CICS OM 18-028

December 17, 2018

T O : All Member/Participant Banks

R E : IMPLEMENTING PROCEDURES COVERING RETURNS OF CLEARED/PAID ITEMS WITH TECHNICAL DEFECTS AND/OR FORGED ENDORSEMENT OR NO ENDORSEMENT (Returns Under Section 19 of the Amended CICS Rules and Regulations)

1. This Operations Memo covers the return of cleared/paid clearing items due to Technical Defects and/or Forged Endorsement or No Endorsement (when such endorsement is necessary for negotiation).

2. For purposes of this Operating Memo, the procedures for the return of cleared/paid items are classified into two (2) categories. The first category is the Return due to claim of Alteration or Counterfeit Check or Forged Endorsement or Lack of Endorsement (when such endorsement is necessary for negotiation), and the second is the Return due to Technical Defect/s other than Alteration or Counterfeit Check/s.

2.1. Returns due to claim of Alteration or Counterfeit Check or Forged Endorsement or Lack of Endorsement

Upon the complaint of the Drawer, the Drawee Bank may return a cleared/paid clearing

item to the Presenting Bank under Section 19 of the amended CICS RR provided the return

is made within the required direct presentment period. Direct presentment of such return

to the Presenting Bank is subject to the following procedure:

2.1.1. Drawee Bank

2.1.1.1. Prepare a Transmittal Letter (please refer to Annex A to this Operating Memo

for the format) addressed to the Presenting Bank/Branch covering the item to

be returned.

2.1.1.2. Generate a Post-payment Return Check Advice or PRCA (please refer to Annex

B to this Operating Memo for the format) of the item and prepare a Clearing

Receipt for reversal of the value of the returned item or the refund of the

amount paid without authority of the Drawer;

2.1.1.3. Affidavit of the Payee/s or Affidavit of the Payee/s and of the Drawer, may be

attached to the Transmittal Letter for the return of any item based on in any

of the following claims:

2.1.1.3.1. Name of the Payee is Altered

If the Drawer claims that the name of the Payee (of the Check covered

by the return) is altered, the Drawer may execute an Affidavit to

demand for refund. Additionally, the Drawer may at his/its option,

attach an Affidavit of the person or the entity named by the Drawer as

the Real Payee of the cleared/paid Check.

2.1.1.3.1.1. Drawer’s Affidavit

The Drawer’s Affidavit shall state among other details that

(a) the date of issue has been altered; or (b) the name of

the Payee has been altered; or (c) the amount has been

altered, as the case may be. .Suggested formats for the

Drawer’s Affidavit are annexed to this Operating Memo, as

indicated below:

2.1.1.3.1.1.1. Drawer’s Affidavit on Alteration – Individual

(See Annex D1)

2.1.1.3.1.1.2. Drawer’s Affidavit on Alteration – Entity (See

Annex D2)

2.1.1.3.1.2. Affidavit of the Payee/s

The Affidavit of the person/entity named by the Drawer as

the real Payee shall state, among other details, that (a)

he/it was shown a copy of the cleared/paid Check/s and

asked by the Drawer if he/it knew anything about the

deposit of the Check/s; (b) he/it is not the person/entity

indicated in the paid Check/item; (b) he/it did not

authorize anyone to receive the proceeds of the

Check/item; and (c) he/it did not receive the proceeds of

the Check/item. Suggested formats for the real Payee’s

Affidavit are annexed to this Operating Memo, as

indicated below:

2.1.1.3.1.2.1. Affidavit of the Payee on Alteration –

Individual (See Annex C1)

2.1.1.3.1.2.2. Affidavit of the Payee on Alteration – Entity

(See Annex C2)

2.1.1.3.2. Forged Endorsement or Lack of Endorsement

In case Forged Endorsement or Lack of Endorsement (when such

endorsement is necessary for negotiation) is cited as basis for return,

the Drawer may attach an Affidavit of the Payee/s attesting to the

forgery of the endorsement or the non-receipt by the Payee/s of the

proceeds of the item. Alternatively, the Drawer may attach any other

document to substantiate the claim.

2.1.1.3.2.1. Affidavit of the Payee

The Affidavit of the Payee shall state among other details

that the Payee (a) did not authorize anyone to endorse

the Check/item or deposit the Check with any Bank; and

(b) did not receive the proceeds of the Check/item.

Suggested formats for the Payee’s Affidavit are annexed to

this Operating Memo, as indicated below:

2.1.1.3.2.1.1. Affidavit of the Payee on Forgery – Individual

(See Annex C3)

2.1.1.3.2.1.2. Affidavit of the Payee on Forgery – Entity (See

Annex C4)

2.1.1.3.2.1.3. Affidavit of the Payee on No Endorsement –

Individual (See Annex C5)

2.1.1.3.2.1.4. Affidavit of the Payee on No Endorsement –

Entity (See Annex C6)

2.1.1.3.2.2. Drawer’s Affidavit

The Drawer’s Affidavit shall state among other details that

he/it was informed by the Payee that (a) they/it did not

endorse or authorize anyone to endorse the Check/s or

deposit the same with any Bank; and (b) they/it did not

receive the proceeds or amount of the Check/s, whether

directly or indirectly.

