MIP Holdings has partnered with advocate and fraud expert Deon van Wyk to design QuickCheck, a system that enables companies to comply with regulatory requirements and protect themselves from cheque fraud.
Van Wyk identified a number of problems regarding payment by cheque, which prompted him to develop QuickCheck on a shared risk basis with MIP.
Clients who subscribe to QuickCheck are immediately alerted when a cheque is deposited that may have been fraudulently drawn. They are charged per transaction based on volume, says Van Wyk.
"QuickCheck receives information from customers on an electronic transmittable file on a daily basis of all cheques issued by the customer on that day. The only variable information required by QuickCheck is the cheque number and the amount," says Rona van Wyk, MIP Holdings` senior analyst programmer.
This information is then matched with information received from the customer`s bank.
"The information transmitted to the QuickCheck client depends on how their account is set up. The CEO of the company may want to be alerted when cheques over a certain amount are issued or deposited; in that instance, we will email or SMS the client."
Cheque fraud is still rife in SA and across the world, despite the fact that legislation regarding cheques has been tightened up considerably, Nedbank estimated losses due to cheque fraud during 2000 at R500 million, while in the US - according to the Washington State Auditor - cheque fraud is viewed as a $16 billion "industry" in that country.
Cheques remain a preferred means of payment, despite the convenience of electronic banking, because a cheque is a legal document - a proof of transaction on paper.
However, the more advanced checks and balances become regarding cheques, the more sophisticated fraudsters become in response. Although altered cheques are not negotiable, a professional forger can make changes that are undetectable by bank staff.
The amendments to the Bill of Exchange Act (2000) have not made it easier for the drawer: the onus is on corporate clients to have a system to keep cheques safe, to do early reconciliations of bank statements and to have a system to prevent forgeries. Such systems are not easily available, and it is almost impossible to keep one`s signature out of circulation. Signatures can freely be viewed, not only on cheques, but on documents and even in the public domain in annual reports and on Web sites.
Time is of the essence in detecting cheque fraud. Problems occur because companies reconcile bank statements weeks, sometimes months later, and by that time the person who deposited the cheque fraudulently cannot be easily traced. QuickCheck enables clients to do an early reconciliation and therefore to detect and prevent cheque fraud at an early stage, thereby curbing losses. On detection of a problem, a customer can immediately stop the cheque and investigate the transaction.
The system is designed to detect and prevent:
* The tendering of stolen blank cheques;
* The tendering of duplicate cheques;
* The tendering of cheques on which the amounts have been altered;
* The tendering of cheques already paid;
* The tendering of stale cheques; and
* Cheque-related fraud by bank officials.
"QuickCheck is loosely based on the American Positive Pay system, but is more refined and effective," says Rona van Wyk.
During 2000, up to 83% of US commercial banks provided Positive Pay for their corporate customers, while 46% of all US companies use it on their accounts payable, payroll and refund accounts.
The advantage of QuickCheck is that it is a South African product, designed especially for the South African environment.
Much crime is perpetrated inside companies and even banks; it is difficult to prevent cheques getting into the wrong hands. But with QuickCheck, companies can make those forged cheques completely useless to fraudsters.
Deon van Wyk`s invention has the complete backing of MIP Holdings, says CEO Richard Firth.
"The QuickCheck project was done on a shared risk basis; Deon van Wyk is an expert in his field and he identified problems in the market. I believe this product will have a big impact on companies."
While banks, to some extent, will refund clients for electronic fraud, they do not cover cheque fraud, Firth says.
"QuickCheck, because it enables early detection of fraud, closes the loophole, from a fraud perspective. By giving customers the ability to protect themselves from fraud, it can restore financial control to companies."
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