Cheques and drafts fraud

If accepting payment by cheque, treat the payment with caution and don’t release the goods before you have positively established that the cheque will not be returned unpaid.

Cheques drawn under the cheque guarantee card scheme provide you with a measure of protection, but cheques not covered by it should always be treated with caution until you are certain they cannot be returned unpaid.

Please visit the UK Payments Administration website for full details of protection afforded by the scheme.

Drafts go through the normal clearing process like any other cheque.

If your business is offered a bank draft in payment, do not release the goods until you are sure the draft is genuine and will not be returned unpaid.

Sometimes it’s difficult to understand when you can withdraw money after a cheque has been paid into your account. The clearing guide below helps you calculate when your money begins to earn interest, when money can be withdrawn from the account and when you can be sure that the cheque has cleared.

For example: If you pay a cheque into your account on a Monday, you can expect to earn interest (if the account pays interest on credit balances) two working days later on Wednesday (Transaction day +2). This is also the point at which this money will reduce the amount of your overdraft interest charged (if applicable). Funds can be withdrawn by day five, Friday (Transaction day +4). By the end of day seven, the second Tuesday (Transaction day +6) the money cannot be reclaimed after this time (i.e. as a result of a cheque being returned unpaid). Any unpaid cheques returned too late, i.e. after Transaction day +6, will not be debited to your account.

The Clearing Cycle Calculator

• When to be suspicious
• More secure alternatives
• More information

Always make sure you know who you are dealing with and remain vigilant at all times. Be alert to scams and any transactions which differ from the usual profile for your business. Always ask yourself whether explanations from your customer are credible. If a sale seems too good to be true then it probably is.

You should be suspicious:

• Of a new customer or an unusually large order.
• When a customer appears disinterested in the price or detailed description of goods.
• Where the goods are high value or easily re-sold.
• If the buyer makes a payment above the agreed price and asks you to return the overpayment in cash or electronically, e.g. Internet Banking.
• If you are requested to transfer the money to a Money Transfer Agency rather than a Financial Institution, and / or if the funds are being remitted abroad.
• If you are put under pressure to release goods or funds without undertaking essential checks.
• Of demands for next-day delivery with no consideration for any additional costs or if the customer’s address is local to you.
• Of phone calls on the day of delivery asking what time the goods will be delivered.
• Of a customer who will only provide either a mobile telephone number or an email address, as this could be a scam.
• If the buyer offers a cheque or bank draft for a value above the asking price and asks you to return the overpayment in cash, via CHAPS or by some other means. This is a scam.
• Where payment is remitted directly to your bank account without prior notification, or where the method of payment differs from what was previously discussed. For example if you are expecting an electronic transfer, when checking your account balance make sure this is the method used by the payer and be wary if payment is made by cheque or draft. Check that any payment to you cannot be returned before releasing any goods or funds. Clearing cycle scam

More secure alternatives

Electronic payment systems have the benefit of added security and fraud prevention controls which are not available for cheques or bank drafts.

Consider alternative ways of receiving money that offer your business greater security and are more convenient than cheques or bank drafts – such as CHAPS, BACS and Faster Payments.

More information

Financial Fraud Action provides advice to help prevent cheque fraud.