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Kerridge International Inc.

Bank & Authentication Systems for the New Millennia !"" Brook#ille $d. Sil#er S%ring& M' () !)*!+!) (,+ Amana 'r. -enderson& N. + )//*!"""

Check Cashing & Fraud Costs to Grocery Stores


Food Marketing Institute (FMI) reports that SWORD wi sa!e the a!erage grocery store "#$%$$$&$$ '('R) W''* in a+or costs% reduced shrinkage and !au t cash costs, -./S a reduction in check 0raud costs1 Furthermore, Monday morning check handling and bank deposit labor costs are ELIMINATED! Labor Costs (losses) to perform Check Cashing Functions 1) Extra staff on payroll to support check cashing functions Friday and Saturday 2) Cashier calls check riter!employer to determine if presenter cashing check is indeed the rightful presenter of said check" #escribes presenter" $) Cashier then calls bank to determine if check riter!employer is a bank customer %) Cashier &isually examines the check for signs of tampering" ashier has no !ay o" determining !hether the check is authentic, altered, stolen or other!ise "raudulent# ') Cashier then &isually examines (# presented and makes a notation of the (# number ie dri&er license number" ashier has no !ay o" determining !hether the ID is authentic or person is authentic and right"ul holder o" said ID# W2R3I3G4 3either cashier nor retai er nor +ank ha!e any idea i0 presenter cashing check or check writer5e6p oyer that wrote said check is isted on an 26erican undesira+ es5terrorists OF2C7s ist or Internationa Watch .ist& Grocery store and +ank 0ace possi+ e 0ines 0or aundering 6oney or aiding and a+etting in a cri6e& 3O8'4 Direct resu t is that +anks do not want to accept third party checks 0ro6 grocery stores or other check cashers and are now re0using to process third party checks due to possi+ e 0ines e!ied +y FinC'3 0or !io ating -atriot 2ct c ause 9*now )our Custo6er: (*)C)& )) Cashier then manually enters transaction into a *+S terminal ,) Cashier then manually counts out bills and coins less fees

Without SWORD
8ota a6ount o0 ti6e to process one custo6er with on y one check% #$;#< 6inutes '2C= 8IM' check is cashed1

With SWORD 9One 8i6e: 'nro 6ent


S2(' > 6inutes per custo6er? dou+ ing output reduces one 0u ti6e e6p oyee at Custo6er Ser!ice Counter& 8here0ore reduction wou d sa!e "@$;@>%$$$5year in a+or costs&

Further Sa!ings 3eAt Week Once account is esta+ ished the neAt check cashing routine is .'SS 8=23 # Minute&

What cou d SWORD sa!e you per year in a+or and 0raud costsB
Without this o!erhead stores cou d pass the sa!ings on to the custo6er1
-*ride . #ignity /anking . Financial Ser&ices for 0ll1

Other 2dditiona Costs to Cashing Checks 0rmored car ser&ices and &ault cash costs +ffice staff labor to handle checks a second time and register checks 2onday morning for bank deposit 3ime and labor to dri&e checks to bank for processing /ank processing costs plus any additional charge back costs for 4SF checks Legal costs to pursue fraudulent checks Court time to pursue fraudulent check riter(s) Cost of insurance Cost of shrinkage and theft Cost of additional resources re paper ork5 consumables Lost re&enues due to offended customers 4+3 patroni6ing store because of long check cashing lines 7anitorial costs during check cashing operations due to increased loitering due to long ait times

8hird -arty Reports


Anne-Marie Roerink Director of Research of the Food Marketing Institute [FMI] reported April 14, 2 ! that the average loss for companies was $172,000 per year [per store] for "orthless checks#$ [#Assu%e all checks$ &sing the for%ula fro% the article 'elo" (otel)nline reports ()&*+),, ,o-$ 12,1!!. Although check cashing accounts for onl/ 0 to 1 percent of a grocer1s check acti-it/, it can represent a'out half of a super%arket1s check loss$ Therefore an average loss for check cashing would be $86,000 per year ]

!"# 2006 $upermarke% &oss 'reven%ion (epor%) !ood (e%ailers (educe Thef% *sing Technology, $urveillance, +duca%ion
2A*(I,3+),, D4 5 *epte%'er 2 , 2 6 5 Food retailers used technolog/, sur-eillance, hotlines and other %ethods to decrease losses fro% theft and other for%s of shrink to 1$6! percent of sales in 2 0, do"n fro% 2$ percent the pre-ious /ear, according to the Food Marketing Institute 7FMI8 *uper%arket 9Retailers "ho reduce shrink are the %ost -igilant and foster a culture of lo" tolerance,9 said FMI *enior :ice ;resident Michael *ansolo$ 9+he/ detect %ore theft, wor%hless checks, coun%erfei% money and fraud , /et the i%pact on their 'otto% line is lo"er 'ecause the/ reco-er %ore losses and pre-ent %ore cri%e$9 *hrink a%ong the top perfor%ers "as a %edian of $6. percent of sales in 2 0, co%pared "ith 1$6! percent for all stores, according to the report$ )ther top-line results of FMI<s loss pre-ention sur-e/= Ro''eries, ,ad -hecks and 3ift 4ard Fraud *i> in 1 co%panies reported at least one ro''er/, costing retailers an a-erage of ?@,04@ per incident$ (e%ailers accep%ed more %han half a million wor%hless checks, resul%ing in a median loss of $.7,.67 per company /s%ore0 in 200. +he e>plosi-e gro"th in gift cards has spa"ned a ne" for% of fraud$ +hese cri%inals, for e>a%ple, ta%per "ith 'ar codes to increase the -alue on stolen cards and 'u/ gift cards "ith "orthless checks or stolen credit cards, effecti-el/ laundering the%$ +"o-thirds of retailers selling gift cards e>perienced so%e for% of ta%pering, fraud or theft$

