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Cheques in UAE – More Care with Payments from UAE Nationals

(Dubai, 06/11/2012) Bounced cheques, issued by UAE nationals, are falling no longer under criminal law!

It is well known that bounced cheques - mainly returned due to insufficient funds - may lead in the United Arab Emirates to a criminal case, up to jail terms to be served. Last year, 1.5 million cheques used for payment were returned as invalid, representing payments worth AED 55.3 billion (US$15.05 billion). The failure rate reflects about one bad cheque for every 20 used for payment. Due to a lack of credit bureaus and with view to the extreme "transient" society in UAE with a foreigner rate above 85%, post-dated cheques are frequently used as security by law on certain transactions, a factor that led cheque failure rates to spike during the financial crisis as residents lost their jobs or were forced to leave the country.

On 25/10/2012, a presidential decree removed potential criminal liabilities from cheques written by UAE nationals and used as security for payments to banks and finance companies. The same decree also freed all Emiratis currently detained or serving prison sentences for bouncing a cheque.

Actually, it is not possible to estimate, how far this new development may lead to a general free rein for Emiratis, issuing cheques even for standrad payments on open issues. It must be differentiated between security and standard payment cheque - but such kind of differentiation has only a value if it is seen by all in the same manner.

(Sad) insider recommendation might be: Don't accept cheques from Emiratis any more . . . we don't know if this move really helps the economy.

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