It is strongly recommended that the following checklist be used by financial institutions as a basis for setting up bilateral or multilateral agreements for processing truncated cheques.
It is recommended that all items listed be covered in the bilateral or multilateral agreements. In order to further facilitate the setting up of these agreements, common procedures have been defined which financial institutions may choose to override.
The checklist is not intended to provide an exhaustive list of items nor does SWIFT claim any responsibility for it. Topics may include:
Specify minimum and maximum amounts per type of cheque
Specify currencies accepted per type of cheque
Set out the procedure to follow when there is a discrepancy between the code line and another field, for example, the amount
Unless otherwise agreed, cheque truncation messages are expressed in either the currency of the sending or the receiving country. If financial institutions wish to accept third currencies this should be bilaterally agreed.
Enumerate (inter)national laws and regulations
Specify regulatory reporting requirements
Specify the period within which a cheque can be protested, per type of cheque/place of issue (see also 'Dates and Time frames')
Specify data or fields in the cheque truncation message and the MT 256 that are mandatory for legal purposes and processing requirements
Define stale date
List the criteria for cheque truncation
An existing cash letter agreement could be extended to cater for cheque truncation as well. This may simplify the new agreement.
Endorsement issue - Agree on procedures to follow, for example, normally the beneficiary's financial institution must endorse that the party that cashes the cheque is the legitimate beneficial party
Back of cheque - Since it is very difficult to automatically truncate this information, the truncation agreement should make it the truncating party's responsibility to ensure that the truncated cheques contain all legally required endorsements.
Define the responsible parties at each stage of the whole process, for example, whether or not the beneficiary's financial institution can determine stale dated cheques. Also the agreement should establish the party responsible for verifying certain parts, for example, Code Line, of the truncated cheque.
The capture and verification of the Code Line are key elements to the success of check truncation. Therefore, establish ways of avoiding bad code lines such as:
using a specific control key to help manual keying when the code line is unreadable
avoiding double truncation of a cheque through automatic checking at the point of capture.
Specify which party must safekeep the original
Agree the period the original must be kept
Agree whether or not the cheque (or a copy) must be sent to the drawee bank and if so when
Agree the route the paper cheque must follow, if any (where it differs from the truncation route).
Agree bilateral codes to indicate the type of electronic cheque/model/format.
Define the types of charges, per type of cheque, the currency and the amount
Define the charging period, for example, once a month
Unless otherwise agreed, charges will always be expressed in the same currency as the transaction amount(s) and settlement amount of the message.
Where there is a direct account relationship between the sender and receiver of the cheque truncation message, the cheque truncation message can be used as a financial message to request to credit the account of the Sender automatically.
Whatever the agreement, transactions contained in a message will always be booked as a single entry.
Define the contact address, for example, postal address, department, telephone number, fax number, to be used in the event of questions.
Agree on the time frame required by the receiver of the cheque truncation message to execute the payment of valid truncated cheques. This time frame starts at an agreed cut-off time for receipt of incoming messages by the receiver.
Messages received before the cut-off time, will receive final settlement on a pre-agreed day which is a (number of) day(s) following the day of receipt (day of receipt = D).
For messages received after cut-off time, the final settlement time frame will be based on D+1.
D is the basis for calculating the value date, that is, date when the funds are available to the Beneficiary.
Agree the time frames for sending back charges.
Determine the period in which items may be returned/dishonoured, and how such items should be conveyed, for example, CD-ROM, diskette, Internet, mail.
Agree whether any, and if so which, information should be conveyed in field 72 through the use of bilaterally agreed codes.
