Forged cheques - safeguards

Protecting your cheques is important as letting others have access to them exposes you to the risk of fraud.

Here are some basic precautions -
1. Do not pre-sign cheques. If this is unavoidable, only sign a few and place them into the hands of one person who wil be monitored by another.

2. Set withdrawal limits on each cheque so that any forger will have to sign several in order to steal a large amount.

3. Monitor how many cheque books the bank has issued to your company. This is to ensure that employees do not make requests for such without your knowledge, or intercept them when the cheque books are sent to you.

4. Do bank reconciliation statements every month as they will warn employees that any dishonesty will be quickly caught. Some cases of forged cheques involved dishonesty over a long period of time.

5. Something unusual - ask every employee's spouse to sign an indemnity - he/she will be responsible for any fraud caused by the spouse. Depending on how badly employee wants the job, this may be difficult to achieve.

Forged cheques again

In a previous posting in April 2009, I raised the issue of cheques with forged signatures. Banks are under common law liable for the value of such cheques as they are not allowed to pay out under the cheques except if the actual signature of the customer is present. However, the banks use contractual clauses to shift the risk of forged cheques onto the customer.

Mr Michael Hwang, Senior Counsel, and President of the Law Society, has now raised the issue of whether the banks should do so. He has raised the issue with the Association of Banks, the Consumers' Association of Singapoe and with a Cabinet Minister. However, nothing has made banks change their minds about the use of such clauses. He mentions that in Malaysia and in Hong Kong, customers will not stand for the use of such clauses. Hopefully, the business community acting through trade associations and the like will exert some pressure on the banks to change.

In the meantime, for us individuals, there is always the issue of whether we can rely on provisions of the Unfair Contract Terms Act to try to argue that the banks' clauses are invalid.

Bank officer's fraud

Former bank officer, Ms Lynette Ng Pei Ling, was sentenced to 3 months for her offence of forgery in July 2007. As a relationship manager with United Overseas Bank, she had forged a letter purportedly from the bank guaranteeing a customer Mr Lok Kok Seng 10% returns per annum for 4 years. She made full restitution, an important fact in the court sentencing decision.

She later jointed HSBC but in court, said that she had lost her job.

She was supposed to obtain a $1,440 commission from the sale of a $150,000 investment to Mr Lok.