Abstract:
A method and system for preventing financial fraud with financial instruments is disclosed. The present invention first receives from a first source identifying information concerning the financial instrument, and stores this identifying information into a financial instrument database. Next, the present invention receives information from a second source regarding the financial instrument. The information from the second source is compared with the identifying information concerning the financial instrument stored in the financial instrument database. If there is a match, the financial instrument is honored.

Description:
RELATED APPLICATIONS  
       [0001]    This application claims priority to Provisional Application No. 60/393,857, filed on Jul. 8, 2002. 
     
    
     
       FIELD OF THE INVENTION  
         [0002]    This invention relates generally to the field of financial fraud prevention, and in particular, to a method and system of electronically preventing fraudulent transactions utilizing a telecommunications network.  
         BACKGROUND OF THE INVENTION  
         [0003]    People are intensively relying on various financial instruments, such as checks, to facilitate business and personal transactions each day. While these instruments have a vital role in our economy, there is a great potential for fraudulent transactions. Financial fraud not only affects the parties to the transaction, but the economy as a whole.  
           [0004]    The market currently does not provide a system or method for preventing this type of financial fraud. If a financial institution such as a bank questions the authenticity of a particular instrument, that financial institution possibly may telephone the source of the instrument to verify its authenticity. However, telephoning for a confirmation of each transaction is prohibitively time-consuming and only available if the institutions&#39; hours of operation allow it, for the institutions may be in different time zones. Besides such action, however, a specialized system or method does not exist to take such precautions.  
           [0005]    In view of the foregoing, there is a need for a method and system for effectively preventing fraudulent transactions involving financial instruments such as checks. Other financial instruments applicable to this system include cashier&#39;s checks, money orders (postal and commercial), traveler&#39;s checks, letters of credit, drafts, payment orders, acceptances, bills of exchange, safekeeping receipts, and any other financial or other instrument receipt, bill, draft, or other means of transferring funds or goods from one entity to another.  
         SUMMARY OF THE INVENTION  
         [0006]    The present invention satisfies the above needs by providing a system and method to prevent fraudulent financial transactions. The method of the present invention comprises receiving identifying information from a first source, i.e, the maker of the financial instrument, concerning the financial instrument. This information from the first source is stored in a financial instrument database. Information from a second source, i.e., a party to whom the financial instrument has been presented, is then received regarding the financial instrument. The information from the first source is then compared with the information from the second source. The financial instrument is deemed to be valid if the information from the first source matches the information from the second source.  
           [0007]    The system for preventing financial fraud in accordance with the present invention comprises a first device; a second device; and a server. The server includes a program module for storing a financial instrument database, and further comprising a program module operative to perform the method in accordance with the present invention.  
           [0008]    The present invention is described in the central web-based embodiment as operating within a server connected to a bank and a user via the Internet. In the second stand-alone embodiment, the program module of the present invention resides in an external device, such as a stand-alone server. The present invention could then be utilized without having to access a server via the Internet.  
       
    
    
     BRIEF DESCRIPTION OF THE DRAWINGS  
       [0009]    [0009]FIG. 1 is a simplified system diagram of the central web-based embodiment of the present invention.  
         [0010]    [0010]FIG. 2 is a flow diagram illustrating the operation of the central web-based system of the present invention regarding the authentication of a cashier&#39;s check.  
         [0011]    [0011]FIG. 3 is a system diagram illustrating the stand-alone embodiment of the present invention.  
         [0012]    [0012]FIG. 4 is a flow diagram illustrating the operation of the stand-alone embodiment of the present invention involving checks.  
         [0013]    [0013]FIG. 5 is a simplified system diagram that illustrates an exemplary environment suitable for implementing the various embodiments of the present invention. 
     
