Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

Instructions No. (2) of 2017

Concerning Bounced Cheques, Settlements, and Suspended and Lost Cheques

Based on the provisions of Legislative Decree No. (09) of 2010 concerning Banks, particularly Article (72) thereof, and based on the provisions of Decision No. (132) of 2011 concerning the Licensing and Supervision of Specialized Lending Institutions, particularly Article (35) thereof, and in accordance with the powers delegated to us, and in the public interest, we have issued the following Instructions:

---

Article (1)

Purpose

These Instructions aim to automate banking operations and reduce the volume of credit and operational risks faced by the banking sector by developing the bounced cheque system, the mechanisms for amicable settlements, and the suspended and lost cheque system.

---

Article (2)

Definitions

The words and phrases listed below shall have the meanings assigned to them, unless the context indicates otherwise:

The System: The bounced cheque system, the amicable settlement system, and the suspended and lost cheque system operated by the Palestine Monetary Authority.

Bounced Cheque File: The daily bounced cheque file for customer accounts between branches of the same bank, and from Israeli clearing and foreign clearing houses.

Fees: The fees collected from the customer who submits a settlement request.

Settlement: The amicable settlement submitted by the customer to the bank to modify their classification on the bounced cheque system.

Suspended Cheque: A cheque whose payment is stopped upon the drawer's request after the full value of the cheque is frozen.

Lost Cheque: A cheque that is stopped upon the drawer's request due to its loss or theft.

Bank: Commercial bank and Islamic bank.

System User: Specialized lending institutions, finance leasing companies, and any other entity granted system usage rights by the Palestine Monetary Authority.

---

Article (3)

Scope of Application

The provisions of these Instructions shall apply to banks and system users.

---

Article (4)

Acknowledgement of Data Accuracy, Waiver of Inquiry, and Declaration

1. The bank must obtain the signature of the customer or the authorized account manager on the "Acknowledgement of Data Accuracy, Waiver of Inquiry, and Declaration" form before opening any new accounts or issuing new cheque books.
2. The acknowledgement and waiver referred to in paragraph (1) of this Article shall remain valid throughout the duration of the banking relationship between the customer and the bank, and shall expire upon the final closure of the account.

---

Article (5)

Bank Obligations Regarding the Bounced Cheque System

The bank must comply with the following:

1. Inquire about the customer using the designated form when the customer submits a request for new cheque books, whether in paper or electronic format, as well as inquire about the customer before delivering the new cheque books.
2. Enter all personal data of the inquired customer and verify its accuracy.
3. Report cheque books delivered to customers to the bounced cheque system at the same time the customer receives the cheque books.
4. Enter all personal data and cheque-related data when extracting customer data from clearing files, branch files received from general or regional departments, or data entered via account opening screens.
5. A cheque submitted to the bank more than once and returned for any reason listed in Article (6) of these Instructions shall be counted only once for classification purposes.
6. Treat parties to a joint account as a single unit for classification purposes on the bounced cheque system.
7. Do not issue any cheque books, regardless of quantity, to any customer, whether natural or legal, if that person is classified at grade (C or D regular or flagged). Customers classified at grade (C or D regular or flagged) are permitted to open accounts at banks and operate them to conduct banking transactions.
8. Do not stop a cheque upon the drawer's request without freezing the full value of the cheque to be stopped. If there is insufficient balance to cover the value of the cheque to be stopped, it shall be returned for insufficient funds.
9. Transfer the daily bounced cheque file between branches, foreign clearing, and Israeli clearing, process any errors, and send it before 9:00 AM on each working day via the bounced cheque file upload screen.

---

Article (6)

Approved Reasons for Return for Classification Purposes

The bank must adhere to the following cheque return reasons for classification purposes on the bounced cheque system:

1. Insufficient funds.
2. Drawer's funds are frozen for legal reasons.
3. Multiple dates written on the cheque.
4. Correction (amendment) requires a signature.
5. Signature mismatch.

---

Article (7)

Classified Agent

An agent or authorized signatory for a natural or legal person may be issued a cheque book if the agent or authorized signatory on the account is classified within grades (C or D regular or flagged).

---

Article (8)

Bank Obligations Regarding the Settlement System

The bank must comply with the following:

1. Submit a settlement request to the settlement system, where the settlement covers all bounced cheques on the customer's account.
2. The customer must sign the settlement request and an acknowledgement releasing the Palestine Monetary Authority and the bank from any liability whatsoever, or from any other party, in the event the cheque(s) subject to settlement are cashed.
3. Collect a fee of (50) fifty shekels for each bounced cheque. The fees shall be deposited into a suspense account pending approval or rejection of the settlement request. At the end of each month, the fee amount shall be credited to the bank's account with the Palestine Monetary Authority if the settlement request is approved.
4. Retain the settlement submitted by the customer at the bank. It shall not be sent to the Palestine Monetary Authority unless specifically requested.

---

Article (9)

Fees and Error Correction

1. The Palestine Monetary Authority shall debit an amount of (20) twenty shekels for each settlement request approved by the Authority from the bank's account that submitted the settlement request on behalf of the customer at the end of each month.
2. The bank is prohibited from collecting any additional fees or commissions for itself in exchange for submitting a settlement request.
3. If the bank makes an error in extracting the customer's cheque data, the bank must submit a written request to the Palestine Monetary Authority or act upon a customer's objection to correct the error and pay a correction fee of (100) one hundred shekels.

---

Article (10)

Suspended and Lost Cheque System

The bank must immediately report suspended or lost cheques to the suspended and lost cheque system.

---

Article (11)

System User Inquiry

The system user must obtain the customer's waiver on the inquiry waiver form before conducting an inquiry on the cheque system.

---

Article (12)

Repeal

1. Instructions No. (2010/02) concerning the bounced cheque system at banks and Instructions (2012/10) concerning the suspended and lost cheque system.
2. Circular No. (2010/29) and Circular No. (2010/55) concerning amicable settlements are repealed, as well as Circular No. (2014/42) concerning stopping original cheques, Circular No. (2017/17) concerning accuracy in declaring bounced cheque data, and Circular No. (2011/109) concerning dealing with principals and authorized signatories for legal persons.

---

Article (13)

Implementation and Enactment

All competent authorities shall implement the provisions of these Instructions within their respective jurisdictions. The provisions of these Instructions shall apply effective from 2017/02/05.

Issued in Ramallah on 2017/02/02

Market Instructions Department Palestine Monetary Authority

---