Instruction No. 001-DCR/2010 on the Procedures for Declaring, Processing, and Utilizing Information Regarding Payment Incidents on Cheques

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CENTRAL BANK OF MADAGASCAR

INSTRUCTION NO. 001-DCR/2010 on the procedures for declaring, processing, and utilizing information regarding payment incidents on cheques

The Governor of the Central Bank of Madagascar,

Having regard to Law No. 94-004 of 10 June 1994, as amended, establishing the statutes of the Central Bank of Madagascar,

Having regard to Law No. 95-030 of 22 February 1996, as amended, on the activity and supervision of credit institutions,

Having regard to Law No. 2004-045 of 14 January 2005 on the prevention and repression of offences relating to cheques,

Having regard to Decree No. 2006-281 of 25 April 2006 setting the implementation modalities of certain provisions of Law No. 2005-045 of 14 January 2005 on the prevention and repression of offences relating to cheques,

Having regard to Decree No. 2007-027 of 29 January 2007 appointing the Governor of the Central Bank of Madagascar,

DECIDES:

Article 1: General Provisions

This instruction aims to establish the procedures for the centralization and monitoring of payment incidents as provided for by Law No. 2004-045 of 14 January 2005 on the prevention and repression of offences relating to cheques, hereinafter referred to as "the Law".

These procedures include those pertaining to the declaration, processing, and utilization of information concerning payment incidents.

For the purposes of this instruction, declarants are defined as credit institutions authorized to maintain accounts on which cheques may be drawn, and the Postal Cheque Centres (PCC).

The attachments annexed to this instruction form an integral part of it.

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Article 2: Objects of Declaration

2.1. Declarants are required to report to the Central Bank the following events :

a. Payment incidents, namely :

• insufficient available funds,
• unavailability of funds due to garnishment, notice to third-party holder, or requisition,
• unavailability of funds due to stop payment by the drawer or closed account,
• refusal to pay a cheque issued prior to the date of acknowledgment of receipt of the letter notifying a banking prohibition or a judicial prohibition decision,
• refusal to pay a cheque issued during the period of execution of a judicial prohibition,
• refusal to pay a cheque issued on a non-existent account.

b. Regularization or failure to regularize following total or partial payment refusal,

c. Violation of a banking or judicial prohibition, consisting of issuing a cheque after notification of a banking prohibition from the date of acknowledgment of receipt of the notification letter, or from the pronouncement of a judicial prohibition,

d. Stop payment for loss or theft,

e. Account closure,

f. Cancellation of a payment incident declaration meeting the conditions set forth by the Law,

g. Counterfeiting or falsification of payment or withdrawal cards, use or attempted use of, or acceptance of payment by, a counterfeit or falsified payment card.

2.2. To be admissible, any declaration of refusal to pay a cheque subject to stop payment must be supported by a prior stop payment declaration and on separate forms. Failing such prior declaration, the declarant must immediately regularize it by specifying the reasons for the delay. The stop payment declaration must be accompanied by two copies of the drawer's initial stop payment notification letter.

Article 3: Transmission and Consultation Modalities

3.1. Information transmission is carried out via secure electronic means according to the exchange file descriptions in the annex.

3.2. Paper confirmation of these electronic transmissions, using the forms attached to this instruction, is nevertheless mandatory for the following declarations :

a. Regularization certificate (Annex 3), to be submitted systematically regardless of whether regularization occurred. In case of non-regularization, the certificate must be accompanied by the following documents in two copies :

• non-payment certificate with the date of dispatch and acknowledgment of receipt of the notification/injunction letter by the drawer or their legal representative, or the date of the bailiff's deed,

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B.P. 550 Antananarivo (101) - Madagascar ■ Tel. (261) 20 22 217 51 / 20 22 234 65 ■ Fax (261) 20 22 345 32 Website: www.banque-centrale.mg ■ Email: banque-centrale@bfm.mg 2

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• copy of the injunction letter,
• copy of the acknowledgment of receipt of the notification/injunction letter by the drawer or their known representatives. In the absence of a receipt, notification is made by bailiff to the person or at the domicile of the drawer and their representatives.

b. Violation of prohibition (Annex 4) accompanied by two copies of the notification/injunction letter and its acknowledgment of receipt as indicated above,

c. Falsification of payment instrument (Annex 5),

d. Stop payment (Annex 6),

e. Account closure (Annex 7) with two copies of the account holder's handwritten closure request or an explanatory note from the declarant in case of account closure initiated by the declarant.

Given the importance of every detail, incomplete declarations will not be processed and will be returned.

3.3. For any declaration or consultation, access to the Non-Payment Central Registry by a user must undergo rigorous security measures. For declarants, security devices concern :

• user definition with authorized access rights : declaration, consultation, modification, cancellation, or other actions defined by the Central Bank,
• official request for registration, user replacement, or modification of access rights, to be submitted to the Central Bank,
• user password customization and management.

3.4. The access code is personal. Each declarant must take necessary measures to preserve and secure it. They are responsible for any abusive or unauthorized use of this code.

