Introduction
The accounting field has provided a fertile ground for different kinds of frauds considered as being pervasive making government agencies, business enterprises and non-profits organizations stay away from their comfort zones lest they fall victims of such frauds. Most of the kinds of frauds facing such organizations and entities include misappropriation of cash and assets making more that 90 percent of such cases. These kinds of frauds can be easily detected and most entities have come up with appreciate measures to deal with such situations according to the Association of Certified Fraud Examiners reports. This percentage is dominated by assets misuse, theft and median damages. Misappropriations frauds come in several forms like cash skimming before record accounting takes place. The most unique kinds of fraud are the ones associated with most damages and are hardest to detect. These rare types of frauds occupy the remaining 10 to 5 percentage of the total frauds facing organizations. Though most organizations regard fraudulent statements in accounting to be the rarest and damaging fraud with the way it victimizes yet cannot be easily detected, there are other cheque frauds that are so rare and are of incomparable value. As fraudulent statement is associated with the fabrication of the financial statement of organizations including overstating of organizational revenues as well as understating its liabilities, some forms of cheque fraud involve the figures on the cheque sheet which may seem correct when viewed normally yet are frauded. Even some of the most sophisticated fraud detecting equipments in banks and offices are unable to detect them. Such frauds normally involve large sums of money thus are associated with valuable and rare frauds. A good example of this kind of fraud is the disappearing ink fraud in cheques.
Cheque fraud
In the past, cheque frauds were a common act in the accounting and banking sectors as were defined as being any common criminal act that entailed the use of cheques unlawfully in an effort to illegally access funds. This type of fraud was common and easily detected involving small amounts of money so as not to raise eye brows. It included capitalizing on float, cheque kiting and paper hanging. Cheque kitting involved the depositing of a certain amount of funds before the float period came to an end so as to cover up for the fraud committed while cheque hanging involved using float as an opportunity to come up with fraudulent checks while the accounts were left un replenished. The named forms of cheque frauds become too common that it was not easy to dupe any one. This led to the coming of more sophisticated and unusual form of cheque fraud referred to as the disappearing ink fraud.
Disappearing Ink Fraud
Disappearing ink fraud is a form of cheque fraud that involves invisible ink being used to write cheques with an aim of having different figures appear on a cheque in some time in future after the clarifications stages have been concluded. This is easily achieved by using a type of ink that once it dries up it appears blank after which a cover figure is written on top of the invisible figure so as to avoid suspicion by having a blank check or one with invisible figures. The ink will disappear for several days or hours. A person planning to engage in this type of fraud will write a personalized check to a given bank specifying the desired figure using the disappearing ink. The remainder amount will be written in normal ink and when the cheque is transferred to another bank to be deposited, the desirable amount will appear and will be added but by the time it gets to the original bank for clearance, the amount written in normal ink is what will appear on the check thus it is that amount that will be debited. This type of check fraud is complicated and cannot be easily traced making most people managed to succeed without being detected. Any loss detected will be left as a liability of the bank with the account holder walking away with a good amount of money.
Another type of fraud falling in the same category is the cheque washing fraud that takes place in between the transaction involving the recipient and the writer of the cheque. The fraud involves the use of certain types of chemicals to make the figures on the cheque be invisible and then the cheque which appears as blank is filled with the desirable amount. At times this type of fraud is carried out by bank employees.
This fraud has been observed in charities and community developments where a person moves from one door to the other soliciting funding and contributions and insists on the use of cheques claiming it is the safest means of paying money. After convincing interested parties, the person provides a pen that is filled with invisible ink to be used to sign the cheque. He or she later changes the details of the amount and the payee to suit his or her desires and then cashes the cheque. The type of fraud that was common involved the use of chemical solvent to erase the details on the cheques but this one is more basic.
Despite the many measures to curb this type of fraud such as voiding checks, the fraud still manages to evade the banker’s attention. Most banks fail to explain such situation forcing them to term the fraud as being as a result of encoding which is a common error in banks when it comes to issues on numerical figures on cheques. Banks should step up their monitory handling practices so as to deal effectively with such kind of errors and frauds as the safety of monetary amounts is their main function.
Combating Cheque Fraud
With reference to the law, when the amount on appearing on a cheque differs from the real figure settled at in any negotiation, such a situation is considered as being a criminal law violation. This has however taken different twists like the decision by most banks to refrain from charging fraud victims in case the cheque has proceeded to be deposited in the bank with sufficient funds thus has already been cleared. In some situations, it is the account holder that is held liable by the bank and normally faces penalties or criminal charges where the fraud is discovered and the bank does not clear the cheque.
It is only when the cheque has been successfully cleared by the bank that most banks decide to take action. To deal with such frauds, banks and organizations have come up with kiting schemes. Such schemes are made up of various methods that are meant to detect and curb fraud acts. Systems have been installed in the banks computers so as to detect and alert the officials from the bank in case any customer tries to engage in any activity that seem suspicious like depositing cheques with the same and large amount of money on a regular basis with the deposits followed by averages that tend to zero balances or clients who avoid the teller as much as possible by frequently making their deposits using the ATMs.
In modern banks and offices, the kitting schemes are considered as being outdated and have been replaced by new software that have the capability of catching any illegal act at any teller unlike the traditional methods which had to wait till when the banks were closed for them to run through the checks and detect errors. This ensures that illegal transactions are detected and stopped even before they start. This has led to common types of cheque frauds such as the abandonment and circular frauds being eliminated in the shortest time possible thus no chances of non existing funds being withdrawn. One of the most recent technologies is the image-sharing tool which is able to detect any amounts that appears temporally on the personalized account thus wiping them out immediately. This has helped in dealing with the most difficult types of frauds including the invisible ink fraud.
Some banks and offices have also come up with measures that use any cheque presented before the taller as a device for providing information that is later used during the automatic debiting of money from any of its accounts after which the cheque is handed back to the client. Some of the innovation that are involved in check clearances include the Automated Clearing House (ACH) which makes the clearing process faster as compared to the cheque clearing methods that were used traditionally. Some laws have also been passed to deal with the most complicated styles of frauds one of them being the Bedford’s Law. This law is able to detect and analyze digits and the frequency at which a given figure or digit appears is received or paid accounts.