February 2009

Cheque Fraud:

In recent years it has been the trend within certain retail industries not to accept cheques. You will have noticed that cash/debit cards or credit cards have become the norm for paying for your goods in many stores. The Payments Association of South Africa says the use of cheques has decreased by 20%.

Why has this trend arisen and why is the risk higher?

The physical nature of cheques and the complex way in which they are processed makes them far more vulnerable to fraud than other, more modern methods of payment, such as credit and debit cards, and paying by telephone or the internet.

As you know a cheque is an instruction to your bank to pay a certain amount of money to someone else (the payee). Another risk is the fact that a cheque passes through about 20 to 40 hands from when you wrote it, to you receiving it back. Your cheque can be stolen during this process and altered for fraudulent purposes at any stage of these interactions. Blank cheques also can be stolen contributing to this fraud activity.

Fraudsters are using technology such as colour copiers, scanners and computers to make counterfeit cheques or alter details such as the names on the cheques and amounts. One of the types of cheque fraud commonly used is the chemical removal of the payee’s details as well as the amount payable. This tough to identify process is commonly known as 'washing'. The original information and value is changed and deposited into the fraudster’s bank account that has a false name and ID.

Here are some of the signs that the cheque has been tampered with in this manner:

• The name of the payee is often printed over a solid block of colour (which helps disguise any marks left over as a result of the washing process).
• The name of the payee, or amount payable, is in a different font to the rest of the cheque.
• The name of the payee, and the amount payable, is written in a different colour to that of the rest of the cheque.

Tips and guidelines to safeguard you and prevent fraud

Leave no space in front of the name of the payee and the amount in figures. Unused spaces must be cancelled by drawing lines through them.

• Payee details should appear in full, eg- South African Revenue Services, instead of SARS.
• Write the amount in figures as closely as possible to the 'R' (rand) sign.

Other guidelines:

• Keep your chequebook in a safe place.
• Advise your bank as soon as you suspect fraud on your account or have lost your chequebook.
• If you sign a blank cheque ahead of time, fraudsters can simply complete the details to suit themselves.
• Keep returned cheques in a safe place, preferably under lock and key.
• Furthermore, it is best to punch returned cheques through the magnetic strip to prevent them from being re-used.
• Reconcile bank statements regularly.
• Long-outstanding cheques and used cheques must be examined for unauthorised or unusual endorsements.
• Report lost, stolen or missing cheques immediately.

When accepting a cheque as a means of payment ensure that:

• There is no variation in the hand-writing.
• The same pen is used to complete the cheque.
• There are no visible alterations.
• You are alert to coincidences in terms of words with similar spelling etc.

Crossed cheques:

• Always mark crossed cheques "not transferable".
• Crossing cheques help to prevent fraud, since it is possible to trace the person to whom the cheque was paid.
• If a cheque is not crossed, the person can receive payment in cash over the counter.
• A cheque crossed "not transferable" must be paid into a bank account and to a specific person or organisation.
• Avoid issuing cash cheques.

An alternative to the traditional paper cheque is the cheque card. A number of banks are now issuing cheque cards instead of or together with traditional chequebooks.

A cheque card is like a credit card because it is embossed (the card number is raised) and has a security number on the reverse. You generally need to verify a purchase made using a cheque card with your signature.

A debit card, on the other hand, is generally un-embossed, which means it can be used to pay for goods or services only when the merchant is linked electronically to your bank.

You generally verify a debit card transaction by entering your personal identification number.

However, as with a credit card, you can use a cheque card to pay for goods and services when a merchant is not linked online to the bank, within the limits the merchant has set itself for the acceptance of such payments. You can therefore use a cheque card to pay for goods or services on the internet or via mail or telephone order - something you cannot do with a debit card.

This is a superb manner of dealing with fraud and once again tightens the security in our monetary system. Retailers that do accept cheques cover themselves by checking the cheques payees credit record with a credit bureau and taking down the payees telephone number, identity number or credit card number. Compuscan can assist the retailer in verification of possible fraud dealings.

Compuscan Academy has a Fraud Prevention and Monitoring course based on the following Unit Standards - 13442: Manage and prevent fraud in a micro-finance institution and 110026: Describe and assist in the control of fraud in an office environment.

If you would like to attend this course or would like to send your employees for training, please do not hesitate to contact us at Tel: 0861 51 41 31 or e-mail us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Let us know what you think about the usefulness of these information pieces or should you have any suggestions for future editions by sending us your comments at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or contact us on Tel: 021 888 6000.