The Central Bank of Nigeria has proposed a strict new crackdown on repeat offenders of “dud cheques.”

Under draft guidelines released for consultation, individuals could face an automatic five-year ban for each subsequent offence.

This new policy, established under the CBN Act and BOFIA 2020, would replace all previous regulations on the matter.

The draft guidelines impose specific operational mandates on financial institutions:

Upon confirming a cheque has been dishonoured due to insufficient funds, banks must report the event to the Credit Risk Management System and a minimum of two private credit bureaus within one hour.

Customers must be formally notified through a verifiable channel within two working days, with complete details of the dishonoured instrument.

A copy of every dishonoured cheque must be retained in the bank’s records for at least five years.

CBN stated that banks are obligated to inform all customers of the consequences of issuing dud cheques prior to issuing a cheque book.

A customer will be classified as a “serial dud cheque issuer” upon the third instance of issuing a dishonoured cheque anywhere in the banking system.

Once this label is applied, the Credit Risk Management System will immediately alert all financial institutions, leading to the imposition of severe restrictions on the customer’s activities.

Following the report, the customer’s bank must notify them within two business days and update their record with private credit bureaus.

As a sanction, serial offenders will face a five-year ban from the clearing system, be prohibited from opening new current accounts, and be barred from obtaining credit from any financial institution.

The most significant measure targets repeat offenders. If a customer, after serving their initial five-year ban, issues another dud cheque, they “shall be barred for another five-year period in each instance.”

This creates a renewable ban with no maximum term, effectively excluding persistent offenders from the formal financial system for life.

The guidelines also enforce strict financial penalties on non-compliant banks. Infractions include failing to report dud cheques, not notifying customers, opening accounts without mandatory checks, or failing to cancel unused cheque books. Penalties for these violations range from N1 million to N5 million per incident, depending on the type of institution.

Credit bureaus are not exempt; they face fines of up to N2 million for failing to maintain or provide complete records on dud cheque issuers.