The Changing Face of Payments Fraud (Part 2)

August 13, 2013
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This is the second part of our Q&A on payments fraud with Sean Trundy, co-founder of the document and currency security firm Fraud Fighter. In Part 1, we covered online card fraud, currency counterfeiting, and the evolution of fraud as new technology has become available. Click here to read the full article.

This time, we talk about security measures like UV and biometrics, and discuss what they mean for the future of payments.

Digital Check: Your company specializes in UV, which is used as a security feature on many types of physical payment instruments. What makes it so versatile, and what do you see as its biggest strengths and weaknesses?

Sean Trundy: Ultraviolet really has proven to be an effective tool.  If you reflect, again, on the earlier information I provided about the increase in “home grown” small-time forgery operations, we see why this technology has proven to be effective, even after decades of use.  While it is not impossible to produce UV features in a forged document, the task does provide some challenge.  Most of the compounds used to achieve fluorescence are volatile in nature, so the inks evaporate relatively quickly, unless they are locked into some type of laminated or protected state.  On the US banknotes, the UV feature is mixed into the Teflon material used to produce the security strip we all see when you hold a bill up to a bright light.  On Driver Licenses, the ink is protected by plastic lamination.  Other documents (such as postal money orders or traveler checks) use specific UV resistant coatings to prevent the disappearance of the feature.

Since the rank amateur counterfeiter working out of his dining room doesn’t have ready access to either the inks or the compounds to prevent the ink from evaporating, they typically do not even bother to include UV features in their counterfeits.  Now, this is not a blanket statement, and there are advanced operations (again, typically operated by organized crime rings) that might address these issues in their more professional production facility.  For these notes, we have more advanced currency detectors that examine multiple physical characteristics and can detect even the most advanced counterfeits.

However, in the end, the true “strength” of UV as a tool for fraud prevention lies in three factors.  1) Cost,  2) Ease of use, and 3) flexibility.  UV detectors are very low-cost. Even our top-of-the-line product sells for less than $100, and when purchased in bulk, can be significantly lower in cost.  The ease of use factor cannot be overstated.  When the unit is shipped to a customer, all they need to do is unwrap it and plug it in.  No internet connection, no software to install, no computer required, no network connections.  The training materials we provide allow anyone to understand how to use the device in less than two minutes.  Finally, the flexibility.  This simple tool can verify authenticity of currency, credit cards, driver licenses, passports, traveler checks, gift checks, coupons, and a wide variety of other important document.

DC: To the average retailer, which represents the bigger threat: The great multitude of amateur counterfeiters, or the sophisticated counterfeiting rings that can produce high-quality forgeries?

ST: I think it depends on your transaction portfolio.  What types of transactions do you conduct? Are they high-value, high-selling price items (say, diamonds, big screen TV’s or boutique designer goods)?  If so, then you are exposed to the organized crime rings who will make the time and dollar investment into building a sophisticated attack on your operation.

If, on the other hand, we talk about many smaller transactions, like a grocery store, or a fast-food restaurant, then the risk very obviously lies with the smaller, less sophisticated counterfeiter.

DC: Where do you see the future of fraud and counterfeit prevention headed? In five years, what will it look like?

ST: I am a real believer that the time of biometrics is just around the corner.  Advances in technology such as iris recognition, and facial recognition will make it possible to ID anyone who has committed fraud in your location.  At the same time, such technologies can be used to secure and protect individuals’ assets, such as credit cards and bank accounts.

DC: What is the most common myth about currency and card fraud today?

ST: I am not sure I know the answer to this.  It may be that people don’t think it’s their problem.  They think that if card fraud occurs, it doesn’t affect them. It affects the bank, or the card issuer, or the person whose card is stolen.

But the reality is that these hundreds of billions of dollars of annual fraud – in the end – come out of the consumers’ pockets.

About the Author: Jeff Hempker is Vice President of Digital Check Corporation, an Illinois-based manufacturer of check scanners and imaging equipment for the financial industry. Visit Digital Check online at www.digitalcheck.com.

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