Law No. 2004-045 of January 14, 2005 on the Prevention and Repression of Check-Related Offenses

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LAW NO. 2004-045 OF JANUARY 14, 2005 ON THE PREVENTION AND REPRESSSION OF CHECK-RELATED OFFENSES (JO No. 2966 OF APRIL 25, 2005, P.3450)

STATEMENT OF REASONS The reform implemented in 1972, aiming to strengthen the repression of offenses, did not achieve its objective: reducing the number of checks issued without sufficient funds and restoring public confidence in this payment system. From 1994 to 1998, the number of checks without sufficient funds rose from 5,723 to 9,989 (a 75.2% increase), and their amounts from 12,228.1 billion to 74,130.8 billion FMG (a 507.69% increase). Consequently, significant transactions are conducted in cash, as the use of certified checks or bank drafts remains very limited, partly explaining the increased circulation of currency. New legislative adaptations are therefore proposed to enhance effectiveness:

1. The institution of an automatic banking prohibition on issuing checks incurred by the drawer and notified by the drawee bank upon discovery of the incident (Article 3). It was noted that criminal courts rarely impose judicial prohibition, a complementary sanction already provided for in existing legislation.
2. To encourage the drawer to quickly compensate the check beneficiary, a regularization option consisting of paying the unpaid check is granted; failing this, criminal proceedings will be initiated, with the failure to regularize constituting the intentional element of bad faith (Articles 10 and 22).
3. The recovery procedure for unpaid checks is improved. In addition to the possibility of obtaining a payment judgment before criminal courts (Article 21), an accelerated procedure analogous to the payment order for small claims is available to the beneficiary, enabling them to quickly obtain an enforceable title and pursue seizure of their debtor's assets (Article 18).
4. Furthermore, in response to strengthened repression, the account holder must be informed in advance of automatic debit operations performed by the bank that may sometimes cause checks to be rejected (Article 1, paragraph 2). Similarly, a granted overdraft facility may only be withdrawn after prior notice to the holder, except in cases of imminent peril (Article 2).
5. Following the use of payment cards, definitions and protections against counterfeiting are established (Articles 32-33). This is the object of the present law.

CHAPTER I ON THE PREVENTION OF OFFENSES Article 1. Upon issuance of a check, every drawer must ensure the existence of prior, sufficient, and available funds in their account. Any debit operation performed by the bank on an account and not justified by a check or an instruction from the holder must beforehand be subject to notice sent at least five days prior to the account holder. Article 2. Any overdraft facility or authorization granted by a bank on an account may only be reduced or suspended upon written notification and after the expiration of a notice period fixed at the time the facility is granted. However, subject to any liability action against the bank, the latter is not required to respect this notice period if it proves that the account holder's situation is irremediably compromised or if notification of the notice to the account holder in person is impossible. Article 3. Any refusal to pay a check due to lack, insufficiency, or unavailability of funds automatically triggers for the drawer a banking prohibition on issuing checks for a period of one year. This prohibition is notified by the drawee bank. The notification contains an injunction for the account holder to return to all banks and other institutions of which they are a client, all check forms in their possession or that of their agents, and prohibits them from issuing for one year checks other than certified checks or checks intended for fund withdrawal by the drawer. This notification must be made to the drawer and their known agents at the latest within two days following this payment refusal, by registered letter with acknowledgment of receipt or, failing a receipt slip, by formal service by a bailiff to the person or at the domicile of the drawer and their agents. The notification is also made by the drawee to the Central Bank in the forms and time limits defined by it via instructions. Article 4. The notification of the injunction provided for in Article 3 must also contain notice to the drawer of the regularization option offered pursuant to Article 9 below. Article 5. Any bank informed of the prohibition measure provided for in Article 3 recorded against an account holder must request from the holder and their agents the return of check forms in their possession and refrain for one year from the payment incident from issuing them check forms other than those issued for fund withdrawal by the drawer with the drawee or for certification. Article 6. In the case of a joint account opened in the names of multiple holders, with or without joint liability, acting separately or jointly in the movements of said account, if the payment incident is attributable to one of these holders, the provisions of Article 3 apply automatically to the signatories of the check taken individually. Similarly, the use of the joint account is suspended and the check forms on this account must be returned in accordance with Article 3. Article 7. When the payment incident is attributable to a representative of a legal entity, the provisions of Article 3 apply to the legal entity and its representative held personally liable for the payment incident. Article 8. Any bank must, upon closing an account, require the account holder to return all check forms issued on the closed account. It must notify the Central Bank within five days from the closing date. Article 9. Within five days of receiving the injunction letter provided for in Article 3, the account holder has the regularization option by establishing on their account sufficient and available funds designated for settling the check amount, increased by unpaid fees. This fund is specifically earmarked for payment of said check.

