Tighter rules on cheques paid to banks

In a few weeks time people writing cheques made payable only to a bank or building society will need to break that habit. Instead they will have to add extra details about the beneficiary of the cheque, like the name or account details.

This is because from October 2006 banks and building societies are likely in certain circumstances to decline cheques made out to only a financial institution.

The new arrangements are intended to make it absolutely clear who should benefit from the funds and help prevent fraudsters paying in stolen cheques. As banks and building societies hold accounts on behalf of millions of customers, if the cheque is made payable simply to "XYZ Bank/building society", there is nothing to identify which of those account holders should benefit from the funds.

By making a cheque payable to "XYZ Bank" and adding the "account number" or "name" it is clear who the funds are intended for. Cheques made out to personal or business customers will be unaffected.

These changes were announced last December and are designed to help tackle fraud. Since then, the industry has, been advising people to start adding the extra details immediately, through leaflets and information on cheque books and statements.

Commenting on the changes, Ian Mullen, chief executive of the British Bankers' Association said: "The new arrangements reflect the importance that financial institutions place on fraud prevention."

"Although the instances where fraud has occurred in these particular circumstances are fortunately few, it is crucial that the industry continues to make life for the criminal as difficult as possible. The new measures are simple, but provide additional security when a cheque is made payable to an institution such as a bank or building society and follow good practice guidance that is included in the Banking Code."