UAE: New modifications to Cheque Regulations
HLB HAMT News Team
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The latest revisions to the cheque provisions will take effect on January 2, 2022, according to the UAE’s apex bank, the Central Bank. The CBUAE’s explanation seeks to spread awareness among cheque users about the decriminalisation of authorising a cheque without adequate money, the criminalization of staying away from part payment of the cheque’s sum, and the stringent governmental penalties for authorising a cheque without sufficient funds.
The Commercial Transactions Law has been updated in line with best practices to stay abreast of worldwide changes, according to the apex bank. It also attempts to provide a strict legal framework for these activities, governing the use of checks as a payment method rather than cash.
The modifications have certain objectives, such as strengthening the rule of law by maintaining and protecting the interests of the cheque beneficiary (bearer) in having his rights fulfilled quickly and the drawer’s purpose of having any criminal prosecution brought for non-payment of the cheque dismissed and establishing a solid national economy with a high-quality judicial system and also improving the rule of law and global performance metrics.
Articles 617-627 of the legislation control the payment of cheques, establishing procedures to guarantee that the cheque fulfils its legal and economic functions.
- Where adequate funds are available, the bank (the drawee) is required to pay the cheque’s value upon submission. It cannot refuse to pay since doing so would jeopardise the holder’s primary entitlement to possession of the check in return for money.
- Even though the law allows the bank (the drawee) to refuse to pay if it acquires opposition, the law has shortened the circumstances in which this opposition is acceptable, restricting it to instances of cheque loss and bearer bankruptcy only, to ensure that the cheque serves its primary purpose as a payment instrument.
- Vibrant civil equivalents have been created that contribute to the quickest and shortest feasible recovery of the cheque value.
- A lot of new penalties have been imposed, including the withdrawal of the convicted person’s existing chequebook, the prohibition of the convicted person from obtaining a new chequebook for a period of up to five years, and the suspension of the legal person’s professional or commercial activities.
- The enforcement of a penalty, licence suspension for a term of six months, and licence termination or dissolution of the legal entity for repeated breaches have all been included as new additions for legal persons (excluding banks and financial organisations).
Timeframe for submitting a cheque
The payment of the value of a cheque, according to the CBUAE, is the payment by the drawee bank to the cheque bearer or beneficiary of the amount specified in the cheque.
The fund available in the account, the issuer’s cash in the bank’s custody, a confirmed and specified amount, immediately due and disposable by drawing checks on it, is the consideration for payment.
The legislation set the deadline for delivering a cheque for payment, stating in Article (618) that whether the cheque was drawn in the State or overseas and was due for payment, it must be submitted within six months. This term is calculated from the date written on the cheque (its issue date).
The term is counted from the date mentioned on the cheque as its issuance date, not from the day of partial payment. Because of the extensive procedures involved in preparing a non-payment protest and the low value of some checks, Article 632/1 enables abstention through a method that is faster and easier than a non-payment protest. This is a statement written on a check by a bank staff.
The bank stated that Article 617/2 of the legislation (before to the modification) indicated that: – Where the consideration for payment is less than the value of the cheque, the bearer must request partial payment from the drawee up to the amount available.
- “Where the consideration for payment is less than the value of the cheque, the drawee must pay the amount in their possession partially, unless the bearer declines,” the law states (after the amendment).
- The bank could only make partial payments at the request of the holder under the earlier version of the law. Unless the holder declines, the bank is required to provide partial payment after the adjustment.
Concerning the repercussions of the bank signing the cheque for confirmation, the bank stated that the law describes two consequences of signature for verification, as outlined in clauses (2) and (4) of Article (600) of the legislation:
- The drawee may write an assertion of affirmation on the cheque, indicating that the consideration for payment is available with the drawee on the date of the entry. The signature of the drawee on the check itself serves as confirmation.
- Until the expiration of the time restrictions stipulated for the submission of the cheque for payment, the obligation for payment of a certified cheque shall be frozen with the drawee and under his accountability in behalf of the holder.
