Monday, 13 April 2015

Regulator Frowns on Issuance of Dud Cheques 13 Apr 2015

Regulator Frowns on Issuance of Dud Cheques

13 Apr 2015
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CBN Office
By Obinna Chima
The Central Bank of Nigeria (CBN) has rolled out punitive measures for bank customers that are fond of issuing cheques against unfunded accounts.
The central bank, which stated this in a letter to all banks posted on its website recently, said it had noted with great concern the impunity with which some bank customers issue dud cheques on their accounts despite the provisions of the Dishonoured (Dud) Cheques Act of 1977 and CBN's recent directives to banks’ customers to desist from such practice.
It therefore stated that in order to sustain the positive achievements already recorded in the Nigerian Payment System, it was essential that confidence and integrity in the country’s negotiable instruments, especially cheques, be restored and enhanced.
In addition, the CBN disclosed that it had already started compiling and disseminating information on the serial issuers of dud cheques based on banks’ returns, adding that on completion of the compilation process, the financial institutions would be required to among other things, recall/cancel all unused cheque books issued to the serial issuers of dud cheques.
Also, the banks would bar the affected customers from use of the clearing system for a period of five years and forward the names of the dud Cheque offenders to the three private credit bureaux and the Credit Risk Management System (CRMS).
“The customers’ names would be listed on the database of the private credit bureaux and CRMS for a period of five years from the date of submission, after which offenders will be eligible for removal. However, if the offender is found wanting after the name is removed, such an offender shall be permanently reinstated in the data base of both the three credit bureaux and the CRMS.
“Bar the serial issuers of dud cheques from accessing credit facilities from the banking system for a period of five years. No institution shall, except with the prior written approval of the CBN, remove such a person’s name from the three CRMS.
“Perform status check on a potential customer from CRMS and at least two credit bureaux before on-boarding a customer,” the central bank stated.
Furthermore, in line with the punitive measures, the central bank pointed out that where an institution fails to report a serial dud cheque issuer in its return to the CBN CRMS and the private credit bureaux as required, it shall be considered as concealment and misrepresentation of material fact, adding that the affected institution shall be penalised in accordance with the relevant provisions of the Banks and Other Financial Institutions Act, LFN 2004 CAP B3 (BOFIA).
In addition, the Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Compliance Officer (CCO) and Chief Risk Officer (CRO) shall be liable to sanctions in line with the relevant provisions of the BOFIA.
“Any Institution that contravenes the above directives shall be appropriately sanctioned. The measures are effective from the 1st of April 2015,” it added.

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