Overview
Procedures for Northbound Cash Letters
Important information for Correspondent Banks

Overview

As the new U.S. federal law - Check 21 - comes into effect October 28, 2004, we need to clarify the impact of this legislation on cheques drawn on Canadian financial institutions and bearing a Canadian MICR line.

This new Act gives a substitute cheque that meets the requirements of the Act the same legal status as an original paper cheque within the U.S. and requires U.S. financial institutions to accept these substitute cheques; however, the law does not apply to Canadian items. Cheques drawn on Canadian financial institutions will continue to be processed in the existing manner.

Procedures for Northbound Cash Letters

The Check 21 Act does not cover the following:

• Cheques drawn on Canadian dollar and U.S. dollar personal and business accounts having a Canadian MICR line (items drawn/presented for payment on Canadian Financial Institutions domiciled in Canada).
• Canadian dollar money orders and bank drafts drawn on Canadian financial institutions.

There is no change for processing the items above. The paper cheque is ultimately delivered to the bank it is drawn on in Canada to be entered into the Canadian clearing system. If a substitute cheque is inadvertently created from a U.S. downstream bank the correspondent bank will be required to treat the item as a photocopy and provide the required indemnifications to RBC.

Important Information for Correspondent Banks

Attention: Correspondent Banks
Please cascade this message to your downstream banks:

• Foreign cheques and other foreign items cannot be converted to substitute cheques.
• Only items that satisfy the definition of "cheque" in Regulation CC (see § 229.2(k)) can be reconverted to substitute cheque form.
• Items that are not drawn on a U.S. depository institution, or that are not payable in U.S. dollars, are not cheques under this definition and cannot be used to create substitute cheques.

Canadian Payment Association rules currently do not allow for image transmission to Canadian banks from U.S. or other foreign correspondents. RBC anticipates offering this service once it is permitted. For more information about Truncation and Electronic Cheque Presentment (TECP) please refer to the Canadian Payments Association Web site at www.cdnpay.ca.

If you have any questions, please contact your relationship management team.