CBN Proposes Strict Five-Year Ban for Repeat Dud Cheque Offenders
The Central Bank of Nigeria (CBN) is moving to drastically curb financial indiscipline within the banking sector. The CBN has released a new exposure draft titled Guidelines on the Treatment of Dud Cheques by Banks and Other Financial Institutions in Nigeria, proposing far stricter sanctions, including an automatic five-year ban for individuals who repeatedly issue dud cheques.
This measure aims to tighten reporting standards, restore confidence in the use of cheques, and enhance the overall integrity of Nigeria’s payment systems.
Table of Contents
New Sanctions: Five-Year Ban for Repeat Offenders
Tightened Reporting Rules for Financial Institutions
Definition of a ‘Serial Dud Cheque Issuer’
Penalties for Banks and Credit Bureaus
What Happens After the Ban is Completed?
1. New Sanctions: Five-Year Ban for Repeat Offenders
The proposed guideline, issued under the CBN Act 2007 and BOFIA 2020, replaces all previous circulars on the subject. The most impactful provision targets persistent abuse of the cheque clearing system.
Under the CBN’s new framework, any customer who is previously barred and subsequently issues another dud cheque will face a severe and renewable penalty: The person “shall be barred for another five-year period in each instance.”
This provision creates a mechanism for an indefinite ban on persistent offenders, effectively locking them out of core parts of the financial system for extended periods if they reoffend.
2. Tightened Reporting Rules for Financial Institutions
The CBN is imposing rigorous compliance requirements on banks and financial institutions to ensure rapid reporting and information sharing regarding dishonored cheques.
A. One-Hour Reporting Rule
Once a bank establishes that a cheque is a dud (dishonored due to insufficient funds), it must report the incident to the Credit Risk Management System (CRMS) and at least two private credit bureaus within one hour of the determination.
B. Customer Notification and Record Keeping
Banks must also notify the affected customer within two working days via a verifiable communication channel, providing full details of the dishonored cheque. Furthermore, banks are mandated to retain a copy of every dishonored cheque for a minimum of five years and must inform all customers of the strict consequences before issuing cheque books.
3. Definition of a ‘Serial Dud Cheque Issuer’
The guideline clearly defines the threshold for becoming a serial offender, triggering the most severe restrictions across the entire banking system:
A customer is classified as a “serial dud cheque issuer” upon issuing three dud cheques across the Nigerian banking system.
Once this classification is made, the CRMS instantly notifies all financial institutions. The reporting bank must then officially notify the customer within two working days and update their status with all private credit bureaus.
Sanctions Framework
Serial offenders will be barred for five years from:
Accessing the clearing system.
Opening current accounts in any bank.
Obtaining credit from any bank or financial institution.
4. Penalties for Banks and Credit Bureaus
The CBN’s draft extends accountability beyond the customers, imposing strict financial penalties on financial institutions and credit bureaus for non-compliance.
| Offender Type | Infraction | Penalty Range |
| Banks/Financial Institutions | Failure to file reports, failure to notify customers, opening accounts without status checks, or failure to cancel unused cheque leaves. | ₦1 million to ₦5 million per incident (depending on the institution type). |
| Credit Bureaus | Failure to maintain or provide complete records of dud cheque issuers. | Up to ₦2 million per failure. |
5. What Happens After the Ban is Completed?
The mechanism for re-entry into the system is carefully structured. Once a customer completes the initial five-year ban and is removed from the serial issuer database, they regain access to banking services.
However, the “fresh five-year ban for subsequent offences” clause is designed to prevent recidivism. If a previously barred customer issues just one more dud cheque after their initial removal, they are immediately subject to another five-year suspension in that instance.
The exposure draft is currently open to stakeholder comments for three weeks before finalization, reinforcing the CBN’s commitment to transparency and its goal of ensuring better compliance and deterring abuse across the financial industry.
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