Unsigned Cheques in UAE: A Guide to Handling Payment Disputes

In the United Arab Emirates, a cheque is a common form of payment, particularly in business transactions. However, there are instances when a cheque may be presented without a signature, which can cause confusion and uncertainty for the recipient. If you find yourself in this situation, it’s important to understand the proper steps to take to ensure you receive payment.

The first thing to do when presented with an unsigned cheque is to verify its authenticity. This can be done by checking the cheque against the bank’s records, or by contacting the issuer to confirm that the cheque was issued by them. If the cheque is determined to be genuine, the next step is to obtain a signature from the issuer.

It is important to note that in the UAE, a cheque must be signed by the issuer in order for it to be legally valid. This is known as the “Rule of Signature” and is set out in the UAE Central Bank’s regulations. Without a signature, the cheque is considered “unsigned” and cannot be cashed.

If the issuer is unavailable to sign the cheque, the recipient can seek assistance from the bank. Banks in the UAE are required to assist customers with obtaining signatures on cheques. This can be done by providing a signature guarantee, which is a form of authentication issued by the bank. The recipient will need to provide identification and proof of their relationship with the issuer, such as a copy of the contract or invoice.

Once a signature has been obtained, the cheque can be deposited or cashed. However, it is important to note that if the cheque is not signed within a certain period of time, it may become stale-dated and will no longer be valid. The period of validity for a cheque in the UAE is typically six months from the date of issue.

If the cheque is determined to be fraudulent or the issuer is unable to sign it, the recipient can take legal action. In the UAE, cheque fraud is considered a criminal offense and can result in fines or imprisonment. The recipient can file a complaint with the police and provide evidence, such as the unsigned cheque and any correspondence with the issuer.

What if the Cheque Was Issued from a Dormant Bank Account?

In provision with Article 641 Bis 1 of the Federal Decree Law No. 14 of 2020,if someone endorses or delivers a bearer cheque while knowing that there are not enough funds in the account to cover the cheque, or that the cheque may not be drawn, they will be subject to a penalty. The penalty is a minimum of 10% of the cheque value, but can be as high as the value of the cheque itself, with a minimum penalty of 1,000 dirhams. The penalty will be doubled in the case of repeat offenders. This provision is part of a larger law concerning commercial transactions in the UAE.

According to Article 641 Bis 2, individuals who engage in any of the following actions will face punishment of imprisonment for a minimum of six months and a maximum of two years, as well as a financial penalty of at least 10% of the cheque’s value (with a minimum of Dh5,000) and no more than twice the cheque’s value. The actions that are punishable include: directing or requesting the drawee to not pay the value of a cheque prior to its due date, with the exception of cases outlined in Articles 620 and 625 of the law; closing or emptying an account before issuing a cheque or presenting it for payment, or if the account has been frozen; and intentionally writing or signing a cheque in a way that makes it unpayable. Repeat offenders will face double the penalty.

In the United Arab Emirates (UAE), issuing unsigned cheques as payment forms from dormant bank accounts is considered illegal. This is due to the fact that a dormant bank account is one that has not been used for a certain period of time, typically one year, and is considered inactive by the bank. The bank may freeze the account or close it if it remains inactive for an extended period of time.

When a bank account becomes dormant, the bank may take certain steps to protect the account holder’s funds and prevent fraud. For example, the bank may require the account holder to provide proof of identity or sign a new signature card before allowing any transactions to take place.

One of the main reasons why issuing unsigned cheques from dormant bank accounts is illegal in the UAE is because it can lead to fraud. If a cheque is unsigned, it means that the account holder has not authorized the transaction and the cheque can be easily forged. This can lead to the funds being transferred to an unauthorized party, which can result in financial losses for the account holder and the bank.

Another reason why issuing unsigned cheques from dormant bank accounts is illegal in the UAE is because it can lead to money laundering. Money laundering is the process of disguising the proceeds of illegal activities as legitimate funds. If an unsigned cheque is issued from a dormant bank account, it can be used to transfer funds from illegal activities into the account, making it appear as if the funds are legitimate. This can make it difficult for authorities to trace the funds and hold those responsible accountable.

Moreover, banks have a legal responsibility to report suspicious transactions to the authorities, and if they suspect money laundering or fraud, they may freeze the account or close it. This may cause inconvenience to the account holder and may also result in legal proceedings.

Another important aspect to consider is that when the account holder does not authorize the transaction and the cheque is not signed, the bank may refuse to honor the cheque. This means that the funds will not be transferred and the intended recipient will not receive the payment. This can lead to disputes and legal issues between the parties involved.

Issuing unsigned cheques as payment forms from dormant bank accounts is illegal in the UAE due to the risk of fraud and money laundering. Banks have a legal responsibility to protect the account holder’s funds and prevent unauthorized transactions, and issuing unsigned cheques can violate these responsibilities. It is important for account holders to keep their bank accounts active and to authorize transactions before they take place to avoid any legal issues.

When presented with an unsigned cheque in the UAE, it is important to verify its authenticity and obtain a signature from the issuer. Banks are required to assist customers with this process, but if the cheque is determined to be fraudulent or the issuer is unable to sign it, legal action can be taken. It is also important to be aware that an unsigned cheque does not entitle the recipient to any interest or compensation for delay in payment. By understanding the proper steps to take and the legal implications, recipients can ensure they receive payment for their goods or services.