Monday 9 February 2009

Avoiding cheque fraud

Avoid the `risks’ involved when receiving and paying by cheque.
Although other methods of paying bills are gaining in popularity (eg , telephone banking,EFTPOS, internet banking) cheques are still being used. However, the law about "crossing" cheques was changed in 1996.

As protection against a cheque being cashed by someone other than the person the cheque is made out to . . . you should print the words `Account Payee Only ' or `Not Transferable' across the centre of the cheque. Crossing like this with 'Not Transferable', or 'Account Payee' (A/C Payee) means that the cheque can't be cashed and used by someone else.
A cheque marked as 'Account Payee' can only be paid into the bank account held by the person it is made out to. Some people write 'A/C payee only' which is also fine.

Using this method makes it clearer to the person receiving the cheque, and this will help reduce any chances of cheque fraud, as anyone using the cheque can only put it into the account named on the cheque. But because only the person named on the cheque can bank it, it is very important that the name is written correctly and exactly as the name appears on the account it is being paid into.

Not-negotiable cheques are not the same as 'Non Transferable'. A cheque marked 'Not’ or ‘Non Negotiable' can be transferred to someone other than the person it is made out to. But it still has to be paid into a bank account. Don't accept a 'Non Transferable' cheque made out to someone else. Don't accept a 'Non Transferable' or 'Account Payee' cheque if it has been transferred to you. Only accept it if it has been made out to you in the first place.

Make sure your name is written correctly, as it must be the same name as your bank account. For example: imagine you were selling your car over the weekend and the buyer didn't have enough cash, but, they offered you their wage or pay cheque instead.
If it's a 'Non Transferable' cheque your bank could decline to take it. Then you'd have to track down the buyer and get them to pay you again. (Good Luck) 

Cash cheques -- writing a cheque out to 'cash' means that anyone can cash it for the sum it is written out for. It does not have to be paid into a bank account. This can be done for someone who may not have a bank account so don't also cross the cheque with 'non transferable' or 'A/C payee'. But also be aware that if a cash cheque is lost, anyone could bank it. Treat a `cash’ cheque as if it were actual dollar notes and don’t lose it!

If you just follow a few simple rules then using cheques is still a safe form of using your money.
Written by R.P.Emery
Taken from Legal Guide