Guidelines for Cheque Truncation in Nigeria

CENTRAL BANK OF NIGERIA
Guidelines for Cheque
Truncation in Nigeria

March 14, 2012

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Guidelines for Cheque Truncation in Nigeria Page 2
Table of Contents
1 Preamble ....................................................................................................................... 4
2 Terminology ................................................................................................................... 5
3 Definitions...................................................................................................................... 6
4 The Nigerian Cheque Truncation Model......................................................................... 7
4.1 Model for truncation ................................................................................................ 7
4.2 Data Standards....................................................................................................... 7
4.3 Value Limits on cheque truncation .......................................................................... 7
4.4 Retention of original cheque ................................................................................... 7
4.5 Data Storage........................................................................................................... 7
4.6 Minimum Storage Standards................................................................................... 8
4.7 Implementation and Deployment............................................................................. 8
5 Procedures .................................................................................................................... 9
5.1 General Procedures................................................................................................ 9
5.2 Clearing – Procedure at the Presenting Branch .................................................... 10
5.3 Processing at Clearing House Gateway (CHG) – Outward Clearing ..................... 11
5.4 Processing at Clearing House Gateway - Inward Clearing.................................... 12
5.5 Processing at Branches / Bank’s In-clearing System ............................................ 13
5.6 Special Processing at Clearing House .................................................................. 15
6 Interbank Data Exchange rules.................................................................................... 16
6.1 Use of Dedicated Secure Network ........................................................................ 16
6.2 Transmission of Image / Data ............................................................................... 16
6.3 Media Based Transmission of Exchange Files...................................................... 16
7 Technical Specifications............................................................................................... 17
7.1 Scanning Standard ............................................................................................... 17
7.2 Image Quality Checking........................................................................................ 17
7.3 Handing IQA Failure ............................................................................................. 17

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7.4 Digital Signatures.................................................................................................. 17
8 Data Storage................................................................................................................ 18
8.1 Storage and Archiving System.............................................................................. 18
8.2 Clearing House Table ........................................................................................... 18
8.3 Storage of Physical Instruments............................................................................ 18
9 Risk and Mitigation....................................................................................................... 19
9.1 Internal Control ..................................................................................................... 19
10 Roles and Responsibilities........................................................................................ 20
11 Sanctions ................................................................................................................. 21

CENTRAL BANK OF NIGERIA
Guidelines for Cheque Truncation in Nigeria Page 4 1 Preamble WHEREAS the Central Bank of Nigeria by CBN Act No. 7 of 2007 is to promote monetary stability and sound financial system in Nigeria. WHEREAS the Central Bank of Nigeria by virtue of S. 47 of the CBN Act No. 7 of 2007 is charged with the duty of facilitating the clearing of cheques, credit instruments for banks and for this purpose to organize in conjunction with other Banks, clearing houses in such places as the Bank may consider necessary. WHEREAS ... NOW THEREFORE the Central Bank of Nigeria, pursuant to S. 47 of the CBN Act of 2007 and having had consultations with banks duly established in Nigeria hereby issues the following Guidelines for Cheque Truncation in Nigeria. a) Objectives The objectives of the Cheque Truncation Guidelines are:
(i) To provide for the regulation and management of cheque truncation in Nigeria with the view to reducing cost and days of clearing instruments; (ii) To articulate the rights and responsibilities of presenting and paying banks in the Cheque Truncation System; (iii) To provide for minimum technical and operational standards for cheque truncation; and (iv) To facilitate the implementation of an effective and efficient payment system in the Nigerian Banking Industry. b) Scope These Guidelines shall apply to clearing and settlement activities in the Nigeria Bankers Clearing Houses which practice cheque truncation system. Notwithstanding the provisions of this Guidelines, the provisions of the Revised Nigeria Bankers’ Clearing House Rules shall apply to cheque truncation system in Nigeria subject to necessary modifications. Provided that where there is a conflict between the provisions of the Cheque Truncation Guidelines and Revised Nigeria Bankers’ Clearing House Rules, the former shall prevail.