+he report "as 'ased on sur-e/s fro% 42 co%panies operating .,26 stores$

$hoplif%ing, -heck !raud and +mployee Thef% (emain (e%ailers1 Top -oncerns, 2ccording %o !"#1s 13%h 2nnual &oss 'reven%ion $urvey
2A*(I,3+),, D4 5 Aul/ 14, 2 @ 5 Food retailers and "holesalers report that shoplifting, check fraud and e%plo/ee theft remain %he grea%es% sources of annual losses, according to a ne" report released toda/ '/ the Food Marketing Institute 7FMI8, 2003 Security and Loss Prevention Issues Survey in the Supermarket Industry $

-*ride . #ignity /anking . Financial Ser&ices for 0ll1

-heck !raud 4or%hless checks con%inue %o be a cos%ly problem for supermarke%s, resul%ing in a %o%al ne% loss of appro5ima%ely $316 million for responding companies They accep%ed an average of 1.3,226 bad checks for an average ne% loss in 2002 of more %han $7 1 million per company [40 chains responded] $47(8 -os% 9us%ifica%ion) $7 1million:$30,000 per $47(8 %erminal ; 236 ins%alled s%ores:chain 5 <. chains ; 10,.30 =rounded down> %o%al $47(8 T+("#?2&$ could be ins%alled wi%h $316 million in e5perienced fraud losses Retailers are incorporating %ore %ethods to pre-ent the acceptance of "orthless checks$ 4onsistent "ith pre-ious /ears, the %ost co%%on %ethod is an internal authoriBation s/ste% at the point of sale$ Aust o-er C2 percent of co%panies in the sur-e/ used an internal s/ste%$ )ther fraud-pre-ention %ethods include outside authoriBation s/ste%s 76.$4 percent8 and check guarantee ser-ices 72$2 percent8$ +(D DAIEF DDE&3D of returned checks that pours into his co%pan/1s headGuarters is descri'ed this "a/ '/ E$A$ Moret= 9It1s frightening$ It1s like a ,iagara Falls$9 Moret, corporate office %anager at 3iant Food, Inc$, a super%arket chain 'ased in Eando-er, Md$, sa/s that 9e-er/'od/ in our 'usiness has the sa%e pro'le%$9 +hat state%ent %ight 'e e>tended to e-er/'od/ in retailing$ Dach /ear %illions of checks are returned '/ 'anks$

The !ederal ,ureau of #nves%iga%ion says annual bad@check losses could be as high as $< billion
+he pro'le% is especiall/ serious in food retailing, since grocery s%ores handle a -olu%e of consu%er checks second onl/ to that handled '/ 'anks$ 24H of the &n'anked cash their checks at a grocer/ store according to 4F*I$ (otel)nline reports ()&*+),, ,o-$ 12,1!!. For grocer/ and con-enience stores, check fraud co%es pri%aril/ fro% check cashing$ 2l%hough check cashing accoun%s for only . %o 10 percen% of a grocerAs check ac%ivi%y, i% can represen% abou% half of a supermarke%As check loss &osses from check cashing have been on %he rise, in par% because of new %echnologies available %oday %ha% enable fraud ar%is%s %o more easily coun%erfei% payroll checks /even more %rue %oday0

SWORD 9Forensic Fi tering: -rocessC


2 !raud 2r%is% will be de%erred by $47(8 and ?7T have any desire %o s%and in fron% of a $47(8 %erminal %o have %heir #8 and check researched and recordedB nor %o have %heir pho%o, signa%ure and =op%ional> biome%ric recorded #n fac%, %he %ransac%ion will never reach %his poin% as %he !2C+ #8 will be spo%%ed immedia%ely during %he firs% s%ep of %he ve%%ing and enrollmen% process #f %he #8 is DrealE =%he person is in disguise %o look like %he righ%ful owner of %he #8> %he person mus% %hen answer correc%ly 3@. mul%iple choice Fues%ions %o prove %heir au%hen%ici%y !ail ou% will follow The fraud 2r%is% will be uncovered and %he %ransac%ion cancelled #f %he #8 is DrealE =as in %he case of DrealE !lorida 8rivers &icenses being issued %o %erroris%s> %he person Dfails ou%E due %o %he name found on 7!2-1s or 28 o%her #n%erna%ional 4a%ch &is%s in %he $47(8 da%base 2 similar !orensic !il%ering process of %he check also occurs assuming #8 and person are DrealE

83he 0ccount Set 9p *rocess occurs one ti6e on y during initial enrollment to establish the person in the S:+;# system" 3hereafter at random dates a search is performed for person(s) ho may ha&e been placed on a - atch list1 at a later date after enrolling in the S:+;# system" Forensic Filtering during the check acceptance process occurs e&ery time a check is presented as ne checks contain ne information on person(s) or company(s) that rote!made said check(s) and may be found on a - atch list1" -*ride . #ignity /anking . Financial Ser&ices for 0ll1