US 2007/0043.668A1 Baxter Et Al

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US 2007.0043.668A1 (19) United States (12) Patent Application Publication (10) Pub. No.: US 2007/0043.668A1 Baxter et al. (43) Pub. Date: Feb. 22, 2007

(54) METHODS AND SYSTEMS FOR Related U.S. Application Data NEGOTABLE-INSTRUMENT FRAUD PREVENTION (63) Continuation of application No. 10/371,984, filed on Feb. 20, 2003, now Pat. No. 7,072,868. (75) Inventors: Craig A. Baxter, Castle Rock, CO (US); John Charles Ciaccia, Parker, Publication Classification CO (US); Rodney J. Esch, Littleton, CO (US) (51) Int. Cl. G06Q 99/00 (2006.01) Correspondence Address: (52) U.S. Cl...... 705/50 TOWNSEND AND TOWNSEND AND CREW, LLP (57) ABSTRACT TWO EMBARCADERO CENTER EIGHTH FLOOR SAN FRANCISCO, CA 94111-3834 (US) An authentication value is provided in a magnetic-ink field of a negotiable instrument. The authentication value is (73) Assignee: First Data Corporation, Greenwood derived from application of an encryption algorithm defined Village, CO (US) by a secure key. The authentication value may be used to authenticate the instrument through reapplication of the (21) Appl. No.: 11/481,062 encryption algorithm and comparing the result with the authentication value. The instrument is authenticated if there (22) Filed: Jul. 3, 2006 is a match between the two.

530 instrument Presented at Port of Sae

instrument Conveyed to First Financial MCR line Scanned and instrument 534 Institution Authenticated at Point of Sale

538 Electronic Package Generated with MICR-Line Information andlor image

542 Electronic Package Generated with Electronic Package Transmitted to First MCR-Line information andlor image Financial Institution

544 Provisional Funds Credited by First Financial institution

548 Electronic Package Sent to Clearing Electronic Package Sent to Drawee --- Institution Financial institution

549 Clearing Institution Authenticates Drawee Financial Institution -- instrument Authenticates instrument

552 Clearing institution Credits First Drawee Financial Institution Credits Financianstitution First Financial institution

554 Clearing institution Sends Electronic Package to Drawee Financial Institution

Drawee Financial institution Credits Clearing institution Patent Application Publication Feb. 22, 2007 Sheet 1 of 7 US 2007/0043.668A1

99.' Patent Application Publication Feb. 22, 2007 Sheet 2 of 7 US 2007/0043.668A1

204 Receive Bulklnstrument-Preparation information

208

initialize instrument Counter

212 Retrieve instrument-Preparation information for instrument

216 -1 Determine Applicable Encryption Algorithm

220 Apply Encryption Algorithm

224

Print Check with Authentication Value in MICR Line (with Encryption-Marker Value)

All instruments Printed?

Augment instrument Counter

Fig. 2 Patent Application Publication Feb. 22, 2007 Sheet 3 of 7 US 2007/0043.668A1

220

304 Select lodentified Set of Digits

308 Select Applicable Encryption Key

implement Secure-Key Encryption 312 with Selected Key

316 Apply Cryptographic Hashing Fig. 3

Scan MICR line of instrument

Select identified Set of Digits

Apply identified Secure-Key Encryption with identified Key

ompare Result wit Authentication Value

Different

405 Decline instrument Accept instrument

Fig. 4 Patent Application Publication Feb. 22, 2007 Sheet 4 of 7 US 2007/0043.668A1

Scan MICR line of Instrument

454.

Transmit MCR-line information to 408 MICR Reader

Authentication Authority

412 Authentication Authority Parses - MCR-line information

416 Authentication Authority Applies identified Encryption Algorithm

Same

Authentication Value

Different

424 Authentication Authority issues Authentication Authority issues Decline Code Accept Code Fig. 4B Patent Application Publication Feb. 22, 2007 Sheet 5 of 7 US 2007/0043.668A1

2-9||9

(61-)VG

Patent Application Publication Feb. 22, 2007 Sheet 6 of 7 US 2007/0043.668A1

530 instrument Presented at Point of Sale

instrument Conveyed to First Financials 532 MICR Line Scanned and instrument 534 Institution Authenticated at Point of Sale

536 538 MgRineAthleticated scanned at First and Financiainstrument Electronic Package Generated with Institution MCR-Line information andlor Image9

540 542 Electronic Package Generated with Electronic Package Transmitted to First MICR-Line information andlor image Financial institution

Provisional- Funds Credited by First 544 Financial Institution

546 548 Electronic Package Sent to Clearing - Electronic Package Sent to Drawee institution Financial lnstitution

547 549 Clearing institution Authenticates Drawee Financial Institution instrument Authenticates instrument

Clearing institution Credits Firsta 550 Drawee Financial Institution Credits- 552 Financial institution First Financial institution

Clearing institutiona Sends Electronic 554 Package to Drawee Financial Institution

556 Drawee Financial institution Credits Clearing institution Fig. 5B Patent Application Publication Feb. 22, 2007 Sheet 7 of 7 US 2007/0043.668A1

o- Computer 610b Readable Storage Media

610a

input Output Storage Computer CPU(S) Readable Storage Device(s) Device(s) Device(s) Media Reader

