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N166bn dud cheques: Mixed reactions trail CBN’s plan to prosecute defaulters

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By PETER EGWUATU, NKIRUKA NNOROM, ONOZURE DANIA, & JONAH NWOKOPU

…Customers seek greater awareness
Mixed reactions have continued to trail the revelation by the Central Bank of Nigeria, CBN, of the increasing value of dud cheques issued in Nigeria, which is now over N166 billion. A bounced or dud cheque is an instruction in writing, authorising a bank to make payment against an unfunded or inadequately funded account.

Recall that CBN, in a recent circular to banks, directed that new and existing customers of all banks must pledge not to issue cheques against unfunded accounts, due to the increasing number of dishonoured cheques in the financial sector. It noted that issuance of dud cheques will adversely affect the stability of the Nigerian financial system if there is no control put in place.

The apex bank therefore mandated that the account details of customers who have issued dud cheques to third party individuals be forwarded to the Economic and Financial Crimes Commission (EFCC) for further investigation and prosecution.

Despite the rising trend in the use of dud cheques, there has however been no established cases of prosecution of offenders, thus encouraging others to continue the practice.

Investigation by Financial Vanguard showed that some customers are ignorant of the right to prosecute, while others say it is difficult to prosecute offenders. Many customers who spoke to Financial Vanguard called for greater awareness campaign by both the Central Bank of Nigeria CBN, and banks operating in the country.

Some of the customers said they are not really aware that they can challenge any person who issued a dishonoured cheque. This is because the banks only return such cheques without saying what action could be taken against such person.

For instance, Emmanuel Obiaga, a local artiste, who is a customer of United Bank for Africa, UBA, Plc said, “ I once organsied an album launch and many people gave me cheques that I was never able to cash. That was in 2012. When I went to the bank, they simply told me that the cheques could not be cleared. It was very frustrating. I had almost N200, 000.00  worth of cheques that could not be cashed. I contacted the people that gave me the cheque, some said they would get back to me and never did. Others asked me to be patient that it would clear with time. Eventually, I got fed up and abandoned it. It was a sad experience. CBN

As for prosecuting them, he said, “I had no idea they could be prosecuted. Also, it was difficult to prosecute them because they did not owe me. That was simply a promise they could not fulfill. And taking legal action against them would not have naturally occurred to me.” Another customer of Sterling Bank Plc, who identified himself as Adamu said, “I am not even aware that I have the right to sue any person that gives me a bounced cheque. Some of my customers have given me cheques that were returned by my bank.”

Another person, Mahmood Razak, Managing Director, Aribiland Ventures, said, “I had once received a dud cheque from one of my customers. When I confronted him, he said I should be patient that the money he expected in the account had not reflected. He pleaded with me and I understood with him. I know that I could take action and he could be prosecuted, but he approached me maturely.”

Mr. Babaloja of Ifelodun Market, Bristol, said, “I think generally why people do not resort to litigation is because most of the dud cheques are issued by people who have personal relationships outside business concerns. Although there are instances that people deliberately do it, but just as I said, it now comes with tough sanctions and banks are not always willing to help prosecute the offender.”

Another customer of GTBank, and a capital market activist, Mr. Taiwo Oderinde, said,  “People should be able to prosecute any customer that gave them dud cheques just like in other jurisdictions. The effect of dud cheques on our economy is that there will be lack of trust on business transactions when people or entities give out bounced cheques. So, CBN should come up with a strict policy on the issue. Offenders should be prosecuted and handed over to the law enforcement agencies and the amount involved should also determine the extent of punishment.”

Lawyers Reactions:
Gabriel Omale, a legal practitioner, said that dud cheques technically speaking, is a situation where a person issues a cheque on an account that is not liquid. In other words, there is no credit in that account and so the person in whose favour the dud cheque is issued, on presenting it to the bank, will not be honoured. So, the whole thing becomes a fraud.

“When you are the person, who issued a dud cheque claiming what you don’t have, its a fraud. And that runs contrary to criminal procedure laws of Nigeria and so the prescribed punishment for issuance of dud cheque is seven years imprisonment at the minimum. This is because issuing dud cheques impacts negatively on the economy.

For instance, where two parties are involved in a contract for which one is liable to the other in monetary aspect, then you contact somebody to do a contract for you and the person in question, invests his time, money and resources into the contract, only for him to be issued a dud cheque at the end of the day.

