It is important to distinguish between the offence committed by a bank employee, the civil liability that may be incurred by the bank toward the customer, and the offence committed by the drawer by issuing a cheque without funds available for payment. These are different forms of liability, each governed by its own provisions, elements, and legal effects.
First: The Criminal Provision Specifically Applicable to Bank Employees
Article 533 of the Trade Law provides for the punishment of a bank employee who intentionally commits any of the acts specified by law in relation to cheques.
These acts include:
- Falsely stating that there are no funds available for payment of the cheque or that the available funds are less than their actual amount.
- Refusing payment in bad faith of a cheque for which full or partial funds are available, where no valid objection has been submitted.
- Refusing to place or deliver the statement required by law upon non-payment.
- Delivering to a customer a cheque book that does not contain the mandatory particulars required by law to appear on cheque forms.
These acts constitute the direct banking offences expressly prescribed by the Trade Law in relation to bank employees within the cheque process.
Second: The Penalty Prescribed for a Bank Employee
Article 533 penalizes a bank employee who intentionally commits any of these acts with a fine of not less than EGP 3,000 and not exceeding EGP 10,000.
The Law also makes the bank jointly liable with the convicted employee for payment of the financial penalties imposed.
Accordingly, liability does not arise merely because a banking error occurred; the provision requires that the employee committed the act intentionally.
Third: Falsely Stating That No Funds Are Available
If a cheque is presented to the bank and funds are available in the account, but a bank employee intentionally issues an incorrect statement indicating that no balance exists or that the balance is lower than its actual amount, such conduct falls within the scope of Article 533.
This provision is significant because the bank’s statement regarding the absence of funds available for payment may produce serious civil, commercial, and criminal consequences for both the drawer and the holder.
Accordingly, the legislator criminalized any intentionally false statement issued by a bank employee.
Fourth: Refusing Payment of a Cheque Despite Available Funds
The Trade Law establishes a clear principle that a bank may not refuse payment of a cheque payable in Egypt where funds are available, even if the presentation period has expired, pursuant to Article 506.
Article 533 also penalizes an employee who, in bad faith, refuses payment of a cheque for which full or partial funds are available, unless there is a valid objection preventing payment.
Accordingly, a distinction must be drawn between:
- Lawful refusal: Such as where there are no funds available for payment, there is a valid objection, or a legal defect prevents payment.
- Refusal in bad faith: Despite the existence of funds available for payment and the absence of any legal impediment.
The second form falls within the scope of criminalization.
Fifth: Is the Bank Required to Pay Part of the Cheque’s Value?
Article 533 refers to a cheque for which full or partial funds are available, which is connected to the rules governing partial payment.
Where the balance is lower than the value of the cheque, reference must be made to the provisions governing partial payment and documentation of the remaining amount, rather than automatically refusing the cheque where the law permits the holder to receive the available portion.
Sixth: Objection to Payment of the Cheque
The drawer or customer may not request the bank to stop payment of a cheque merely because a commercial dispute has arisen with the beneficiary.
Article 507 of the Trade Law provides that objection to payment of a cheque is only admissible in specified cases:
- Loss of the cheque.
- Bankruptcy of the holder.
- Placement of the holder under guardianship.
If an objection is submitted for any other reason, the Law permits the holder to apply to the Court of Urgent Matters to have the objection cancelled, even if substantive proceedings are pending.
Accordingly, the bank must distinguish between a valid legal objection and mere instructions issued by the drawer that are not based on one of the cases permitted by law.
Seventh: Is the Bank Liable If It Pays the Cheque Despite an Objection?
The matter depends first on whether the objection is legally valid and admissible.
If the objection is based on a ground permitted by law, the bank is required to observe its effect in accordance with the governing provisions. However, if the objection is not legally permissible, the customer’s mere request does not become a valid impediment to payment.
Accordingly, it is not correct to state generally that the bank is liable whenever it pays a cheque despite a stop-payment request; the legality of the objection itself must first be determined.
Eighth: Paying a Cheque Bearing a Forged Signature
This situation differs from the offences prescribed by Article 533. If the bank pays a cheque bearing a forged signature attributed to the customer, the issue primarily concerns the relationship between the bank and its customer and the validity of debiting the account.
The Court of Cassation has consistently held that the drawer’s signature is an essential requirement for the existence of the cheque and that an instrument bearing a forged signature is not binding upon the customer to whom the signature is attributed.
Accordingly, payment by the bank of a cheque originally bearing a forged signature does not discharge the bank toward the customer, because the bank has paid a person who had no entitlement to receive funds from the drawer’s account.
Ninth: Must the Bank Be at Fault in Cases of a Forged Signature?
One of the important principles established by the Court of Cassation is that liability arising from payment of a forged cheque is not based solely on proving negligence by the bank in examining the signature.
As a general rule, the bank may not debit the value of an instrument that was never issued by its customer. Accordingly, the Court has held that payment by the bank of a cheque bearing a forged signature does not discharge it toward the customer even where payment occurred without fault on the part of the bank.
This differs from cases where the customer themselves committed an independent fault that contributed to the damage, such as negligence in safeguarding the cheque book, in which case the effect of that fault and its connection to the damage must be examined under civil and contractual rules.
Tenth: Payment of a Forged Cheque Should Not Automatically Be Characterized as a Crime
Payment by a bank of a forged cheque may result in civil liability, but it does not automatically make the employee criminally liable.
Criminal liability is personal and arises only where it is established that the employee committed an act criminalized by law and possessed the required mental element.
Mere failure to detect a sophisticated forgery or the occurrence of a professional error does not itself become a criminal offence unless a specific criminal provision applies.
