The amendments come into effect on January 2, 2022. In line with the Central Bank’s strategic initiatives, these changes will improve banking laws and regulations to track developments in the financial sector, create any gaps in the law, and follow international best practice, said Central Bank Governor Khaled Balama.

A regulatory board and ministries introduced changes regarding partial cheque payments and toughened administrative penalties in cases in which checks are issued without funds in the amendments, they announced on Monday.

As a result, they will help to increase commercial and banking transactions, streamline procedures for collecting cheque values, and make the use of cheques more flexible, regulators and ministries said.

The UAE updated the Federal Law on Commercial Transactions with several new provisions in October 2020, with the goal of discouraging criminal prosecutions for bouncing checks.

This legislation, which will also be introduced in 2022, was approved by the Cabinet at the time and redefined crimes regarding bounced cheques and the issuance of checks without funds.

As of December 2017, Dubai’s Attorney General, Essam Al Humaidan, has directed that a range of minor offenses – including bounced checks and rent arrears – will no longer be considered for prosecution in the emirate’s courts. Instead, they will be treated as misdemeanors with financial penalties.

The 2017 ruling means that those responsible for cheques bounced in the emirate of up to Dh50,000 are now fined Dh2,000 while those who bounce cheques whose value is between Dh50,000 and Dh100,000 pay a Dh5,000 fine. The fine for bounced cheques with a value between Dh100,000 and Dh200,000 is Dh10,000.

The Central Bank said, under the latest amendments, the scope for criminalizing returned cheques due to insufficient funds has been narrowed to cases of bad faith and other cheque crimes.

“This would deliver the desired goals of replacing decriminalization with preventative measures, coupled with deterrent alternative penalties to reduce the misuse of cheques,” it said.

Besides securing the rights of check bearers and beneficiaries, the changes would make it easier to collect the value of cheques, which will be determined by the Central Bank.

In addition, digital means will be promoted instead of traditional paper checks to encourage the public to utilize modern technology.

Under the amendments, the partial payment of a cheque has also become mandatory. If the amount available for payment is less than a cheque’s value, the drawee bank must pay the amount partially unless the bearer rejects partial payment.

The decriminalization of the issuance of cheques without funds is an essential step in developing and enhancing the flexibility of legislation regulating economic, business, trade, and investment activities in the UAE, said Abdulla bin Touq, Minister of Economy.

“It would also reinforce the principles of justice, fairness, and equal opportunities in commercial transactions and the business environment in the country, and contribute to enabling sound commercial practices at both individual and institutional levels,” he said.

“Amendments that lift penal protection of the cheque, scheduled to come into force at the beginning of 2022, are part of a series of efforts undertaken by the UAE over the past months to accelerate economic recovery, particularly in private sector activities, and to bring about the qualitative transformation of the current economic model, based on the principles of proactivity and sustainability.”

In September, the International Monetary Fund forecast that the UAE’s economy would grow 3.1 percent in 2021. That is higher than the Central Bank’s estimate, which has the Arab world’s second-largest economy expanding 2.1 percent this year and 4.2 percent in 2022, according to its second-quarter review.