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Guidelines for Cheque Truncation in Nigeria Page 5 2 Terminology CH Clearing House CHG Clearing House Gateway IQA Image Quality Assurance CAR Courtesy Amount Read box UDK Unique Document Key PKI Public Key Infrastructure RRF Return Request File CTS Cheque Truncation System ECPIX Electronic Cheque Presentment with Image Exchange NACS Nigeria Automated Clearing System OACK Outward Acknowledgement File SACK Settlement Acknowledgement File

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Guidelines for Cheque Truncation in Nigeria Page 6 3 Definitions Cheque— an instrument, payable on demand and drawn on or payable through or at an office of a bank, whether or not negotiable, that is handled for forward collection or return. Cheque Truncation— a process that involves stopping the physical movement of the cheque and replacing the physical instrument with the image of the instrument and the corresponding data contained in MICR line. The cheque details are captured, typically by the bank presenting the cheque or its clearing agent and electronically presented in an agreed format to the Clearing House for onward delivery to the paying bank for payment. Unlike the more common form of presentment where a cheque is physically presented to the paying bank, a truncated cheque is typically stored by the presenting bank. Ordinary Caution Notice – This is document issued by the presenting bank to alert other clearing bank (s) about a suspicious instrument. Special Caution Notice – This is document issued by the paying bank, after the closure of the return window to alert the presenting bank not to give value to such clearing instrument. MICR Line— ‘‘magnetic ink character recognition line’’ mean the numbers, which may include the bank routing number, account number, cheque number, cheque amount, and other information, that are printed near the bottom of a cheque in magnetic ink in accordance with the Nigeria Cheque Standards. Paying Bank—(i) the bank by which a cheque is payable, unless the cheque is payable at or through another bank and is sent to the other bank for payment or collection; or (ii) the bank at or through which a cheque is payable and to which the cheque is sent for payment or collection. Person— means a natural person, corporation, unincorporated company, partnership, government unit or instrumentality, trust, or any other entity or organization. Presenting Bank— the bank that receives the cheque from the customer, either directly or via a third party, and presents the cheque to the clearing house for clearing and settlement.

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Guidelines for Cheque Truncation in Nigeria Page 7 4 The Nigerian Cheque Truncation Model
4.1 Model for truncation
The overall model for Nigeria shall be:
Generic model – ‘Image and Data’ model:
Cheque Images and MICR data flow from the Presenting Bank through to the Paying Bank. Data Capture – ‘Presenting Bank’ model:
The cheque is dematerialised by the bank where the cheque is initially presented. Cheques shall be truncated at the Presenting Bank and within prescribed times defined by the Guidelines. Data and Image Exchange - Clearing House Model:
The Clearing House acts as an intermediary for data and image flow between the presenting and the paying bank. Data and Image Archive:
NIBSS shall be the Central Image Warehousing Agency (CIWA) for storage and certification of cheque images. The paying bank may request for any image from CIWA for the purpose of proof of payment up to a period of 10 years. Such data retrieval shall be provided on online real time basis.
4.2 Data Standards
The prescribed data standards shall be ANSI X9.37.
4.3 Value Limits on cheque truncation
All cheques are eligible for cheque truncation subject to value limits that may be imposed by the CBN from time to time.
4.4 Retention of original cheque
The minimum retention period of physical cheques by the presenting bank is five(5) years. The electronic image shall be retained by CIWA for a minimum period of ten (10) years .
4.5 Data Storage
From the point of view of control, it is recommended that that Presenting Bank, Paying Bank, and the Automated Clearing House (NIBSS) shall keep copies of the cheque images.

