Concerns about the risks that digital check processing may pose, particularly with regard to verifying authenticity and the issuance of bounced checks, were voiced by members of Parliament during the debate in the Parliamentary Finance Committee on two bills from the Ministry of Finance aimed at modernizing the framework for the presentation and payment of checks.
The two bills provide, among other things, for the option to present a check for payment via digital imaging through banks’ electronic channels, without requiring the physical presentation of the check. Existing methods of presenting checks remain unaffected.
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The second bill concerns an amendment to the Penal Code so that, in the event of the digital presentation of a bad check, the bank must electronically record the actual reason for non-payment, and that record may be accepted as evidence in court, constituting rebuttable presumption regarding its content.
According to the Ministry of Finance, the changes aim to modernize the existing framework and facilitate matters for citizens and businesses, enabling faster service without the need to physically visit a bank branch, without altering the rights and obligations of the parties involved.
Questions Regarding the Proof of an Uncovered Check
AKEL MP Andreas Pasiourtides specifically highlighted the risks that may arise in proving the offense, noting that in the case of digital presentation, the original document will not be available.
As he noted, issues regarding the signature and handwriting could arise, and the electronic systems to be used could be challenged. As he said, it must be ensured that proving the issuance of a bad check does not become more difficult.
Mr. Pasiourtides also expressed concern about the acceptance of digital imaging in the age of artificial intelligence, raising the issue of potential digital forgery.
DIKO MP and Committee Chair Christiana Erotokritou proposed that a provision be considered requiring the payee to retain the original check for a specific period of time so that it is available for evidentiary purposes.
On behalf of the Bank of Cyprus, which requested the amendment, Neophytos Polyviou stated that the digital image essentially replaces the verification currently performed by the teller upon presentation of the check.
As he explained, the digital image will then be reviewed by a human and forwarded for verification during the clearing process. He argued that the process does not hinder the bank’s audits and that the purpose of the amendment is to ensure the digital copy is legally recognized.
Regarding the retention of the original document, Mr. Polyviou noted that a reasonable time period could be established, citing two weeks as an example, while each bank will determine the conditions and amounts for which this specific service will be provided.
In response to a question from Yiannis Laouris, a member of parliament from the Direct Democracy party, regarding the protection of the issuer in the event of an error, as well as the possibility of post-dated checks, Mr. Polyviou stated that the technical verification currently in place will continue to be carried out, and post-dated checks will not be accepted.
The procedure for the issuer remains unchanged
The Central Bank clarified that the regulations regarding the registration of dishonored checks in the Central Information Registry (CIR) remain unchanged.
In response to a question from AKEL MP Aristos Damianou regarding whether the issuer will be notified in the event of a digital presentation of the check, so that they have the opportunity to correct any errors, the Central Bank stated that the procedure remains the same. The issuer’s bank will notify the issuer, regardless of how the check was presented.
The Legal Service, for its part, noted that under the proposed regulations, a digital image is treated the same as a physical check, and there is no difference in how it is legally treated.
Mr. Damianou, however, requested that measures be taken to ensure the issuer is notified in a timely manner so that, in the event of an error, it can be corrected.
Concerns About Forgery
ALMA President Odysseas Michaelides expressed concern about the possibility of digital forgery, noting that it is easier to forge a check digitally. He also pointed out gaps in the safeguards that are supposed to prevent abuse of the process.
Mr. Polyviou mentioned that the check has a barcode, which is not random, and explained that the app will verify the barcode and the amount. Regarding the signature, he noted that the app will not rely solely on it but will include mechanisms to verify authenticity.
Ms. Erotokritou mentioned, however, that she had seen a forged check bearing a barcode, highlighting concerns about the adequacy of the security measures.
The Association of Banks noted that a similar procedure is already in place abroad at major banks.
The article-by-article debate on the two bills will continue in the Finance Committee next week.
Source: KYPE
