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How to deal with foreign currency cheques.


For the second time in as many months a private client has asked us how best to deal with a foreign currency cheque.

Typically a payment method associated with inheritance and|or dealings with legal businesses abroad, we outline how currency firms tend to view such matters, what options are available to private clients, and our considered view as to the most appropriate way to treat a foreign currency denominated cheque.

Things to bear in mind when in receipt of a foreign currency cheque:

If you were to try and pay it in to your UK sterling bank account then you could be waiting up to if not longer than 4 weeks for the funds to clear.

The rate of exchange used to calculate the sterling equivalent of the foreign currency amount would be determined by your bank and could be applied at any point during the clearing process. So, you could get the rate today, or the rate achievable at any point over the time it takes for the issuer's bank to transmit the foreign currency amount.

Furthermore, the rate you will receive will be an arbitrary 'retail' rate of exchange. Unquestionably it will be at least 2% less competitive than the rate a firm like Prime Cap might quote you.

If you're cheque is €10,000, then you might receive between £200 and £500 less because of the rate alone. Why settle for less?

What questions would we ask?

+ Who is the cheque made out to?

Taking in to account that the bank accounts used by currency companies are not conventional 'current' accounts, but rather what are called 'client trust accounts', if you have a foreign currency cheque made out to you then it is understandable that you cannot pay this cheque into the account of someone else, currency company or not.

It would be a push to assume that the issuer of the cheque would be prepared to rip up the one issued to you and reissue it with the payee being a foreign currency company; so, although possible, it is not a solution we would entertain.

You can only pay a foreign currency cheque in to an account in your name.

+ Do you hold a currency account?

If you hold an account denominated in the currency your cheque is issued in then you are well advised to simply pay said cheque in to your account. From there you can still use our services to convert that foreign currency amount into the currency you wish.

Once the funds are in an account we are in a position to receive them by a simple electronic bank transfer in exactly the same way as if you approached us with cash in the bank.

One option we tend to suggest is enquiring with your current banking provider as to whether they offer foreign currency accounts to individuals. If they do and you consider the costs to be weatherable (on the basis that the rate we can offer for conversion would more than offset the expense you might incur by setting up an account) then, once the facility is set up, you can simply credit the cheque to that account in your name and conduct a conversion as normal.

+ Who has issued the cheque?

Depending on which institution, business or individual issues you with the cheque, you may have recourse to ask them to cancel it and send the funds to you, or indeed us if you are without an appropriately denominated currency account, as a standard|international bank transfer.

Cheques are usually issued by law firms and often we are asked by those who have inherited funds from a relative of benefactor overseas. You are well within your rights to ask such a law firm to pay the foreign currency amount to an account of your choosing and, if you elect, this is entitled to be the appropriately denominated client trust account of Prime Cap.

You may encounter procedural resistance from the issuing party. A law firm might insist on paying funds only to an account in your name; there is no legislative or regulatory reason for this insistence, but, if they are not prepared to concede to this request it is overcome by you setting up the relevant foreign currency account with your bank as above.

You may not be in direct communication with the executors of an estate or the institution|firm overseeing the payment; if that is also the case then the setting up of a foreign currency account in your name may be the only realistic option open to you. Again, your UK bank should be content to open such an account. Don't be shy about explaining why you want them to do this. Telling them you have inherited or are due to be paid money denominated in a foreign currency and that you wish to make up your mind about it's conversion in due course should be sufficient to prompt them to do the necessary for you.

Just because one currency broker is not prepared to receive and honour your cheque does not mean that another firm might|would. Cheques are no longer a realistic or reliable payment method in the context of modern day financial transactions.

Cheques prompt all manner of questions to be asked by financial institutions, whether they're your bank or not. If you are trying to credit a cheque to an account not in your name then the first question is, why?

How can we be sure you didn't just find the cheque lying about?

An incoming electronic transfer however carries with it certain answers to questions over authenticity, origin and use.

By virtue of the ease with which you can now set up a foreign currency account, even if it is just for a one off conversion, you should not feel you have to settle for the poor rate of exchange you own bank might offer you.

If you have questions about this topic or you would like an introduction to one of our banking contacts whom we know to be amenable to the opening of foreign currency accounts for the purposes outline above, then by all means give us a call on 02031728193.

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Prime Cap Payments Limited (T/A Prime Cap | Prime Cap Payments | Prime Cap Global Payments) is registered in England and Wales No: 10755730. Registered address: 27 Old Gloucester Street, London, WC1N 3AXPrime Cap is partnered with, and a programme manager of, Ebury Partners UK Limited who provide Prime Cap's FX and payment services.  Ebury Partners UK Limited is authorised and regulated by the Financial Conduct Authority as an Electronic Money Institution (Financial Services Register No. 900797) and is registered in England and Wales (registered no. 7088713). Registered office: 3rd floor, 100 Victoria Street, Cardinal Place, London, SW1E 5JL.  Ebury Partners UK Ltd is registered with the ICO with registration numnber ZA345828.