Final rule on Treasury check liability will not mandate verification system

The Treasury Department’s Bureau of Fiscal Service issued a final rule governing the payments of Treasury checks.

Rule Details: Effective Dec. 1, banks will be liable if they pay a canceled Treasury check without waiting to receive the return information that would enable them to know the check has been canceled. The Federal Reserve Banks will transmit this information through existing communication channels before the expiration of the funds availability rules as prescribed by Regulation CC.

Proposed Mandate Rescinded: As advocated by ICBA, the bureau will not mandate the use of its Treasury Check Verification System. The bureau previously proposed requiring financial institutions to use the optional TCVS online portal to ensure Treasury checks are authentic and valid.

TCVS Tool: ICBA encourages community banks to use the TCVS to catch canceled, duplicate, or other problematic checks at the time of presentment. Treasury checks have additional security features—including bleeding ink, microprinting, and watermark and ultraviolet overprinting—that should also be verified at presentment.

Background: Canceled checks, also known as payments over cancellation, are improper payments that can amount to $100 million or more each year. Although the use of paper checks for Treasury payments is declining, roughly 45 million checks were issued in fiscal year 2023, with Treasury checks specifically targeted for mail theft amid rising check fraud.