WHY THE GOOD OLD DEPENDABLE CHEQUE STILL HAS ITS PLACE IN THE LEGAL PROFESSION

Background
Dated 16th February 1659, the earliest example of a handwritten cheque known to be in existence in the UK was drawn on Messrs Morris and Clayton, scriveners and bankers based in the City of London, for £400 (about £43,000 today) that was made payable to a Mr Delboe and signed by Nicholas Vanacker.  From this early transaction, the ‘good old dependable cheque’ has scaled great heights with cheque volumes peaking at 4 billion cheques in 1990.


Now, as volumes have started to fall, the UK banks were faced with a new challenge as to how and if  they could bring this payment method into the 21st century. The old adage, “the cheques in the post” offered a reliable, but controversial, means of financial management with the received cheque then taking a further 6 days to clear through the central clearing system with millions of paper cheques transported  around the country to be cleared.
 
The deliberations  of the Payments Council in March 2007 could  have heralded the end of the  cheque but for protests from industry, charities and professional bodies who all demanded the retention of the cheque for all who wished to use them, for as long as they were needed.


Clearing System
With the future of the cheque assured, in December 2013, the board of the Cheque & Credit Clearing Company, the organisation behind the UK’s clearing system, announced major changes in order to introduce new technology that would future-proof the cheque for generations to come by giving the go-ahead for the introduction of an image-based method of clearing. This new process , fully implemented in 2019, meant that cheques would be cleared using an image of the paper cheque rather than by the physical document itself. By not having to transport  paper items around the country, the clearing process has been shortened from 6 to just 2 working days for the funds to be irrevocably transferred to the payee’s account.


Now customers have more choice as to the payment method that they use, knowing the funds will transfer far quicker than previously using a cheque, and the use of the scanned cheque image can have added benefits to a law practise. Where third party cheques are received, a  practice should ensure, where possible, that copies of the cheques are retained. The use of an in-house cheque scanner, for instance, can offer up advantages both for record keeping and transference of funds at a later stage. Indeed, some models of cheque scanner will allow for copies of other documentation received, up to A4 in size, to be retained electronically in a searchable archive. Together, these kinds of records will assist a law practice to discharge its obligation in respect of Section 140(2) ’to record and keep brief particulars sufficient to identify the relevant transaction and any purpose for which the money was received’.
 
The process of cheque ‘truncation’ (the concept of ‘truncating’ a cheque at point of deposit) has other benefits. The process of buying and selling a property has long been associated with cheque transactions. Even with the advent of CHAPS, the humble cheque retains its usefulness in the conveyancing process, particularly in the notorious ‘chain’ of property sales. Indeed, the new cheque image clearing system (ICS) will speed up the whole process of funds transfer by, as previously mentioned, reducing the time taken to receive cleared funds. A clear ‘win-win’ situation for all concerned in the process, leading to potentially speedier home buying experiences.


Fraud Prevention
 The introduction of this new technology and the digitisation  of the cheque has  seen different patterns of attempted  cheque fraud. The legal profession is no stranger to the problems associated with identity fraud and money laundering and have strong deterrents in place to help prevent attempted fraud. In the same way, financial institutions have implemented new methods to assist in the prevention of cheque fraud.


Image Survivable Features
These preventative measures include the application of an Image Survivable Feature (ISF’s) onto the face of a cheque. As it is the image of the cheque that now gets passed into the clearing system, there is no opportunity for the central clearing process to check the authenticity of the actual paper document. Consequently, the addition of an ISF that encrypts defined information from the face of the cheque into a Unique Coded Number (UCN) or QR Code (UCN Plus®) will survive the scanning process as part of the cheque image. This ISF, in turn, can be decrypted in the central clearing system and the details of the cheque automatically verified against the presented image. Any fraudulent alteration or attempted counterfeiting of the cheque can then be flagged, and the item trapped.

Branding
For many professional service organisations, branding and corporate  identity are an essential part of creating a market position. The use of branded corporate cheques, for instance, provides a clear demonstration of the identity and values  which can say as much about the organisation as its company letterhead. Banks offer a range of corporate cheque styles from book cheques through to computer cheques that can be designed to incorporate company colours, type styles and logos. Now increasingly, the banks are encouraging the  introduction of an ISF as well in the fight against cheque fraud. Indeed, the introduction of an ISF onto a cheque says much about the organisation’s desire to be a responsible partner and clearly demonstrate its fight against fraudulent activity. Thus, enhancing the brand!


 
About The TALL Group of Companies
The TALL Group of Companies is the UK’s leading provider of special cheques, credits and secure encoded documents, producing millions of secure documents each month from its fully accredited, secure production facilities for nearly 30 years. Counting leading UK banks, major corporations, SME’s and legal services amongst its customer base, TALL provides a total end-to-end solution to its clients offering consultancy services on the prevention of counterfeit and fraudulent items, with design, secure print and personalisation of both standard and corporate or ‘Special’ ranges of cheque and credit book products supplied. For more information visit www.tallgroup.co.uk or email us at enquiries@tallgroup.co.uk for advice.