Check Washers Launder Money the Easy Way

Methamphetamine addicts steal personal and business checks from the mail, give them a bath, and cash the revived drafts to feed their habits. 

Joe and Samantha Etinger were driving on an Arizona highway when police pulled them over for a routine traffic stop.1 During a search of their car, the officers found five personal checks that the occupants had stolen from the mail in various Arizona cities. Joe and Sam had "washed" away the payees and signatures on the checks with chemicals and had planned to fill in their own information and cash them.  

Postal inspectors, who had obtained a search warrant, found six additional stolen checks in the suspects' motel room and one more soaking in a washing solution. Both husband and wife admitted to needing the money to support their methamphetamine habits.  

Checks are taking a bath and so are unsuspecting citizens. Check washing, a method of altering checks to steal from personal and business accounts, has been in existence since the mid-1980s, but the crude scheme is increasing. According to the National Check Fraud Center (www.ckfraud.org/washing.html), check washing costs consumers and financial institutions $815 million a year.  

Check counterfeiting is becoming a common fraudster's scheme. Fraudsters use computers, scanners, off-the-shelf software, and laser and color printers to create high-quality phony checks that are hard to detect.  

But unsophisticated check washing - a low-tech form of identity theft - is still the preferred choice of culprits who lack computer skills or for those who need quick cash. Methamphetamine addicts, who constantly crave the rush, will create the drug in makeshift laboratories and then use some of the leftover chemicals to wash stolen checks. 

According to an article in the Seattle Post-Intelligencer Reporter, without meth and the addictions it can cause there would be virtually no mail-theft problems.2
"Almost without exception, the people we're arresting for these types of crimes are doing meth," says Tom Montgomery of the Seattle office of the U.S. Postal Inspection Service, as quoted in the Seattle newspaper. "It's a plague." 

According to the article, "Prosecutors and police believe that a 'meth subculture' - often composed of loose-knit groups of manufacturers, sellers and users - have latched on to mail and identity theft because they are non-violent and non-drug-related crimes with relatively small penalties. Further, police often have to follow a long and convoluted paper trail to catch up with the perpetrators, making capture less than a sure thing." 

"The people are just prolific," says William Redkey, head of the General Crimes Unit of the U.S. Attorney's Office, as quoted in the same Seattle newspaper article. "When they get hopped up on speed, they cannot steal enough mail, they cannot make enough IDs. It's amazing." Meth addicts can stay awake for 10 days straight with no need for food. 

Stealing the Checks to Wash 

Serious mail thieves look for large volumes of mail that accumulate before collection or delivery. They will target postal vehicles, collection boxes, rural mailboxes, and the most popular mail drop-offs - apartment mail panels, and free-standing cluster box units. The thieves break into the mailboxes using counterfeit keys, pry open the locked panels, and even remove entire units from the metal anchors. According to the Postal Service, there were 4,570 U.S. volume attacks in FY 1998, and a drop to 3,435 in FY 1999. However, cases increased to 3,929 in FY 2000, and skyrocketed to 6,752 in FY 2001.  

More checks are stolen in the western United States than in any other region. And the Arizona cities of Phoenix and Tucson, and Las Vegas, Nevada, lead the nation in total number of volume mail thefts. (See article on page 29.) 

Volume mail thefts began in the late 1980s with most of the activity restricted to apartment complexes. In the early 1990s, thefts from free-standing collection box units began to increase. Meth addicts, according to the U.S. Postal Inspection Service, committed more than 90 percent of the volume break-ins.  

The mail thieves are most active during the late evening and early morning hours. Many will use stolen bicycles and carry the stolen mail in backpacks or in plastic garbage bags. They'll use needle-nose pliers or screwdrivers to open the collection box units, remove the mail, pocket the checks, and dump the rest. The crooks also will look for raised red flags on mailboxes indicating outgoing mail that may include bill payments with checks enclosed. Sometimes the thieves will pose as business flier deliverers and steal outgoing mail as they walk from mailbox to mailbox.

Making Checks Like New 

Check washers use acetone, benzene, bleach, carbon tetrachloride, chloromice T, clear correction fluids, brake fluid, and other bleaching agents to remove the inked writing from stolen checks. Often the fraudster will cut off the top of a 16-ounce plastic soda bottle, fill it with brake fluid and acetone, dip the check in the solution, and swirl until the hand-written ink disappears. He dries the checks and writes in a new amount and payee and signs it. To negotiate the check, the criminal uses counterfeit identification in the name of the true account holder but with his photo. Often the thief makes the washed checks payable to himself using his own identification to negotiate the check.  

Preventing Check-washing Fraud 

More banks are requiring non-account holders, those opening new accounts, and individuals purchasing cashier's checks and money orders to place inked fingerprints on the faces of the checks they're cashing between the memo and signature lines.  

To prevent or lessen the possibility that someone can "wash" a stolen check: 

• Write out in full the payee, memo and amount portions of the checks. Fill up the entire line with letters or a squiggly line. 

• Use thick, dark ink to write checks. Roller-ball, thick felt tip and fountain pens are best. Ballpoint ink pens and "permanent" markers are the most easily altered. 

• Purchase checks through institutions that use tamper-resistant paper and ink. 