Communications Processing

Working System Acceleration Memory

Operating System

618 Other Code (Programs)

Fig. 6 US 2007/0043.668A1 Feb. 22, 2007

METHODS AND SYSTEMS FOR instrument, where the authentication value is derived from NEGOTIABLE-INSTRUMENT FRAUD application of a encryption algorithm defined by a secure PREVENTION key. Such a feature may then be used to authenticate the instrument through reapplication of the encryption algo BACKGROUND OF THE INVENTION rithm and comparing the result with the authentication 0001) This application is related to negotiable instru value. The instrument is authenticated only if there is a ments. More specifically, this application is related to meth match between the two. This feature is manifested in various ods and Systems for preventing fraudulent use of negotiable embodiments. instruments. 0006 In a first set of embodiments, a document is pro 0002) A significant concern among financial institutions, vided for conducting a financial transaction. The document as well as among businesses and individuals who accept comprises information fields for providing written informa negotiable instruments generally, is the level of fraud that tion to qualify the document as a negotiable instrument. It exists in connection with negotiable instruments. This fraud also comprises a magnetic-ink field having characters is manifested in the use of checks, certified checks, travel printed on the document withink that comprises a magnetic ers' checks, and the like. Because of this concern, a variety material. The magnetic-ink field includes an authentication of techniques have been developed to permit detection of value derived through application of an encryption algo fraudulent instruments and thereby reduce the incidence of rithm defined by a secure key to information also printed on fraud. These techniques may generally be grouped accord the document. In one such embodiment, the encryption ing to two classifications. Techniques in the first classifica algorithm may be one of a plurality of possible encryption tion rely on comparing characteristics of negotiable instru algorithms, each of which is defined by a secure key. In such ments presented for payment with lists of characteristics an instance, the magnetic-ink field may further include an known to identify valid instruments. For example, a list of encryption-marker value that defines which of the plurality valid serial numbers for negotiable instruments issued by a of possible encryption algorithms corresponds to the encryp particular financial institution may be maintained so that tion algorithm. In different embodiments, the encryption when an instrument is presented for payment, a comparison algorithm may comprise a stream cipher or may comprise a may be made between the serial number of the presented block cipher. In addition, in some instances the authentica instrument and the list of valid serial numbers. If there is no tion value may be further derived through application of a match, the instrument may be declined. The success of these cryptographic hashing, such as may be based on a cyclic types of techniques is limited by the ease with which redundancy code. Examples of negotiable instruments that counterfeiters may deduce the relatively simple manner in may be provided with such embodiments include drafts, which serial numbers or other characteristics are assigned. Such as checks, and notes. 0003) Techniques in the second classification incorporate 0007. In another set of embodiments, a method is pro fraud-prevention devices directly into the negotiable instru Vided for producing a document. Preparation information for ments themselves. In some cases, such devices are used in the document is received. An encryption algorithm defined a uniform fashion, such as when they are applied in sub by a secure key is applied to selected portions of the stantially the same way to all negotiable instruments issued preparation information to derive an authentication value. by a particular financial institution. Examples of such The document is then printed with information fields for devices include watermarks, pantograph patterns, holo providing written information to qualify the document as a graphs, and the like incorporated directly into the paper of negotiable instrument. A magnetic-ink field is printed on the the instrument. Because these devices are not unique to any document withink that comprises a magnetic material, with particular instrument, their value is mainly in acting as a the authentication value being included in the magnetic-ink deterrent to fraud by increasing the difficulty of a counter field. In some such embodiments, the encryption algorithm feiting process. There are, however, a significant number of may be selected from a plurality of possible encryption counterfeiters who possess the capabilities needed to repro algorithms, each of which is defined by a secure key, duce such features. A different approach that has been according to an encryption-marker value defined by the proposed is to print a bar code onto each negotiable instru preparation information; in such cases, the magnetic-ink ment, with the bar code derived from information included field may further include the encryption-marker value. The elsewhere on the instrument, such as its serial number, the encryption algorithm may comprise a stream cipher or a amount of the instrument, or the date of execution of the block cipher, and in some embodiments a cryptographic instrument. While this approach has some advantages over hashing, such as one based on a cyclic redundancy code, other approaches, it tends to be unreliable in systems where may also be applied. These methods may be embodied in a instruments are truncated or that otherwise use scanning and computer-readable storage medium having a computer-read electronic transmission of images of the instrument. Fur able program embodied therein for directing operation of a thermore, the presence of a bar code on the instrument computer system, with the program including instructions to requires the use of an additional type of reader when implement the methods. processing the instrument. 0008. In a further set of embodiments, a method is 0004) There is accordingly a general need in the art for provided for authenticating a negotiable instrument. Infor improved methods and systems that prevent fraudulent use mation read from the negotiable instrument is received. The of negotiable instruments. information includes an authentication value read from a magnetic-ink field printed on the negotiable instrument with BRIEF SUMMARY OF THE INVENTION ink that comprises a magnetic material. An encryption 0005 Thus, embodiments of the invention provide an algorithm defined by a secure key is applied to selected authentication value in a magnetic-ink field of the negotiable portions of the information read from the negotiable instru US 2007/0043.668A1 Feb. 22, 2007 ment to derive a result for comparison with the authentica 0016 FIG. 4C is a schematic illustration of communica tion value. As in other embodiments, the information may tion between a MICR reader and an authentication authority; further include an encryption-mark value, in which case the method may further comprise selecting the encryption algo 0017 FIG. 5A is a schematic illustration of an arrange rithm from a plurality of possible encryption algorithms, ment that may be used to process images of negotiable each of which is defined by a secure key, according to the instruments in an embodiment; encryption-marker value. The encryption algorithm may 0018 FIG. 5B is a flow diagram that illustrates how comprise a stream cipher or a block cipher. The method may imaged negotiable instruments may be processed; and further comprise applying a cryptographic hashing, such as one based on a cyclic redundancy code, to derive the result. 0019 FIG. 6 is a schematic illustration of a computer These methods may be embodied in a computer-readable system on which methods of the invention may be embod storage medium having a computer-readable program ied. embodied therein for directing operation of a computer system, with the program including instructions to imple DETAILED DESCRIPTION OF THE ment the methods. INVENTION 0009. In an additional set of embodiments, a method is 0020 Embodiments of the invention use an encryption provided for processing a negotiable instrument. An elec algorithm defined by a secure key to provide an authenti tronic package is received from a presenter at a first financial cation value that is included in a magnetic-ink character institution. The electronic package defines information read recognition (“MICR) line of a negotiable instrument. Such from the negotiable instrument, and the information includes an algorithm is sometimes referred to herein as a “secure an authentication value read from a magnetic-ink field key encryption algorithm, and is intended to refer to an printed on the negotiable instrument with ink that comprises encryption process that depends on a secret encryption key a magnetic material. An encryption algorithm defined by a used to define the algorithm. The algorithm itself may or secure key is applied to selected portions of the information may not itself be secret, and the key is not subject to the read from the negotiable instrument to derive a result. The algorithm but is used externally in defining it. Several presented is credited for funds in accordance with the examples of Such secure-key encryption algorithms are information if the result is consistent with the authentication discussed below in connection with specific embodiments value. The information may further include an image of the and are advantageous in the enhanced security they provide negotiable instrument. The method may further comprise over other encryption schemes, such as schemes that merely transmitting the electronic package with a request for recov incorporate a secret value into the information being ery of the funds. The encryption algorithm may comprise a encrypted. The authentication value is provided in addition stream cipher or may comprise a block cipher, and, in some to other information that may be included in the MICR line, embodiments, a cryptographic hashing may further be such as the MICR version of the serial number of the applied to derive the