3.5. The declarant must immediately communicate to the Non-Payment Central Registry any significant event occurring until the end of the prohibition period, such as : change of management or representative, modification of address or location, or generally, any modification in previous declarations.

3.6. The deadline for transmitting accompanying paper support is five days from the date of the relevant event.

Article 4: Centralization

4.1. The Central Bank is responsible for managing the Central Cheque File. To this end, it centralizes all declarations from declarants relating to the incidents and facts listed in Article 2 of this instruction.

4.2. Branches of declarants operating within the jurisdictions of the Central Bank's Territorial Representations (list in Annex 20) send directly to these representations the paper declarations mentioned in Article 3.6.

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4.3. Declarant branches located outside these jurisdictions correspond directly with the Central Bank headquarters.

4.4. The Central Bank headquarters is the sole authority authorized to hold, make available, or disseminate all centralized information regarding cheque offences.

Article 5: Making Centralized Information Available

5.1. The Central Bank makes centralized information available to all declarants, who thus have the possibility to consult their clients' status via access to the Integrated Information System for Enterprises (SIIE) website.

5.2. Other declarants informed of the prohibition measure instruct their clients included in the list thus made available to them to return any cheque books in their possession, in accordance with the provisions of Article 5 of the Law.

Article 6: Notifying the Drawer

6.1. The declarant notifies the drawer of the banking prohibition by registered letter with acknowledgment of receipt or, failing that, by service of process by a bailiff to the person or at the domicile of the drawer and their representatives.

6.2. The declarant attaches in two copies a copy of the acknowledgment of receipt of the notification letter duly signed by the drawer or one of their representatives as provided by the Law, to subsequent declarations relating to the incident concerned, particularly declarations of non-regularization or violation of prohibition.

6.3. The declarant must require a non-resident client to provide an address in Madagascar to which all necessary notifications will reach them.

Article 7: Cancellation of Non-Payment Declaration

7.1. Cancellation of declaration is only admissible in one of the following cases :

• error by the drawee bank's services,
• disappearance of funds following an event not attributable to any of the persons authorized to draw cheques on the account.

7.2. Declarants submit the cancellation request to the Central Bank using the model in Annex 2 and the exchange file in Annex 2.1. Declarants must take arrangements to inform their respective clients that requests originating directly from bank clients are inadmissible at the Central Bank level. The Central Bank reserves the right to request additional information from declarants, particularly in case of repeated cancellation requests from a branch.

7.3. Within ten days following the date of receipt of the request or, if applicable, receipt of the last requested supplementary information, the Central Bank notifies the drawee bank of its decision and, where applicable, notifies other declarants of the lifting of the banking prohibition. It also informs the relevant Court if it has already been seized previously.

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7.4. Declarants must include in the prohibition notification letter the possible appeal routes provided for by the Law, in case of contestation of banking prohibitions, namely :

• request for suspension for serious contestation before the Summary Proceedings Court,
• or request for cancellation before the declarants as stipulated in this instruction, or failing that, before the Civil Court.

Article 8: Regularization and Non-Regularization

8.1. Regularization must be carried out within five days from the date of acknowledgment of receipt of the injunction letter by the drawer, by establishing on the account linked to the cheque a sufficient and available provision intended to settle the cheque amount, independent of any non-payment fees that may be charged by the drawee institution. To this end, direct cash payment to the beneficiary, by transfer, or in any other form, does not constitute a valid regularization under the Law. The provision thus established remains unavailable for any other purpose for a period of one year.

8.2. Within fifteen days following the expiration of the regularization deadline, declarants send to the Central Bank an individual regularization or non-regularization certificate for each regularized or non-regularized unpaid cheque. In case of non-regularization, the declaration must be accompanied by copies of the documents listed in the first point of the provisions of Article 3.2 of this instruction.

8.3. The Central Bank headquarters sends to the Public Prosecutor of the jurisdiction of the drawer's domicile, before the 15th of the month, a list of unpaid cheques not followed by regularization, with non-payment certificates and the documents listed in the first point of Article 3.2 of this instruction, of which it was informed during the previous month.

Article 9: Judicial Prohibition

After the Public Ministry notifies the Central Bank of the pronouncement of Court judgments, the latter has a period of 10 days from this notice to inform the headquarters of declarants, who are responsible for informing their respective branches.

Article 10: Violation of Banking or Judicial Prohibition

10.1. Violation of banking or judicial prohibition refers to any cheque issuance during the period between the date of acknowledgment of receipt of the prohibition notification letter and the end of this prohibition.

10.2. If the issuance date of a cheque presented during the prohibition period is nevertheless prior to the date of acknowledgment of receipt of the prohibition notification letter, the account-holding declarant proceeds with payment if funds are available. In case of an incident, the relevant provisions of this instruction apply, without requiring a violation of prohibition declaration. A new one-year prohibition period is calculated from the date of presentation of the new rejected cheque.

10.3. Within five days from the date of detection of the violation, declarants send the corresponding declaration to the Central Bank (Annex 4 and exchange file Annex 4.1).

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10.4. Within ten days from the receipt of this declaration, the Central Bank informs the competent Court based on the drawer's domicile.

