The U.S. Treasury Department today proposed a new requirement that financial institutions use the Treasury Check Verification System, or a similar authorized system, to verify that Treasury checks are both authentic and valid. Currently, when the Treasury Department or a payment certifying agency puts a “stop payment” on a Treasury check to cancel it, the canceled check may still be negotiated, which leads to a payment over cancellation, or POC. Resolving POCs costs the federal government approximately $1.3 million every year, the agency said.
In a notice of proposed rulemaking, the Treasury Department said the proposed mandate seeks to prevent Treasury checks from being negotiated after cancellation. The rulemaking also would amend the reasons for which a Federal Reserve Bank must decline payment of a Treasury check to include prior cancellation of the check, so the department may place a “true stop” on a Treasury check and avoid a POC. Comments on the proposed rulemaking must be submitted by April 3.
