Cheque fraud

Be on your guard!

Don't accept a cheque, or banker's draft, from someone unless you know and trust them. Be especially wary when accepting a high-value cheque - for instance if you are selling a car.

Be aware that, until a cheque has been "cleared for fate" at the end of the 6th day after you have paid the cheque in to your account, there is a risk that the money could be reclaimed IF the cheque turns out to be stolen, fraudulently altered or counterfeit.

It is safer to ask for payment for high-value items to be made by other means - an internet or phone banking payment or a CHAPS payment. There is a charge for a CHAPS payment but it is a guaranteed same-day value payment. If the "buyer" is unwilling to pay the relatively small cost involved - or to split it with you - then you really do need to be on your guard.

Be aware that a banker's draft or building society cheque is not necessarily safe from fraud. They can be stolen or altered like any other cheque,and if altered, stolen or counterfeit they will not be honoured. If you receive a banker's draft in payment for goods you should wait until you have certainty of fate at the end of the 6th working day after you've paid the cheque in to your account before releasing the goods.

How do cheque fraud scams typically happen?

In recent years organised gangs have targeted consumers selling high-value goods such as cars. So if you're selling a high-value item be particularly wary of accepting a cheque. If you do, you shouldn't hand over the goods until you have certainty that the cheque funds will not be reclaimed from you (this happens at the end of the 6th working day after you have paid the cheque in to your account).

Typically the gangs use stolen or counterfeit cheques, they will offer a cheque or banker's draft for more than the price of the goods (as ever, anything that sounds too good to be true should set alarm bells ringing, but their excuse may sound plausible).

You're then asked to transfer the amount of the overpayment either to them or to a third party two days after you have paid the cheque in when, it is claimed, the cheque will have cleared.

Of course, the cheque or draft isn't genuine and,whilst banks do all they can to spot and stop such fraudulent cheques in the clearing process it is not until the end of the 6th working day after you have paid the cheque in that your bank or you can be sure that the cheque funds are certain and will not be returned unpaid to you.

What are the banks doing to protect customers from fraud?

The banking industry introduced the 2-4-6 changes to sterling cheque clearing timescales for customers in November 2007. As a result, for the first time you can be confident that at the end of 6 days after paying in a sterling cheque or banker's draft the money is yours and you are protected from any loss even if the cheque subsequently bounces (i.e. is returned unpaid), or if it turns out to be fraudulent. The funds can't be reclaimed without your consent unless you're a knowing party to a fraud.

There are a range of other fraud prevention measures at both bank and industry level. These include:

• The industry sponsors its own specialist police fraud squad - the Dedicated Cheque and Plastic Crime Unit (DCPCU) to target the organised gangs behind cheque fraud.
• Banks are focusing on identifying lost or fraudulent cheques as they pass through the clearing system. The industry has a good track record: in 2006 more than 90% of attempted cheque fraud was spotted and stopped in the cheque clearing process.
• The Cheque Printer Accreditation Scheme (CPAS) helps combat fraud by ensuring all customer chequebooks are printed to the highest security standards. All cheque printers have to be accredited by this Scheme.
• Security features on cheques are particularly effective in combating both counterfeit and fraudulently altered cheques. CPAS is managed by the Cheque and Credit Clearing Company.

Where can I go for more advice?

Always contact your bank for advice or refer to your bank's terms and conditions. If you're concerned about the most suitable payment option, your bank should be able to offer you advice.