The "Z rule of cheque" refers to a banking practice aimed at preventing fraudulent alterations on a cheque after it has been written. It involves drawing a line immediately after the written amount to fill the remaining space and prevent anyone from adding extra digits or words. It is also related to the concept of a 'not negotiable' endorsement to further enhance security.
Explanation of the Z Rule
The purpose of the Z rule is simple: to safeguard the amount written on a cheque. By drawing a line (often resembling a "Z") immediately following the written amount in words, any attempt to insert additional words or figures to increase the value of the cheque becomes more difficult and noticeable.
How it Works:
- Write the Amount: After writing the amount in words (e.g., "One Hundred Dollars"), immediately draw a line extending to the end of the designated space. This line can be straight or have a "Z" shape.
- Fill the Space: The aim is to ensure that there's no blank space available for alteration.
- Prevent Fraud: By filling the space, it becomes harder for fraudsters to add words or numbers to increase the cheque's value without making the alteration obvious.
Example:
If you are writing a cheque for "Five Hundred Dollars," you would write:
"Pay to the order of: [Payee Name]
Five Hundred Dollars _____"
The line after "Five Hundred Dollars" fills the rest of the space preventing someone from adding "and fifty" or any other such addition.
'Not Negotiable' Endorsement
The reference also mentions the "not negotiable" rule, which is a separate but related security measure. Stamping a cheque with "Not Negotiable" limits its transferability. This means the person receiving the cheque cannot transfer it to someone else and have better rights than the original holder. If the cheque was obtained fraudulently or there's a defect in the title, subsequent holders also take the cheque subject to those defects.
Benefits of the Z Rule
- Fraud Prevention: Deters potential fraudsters from altering the cheque amount.
- Increased Security: Adds an extra layer of security to financial transactions.
- Simple Implementation: Easy to implement and requires no special tools or skills.
Conclusion
In summary, the "Z rule of cheque" is a straightforward yet effective method to mitigate cheque fraud by preventing alterations to the written amount. Its simple implementation and preventative benefits make it a valuable security practice.
