Check Clearing Operations.2011a
Check Clearing Operations.2011b
Introduction to CICS
1. What is CICS?
CICS is an electronic payment system by the Philippine Clearing House Corporation (PCHC) where the image and information on the check is digitally captured by the bank receiving the check for deposit (presenting bank) and presented electronically to the paying (drawee) bank.
Benefits and Impact to Public
2. How will CICS benefit the banking customer?
- a. Shorter clearing cycle enables faster crediting of funds to your account; from 3—5 banking days to the next banking day.
- b. Quicker feedback if check is funded or not—regardless of location of the paying bank/branch.
- c. Better customer service as check deposits cut-off can be extended by the banks.
- d. Improved security against losing checks in transit as CICS eliminates the physical transport of checks.
- e. CICS-compliant checks with new design standards are more secure, reducing the chances of fraud.
3. What are the changes under CICS?
- a. As a preparation for CICS migration, starting January 4, 2016, checks with ALTERATION OR ERASURE, even if countersigned and checks with INCOMPLETE INFORMATION will no longer be accepted for clearing.
- b. When writing a check, necessary information should include the following: a. Date of the Check b. Name of Payee c. Amount Payable in Figures d. Amount Payable in Words e. Signature of the Drawer
- c. The use of a “check-writer” which affixes numbers in the amount in words line will no longer be accepted for clearing.
- d. An essential requirement for CICS is the Authorization and Waiver Statement:
“I/We allow the electronic clearing of this check and hereby waive the presentation for payment of this original to (Drawee Bank).”
4. What happens to old design checks if there would be a set deadline for accepting non-CICS checks?
Checkbooks are to be CICS-compliant. Old checks shall continue to be accepted until the date of non-acceptance is set by the Philippine Clearing House Corporation (PCHC). Acceptance of non-CICS checks over-the-counter after the deadline for acceptance in clearing is set by PCHC will be at the discretion of the drawee bank.
5. Will the cut-off times for deposit of checks be standardized under the CICS environment?
Deposit cut-off times are set at the sole discretion of the depository banks. With the introduction of electronic clearing under CICS however, banks may be able to extend the cut-off for acceptance of checks.
6. Why do some banks ask replacement of Post-Dated Checks received prior to January 4, 2016? We thought they are exempted?
While PDCs received and under custody of the banks prior to January 4, 2016 cut-off are still acceptable for clearing if it bears signed erasure/alteration, the same policy (CHOM No. 15-460) provides that the Presenting Bank will be held liable for damages if the drawer complains about any irregularities arising from the erasures and/or alterations on a check. This risk compels presenting banks to ascertain the authenticity of any erasures and alterations on checks before accepting these for deposit/clearing. Thus, Presenting Banks have the prerogative to seek replacement of stamped check received prior to January 4, 2016.
7. Are there any changes to the current check clearing timelines?
While there will be basically one clearing cut-off at 4:30 PM for regular items and 7:30 AM the following clearing day for Morning Returns, availability of funds may be as early as 3:00 PM on the next clearing day. However, during the initial stages of implementation (Migration Run), availability of funds would still take 3-5 clearing days.
8. Banks presently charge commission for out-of-town checks; would this practice be continued under CICS?
Since Out-Of-Town checks deposits are special accommodation extended to the clients, such practice is not sanctioned by PCHC and are at the discretion of the presenting bank.
9. Will a check affixed with rubber-stamp, chop and personal seal be accepted for clearing under CICS? If not, why?
Under CICS, only images will be presented for payment thru the Clearing House. For protection, the new check design carries security features that help the presenting bank determines the authenticity of the check as well as its integrity. The use of rubber-stamp, chop and personal seal is strongly discouraged by PCHC under CICS due to the challenges it entails to verifiers that will be relying on the images of the check.
10. What happens to the existing manual clearing of RLX under the CICS Environment?
The main impediment that prevents RLX from being integrated in GMA Clearing is the inability of flights that will transport the physical checks from the regions to Manila. With the use of Images under CICS, any region throughout the country that has network connectivity can be able to participate in clearing. Thus, the existing manual exchanges will be converted to image clearing.
Check Design Standards
11. Why is there a need to change the check design under CICS?
Under CICS, paper checks will no longer travel from the Presenting Bank to the Drawee Bank, thus the presenting bank will be responsible for determining the authenticity and integrity of deposited checks. In order to protect the presenting bank, there is a need to redesign the check so that it can include embedded security features that will help detect fraud attempts and determine genuineness of the check itself.
12. We currently have checks, which are completed on computer printers using magnetic ink for the printing. Can we continue to use magnetic ink for the printing?
13. What measures are in place to reduce check fraud?
The new check design has features that allow the presenting bank to test the check’s authenticity and integrity. The use of a security paper will also ensure that any check cannot be fraudulently copied and negotiated undetected. Security Printers undergo accreditation process and PCHC has control on the production (sources are accredited by PCHC) of Security Paper. PCHC through the Committee on Rules crafted rules and regulations aimed to reduce opportunity for fraud; such as the policy on erasure/alteration and/or deficiency.
14. Your policy on erasure/alteration and/or deficiency is not very clear even to the banks; some banks accept checks with machine affixed amount in figures, some do not. Can you elaborate further what are acceptable and not acceptable for clearing?
CHOM No. 15-460 as clarified in 15-460-A is all about fraud mitigating measures initiative of the banks. This is being incorporated by PCHC in its rules and regulation to protect the banks and their customers against fraudulent attempts to alter checks. Initially, the policy exempted the checks (MC, CC, GC or DD) issued by banks for the reason that parties to which are also banks, have a quicker way of validating the payment information as indicated in the instrument. Items with missing information like amount in words can be represented when the issuer will indicate the amount in words as required. Indicating the missing information using a different ink color or writer style will not invalidate the instrument.