UAE to implement new technology to reduce cheque fraud

Banks in the UAE are expected to soon start implementing new technology – including the use of QR codes to improve cheque security in the country.

Members of the UAE Banks Federation (UBF) plan to introduce enhanced encryption technology which will see individual cheques allocated a random number that can then be read electronically during an automated validation process.

The number is unique to the specific cheque and will ensure that only legitimate cheques will be honoured by banks, a statement said.

“Counterfeit cheques currently expose banks, businesses and customers to financial, reputational and legal risks. Sophisticated printing technologies have pushed incidences of fraud to increase, and UBF member banks are keen to work together to combat this risk,” the statement added.

Abdul Aziz Al Ghurair, UBF’s chairman said: “We are committed to enhancing the security of the UAE financial system.

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

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 ChequeChain system for validation against the unique HASH. If the value matches the HASH then the ChequeChain system will authorise the cheque.

The new cheque verification process will help to limit incidences of fraud and support the UAE’s move towards becoming a cashless society, the statement added.

The UAE aims to become a cashless society by 2020 and several initiatives and programmes have been launched to enable that transformation.

Read: Cashing out? The future of payments

In 2017, a new app was unveiled by Emirates Digital Wallet, a platform backed by 16 of the UAE’s top banks, to reduce the use of physical notes and coins.

Klip allows the cashless spending, transfer and storage of money for anyone living and working in the country.

It aims to replace cash in the day-to-day economy and provide digital transaction security for those who do not have bank accounts.

Read: UAE app aims to make half of transactions cashless in 5 years