The use of QR codes in cheques will now be introduced, to help banks filter out counterfeits. Image Credit: File photo

Dubai: Banks across the UAE will be introducing new improvements to their cheque verification systems to combat fraudulent transactions.

The UAE Banks Federation (UBF) has recently come together to discuss a new strategy to fight fraud and agreed to use QR codes to filter out counterfeit cheques.

The new verification change will see individual cheques allocated a random number, which can then be read electronically during an automated validation process.

The number is unique to each cheque and will help ensure that only valid non-cash transactions are made through banks.

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“The new automated approach is expected to use a cryptographic protocol, a one-way identifier called HASH which uses an algorithm to combine a random number with magnetic ink character recognition (MICR) data,” the association said in a statement.

“HASH is completely random and unique to the individual cheque and acts as a secure secret key for the cheque. It is not stored anywhere except on the cheque leaf. When the cheque is presented, the QR code will be read from the cheque leaf along with MICR details and passed to the cheque chain system for validation against the unique HASH.”

If the value matches the HASH, then the cheque will go through.

AbdulAziz Al Ghurair said the new improvements are “further evidence of our collective desire to tackle the issue of cheque fraud.”

“By introducing technology that allows us to detect problems in real time, we are confident that we can lessen the impact of fraud on our customers. In addition, these changes will improve operational efficiency, reduce costs and lay the foundations for further innovation that will benefit the banking sector.”

The use of fake cheques has been rising, as new printing technologies have made it easier for scammers to produce hard-to-spot counterfeits.

But the banks said they are “keen to work together to combat this risk.

“Counterfeit cheques currently expose banks, businesses and customers to financial, reputational and legal risks. Sophisticated printing technologies have pushed incidences of fraud to increase,” the association said.

UAE authorities are not only increasing their vigilance against counterfeit cheques. Banks across the country have recently been mandated to do some background checks on customers before releasing cheque books.

This is to ensure that users of cheques won’t default on any debt obligations or payments.

From January to April this year, more than 7.16 million cheques worth Dh351.1 billion were processed by the UAE Clearing Cheque System, up by 29.7 per cent from the same period last year.

The value of bounced cheques, however, has declined to Dh15.7 billion. Early this year, an Indian businessman was arrested for racking up a total of Dh624 million in bounced cheques.