The Central Bank of Nigeria has raised the alarm over the rising incidence of dud cheques with estimates for the numbers processed in the last 12 months totaling N166billion alone, a development, the apex bank considers unhealthy for the nation’s financial system and feels very strongly that a review of the Dishonoured Cheque Offences Decree of 1977 would curb the excesses, reports Ibrahim Apekhade Yusuf.
Of all the extant laws operating in the country, the Dishonoured Cheque Offences Decree of 1977 is one of the laws being criminally observed in the breach.
The Nation can authoritatively report that 36 years after the legal framework for ensuring strict eradication of dud cheques took effect, rather than abate most Deposit Money Banks in the country have had the misfortune of processing high volumes of dud cheques in their daily transactions, in recent times.
A worrisome trend
To analysts who have studied the trend, they can hardly understand the steadily but alarmingly high degree of non compliance judging by the upsurge in the crime.
From a paltry volume of N9billion in 2005, statistics obtained from the CBN shows that in the last 12 months alone, banks have processed over and above N166billion dud cheques.
This value, according to the CBN, indicates an enormous volume of dishonoured cheques in the financial sector.
Apparently miffed by this development, CBN Deputy Governor, Corporate Services, Alhaji Suleiman Barau, said that the issuance of dud cheques needed to be discouraged as it could erode the confidence in the banking sector.
He spoke in Abuja last Wednesday through the Director, Legal Services, CBN, Mr. Simon Onoketu, at a two-day national stakeholders’ workshop on dishonoured cheques in Nigeria.
The deputy governor admitted that enforcing the law on dud cheques was still a big challenge to the banking sector.
He said the menace of bounced cheques had the potential of eroding confidence in the banking sector as well as discouraging Foreign Direct Investment (FDI), adding that the CBN intends to create a system where dud cheques are discouraged.
He, however, said that the apex bank had begun to use the apparatus in the banking sector to discourage the issuance of dud cheques.
Barau said, “Generally, enforcement is a big challenge for us as a country. But what the regulatory authority has done is to ensure that we use the apparatus of the banking system to say if on three occasions, you issued a dud cheque, you should not be allowed to have anything to do with the banking system.
“Now, what that does is that you are marked as somebody who has the propensity to run down the banking system and so what we are trying to enthrone is a situation where you are reported formally to the Economic and Financial Crimes Commission, for instance, and what that does is that you will be prosecuted.
“So, we expect that once the arrangement that we have put in place works, we will get to a point where people will know that if you issue dud cheques, you are likely to end up in prison.”
Echoing similar sentiments, a Commissioner with the Law Reform Commission, Prof. Osaremen Osunbor, in a keynote lecture said a situation where culprits of dud cheques were allowed an option to pay a fine of the sum of N5,000 as stipulated by the existing Act was counter-productive and ineffective in the present economic reality because the value of the Naira had since depreciated as a result of inflation.
He also argued that the current definition of dud cheques needed to be clarified and expanded to go beyond the notion of having insufficient funds in the issuer’s bank account.
According to him, those who issue such cheques could deliberately append irregular signatures including other conscious errors to cause their cheques to bounce.
Osunbor said there was need to revisit the two-year imprisonment term, which had the option of fine as stipulated by the Act.
He, therefore, challenged the CBN to do more to reduce the menace to the barest minimum by mandating banks and victims to report all incidences of bounced cheques.
Also speaking at the occasion, the Chairman, Independent Corrupt Practices and Other Related Offences (ICPC), Mr. Ekpo Nta, said there had been increased cases of dishonoured cheques in the commission in recent times. This, according to him, could affect the image of the country as well as the atmosphere for doing business in the country if allowed to continue.
Not a question of the law
In the view of the CBN and other experts, the law in its current form can not effectively discourage the issuance of dud cheques.
But not many people share CBN’s sentiments.
Speaking with The Nation over the weekend, Mazi Okechukwu Unegbu, Chairman/Chief Executive, Maxifund Investment Securities Plc, said there was virtually nothing wrong with the law.
“Any law is as good as those who operate it. If a law has been made the onus lies on the people to obey it. It is as simple as that. My take is that if you are given a bounced cheque, simply go to court. Even if you amend the law one million times, those who will flout it will do so with impunity,” he argued.
Sharing a personal experience, Unegbu, a lawyer, and erstwhile President of the Chartered Institute of Bankers of Nigeria (CIBN) recalled that he once made legal representation for a client who got a bounced cheque and got reprieve from the court.
“A client of mine was once issued a dud cheque by someone. As soon as I was notified, I wasted no time in going to court. What we did was to file a civil and criminal proceeding against him and as you would expect, he begged us to settle out of court and had to pay up the money in contention because he knew he risked two years jail term if we pressed for prosecution,” he recalled.
Pressed further, he said: “Of course, I’m very sure that particular individual would be the last person to issue another dud cheque in the future to someone else. He would say never again.”
