Banks will be able to cash digital checks

The Legislature approved reform of the Commercial Code to add a check cashing section, which will mandate that financial entities properly receive checks in digital form.

According to the approved text, check truncation is a procedure through which the physical exchange of a check is reduced or eliminated as a precondition for the release of funds to the final beneficiaries, and replaced with electronic records that include an image of the check, either for processing or automatic transmission.

The process also includes check clearing, which is the act through which banks exchange checks deposited with each other and settle them.

“The bank receiving the physical check may subsequently deliver it to the bank against which it was drawn for safekeeping,” the ruling states.

The BCR will be the entity responsible for setting regulations and managing the process of clearing checks and other payment systems, between banks and other institutions in the financial system.

The time period required for the preparation of the guidelines by the ECB will be within 90 days, which is the same period that financial institutions will have to adapt to the new text.

Likewise, the BCR will also issue provisions on the characteristics and security measures of physical examinations and electronic records bearing its image for withholding purposes.

Therefore, this measure will not be applicable immediately. The commercial law reform will enter into force up to eight days after its publication in the Official Gazette of the Republic.

According to the association, the regulation will speed up the compensation process, in order to release the funds in less time.

The head of the Finance Committee, Dania Gonzalez, said, “(This reform) will make us the country that clears checks faster at the regional level, because this process will take about four hours to disburse.”

The association highlighted that, according to the BCR, 3.71 million checks were issued during 2021, equivalent to $21 million. With cuts, the economy can be made more dynamic and this number can increase.

Additionally, in 2021, a new check clearing process and system was developed. Deposit times have also been reduced from up to three days to just one day after presenting the voucher for collection, which has been reduced from two sessions to one for exchanging physical checks.

El Salvador was late in implementation

The Salvadoran economist, Rafael Lemos, realized that this measure represented further progress in reducing the monetary or bureaucratic processes of carrying a check from one place to another, and that the state would transmit a digital image of the check, and a digital image. However, he explained to El Diario de Hoy that this is a late judgement.

“These cut checks are not new, El Salvador is late. Honduras, Nicaragua, Costa Rica, Panama, etc. have it. “The only thing is that the government is trying to catch up and trying to be more efficient on the issue of cut checks,” Lemos said.

Actions that would constitute violations

There are at least ten procedures that financial institutions will fall into regarding check truncation.

Some of them alter, interfere with, or interrupt the computer system designated for clearing checks.