The UAE Cabinet has made a critical amendment to Federal Law No. 18 of 1993 i.e. The Commercial Transactions Law concerning the bounced cheques. The changes to the law will be in effect from 2022.

The Penalties For Bounced Cheques

The previous amendment of the UAE Law on dishonored cheques stipulated the drawer can be sentenced to a minimum cheque bounce fine of AED 1,000, and at least one month of imprisonment depending on the cheque amount.

The latest amendment now states that any person who endorses or issues a cheque in favor of another, knowing that there is an insufficient balance or is not withdrawable, will be fined a minimum of 10 percent of the cheque amount and not less than AED 1k. The penalty is doubled if this offense is repeated.

The amendment also carries an imprisonment sentence of six months to one year to defaulters.

Article 642 of the law, the court has the right to publish the judgment with the person’s name, occupation, and residence in two local newspapers (in English and Arabic). The defaulter must cover the expenses for publishing.

Why Is The Amendment Significant?

Some businesses in the UAE believe that laws criminalizing the issuance of dishonored checks are important, while others believe that the criminal penalty should be eliminated. The most recent legalization reform takes into account the difference of opinions and identifies the criminal offenses that will be associated in an event of a bounced cheque, while simultaneously identifying what accounts for a criminal offense.

What are the criminal offenses associated with a bounced cheque?

The following incidents are classified as offenses that carry a criminal penalty under the amended law:

• Falsifying cheques
• Fraudulently using the cheques by instructing the respective bank to not pay the specified cheque amount
• Counterfeiting cheques
• Withdrawing the account balance before the date of the cheque to prevent encashment

Banks are now required to make partial payments of the cheque amount to the beneficiaries to satisfy their claims in cases where the cheque is presented for payment and the account does not have sufficient funds to satisfy the written amount. This change is a step towards improving the process of collection of payments through cheques.

The amendment is designed to make it easier to follow the law. The Civil Court in the UAE may order the issuer of a bounced check to pay an amount equal to the cheque’s value or the remaining balance of the check to the beneficiary.

Other penalties applied to a bounced cheque

The convicted person’s cheque book will be withdrawn, and he or she will be restrained from obtaining new cheque books for a term of five years, according to the Law. The convicted person may also face suspension from partaking in any business or commercial activities.

In the case of repetitive offenses, legal persons (except banks and financial institutions) can face fines, revocation of business licenses for six months, suspension of licenses, or may be forced to liquidate.