New Central Bank of Malta directive will affect cheque payments as from 2022

The Central Bank of Malta (Bank) is issuing Directive No. 19 which will come into force in 2022 introducing regulations on the use of cheques and bank drafts. 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. It is also setting up a dedicated email – directive19@centralbankmalta.org ­– for any queries.

These are the main changes that will come into force on 1 January 2022:

1. Cheques will only be encashed or credited to the person named by the payer
2. Cheques cannot be dated to a future date, and may be accepted in any case if presented before that future date
3. Cheques over €5,000 can only be deposited into the beneficiary’s own account
4. Cheques cannot be issued for amounts below €20
5. Cheque facilities will be withdrawn if cheques are repeatedly issued that cannot be honoured.
6. Service providers will ensure that all information related to cheques is retained for at least five years
7. Users who breach the regulations are subject to fines up to €200 for each contravention.

The Directive has been issued with the full collaboration of the Malta Bankers’ Association, which considers this to be a positive development which will decrease the possibility of such instruments being used for money laundering purposes. The MBA also believes that, through common regulatory provisions, this will instil certainty in the use of the products within the scope of the new directive for both users and service providers. 

The MBA said that the implementation of this Directive would irrevocably change the nation’s payments landscape and ensure a further shift to more efficient modes of payment, in line with the objectives of the National Strategy for Electronic Payments of August 2018.  

Following the excellent cooperation during the consultation stages of this directive, the MBA and its members commit to work closely with the Bank to ensure an effective implementation so as to ensure the continued transformation of the local payments landscape as from 1 January 2022.

The Bank has already engaged with various stakeholders ­– including service providers – to ensure that the transition to the new rules is effective. It is to be noted that service providers have already over the last two years proactively 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 as well as providing practical information on the implications of the new provisions while ensuring that service providers will promote the respective alternative means of payment methods available in time for users to prepare for the January 2022 deadline.

The regulations are part of an effort by authorities to ensure payments are conducted in line with international anti-money laundering expectations, and continue to be safe and effective to their users.

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 regulation also curtails the use of post-dated cheques while mandating banks to withdraw their services for users who repeatedly issue cheques which cannot be honoured by their bank. The regulation also prohibits service providers from encashing cheques for amounts above €5,000, with these now expected to be credited to the account of the beneficiary.

The regulation aligns with the growing trend, indicated by respondents of surveys in Malta who intend to increase their use of credit transfers, direct debits, together with debit and credit cards in future, 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.

Directive 19

Guidance Notes – Directive 19

Understanding Directive 19 – Cheques and Bank Drafts