New Legislation on Bounced Cheques and What You Need to Know

The UAE and Dubai have always relied more heavily on payment via cheques rather than electronic bank transfers or payments via debit or credit card.

This has meant that cheques have become an integral part of the financial system of Dubai. Electronic funds payments were only introduced to the country in 2013, just under five years ago.

While there are no issues with making payments via cheques, in Dubai, a bounced cheque, on the other hand, is a serious criminal offence. You might be thinking how so? The law says that if you were to write a cheque which when writing it out you knew there were insufficient funds in your account to pay for it that is where the criminal offence takes place.

Until recently, the punishment for a cheque bouncing was jail time. But, in a shock move, the penal code of Dubai has recently been changed. Court fines have replaced jail time for many minor offences, such as the bouncing of a cheque.

Of course, this approach “jail time for a bounced cheque” was regarded as an outdated approach by many. An approach that created a somewhat hostile environment for many businesses, as well as for anyone who signs cheques on a regular basis.

Anyone who in bad faith wrote a cheque that went on to bounce would be at risk of jail terms. The issue was that was not always possible to determine when a cheque was and wasn’t written in bad faith.

Luckily that has all changed, thanks to the new ruling that uses fines to punish the senders of bounced cheques, rather than jail time. The new ruling that came into effect in December of last year means that people who are responsible for bounced cheques will now be issued fines. The amounts are as follows:

• Up to Dh50,000 will be fined Dh2,000.
• From Dh50,000 to Dh100,000 will be fined Dh5,000.
• From Dh100,000 and Dh200,000 will be fined Dh10,000.

This new system of dealing with bounced cheques in the UAE falls under Law No. (1) of 2017, which was approved by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and the ruler of Dubai.

These rules came into effect because many minor cases of law-breaking have been recategorised and are now receiving less serious penalties. Due to this new system, cases of bounced cheques are no longer processed through the court system. Instead, they are now dealt with the public prosecutor. This has helped to reduce the pressure on the Dubai court system, ensuring speedier resolution for offences.

Although this is not the decriminalisation of bounced cheques and does not remove the total risk of jail time. Such as in instances of fraud or more sizeable cheques, these rules show how Dubai and the UAE is developing and modernising.

This change in the law is also a more debtor-friendly measure, which has been welcomed by small businesses and other people who work in the financial sectors and write cheques on a daily basis.