result. instrument and relevant routing and/or account number information. One advantage to including the authentication BRIEF DESCRIPTION OF THE DRAWINGS value in the MICR line is that it is easily read by existing 0010. A further understanding of the nature and advan printing, reading, and Sorting devices designed for process tages of the present invention may be realized by reference ing negotiable instruments; implementation of embodiments to the remaining portions of the specification and the draw of the invention does not require the use of additional ings wherein like reference numerals are used throughout readers or other equipment to process negotiable instru the several drawings to refer to similar components. In some mentS. instances, a Sublabel is associated with a reference numeral and follows a hyphen to denote one of multiple similar 0021. This advantage is seen particularly in the ease with components. When reference is made to a reference numeral which systems that make use Surrogates in place of original without specification to an existing Sublabel, it is intended to negotiable instruments may be accommodated. For refer to all Such multiple similar components. example, the use of Such Surrogates may occur in Systems that “truncate processing of the negotiable instruments by 0011 FIG. 1 provides an example of a negotiable instru removing an original paper instrument from the collection or ment according to an embodiment of the invention; return process and Substituting it with the Surrogate. Because 0012 FIG. 2 is a flow diagram that illustrates a method routing information is included in the MICR line, prepara for producing negotiable instruments in accordance with an tion of the Surrogate is generally performed in a manner that embodiment of the invention; accurately retrieves information from the MICR line, mak ing the placement of the authentication value especially 0013 FIG. 3 is a flow diagram that illustrates a method valuable in ensuring authentication reliability. The Surrogate for applying an encryption algorithm as part of producing may also include an electronically derived image of the negotiable instruments in accordance with an embodiment negotiable instrument that is transmitted electronically as of the invention; part of collection and return processes instead of being 0014 FIG. 4A is a flow diagram that illustrates a method conveyed physically. for verifying the validity of a negotiable instrument in 0022. An example of a negotiable instrument produced accordance with an embodiment of the invention; according to a method of the invention is illustrated in FIG. 0.015 FIG. 4B is a flow diagram that illustrates a method 1. The negotiable instrument 100 is shown in the form of an for verifying the validity of a negotiable instrument with an Official Check, such as may be provided by First Data authentication authority in accordance with an embodiment Corporations(R) of Englewood, Colo., although it will be of the invention; appreciated that embodiments of the invention are generally US 2007/0043.668A1 Feb. 22, 2007 applicable to any negotiable instrument having MICR infor 0025. In many instances, it is desirable to produce a mation. Thus, as used herein, a “negotiable instrument' is plurality of negotiable instruments that include the authen intended to be construed broadly to include any note, draft, tication values in a batch process. One example of Such a check, cashier's check, teller's check, traveler's check, batch process is provided with the flow diagram shown in certificate of deposit, or any other instrument that falls FIG. 2. In some embodiments, the method illustrated in FIG. within the definition of “negotiable instrument provided in 2 may be carried out by a computer system such as described S3-104 of the Uniform Commercial Code. below in connection with FIG. 6. At block 204, bulk instrument-preparation information is received. In some 0023 The payment information of the instrument, includ instances, such information may conveniently be received as ing Such factors as whether it is payable to bearer or to order, an electronic file, either over a communications link or from may differ depending on the type of instrument, but Such a magnetic or optical storage device. The bulk instrument differences do not affect the scope of the invention. Thus, for preparation information may include Such factors as the the negotiable instrument 100 shown in FIG. 1, the payment routing information to be printed for each instrument, the information includes a numerical indication of the amount to serial number of each instrument, the encryption scheme to be paid 120, a written indication of the amount to be paid be used for each instrument, and the like. At block 208, an 104, an identification of order conditions 108, an identifi instrument counter is initialized so that the instrument cation of the drawer 116 of the instrument, and an identifi preparation information for the first instrument may be cation of the remitter 112. For other types of negotiable retrieved at block 212. The applicable encryption algorithm instruments, the payment information may be different. In is determined from the retrieved information at block 216 addition to the payment information, the instrument 100 and applied at block 220 to determine the authentication shown in FIG. 1 includes a serial number 128, a date 124, value. The instrument is then printed at block 224 in a signature 132, and a MICR line that is shown as compris accordance with the relevant instrument-preparation infor ing numeric information. Currently, MICR characters mation. Such printing includes printing the MICR line with include the numeric characters 0-9 and four special symbol the appropriate routing information, the authentication value characters, although the scope of the set of MICR characters 152 and encryption-marker value 148 if used. A check is does not limit the invention, which may generally be applied made at block 228 whether all instruments have been to any set of MICR characters. The MICR characters are printed, with the method stopping at block 232 if they have printed on the instrument 100 with ink or toner that com been. If not, the instrument counter is augmented at block prises a magnetic material Such as ferrous oxide so that they 236, and the method loops until all instruments defined by each provide a unique magnetic signal when magnetized. the instrument-preparation information have been printed. The unique magnetic signal is related to the shape and 0026. The are a variety of different ways in which appli magnetic content of the printed character. cation of the encryption algorithm at block 220 may pro 0024. The MICR line includes routing information that is ceed. One example is illustrated with the flow diagram in used in processing the instrument 100 after it has been FIG. 3. At block 304, a set of digits identified by the presented for payment. Such routing information may encryption algorithm is selected. Such as from the other include, for example, an American Banking Association numerical information that is associated with the instrument. number 140 that identifies a financial institution, an account At block 308, the applicable encryption key is selected. In number 136, and the like, with the specific type of routing Some embodiments, the same encryption key may be used information sometimes depending on the type of negotiable for all the instruments while, in other embodiments, the instrument. In addition, the MICR line may include a MICR encryption key may be defined for each instrument with the version of the serial number 144 of the instrument 100. corresponding encryption-value marker. According to embodiments of the invention, the MICR line 0027. At block 312, the input set of digits selected at may also include an encryption-marker value 148 and an block 304 is encrypted with the encryption key selected at authentication value 152. The encryption-marker value 148 block 308 using the appropriate secure-key encryption tech may be used to identify one of a plurality of encryption nique. Any suitable secure-key encryption technique known methods used to determine the authentication value, depend to those of skill in the art may be used, including the use of ing on Such factors as the encryption algorithm used, the key stream ciphers and block ciphers. Stream ciphers operate on value used, the input values used, and the like. As described the input digits a single bit (or sometimes byte) at a time in further detail below, the instrument 100 may thus be while block ciphers operate on groups of bits of the input validated by ensuring that application of the encryption digits. A typical block cipher operates on 64 bits at a time, method identified by the encryption-marker value 148 pro although the invention is not limited by the block size. Many duces the correct authentication value 152. Space is often different types of block ciphers that may be used are known reserved to the right of the printed MICR information for to those of skill in the art, including, for example, the Data Subsequent printing of the amount of the instrument with Encryption Standard (“DES”), Lucifer, Madryga, NewDES, magnetic ink, such as by a document endorser. In some FEAL REDOC and its variants, LOKI, Khufu, Khafre, embodiments where only a single encryption method is RC2, IDEA, MMB, CA-1.1, Skipjack, GOST, CAST, Blow used, the encryption-marker value may be omitted. Also, fish, SAFER, 3-Way, Crab, SXAL8, MBAL, and RC-5, while the encryption-marker value 148 is shown as a single among others. These block-cipher techniques are described digit character and the authentication value 152 is shown as in further detail in Bruce Schneier, Applied Cryptography a four-digit character, they may more generally be of any (John Wiley & Sons 1996), 2d ed., Chaps. 12-14 (“Schneier length. The length of the authentication value 152 may I”), the entire disclosure of which is herein incorporated by reflect such factors as the appropriate difficulty of breaking reference in its entirety for all purposes. As explained further the encryption scheme, convenience established by the in Schneier I, most block ciphers comprise the use of Feistel encryption scheme, and similar such factors. networks, in which a block of even length n is divided into US 2007/0043.668A1 Feb. 22, 2007

