Business | Banking

UAE extends deadline for high-security cheques

Move will provide more time for compliance

  • By Babu Das Augustine, Deputy Business Editor
  • Published: 00:00 January 6, 2011
  • Gulf News

  • Image Credit: Jupiter Images
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Dubai: In a circular issued late on Tuesday, the UAE Central Bank has advised all banks to postpone the implementation of the new security rules relating to cheques until further notice.

Publication of news reports in some sections of the press — that all banks and other establishments have started accepting only machine readable cheques (MRCs) — has caused panic among bank customers across the UAE.

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"From 1st January 2011, customers who were holding cheques without security features were denied the ability to deposit such items at the counter of various collecting banks. This has led to problems in various quarters. A revised cut-off date for handling cheques without security features will be released in the near future. Until then, banks should revert to accepting all cheques presented to them," the new Central Bank circular said.

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The Central Bank introduced the rules relating to the new machine readable cheque system last February in a bid to curb embezzlement and forgery. These are specially designed with electronic bars and can be sorted out by machines — much faster than the previously used manual clearance system. The deadline to start the implementation was January 1, 2011.

Business as usual

Following the new circular from the Central Bank, a banker told Gulf News it is business as usual for banks and its customers until the new deadline is announced.

"There is no reason for anyone to panic. Banks will continue to accept old cheques and there will be a sufficient grace period before the new deadline," a banker said.

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Although the deadline on compliance with new security features on cheques has been indefinitely postponed, eventually all banks in the UAE will be required to incorporate new minimum mandated security features in the monetary instruments such as cheques, demand drafts and pay orders.

This has been mandated by the Central Bank in the interests of the public to reduce the incidence of fraud, as the instruments with the new security features are tamper-proof.

Currently all cheques are cleared through the Image Cheque Clearing System. Incorporating security features on the cheques will enable verification of their authenticity by collecting banks.

Some of the features are visible to the naked eye whereas some of them can be viewed under UV light and magnifying glass. The simplest form of verifying if the instrument at hand is compliant is to gently rub on the word indicative of the instrument type, such as "CHEQUE" printed in thermo chromic ink. The word will fade off due to the heat and will reappear once it has cooled down.

Convenience

Knowing the fact that the banks are holding a large inventory of non-compliant post dated cheque Central Bank had agreed to present these items in clearing to avoid the inconvenience of banks and customers to replace such cheques.

This includes instalment cheques, security cheques against advances, and post dated cheques deposited by customers for safe custody and presentment on due dates. Even after the announcement of the new deadline these category of cheques currently held by the banks can be presented on their due dates irrespective of the cut off date, a banker said.

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