The Directive No 19 on the use of cheques and bank drafts in terms of the CENTRAL BANK OF MALTA ACT (Cap. 204) seeks to ensure the safe and effective use of cheques and bank drafts, referred to as ‘paper-based instruments’, to reduce the legal and operational risks associated with these payment instruments. It is issued under the Bank’s remit as per the Central Bank of Malta Act, and is binding on financial and credit institutions in Malta. This Directive shall enter into force on the 1 January 2022.
The below is a summary of the main Rules of the Directive:
- Cheques should be dated on the day they are issued (Paragraph 8);
- Should a cheque be issued post-dated, such cheque will be honoured by the bank on the day of receipt, irrespective of the future date (Paragraph 8).
- All cheques should be issued as ‘Only’ cheques meaning that cheques are not transferable and will only be payable to the named person on the cheque (Paragraph 8);
- An individual receiving payment through cheque is obliged to endorse at the back before presenting it at the bank (Paragraph 9);
- An individual with an instrument bearing on its face the word “Or Order”, as paper-based instruments are no longer transferable to third parties.
- Cheques below or equal to €20 cannot be issued from 1 January 2022 and will be dishonoured if presented at the bank.
- Should there be consecutive cheques issued by the drawer to the same payee over a short period of time, for amounts lower than or up to €5,000, the drawee institution may refuse to pay such cheques in cash.
- In the event that the payee does not hold an account with the drawee institution, the latter is only obliged to encash paper-based instruments for which the payable sum is equal or less than €5,000.
The below is a summary of the main Regulations of the Directive:
- The restrictions imposed by the regulations apply to anyone even if for an unregistered private seller.
- The Regulations prohibit any person from making or receiving payment or otherwise carrying out transactions in cash amounting to or exceeding €10,000 or its equivalent in any other currency, whether in one transaction or in several linked transactions, in respect of the purchase or sale of:
- Immovable property
- Jewellery, precious metals/stones and pearls
- Works of Art
- A breach of the above-mentioned cash transaction limit constitutes an offence which renders the offender liable, upon conviction by the Court of Magistrates in its criminal jurisdiction, to a fine (multa) or criminal proceedings depending on the case.
- Failure by traders and notaries to abide by the procedures and requirements issued by the FIAU will result in an administrative penalty of not more than €5,000. The FIAU may issue a warning in writing instead of an administrative penalty.
As from 1st January 2022, the Malta Business Registry (“MBR”) also needs to follow this directive and thus payments by cheques and bank drafts or by cash will be allowed using the following policy:
In case of Cheques and Bank Drafts:
- Cheques will only be encashed or credited to the person named by the payer
- Cheques cannot be dated to a future date, and may be accepted in any case if presented before that future date
- Cheques equalling or over €5,000 can only be deposited into the beneficiary’s own account
- Cheques cannot be issued for amounts of €20 or less
- Cheque facilities will be withdrawn if cheques are repeatedly issued that cannot be honoured
- Service providers will ensure that all information related to cheques is retained for at least five years
In case of Cash-based Transactions:
- Maximum cash amount accepted by MBR will not exceed €500
- Payment in cash for the same transaction cannot be divided in parts (Vide: FIAU linked transactions)
- €500 notes are not accepted
- Multiple payments by the same person in cash may require additional (enhanced) due diligence
More details about the Directive can be found on the Central Bank of Malta website (News – Central Bank of Malta (centralbankmalta.org)). Moreover, further details about the Cash (Restriction) Regulations can also be found on the FIAU website (Cash Restriction – FIAU Malta)