2.1.1.3.2.2.1. Drawer’s Affidavit on Forged or No

Endorsement - Individual (See Annex D5)

2.1.1.3.2.2.2. Drawer’s Affidavit on Forged or No

Endorsement – Entity (See Annex D6)

2.1.1.3.3. Counterfeit Check

In case the Drawer claims that the Check/s subject of the return is/are

Counterfeit/s, the Drawer shall attach his/its Affidavit supporting such

claim. Suggested formats for the Drawer’s Affidavit are annexed to this

Operating Memo, as indicated below:

2.1.1.3.3.1. Drawer’s Affidavit on Counterfeit – Individual (See Annex

D3)

2.1.1.3.3.2. Drawer’s Affidavit on Counterfeit – Entity (See Annex D4)

2.1.1.4. Deliver the Transmittal Letter and the Clearing Receipt to the Presenting

Bank/Branch by messenger or special courier.

2.1.2. Presenting Bank

2.1.2.1. Acknowledge receipt of the Transmittal Letter. Such acknowledgement of

receipt is mandatory if the letter is delivered to the Presenting Bank/Branch

within:

2.1.2.1.1. One Hundred Eighty (180) days from clearing date if the reason for

the return is Alteration or Counterfeit Check (This period limitation is

set to ensure availability of the original deposited Check for physical

examination).

2.1.2.1.2. Three (3) years from clearing date if the reason for the return is

Forged Endorsement or No Endorsement (when such endorsement is

necessary for negotiation).

2.1.2.2. The acknowledgement by the Presenting Bank/Branch of receipt of the

Transmittal Letter shall not be construed as an admission by the Presenting

Bank of liability nor an agreement to the demand of the Drawee Bank.

2.1.2.3. The refusal by the Presenting Bank to acknowledge receipt of the Transmittal

Letter shall be reported in writing by the Drawee Bank to the PCHC Board for

proper action or imposition of sanctions.

2.1.2.4. If the Presenting Bank/Branch consents to the return by direct presentation of

the paid/cleared item, the Presenting Bank/Branch shall accept/sign all copies

of the Clearing Receipt. The Drawee Bank shall effect the settlement by

sending the Clearing Receipt in the next clearing session. The representative

of the Presenting Bank/Branch who signs for the documents must be an

Authorized Signatory;

2.1.2.5. If the Clearing Receipt is not immediately signed by the Presenting Bank

authorized representative upon its receipt, the Presenting Bank is obliged to

respond in writing to the claim/s of the returning Drawee Bank/Branch

conveyed in the Transmittal Letter within ten (10) clearing days from date of

receipt of the Letter;

2.1.2.6. If the response of the Presenting Bank is in the negative, the Presenting Bank

shall indicate the reason for its refusal to accept (in the space provided for in

the Transmittal Letter) the return of the paid/cleared item and furnish the

Drawee Bank whatever document or affidavit it has to support such refusal.

2.1.2.7. If the Presenting Bank fails to respond to the Transmittal Letter within ten (10)

clearing days from date of its receipt, or if the response of the Presenting Bank

is not acceptable to the Drawee Bank, the claim of the Drawee Bank may be

elevated or filed with the PCHC Arbitration Committee.

2.1.2.8. The detailed procedures for the elevation to the Arbitration Committee of

claims between participating banks are covered under Section 33 of the CICS

RR.

2.1.2.9. Banks are enjoined to strictly observe the foregoing procedures in order to

preclude sanctions or penalties that may be imposed by PCHC Board should

non-compliance persist. Any violation shall be subject to penalty, the amount

of which shall be fixed by the PCHC Board of Directors.

2.2. Returns Due to Technical Defect other than Alteration or Counterfeit Check

2.2.1. Drawee Bank

2.2.1.1. Prepare a Charge Slip addressed to the Presenting Bank/Branch covering the

item to be returned. The Charge Slip is to demand reimbursement of the

amount that is shown to have been erroneously paid by the Drawee Bank on

said item.

2.2.1.2. Generate a Post-payment Return Check Advice (PRCA) of the item to be

returned (Please refer to Annex B to this Operating Memo for the format);

2.2.1.3. Deliver the Written Demand (please refer to Annex E for the format) to the

Presenting Bank/Branch and present via CICS the Charge Slip;

2.2.1.4. Acceptance by the Presenting Bank/Branch of the Charge Slip is mandatory

provided the Written Demand is delivered to the Presenting Bank/Branch

within three (3) years from the clearing date of the item covered by the Charge

Slip;

2.2.1.5. The refusal by the Presenting Bank to receive the Written Demand or to accept

the Charge Slip shall be reported in writing by the Drawee Bank to the PCHC

Board for proper action or imposition of sanctions.

3. This operating memo shall supersede CICS OM No. 17-007 dated January 18, 2017.

CICS OM No.18-028

.Implementing Procedure

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CICS OM No.18-028.Annex A

.Transmittal Le

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CICS OM No.18-028.Annex B

.Post-payment R

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CICS OM No.18-028.Annex C1

.Real Payee's

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CICS OM No.18-028.Annex C2

.Real Payee's

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CICS OM No.18-028.Annex C3

.Payee's Affid

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CICS OM No.18-028.Annex C4

.Payee's Affid

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CICS OM No.18-028.Annex C5

.Payee's Affid

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CICS OM No.18-028.Annex C6

.Payee's Affid

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CICS OM No.18-028.Annex D1

.Drawer's Affi

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CICS OM No.18-028.Annex D2

.Drawer's Affi

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CICS OM No.18-028.Annex D3

.Drawer's Affi

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CICS OM No.18-028.Annex D4

.Drawer's Affi

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CICS OM No.18-028.Annex D5

.Drawer's Affi

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CICS OM No.18-028.Annex D6

.Drawer's Affi

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CICS OM No.18-028.Annex E

.Written Demand

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