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 45 4. 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,