Virtual Cheque and e-Money

Md. Badrul Millat Ibne Hannan: Virtual Cheque and e-Money: Suppose, you have received a cheque from one of your accounts receivable and placed it to bank’s respective counter for collection and deposit the stated amount into your account lying with the collecting Bank. Bank usually places this cheque to the online platform of Central Bank known as BACH. Collecting Bank informs you at 5.00 pm that the cheque has been returned due to not sufficient fund and you have decided to consult with your lawyer for legal action against account receivable. Now the question is if it occurs with virtual cheque or e-Cheque, what would you do? As there is no specific definition or instruction about virtual cheque or e-Cheque in negotiable instrument act ( NI)-1881.

As per Negotiable Instrument Act-1881 which was adopted December 9, 1881 (Act no XXVI of 1881), chapter no. II, section-06, defined that A “cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. Again, Bill of Exchange stated in section-5, A “bill of exchange” is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay on demand or at fixed or determinable future time a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.

আরও দেখুন:
◾ আইবিবি ব্যাংকিং ডিপ্লোমা সার্কুলার, সময়সূচি, সিলেবাস, রেজাল্ট, বিগত সালের প্রশ্ন ও সাজেশন

If this stated banking transactional events occurred for virtual cheque or e-cheque, what action to be taken against the drawer. Although procedure of legal action with the punishment has been stated in NI Act-1881, section-138 and sub-section-1 (a), (b) 2, 3.

But it is a matter of thinking that every day huge amount of money has been transacted over virtually such as Bangladesh Automated Clearing House known as BACH, Electronic Fund Transfer known as BEFNT and Real Time Gross Settlement known as RTGS. Virtual transaction is many times more than cash transaction. Bangladesh Bank has issued a PSD Circular No-07 dated-05 December 2019 for BACH and EFTN but there is no any ACT passed by government for virtual Cheque or e-cheque. If the government wants to modify the NI Act, there must consider some matters like- concrete definition and its application with explanation. Government is bound to pass act due to such changes and diversity of transactions.

Definition may be selected simultaneously with NI Act- “An electronic cheque/ virtual cheque is a bill of exchange or an unconditional instruction received from drawer (s) to a banker either over email or others online platform (WhatsApp, Textual Message over Mobile Phone or other acceptable social media) or virtual image to pay a specified person, to pay a specified amount at specified time into drawee’s bank account lying collecting bank.”

Here, drawer means a person who has an account number either cheque bearing or not and drawee means receiver of the amount. Cheque is meant here printed MICR cheque, image of the printed MICR cheque, virtual unconditional instruction from drawer’s email or mobile number which is registered with respective bank’s databased systems.

There are many countries in the world have modified their act for upgradation and enacted separate laws. Our Government can do it for the betterment and safeguard of the Banks and Financial Institutes as well citizens.

Hong Kong Monetary Authority defined and provided the guideline for the security of the e-Cheque “as an electronic counterpart of paper cheque. It turns the cheque writing and deposit processes totally online. Paying with e-Cheques will be an entirely paperless experience.”

Security for e-Cheque-The payer is required to pass through Two Factor Authentication (2FA) before issuing an e-Cheque The e-Cheque issuance record kept by the paying bank provides an additional channel for the bank to verify the e-Cheques Adoption of Public Key Infrastructure (PKI) technology in the digital signature of e-Cheque prevents e-Cheque tampering Centralized presentment checking mechanism avoids multiple deposits of e-Cheques The payer may consider encrypting an e-Cheque before delivery to further improve security.

BEFORE ISSUANCE OF E-CHEQUE Sign up for the e-Cheque service through your Internet banking account and apply for a digital certificate for the purpose of e-Cheque signing* Obtain the payee’s agreement and the latest email address for receiving e-Cheques* Some paying banks may offer to apply, renew and keep custody of the digital certificate on behalf of the payers. The application and renewal can be completed online in a short period of time.

Now the e-Money “E-money is defined as a digital, monetary medium of exchange that is represented over an electronic device. The device in question could be software (like an internet banking system, or a payment service provider such as bKash, Rocket, Nagad, mCash etc) or a piece of hardware like a smartphone or a magnetic device such as a prepaid card, iBanking, Cellfin and other virtual Banking platform. In both cases, we call such devices storing e-money electronic wallets or e-wallets.”

A guideline may be taken for the Security and Compliance Measures by E-Wallet Providers-

• Customer Due Diligence: E-wallet providers conduct CDD checks to verify a user’s name, addresses, birth date etc. Users who might pose a higher risk are subject to Enhanced Due Diligence (EDD). Depending on the user verification level different limits apply to payment transactions and other activities.
• Transaction Monitoring: E-wallet providers scan transactions for unusual volumes and frequencies, assembling Suspicious Activity Reports (SARs) to pass on to financial supervisory authorities.
• PCI DSS: When handling credit card information, e-wallet companies have to adhere to the Payment Card Industry Data Security Standard (PCI DSS). It’s an internationally applied security standard for major card schemes.
• Strong Customer Authentication: This includes procedures such as two-factor authentication to verify the user’s evidence accurately and prevent fraud.

Present world is witnessing many changes and diversification in recent years. Changes are not always negative if adaptation and necessary action taken parallelly in right time. Sometime, changes become mandatory. So, intellect persons adapt with the changes to save themselves before happening any bitter and irreplaceable losses.

Although the use of e-cheque has started as a concept in the 1980s and rose to prominence during the Dot-Com era, it has acted as one of the biggest game-changers in the financial industry. In a matter of only four years, from 2014 to 2018, the number of electronic money transactions in Europe alone doubled to more than 4 billion.

Author: Md. Badrul Millat Ibne Hannan, MPA, AIS (DU), ACCA (Final Level) & Officer at Islami Bank Bangladesh PLC