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  • 20-01-2021
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What are the new rules involving cheque fraud: 2022?

The UAE has long suffered with the issuance of fraudulent cheques; affecting many individuals and businesses for decades. Thankfully towards the end of 2020; amendments pertaining to Commercial Law transactions (Federal Law No. 18/1993) vis-à-vis bounced or zero value cheques were made, with changes set to come in to force in 2022.  

These amendments offer greater protection to people who accept cheques as a form of payment in their business; providing greater protection and remedies to seek recovery of lost sums.

What are the objectives of the new amendments?

The amendments seek to provide, “fast, advanced and civil mechanisms” to recover any loss of payments; swiftly circumventing it from criminal courts; thus, the fraudulent activity may no longer be deemed as a criminal offence (Article 401 of UAE penal law) but a civil one. 

How will it be remedied in the civil courts?

The civil courts will now facilitate in the execution of any duplicitous cheques issued, as it will automatically be deemed an ‘executive document’ ready to be enforced by Judges. 

The amendments will also seek to provide an alternative resolution for parties; including mediation and settlement; in stark contrast to the current penalty which is either a heavy fine or jail sentence. 

This will also assist in reducing the pressure of criminal courts where such matters are currently litigated. 

What will be the banks role?

The amendments will see an exceptionally valuable remedy for victims of cheque fraud, in that banks will be obligated to make a partial payment of the sum of the bounced cheque to the Claimant; dependant on the sums available in the issuers account. Despite this being a recovery method banks are able to use even today; they are not forthcoming in offering this as a solution and clear guidelines will certainly make things easier.


       


Will these amendments really help?

The benefit of these amendments is to give reassurance to the recipient who accepts cheques as a form of payment. It alleviates concerns over receiving cheques in business; but also, the option of utilising mediation within a civil setting is less daunting and thus more likely to obtain a positive result for them in the form of payment being made. 

It is also a sound supportive mechanism to help businesses, especially in the midst of an ongoing global pandemic; and these measures will undoubtedly assure UAE businesses.  

What other penalties are there for those who issue fraudulent cheques under the new amendments?

The amendments provide additional penalties for fraudulent issuers of cheques; this list is not exhaustive, however, includes barring from banks and various fines; strong sanctions such as ceasing their business activities, suspension of licences as well (up to six months); withdrawing cheque books of individuals who are convicted; and refusal to issue them with new cheque books for five years.

What about joint bank accounts?

The new amendments also include revised rules for joint bank account holders. 

The amendments also deal with the rules on opening joint accounts. If one of the joint account holders dies or loses legal control, the other joint account holders must notify the bank within 10 days from the date of death or disqualification, and the bank must, from the date of notification, limit the ability to withdraw from the joint account that party’s share of the account balance.

Final thoughts?

Overall, the amendments are undoubtedly perceived as positive; encouraging; and much needed reforms; safeguarding businesses and individuals across the UAE. Additional matters will be clearer closer to the implementation date; which at present has not been confirmed.



Comments

Created By 2021-01-19 23:51:09 Posted By Thomas Matterson Comment Link
This was a much needed overhaul. Businesses have suffered too much because of fraudlent cheques