Soon, no one will be able to say “The cheque is in the mail!”
Expressions like “live paycheck to paycheck” or “give someone a blank check” may one day be obsolete, just as cheques will be one day soon. Until then, issuing bad cheques in the UAE or Saudi can land you in legal trouble.
UAE amendments to Commmercial Transaction Law
The UAE Central Bank has announced amendments to the Commercial Transactions Law, that decriminalizes cheques issued without funds. This will go into force starting January 2, 2022.
What are the key changes?
- Criminalization of bounced cheques due to insufficient funds is now confined to cases of fraud, forgery, and bad faith
- Partial payment of becomes mandatory
- Banks must pay drawee the partial amount from the account if the amount in the account is less than the value mentioned in the unless drawee rejects it
- Amendments include deterrent alternative penalties to reduce misuse of cheques
- Amendments will expedite the collection of value in a more effective manner
Failure to late complete the full transaction can result in the bank withdrawing checkbook or denying violators the right to receive a new checkbook for up to 5 years. Businesses run the risk of having their professional or commercial activity suspended.
“The Central Bank’s strategic initiatives and plans to upgrade banking laws and regulations continue to track developments in the financial sector, to fill any legal gaps and shortcomings, and to deliver the CBUAE’s vision to follow best practice internationally in this respect,” said Khaled Mohamed Balama, Governor of the Central Bank of the UAE.
These amendments are aimed at securing the rights of bearers and beneficiaries, and would also expedite collection of the value in a more effective manner (determined by the Central Bank), whilst also encouraging the public to use modern technology and digital means, instead of traditional paper cheques.
“Criminalization has been confined to forging and their illegal use, deliberately writing or signing in a way that renders them unpayable. The phenomenon commonly known as returned or “bounced” cheques, was canceled, similar to the adopted practice in a large number of jurisdictions such as France and the US,” said Abdullah Sultan Bin Awad Al Nuaimi, Minister of Justice.
Last June, Saudi authorities have named and shamed 10 Saudi bad issuers, who had their names, ID card numbers as well as their prison terms and fines published in local media at the offenders’ expense, local media reported.
The men were convicted of writing bad s by the criminal court and were handed down fines and or prison terms of up to 6 months.
Under Saudi law, anyone convicted of doing so is liable to be imprisoned for up to 3 years and face a fine of up to 50,000 SAR ($13,500). If the offense is repeated within 3 years, the maximum period of imprisonment increases to 5 years and the maximum fine to 100,000 SAR ($27,000).
The law also authorizes the publication of offenders’ names, provided that the court specifies how this may occur.
Saudi law deals strictly with anyone who writes a cheque without having sufficient funds in their bank account to cover it.
According to Saudi Ministry of Justice figures, there were about 18,700 cases in 2018 of enforcement proceedings related to bounced cheques, mainly because of insufficient funds. Failure to prove criminal intent and showing intention to pay the beneficiaries means the violator will be spared the wrath of the law.
Paper cheques on the way out, anyway
Paper cheques will likely be extinct by 2026, according to Business Insider. Paper cheques have pretty much disappeared from the grocery checkout line, and even without a debit card, now you can pay at many stores with just an app on your phone or tablet.
The number of cheques being written is dropping by 1.8 billion a year, and at that rate, cheques would go away entirely by 2026.
There are reasons helping this in the region. The UAE is going paperless and both it and Saudi are aggressively pursuing digitization of their economies. Digital options are faster and safer with security features such as encryption codes, not to mention contactless.