CHAPTER II ON THE REPRESSSION OF OFFENSES Article 10. The failure to regularize under the conditions set forth in Article 9 constitutes bad faith or intent to harm as provided for in Article 11 below and entails criminal proceedings against the person who personally signed the check. Article 11. Subject to imprisonment of six months to five years and a fine of 1,000,000 Ariary to 10,000,000 Ariary (5,000,000 to 50,000,000 FMG) or one of these two penalties only:

1. the person who, with intent to harm or in bad faith, issued a check not covered by prior, sufficient, and available funds or on a closed account;
2. the person who withdrew after issuing a check all or part of the funds with the intent to impair the rights of others;
3. the person who, in bad faith, opposed payment of a check;
4. the person who counterfeited or forged a check;
5. the person who, knowing full well, used or attempted to use a counterfeited or forged check;
6. the person who, knowing full well, accepted to receive or endorsed a counterfeited or forged check. In case of recidivism, unsuspended imprisonment is always imposed. Article 12. Subject to the penalties provided for in Article 11 above:
7. the person who, disregarding the prohibition addressed to them under Article 3 above, issued one or more checks;
8. the person who, as an agent and knowing full well, issued one or more checks whose issuance was prohibited to their principal under Article 7 above. Confusion cannot be pronounced between the penalties imposed under Article 11 and those imposed under this article. Article 13. Subject to the penalties provided for in Article 11 above:
9. the person who counterfeited or forged a payment or withdrawal card;
10. the person who, knowing full well, used or attempted to use a counterfeited or forged payment or withdrawal card;
11. the person who, knowing full well, accepted to receive payment by means of a counterfeited or forged payment card. Article 14. Punished by a fine of 1,000,000 Ariary to 10,000,000 Ariary (5,000,000 to 50,000,000 FMG) is the person who, knowing full well, accepted a check issued without prior, sufficient, and available funds. Article 15. Punished by a fine of 1,000,000 Ariary to 10,000,000 Ariary (5,000,000 to 50,000,000 FMG):
12. the drawee who did not declare, under the conditions provided for in Article 22 below, payment incidents as well as the offenses provided by Article 12.
13. The bank that, informed of the banking prohibition incurred by the drawer, continued to accept checks issued by said drawer, other than certified checks or checks intended for fund withdrawal.
14. The drawee who refused payment of a check subject to opposition not based on one of the motives enumerated exhaustively by law and not notified in writing. Article 16. In the cases provided for by Articles 11 and 13, counterfeited or forged checks and payment or withdrawal cards shall be confiscated and destroyed. Confiscation of materials, machines, apparatus, or instruments that served or were intended to serve in the manufacture of said objects shall be imposed, unless they were used without the owner's knowledge. Article 17. In all specific cases under Article 11, the Court may prohibit the convicted person, for a duration of one to five years, from issuing checks other than certified checks or checks intended for fund withdrawal with the drawee. This judicial prohibition is enforceable provisionally, notwithstanding appeal or opposition. It is accompanied by an injunction for the convicted person to return to the bank that issued them the check forms in their possession or that of their agents. Notice of the prohibition is given by the Public Prosecutor to the Central Bank of Madagascar within fifteen days of the judgment being pronounced.

CHAPTER III ON THE REMEDIES OF BENEFICIARIES Article 18. Failing the establishment of funds within the period indicated in Article 9, the drawee bank issues, free of charge and upon the beneficiary's request, a certificate of non-payment. Notification by registered letter with acknowledgment of receipt, or failing that, service of the certificate of non-payment to the drawer by a bailiff constitutes a command to pay the check amount and recovery fees. By derogation from territorial jurisdiction rules of the Code of Civil Procedure, upon completion of the prescribed formalities above, the check beneficiary may submit a petition to the President of the Court of their domicile who, upon reviewing supporting documents, authorizes by order the clerk to attach the enforceable formula to the bottom of the petition. The order produces all effects of a contradictory judgment. Article 19. The drawee must pay, notwithstanding insufficiency or unavailability of funds, any check:

1. issued by means of a form from which it has not obtained return under the conditions provided in Articles 3 and 8, unless it proves having implemented the diligence provided by these articles;
2. issued by means of a form it delivered in violation of Article 5 provisions. Article 20. The drawee who made payment under the conditions provided in Article 19 is subrogated to the rights of the check holder up to the amount advanced. It may, failing automatic deduction from the drawer's account and without prejudice to any other legal recourse, serve a formal notice by bailiff on the account holder to pay the sum due. If no payment occurs within 20 days from the formal notice, proceedings are carried out as stated in Article 18, paragraph 3. Article 21. Except recourse to the application of provisions of Article 18, paragraph 3, the holder may join as a civil party before criminal courts to claim an amount equal to the check value, without prejudice, if applicable, to all damages. The person who accepted, knowing full well, a check issued without prior, sufficient, and available funds, is not entitled to claim damages other than payment of the check.

