CICS OM 17-009

18 January 2017

Memo To : All Member/Participant Banks

Subject : HANDLING OF CHECKS PAYABLE TO THE BIR and BOC

1. With the truncation of checks under the Check Image Clearing System (CICS), the existing

procedures in handling checks payable to the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC), has to be updated to conform to the new processes.

2. Below is the Guidelines/Procedures in processing Checks made payable to BIR and BOC:

2.1. Outward Preparation of Presenting Authorized Agent Bank

2.1.1. Outward clearing items payable to the BIR and the BOC shall be presented for clearing by the Authorized Agent Banks (AABs) only.

2.1.1.1. Batch all items payable to BIR separately.

2.1.1.2. In the same manner, items payable to BOC should also be in separate batch.

2.1.2. During capture, Front-end System of AABs should be able to identify thru tagging as BIR or BOC checks.

2.1.3. From the ICLs received by PCHC from AABs, it shall provide MIS Reports to both the Presenting and Drawee Banks to serve as tools in their respective proving/reconciliation.

2.1.4. Presenting AABs should reconcile their internal reports against the MIS Reports provided by PCHC.

2.2. Verification of Inward Items by Drawee Banks

2.2.1. Drawee Banks should validate if items payable to BIR/BOC are accordingly tagged by the Presenting Bank by comparing them to the MIS Reports provided by PCHC or as indicated in the Image Cash Letter (ICL).

2.2.2. Non-printing of BIR/BOC UIC does not affect tagging of the item. As such, should not serve as reason for dishonor.

2.2.3. In case of a discrepancy, the Drawee Bank should notify the presenting bank immediately.

2.2.3.1. Drawee bank shall dishonor untagged items made payable to the BIR/BOC and return within the prescribed period using the reason: (M) – Untagged BIR/BOC Check

2.2.3.2. Drawee bank shall charge the presenting bank:

2.2.3.2.1. For AAB, Php100.00 per item for failure to tag as BIR/BOC checks; or

2.2.3.2.2. Php1,000.00 per item if the presenting bank is not an AAB or the presenting bank is an AAB but the untagged items are already for re- clearing; or

2.2.3.2.3. Reward of 10% of the face amount of the item or Php20,000.00 whichever is lower, on discovery of a “check switching” attempt;

2.2.3.3. The debit entry to the Drawer’s Account should not in the meantime be reversed. Instead, book the return under the following suggested accounting entries:

2.2.3.3.1. Debit (DR): Due from BSP

2.2.3.3.2. Credit (CR): Sundry Credit-Untagged BIR/BOC Check

2.2.3.3.3. Collection of applicable penalty is via charge slip.

2.2.3.3.4. When untagged check presented by AAB is re-cleared, reverse the

Sundry Account entry.

2.2.3.4. In case the untagged BIR/BOC Check has funding issue or has technical defects

aside from being untagged, i.e. DAIF, CLOSED ACCOUNT, POST-DATED, such

reason shall be used in returning the same, applying corresponding penalty if

any. Indicating “untagged” is unnecessary since tagging on re-presentation may

not cure the primary reason for its return.

2.2.3.5. If dishonored untagged BIR/BOC Check is not re-cleared on the next clearing

session from the return thereof, Drawee Bank shall immediately notify the

Presenting AAB’s Liaison/Clearing Officer/Internal Auditor using the attached pro

forma BIR/BOC Notification and Confirmation Form.

2.2.3.6. If the notification for re-clearing is not responded and subject item is not re-

presented for clearing on the succeeding clearing session (3rd clearing session

counting from the original presentation of untagged BIR/BOC Check), the

applicable Reward as defined under 1.1.6.2.3. can be collected by the Drawee

Bank (as failure of the Presenting Bank to re-clear the untagged item may be

construed that such item is indeed fraudulently negotiated). As such, the

following action should be performed:

2.2.3.6.1. Reverse the Sundry Credit and lodge the amount involved in an

appropriate account.

2.2.3.6.2. DR: Sundry Credit

2.2.3.6.3. CR: Accounts Payable (or to the applicable Account Name)

2.3. Procedures to be observed by Presenting AAB in re-clearing untagged BIR/BOC Checks

2.3.1. As soon as a returned ICL containing Untagged BIR/BOC Check is received, verify if the

item is credited to the account of the BIR/BOC.

2.3.1.1. If Not Credited, conduct immediate verification where the item was credited

and correspondingly debit the account to avoid withdrawal of proceeds from

the check in question. If found to be fraudulently negotiated, each individual

bank’s internal control and legal policies shall be observed.

2.3.1.2. If Credited, the following procedures shall apply:

2.3.1.2.1. Book appropriate accounting entries

2.3.1.2.2. DR Entry: Sundry Debit-Untagged BIR/BOC Check

2.3.1.2.3. CR Entry: Due from BSP

2.3.2. Re-clear the item by re-scanning the Original BIR/BOC Check

2.3.2.1. Batch the Item separately as BIR/BOC Check

2.3.2.2. Tagged the Item as Re-clearing

2.3.2.3. Reverse the Sundry Account Entries

2.3.2.4. DR Entry: Due from BSP

2.3.2.5. CR Entry: Sundry Debit-Untagged BIR/BOC Check

2.3.3. If unable to re-clear the returned untagged BIR/BOC Check despite the notification of

the Drawee Bank, the Presenting Bank is mandated to immediately deliver its duly

accomplished Confirmation Form by Fax and/or by hand. Failure to do so shall be

considered that the subject check was indeed fraudulently negotiated.

2.4. Immediate settlement of discrepancy arising from the non-tagging of BIR/BOC Check

should be a collaborative effort of all the transacting parties. Hence, both the Presenting

and Returning Drawee Banks must endeavour to settle the Sundry Account the soonest

possible time.

2.5. We wish it noted that the booking entries as proposed herein are suggestive and should not

be construed as the ones prescribed. The booking of entries may vary depending on each

bank’s internal rules and standards.

3. The foregoing procedures/guidelines shall become effective on the date set by PCHC as the Full

Implementation of CICS.

4. For your information and guidance.

CICS OM No.17-009

.Handling of Checks Pay

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