Here's how to detect a washed check: 

• The finish on the check may look or feel softer than the original. 

• The finish may feel bumpy. 

• The ink color may be slightly changed. 

• The paper color may have a grayish tint. 

• The watermark may have been washed off or lightened. 

Preventing Check Theft 

The Postal Service is reinforcing the rear doors of free-standing collection units and installing locks that are virtually impossible to counterfeit. It's also conducting public awareness campaigns and communicating with law enforcement officials about security and prevention methods. 

In 2001, a three-month media campaign in Arizona featured billboards posted at eight major thoroughfares in Phoenix and 11 in Tucson, warning drivers about mail theft activity. At the same time, local television and radio broadcasts alerted customers to theft-prevention strategies, and Web site postings offered customers additional advice on safeguarding their mail. 

Here are ways to deter mail theft: 

• Retrieve mail as soon as possible after delivery to the mail receptacle. Don't leave mail in the mailbox overnight. 

• Mail letters at the post office instead of leaving them in a residential box.  

• If allowed by employers, post personal mail with office mail. 

• Check locks on mail receptacles to ensure they're working. 

• Arrange a hold on mail during trips. 

• Report to the police department and postal inspectors any suspicious activity around mail receptacles, letter carrier vehicles, and collection boxes.  

• Quickly report non-receipt of valuable mail to banks, credit card issuers, and the Postal Inspection Service. 

• Check bank, credit card, and other financial statements for fraudulent activity. 

• Guard checkbooks. Report lost or stolen checks to banks immediately. 

• Properly store or dispose canceled checks. 

• Review canceled checks to assure that the payee name or amount paid hasn't been changed. 

• Provide checking account information only to reputable businesses or individuals.  

The U.S. Postal Inspection Service offers a reward of up to $10,000 for information and services leading to the arrest and conviction of any person for mail theft. Mail theft is a federal felony and upon conviction may be punishable by a fine of up to $250,000 and imprisonment up to five years, or both.  

As fraud examiners, there's not much we can do to slow the rate of methamphetamine use in the United States. But we can help protect unsuspecting citizens by publicizing meth addicts' mail theft methods and knowing their check-washing schemes. 

Martin T. Biegelman, CFE, Fellow of the Association of Certified Fraud Examiners, is a director of litigation and investigative services at BDO Seidman, LLP, in New York, N.Y. A former postal inspector, he is a Regent Emeritus and an Association faculty member. His e-mail address is: mbiegelman@bdo.com.  

1 Names have been changed.
2 Sam Skolink, "Meth use linked to jump in ID, mail thefts," Seattle Post-Intelligencer Reporter, July 23, 2001. 

SIDE BAR 

Stealing Mail and Citizens' Identities 

Mail theft incidents from collection box units and apartment panels were 3,929 in FY 2000 but skyrocketed to 6,752 in FY 2001. Following are examples of volume mail attacks from postal inspectors' files in FY 2001. 

Postal inspectors in Phoenix, Ariz., arrested a woman for a series of mail thefts in New Mexico, Colorado, Nebraska, Utah, and Idaho. Inspectors searched her car and found guns, drugs, checks, credit cards, counterfeit IDs, forged birth certificates, and financial documents. She's believed to have stolen more than $1 million in checks from the mail. 

A Fort Worth, Texas woman was sentenced to 30 months in prison and three years of supervised release after pleading guilty to two counts of possessing stolen mail. The judge cited her 21 prior felony convictions as the reason for his departure from sentencing guidelines. The woman was the subject of four previous Inspection Service investigations involving volume mail thefts from apartment panel boxes. 

A Texas man was sentenced to 14 years in prison and three years of supervised release and was ordered to pay $275,000 in restitution, with a special assessment of $1,800. Postal inspectors identified him as part of a ring in Houston that stole personal and business checks from the mail, created counterfeits of the checks, and cashed them at various post offices across the country in exchange for stamps. 

Five Nigerian suspects were indicted in Atlanta, Ga., for conspiracy and bank fraud. Postal inspectors determined the men used IDs from numerous victims to open fraudulent checking accounts and then deposit stolen checks, convenience checks, and counterfeit checks into the accounts. They obtained debit cards for the fraudulent accounts to purchase postal money accounts in amounts of $700 each, keeping the transactions under $3,000 to avoid federal reporting requirements. All of them used commercial mail receiving agency addresses to maintain their anonymity. Fraud losses associated with the scheme exceeded $600,000. 

Police in Scottsdale, Ariz., responded to a forgery in progress at a local bank and brought a suspect back to the station for questioning. After they determined he was part of a mail theft ring in Mesa, police notified postal inspectors in the Phoenix Volume Mail Theft Task Force.  

The suspect provided inspectors with the locations of two major players in the mail theft ring, one of whom had an outstanding arrest warrant from the Postal Inspection Service. Las Vegas police officers and postal inspectors confirmed the fugitive was staying at a hotel in town and was armed. The Las Vegas Metro Police SWAT Team responded to the hotel. A postal inspector contacted the suspect by telephone and eventually convinced him to surrender. They located the other suspect and arrested him the same day. Both men were alleged to have been stealing mail from neighborhood delivery collection box units and other mailboxes in the East Phoenix Valley for more than two years as part of a ring of at least 50 people.