Giving cheques a new image

The Cheque and Credit Clearing Company (C&CCC) is introducing a new and quicker way to clear cheques using UK banks. The system will see an accelerated clearing process where cheques will be cleared within two weekdays rather than the current six.

This faster and more efficient system is due to the introduction of an image clearing system (ICS), which is a mandatory, industry-wide change, and all UK banks will be moving to this system by January 2019.

Why is this being highlighted now?

The system is being phased in from October 2017 through to the end of 2018, and will have an impact on members and their accounting practices from as early as the end of October 2017.

All banks will be complying with the rollout phase; however, you should contact your individual bank to find out what additional services they will be including per phase, as some banks may be introducing individual aspects such as mobile apps. The main thing to note at this time is that phase 1 (October 2017) will see the introduction of the new cheque clearing system to all banks.

How does this affect you?

There are two main areas which I have identified as being of immediate importance:

(1) Cheque clearance times. From October 2017 through to the end of 2018, some cheques may start to clear on the next business day under the new clearing system, while others will remain on a standard six working day turnaround. Which route your cheque takes will depend on how it is paid in and to which bank it is paid in – this will be under the control of the bank. My advice is that to be on the safe side you should continue to allow six working days for any cheque that you have paid in to clear, until the end of 2018 when the new system is fully rolled out.

I understand this is not ideal; however, as with all new systems this will take a bit of time to bed in.

(2) Accounts rules – rule B6. I understand that another of the main changes to the banking system will be that banks will no longer be returning cheques to you with your statements. The reason for this may be that the cheque was deposited digitally, so the bank has never had the paper cheque. Digital images of the cheques should be available through your bank’s online system or through alternative arrangements with the banks. It will ultimately be your responsibility to ensure that your bank has arrangements in place so that should you request it, copies of cheques, for a minimum period of seven years, will be made available to you.

For clarification, rule B6.7.5 states that a practice unit shall:
(a) retain paid cheques;
(b) retain a digital image of the front and back of each cheque supplied by the relevant bank or building society; or
(c) have in place an arrangement with the relevant bank or building society for the production, promptly upon request, of a digital image of the front and back of each cheque requested, in each case for at least the required retention period (six years plus the period from the date of cheque to the end of that financial year) from the date of the cheque.

With these changes, I would anticipate most firms having an arrangement with their bank to provide digital images if required.

As I understand it, there are more changes due within the UK banking system over the next 18 months and I suggest that you discuss with your individual branch what these changes are and how they may affect you.
Additional information

C&CCC is leading these changes on behalf of HM Treasury. Further information is on its website and it has also uploaded a number of video tutorials about the improvements/changes.

These can be viewed at:
www.chequeandcredit.co.uk
www.youtube.com/user/chequeandcredit