two halves of length n/2, although other encryption tech check digit. This enhanced security arises from the nature of niques may be used that do not comprise the use of Feistel secure-key encryption, which depends on the use of a secret networks. encryption key in an algorithm, while a check digit is merely the result of a secret algorithm. Thus, a check-digit algo 0028. In some embodiments, the encryption technique rithm is completely compromised by disclosure of the may comprise performing a plurality of encryptions. For algorithm, while secure-key encryption may function example, in one embodiment, a double encryption is per securely even with a publicly available algorithm. Most formed by encrypting a block successively with two differ check-digit algorithms are therefore relatively simple and ent keys. In other embodiments, still greater numbers of encryptions may be performed, sometimes reusing keys as are intended as a check that serves to provide an alert to the in a triple encryption scheme that Successively applies key 1, possibility that characters have been transposed rather than key2, and key 1 to a block. Still other multiple-encryption acting as security features resistant to decryption efforts. techniques are known to those of skill in the art. Moreover, 0032 FIG. 4 provides a flow diagram that illustrates a there are a variety of peripheral techniques known to those method for authenticating a negotiable instrument in accor of skill in the art that may be incorporated to tailor the dance with an embodiment. At block 400, the MICR line of encryption technique to particular applications. the negotiable instrument is scanned. The same set of digits identified at block 304 when the instrument was created are 0029. In some embodiments, cryptographic hashing may identified at block 401. Such identification may comprise additionally be applied at block 316. Cryptographic hashing identifying an applicable encryption algorithm and encryp refers to a computationally efficient function mapping binary tion key that defines the encryption algorithm according to strings of arbitrary length to binary strings of some fixed an encryption-marker value 148 if such an encryption length, often called “hash values.” It thus permits a string of marker value 148 is included on the instrument. At block arbitrary length to be mapped to a smaller string in a fashion 402, the identified encryption algorithm is applied according that makes recovery of the original string difficult. The use to the defining identified encryption key. The result of such of Such cryptographic hashing may be desirable to ensure encryption on the selected digits is compared with the that the authentication value 152 is of the desired length. authentication value 152 scanned from the instrument at There are numerous cryptographic hashing functions that are block 403. If the result and authentication values are the known to those of skill in the art and that may be used, including, for example Snefru, N-Hash, MD4. MD5, MD2, same, the instrument is accepted at block 405, and, if they Secure Hash Algorithm (“SHA'). RIPE-MD, and HAVAL. are different, the instrument is declined at block 404. Each of these cryptographic hashing techniques and others 0033. In some instances, authentication of negotiable is described in further detail in Bruce Schneier, Applied instruments may be coordinated with an authentication Cryptography (John Wiley & Sons 1996), 2d ed., Chap. 18 authority. An example of Such an embodiment is illustrated (“Schneier II), the entire disclosure of which is herein with the combination of FIGS. 4B and 4C, with FIG. 4B incorporated by reference in its entirety for all purposes. providing a flow diagram of a method for authenticating the instrument and FIG. 4C providing a schematic illustration of 0030. Another class of cryptographic hashing techniques interaction with an authentication authority. The following that may be used in Some embodiments, and which are description refers simultaneously to FIG. 4B and FIG. 4C. known to those of skill in the art, include the use of hash When an instrument is presented for payment, or perhaps as functions based on cyclic redundancy codes (“CRCs). The part of collection or return processes, the MICR line of the use of CRCs may be viewed as taking a binary message and instrument is scanned at block 406 so that the various dividing it by a fixed binary number with the remainder numerical values on the MICR line may be retrieved. In being the CRC. The fixed binary number in the divisor is many embodiments, such scanning may be performed with commonly called the generator polynomial. The following a magnetic-ink reader 454 Such as is known in the art. The table provides examples of generator polynomials for pro scanned MICR-line information is then transmitted to the ducing CRCs with a desired number of bits: authentication authority 458 at block 408. The transmission may be effected with dedicated transmission lines or through a network protocol At block 412, the authentication author No. ity 458 parses the received MICR-line information to iden Method Generator Polynomial Bits tify the encryption-marker value 148 (if included), input CRC-32 x2 + x2 + x2 + x2 + x + x2 + x + 32 information, and purported authentication value 152. At x + x + x + x + x + x2 + x + 1 block 416, the encryption algorithm identified by the CRC-24 x2 + x2 + x + x2 + x + 1 24 encryption-marker value 148 (or the default encryption CRC-16 x + x' + x + 1 16 algorithm if no encryption-marker value is included) is CRC-8 x+x+x+x+x^+ 1 8 applied to the identified input data with the defining encryp CRC-4 x + x + x + x + 1 4 tion key. Such application may be assisted with a data store 462 that includes an identification of Such parameters as 0031. The result of the encryption algorithm 220 define the encryption algorithm and the secure key. described in connection with FIG. 3 is an authentication 0034. The result of applying the encryption algorithm is value 152 that has been produced through application of a compared with the purported authentication value 152 at secure-key encryption technique. Consequently, the security block 420 so that the authentication authority 458 may of the authentication value may result from its sensitivity to determine whether the instrument should be accepted or even minor changes in input value. The authentication value declined. If the result matches the purported authentication 152 is thus significantly more secure than simplistic alter value, the authentication authority 458 issues a code that native techniques, such as might be used by providing a indicates the instrument should be accepted at block 424. US 2007/0043.668A1 Feb. 22, 2007