Article 11: Cheque Forgery

Within ten days from the date of detection of a cheque's forgery, the concerned declarant informs the Central Bank (Annex 5 and exchange file Annex 5.1). Within ten days from the receipt of this declaration, the Central Bank informs the competent Court.

Article 12: Stop Payment for Theft or Loss of Cheque

Within ten days from the date of receipt of the letter objecting to the payment of a cheque for theft or loss, the concerned declarant informs the Central Bank according to Annex 6 and exchange file Annex 6.1, accompanied by a copy of the corresponding stop payment declaration made by the account holder and documents issued by the competent authority.

Article 13: Account Closure

13.1. At the time of account closure, the declarant requires the account holder to return all unused cheque forms attached to the closed account and mentions the numbers of the unissued cheques in the corresponding declaration.

13.2. The declaration must be made within five days from the closure date following the model in Annex 7.

13.3. In anticipation of disputes in case of contestation of prohibition for closed account, the declarant systematically attaches to the corresponding declaration a double copy of the closure request made by the concerned account holder, or a copy of the closure notification to their client in case of closure decided unilaterally by the declarant itself.

Article 14: Individual Payment Status Request

14.1. The Central Bank permanently updates the summary list of prohibited cheque holders. This list is published on the SIIE website for declarants' access. The mandatory individual payment status request will concern persons not listed on this list.

14.2. The subrogation to payment mentioned in Article 18.3 does not in any case constitute a ground for refusing to issue a cheque book.

Article 15: Monthly Summary Reports

The Central Bank makes available to declarants, for consultation, by the 15th of each month at the latest, the summary reports of information received during the previous month, covering the following events :

• payment incidents, with or without regularization,
• cancellation of prohibition,
• lifting of prohibition,
• account closure.

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Article 16: Lifting of Banking and Judicial Prohibition

Apart from prohibitions lifted following the cancellation of declarations referred to in Article 7 above, the Central Bank publishes on the SIIE website, before the end of the month, a monthly list of banking and judicial prohibitions scheduled to expire during the following month. This list is accessible according to the procedures described elsewhere in this instruction.

Article 17: Authorized Signatures

For obvious security reasons, a specimen signature of persons authorized by declarants to sign the paper declarations cited in this instruction must be deposited with the Central Bank within 30 days from the effective date of this instruction, under the cover of the Primary Responsible of the concerned declarant.

Article 18: Sanctions

18.1. Any breach of the provisions of this instruction is subject to the sanctions or penalties stipulated in Articles 49, 52, and 83 of Law No. 95-030 of 22 February 1996, as amended, on the activity and supervision of credit institutions. This applies notably to delays in transmitting information, or submitting inaccurate documents or information.

18.2. It is particularly recalled that failure to comply with the obligation to declare offences mentioned by the Law exposes the defaulting declarant to fines.

18.3. As a reminder of the terms of Article 19 of the Law, declarants must pay, notwithstanding insufficient or unavailable funds, any cheque :

• issued using a form for which they have not obtained return under the conditions provided in Articles 3 and 8 of the Law, unless they prove they have implemented the diligence provided by these articles,
• issued using a form they issued in violation of the provisions of Article 5 of the Law.

Article 19: Effects of Repeated Payment Incidents

19.1. The Central Bank excludes from its refinancing system the signatures of repeat defaulters (cheques and bills combined). It periodically makes the corresponding list available to all declarants for consultation.

19.2. Rehabilitation of excluded signatures is carried out in the following cases :

• systematic rehabilitation upon expiration of the sanction period in the absence of new defaults or other adverse information during the twelve months preceding the end of the sanction period,
• formal agreement of the Central Bank upon motivated request on behalf of the concerned party. This request is only admissible after six months from the exclusion and must, for legal entities required to maintain regular accounting, include financial statements for the last three fiscal years.

19.3. A corresponding periodic list is made available by the Central Bank to declarants for consultation.

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19.4. Before any rehabilitation request, the declarant ensures that the concerned party is indeed listed on the excluded signatures list.

19.5. The rehabilitation request falls exclusively under the jurisdiction of declarants, who must inform their clients so that they refrain from any direct contact with the Central Bank.

19.6. It is customary for declarants to bring to the attention of their clients the risks incurred in case of repeated defaults.

Article 20: Miscellaneous Provisions

20.1. Within ten days from the date of detection of the forgery of a payment or withdrawal card, the concerned declarant informs the Central Bank (Annex 5 and exchange file Annex 5.1).

20.2. Within ten days from the receipt of this declaration, the Central Bank informs the competent Court.

20.3. Within ten days from the date of receipt of the letter objecting to payment by a stolen or lost card, the concerned declarant informs the Central Bank according to Annex 6 and exchange file Annex 6.1, accompanied by a copy of the corresponding stop payment declaration made by the account holder and documents issued by the competent authority.

Article 21: Final Provisions

This instruction enters into force upon its notification to Professional Associations and other declarants who are not members of a Professional Association.

All provisions of Instruction No. 002-CR/06 of 24 November 2006 are hereby repealed.

Antananarivo, 08 NOV 2010

The Governor, [Signature] Frédéric RASAMOELY

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