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HMRC internal manual

Money Laundering Regulations: Compliance

HM Revenue & Customs
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Business sector specific Guidance: Money Service Businesses: How do Cheque Cashers Operate?

Cheque cashers generate income from the fee they charge for cashing the cheque. This can either be a % of the face value on the cheque, a fixed fee based on a sliding scale or a combination of the two. Rates of commission charged are usually in the range 5-8%.

The general process for cashing cheques is as follows.

* Cheques are visually examined and where the drawer (person issuing the cheque) is not known to the business a credit check is usually performed using commercial software.
* The payee’s entitlement to the cheque is then checked. This is done by obtaining ID for all new customers, and additionally, in some circumstances, by contacting the drawer. The most common form of ID obtained is photo (passport or driving licence) plus proof of address. However, some cheque cashers use a point scoring system where each piece of ID is allocated a score and the transaction can only proceed if the overall score is above a certain limit. In addition to these checks the customer is usually required to complete a mandate form. Where the customer is presenting a wages cheque for encashment the business should ask to see the corresponding wages slip. 
* The customer and cheque details are then entered into the business records. The majority of cheque cashers use bespoke software to record this information and some have the facility to take the customer’s photo and upload it onto the customer’s record. It is not uncommon for businesses to issue membership cards at this point, particularly if it is a franchise.
* The fee is then deducted from the face value of the cheque and the balance paid to the customer. In some cases the cheque casher may decide to make a partial payment or delay payment altogether until the cheque has been cleared using a special clearance facility. 
* The cheque is then paid either into the businesses own bank account or into the franchisor’s account. If it is paid into the franchisor’s account the commission fee is split between the franchisor and the business.