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4.6 Minimum Storage Standards
The Cheque front shall be stored in Grey Scale format, while Black and White format shall be used for the cheque front and rear.
4.7 Implementation and Deployment
Truncation shall be mandatory for all banks at a particular centre from a cut-off date as may be determined by the CBN. The cut-over date shall be announced well in advance and the participating banks are required to undertake a formal certification test to demonstrate operational readiness for the conversion to cheque truncation.

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Guidelines for Cheque Truncation in Nigeria Page 9 5 Procedures
5.1 General Procedures
Clearing Period – Under the Cheque Truncation regime, cheques shall clear on a T+1 basis such that customers receive value in the morning of T+2. TRANSACTION DAY CHEQUE CLEARING CYCLE MONDAY (T) Fresh cheques are deposited at bank branch TUESDAY (T+1)  Cheques are presented at the clearing house  Paying Bank to return unpaid instruments same day  Beneficiary Bank gets value WEDNESDAY(T+2) At the beginning of day, bank customer receives value for cheques not returned
5.1.1 Clearing Timings
The CH shall operate 3 sessions as follows:
Session 1 (1am-8am): Permits all clearing instruments (cheque, NEFT–fresh and returned items) Session 2 (11am - 2pm): Permits only Returned cheques, fresh NEFT and Returned NEFT. Fresh cheques are not allowed. Session 3 (4pm - 6pm): Permits only Returned cheques and Returned NEFT Instruments. NOTES:

1. Settlements for 1
   st and 2 nd clearing sessions shall be same day, while Return Instruments (3 rd session) shall be settled next day.
2. All unpaid clearing cheques shall be returned same day.
3. NIBSS shall ensure that all inward files and reports are available to
   banks for download within 1 hour of session closure.
   5.1.2 Point of Truncation
   The point of truncation is left to the discretion of the Presenting Bank.

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Guidelines for Cheque Truncation in Nigeria Page 10 Provided that banks shall put in place a process of proper authorization and controls to ensure that all cheques are processed accurately and in accordance with the service levels concerning timings.
5.1.3 Settlement
Settlement shall be generated on the basis of the existing MICR code line. The AMOUNT field shall be captured and keyed in separately by the Presenting Bank. The specifications of the cheques detailed for MICR clearing shall be followed. Presenting Banks are encouraged to auto-read CAR field and specify cheque value. This shall eliminate cheque post-encoding which is time consuming in the first place. With the commencement of cheque truncation, post-encoding of the amount field shall no longer be mandatory. Presenting Banks shall employ appropriate Optical Character Recognition technologies to auto-read the AMOUNT field such that cheque post-encoding would be eliminated in the in-clearing process as advised in the Nigeria Cheque Standards.
5.2 Clearing – Procedure at the Presenting Bank
5.2.1 Preliminary Verification
As the payment processing is done on the basis of images, the onus of due diligence shifts to the Presenting Bank for validation of the physical instrument. The Presenting Bank shall observe reasonable precautions such as:
 verifying the tenor of the instrument,
 physical feel of the instrument and
 identifying evidence of tampering that is visible to the naked eye and UV light . For enhanced attention, based on exceptions, the banks shall employ suitable risk management techniques such as enhanced scrutiny of high value transactions. The Presenting Bank takes full responsibility for collecting a cheque and exercises due diligence as per the standard banking conditions and the minimum security standard specified in the Nigeria Cheque Standard. The presenting bank shall ensure that the cheque they are presenting conforms to the Nigeria Cheque Standard.
5.2.2 Crossing
All cheques received over the bank’s counters for the purpose of clearing are required to be branded with the bank’s special crossing and presentation stamp prior to scanning.
5.2.3 Return Processing
The Central Clearing Center of the Presenting bank shall receive the return exchange file/s for each return session containing the returns on the presentation lodged by them. An item may be returned as long as its clearing period has not expired, and a session is available for the particular clearing type. The return file shall contain the item detail and return reason code. It shall be the responsibility of

