CBN Proposes Five-Year Renewable Ban for Serial Dud Cheque Offenders in Nigeria

The Central Bank of Nigeria has unveiled comprehensive regulatory measures targeting individuals who repeatedly issue dud cheques, proposing an automatic five-year ban that can be renewed indefinitely for persistent offenders. This groundbreaking policy marks the apex bank's most aggressive stance yet on cheque fraud and financial discipline.

What Are the New CBN Guidelines on Dud Cheques?

The newly released exposure draft titled "Guidelines on the Treatment of Dud Cheques by Banks and Other Financial Institutions in Nigeria" establishes a framework under the CBN Act 2007 and the Banks and Other Financial Institutions Act 2020. The guidelines replace all previous circulars and introduce stricter enforcement mechanisms across Nigeria's banking sector.

The draft is currently open for stakeholder comments for three weeks, with submissions directed to the Director of the Financial Policy and Regulation Department.

Who Qualifies as a Serial Dud Cheque Issuer?

A customer becomes classified as a "serial dud cheque issuer" after issuing three dud cheques across the banking system. A dud cheque is defined as any cheque dishonored due to insufficient funds in the account holder's bank account.

Once this threshold is reached, the Credit Risk Management System automatically notifies all financial institutions nationwide, triggering immediate system-wide restrictions.

Five-Year Ban for Dud Cheque Offenders: Key Sanctions

Serial offenders face severe consequences under the proposed framework:

Primary Sanctions

Complete Financial System Exclusion: Offenders are barred for five years from accessing the cheque clearing system, opening current accounts, or obtaining credit from any bank or financial institution in Nigeria.

Credit Bureau Reporting: Banks must report dud cheque incidents to the Credit Risk Management System and at least two private credit bureaus within one hour.

Customer Notification: The reporting bank must inform the affected customer of their new status within two working days through verifiable communication channels.

Renewable Ban Provisions

The most significant aspect of the new guidelines is the renewable nature of sanctions. If a previously barred customer issues another dud cheque after being removed from the database, the person shall be barred for another five years. This means the ban has no upper limit, effectively locking persistent offenders out of Nigeria's financial system indefinitely.

Mandatory Reporting Requirements for Banks

Financial institutions must comply with strict reporting timelines:

Immediate Reporting:All commercial, merchant, non-interest, mortgage, and microfinance banks must report dud cheques within one hour on the CRMS or any CBN-approved platform.

Record Retention: Every bank must retain copies of dishonored cheques for at least five years for audit and reference purposes.

Customer Education: Banks must inform all customers of the consequences of issuing dud cheques before issuing cheque books.

Due Diligence: Before opening current accounts, banks must verify customer status in the CRMS and consult at least two private credit bureaus.

Bank Penalties for Non-Compliance

Banks face a minimum fine of N5 million for failing to enforce restrictions and N3 million for opening a current account without checking a customer's CRMS status. Additional penalties range from N1 million to N5 million per incident depending on the institution type and nature of the violation.

Infractions that attract penalties include:

• Failure to file required reports
• Failure to notify customers
• Opening accounts without mandatory status checks
• Failure to cancel unused cheque leaves

Credit bureaus also face penalties of up to N2 million for failing to maintain or provide complete records of dud cheque issuers.

Impact on Nigeria's Payment System

The CBN's initiative aims to address long-standing issues that have undermined confidence in cheque-based transactions. By implementing these stringent measures, the apex bank seeks to:

• Strengthen financial discipline across the banking sector
• Protect the integrity of the cheque clearing system
• Reduce the incidence of payment failures that delay settlements
• Restore public confidence in negotiable instruments
• Support the enforcement of the Dishonoured Cheques (Offences) Act of 1977

What Happens to Unused Cheque Books?

Banks must retrieve unused cheque leaves from affected customers and upload their details to the Credit Risk Management System and at least two private credit bureaus. This measure prevents offenders from continuing to issue cheques during their suspension period.

The Central Bank of Nigeria's proposed five-year renewable ban on serial dud cheque offenders represents a watershed moment in Nigerian banking regulation. By combining strict sanctions, immediate reporting requirements, and substantial penalties for non-compliant banks, the CBN is sending a clear message that financial discipline is non-negotiable.