‘Banks to improve internal control procedures for fraudulent cheques’

KARACHI: The State Bank of Pakistan (SBP) Saturday advised all banks to assess adequacy and implementation of their internal control procedures pertaining to encashment of cheques in order to prevent financial loss and mitigate associated reputational risk to the institution which can potentially arise from fraudulent cheques encashment practices.SBP’s Consumer Protection Department received series of complaints wherein some unscrupulous elements are defrauding general public through “cheque washing”, a practice wherein text of a cheque is erased by chemicals and then rewritten with a new payee and amount. Impact of such alteration on surface of  cheque is difficult or sometimes impossible to detect with naked eye.To address these complaints effectively, SBP asked all banks that in addition to conformity with Clearing Bank Specification (CBS) -1 as specified in BPD Circular No.19, dated June 25, 2003, effective equipment such as ultraviolet lamps be deployed at the branches, according to CPD circular  No.2 of July 2, 2011.

Banks/DFIs should train their front-desk staff to assess authenticity of cheques. Prudence should be exercised while making payments against cheques, and especially against bearer cheques. In addition, banks/DFIs have also been advised to strictly adhere to guidelines on internal controls and instructions relating to opening and operations of accounts issued by SBP from time to time, the circular added. – Brecorder