    
     DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT  
       [0014]    Referring now to the figures in which like numerals refer to like elements throughout the several views, various embodiments and aspects of the present invention are described. Although the present invention is described as embodied within a server communicating between the various participants, those skilled in the art will appreciate that the present invention may be used in conjunction with any device or system capable of facilitating communication between the participants.  
         [0015]    [0015]FIG. 1 is a simplified system diagram of the central web-based embodiment of the present invention. System  100  comprises Server  106 , which in this embodiment is connected to the Internet. Server  106  includes a stored data base; a memory device for containing a program module, an user interface; and a processing unit coupled to the memory device, the data object and the user interface. The processing unit operates in response to the instructions of the program module to perform the method as described in FIG. 2.  
         [0016]    Bank A  102  and Bank B  104  are linked via a telecommunications link to Server  106 . In the central web-based embodiment of the present invention, this link is by connection to the internet, wherein Server  106  may be accessed via a web-enabled browser. However, those skilled in the art will recognize that other methods may be utilized to connect Server  106  to Bank A  102  and Bank B  104 . Furthermore, although FIG.  1  illustrates the system as involving two devices, Bank A  102  and Bank B  104 , connected to Server  106 , those skilled in the art will appreciate that more devices may be connected to Server  106 .  
         [0017]    [0017]FIG. 2 is a flow diagram illustrating the operation of the central web-based system of the present invention regarding the authentication of a cashier&#39;s check. After Bank A issues a check at step  200 , Bank A registers identifying information concerning the check into a financial instrument database. This identifying information may include, but is not limited to, the name of the payee, the image of the signature affixed to the check, an image of the entire check, the date the check was created or written, or the amount.  
         [0018]    Bank B then receives the check, and transmits information concerning the check to the system operating the present invention at step  204 . At step  206 , the information from Bank B is compared with the identifying information concerning the check stored in the financial instrument database, which was received from Bank A at step  202 .  
         [0019]    If the comparison at step  206  results in a match, Bank B honors the check. Otherwise, Bank B dishonors the check to avoid a possibly fraudulent transaction.  
         [0020]    [0020]FIG. 3 is a system diagram illustrating the stand-alone embodiment of the present invention. Stand-alone server  306  comprises a stored data base, a memory device for containing a program module, an user interface, and a processing unit. The processing unit is coupled to the memory device, the data object and the user interface, and is operative in response to the instructions of the program module to perform the method described in FIG. 4.  
         [0021]    Customer  302  and Bank  304  are linked via a telecommunications link to Server  306 . In the stand-alone embodiment of the present invention, this link can be accomplished by any networking protocol capable of transmitting data from the Server  306  to Customer  302  and Bank  304 . However, those skilled in the art will recognize that other methods may be utilized to connect Server  306  to Bank  304  and Customer  302 . Furthermore, although FIG. 3 illustrates the system as involving two devices, Bank  304  and Customer  302 , connected to Server  306 , those skilled in the art will appreciate that more devices may be connected to Server  306  in the spirit of the present invention.  
         [0022]    [0022]FIG. 4 is a flow diagram illustrating the operation of the stand-alone embodiment of the present invention involving checks. After Customer writes a check at step  400 , Customer accesses a website for Customer&#39;s financial institution, “Bank”, at step  402 , and registers identifying information concerning the check into a financial instrument database. This identifying information may include, but is not limited to, the name of the payee, the image of the signature affixed to the check, the date the check was created or written, or the amount.  
         [0023]    Bank then receives the check at step  404 , and transmits information concerning the check to the system operating the present invention at step  406 . At step  406 , the information from Bank is compared with the identifying information concerning the check which is stored in the financial instrument database, which was received from Customer at step  402 . If the comparison at step  406  results in a match, Bank honors the check at step  408 . Otherwise, Bank dishonors the check at step  410  to avoid a possibly fraudulent transaction.  
         [0024]    [0024]FIG. 5 is a system diagram that illustrates an exemplary environment suitable for implementing various embodiments of the present invention. FIG. 5 and the following discussion provide a general overview of a platform onto which the invention may be integrated or implemented. Although in the context of the exemplary environment the invention will be described as consisting of a set of instructions within a software program being executed by a processing unit, those skilled in the art will understand that portions of the invention, or the entire invention itself may also be implemented by using hardware components, state machines, or a combination of any of these techniques. In addition, a software program implementing an embodiment of the invention may run as a stand-alone program or as a software module, routine, or function call, operating in conjunction with an operating system, another program, system call, interrupt routine, library routine, or the like. The term program module will be used to refer to software programs, routines, functions, macros, data, data structures, or any set of machine readable instructions or object code, or software instructions that can be compiled into such, and executed by a processing unit.  
