Cheques for less than €20 will no longer be legal

The Central Bank of Malta has issued a directive that will come into force in 2022 introducing regulations on the use of cheques and bank drafts.

The main changes include a prohibition of cheques issued for amounts below €20.

Other main changes will be that cheques will only be encashed or credited to the person named by the payer; and:

Cheques cannot be dated to a future date, and may be accepted in any case if presented before that future date; and cheques over €5,000 can only be deposited into the beneficiary’s own account.

Under the new rules cheque facilities will be withdrawn if cheques are repeatedly issued that cannot be honoured.

Service providers will have to retain information related to cheques for at least five years. Users who breach the regulations are subject to fines up to €200 for each contravention.

The rules are part of an effort by authorities to ensure payments are conducted in line with international anti-money laundering expectations. The main focus of the regulation is to ensure that the cheque becomes a non-transferable payment instrument from the payer to the beneficiary.

The rules align with a growing trend showing a growth in credit transfers, direct debits, as well as debit and credit cards, at the expense of cheques’ usage.

“Cheques remain a highly inefficient payment product which is prone to AML issues while being weak with its assurances both for the payer and the beneficiary,” the Central Bank said.

The Malta Bankers’ Association called it a positive development which will decrease the possibility of such instruments being used for money laundering purposes.

The implementation of the Directive will irrevocably change the nation’s payments landscape, further shifting to more efficient modes of payment, mainly electronic.

The Central Bank has engaged with service providers to ensure that the transition to the new rules is effective. Over the last two years, service providers have already introduced a number of the measures in this directive. 

A comprehensive communication campaign is being launched by the Bank, the MBA and the MBA’s members in the coming months to ensure that the public becomes aware of its rights and obligations under the new rules.