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Guidelines for Cheque Truncation in Nigeria Page 11 the presenting bank to generate the return memo to the customer from the information in the return file.
5.2.4 Capture of Images and Data
The images of all the instruments in a batch / file shall be duly captured along with MICR data using scanners set up for the purpose. The amount needs to be captured/ keyed in to complete the data record.
5.2.5 Reject Repair and Balancing
The banks shall have proper systems and procedures in place to ensure that the rejects of the MICR line are appropriately repaired and the batch file is balanced before the same is uploaded from the capture system to the Clearing House. Banks are required to pass on the value in the MICR repair tag for any correction / changes / rejects on the MICR band of the cheques in the capture files.
5.3 Processing at Clearing House Gateway (CHG) – Outward Clearing
5.3.1 Receiving Outward Presentment
The CHG shall receive correctly formatted outward MICR Clearing Data files and Image files from the capture system of the Presenting Bank. The Presenting Bank shall ensure that the total amount and individual line items in the MICR Data File are reconciled against the Data Image File.
5.3.2 Image Quality Analysis and Failure Handling
The incoming images are subjected to IQA validations. The images which fail IQA validations are rejected with an appropriate response file. The bank may rescan the instrument and present in line with bank’s internal processes/ control procedures. The member banks have to maintain control over such re-presentments.
5.3.3 Item Processing
The MICR Data Files and Cheque Image files presented by the capture system are validated by the CHG against the file and item level validations indicated in the CHG Specifications, as released by the Clearing House from time to time. The CHG after validations generates response files which contain information related to acceptance or rejection of each file and the items present in each file with appropriate reason codes. Sometimes there may be multiple response files for a MICR Data File and Cheque Image file. It is the responsibility of the capture system to take these response files and take appropriate actions. The CHG then sorts the MICR data and their related images into bundles per paying bank and bundle collection type and creates exchange files internally and validates these bundles against the session window to which they shall be attached at the Clearing House. The CHG, before attaching the items to the session, signs MICR data as well as image views. It also signs and encrypts the exchange files before transmission to CH.

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5.3.4 Session Attachment
The items are assigned to an appropriate clearing session that is open based on parameters fixed for a session by the Clearing House. These parameters are passed on to the capture system through the CHG. The item inherits ‘session date’ that is the business date of the session. If there is no appropriate session that is open, the items/ bundles wait at the CHG until such a session opens. A validation of the item’s Presentment Date versus the item’s Session Date is performed and items that exceed as prescribed shall be rejected by the Clearing House. The Clearing House shall from time to time prescribe this parameter.
5.3.5 Transmission of Files to Clearing House
CHG shall build exchange files for the MICR data and the cheque images for onward transmission to Clearing House. Each exchange file is digitally signed and encrypted before it is transmitted to the CH. Banks shall plan transmission of their outward presentation by taking into account presentation volume, the bandwidth of network with the Clearing House, and the session window. In the event of an exchange file being received at the CHG within a session time but not passed to the Clearing House (due to unforeseen circumstances such as network congestion) before close of the session, the CHG shall unbundle the exchange file, and reattach to a new session.
5.3.6 Reconciliation of Outward Presentation
It shall be the responsibility of the Presenting Bank to verify and ensure that all the items presented / transmitted by it have been included in the settlement and reconcile the total credits with the presentation made by it. After End of Session at the CH, CHG generates an OACK file containing the details of Items that have been taken up for settlement at the CH. It shall be the responsibility of presenting bank to reconcile their entire presentation by collating the information from OACK file and various response files.
5.4 Processing at Clearing House Gateway - Inward Clearing
5.4.1 Receipt of Inward Data / Images
The Inward processing deals with accepting inward presentment data and images from the CH and providing data in the form of files for use within the bank’s in￾clearing (paying bank) system. The CHG receives digitally signed inward financial data exchange files and image exchange files from the CH.
5.4.2 Validation
The CHG shall authenticate and load the exchange file data into the system and send an error exchange file to the CH if the inward financial data exchange file or image exchange file failed decryption or authentication. The CHG shall send an acknowledgement exchange file to the CH if the inward financial data exchange file