Similarly, if the result fails to match the purported authen more financial-institution computers 516 upon receipt of an tication value, the authentication authority 458 issues a code accept code from the authentication authority. In some that indicates the instrument should not be accepted at block embodiments, both the MICR reader 454 and imaging 428. In some embodiments, the authentication authority may device 508 may be comprised by an integrated multifunction comprise a computer system, Such as described below in point-of-sale device such as described in one or more of the connection with FIG. 6, configured to perform the authen following commonly assigned applications, the entire dis tication functions. closures of which are incorporated herein by reference for 0035. There are a variety of ways in which the negotiable all purposes: U.S. Prov. Pat. Appl. No. 60/147,889, entitled instruments of the invention may ultimately be processed. “INTEGRATED POINT OF SALE DEVICE, filed Aug.9, For example, each instrument may be processed in a tradi 1999 by Randy J. Templeton et al.; U.S. patent application tional fashion in which it is physically conveyed from party Ser. No. 09/634,901, entitled “POINT OF SALE PAYMENT to party. This provides each party with direct access to the SYSTEM,” filed Aug. 9, 2000 by Randy J. Templeton et al.: MICR line so that the authenticity of the instrument may be U.S. patent application Ser. No. 10/116,689, entitled “SYS verified directly. In a typical arrangement that uses Such TEMS AND METHODS FOR PERFORMING TRANSAC physical transfers, a clearing institution is often used to TIONS AT A POINT-OF-SALE, filed Apr. 3, 2002 by coordinate instruments drawn on a number of different Earney Stoutenburg et al.; U.S. patent application Ser. No. institutions, with the clearing institution providing the mechanism for the exchange of instruments among partici 10/116,733, entitled “SYSTEMS AND METHODS FOR pant financial institutions. In addition, some financial insti DEPLOYING A POINT-OF-SALE SYSTEM filed Apr. 3, tutions use a reserve system, such as exemplified in the 2002 by Earney Stoutenburg et al.; U.S. patent application United States with the U.S. Federal Reserve Banking Sys Ser. No. 10/116,686, entitled “SYSTEMS AND METHODS tem, structured so that financial institutions set aside FOR UTILIZING A POINT-OF-SALE SYSTEM, filed reserves held against customer deposits. Such reserves are Apr. 3, 2002 by Earney Stoutenburg et al.; and U.S. patent held in reserve accounts by institutions within the reserve application Ser. No. 10/116,735, entitled “SYSTEMS AND system. When an instrument is processed through a reserve METHODS FOR CONFIGURING A POINT OF-SALE institution, the reserve account for the financial institution SYSTEM,” filed Apr. 3, 2002 by Earney Stoutenburg. presenting the instrument is credited, and in this way the 0039 The communications lines shown in the schematic reserve institution also functions as a clearing institution. illustration by Solid lines permit transmission of an elec 0036. In other embodiments, truncation may be used to tronic package that includes the MICR-line information eliminate the need to convey the physical instruments. Such and/or imaged financial instrument between the necessary truncation may be implemented in Some instances by having entities as it is processed according to embodiments of the a financial institution remove the original instrument from invention. The same communications lines may be used (in the collection process once it comes into the hands of that the opposite direction) in some embodiments for electronic financial institution. Alternatively, in some embodiments, funds transfers to satisfy the terms of the negotiable instru the original instrument may be removed directly at a point ments. Since the negotiable instruments are received elec of-sale where it is accepted. A number of examples of tronically by the clearing institution 520, software may be arrangements that use Such removal are described in copend adapted as described below to improve sorting of the instru ing, commonly assigned U.S. patent application Ser. No. ments before they are transmitted to the respective drawee 09/971,726, entitled “METHODS AND SYSTEMS FOR financial institutions. The dashed lines in FIG. 5A are used PROCESSING FINANCIAL INSTRUMENTS, filed Oct. to indicate that in other embodiments there may be elec 4, 2001 by Mark Thompson, the entire disclosure of which tronic communications lines between the computers 516 of is herein incorporated by reference for all purposes. A the different financial institutions 512. In one embodiment, general overview of Some Such systems is provided with the Such supplementary communications lines are used to schematic diagram shown in FIG. 5A and the flow diagram bypass the clearing institution 520 so that the electronic provided in FIG. 5B. In these embodiments, truncation is package including the MICR-line information and/or effected in part by imaging the instrument and conveying the imaged financial instrument is transferred directly between image of the instrument with the information scanned from financial-institution computers 516. Software similar to that the MICR line, although Such imaging is not necessary. used by the clearing institution 520 may be provided on the 0037. In the embodiment shown in FIG. 5A, electronic computer system 516 of each financial institution 512 so that communications lines are provided to connect computers sorting of information for transmission to respective drawee 516 at each of a plurality of financial institutions 512 with financial institutions is simplified. Accordingly, embodi a computer 524 at a clearing institution 520 and with ments in which communications are made directly between point-of-sale devices configured to extract the MICR-line financial institutions without the use of a clearing institution information and/or image information from instruments. At are made more readily practical with truncation of nego the point of sale 504, a presented negotiable instrument may tiable instruments. be validated through interaction with an authentication 0040. In embodiments where the truncation is performed authority 458 by a MICR reader 454 as described in con by a financial institution 512 instead of at a point of sale 504, nection with FIGS. 4B and 4C. In one embodiment, the a suitable architecture may be similar to that shown in FIG. authentication authority 458 and clearing institution 520 are 5A. In such an instance, each of the financial institutions 512 the same so that both authentication and clearing functions may comprise a MICR reader and/or imaging device to may be handled by a single entity. derive the information to be transmitted electronically after 0038 An imaging device 508 may be configured to truncation. Alternatively, the clearing institution 520 may collect an image of the instrument for transmission to one or comprise a MICR reader and/or imaging device to aid in US 2007/0043.668A1 Feb. 22, 2007

