Cancelling a cheque in the UAE- Compare4benefit

Cancelling a cheque in the UAE can be a daunting process for many individuals and businesses alike. Whether you’ve issued a cheque that needs to be retracted due to various reasons or you’re on the receiving end of a bounced cheque, understanding the cancellation process is crucial.

In this comprehensive guide, we’ll delve into the intricacies of cancelling a cheque in the UAE, providing you with valuable insights and step-by-step instructions to navigate this procedure effectively.

What is a canceled cheque?

Canceling a cheque is known as “protest to a cheque” in banking terms. According to the new Commercial Transactions Law which came into effect on January 2, 2022, stop payment orders from the cheque issuer to the bank are no longer valid except under two specified conditions.

The amendment was made by the CBUAE to create awareness among cheque users on
topics like the decriminalization of issuing cheques without sufficient funds and
the criminalization of holding back from partial payment of the cheque amount.

Legal Framework:

The UAE has stringent laws governing cheque transactions to ensure the integrity and reliability of financial instruments. Under UAE Federal Law No. 18 of 1993 on Commercial Transactions and its subsequent amendments, bouncing a cheque due to insufficient funds or any other reason is considered a criminal offense, subject to penalties and legal consequences.

The exceptions in the modified law are:

1. When a cheque is lost or stolen. If the issuer or bearer loses the cheque or checkbook, it can be canceled.

2. When the account holder goes bankrupt.
In the first scenario where a checkbook is stolen, misplaced or obtained through
fraudulent methods, the bearer or the issuer can request the drawee bank to halt the
payment. Only in these two cases can a cheque be canceled.

On every other occasion, the “protest to a cheque” remains invalid.
The amendments are meant to bring in some positive impacts on the banking system. The
law now can protect the interests of both the beneficiaries and the drawers by practicing
strict rules of justice and equality. The law also helps in enhancing the national economy by
improving international competition standards.

As part of the modifications made, confidentiality terms have also been redefined. As long
as the disclosure is made within the boundaries of the statement, a bank employee’s
a declaration that there is an insufficient fund for the value of the cheque/part of the value of a cheque is not considered a violation of banking secrecy. According to a note from the
CBUAE, “there is no breach in the banking secrecy if the bank employee’s statement is that there is an insufficient fund, or that there is a part of it in the drawer’s/ client’s account to cash the cheque is confined to that only, without referring to other data.”

Why this new law is effective?

Also, as per the new law, when the bank provides the certificate of partial payment to the
beneficiary/bearer or states that there is an insufficient fund to cash the cheque, this is not the disclosure of the client’s account secrecy if the bank’s statement is restricted to that only, without providing other details.

The account holder cannot sue the bank for disclosing account confidentiality under these circumstances. However, bank employees can be punished if they refuse to cash a cheque without providing valid reasons. This is also applicable if the bank employee refrains from partial payment of the cheque refrain from issuing the partial payment certificate, or refrains from giving back the original cheque.

The legal and economic functions of the cheques can be assured by following the below-mentioned rules:

• When there are adequate funds available in the issuer’s account, the drawee bank is
  obliged to pay the amount when the cheque is presented. The bank cannot refuse the
  payment under this scenario, as this would affect the principal rights of the cheque
  holder.
• The bank could refrain from processing the payment if it receives opposition to proceeding with the payment. Nevertheless, according to the new amendments that have been made, the scenarios in which this opposition can be made have been narrowed down to two, that is when a cheque is stolen or when there is a case of bankruptcy.
• Strong civil alternatives have been created to ensure that the cheque values are
  collected in the fastest and simplest ways.

These include:
ï‚· Obligating the bank to pay the cheque at least partially.
 Making a cheque from the drawee’s bank account with insufficient funds is an
executive document to be implemented directly through the execution judges.

Reasons for Cancelling a Cheque:

There are several reasons why individuals or businesses may need to cancel a cheque in the UAE:

1. Insufficient Funds: If the issuer realizes that there are insufficient funds in their account to cover the cheque amount, they may choose to cancel the cheque to avoid legal repercussions.
2. Dispute Resolution: In case of disputes or discrepancies regarding the transaction, either party may opt to cancel the cheque until the matter is resolved.
3. Fraud Prevention: Cancelling a cheque can also serve as a preventive measure against potential fraud or unauthorized use of the cheque.

Steps to Cancel a Cheque:

1. Notify the Bank: The first step in cancelling a cheque is to inform your bank immediately upon realizing the need for cancellation. Most banks in the UAE offer online and offline channels for cheque cancellation requests.
2. Provide Necessary Details: When requesting a cheque cancellation, you will be required to provide specific details such as the cheque number, date, amount, and the name of the beneficiary.
3. Submit Request Form: Depending on the bank’s policies, you may need to fill out a cheque cancellation request form, either online or at the branch.
4. Verification Process: The bank will initiate a verification process to confirm the authenticity of the cancellation request and ensure compliance with regulatory requirements.
5. Confirmation: Once the cancellation request is processed and verified, the bank will confirm the cancellation of the cheque, providing you with a reference number for future inquiries.

Important Considerations in cancelling a cheque:

• Timeliness: It’s crucial to act promptly when cancelling a cheque to prevent any unauthorized transactions or legal complications.
• Documentation: Maintain documentation of the cheque cancellation request, including reference numbers and confirmation receipts, for your records and reference.
• Communication: Keep lines of communication open with the beneficiary or the recipient of the cheque to ensure transparency and avoid misunderstandings.
• Legal Advice: In cases involving complex financial transactions or legal disputes, seeking legal advice from qualified professionals is advisable to protect your interests.

Conclusion:

Cancelling a cheque in the UAE requires careful consideration of legal requirements, procedural steps, and potential implications. By following the guidelines outlined in this comprehensive guide, individuals and businesses can navigate the cheque cancellation process effectively, safeguarding their financial interests and ensuring compliance with UAE regulations. Remember, proactive communication, timely action, and adherence to legal standards are paramount when dealing with cheque transactions in the UAE. Stay informed, stay compliant, and protect your financial well-being.

In the dynamic landscape of financial transactions, knowledge is your most valuable asset. Empower yourself with the insights shared in this guide to navigate the complexities of cheque cancellation in the UAE confidently. Your financial security and peace of mind are worth every effort invested in understanding and adhering to the rules of the game.