Kenyan banks will save a tune of Sh 456 million by embracing cheque truncation system (CTS) along side mitigating fraud and enhancing faster money transfer.
Fidelis Muia, a consultant with Kenya Bankers Association (KBA) says Sh 256 million is annually paid by banks for the courier services while Sh 200 million for centralist clearing systems.
According to the Central Bank of Kenya (CBK) the current practice of transporting cheques from all banks branches countrywide to the automated clearing house using courier services will cease. Banks will instead use telecommunications links between their branches to send the cheque data for settlement of payment.
CBK says the new CTS will drastically reduce time taken to clear the cheque from the current 10 days in the upcountry to three days from 31 may and then to one day by January next year - while offering a more accurate reconciliation of accounts and reducing avenues for fraud emanating from paperwork cheque transaction.
Although commercial banks will invest Sh 650 million for CTS in a period of 5 years - Deloitte, a financial consulting firm released last week indicate that Sh 3 billion have been lost fraudulently through different means including current cheque transaction.
Stephen Mwaura, Assistant Director, National Payment Systems Department of CBK/ KBA Joint Steering Committee said the new CTS compliant cheque has been redesigned with advanced security features to identify alternations and fraud attempts. Customers required to use dark colour ink (blue or black) while drawing the instruments. Care will be exercised in the use of stamps, so that it will not interfere with the clear appearance of the cheque image.
Mwaura, while updating the media fraternity on the CTS project said security, integrity, non-repudiation and authenticity of the data and image transmitted from the paying bank to the payee bank will be issued using encryption and other security techniques to ensure integrity of the date from one bank to another. Any alternations on the image will be detected and the paying bank will return the altered image.
He said the new cheque design will incorporate a security watermark. Extensive use of new Ultra violet sensitive paper, temper – evidence paper stock as well as Micro Text features on the cheque further enhances the security of the cheques.
As part of the new standard, the cheque book size will be 7 inches by 4 inches, corporate size. This size will enhance security features, as it allows scanners to effectively capture all the cheque details that get transmitted in the electronic clearing process.
CBK further says on acceptance of a customer cheque deposit, the collecting bank takes an image of the cheque and reads in the magnetic ink character recognition (MICR) code in line information from the cheque. This information together with the cheque amount is sent to the paying bank through the automated clearing house for settlement.
Since the purpose of the cheque truncation is to stop the physical movement of the cheques, any cheque returned unpaid will not be returned to the customers. Instead the correcting ban will issue an image return document to the payee. This document will contain the image of the cheque, the payment information as well as reason for return. The IRD will be sufficient advice of the unpaid cheque and can be re-presented, depending on the return reason.
The new CTS will cater for Kenya Shilling cheques and domestic foreign currency cheques drawn on banks in Kenya including the sterling Pound, United States dollar and the Euro. There will be no changes in the clearing process for foreign cheques drawn on offshore bank, out of Kenya.
By 31 May this year the current design of cheque books will be faced out. The current cheque books will not be accepted by banks after 1 June this year. Banks will decline to process the cheque and will request the customer obtain a cheque truncation system (CTS) complaint from the drawer.
All currently existing cheque books will be replaced with new CTS compliant books that will be requested/ordered for by the customers from their respective banks in the usual manner.
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