Bank Cheque Truncation System in Kenya
Bank Cheque truncation system that is said to be secure. It has been introduced in the market by Kenya Bankers Association member banks, which are working together for banking industry in Kenya. The cheque leaves will be 4 inches by 7 inches and it has extra features making clearing faster and with enhanced security.
What is cheque truncation system?
Cheque truncation is a clearing and settlement system that makes use of images and electronic payment data. It does not rely on the exchange of physical cheques. Cheques will no longer be taken to the automated clearing house by courier. Telecommunication links will be used by banks and their branches to send cheque data for settlement.
The customer will draw a cheque and present it to the bank. The bank where this cheque is deposited is known as the collecting bank. The collecting bank will take the image of the cheque leaf that has been presented and also read the information line with the magnetic ink character recognition (MICR) code on the cheque. The information together with the amount to be paid is sent to the paying bank through the automated clearing House for settlement.
The new cheque truncation system is relevant for Kenya shillings and domestic foreign currency cheques drawn on Kenyan banks. This includs United States, Euro and Sterling Pound cheques. For offshore drawn cheques, the old process will not be changed
Advantages for Bank cheque truncation system in Kenya
- Cheque truncation will reduce the time it takes to transmit data between banks.
- The time saved will reduce the clearing time
- There will be accurate reconciliation of accounts
- Paperwork will be minimal.
- Fraud avenues emanating from cheque substitution will be reduced because of the elimination of physical movement of cheques. Any changes on the cheque leaf can be detected.
- The liquidity of the economy will be generally improved because of the reduction of the clearing cycle. The time taken to clear funds will be faster ensuring funds circulate in the economy at faster rates.
Security features for the Bank cheque truncation system in Kenya
- The customer should use dark coloured ink which could either be black or blue when drawing the cheques. This is because the new cheques have been redesigned with security features that identify alterations and fraud attempts. Bank stamps should not be placed where they interfere with the clear appearance of the cheque image.
- Transmission of the cheque details from one bank to another will be encrypted and other security techniques enhanced, so that integrity of data from one bank to another is maintained. Banks cannot alter the cheques either and any attempt to make alterations will result in the image being returned to the originating bank.
- There is a security water mark in the design
- Extensive use of new ultra violet sensitive paper
- Tamper evident paper stock
- Micro text features
- Corporate size cheque leaves which are 4 inches width and 7 inches length. The size of the new cheques is important because of the enhanced security features and the new scanners will easily pick and transmit the cheque settlement details for the electronic clearing process.
Unlike in previous operations, where a cheque is unpaid it will not be returned to the customer. The collecting bank will instead issue an Image Returned Document (IRD) to the payee. The document contains the unpaid cheque image, the reason for the return and the payment information. The IRD can be represented depending on the reason for unpaying.The IRD is sufficient advice for the unpaid cheque.
Bank cheque truncation system customer requirements
The old cheque books must be replaced with the new ones. The deadline has been moved to August 2011 from 31st May 2011. When the deadline expires, the old cheque books will no longer be valid. Customers have to order the new cheque books from their banks as they normally do. The Bank cheque truncation system channel in Kenya will improve the banking sector service to customers.