The UAE Central Bank yesterday started implementing a high-tech system that will greatly speed up the clearance of cheques.
The image cheque clearance system (ICCS) will slash the time taken to process cheques and transfer funds between banks from several days to four hours, with a maximum of 36 hours.
Its introduction was delayed because not all banks met the technical requirements in time but these problems have now been solved.
The system involves a branch of a UAE or foreign bank scanning a cheque and immediately transmitting the image electronically via their headquarters to the Central Bank, which then instructs the bank that issued the cheque to release the funds. It will be able to process more than 90,000 cheques a day. The previous clearance system took up to five days.
"The ICCS represents the modern way of processing traditional paper-based payment instruments," said a Central Bank spokesman. "The Central Bank will explore other ways of streamlining its payment system to ensure speedy, efficient and secure payment solutions.
"Cheque data will be stored for 10 years initially. This may be extended once the system has been operational for some time. The system will also provide a cheque archive facility at the Central Bank, which will be accessible by all banks in the UAE."
However, there are some legal concerns that need to be addressed by the Ministry of Justice, the Ministry of Finance and the Central Bank as there are fears that fraudulent cheques will be scanned and sent for clearance.
In response to these worries, the Central Bank has issued a statement saying: "Until the legal issues have been resolved banks will continue to retain physical cheques for legal purposes. Clearing and settlement will be carried out based on cheque images and captured cheque data.
"The Central Bank will act as the arbitrator in cases where the issuing bank, upon physical inspection of the document, believes that a cheque is not valid."
The Central Bank will hold the presenting bank responsible for the inspection of the cheques rather than the issuing bank.
"Banks need to be aware of their responsibility to other banks and to the banking system in general," the statement continues.
"Issuing banks will make decisions to pay based on cheque images and data gathered by presenting banks.
"The responsibility for quality control checking lies firmly with the presenting bank. If the issuing bank subsequently finds that the cheque should not have been submitted to ICCS because of obvious irregularities with the cheque, they will be entitled to ask the Central Bank to intervene.
"If the Central Bank finds that the presenting bank has been at fault, it will take action and penalise the presenting bank."
The previous cheque clearing system will be phased out by the end of October but will remain operational as a contingency system.