performing the truncation, with physical instruments being drawee financial institution, after examining the transmitted physically delivered to the clearing institution 520 in the electronic package, credits the clearing institution 520 at traditional fashion. block 556. 0041. The manner in which the negotiable instruments 0044) In embodiments that do not use the clearing insti may be processed with truncation at different points in the tution 520, a similar process is followed. At block 548, the process is summarized with the flow diagram shown in FIG. electronic package is transmitted from the first financial 5B. At block 530, the negotiable instrument is presented as institution 512-1 to the drawee financial institution after that part of a transaction at the point of sale 504. After such institution has been identified. The drawee financial institu presentment, the right side of the top of the figure shows tion may then perform its own authentication of the instru truncation (and sometimes also authentication) performed at ment at block 549, particularly if no previous authentication the point of sale 504 and the left side of the top of the figure has been performed. The drawee financial institution, after shows authentication and truncation performed at a financial examining the transmitted electronic package, credits the institution 512. As indicated on the right side, authentication first financial institution at block 552. may be performed at the point of sale 504 at block 534 by scanning the MICR line using a MICR reader 454 and 0045. There are alternative embodiments that will be conveying the scanned information to the authentication evident to those of skill in the art after reading this descrip authority 458. If the authentication authority 458 returns an tion. For example, while the processing of the financial accept code as described above, an electronic package is instrument has been described as including transmission of generated that defines the MICR-line information and/or an electronic package between a point of sale, financial contains an image of the instrument at block 538. The institutions, and/or a clearing institution, it will be appreci electronic package usually also contains the accept code that ated that such transmission may be avoided. In particular, serves to authenticate the instrument. The electronic pack the electronic package may alternatively be stored in a data age is thus transmitted to a first financial institution 512-1 at store accessible to each Such entity, with transmission being block 542. In other embodiments, authentication may be made only of an identifier of the location of the electronic deferred to a clearing or drawee institution as described package in the data store. Each entity may then accesses the below, in which case the authentication at block 534 may be electronic package as it requires or desires in order to effect avoided. Such embodiments have the advantage of the processing of the instrument. improved efficiency at the point of sale, which may be 0046 FIG. 6 provides a schematic illustration of a struc especially desirable in high-volume sale environments. ture that may be used to implement embodiments of the 0042. As indicated on the left side of the top of FIG. 5B, invention with a computer system 600. The computer system in another embodiment the instrument may be conveyed 600 or its equivalent may be used in applying the encryption physically from the point of sale 504 to the first financial algorithm to generate the authentication values, to coordi institution 512-1 at block 532. It is at the first financial nate a system for printing the negotiable instruments, to institution 512-1 that the MICR line is scanned at block 536 perform the authentication functions of the authentication and authenticated through communication with the authen authority, to coordinate functions of the point-of-sale tication authority 458. If the authentication authority 458 devices, to coordinate functions at the financial institutions, returns an accept code as described above, the electronic and/or to coordinate functions at the clearing institution, package that defines the MICR-line information and/or among others. FIG. 6 broadly illustrates how individual contains an image of the instrument, usually together with system elements may be implemented in a separated or more the authenticating accept code, is generated at the first integrated manner. The computer system 600 is shown financial institution 512-1 at block 540. comprised of hardware elements that are electrically coupled via bus 626, including a processor 602, an input device 604, 0043. Irrespective of whether the left or right branch at an output device 606, a storage device 608, a computer the top of FIG. 5B is followed, the first financial institution readable storage media reader 610a, a communications 512-1 is in possession of the electronic package containing system 614, a processing acceleration unit 616 Such as a the instrument information at block 540 or 542. Accordingly, DSP or special-purpose processor, and a memory 618. The the first financial institution 512-1 provisionally credits computer-readable storage media reader 610a is further funds to an account of the entity presenting the instrument, connected to a computer-readable storage medium 610b, the Such as of a party to the transaction effected at the point of combination comprehensively representing remote, local, sale 504. At this stage, different embodiments correspond to fixed, and/or removable storage devices plus storage media the use of a clearing institution 520 in the processing, shown for temporarily and/or more permanently containing com in the left portion of the figure, and direct interaction puter-readable information. The communications system between financial institutions, shown in the right portion of 614 may comprise a wired, wireless, modem, and/or other the figure. Thus, in embodiments that use a clearing insti type of interfacing connection and permits data to be tution 520, the electronic package is transmitted to the exchanged among the point of sale 504, the authentication clearing institution 520 at block 546. The clearing institution authority 458, the financial institutions 512, and/or the 520 may perform its own authentication of the instrument at clearing institution 520 to implement embodiments as block 547 using the methods described above. This may be described above. especially desirable in cases where no authentication has previously been performed on the instrument. The clearing 0047 The computer system 600 also comprises software institution 520 then credits the first financial institution elements, shown as being currently located within working 512-1 at block 550. After identifying the drawee financial memory 620, including an operating system 624 and other institution, the clearing institution 520 transmits the elec code 622. Such as a program designed to implement methods tronic package to the drawee institution at block 554. The of the invention. It will be apparent to those skilled in the art US 2007/0043.668A1 Feb. 22, 2007

