The ability to develop fraudulent checks has been enhanced by the widespread availability of quality graphics packages for microcomputers and the lower prices of equipment used to code checks for processing. This equipment uses magnetic-ink character recognition (MICR), which is embedded in the checksand used by the bank to process checks against the customer's account.

To develop fraudulent checks against a company, the following are needed:

Blank check stock (that is, the check forms)

A high-quality graphics program and printer with the capabilty of duplicating letterheads, different font styles, and signatures.

A copy of a check from the commpany whose account the check is to be written against, so that all important aspects of the check (such as MICR coding) can be duplicated.

A machine to perform MICR coding. The equipment needed to carry out such a scam could be obtained at a cost somewhere between $10,000 and $30,000. The equpment is capable of developing a fake check that is virtually indistinguishable from the real check.

Are there any solutions or safeguards against such frauds? Fortunately, basic controls could be implemented including the following:

Develop organization logos that are embedded in the checks, making them difficukt to duplicate.

Use multiple-color checks

Restrict the type of paper used in the blank check stock.

Use seperate accounts for low-dollar-value checks.

Implement edit controls over the use of smaller checks, thus treating the low-dollar accounts as imprest bank accounts.

Provide timely and thorough independent reconciliations of the account balances.