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Banks and building societies are to stop accepting cheques made payable to
themselves, after the Financial Services Authority (FSA) agreed with the British
Bankers' Association (BBA) and Building Societies Association (BSA) to changes
in industry practice that will help reduce the risk that cheques made payable
just to a bank or building society can be intercepted by a fraudster and paid
into his or her account.
The new arrangements reflect the importance that financial institutions
increasingly place on fraud prevention.
Following a recent incident of this kind of fraud, the FSA entered into
discussions with the industry on how best to change cheque handling practices.
As a result, the banks and building societies have decided that from 30
September 2006, the industry will, in a range of circumstances, stop accepting
cheques made payable simply to a financial institution.
From next year, people will need to add further details, such as the name of the
person whose account is to be credited, to the payee line of cheques that are
payable to a bank or building society.
Philip Robinson, Financial Crime Sector Leader at the FSA, explained: “In
reaching this agreement with the FSA, the BBA and BSA have helped to end a
practice that was exposing consumers to the small possibility of fraud.
"We were concerned that consumers were at risk following the recent incident of
fraud in this area, and we are pleased that the industry has responded
positively to our calls for change. Over the coming months, we will continue to
work closely with the BBA and BSA as they and their members ensure that
consumers are aware of what this new arrangement will mean for them when it
comes into effect next October”.
Ian Mullen, Chief Executive of the BBA, commented: “The
new arrangements reflect the importance that financial institutions place on
fraud prevention. Although the instances where fraud has occurred in these
particular circumstances are fortunately low, it is crucial that the industry
continues to make life for the criminal as difficult as possible.
"The new measures are simple, but provide additional security when a cheque is
made payable to an institution such as a bank or building society and follow
good practice guidance that is included in the Banking Code”.
Source:
Credit Control Journal
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