         [0025]    Those skilled in the art will appreciate that the system illustrated in FIG. 5 may take on many forms and may be directed towards performing a variety of functions. Examples of such forms and functions include mainframe computers, mini computers, servers, work stations, personal computers, hand-held devices such a personal data assistants and calculators, consumer electronics, note-book computers, lap-top computers, and a variety of other applications, each of which may serve as an exemplary environment for embodiments of the present invention. The invention may also be practiced in a distributed computing environment where tasks are performed by remote processing devices that are linked through a communications network. In a distributed computing environment, program modules may be located in both local and remote memory storage devices.  
         [0026]    The exemplary system illustrated in FIG. 5 includes a computing device  510  that is made up of various components including, but not limited to a processing unit  512 , nonvolatile memory  514 , volatile memory  516 , and a system bus  518  that couples the nonvolatile memory  514  and volatile memory  516  to the processing unit  512 . The nonvolatile memory  514  may include a variety of memory types including, but not limited to, read only memory (ROM), electronically erasable read only memory (EEROM), electronically erasable and programmable read only memory (EEPROM), electronically programmable read only memory (EPROM), electronically alterable read only memory (EAROM), and battery backed random access memory (RAM). The non-volatile memory  514  provides storage for power on and reset routines (bootstrap routines) that are invoked upon applying power or resetting the computing device  510 . In some configurations the non-volatile memory  514  provides the basic input/output system (BIOS) routines that are utilized to perform the transfer of information between elements within the various components of the computing device  510 .  
         [0027]    The volatile memory  516  may include, but is not limited to, a variety of memory types and devices including, but not limited to, random access memory (RAM), dynamic random access memory (DRAM), FLASH memory, EEROM, bubble memory, registers, or the like. The volatile memory  516  provides temporary storage for routines, modules, functions, macros, data etc. that are being or may be executed by, or are being accessed or modified by the processing unit  512 . In general, the distinction between non-volatile memory  514  and volatile memory  516  is that when power is removed from the computing device  510  and then reapplied, the contents of the non-volatile memory  514  remain intact, whereas the contents of the volatile memory  516  are lost, corrupted, or erased.  
         [0028]    The computing device  510  may access one or more external display devices  530  such as a CRT monitor, LCD panel, LED panel, electro-luminescent panel, or other display device, for the purpose of providing information or computing results to a user. The processing unit  512  interfaces to each display device  530  through a video interface  520  coupled to the processing unit  512  over system bus  518 .  
         [0029]    The computing device  510  may receive input or commands from one or more input devices  534  such as a keyboard, pointing device, mouse, modem, RF or infrared receiver, microphone, joystick, track ball, light pen, game pad, scanner, camera, or the like. The processing unit  512  interfaces to each input device  534  through an input interface  524  coupled to the processing unit  512  over system bus  518 . The input interface may include one or more of a variety of interfaces, including but not limited to, an RS-232 serial port interface or other serial port interface, a parallel port interface, a universal serial bus (USB), an optical interface such as infrared or IRDA, an RF or wireless interface such as Bluetooth, or other interface.  
         [0030]    The computing device  510  may send output information, in addition to the display  530 , to one or more output devices  532  such as a speaker, modem, printer, plotter, facsimile machine, RF or infrared transmitter, or any other of a variety of devices that can be controlled by the computing device  510 . The processing unit  512  interfaces to each output device  532  through an output interface  522  coupled to the processing unit  512  over system bus  518 . The output interface may include one or more of a variety of interfaces, including but not limited to, an RS-232 serial port interface or other serial port interface, a parallel port interface, a universal serial bus (USB), an optical interface such as infrared or IRDA, an RF or wireless interface such as Bluetooth, or other interface.  
         [0031]    The computing device  510  may communicate information to a communications system  536 . This communication system receives information from computing device  510  from the transmitter  526 . The computing device  510  may also receive information from communications system  536  by the receiver  528 . The processing unit  512  interfaces with the communications system  536  through the transceiver  526  and the receiver  528 , which are both coupled to the processing unit  512  over system bus  518 .  
         [0032]    It will be appreciated that program modules implementing various embodiments of the present invention may be stored in the non-volatile memory  514  or the volatile memory  516 . The program modules may include an operating system, application programs, other program modules, and program data. The processing unit  512  may access various portions of the program modules in response to the various instructions contained therein, as well as under the direction of events occurring or being received over the input interface  524 .  
         [0033]    Overall, this invention will provide a mechanism for preventing financial fraud by providing a database for validating financial instruments such as checks. Additionally, this invention will be useful because of the improved prevention and detection of financial fraud resulting from the use of the database. Whereas this invention has been described in detail with particular reference to its most preferred embodiment, it is understood that variations and modifications can be effected within the spirit and scope of the invention, as described herein before and as defined in the appended claims.