Electronic transfers

Switch from using checks


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No one really knows when the checks were first used. But many historians believe that in Venice in the 13th century, the check was created as a device to enable international trade.

The use of checks oiled the wheels of international trade for centuries, as their transferability complemented the exchange of goods for cash.

The rapid development of technology over the past decades and the increase in financial crime make the use of checks redundant and undesirable. Regulators argue that the use of checks is not only inefficient but very costly for the credit and financial institutions that operate the check clearing system. Checks could also pose a financial crime prevention risk.

The Central Bank of Malta has issued a directive on the use of checks and bank drafts, which will enter into force from January 2022. The main effect of this directive is to eliminate the portability of checks, reduce their use and by doing so, to contribute to the prevention of money laundering.

The Malta Bankers Association welcomed the directive. He argues that the proposed measures “would change the country’s payments landscape and ensure the continued transition to more efficient payment methods.” Some countries have already significantly reduced the use of checks, encouraging customers to use electronic payment systems such as credit and debit cards, online banking for bill payments, and direct debit for regular payments. to third parties.

By eliminating the portability of checks, it will be easier for financial crime authorities to trace the origin of funds passing through the payment system and their ultimate beneficiaries. When banks recently introduced new controls on cash transactions in businesses and personal money transfers, it was to be expected that non-good faith money transferors would exploit the portability of checks to hide the trail of money. ‘audit of illegal funds circulating in the payment system.

The financial services community today is burdened with complex financial crime regulations that are very costly to administer. They also have to finance the costs of a check clearing system that still requires considerable manual intervention to function. This is why, from January 2022, checks can no longer be drawn for amounts less than € 20.

By eliminating check portability, banks can now more easily determine the origin of funds entering or leaving a customer’s account.

Malta’s current challenge is to prove to international regulators that it is truly committed to implementing and enforcing anti-financial crime regulations. The new directive should make this challenge less intimidating.

Businesses and individuals who still use checks for payments must adapt quickly by switching to electronic means of payment. With the current high incidence of cybercrime, it is understandable that some may be reluctant to use electronic payment methods. This means that banks and businesses need to invest more resources to make electronic payment systems more secure and resistant to cyber attacks.

The payments evolution may have been slow to take off in Malta, which still has one of the highest volumes of cash in circulation and high check usage compared to other developed economies. The Central Bank’s decision is therefore a step in the right direction.

Individuals and businesses would do well to start preparing to embrace the change and fully embrace new payment methods as soon as the directive is implemented in January 2022. These changes should help show international observers the fight against it. financial crime that Malta has found a new resolve to adhere to through sensible crime prevention rules.

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