Strict amendments to the Check Law now applicable

Nouraei & M.Mostafavi Law Offices – 28 March 2021-Tehran- Checks are widely used as instruments of payment in the Islamic Republic of Iran. Foreigners transacting with Iranians or having a commercial presence within the territory of Iran, will probably find themselves resorting to this financial instrument. Hence, understanding the legal nature and usage of checks in the Iranian market, will assist foreigners in carrying out their business activities. We have already published a booklet on the Check Law. However, since then, for the purpose of combating money laundering, forgery, mitigating financial confusion and insecurity in the national economy, and boosting tax transparency,  certain amendments were made to the Check Law on 12/08/1397 (4 November 2018). 

Following the deadline given in the law to the Central Bank of the Islamic Republic of Iran (CBI) to prepare the technical requirements and infrastructure for implementation of the law, the changes are now in force and the issuers and receivers of the checks, as well as the banks and financial institutes are bound to observe these new rules and arrangements as of 1/1/1400 (21 March 2021).  Sending electronic checks and gradually removing paper checks, is foreseen in the amendment law as well.

The main new stipulations of the amended Check Law are as follows.

1- Issue of “to the bearer checks’’ (Dar Vajhe Hamel in Farsi Language)are not allowed any longer. The full name of the beneficiary should be written on the check and registered in the online system Sayyad. It is an integrated system of CBI in which all the checks must be registered, confirmed and transferred. Obligation of registration in the Sayyad system is written on the leaves of the new check books. The checks not registered on Sayyad, shall not be considered valid and cashable. Before taking delivery of the check, the beneficiary may procure information from Sayyad databank respecting the credit status of the issuer of the check.

2-The banks are obliged to supply checkbooks to their customers after firstly checking their identity and credit records through the Sayyad integrated system. The validity of such checkbooks is three years as from the date of issue.

3- Any person who has used a deceitful or inappropriate manner to obtain check books shall be deprived of receiving any new check book and issuing any check and will be liable for a cash penalty. In case the committed act is subject to other felonies, the respective punishment could be applied as well.

4- The banks are bound to close the current accounts of the persons who have issued bad checks more than one time and the prosecution of such perpetrators has resulted in a prosecutor’s indictment. Furthermore, the banks will not open any new current account in their name for three years.

5-The penalties for issuers of bad checks are: Banning of opening any new bank accounts and bank cards, blocking of all the sums belonging to the issuer in all the  banks or credit institutes across the country under any title in proportion to the shortage of the amount of the check as declared by the CBI, avoidance of provision of bank facilities or guarantees in foreign exchange or in the local currency of Rial amounts, avoidance of opening of letters of credit in foreign currency or in Rial amounts. All the persons who have signed the bad check, even the proxy signatories, shall be held responsible and subjected to the aforesaid penalties.

6- The time and manner of taking legal action against the issuers of bad checks has been eased and facilitated. In the past, in case of bad checks, the beneficiary was bound to file a lawsuit or complaint directly with the competent courts of the Judiciary for administration of his/her rights. If the court ruled in favor of the beneficiary, the enforcement writ would be issued. Now, under the current procedure of the amended law, the beneficiary shall directly ask the competent court for issuance of the enforcement writ for getting the amount of the check. 

7- Foreign nationals are considered as Iranian nationals with regard to issuance and receipt of checks. The only difference is that their Code Faragir (identity number allocated to the foreigners in Iran) should be used in this respect.

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