that Substantial variations may be made in accordance with key encryption algorithms being defined by a secret specific requirements. For example, customized hardware encryption key that is not itself subject to the each of might also be used and/or particular elements might be the plurality of secure-key encryption algorithms; implemented in hardware, Software (including portable soft ware, Such as applets), or both. Further, connection to other encrypting the selected portions of the preparation infor computing devices such as network input/output devices mation by applying the one of the plurality of secure may be employed. key encryption algorithms to derive an authentication value; 0.048 Thus, having described several embodiments, it will be recognized by those of skill in the art that various producing the document with information fields for pro other modifications, alternative constructions, and equiva viding written information to qualify the document as lents may be used without departing from the spirit of the a negotiable instrument and with invention. Accordingly, the above description should not be a field aving: taken as limiting the scope of the invention, which is defined in the following claims. routing information that identifies a financial institution and an account maintained at the financial institu 1. A document for conducting a financial transaction, the tion; document comprising: the authentication value; and information fields for providing written information to an encryption-marker value that defines which of the qualify the document as a negotiable instrument; and plurality of secure-key encryption algorithms is the a field having characters on the document, the field one of the plurality of secure-key encryption algo including: rithms. routing information that identifies a financial institution 11. (canceled) and an account maintained at the financial institu 12. The method recited in claim 10 wherein the one of the tion; plurality of secure-key encryption algorithms comprises a stream cipher. an authentication value derived through application of 13. The method recited in claim 10 wherein the one of the one of a plurality of predetermined secure-key plurality of secure-key encryption algorithms comprises a encryption algorithms to information also printed on block cipher. the document, each of the plurality of secure-key 14. The method recited in claim 10 further comprising encryption algorithms being defined by a secret applying a cryptographic hashing to derive the authentica encryption key that is not itself subject to the each of tion value. the plurality of secure-key encryption algorithms; 15. The method recited in claim 14 wherein the crypto and graphic hashing is based on a cyclic redundancy code. an encryption-marker value that defines which of the 16. A method for authenticating a negotiable instrument, plurality of secure-key encryption algorithms is the the method comprising: one of the plurality of secure-key encryption algo rithms. receiving information read from the negotiable instru 2. (canceled) ments; 3. The document recited in claim 1 wherein the one of the receiving field information read from a field of the nego plurality of secure-key encryption algorithms comprises a tiable instrument, the field information including: stream cipher. 4. The document recited in claim 1 wherein the one of the routing information that identifies a financial institution plurality of secure-key encryption algorithm comprises a and an account maintained at the financial institu block cipher. tion; 5. The document recited in claim 1 wherein the authen an authentication value; and tication value is further derived through application of a cryptographic hashing. an encryotion-marker value that defines one of a plu rality of predetermined secure-key encryption algo 6. The document recited in claim 5 wherein the crypto rithms, each of the plurality of secure-key encryption graphic hashing is based on a cyclic redundancy code. algorithms being defined by a secret encryption key 7. The document recited in claim 1 wherein the negotiable that is not itself subject to the each of the plurality of instrument comprises a draft. secure-key encryption algorithms; 8. The document recited in claim 7 wherein the negotiable instrument comprises a check. identifying the one of the plurality of secure-key encryp 9. The document recited in claim 1 wherein the negotiable tion algorithms from the encryption-marker value; and instrument comprises a note. 10. A method for producing a document, the method applying the one of the plurality of secure-key encryption comprising: algorithms to selected portions of the information read from the negotiable instrument to derive a result for receiving preparation information for the document; comparison with the authentication value. 17. (canceled) Selecting portions of the preparation information; 18. The method recited in claim 16 wherein the one of the Selecting one of a plurality of predetermined secure-key plurality of secure-key encryption algorithms comprises a encryption algorithms each of the plurality of secure stream cipher. US 2007/0043.668A1 Feb. 22, 2007

