UAE AMENDS ITS LAW TO DECRIMINALIZE BOUNCED CHEQUES

The UAE Central Bank, the Ministry of Economy, and the Ministry of Justice have all amended the Commercial Transactions Law to make bounced checks non-criminal. The regulator and the ministries made adjustments to the partial payment of cheques and strengthened administrative penalties in situations where they were issued without funds as a result of the amendments.

The new amendments will help reduce the negative aspects of dealing with cheques that have been revealed through practical experience, as compared to the best and most successful international practices, and the scope for criminalizing returned cheques due to insufficient funds has been narrowed, limiting it to cases of bad faith and other cheque crimes. This will achieve the objective outcomes of replacing decriminalization with preventative measures, as well as deterrent alternative sanctions, to reduce cheque fraud.

A prior amendment indicated that the drawer might face a minimum check bounce fee of AED1,000, as well as a minimum of six months in prison.

Now punishments could include withdrawal of cheque books from the transgressor, denying them the right to receive new cheque books for a maximum of five years, and suspending their professional or commercial activity.

The following are the most significant amendments to the UAE Commercial Transactions Law:

• Decriminalization of non-sufficient-funds cheque
• Bounced cheques owing to insufficient money is only decriminalized in circumstances of fraud, forgery, or bad faith
• Partial payment of a cheque is now accepted
• If the amount in the account is less than the value stated in the check, unless the drawee rejects it, banks must pay the partial amount from the account to the drawee
• Decriminalization has been replaced by preventative measures in the new amendments
• Amendments include deterrent alternative penalties to reduce misuse of cheques

The long-awaited amendment to the bounced check crime will take effect in the UAE market by January 2022. By removing the criminal responsibility associated with a failed check due to a lack of cash, this will: 

• Reduction in the legal costs
• Reduction in the number of criminal complaints filed for bounce cheque
• Swift decisions
• Effective justice
• Enhance the country’s position in global competitiveness reports
• It is believed that these changes will make the national economy of the United Arab Emirates more competitive and sustainable
• They also aim to protect the rights of cheque bearers and beneficiaries, as well as expedite the collection of the cheque value in a more “effective” (as determined by the Central Bank) manner, while encouraging the public to use modern technological and digital means rather than traditional paper cheques