In recent years, digital transactions have transformed the entire ecosystem of banking and financial services. With the advent of internet banking, mobile banking, credit cards, debit cards and e-wallets, the traditional banking practices usually handled manually, have considerably declined.
However, there are certain banking instruments which have not been consigned to history. One such instrument is the cheque, which has long been a reliable payment method for both businesses and consumers worldwide. Although usage of the cheque as a payment instrument has fallen dramatically over the last decade, there are consumers and businesses in particular who are still in no rush to shred their cheque books just yet. However, at the same time, they also graze on the convenience of digital platform. It’s also a fact that mounting ‘out of box’ online frauds where fraudsters have remained untraced have pushed many people on blackfoot and they are not ready to trust new technologies in financial transactions.
As far as cheque is concerned, it is not a mere piece of paper. The cheque is a bond of trust between three parties – drawer, who makes the cheque; the payee, who is the recipient of the amount of money mentioned in the cheque and the drawee, the bank where the cheque can be presented for payment. Precisely, it is an instrument payable to a certain person or to his nominee or to the bearer of the instrument.
However, cheque too has been grossly misused by the fraudsters. The criminals fraudulently alter a beneficiary’s name or amount on a genuine cheque before it is paid. Counterfeit and forged cheque frauds are other common examples of misuse of this piece of valuable paper.
In this era of digital transactions, frequent incidents of frauds through ‘cancelled’ cheque leaves have been surfacing. Though a cancelled cheque makes sure that no one can withdraw money from your account, there have been cases where the money has been withdrawn fraudulently through this ‘cancelled cheque’. To insulate against such frauds, you have to imperatively understand the modus operandi of the fraudsters. Before deliberating upon this, let’s know what a cancelled cheque is.
A cancelled cheque is crossed by drawing two parallel lines on the cheque and the word “Cancelled” is written on it. Except this, nothing else needs to be written on the cheque. However, the cheque will have bank account number, MICR code and cheque number which can be used for the reference of concerned persons. ‘Cancelled cheque’ means no one can withdraw money without your knowledge.
There are certain areas where you will be asked to submit a cancelled cheque leaf. For example, a cancelled cheque has become essential for know your customer (KYC) procedures and documentations. Investment plans like mutual funds, stocks etc require KYC documents in which a cancelled cheque submission is mandatory. A cancelled cheque is also a requisite for finalising EMI payments for various types of loans. Even submission of a cancelled cheque is asked on purchase of some insurance policies, and in opening of a demat account too you shall be asked to submit a cancelled cheque.
Now coming to the misuse of cancelled cheque. It is a common sight now on online platform that offers are highlighted for quick loans sanctions under personal loan segment. The fraudster acting as a loan agent among other documents asks for cancelled cheques for sanctioning the loan. After the documents are submitted, the fraudsters misuses the ‘cancelled cheque’ and withdraw money from the accountholder.
Be cautious while submitting a cancelled cheque. Here, you need to cancel it in a proper way so that it has no scope of becoming an instrument of abuse. You have to draw two parallel lines across the cheque leaf and write the word “cancelled” across the lines. Don’t sign the cheque as it’s not to be used in any transaction.
It is also important for you to be sure about the person whom you are handing over the cancelled cheque. Always submit it to the institution in person instead of handing over to a person, even if he is known to you. Otherwise, chances of someone faking his identity and misusing cancelled cheques are ripe.
(The views are of the author and not the institution he works for)
sajjadbazaz@greaterkashmir.com