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Guidelines for Cheque Truncation in Nigeria Page 13 or image exchange file gets successfully loaded. The CHG shall also validate the digital signatures on the Exchange MICR and Image Files.
5.4.3 Control Mechanism
The Paying Bank shall verify that all the inward bundles/ items have been received by it to ensure that there has been no data loss in the transmission from Clearing House to the CHG. The CHG supervisor may compare the relevant information available at the ‘Clearing House Processing Monitor’ and ‘Inward Exchange File Screen’ for the purpose. The paying bank would not be able to generate posting files unless all the inward bundles/ items have been actually received at the CHG. If any files are lost in transmission the bank may request the Clearing House for retransmission of images and data.
5.4.4 Generation of Posting File
CHG, for each session, shall generate files for interfacing with the bank’s in-clearing or exception processing system. CHG is capable of creating posting files (both image and data files) for payment processing bank wide in one of the following three ways:
i. Bank wise for the entire bank
ii. Branch wise within each bank
iii. Branch and transaction code wise for each branch.
The type of posting file paying bank requires is configurable at CHG.
5.5 Processing at Branches / Bank’s In-clearing System
5.5.1 Transmission of Posting Files
It shall be the responsibility of the paying bank module to fetch the posting files from CHG and undertake the payment processing.
5.5.2 Duplication Checking
The CHG detects duplicate items based on MICR code line on the data for the configured number of days. The duplicate items are indicated in the SACK files generated by the paying bank’s CHG, and it is the responsibility of paying bank module to have processes in place to take necessary caution/control while processing such items. Additionally, CH also generates a report of duplicate items for each CHG after each session, and is available for CHGs to access the same and download, if required.
5.5.3 Payment Processing
The banks shall do the payment processing based on images of the instruments following all the prudent practices. Both the presenting bank and the paying bank shall be liable for payment of a stale or post dated instrument.

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5.5.4 Return Request File
It shall be the responsibility of the paying bank to collate all the return items and create Return Request File/s (RRF) as per specifications provided in CHG Specification document. The paying bank in-clearing system shall forward such Return Request File/s to CHG for onward transmission to the CH.
5.5.5 Return Processing at the CHG
The CHG shall receive RRF/s from paying bank system containing all the outgoing returns along with return reason codes. The CHG shall validate the file for file integrity and data integrity, process the data and generates exchange file for the CH. During return clearing images would not travel. Each exchange file is digitally signed and encrypted before it is transmitted to CH.
5.5.6 Control of Returned Cheques Incidents
The Clearing House (CH) shall update and analyse the list of all returned cheques monthly. Customers with cases of high frequencies shall be reported to the CBN and accredited Consumer Credit Bureaus. Appropriate return reason code shall be specified in the RRF/s by the Paying Bank.
5.5.7 Commission on Turnover (COT)
The Presenting and Paying Banks shall not charge COT on Debit entries arising from Returned Instruments. However the paying bank shall be free to apply returned cheque charges as provided in the Bankers Tariff.
5.5.8 Transmission Discipline
CHG shall transmit the Outward Return Exchange Files within the given return window. As there may be a time lag during transmission of a file from CHG to CH, the paying bank shall ensure that the return exchange files reach the Clearing House within the timeframe before the closure of the return session.
5.5.9 Internal Control
While handling the inward clearing, the banks shall search for duplicate MICR cheques and maintain a duplicate MICR cheques list. In addition to the inward instruments drawn on branches of a bank, the reports generated by the Clearing House shall contain the summary position of the total number of instruments and the total value thereof. After the processing of inward clearing, banks shall verify the inward clearing figures.
5.5.10 Reconciliation of Clearing Differences
In CTS Clearing the images and data shall be received together in the separate files (images in IMG and data in XML) and hence the possibility of a bank being debited without receiving an image shall not arise. In the case of a bank being debited with the cheque image of another bank (caused, for example, of data entry error) the same shall be returned to the presenting bank with appropriate return reason code.

