According to the British Bankers Association (BBA), the new
rules simply clarify a measure that has always been the recommended
practice, but has not always been followed.
The changes, developed by the BBA and the Building Societies
Association (BSA), mean that from October, cheques that are payable
simply to a bank or building society and which are not being paid
into the drawer's own account are likely to be refused by the bank
or building society involved.
The new arrangements will not affect payments being paid into
the drawer's own account, or cheques used to pay a utility bill or
credit card bill in the drawer's own name. Cheques payable to an
individual or other business will not be affected.
The need for a tighter control on the way banks and building
societies handle cheques of this sort has been highlighted by an
investigation into a fraudulent independent financial advisor.
According to The Guardian, the advisor had instructed some of
his investment clients to write cheques made out simply to the
institution in which they wanted to invest, but then paid the
cheques into his own account with that institution.
While the rules will not come into force until October 2006, the
industry is advising that people start adding the extra details
now, so that they benefit from greater protection immediately.
"The new arrangements reflect the importance that financial
institutions place on fraud prevention,” said Ian Mullen, Chief
Executive of the British Bankers' Association. “Although the
instances where fraud has occurred in these particular
circumstances are fortunately low, it is crucial that the industry
continues to make life for the criminal as difficult as
possible."
The Financial Services Authority, the regulator for the
financial services industry, has welcomed the changes.