CHAPTER IV ON CENTRALIZATION, CONTROL, AND INFORMATION Article 22. Any refusal to pay a check not followed by regularization within the period provided in Article 9 must immediately be declared by the drawee bank to the Central Bank of Madagascar in the forms and time limits fixed via instruction of this institution. All infringements to provisions of Articles 3, 12, and 13 must also be declared by the drawee bank to the Central Bank of Madagascar in the forms and time limits fixed by instruction of this institution. Article 23. The bank notifies the Central Bank of oppositions for loss or theft of check forms in accordance with the procedure fixed via instruction of this institution. Article 24. In the forms and time limits defined by the Central Bank via instruction, it informs banks and establishments on which checks may be drawn of payment incidents, bank account closures, prohibitions imposed under Articles 3 and 17, and lifting of prohibitions. Only the Central Bank of Madagascar ensures centralization of information provided in the preceding paragraph by means of a Central Check File. Article 25. The Central Bank informs the Public Prosecutor, competent by reason of the drawer's domicile, of any partial or total refusal to pay a check, not followed by regularization within the period provided in Article 9. Article 26. Any bank or other establishment issuing checks must consult beforehand the Central Check File maintained by the Central Bank of Madagascar upon first issuance of check forms to a new account holder. Article 27. The Central Bank communicates to any judicial police officer acting under instruction of the Public Prosecutor via commission rogatoire and to any magistrate seized with a procedure, the record of payment incidents registered in the name of an account holder. Article 28. The Central Bank cancels the payment incident declaration upon request of the drawee bank in the following cases:

1. when the refusal to pay and the corresponding declaration to the Central Bank result from an error by the services of the drawee bank;
2. when it is established by the account holder that an event not attributable to one of the persons authorized to draw checks on the account caused the disappearance of funds. The banking prohibition measure implemented by the drawee bank then ceases to have effect. The Central Bank notifies the drawee bank that it has proceeded with the cancellation, and the latter must inform its client. The Central Bank also notifies other banks of the lifting of the prohibition on issuing checks. Notice is also given to the Public Prosecutor if Article 25 was applied. When the account holder requests the drawee bank to apply the procedure provided by this article, the latter, if it follows through, seizes the Central Bank at the latest within ten days following this request. It notifies its client within the same time limit. Its silence at the end of the period constitutes refusal. Article 29. Without prejudice to provisions of Article 28 above, disputes regarding the prohibition on issuing checks provided for in Article 3 are submitted to civil jurisdiction. The legal action before this jurisdiction does not have a suspensive effect. However, the summary judgment judge may order suspension of the prohibition in case of serious dispute. Disputes raised regarding bank diligence on application of Article 19 provisions fall under civil jurisdiction. Article 30. Subject to application of Article 77 of Law No. 95-030 on the activity and control of credit institutions, any bank may, by reasoned decision, refuse to issue account holders check forms other than checks intended for fund withdrawal by the drawer or certified checks.

CHAPTER V MISCELLANEOUS PROVISIONS Article 31. Opposition to payment of a check formulated by the drawer is only admitted in case of loss, theft, forgery or counterfeiting of the check or bankruptcy of the holder. The drawer must immediately notify their opposition in writing to the drawee bank. Article 32. A payment card constitutes any card issued by a credit institution defined by Law No. 95-030 of February 22, 1996 on the activity and control of credit institutions and enabling its holder to withdraw or transfer funds. A withdrawal card constitutes any card issued by a credit institution and enabling exclusively its holder to withdraw funds. Article 33. The order or commitment to pay given by means of a payment card is irrevocable. Opposition may only be made in case of loss or theft, or forgery or counterfeiting of the card, or bankruptcy of the beneficiary. Article 34. After a period of six months from the date of promulgation of this law, booklets containing check forms made available to account holders must bear on their cover or an insert the mention in French and Malagasy of excerpts from Articles 3 (paragraph 1), 8, 9, 10, 11, 12, and 31 of this law. Article 35. All provisions contrary to this law, notably Ordinance No. 72-041 of November 16, 1972, are repealed. Article 36. Implementation details of this law will be specified as needed by decrees and orders. Article 37. This law shall be published in the Official Journal of the Republic. It shall be executed as a law of the State.