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5.6 Special Processing at Clearing House
5.6.1 Caution Notice
Ordinary Caution Notice shall cease to exist in the CTS regime.
5.6.2 Different Status of CHG / Bank
Suspended: CH shall change the status of a bank from ‘in clearing’ to ‘suspended’ under exceptional circumstances such as moratorium or unwinding. In such a scenario, the suspended bank shall not be able to participate in any clearing. But banks may return items presented by the suspended bank in the suspended period. Not in Clearing: CH shall put a bank in ‘not clearing’ mode when a bank does not participate in clearing. Once set as ‘not clearing’ the bank cannot make or receive any presentations during the ‘not clearing’ period. Other banks also cannot return items presented on/by the bank.

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Guidelines for Cheque Truncation in Nigeria Page 16 6 Interbank Data Exchange rules
6.1 Use of Dedicated Secure Network
Images accompanied by the MICR line data, duly encrypted & digitally signed, shall travel over a dedicated network connecting all the CHGs with the Clearing House.
6.2 Transmission of Image / Data
The capture system shall transmit the MICR data and images of the cheques to its Clearing House Interface electronically and/or on the media. Banks may have procedures in place to optimise bandwidth and ensure that the branches upload their presentation in over a period of time rather than sending all the images and data relating to the day’s clearing of the branch at the end of the day or at a given point of time.
6.3 Media Based Transmission of Exchange Files
In the event of a network failure or in case of an offline CHG, the application allows for data and image files to be exchanged with the CH using different types of Electronic medium. The same Public Key Infrastructure (PKI) infrastructure that is used during network transmission is used to create the files for transfer using physical media options.

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Guidelines for Cheque Truncation in Nigeria Page 17 7 Technical Specifications
7.1 Scanning Standard
The scanning shall conform to the prescribed standards which are, for front side, grey scale 100 DPI 8 bit (256 level) in JFIF format with JPEG compression, and front and back bi-tonal (black and white), 200 DPI TIFF image. Compression techniques used are JPEG for grey scale image and CCITT G4 standards for the bi-tonal. The image quality assurance (IQA) is required at the scanning stage so that the images meet the processing quality standards. The image specifications are as follows:
Sl. No. Image Type Minimum DPI Format Compressio n 1 Front Grey Scale 100 DPI JFIF JPEG 2 Front Black & White 200 DPI TIFF CCITT G4 3 Reverse Black & White 200 DPI TIFF CCITT G4 The background of the cheques shall be image-friendly. There shall be no dark background.
7.2 Image Quality Checking
The banks need to perform IQA validations at the capture system. Each image shall have an IQA indicator tag indicating the outcome of the IQA test carried out by the capture system. The threshold values for different IQA parameters shall be intimated to the banks by the Clearing House from time to time. The banks shall take care to synchronize the IQA parameters at the capture system, to avoid excessive rejection at the CHG.
7.3 Handing IQA Failure
The Clearing House retains the right to define threshold limits on items failing IQA, and invoke penal provisions for its violations.
7.4 Digital Signatures
The use of the Public Key Infrastructure (PKI) ensures data authenticity, integrity and non-repudiation, adding strength to the entire system. The Presenting Bank CHG shall affix digital signature on each Exchange File before transmission to CH. The digital signatures used for the clearing file exchange between the CH and CHGs shall have an unexpired life of at least one month. The Exchange Files are secured using the PKI throughout the entire cycle covering capture system, the Presenting Bank, the Clearing House and the paying bank.

