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- Two Finance Ministry bills would allow cheque payment via digital images through banks’ electronic channels, while existing presentation methods would remain.
- The ministry says the reforms aim to modernise banking, speed processing, and avoid branch visits, without changing parties’ rights or obligations.
- MPs raised worries about forged digital cheques, signatures, handwriting, and the need for safeguards in an era of artificial intelligence.
- The Central Bank said issuer notification and bounced-cheque registry rules would remain unchanged, and the committee will continue examining the bills next week.
Lawmakers in Cyprus have raised concerns over the risks linked to digital cheque presentation, particularly the ability to prove a cheque’s authenticity and establish the issuing of a bounced cheque.
The issue was discussed by the House Finance Committee during its examination of two Finance Ministry bills aimed at modernising the framework governing the presentation and payment of cheques.
The proposed changes would allow cheques to be presented for payment through digital images via banks’ electronic channels, without the need to physically submit the original. Existing methods of presenting cheques would remain available.
The second bill would amend the Criminal Code to provide that, when a bounced cheque is presented digitally, the bank would electronically record the actual reason for non-payment. That record could then be accepted as evidence in court and would constitute rebuttable evidence of its contents.
The Finance Ministry says the changes are intended to modernise the existing framework and make banking services easier for individuals and businesses, while allowing faster processing without requiring customers to visit a bank branch. The ministry says the rights and obligations of the parties involved would not change.
Questions over proving bounced cheques
AKEL MP Andreas Pasiourtidis raised concerns about how the offence of issuing a bounced cheque would be proven when the original document is not physically available.
He said questions could arise over signatures and handwriting, while the electronic systems used could also be challenged. He stressed the need to ensure that the changes do not make it more difficult to prove that a bounced cheque was issued.
Pasiourtidis also questioned the use of digital images in an era of artificial intelligence, raising the possibility of digitally forged cheques.
DIKO MP and Finance Committee Chair Christiana Erotokritou suggested considering a provision requiring the beneficiary to retain the original cheque for a specified period so that it remains available as evidence if needed.
Bank says digital image would replace manual check
Neofytos Polyviou, representing Bank of Cyprus, which requested the change, said the digital image would effectively replace the check currently carried out by a bank teller when a cheque is physically presented.
He said the digital image would subsequently be checked by a bank employee and processed as part of the clearing procedure. According to Polyviou, the proposed process would not make the bank’s checks more difficult, while the aim of the amendment is to give the digital copy legal recognition.
On retaining the original, Polyviou said a reasonable period could be established, giving two weeks as an example. He added that each bank would determine the conditions and amounts for which the service would be available.
Asked by Direct Democracy MP Giannis Laouris about protection for the cheque issuer in the event of an error and the use of post-dated cheques, Polyviou said the technical checks currently in place would continue and post-dated cheques would not be accepted.
Issuer notification would remain unchanged
The Central Bank clarified that the rules governing the registration of bounced cheques in the Central Information Registry (CIR) would not change.
AKEL MP Aristos Damianou asked whether the issuer would be notified when a cheque was presented digitally, giving them an opportunity to correct a possible error.
The Central Bank said the existing procedure would remain in place, with the issuer’s bank notifying them regardless of how the cheque was presented.
The Law Office said the proposed regulations would treat the digital image as equivalent to the physical cheque, with no difference in its legal treatment.
Damianou nevertheless called for safeguards to ensure that issuers are informed in time to correct any mistakes.
Concerns over digital forgery
ALMA leader Odysseas Michaelides also raised concerns about digital forgery, arguing that a cheque could be easier to forge digitally and pointing to the need for adequate safeguards against abuse of the system.
Polyviou said cheques contain a non-random code line and explained that the application would check both the code line and the amount. Regarding signatures, he said the system would not rely on the signature alone but would use mechanisms to verify authenticity.
Erotokritou said, however, that she had seen a forged cheque that included a code line, highlighting concerns over whether the proposed security measures would be sufficient.
The Association of Cyprus Banks said a similar process is already used by major banks abroad.
The Finance Committee will continue its article-by-article examination of the two bills next week.
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