Mr. Adetola Adekoya, a human capital development expert with over three decade’s cognate experience in the banking and financial services sector, is also on the same page with Unegbu.
As far as Adekoya is concerned, “it is not the issue of whether the law is weak but its applicability. The Dishonoured Cheque Offences Decree, to all intent and purpose, is adequate enough. It has always been there but the problem really is with the enforcement of the law. That is what I think is the real issue here.”
Psychology of dud cheques’ culprits
For most crime investigators, one better way to unravel the motive for a crime is to first of all understand the psyche of the perpetrator of such a crime.
Adekoya, who is also Project Consultant and Chief Operating Officer, School of Banking Honours, Lagos, one of the acclaimed innovative enterprise institutions in the country, offers a plausible explanation on the psyche of dud cheques culprits.
According to him, “You really have to go into the minds of those who issue fake cheques to know how it works because individuals would always find justification for any crime they commit.”
He however, said matter-of-factly that: “Those who issue dud cheques fall into two categories. Category A are those who deliberately and fraudulently issue cheques with the intent to deceive the recipients while category B are those who are forced by circumstances to issue same when there is an uncertainty surrounding their revenue profile.”
Expatiating, he said: “For instance, if you get lease from a bank to buy a car they normally would ask you to present to them a postdated cheque as part of the repayment plan. So if your income projection for a particular month is not met, automatically, your cheque for that month, would bounce so it doesn’t mean that you set out from the outset to deceive your bank. You just have problem of cashflow. Naturally, you fall into category B, whereby your revenue profile is not certain.
“We have more of category B now compared to category A because of the advent of the EFCC. But it never used to be like that in the recent past when we had high incidence of dishonoured cheques issued by criminally-minded and fraudulent individuals.
“Category A used to be in higher proportion before but it is coming down now but we now have more of those who are not certain about their revenue status and such can’t redeem their financial obligations as and when due. It is not that they deliberately set out to issue those cheques.”
Best practice
While sharing best practices abroad, Adekoya said: “In the developed countries, in order to avoid falling into category B, you can do insurance in an instrument, in which case if it fails, you’re protected or indemnified as the case may be. Everything is insurable in the developed countries. You can buy a ring now, and the next minute you are asked to insure it. You buy a phone, you insure it. It is as simple as that. We don’t do such here because insurance has still not attained its full market potential as we have abroad.”
Onus of whistleblower
Between the bank and the recipient, opinions are that the latter is mandated by law to blow the whistle on the party who issued the dud cheque in the first place.
“The beneficiary naturally should blow the whistle on the issuer because it is he who is not able to get the value of his money on the basis of maturity of the cheque. But I know also that the law provides that if he is not able to claim this money for upward of three months, that’s when it becomes a full crime and then the recipient, can go to court and press for charges,” informed Adekoya.
Unegbu and a cross-section of analysts and experts all concur that the recipient of a dud cheque has the right to take the issuer to task because he has been so wronged.
“I know that if a cheque bounces, the issuer must make payment within three months, failing which he goes to jail and pays a fine. The original cheque can suffice without necessarily reissuing another one,” deadpans Umar Lukman, a credit analyst in Lagos.
Awareness is okay and everybody knows it is a crime to so issue a dud cheque even the banks have posters pasted in the banking hall warning about it. What needs to be done is ensuring that those who still flout this law are made to answer for it. Simple.”
Renewed vigour on awr against dud cheques
The banks have also been directed to intensify their campaign against the practice by placing posters on the sanction for offenders in their banking halls.
A CBN staff who asked not to be named disclosed that as part of a new impetus against dud cheques, the apex bank has endorsed the special website in which offenders’ names are sent to would be made available to the EFCC for necessary action. The implication, he said, is that very soon, operatives of EFCC would start picking up defaulters in connection with the offence. To create the necessary awareness among Nigerians, he said that banks had been mandated to put up posters in their banking halls, warning people of the consequences of issuing dud cheques.
Further checks by The Nation revealed that many banks have pasted the posters in their halls. The posters, with dominant red background, read: “Be warned! Issuance of dud cheques is a serious financial crime. Two years jail term awaits offenders.”
The posters were said to have been sponsored by the Bankers Committee, an organisation of chief executives of the nation’s banks, CBN and the Chartered Institute of Bankers (CIBN), among others.
It was learnt that the management of the banks had handed the task over to an elite group in top management to supply information to the dud cheques website set up by the CBN.
The password to this website is in the exclusive possession of the group. The CBN’s game-plan is besides making the names available to relevant government agencies, to avail banks of such names in order to effectively monitor their activities.
The scheme will also be used as a credit-rating system for individuals. The rating technique obtains in Brazil as issued cheques are rated up to five stars depending on the credibility of the issuers. An issuer with impeccable record of financial dealings usually has his cheques marked with five stars at the back of any cheque issued by him. The rating ranges from one star to five stars.
