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Counterfeit Fraud Detection Tips, Tools and Techniques Sean Trundy, COO James Smith, SVP, Sales Counterfeit Fraud Detection Tips, Tools and Techniques Sean Trundy, COO James Smith, SVP, Sales & Marketing

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Agenda • UVeritech - Introduction • Counterfeit Fraud– An Overview – – – Types 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 • 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 A Leader in Fraud Prevention Solutions • 14 of top 20 US banks use our products over 14, 000 units over 20, 000 units • Over 1000 Credit Unions installed • Over 500, 000 units sold • Marquis customers in all verticals over 28, 000 units

Counterfeit Fraud Overview Counterfeit fraud is the act of intentionally presenting a forged item 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 farreaching 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 2008 Secret Service made 2, 506 domestic Currency Counterfeiting 2009 Saw 77% Increase over 2008 Secret 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 FY 2008.

Currency Counterfeiting on the upswing Currency Counterfeiting on the upswing

Currency Counterfeiting • Factors Contributing to Increased Counterfeit Currency – Digital Tools • Office 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 Counterfeiting Types of Counterfeit Notes • Washed Notes - “Bleaching” Genuine Banknotes • Currency Counterfeiting Types 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! • Super. Notes – 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/Photo. Shop 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 Counterfeiting Washed Notes Currency Counterfeiting Washed Notes

Currency Counterfeiting Altered Notes; Digital Notes Copy Genuine Currency Counterfeiting Altered Notes; Digital Notes Copy Genuine

Counterfeit Negotiable Instruments • Negotiable Instrument Types – Money Orders, Postal Money Orders, Cashiers 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

Traveler Checks - Features Traveler Checks - Features

Postal Money Order- Features Postal Money Order- Features

Counterfeit Identity Documents Identity theft is a form of fraud or cheating of another 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 Identity theft by category

Counterfeit Identity Documents Common Techniques For Stealing ID Information • Dumpster Diving. They rummage 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.

Counterfeit Identity Documents Cont’d Common ID Theft Techniques • Hacking computer networks, systems and Counterfeit Identity Documents 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

Coupons; Store Currency Coupons; Store Currency

Types of Counterfeit Fraud Credit Cards, Gift Cards • Fake Cards – Card “Skimming” Types of Counterfeit Fraud Credit 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 $310 Lexis–Nexis The Cost of Fraud For every $100 of fraud, total losses equal $310 Lexis–Nexis 2010 True Cost of Fraud Study In addition to the transactional (dollar) losses, organizations also incur: üAssociated expenses ØAudits, legal, investigative, report preparation (SAR’s, CTR’s), employee interviews üLoss recovery – e. g. pursuit of lost funds üFees and interest

Counterfeit Fraud Losses • $200 million in counterfeit currency in the U. S. (2009 Counterfeit Fraud Losses • $200 million in counterfeit currency in the U. S. (2009 US Treasury) $109 M 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 Fraud Techniques Amateur • Alteration • Digital • Chemical Wash Professional • Engraved/Off-set Counterfeit Fraud Techniques Amateur • Alteration • Digital • Chemical Wash Professional • Engraved/Off-set • “Breeder” Document Replication

Who is Counterfeiting? • • • Foreign Governments Foreign Organized Crime Domestic “small time” Who is Counterfeiting? • • • Foreign Governments Foreign Organized Crime Domestic “small time” operators Domestic – “Opportunity Forgers”

Document Authentication Common Methods • Document Authentication Methods – Visible/Physical Document Inspection • “Test” Document Authentication Common 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 Authentication Physical Inspection • Color-Shifting Ink • Holographic Images • Thermal Ink Document Authentication Physical Inspection • Color-Shifting Ink • Holographic Images • Thermal Ink

Document Authentication Physical Inspection Intaglio Printing Document Authentication Physical Inspection Intaglio Printing

Document Authentication Visible Inspection • Watermarks Artificial Genuine Document Authentication Visible Inspection • Watermarks Artificial Genuine

Document Authentication Covert Feature Inspection “Covert” features, by definition, are hidden features that cannot Document Authentication Covert 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

Verifying UV Features Ultra-Violet security features are popular and used quite commonly because: – Verifying UV Features 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)

Traveller Check UV Features Traveller Check UV Features

Money Order UV Features Money Order UV Features

ID Document UV Features ID Document UV Features

Currency UV Features Currency UV Features

Verifying IR Features Infra-Red ink features appear as monochromatic and require an IR viewing Verifying IR 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

Currency IR Features Currency IR Features

ID Document IR Features ID Document IR Features

Forensic Examination • Pattern Matching • MCR/MRZ (Machine Readable Character Recognition/ Machine Readable Zones) Forensic Examination • Pattern Matching • MCR/MRZ (Machine Readable Character Recognition/ Machine Readable Zones) • Data Match/ Data Compare – – OCR Bar-Code RFID Digi. Mark

Document Authentication Pattern Matching Document Authentication Pattern Matching

Data Compare Intelligent database recognizes document and looks for visible and stored data in Data Compare Intelligent database recognizes document and looks for visible and stored data in expected locations

Tools for Counterfeit Document Detection • • • Visible Review Aids UV Lights Infra-Red Tools for Counterfeit Document Detection • • • Visible Review Aids UV Lights Infra-Red Viewers Machine-Readable Character Devices Forensic Analysis Devices

Aids for Physical Document Review • Magnifying Glass/Jeweler’s Loupe – Enables verification of micro-printing 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 Ultra-Violet Devices

Infra-Red Devices Infra-Red Devices

MRC Character Reader Devices MRC Character Reader Devices

Forensic/Advanced Analytical Devices Infrared Pattern Seal/tamper check UV check Visible Pattern 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 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 Currency, ID, Credit Cards Image capture Authentication Below counter wall Layers of Fraud Prevention Currency, ID, Credit Cards Image capture Authentication Below counter wall mounted Currency, ID, Credit Cards Managers Currency Super $50/$100 International Back-office currency counting and fraud detection

Summary • • Prevent fraudulent transactions Regulatory Compliance adherence Avoid monetary and disciplinary penalties 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

Questions and Answers Jim Smith SVP Sales & Marketing jims@uveritech. com Questions and Answers Jim Smith SVP Sales & Marketing [email protected] com