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2017-01-01

Instructions No. 2 on Returned Cheques, Settlements, and Stopped and Lost Cheques

The Palestine Monetary Authority issued Instructions No. 2 (2017) to automate banking operations and mitigate credit and operational risks by mandating the use of centralized systems for returned, stopped, and lost cheques, as well as amicable settlements. The regulations impose strict compliance obligations on banks, including mandatory customer data verification, standardized return reasons, and specific fee structures for settlement requests and error corrections. Furthermore, the Instructions repeal numerous prior directives and circulars, establishing a unified regulatory framework effective February 5, 2017.

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Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

Instructions No. (2) for the Year 2017

Regarding Returned Cheques, Settlements, and Stopped 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 on the Licensing and Supervision of Specialized Credit Institutions, particularly Article (35) thereof, and in accordance with the powers delegated to us, and in pursuit of the public interest, we have issued the following Instructions:

Article (1)

Objective

These Instructions aim to automate banking operations and reduce the volume of credit and operational risks faced by the banking sector by developing the Returned Cheques System, the mechanisms for amicable settlements, and the Stopped and Lost Cheques 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 Returned Cheques System, the Amicable Settlements System, and the Stopped and Lost Cheques System in effect with the Palestine Monetary Authority.

Returned Cheques File: The daily file of returned cheques on customer accounts between branches of the same bank, and from the Israeli clearing house 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 Returned Cheques System.

Stopped Cheque: A cheque whose payment is halted upon the drawer's request after the full value of the cheque has been frozen.

Article (3)

Scope of Application

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

Article (4)

Declaration of Data Accuracy and Authorization for Inquiry and Disclosure

  1. The bank must obtain the signature of the customer or the account manager on the "Declaration of Data Accuracy and Authorization for Inquiry and Disclosure" form, prior to opening any new accounts or issuing new cheque books.
  2. The declaration and authorization 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 its validity shall expire upon the final closure of the account.

Article (5)

Bank Obligations Regarding the Returned Cheques System

The bank shall comply with the following:

  1. Inquire about the customer using the designated form when the customer submits a request for new cheques, whether in writing or electronically, as well as inquire about the customer before handing over 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 Returned Cheques System at the same time the customer receives the cheque books.

Article (6)

Approved Reasons for Return for Classification Purposes

The bank shall adhere to the following cheque return reasons for classification purposes on the Returned Cheques System:

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

Article (7)

Authorized Agent Classified on the System

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 under classification grades (C or D, normal or flagged).

Article (8)

Bank Obligations Regarding the Settlements System

The bank shall comply with the following:

  1. Submit the settlement request to the Settlements System, ensuring the settlement covers all returned cheques on the customer's account.
  2. The customer shall sign the settlement request and a declaration releasing the Palestine Monetary Authority and the bank from any liability, or any other party, in any form whatsoever, in the event the cheque(s) subject to settlement are paid.
  3. Collect a fee of (50) fifty shekels for each returned cheque, and deposit the fees into an intermediary 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 request submitted by the customer at the bank, and 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 credit an amount of (20) twenty shekels for each settlement request approved by the Authority to 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 errs in disclosing the customer's cheque data, the bank must submit a written request to the Palestine Monetary Authority or act upon an objection submitted by the customer to correct the error and pay a correction fee of (100) one hundred shekels.

Article (10)

Stopped and Lost Cheques System

The bank shall comply with immediately reporting stopped or lost cheques to the Stopped and Lost Cheques System.

Article (11)

System User Inquiry

The system user must obtain the customer's signature on the Authorization for Customer Inquiry form on the Cheques System before executing the inquiry process.

Article (12)

Repeal

  1. Regarding the Returned Cheques System for Banks and Instructions (2010/02) concerning the Stopped and Lost Cheques System (2012/10)
  2. Circular No. (2010/29) and Circular No. (2010/55) regarding amicable settlements are repealed, as well as Circular No. (2014/42) regarding attaching cheques and Circular No. (2017/17) on the accuracy of declaring returned cheque data. Circular No. (2011/109) concerning dealing with principals and authorized signatories for legal persons is also repealed.

Article (13)

Implementation and Enforcement

All competent authorities shall implement the provisions of these Instructions according to their respective jurisdictions, and the provisions of these Instructions shall apply as of 2017/02/05

Issued in Ramallah on 2017/02/02

Market Regulation Department Palestine Monetary Authority

Ramallah - Palestine P.O. Box 452 | Tel: +970 2 2415250 | Fax: +970 2 2409922 | Fax: +970 2 2409922 | Tel: +970 2 2415250 | P.O. Box 452 Ramallah - Palestine Gaza - Palestine P.O. Box 4026 | Tel: +970 8 2825292 | Fax: +970 8 2844487 | Fax: +970 8 2844487 | Tel: +970 8 2825292 | P.O. Box 4026 Gaza - Palestine Email: info@pma.ps | Email: info@pma.ps www.pma.ps

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