particular industry for a purpose that is stated on the document's face - and they often bear claim numbers.
The payee(s) must personally endorse the document in the employee's presence at the time of negotiation if he/she wants to cash it. If the warrant is made payable to John or Mary Jones, either person may cash it. If the warrant is made payable to John and Mary Jones, both persons must endorse the document in the employee's presence to cash it. If it does not indicate an "and" or an "or", it's safest to insist on both endorsements.
A deviation from this procedure is a power of attorney accompanied by a notarized statement from one payee, or similar wording on the face of the signature card that was signed by both persons at the time the account was opened. The wording stipulates that the person presenting the warrant may accept payment for both payees. The institution may also supply the endorsement for full deposit.
The other area of concern is that merchants deposit these warrants and government items to their commercial accounts and they don't properly identify those persons cashing them. If the financial institution accepts these items and they are stolen or forged - or any dispute regarding unauthorized payment arises - the institution may be held liable by the issuing agency or company. If the issuing agency or company causes the institution to pay the amount of the item, the institution will then have to locate the endorser to arrange repayment, if it's possible.
Any merchant who cashes warrants and government items for its customers - and later deposits those them to its commercial account - should be counseled by institution personnel about identification practices. The merchant should be instructed to obtain and record complete identification information at the time that they are negotiated. If the item does not contain that information at the time it is deposited, it should be returned to the merchant and not accepted for deposit until the endorser is properly identified. The institution may also require a "hold harmless" agreement that places the financial responsibility for negotiating these items on the merchant. Examples include:
Death benefits from a life insurance policy;
Hospitalization or medical claim benefits from a health insurance policy;
Collision repair reimbursement from an auto insurance policy;
Personal property reimbursement from a disaster or theft policy;
Welfare/Aid to Families with Dependent Children;
Social Security;
Disability;
Widows and orphans;
Retirement;
Tax refund; and
Educational reimbursement
(Editor's note: Dana Turner can be reached in Pipe Creek, Texas at 830-535-6500 or by email at danaturner@bankersonline.com)
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