By the beginning of next year, banks in the United States, Mexico, and Canada expect to publish operational guidelines meant to speed the clearance of checks between the three countries.

The guidelines will stipulate for the first time that banks in the three countries have up to a day to return bounced or invalid checks across their borders.

Currently, no specific deadlines exist for returns between countries, but rules require timely returns within countries.

Options Are Inadequate

As a result, banks may take as long as a month to return bounced checks across borders to the institution in which they were deposited, bankers said, increasing the chances for fraud.

This delay forces banks either to make customers wait weeks before withdrawing funds or to incur risk in releasing the funds.

Bankers said this situation will be unacceptable if the North American Free Trade Agreement, which was submitted to Congress this week, is passed and cross-border trade flourishes.

"With the [North American] free trade agreement, there will be much greater movement of funds between the countries, and more of a need for this type of clearing system" said Dan Taylor, president of the U.S. Council on International Banking, New York.

Details Being Drafted

The U.S. Council is not-for-profit association of more than 350 institutions that is spear-heading development of the new guidelines, along with the Canadian and Mexican Bankers Associations.

According to U.S. Council officials, the three associations agreed to push for creation of the check-return deadline at a meeting in Tucson, Ariz., in July.

The guidelines are also expected to stipulate check-handling and dispute-resolution procedures.

Trillions of dollars of checks are passed annually between Canada and the United States, according to the Canadian Bankers Association. Bankers said only a handful of checks flows between the United States and Mexico.

Liberalization a Factor

Check payments will also rise as a result of new Mexican rules that allow corporations to maintain dollar accounts in Mexican banks, Mr. Taylor said.

In the early 1980s, banks in Canada and the United States worked out operational guidelines to expedite check returns between the two countries. But neither country has rules governing the movement of checks to and from Mexico.

As a result, Mr. Taylor said banks have developed their own procedures, with some institutions processing cross-border check payments promptly, and others dragging their heels.

"I've heard all sorts of stories of banks taking three weeks to a month" to return invalid checks, said Gene Saunders, compliance manager of Valley National Corp., Phoenix, Ariz., who attended the Tucson meeting.

The new guidelines will not be a panacea, since they will not carry the force of law, said George Girard, director of operations for the Canadian Bankers Association in Toronto.

But failure to follow the guidelines could be used to support a lawsuit or judgment, he said.

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