Partial payment of a Cheque
In relation to the bank’s participation in partial payment of a cheque, the CBUAE said that, in addition to the bank’s duty described in Article (600), the bank must notify the CBUAE of the account owner’s information in any of the following instances, according to a system that would be distributed soon:
- a) When there is insufficient, existing, and workable evaluation for payment of the cheque’s value at the time of its maturity, b) the drawer pulls back the entire consideration for payment after releasing the cheque, making it impossible to pay the cheque’s value, or c) the bank temporarily pays the cheque’s value.
The CBUAE will shortly distribute the method for implementing the new modifications to the Law relating to part payment of the cheque. Workers and clients of the bank will be informed of the changes by all regular means and techniques, including social media, sites, digital apps, text messages or SMS shown on ATM screens, corporate screens, or other conventional or new digital media. Increasing the level of education and understanding among the bank’s staff and customers so that they may be guided and enabled to grasp the fundamental risks, as well as providing them with all essential information on the new amendments and their consequences.
Furthermore, the processes and techniques for applying partial payment of the cheque’s value, the specific procedures to be followed in these cases, and how to prevent responsibility and fines as a result of breaching this legislation and abusing cheques are all clarified. Providing the required and suitable means and methods to reply to customers’ complaints and questions, as well as to clarify their rights and duties in light of all new Law revisions.
Clause (3) of Article (617) of the law states: In any of the following instances, the drawee should disclose the account owner’s data to the Central Bank, in line with the Central Bank’s policies and standards:
- When there is insufficient, existent, and useable consideration for the payment of the cheque value at the maturity date.
- When the drawer withdraws the entire consideration for payment after writing the cheque, it is impossible to pay its value.
- In line with clause 2, the drawee pays a portion of the cheque’s value.
‘Crowding’ cheques
It is not deemed crowded cheques if cheques are submitted one after the other. The term “crowding” refers to when a bank has two or more cheques in its custody at the same time, each bearer seeking payment of their entitlement to the funds, and the bank determines that the current payment consideration is inadequate to cover all applicants.
The criteria used in this instance are outlined in Article (622) of the statute, which states:
- When numerous cheques are submitted at the same time and the payment consideration is inadequate to cover the whole amount of the cheques, the dates of their issuance must be considered.
- Unless otherwise demonstrated, the cheque with the first serial number is believed to have been written before the others if they all emanate from the same cheque book and have the same date.
The general rule is to examine the cheques themselves rather than the date on which the bearer received the cheque. Because the drawer of the first-issued cheque has paid the regard for payment to the beneficiary, the cheque with the earlier withdrawal date will take precedence; if this cheque covers the consideration for payment, the attention for payment will be transmitted to the benefactor who received the first cheque.
Cheque Forgery
The bank stated clearly that the penalty for forging or counterfeiting a cheque, attributing it to others, or intentionally using a forged cheque is as follows: “Whoever commits any of the acts below shall be punished by imprisonment for not less than one year in addition to a penalty of not less than Dh20,000 (twenty thousand) and not exceeding Dh100,000 (one hundred thousand):
- Forging or counterfeiting a cheque or referring it to a third party by modifying facts by insertion, deletion, or other techniques specified in Article (216) of Federal Law No. 3 of 1987, with the intent to do harm to a third party and to use it for the purpose of forgery.
- Using a fake or counterfeited cheque on purpose.
- Receiving funds paid using a false or counterfeited cheque with knowledge.
- Using a real cheque issued in someone else’s name, improperly profiting from it, or using it in connection with a fraud offence.
- Importing, producing, obtaining, selling, offering, or giving any tools, equipment, software, information, or data utilised in the crime of forgery with knowledge.
The bank came to the conclusion that any criminal case involving these crimes would be dismissed if the full or remaining cheque value was paid before the start of forcible implementation practises, or if the full or remaining cheque value was paid or a reconciliation was reached before the final judgement was issued. If reconciliation is made after a final judgement has been issued, the judgment’s execution will be halted.
These amendments achieve the objective outcomes of substituting decriminalisation with preventative measures and prohibitive alternative penalties to combat cheque fraud and other issues. In addition, the law, which takes effect on January 2, 2022, would incorporate best international practises into the country’s financial sector.
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