Eleventh: Collusion with a Forger or Beneficiary
The position differs where it is established that a bank employee knew that the cheque was forged, participated in fabricating it, or intentionally facilitated its payment to a person not entitled to its value.
In such case, the matter is not limited to banking liability and may fall within forgery offences, use of forged documents, misappropriation, or other offences depending on the employee’s role and the legal nature of the funds involved.
The agreement, assistance, or knowledge must be established; the mere fact that the employee executed the payment transaction is not sufficient.
Twelfth: Refusal to Provide a Statement of Non-Payment
The bank’s statement of non-payment plays an important role in proving presentation of the cheque and the reason for non-payment. Accordingly, the legislator criminalized the intentional refusal by a bank employee to place or deliver the statement required by the Trade Law.
The seriousness of such conduct arises from the fact that the refusal may affect the holder’s ability to prove the incident and exercise the rights granted by law.
Thirteenth: A Cheque Book That Does Not Comply with the Law
Article 530 requires a bank delivering a cheque book to a customer to include on each form the particulars specified by law, including:
- The cheque number.
- The name of the bank or one of its branches.
- The name of the customer to whom the cheque book was delivered.
- The customer’s account number.
Article 533 criminalizes the intentional delivery by a bank employee of a cheque book that does not contain these particulars.
This is an important form of criminal liability specifically applicable to banks and their employees, and it differs from the liability incurred by the drawer when misusing a valid cheque book.
Fourteenth: Issuing a Cheque Without Funds Available for Payment Is Primarily the Drawer’s Liability
Article 534 of the Trade Law primarily concerns a person who issues a cheque without funds available for payment, withdraws the balance after issuance, issues an unlawful stop-payment order, or draws the cheque in bad faith in a manner that prevents payment.
This offence differs from the offences attributed to bank employees under Article 533.
If a customer issues a cheque without funds available for payment, the bank does not become the perpetrator of the offence merely because the account lacks sufficient funds; criminal liability falls primarily upon the drawer where the elements of Article 534 are satisfied.
Fifteenth: A Bank Does Not «Pay a Cheque Without Funds» in the Ordinary Legal Sense
It is inaccurate to state that the bank incurs liability because it «paid a cheque without funds»; payment itself ordinarily presupposes the existence of funds, a facility, or another basis permitting the debit.
If the bank pays the value of the cheque despite insufficient funds in the customer’s account, the customer may become indebted to the bank or a banking facility may arise, depending on the banking relationship between them.
The specific offence of issuing a cheque without funds available for payment concerns the drawer, not the bank that decides – within the framework of its relationship with the customer – to honor the cheque.
Sixteenth: Civil Liability of the Bank for Payment Errors
The bank may incur civil liability if it breaches a legal or contractual obligation and thereby causes damage to the customer or the person entitled to the funds.
Examples requiring examination depending on the circumstances include:
- Debiting the customer’s account on the basis of a forged signature.
- Paying the cheque to a person who has no right to receive its value.
- Disregarding a valid legal objection to payment.
- Unlawfully refusing payment despite satisfaction of the applicable conditions.
- Errors in executing account instructions or verifying the beneficiary.
Civil liability does not necessarily mean that a criminal offence has been committed; each regime has its own independent elements.
Seventeenth: Account Statements and the Effect of Failure to Object
Article 530 also regulates the effect of periodic account statements sent by the bank to the customer.
Express or implied acceptance of an account statement is deemed to discharge the bank in respect of the entries contained therein within the limits prescribed by the provision, and failure by the customer to object within thirty days of receiving the statement constitutes a form of implied acceptance.
This rule has significant practical importance in disputes involving cheques previously debited from the account. Accordingly, customers should review account statements and promptly object to disputed entries once they appear.
Eighteenth: What Should Be Examined in a Dispute with a Bank Concerning a Cheque?
- The original cheque or its bank copy: To verify the signature, particulars, and endorsements.
- The account statement: To determine the balance, debit, and timing of the transaction.
- The reason for non-payment: And the statement issued by the bank concerning it.
- Existence of an objection: Its ground, date, and compliance with Article 507.
- The cheque book: And how the cheque left the customer’s possession where forgery or theft is alleged.
- The specimen signature: Approved by the bank at the time the cheque was presented.
- Communications between the customer and the bank: Particularly notifications concerning loss or theft of the cheque book.
- Periodic account statements: Their date of receipt and any objections made against them.
- The employee’s role: Where there is suspicion of intentional conduct or collusion.
Nineteenth: The Difference Between a Criminal Offence and a Banking Error
The distinction may be summarized as follows: a criminal offence requires a criminal provision and intentional conduct or criminal intent as required by that provision, whereas civil liability may arise from the bank’s breach of a contractual or legal obligation even where no criminal offence is established.
An employee’s bad-faith refusal to pay a cheque for which funds are available falls directly within Article 533, whereas an unintentional error in executing a banking transaction may result in compensation without constituting a criminal offence.
Likewise, payment on the basis of a forged signature primarily produces significant civil consequences in the relationship between the bank and its customer, and is not sufficient by itself to attribute a criminal offence to the employee who made the payment.
Conclusion
Trade Law No. 17 of 1999 specifies certain offences that may be committed by bank employees in dealing with cheques, principally falsely stating that there are no funds available for payment, refusing payment in bad faith despite the availability of funds, intentionally refusing to provide a statement of non-payment, and delivering a cheque book that fails to comply with statutory requirements.
By contrast, matters such as paying a cheque bearing a forged signature or incorrectly executing a banking transaction remain primarily subject to the rules of civil liability unless an independent criminal act is established.
Accordingly, proper legal assessment always begins by identifying the act attributed to the bank or employee, whether it was intentional, the legal provision criminalizing it, and whether the dispute concerns a criminal offence or merely civil or banking liability.