Cheques have long been a key financial instrument, dating back to ancient Mesopotamia and Rome, with modern versions emerging in 17th-century Europe as banking institutions formalised. By the 18th century, standardised cheque systems were established, particularly in England, and gradually adopted worldwide. Their usage peaked in the 1980s and 1990s, facilitating payroll, bill payments, and commercial transactions, including in Rwanda, where they became integral to banking in the mid-20th century. However, as cheque usage expanded, so did fraud. Early fraudsters forged signatures and altered amounts, while the slow bank communication of the 18th and 19th centuries enabled individuals to issue cheques without sufficient funds. By the 20th century, fraud had become more sophisticated, with cheque-kiting and other schemes exploiting clearing delays. The late 20th and early 22st centuries saw an increase in counterfeit cheques, phishing scams, and digital alterations due to advancements in technology. In response, financial institutions and regulators introduced stricter verification measures, cheque truncation systems, and tougher regulations to enhance security and deter fraud. Rwanda’s cheque regulations date back to the 1951 Decree and have been continuously updated to address evolving financial risks while ensuring compliance with global standards. The latest Regulation No. 87/2024 reaffirms Rwanda’s commitment to modernising cheque governance, strengthening enforcement, and aligning with international best practices to enhance financial integrity and discipline. The evolution 1950-1986: Minimal regulation and misuse of cheques Between the 1950s and 1980s, cheques were minimally regulated under the 1951 Decree and largely unfamiliar to the public, leading to low adoption. There were no clear definitions of bounced cheques or penalties for defaulters, except for a 15-day regularisation period for first-time offenders. As a result, cheques were often misused as credit instruments rather than payment tools. 1986-2015: Structured regulations and initial reforms The 1986 regulation (“Régime de prévention et de répression des infractions en matières des chèques du 1er Août 1986”) defined bounced cheques as those drawn against closed or insufficiently funded accounts. It imposed a one-year ban on cheque issuance, required the return of checkbooks, and mandated reporting defaulters to the National Bank of Rwanda (BNR). Banks had to record defaulters, and new checkbooks could only be issued with NBR approval. Sanctions could be lifted upon settling outstanding amounts, obtaining judicial clearance, and paying administrative fees. 2015-2018: Stricter sanctions and enforcement measures Regulation No. 006/2015, amended in 2018, imposed stricter penalties for bounced cheques due to insufficient funds or closed accounts. Sanctions included credit restrictions, account-opening bans, and cheque issuance prohibitions lasting six months for first-time offenders and one year for repeat offenders. The conditions to lift these sanctions had been toughened to require the defaulters to prove payment, obtain Prosecution clearance, and pay a 20% penalty on the cheque amount. However, some challenges remained. The absence of provisions on record-keeping and the statute of limitations for cheque-related sanctions created legal uncertainty, while inconsistent Credit Reference Bureau (CRB) reporting led to erratic enforcement. These gaps underscored the need for reform. In response, the National Bank of Rwanda revised Regulation No. 87/2024, establishing a comprehensive framework to enhance financial discipline and accountability in cheque transactions. Key updates in the revised regulation Enhanced responsibilities and accountability for financial institutions Institutions must ensure cheque issuers understand their obligations before receiving checkbooks. They must notify issuers of bounced cheques and allow a five-day settlement period before reporting to the Credit Reference Bureau (CRB). Additionally, they must retain bounced cheque records for at least ten years for audit and compliance. Non-compliance will result in the following fines: - Failure to notify a cheque defaulter: Rwf200,000 for banks, Rwf150,000 for microfinance. - Inaccurate reporting of a bounced cheque: Rwf300,000 for banks, Rwf200,000 for microfinance. - Violation of record-keeping requirements: Rwf100,000 for banks, Rwf50,000 for microfinance Increased obligations for cheque issuers Cheque issuers must now ensure all cheque details are accurately completed, maintain sufficient funds, and promptly report lost or stolen checkbooks. Proportionate and deterrent sanctions for bounced cheques A cheque defaulter faces a 10% penalty on the bounced cheque amount, up to a maximum of 10 million Rwandan Francs (Rwf10 million). Additional penalties include immediate cheque return, credit restrictions, and a cheque usage ban ranging from 45 days for first-time offenders to 365 days for repeat offenders. Sanctions are lifted only upon full settlement of unpaid cheques and penalties. Additional regulatory enhancements - Introduction of the prescription period for sanctions: Sanctions expire after ten years, but beneficiaries retain the legal right to seek redress. - Proportional and deterrent sanctions: The penalty for bounced cheques has been reduced from 20 per cent to 10 per cent, with a cap of Rwf10 million. - Introducing a mandatory notification period: Financial institutions must notify cheque issuers within five days, detailing the bounced cheque and applicable sanctions. - Expanded regulatory scope: The revised regulation now includes Deposit-Taking Microfinance Institutions (DTMIs), ensuring uniform compliance across financial entities. - Strengthened record-keeping requirements: Financial institutions must maintain accurate records of bounced cheques for ten years to facilitate audits and enhance transparency. The revision of Regulation No. 87 of 2024 modernizes financial regulations, enhances customer protection, strengthens financial accountability, and expands regulatory oversight. It mitigates fraud risks and improves cheque clearing by establishing clear guidelines on validity, dishonor procedures, and legal enforcement. These changes are intended to boost public confidence in cheque transactions while aligning with international best practices in payment systems oversight. The author is Manager for Financial Sector, Legal and Regulatory Frameworks at the National Bank of Rwanda (BNR).
