Kampala, Uganda | THE INDEPENDENT | The Civil Division of the High Court has ordered DFCU Bank to unfreeze a customer account it had frozen since 2023 on allegations of money laundering. In her ruling, Judge Joyce Kavuma found that DFCU bank had breached public trust when it froze the account of Bob Aneibyoona even when he had been acquitted of allegations of fraud, the basis of which it had frozen it.
“Being mindful that banks can freeze accounts for lawful reasons if unusual activity on the accounts is suspected. However, these actions must not be arbitrary and whimsical. The account holder must be allowed to be heard. This Court cannot shy away from exercising its powers to safeguard and uphold the interests of an individual customer, or the public at large, where those interests are threatened by unlawful actions of a bank, such as the freezing of an account without lawful justification.
It is a fundamental concern of any court of justice to ensure that the banking system remains stable, efficient, and properly supervised, whether by the Central Bank or the Financial Intelligence Authority (FIA), so that suspicious or potentially illicit transactions are appropriately addressed, without causing undue prejudice to innocent account holders,” the judge ruled.
In his application, Ainebyoona told the court that he held a Dembe Account with DFCU Bank and had a good customer relationship until attempting a withdrawal at the Naalya branch, where he was redirected to the Ndeeba branch and then the head office in Kampala. At the head office, he said he was unlawfully detained and arrested by police on theft allegations, leading to the account being frozen without notice.
He was subsequently charged with theft of UGX 13.1million from MKASH. However, he was later acquitted in December 2023. Notwithstanding the acquittal, the bank refused to unfreeze the account. In their defence, the bank said they continued restricting the account due to internal investigations that revealed funds were obtained fraudulently, violating financial laws and the bank’s Anti-Money Laundering and compliance policies.
The bank also added that the decision of the Chief Magistrate does not resolve the puzzle of who the money belonged to. But in her ruling, Judge Kavuma said the bank has a relationship with its customers that obliges it to receive funds on their behalf, and thus it must exercise reasonable care and skill in the performance of all obligations arising from their banking relationship.
“The banker-customer relationship is fundamentally contractual, shaped by well-established commercial usages. It is characterized by the bank’s core functions of receiving money on current accounts, and honoring cheques andother instruments presented by its customers. Therefore, any decision by the bank to block or freeze the applicant’s account must therefore be supported by sufficient notice, cogent and lawful justification, not taken whimsically oron extraneous grounds,” the judge ruled.
She added that it was inconceivable that DFCU bank would keep holding Ainebyoona’s money on the grounds of a continuing obligation to report any suspicious activities to the Financial Intelligence Authority when, in fact, they have never reported the matter.
“It is important to note that the respondent retained the applicant’s funds for a period exceeding that prescribed by law for dealing with suspicious transactions, thereby acting contrary to its statutory obligations. Additionally, the respondent’s suspicions arise from the same transactions already examined in criminal proceedings, yet, in their affidavit in reply, the respondent adduces no fresh evidence of other alleged fraudulent activity beyond the acquitted sum of UGX 13,100,000/=. The Court’s view is that to permit the continued restriction on this basis would undermine the applicant’s right to property,” the court ruled.
It therefore ordered that DFCU bank unfreeze Ainebyoona’s account within seven days after the delivery of the ruling. It also awarded the costs of the suit to Ainebyoona.
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