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Guidelines for Cheque Truncation in Nigeria Page 18 8 Data Storage
8.1 Storage and Archiving System
A sound storage and archiving system of images is an integral part of CTS which takes care of disputes, complaints, reconciliation, etc. The physical instruments and electronic image shall be stored by the presenting bank for a minimum of five (5) and ten (10) years respectively.
8.2 Clearing House Table
The master table information, such as sort codes, transaction codes, branch codes, bank codes, clearing zone codes, calendar, and designated branches, etc., of the capture system shall be synchronised with that of Clearing House Table. Any changes in the clearing house table shall get automatically updated on the online CHGs, and it shall be the bank’s responsibility to update its capture system immediately. CHG supervisors shall monitor whether the CH Table has been updated successfully or not. Any error related to CH Table updates is reflected in the system monitor screen of the CHGs. It shall be the responsibility of the offline CHGs (CHGs which are not connected to CH over network) to ascertain any updates to the Master Tables, before the commencement of any session. Offline CHGs may have to approach the Clearing House for any updates.
8.3 Storage of Physical Instruments
The presenting banks need to put in place arrangements to physically archive the cleared instruments for ready retrieval, whenever required at a later date. The physical instruments shall be stored for the required statutory period, as mentioned.

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Guidelines for Cheque Truncation in Nigeria Page 19 9 Risk and Mitigation
9.1 Internal Control
The banks shall document the process flow and ensure that the adequate control mechanisms are in place. Special care and adequate physical check shall be taken during re-scanning of instruments and re-presentation of instruments. The banks shall have a mechanism to generate internal control reports at the end of the session / day to effectively reconcile the presentation made by it and the credit received by it from the CH. Any discrepancy shall be identified on the same business day and resolved on the following business day at latest. Banks shall put in place a framework for mitigation of operational, legal and reputational risks in compliance with the Electronic Banking Guidelines.

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Guidelines for Cheque Truncation in Nigeria Page 20 10 Roles and Responsibilities The introduction of the truncation process changes the roles and the responsibilities of the various participants in the clearing system and may lead to introduction of certain risks which have to be mitigated. These are documented below. a. At the presenting bank level, the responsibility to verify the genuineness of the cheque based on the apparent tenor or the features of the cheque presented for collection may lead to banks refusing to accept a genuine cheque or accept a forged cheque based on a manual scrutiny. Images and MICR data to be sent to the clearing house have to be matched before they are released to the Clearing House. b. The Clearing House shall assume that the data given by the banks is the data meant for that day’s clearing and shall arrive at the settlement based on this assumption. If the MICR data given by the bank is not that matching with the day’s image the bank has sent for collection, it may lead to erroneous settlement and large returns.
c. Truncating cheques entails additional operational risks. Banks shall take
adequate measures to ensure that all necessary safeguards are provided for in consonance with legal requirements and banking practice while making payments, especially for high value instruments. d. The paying bank shall verify the signature on the image of a cheque. If a paying bank chooses to verify signatures on the images of cheques above a cut-off amount only, then it runs the risk of paying some forged instruments.

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Guidelines for Cheque Truncation in Nigeria Page 21 11 Sanctions Responsibilities Sanction 1 Persistent transmission of data that are not in agreement with the image Bank shall be reported to the CBN. After 3 warnings the bank shall be suspended from clearing until such error is corrected. 2 Presentation of cheques with alteration/erasures which are visible under the UV light/naked eye thus leading to fraud Presenting bank shall be fully liable 3 Presenting cheques which are not in accordance with the Nigeria Cheque Standard Relevant CBN sanction shall apply. 4 Presentation of cheques with irregularity such as stale, post-dated, amount in words and figures differ The presenting and paying bank shall be jointly liable(50:50) if there is a loss 5 Paying bank to ensure that their host application can prevent the payment of duplicated cheques Paying Bank is fully liable. 6 Failure to return an unpaid instrument within the clearing period/window without notice to the presenting bank Paying bank shall be fully liable 7 Presenting bank’s failure to honour Special Caution Notice from the paying bank duly served within the business hour of presentment day Presenting bank shall be fully liable 8 Undue delay in transmission of cheques valid for presentment which made a customer to suffer a loss as a result of delay in getting value Applicable CBN sanction shall be invoked.