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Counterfeit Fraud Detection
Tips, Tools and Techniques
Sean Trundy, COOJames Smith, SVP, Sales & Marketing
How Peru Became the World's Counterfeit CapitalBy Lucien Chauvin / Lima
Agenda• UVeritech - Introduction• Counterfeit Fraud– An Overview
– Types of Counterfeit Fraud– Losses– Counterfeiting Techniques– Sources of Counterfeit– What’s Next?
• Document Authentication Methods– Visible/Physical Document Inspection– Covert Feature Detection(UV, IR, MG)– Forensic Analysis
• Tools for Detection• Live Product Demo
UVeritech Background
• Founded in 2000• Leaders in “counterfeit fraud prevention”
solutions• Pioneered POS counterfeit detection
scanners in enterprise accounts• Multiple layers of Fraud Prevention
– UV, Automated Currency Detection, Image Capture, Verification and Authentication
A Leader in Fraud Prevention Solutions
• 14 of top 20 US banks use our products
over 14,000 units over 20,000 units over 28,000 units
• Over 1000 Credit Unions installed• Over 500,000 units sold• Marquis customers in all verticals
Counterfeit Fraud Overview
Counterfeit fraud is the act of intentionally presenting a forged item in order to gain a benefit.
While often associated primarily with currency (e.g. counterfeit money), in fact, counterfeit fraud can include an amazingly far-reaching range of items, including:•Negotiable instruments (cash, checks, cashiers checks, postal money orders, traveler checks, gift certificates)•Identification Documents or “breeder” documents to create a false identity (e.g. birth certificate, driver license, passport)•Title documents showing ownership (vehicle, real estate)•Certificates of Authenticity for collectibles and rare articles•Coupons, “promotional dollars”, or other store currency•Credit cards, gift cards, P-Cards, stored value cards
Currency Counterfeiting
2009 Saw 77% Increase over 2008Secret Service made 2,506 domestic arrests and assisted in 360 foreign arrests for counterfeiting offenses, and helped to remove more than $182 million in counterfeit U.S. currency from circulation, up $79 million from FY2008.
Currency Counterfeiting
Counterfeiting on the upswing
Currency Counterfeiting• Factors Contributing to Increased Counterfeit Currency
– Digital Tools• Office Copier Technology/Digital Graphics Programs• Printer/Toner Technology • Criminal “Social Networks” propagating files and know-how
– Organized Crime Participation• “Mass Production” factories utilizing washed notes
– Improved quality, quality control programs, incremental improvements over iterative generation
– Foreign Government Collusion• North Korea, Iran, Bulgaria, Columbia and China produce “Supernotes”
– Access to Intaglio printers and heavy offset presses
Currency CounterfeitingTypes of Counterfeit Notes
• Washed Notes - “Bleaching” Genuine Banknotes• Produces Genuine US Banknote Stock upon which to print higher-denomination
counterfeit note• Washed Notes pass the pen-test, and most common visual inspection techniques• “Feels” like real money – because it is!
• SuperNotes – Produced on Same Equipment used by BEP• Heavy Offset Presses, similar paper, similar inks, ability to reproduce many of the physical
characteristics of genuine banknotes
• Digital Notes - The Most Common Form of Counterfeit• Copier/PhotoShop productions – can typically be identified by lack of intaglio printing,
lack of “covert” security features, and incorrect paper
• Altered Notes– Bank notes altered to appear as higher denomination, e.g. “raised” notes
Currency CounterfeitingWashed Notes
Currency CounterfeitingAltered Notes; Digital Notes
Copy
Genuine
Counterfeit Negotiable Instruments• Negotiable Instrument Types
– Money Orders, Postal Money Orders, Cashiers Checks
– Traveler Checks
– State and Federal Treasury Checks – e.g. Tax Returns, Social Security, Unemployment, etc
Traveler Checks - Features
Traveler Checks - Features
Postal Money Order- Features
Counterfeit Identity Documents Identity theft is a form of fraud or cheating of another person's identity in which someone pretends to be someone else by assuming that person's identity, typically in order to access resources or obtain credit and other benefits in that person's name.
•The FTC estimates that as many as 9
million Americans have their identities
stolen each year.
Identity theft by category
Counterfeit Identity Documents Common Techniques For Stealing ID Information•Dumpster Diving. They rummage through trash looking for bills or other paper with your personal information on it.
•Skimming. They steal credit/debit card numbers by using a special storage device when processing your card.
•Phishing. They pretend to be financial institutions or companies and send spam or pop-up messages to get you to reveal your personal information.
•Changing Your Address. They divert your billing statements to another location by completing a change of address form.
•Old-Fashioned Stealing. They steal wallets and purses; mail, including bank and credit card statements; pre-approved credit offers; and new checks or tax information.
•Pretexting. They use false pretenses to obtain your personal information from financial institutions, telephone companies, and other sources.
