Tackling the dud cheques menace

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Recently, the Central Bank of Nigeria (CBN) revealed that more than 167, 507 dud cheques valued at N166 billion were processed by Deposit Money Banks (DMBs) in the country last year. Consequently, the apex bank has said it will start prosecuting the issuers of financial instruments fraudulently drawn on unfunded accounts. It is astonishing that the banks recorded such a staggering number of “bounced” cheques within one year, specifically between January and December 2012. This happened despite extant laws that prohibit issuance of dud cheques.

As the CBN has directed, banks should forward the details of erring customers to the Economic and Financial Crimes Commission (EFCC), as this infraction falls within its purview.  The banks should not have allowed the dud cheques profile to rise to the level it is now before nipping the problem in the bud.

The police and the EFCC must enforce the laws relating to this crime. Obviously, the problem is not a lack of laws but nonchalance on the part of financial institutions and law enforcement agencies to bring the culprits to book. The lackadaisical approach to this issue is responsible for proliferation of these cheques in the banking system.

One of the major roles of banks is financial mediation. Since this puts them in a prime position to know when a cheque is issued against an unfunded account, they are expected to report security agencies immediately for investigation and possible prosecution of culprits. If banks fail to do this, they could be accused of complicity in the fraud.

We believe that the onus is on the banks to immediately report erring customers to the appropriate quarters so that action can be taken against them immediately. It does not do the system any good to allow this kind of matter to drag on for long. Dud cheques erode confidence in cashless instruments at a time that the government is trying to move Nigeria to a cashless economy.   The perpetrators of this crime also cause third-party collateral damage to intended beneficiaries of such cheques. Dud cheques are used to defraud unsuspecting persons. So, banks need to be proactive on this matter as delay is inimical to the interest of the citizens and the nation’s general economic system, especially the cashless policy.

The Dishonoured Cheques (Offences) Act of 1978 describes dud cheques as “those instrumentalities drawn on insufficient credit balance (or exceeding the approved overdraft limit) on the account of the customer.” Such cheques are required to be returned unpaid. Sometimes, such issuances are done with the hope that if the bank mistakenly forgets to return them unpaid, the recovery of such an amount may be impossible from such dubious customers. Issuance of dud cheques has remained a common offence in banking probably because offenders are hardly prosecuted. Also, the offence only attracts imprisonment for two years or a fine of N5,000 or both.

It is necessary to amend statutory provisions on the punishment for dud cheque fraud. A situation where an offender may get away with as little as N5,000 fine is not deterrent enough.  The penalty noose should be tightened to discourage prospective criminals. Even the two years jail term for a crime that may involve billions of naira is not commensurate with the magnitude of the offence. There should be clear deterrents to discourage issuance of dud cheques. The rising profile of this despicable crime is detrimental to the economy generally, and banking particularly.

It should not be the responsibility of the dud cheque beneficiary to apprehend the bank customer who issued the instrument. Banks, first and foremost, should initiate the process of apprehension of culprits immediately they discover such invidious transaction by notifying the police and EFCC at once. Anything short of this makes a mockery of the signs in banking halls warning their clientele on the consequences of fraudulent transactions. Banks must institute processes to bring fraudulent customers involved in the issuance of dud cheques to justice.

 

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