When the person goes to present the cheque in the bank, it would be dishonoured, looking at that, the contractor has been reduced by credit because he has committed all his money to do that job.

“Obviously, you have put the contractor in jeopardy. Take for instance, the contractor has a company and employees and you know that in this country, ten people can depend on one person, so by the time the company collapses, it means that the employee has been dispossessed of their livelihood, which can force them to take to crime if they don’t have any other option. If they are out of job, then they might not be able to remit tax to the government.

Most times, you see that when these cases are brought to court, they don’t get to logical conclusions because they would go and settle out of court and there would be no trial. I know about a case of dud cheque that was brought before the court about three years ago, but it did not sail through because most times, people settle out of court. I have not personally defended or prosecuted any case that has to do with dud cheques.”

Another lawyer, Aliu Babatunde, said that issuing dud cheque is a criminal offence. He wondered why one who does not have money in his account should give somebody a cheque that cannot be honoured.

“Most people, who issue dud cheques at times might not be doing that deliberately. Recently, somebody gave me a cheque thinking that somebody was going to send money into his account but unfortunately the person did not  send the money and he genuinely was owed that money.

Capital market operators’ reactions:
Wale Oluwo, an economist, stated that issuance of dud cheques is a criminal offence, prosecutable by the anti-graft agencies under the Money Laundry Act.

He stated that bank customers are reluctant to drag defaulters to court because of the stress associated with the snail pace of litigation process in Nigerian courts, adding that some Nigerians make their money through illegitimate activities, hence they are reluctant to take action on dud cheques issued to them for fear of inadvertently attracting the prying eyes of the security agencies to the source of the money that generated the dud cheques transaction in the first place.

He further affirmed that some SMEs may not want to report cases of dud cheques from their big corporate customers, who give them jobs/contracts that sustain their businesses. Escalation of such dud cheques, according to him, might lead to stoppage of the patronage, thereby threatening the ‘going concern’ status of the affected SMEs.

Oluwo, however, explained that not all dud cheques result from malicious intentions to defraud, mislead, avoid payment responsibilities, or commit financial crimes, insisting that some cheques return unpaid due to innocent mistakes like errors, reconciliation issues, delays in getting accounts funded by counterparts, sluggishness in confirming cheques by issuers, and late presentation of cheques by beneficiaries. “Sometimes, unexpected direct debit month-end charges by banks may unwittingly deplete customer balances below the threshold of funds earlier set aside by customers to meet their yet to be presented cheques,” he added.

To curb the incident, Oluwo urged the EFCC to deepen their investigation of the reasons for returned cheques before rushing to arrest and possibly prosecute suspected offenders.

Speaking further,  he explained that issuance of dud cheques could undermine the integrity of the financial system as it makes people reluctant to accept cheques for settlement of transactions and debts.

“It creates unnecessary workload for the Clearing House and the various operations departments of banks. It opens a wide window for manipulation and fraudulent practices by staff and customers of banks, and it creates a negative social integrity perception for Nigeria, particularly when foreigners living in Nigeria rely on cheques issued by their Nigerian customers,” he stressed.

According to David Adonri, Managing Director/CEO, Lambeth Trust and Investment Limited, several payees are not aware that it is a crime for a drawer’s cheque to be dishonored by the paying banker.

He noted that the practice of issuing dud cheques is damaging and erodes the confidence of people in the financial system, advising that aggrieved parties could seek legal redress to enable unrepentant culprits face the full weight of the law.  “If the CBN can intervene in all possible ways by ensuring that culprits are brought to justice in order to eliminate the problem, the cashless economy will be better for it,” he stated.

A circular from the banks’ regulatory body with reference number FPR/DIR/CIR/GEN/03/005, dated July 5 directed banks to forward to it details of clients with cases of dud cheque issuance on three occasions from July 5.   Some of the banks had in recent times  consequently issued  text to clients against the practice and communicated the CBN’s position to them.

The text:   “Banks have been directed to send details of customers together with copies of dud cheques to CBN. The Central Bank will in turn forward such details to the Economic and Financial Crimes Commission (EFCC) for further investigation.

“Our esteemed customers are therefore advised to make sure that their accounts are funded before issuing a cheque to a third party and to also confirm all cheques via our internet banking platform or relationship managers, as this will ensure the cheque is honoured.”

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