Finance Essay

Forgeries- The Problem and its negative impact

Forgeries are the illegal activities where an individual, with the intent to deceive the other or to gain money, imitates the signature on a legal instrument of the actual owner of those instruments. The problem related with forgery has its origin from years and largely affect the rights, obligations and monetary position of another person whose signature are forged. The act is also referred to ‘’Uttering false instrument’’ while in the financial industry, where the subject of forgery involves currency and financial instruments, the act is known ‘’Counterfeiting’’.

Negative impact of Forgeries:

Since our society and the banking system rely heavily on the documentation procedure, any act of forgery will have a multi-dimensional effect on not only those who are immediately forged but also on the society and the businesses. Below discussed are negative impacts of forgeries:
i)Loss to the individual concerned
In the case of successful forgeries, the individual either loses his money or gets affected in the form of some loss to his property.
ii) Loss of confidence in the banking security system
Although many casualty insurance companies are offering ‘Commercial Forgery Policy’ which protects the insured individuals from the counterfeit checks and from the forgery activity of the check kiters, however, the act of forgery will make the individuals lose the confidence in the banking system believing that their bank is not capable to stop the forgeries.
iii)Bring imperfection to the market
Acts of forgeries has the potential to heavily alter the equilibrium of the market because they bring imperfect information, new uncertainty, and transaction costs.