FMS Investigates Forensic Document Challenges in a Check 21 World

By Heather Davis, Check Resolution Division

In 2003, when Check 21 was instituted and financial institutions (FI's) were permitted to destroy the original negotiated U.S. Treasury checks, forensic document examiners were faced with new challenges in their struggle to combat fraud. Prior to Check 21, examiners had access to the original documents to microscopically examine, image, and test for fraud using complex equipment and techniques such as ink analysis. However, as checks were phased out by electronic transactions, FMS's forensic examiners began to work with outside agency fraud investigators, FI's, and law enforcement to achieve our common goal: the prevention of fraud and abuse stemming from Treasury document schemes.

In fiscal year 2010, FMS Questioned Documents (QD) Staff identified more than one hundred counterfeit Treasury checks totaling more than $700,000, and more than 200 altered checks totaling more than $13 million. Using available QD staff resources and data, we assist outside agencies such as the United States Secret Service, Treasury Office of the Inspector General (OIG) and Social Security Administration in combating fraud.

Currently, the QD staff is assisting Treasury OIG investigators to identify trends in various stolen check cases. While FIs use the Treasury Check Verification Application (TCVA) system as a first step, Treasury OIG requested the assistance of the QD staff to track cases involving specific check cashing facilities. This was an effort to thwart fraud at the beginning of the check negotiating process, thereby allowing investigators to amass hundreds of thousands of dollars in prospective fraud cases for prosecutors. (These cases otherwise would have been overlooked due to their small dollar value as a fraud transaction).

In another case, QD staff used specific data points from several counterfeit checks and ran them against recently added fields in our databases. Doing so, allowed QD staff to provide numerous checks for the Social Security Administration’s investigation and increased the dollar amount of their fraud case.

In addition to revealing U.S. Treasury check fraud involving stolen, forged, altered, and counterfeit checks, QD has worked to combat Treasury document fraud perpetrated through online scams. The QD staff daily receives inquiries from FIs, investment firms, and private citizens, regarding false Treasury items such as: Sight Drafts, Bills of Exchange, Treasury money orders, and "Private Trust" scams — all where citizens may have revealed personal information as well.

We recently received a new group of documents for examination called "Private Discharging and Indemnity Bonds," which are not examples of legal negotiable Treasury documents. All four were submitted for $300,000,000 and were being used to establish a brokerage account with a FI. The FI, fortunately, contacted our office before accepting the payments which would have totaled $1.2 billion.

These are just a few of the examples of the work the FMS QD staff investigates on a daily basis. By utilizing our valuable resources, establishing a strong relationship with other federal agencies and facilitating effective communication between investigators and the FI's, the U.S. Treasury continues to catch and prevent Treasury document fraud in a Check 21 world.

For more information about the work of the QD staff in the Check Resolution Division, please contact Heather Davis at heather.davis@fms.treas.gov.