For more than five years, Bob Ainebyoona had held a Dembe Account at DFCU Bank and had had a good working relationship with the bank.
One day in 2020, he attempted to withdraw some money from his account at the bank’s Naalya branch at the Quality Shopping Mall. The officials there redirected him to the Ndeeba branch.
When he went to Ndeeba, he was told he could only withdraw the money from the head office in Nakasero.
At the head office, Ainebyoona was instead detained and arrested by police on allegations of theft. His account was immediately frozen.
He was subsequently charged with theft of Shs 13.1 million, which had been proceeds from the sale of bitcoins. Ironically, his bank account at the time had Shs 80.4 million.
After three years of trial, the court acquitted him, arguing that the Shs 13.1 million had been deposited on his account by a friend who dealt in Bitcoin, a popular cryptocurrency.
Yet despite the acquittal, DFCU Bank refused to unfreeze his account.
He then travelled to the UK for studies, and upon his return, the account, which still had his Shs 80 million, was still frozen.
He urged the bank to allow him access to the funds because the matter had been settled by the court.
DFCU Bank declined, and he took them to court, accusing the bank of causing “serious inconvenience, financial loss, and suffering.”
Through his lawyers, Pathways Advocates, Ainebyoona asked the court to order the bank to unfreeze the account, release his money, pay general damages, and meet costs.
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DFCU, which was represented by its legal department, defended its decision.
In an affidavit sworn by Christopher Ahimbisibwe, the bank’s acting head of financial crime management, the bank admitted freezing the account but argued it acted within its regulatory obligations.
It said internal investigations revealed funds had been obtained through a suspicious activity and maintained that Ainebyoona’s acquittal did not eliminate the bank’s regulatory obligations.
The bank argued that financial institutions must vigilantly prevent laundering of suspected fraudulent funds and asked the court, if it were inclined to release the money, to grant it indemnity against future claims.
At first, Ainebyoona’s lawyers argued the bank’s affidavit in reply had been filed out of time and should be struck out.
However, Justice Joyce Kavuma disagreed with this view. She said the lawyers should not dwell on technicalities but on the substance of the dispute.
At this point, it appeared as if DFCU was headed for a win, but the matter took a sharp turn.
According to Justice Kavuma, the key contestation should have been whether the continued freezing of Ainebyoona’s account by the bank for more than two years was lawful and reasonable.
She said the banker-customer relationship is contractual and imposes a duty on banks to exercise reasonable care and skill, and that any decision by the bank to block or freeze a customer’s account must be supported by sufficient notice and lawful justification.
Justice Kavuma acknowledged that banks can freeze accounts where unusual activity is suspected. She even noted that DFCU initially acted prudently and in good faith, drawing smiles from the bank’s lawyers.
Then she went for the jugular.
She said while the bank continued to allege fraud on the part of Ainebyoona, it did not table evidence to support the allegation.
“It is a cardinal rule of law that the party alleging fraud bears the heavy burden of strictly proving it. Fraud cannot be simply inferred from the facts,” she ruled.
After she examined the Anti-Money Laundering Act provisions relied upon by the bank, she noted that there are reasonable grounds to suspect suspicious transactions.
However, she said, there is no evidence on the court record that the bank reported the alleged suspicious activity to the authorities.
“It is inconceivable for the bank to keep holding the applicant’s money on grounds of a continuing obligation to report when in fact they have not reported,” Justice Kavuma ruled.
In the court, the bank had claimed there were “strong grounds” that the funds may constitute proceeds of unlawful activity, but Justice Kavuma dismissed that argument bluntly.
“The respondent’s claim of ‘strong grounds’ remains unsubstantiated and, without supporting evidence, cannot withstand judicial scrutiny. Further, the law requires reasonable grounds to suspect and not strong grounds,” she said.
In the end, the court said the bank’s decision to freeze Ainebyoona’s account was illegal and unlawful. It ordered DFCU to unfreeze the account within seven days of the ruling.
But Justice Kavuma declined to award general damages to Ainebyoona, noting that he had not provided evidence to prove financial loss.
Still, the ruling means that Ainebyoona is now free to access his Shs 80.4 million.
Phew!