19. The method recited in claim 16 wherein one of the identifying the one of the plurality of secure-key encryp plurality of secure-key the encryption algorithms comprises tion algorithms from the encryption-marker value; a block cipher. 20. The method recited in claim 16 further comprising applying the one of the plurality of secure-key encryption applying a cryptographic hashing to derive the result. algorithms to selected portions of the information read 21. The method recited in claim 20 wherein the crypto from the negotiable instrument to derive a result; and graphic hashing is based on a cyclic redundancy code. 22.-27. (canceled) crediting the presenter for funds in accordance with the 28. A method for processing a negotiable instrument, the information if the result is consistent with the authen method comprising: tication value. receiving an electronic package from a presenter, wherein 29. The method recited in claim 28 wherein the informa the electronic package defines information read from tion further includes an image of the negotiable instrument. the negotiable instrument and field information read 30. The method recited in claim 28 further comprising from a field of the negotiable instrument, the field transmitting the electronic package to the financial institu information including: tion with a request for recovery of the funds. routing information that identifies a financial institution 31. The method recited in claim 28 wherein the one of the and an account maintained at the financial institu plurality of secure-key encryption algorithms comprises a tion; stream cipher. an authentication value; and 32. The method recited in claim 28 wherein the one of the plurality of secure-key encryption algorithms comprises a an encryption-marker value that defines one of a plu rality of predetermined secure-key encryption algo block cipher. rithms, each of the plurality of secure-key encryption 33. The method recited in claim 28 further comprising algorithms being defined by a secret encryption key applying a cryptographic hashing to derive the result. that is not itself subject to the each of the plurality of secure-key encryption algorithms;