Ruling against Bank of Africa for Freezing Client’s Account Adds to Growing List of Ugandan Banks’ Troubles with Customers

The latest ruling of the High Court which declared that Bank of Africa was in breach of contract for freezing Victoria Candles Limited’s account after Shs1.7bn landed on the same is just an addition to the list of troubled relationships between Ugandan commercial banks and their clients.

A few days ago, Justice Musa Ssekaana of the High Court faulted Bank of Africa for freezing Victoria Candles Limited’s account, blocking its access to the funds and wiring the money back to Absa Bank was an illegality.

Trouble began when Victoria Candles Limited sued Government of Uganda and Uganda Police Force (UPF) officials in the High Court over eviction from land in Muyenga, Kampala. The High Court ruled in favour of the company. Consequently, a certificate of order against Government of Uganda was issued to the company.

Even the Attorney General advised Uganda Police to respect the order and comply accordingly. As is normally the trouble with government payments, the money delayed. Victoria Candles moved to assign its rights and claims in its cases to Molly Katanga through a deed of assignment. Complying with the assignment, Molly Katanga gave instructions to M/s Riverwood Logistics Ltd directing the payment of the applicant’s money on Account No. 06011480007 held with the respondent’s Bank, Bank of Africa.

But to the shock of officials at Victoria Candles Limited, Bank of Africa withheld the money for reasons the company thought was unjustifiable within the law, and in a manner that they say negatively affected business.

Victoria Candles Limited insisted that the company had not hidden any information the bank needed on the money. The company sought punitive measures against the bank for breaching the contract between them and the company.

BANK OF AFRICA’S DEFENCE

Defending Bank of Africa in court, Nelly Erongot, the Head of Compliance at the financial institution submitted that on November  17, 2023, Riverwood Logistics Ltd deposited Shs1.75bn onto accounts of Victoria Candles Limited. That Bank of Africa sought an explanation from Victoria Candles Limited on where the money was coming from and what purpose it was supposed to serve.

That the company presented an assignment deed issued on October 26, 2023 between them and Molly Katanga.

The confusion, Bank of Africa’s compliance boss further noted, emanated from the fact that when the financial institution read through the documents, they indicated that it was Molly Katanga who would provide the money in her capacity as an assignee. Yet the money was wired from the accounts of Riverwood Logistics Ltd. The bank said that the parties failed to explained how the assignee, Molly Katanga, was linked to the company that sent the funds, Riverwood Logistics Ltd.

It was based on this that Bank of Africa flagged the transaction “suspicious for lack of sufficient information regarding the transaction in question,” adding that this action was part of its efforts in fighting money laundering.

Consequently, on December 08, 2023, Bank of Africa wired the money back to Riverwood Logistics Limited, the company which had sent it.

JUDGEMENT

While presiding judge Musa Ssekaana applauded Bank of Africa for seeking an explanation on the source and purpose of the money, he faulted the financial institution for declining the explanation offered to it and choosing to hold onto the money for three weeks, then wiring it back to sender.

“There is no evidence on record to support the respondent’s contention that indeed they ever questioned the source of money as being sent or wired from another company. The applicant would still have explained the transaction in which the assignee had instructed another company to honor her obligations with the applicant,” ruled Ssekaana.

“The bank held on the money since November 17, 2023 and it was returned on December 08, 2023 for three weeks. There is no justification for why the bank decided to return the money to Absa Bank after it had been duly served with the Notice of Motion due to hearing on December 11, 2023. It would appear the bank acted in panic after breaching the law to make the flimsy argument that the application is overtaken by events because they had illegally returned the money,” said Ssekaana.

BANK OF AFRICA’S OTHER WOES

A few months ago, Bank of Africa was battling allegations of illegal activities, including insider lending and theft of money on clients’ dormant accounts, after a whistleblower sought to expose the financial institution.

The whistleblower alleged that an employee working with the bank and named Ivan Matende had been “caught red handed, after, on five successful  times, he had drawn huge sums of money from dormant accounts in the bank.”

The whistleblower also made allegations on the management of Bank of Africa, including wrangles at a top level.

“Bank of Africa has a manpower deficiency. There is a very high staff exodus. This problem is so big that staff can hardly take annual leave because of the inadequate staff to do work for those who have gone on leave. All the staff on the list that has circulated, all seniors, have left and others are still going, largely because of the conduct of the MD. The MD wants to use the disciplinary committee to throw  out his deputy.

“There are personal misunderstandings between the MD and the pro-staff ED, that have led  to ineffectiveness in the bank and with the MD humiliating and battling the ED, many times  in public meetings.”

But Bank of Africa denied the allegations and said it would attempt legal action over ‘false information.’ “Bank of Africa maintains the highest standards of financial integrity and security. All customer deposits are safe, and our financial standing is sound as reflected in our recently published financial statements.”

CASES OF OTHER UGANDAN BANKS Vs CUSTOMERS

Other commercial banks have previously been on the spot over their clients’ money – from contestation over loan figures to illegal withdrawal of money.

A few years ago, a fallen freedom fighter’s wife got in trouble with Housing Finance Bank over a multi-billion loan. The matter had not yet been resolved by the time the freedom fighter’s widow died. (See Details Here and There).

In February 2023, fraudsters gained unauthorized access to a Stanbic Bank client’s account and stole shs6.6bn. The same month, an Equity Bank Customer complained that her millions of money had “mysteriously’ disappeared from her account (See Details Here and There).

You can see list of Ugandan banks making profits and losses – and how much they are earning HERE.