Cont’d Common ID Theft Techniques•Hacking computer networks, systems and databases
•Exploiting breaches that result in the publication of personal information such as names, Social Security number or credit card
•Advertising bogus job offers in order to accumulate resumes typically disclosing applicants' names, home and email addresses, telephone numbers and sometimes their banking details
•Exploiting privileged IT users to access personal data on their employers' systems
•Infiltrating organizations that store valuable personal information
•Brute-force attacking weak passwords; compromising weak password reset questions
•Obtaining castings of fingers to falsify fingerprint identification
•Browsing social networking websites for personal details published by users
Counterfeit Identity Documents
Coupons; Store Currency
Types of Counterfeit FraudCredit Cards, Gift Cards
• Fake Cards– Card “Skimming”
– Breached data theft
• Stolen Cards– Card not present Transaction
– Presented with Fake ID
The Cost of Fraud
For every $100 of fraud, total losses equal $310Lexis–Nexis 2010 True Cost of Fraud Study
In addition to the transactional (dollar) losses, organizations also incur:
Associated expensesAudits, legal, investigative, report preparation (SAR’s, CTR’s), employee interviews
Loss recovery – e.g. pursuit of lost fundsFees and interest
Counterfeit Fraud Losses• $200 million in counterfeit currency in the U.S.
(2009 US Treasury) $109M confiscated by Secret Service in 2008
• $12.2 billion in losses due to check fraud(2006 American Bankers Association)
• $500 million per year in credit card fraud• $31 billion in US existing account fraud
(2009 Javelin Strategy and Research)
• $221 billion worldwide per year due to identity theft (Aberdeen Group)
Counterfeit FraudTechniques
Amateur•Alteration•Digital•Chemical Wash
Professional•Engraved/Off-set•“Breeder” Document Replication
Who is Counterfeiting?
• Foreign Governments
• Foreign Organized Crime
• Domestic Organized Crime
• Domestic “small time” operators
• Domestic – “Opportunity Forgers”
Document AuthenticationCommon Methods
• Document Authentication Methods– Visible/Physical Document Inspection
• “Test” the paper by feel• Look at colors and “visible” security features
– Color shifting, Holographic, thermal sensitive
– Covert Feature Detection• Ultra-Violet• Infra Red• Magnetic
– Forensic Analysis• Pattern Matching• Content Matching
Document AuthenticationPhysical Inspection
• Color-Shifting Ink
• Holographic Images
• Thermal Ink
Document AuthenticationPhysical Inspection
Intaglio Printing
Document AuthenticationVisible Inspection
• Watermarks
Artificial
Genuine
Document AuthenticationCovert Feature Inspection
“Covert” features, by definition, are hidden features that cannot be read without technological assistance•Ultra-Violet
– Fluorescent “glowing” features
•Infra-Red– Special ink only reflects infra-red light
•Magnetic (MICR)– Machine readable characters printed with magnetic
ink
Ultra-Violet security features are popular and used quite commonly because:
– The fluorescence is visible to the naked eye
– The printing techniques are understood and easy to control
– Features can be easily varied, and are able to be made into interesting, compelling designs (which can be easily remembered)
Verifying UV Features
Traveller Check UV Features
Money Order UV Features
ID Document UV Features
Currency UV Features
Infra-Red ink features appear as monochromatic and require an IR viewing filter for human eye to see.
Infra-Red features are popular for government controlled documents (ID’s, currency, etc.) because:
–Machine Readable Characters are easy to be read
–Optical Character Recognition (OCR) software can see IR printed letters and numbers better than visible light
–Casual counterfeiting operations are incapable of reproducing IR printed features and/or are unaware of them
Verifying IR Features
Currency IR Features
ID Document IR Features
Forensic Examination
• Pattern Matching• MCR/MRZ (Machine Readable Character
Recognition/ Machine Readable Zones)• Data Match/ Data Compare
– OCR– Bar-Code– RFID– DigiMark
Document AuthenticationPattern Matching
Data Compare
Intelligent data-
base recognizes
document and
looks for visible
and stored data in
expected locations
Tools for Counterfeit Document Detection
Aids for Physical Document Review
• Magnifying Glass/Jeweler’s Loupe– Enables verification of micro-printing
Requires very detailed knowledge of document
design and layout. Slow process; potentially offensive to customers
• Starch-pen/ink testing pens– Tests validity of paper and/or the ink used in printing
process
Forgers now use paper that can pass the litmus test, higher-end laser printers can stump the ink-tester pen
Ultra-Violet Devices
Infra-Red Devices
MRC Character Reader Devices
Forensic/Advanced Analytical Devices
Infrared Pattern
Seal/tamper check
UV check
Visible Pattern
Layered Fraud Prevention
• POS Ultra-Violet Devices-POS and Perimeter Protection– Verify Currency, Driver Licenses, Credit Cards, Traveler Checks,
Money Orders, Passports, etc.
• Advanced currency and ID scanners– Detects counterfeit “Super Bills”– Mag-strip, optical character and bar-code readers– Age verification for restricted products– High Speed Money Counting Machines
• ID Validation and image capture authentication
Layers of Fraud Prevention
Image capture Authentication
Back-office currencycounting and fraud detection
CurrencySuper $50/$100 InternationalManagers
Below counter wall mounted
Currency, ID,Credit Cards
Front
Rear
Front
Rear
Currency, ID, Credit Cards
Summary• Prevent fraudulent transactions• Regulatory Compliance adherence• Avoid monetary and disciplinary penalties• Secure encrypted image of DL for future archive
retrieval and storage• Reduce FTC-privacy exposure while enhancing
any pending litigation• Reduce exposure to privacy violation from
internal employees
