HOW TO REDUCE RISK OF FORGERY OF CHEQUES?
Ask yourself these 10 questions about your firm's financial and accounting practices.
Do you or your partners:
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Regularly ask for status reports from your accounts staff?
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Exercise separation of duties ie one to receive cash and one to issue receipts?
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Have an easy to audit (paper trail) system to support all monetary transactions within the firm?
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Issue receipts for ALL payments received from clients?
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Cross-check payment of cheques and vouchers against the relevant file?
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Check that all payments issued are recorded on file?
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Reconcile receipts with bank statements at least once a month?
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Have a "two to sign" policy, if you are in partnership?
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Monitor frequency of requests for cheque books and cheques issued?
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Store the firm's cheque books in the office safe at the end of every working day?
Did You Know?
Under the amended Section 73A of the Bills of Exchange Act 1949 (Act 204), banks are not strictly liable in cases of forgery of cheques.
How does this affect my law firm?
Where it can be shown that:
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The bank exercised caution and
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There was negligence on the part, the bank will not be held fully liable for losses on the forgery.
Illustrations of Negligence
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Firm’s cheque books kept by accounts staff, not partners.
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Leaving cheque books in the care of staff whilst on leave.
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Pre-signing blank cheques.
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Signing cheques without being fully appraised of the file/purpose of payment/checking the payment voucher details.