Equity Bank Uganda Limited has suffered a major legal setback after Uganda’s High Court ruled that the bank unlawfully froze a customer’s account without valid justification.
The ruling, handed down by Hon. Justice Ssekaana Musa, found that the bank had breached both its contractual obligations and banking regulations in its dealings with Mr. Barigye Innocent Herbert Baitwababo, the customer at the heart of the case.
The dispute began in July 2024 when Barigye’s account, No. 1027200288085, was frozen after he deposited UGX 85,000,000.
The money, earned from the sale of 150 head of cattle, was documented with a signed agreement.
Despite presenting these records, Barigye’s funds were withheld, prompting him to seek legal recourse.
In his petition, Barigye asked the court to force the bank to unfreeze his account, return his money, and compensate him for the significant financial loss and emotional distress caused by the bank’s actions.
He argued that the freezing of his account had been arbitrary, severely disrupting his business operations.
In response, Equity Bank, through its Financial Crime Investigation Manager Charles Okello Ado, defended the decision, citing concerns over anti-money laundering regulations.
The bank claimed that Barigye’s large transaction was suspicious due to the lack of certain documents, such as a cattle movement permit or a declaration at Uganda Revenue Authority upon the cattle’s entry from Tanzania.
Additionally, the bank claimed that it had referred the matter to the Financial Intelligence Authority (FIA) for investigation.
However, court records revealed that the bank only reported the transaction three days after receiving court documents, and sixteen days after freezing the account.
This was in direct violation of the 48-hour reporting requirement under the Anti-Money Laundering Act.
In his judgment, Justice Ssekaana found that while banks do have the right to flag and investigate suspicious transactions, this must be done within reasonable and legal boundaries.
He ruled that Equity Bank had failed to exercise due diligence, continuing to withhold Barigye’s funds even after receiving sufficient proof that the transaction was legitimate.
Moreover, the judge pointed out that the bank’s failure to adhere to the mandatory reporting timeframes under the Anti-Money Laundering Act rendered its justification for freezing the account invalid.
Although Barigye’s account was eventually unfrozen, reportedly after intervention from a senior bank official, the court emphasised that this did not absolve the bank of its earlier wrongful conduct.
The court concluded that Equity Bank’s actions were unlawful and a violation of its duties to its customer. It ordered the bank to unfreeze the account and awarded costs to Barigye.
However, the matter of general damages was left unresolved, with Barigye being given the option to file a separate suit for compensation.
This ruling serves as a stern reminder to banks and financial institutions about the importance of balancing regulatory compliance with the rights of their customers.
It sends a clear message that arbitrary account freezes can have serious legal consequences, particularly when they violate established legal frameworks.
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