What is MICR?
MICR is an acronym for “Magnetic Ink Character Recognition,” which refers to machine-readable text that allows computers to read and process the printed information. MICR technology system was developed by the American Bankers Association in the 1950s and has allowed financial institutions to facilitate automatic check-clearing and streamline their check processing. The MICR line is a group of three series of digits, which are the check number, account number, and bank routing number. The benefit of MICR over other computer-readable information such as bar codes is that humans are able to read MICR numbers. There two types MICR fonts that are used worldwide are E-13B and CMC-7, these unique fonts are used to help computers recognize the characters and limit check fraud.
In the US, the bottom of any check is considered a “Keep Clear” zone reserved for MICR characters only.
Benefits of MICR Line
One of the benefits of the magnetic ink character recognition line is its ability to quickly facilitate the use of routing numbers. A routing number is a specific nine-digit numerical code, which banking and other financial institutions use for the purpose of clearing funds and/or processing checks in the U.S. As it appears on the front of a check, the routing number represents the bank that holds the account from which funds are to be drawn. Wire transfers and direct deposits often rely on routing numbers.
Unfortunately, fraud happens throughout the financial services industry. The magnetic ink character recognition line can help prevent financial fraud through the use of its special magnetic ink and unique fonts. For example, MICR makes it challenging to alter checks.
Using the MICR Line to Detect Fraud
The financial services sector is plagued with major cases of fraud. Fraud is internationally recognized as the deception and unlawful acquisition of money through deception or criminal activity.
There are numerous types of check fraud such as, Check Kiting, Counterfeit checks, Forged checks and Altered checks However, the MICR line comprises unique magnetic ink characters designed to detect and curb fraud. For example, the use of unique fonts and special magnetic ink in the MICR line makes it hard to forge checks.
One of the common bank criminal fraud laws is Section 3-407 of the Uniform Commercial Code (UCC). Financial contracts are regulated by the set of business laws provided in the UCC. The statute contains nine articles that tackle each aspect of banking and loans.
Losses caused by different types of fraud can be detected and reduced by using the MICR line. For example, a bank may incur a loss when it fails to verify the legitimacy of a photocopied check cashed by a fraudster.
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