CBN Raises Alarm over N166Bn Dud Cheques

Central Bank of Nigeria (CBN) has raised alarm over the growing incidences of dud cheques and said it will collaborate with commercial banks and law enforcement agencies, to investigate and prosecute errant bank customers who issue dud cheques.

The apex bank said that at last count, banks in the country processed dud cheques issued by customers that were valued at N166 billion between January and December last year.

According to the CBN, the value, showed that the “enormous volume of dishonoured cheques in the financial sector has shown no sign of abating.”

Under the Dishonoured/Dud Cheques Act of 1977, the law stipulates a two-year jail term upon conviction for dud cheque issuers but has rarely been enforced in the country.

But in a circular to banks and other financial institutions, Wednesday, CBN, said the implication of the development was the low confidence generated in the use of financial instruments that was adversely affecting its ‘Cash-Lite’ policy aimed at reducing the volume of cash-based transactions in the country.

Mr. Y. B. Duniya, acting director, Financial Policy and Regulation Department, CBN, who signed the circular noted that over indulgence of cash in the economy tended to increase the cost of banking services.

The central bank said the development was also capable of raising the incidence of crime and facilitating money laundering by obliterating the audit trail.

The circular read in part, “It is on this note that the bank, in liaison with financial institutions and law enforcement agencies, has taken steps to stem the tide of dud cheque issuance as it will adversely affect the stability of the financial system, if left unchecked.

“Customers of financial institutions should be informed that, henceforth, the CBN, in order to check this malaise in the banking sector, will forward the account details of errant customers to the Economic and Financial Crimes Commission for further investigation and prosecution.”

Consequently, Duniya said financial institutions were requested to ensure that prospective customers (at the point of account opening) and existing customers pledged not to issue cheques against unfunded accounts.

By way of enforcement, the bank said financial institutions were required to monitor cheques against unfunded accounts in three instances with effect from the date of the letter, and render monthly report vide the attached format on the letter.

The monthly report, according to the circular, is expected to be forwarded to the Director of Financial Policy and Regulation Department, CBN.

The circular also required banks to report the affected customers’ profile, transactions history and also attach copies of both the front and back of the financial instruments used.

According to the CBN, the latest circular follows an earlier one dated August 24, 2012, which requested banks to make monthly rendition of dud/dishonoured cheques.