The Financial Intelligence Authority (FIA) acted “illegally, irrationally and with procedural impropriety” when it froze a company’s bank account without promptly seeking court approval, the High Court has ruled.
The dispute started on January 4, 2026, when BMS General Trading Limited discovered that it could no longer access its money in Stanbic Bank. At that time, the company’s account had $221,000 (about Shs850 million).
When the company contacted Stanbic Bank, it was instead referred the company to FIA.
BMS wrote to the authority seeking answers, but received no response.
Through their lawyers from MMAKS Advocates, BMS said the freezing of the account was done without notice, without a court order, and without any legal justification. It said the move crippled its business and caused losses exceeding $230,000.
The company also said it had been unfairly linked to terrorism financing, which damaged its reputation and business relationships.
FIA and the Attorney General opposed the application, arguing that the account had been flagged after “suspicious transactions” and that the action was necessary to protect national security.
They told the court that a warning had been received from the Director of Public Prosecutions (DPP) in October 2025, raising suspicion of terrorism financing.
They further argued that giving prior notice to the company would have jeopardised investigations and that the authority acted within its legal mandate.
At the centre of the case was whether FIA acted within the law when it froze the account and whether it followed the required procedures.
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Justice Bonny Isaac Teko made it clear that while FIA has powers to intervene in financial transactions, those powers are limited.
He emphasised that any freezing of accounts must meet three key conditions.
First, the suspicion that someone is engaged in money laundering or any unlawful financial action must be backed by “reasonable evidence.”
Second, there must be strict procedural compliance in that FIA must follow all legal steps, including promptly informing the Director of Public Prosecutions and complying with timelines set out in the law.
Third, there must be prompt judicial oversight. Any freezing order is temporary and must quickly be taken to court for approval. The courts, not FIA, have the final authority to validate and continue the freeze.
The court found that although FIA may have had some initial basis to act, it failed to follow through as required by law.
“While it could be argued that the freeze could have had a scintilla of reasonableness in the beginning, FIA did not act with dispatch to formalize it and bring it fully under judicial oversight,” Justice Teko said.
He added that the delay in obtaining a court order made the continued freezing unlawful.
“The freeze was followed by inordinate delay, which tainted it with a tinge of illegality,” he ruled.
Justice Teko also criticised FIA for relying on suspicion without providing clear evidence linking the company to any crime.
He noted that BMS had presented invoices showing it was trading in maize and had legitimately received the $221,000 (Shs 850 million), but FIA did not properly challenge this evidence.
The court further questioned FIA’s claim that the company was a “sham” without an address, noting that it had been registered and had a bank account, which requires verification documents.
On the procedure, Justice Teko found that FIA failed to follow mandatory legal steps, including notifying the DPP within 48 hours and ensuring the matter was brought before the court quickly.
“There is no evidence on record that these critical steps were complied with. The omission is not a mere technicality; it goes to the root of the legality of the decision,” Justice Teko said.
He added that the prolonged freezing of the account without giving the company a chance to be heard violated its right to fair treatment.
In a strong conclusion, the court held that FIA acted illegally, irrationally, and unfairly.
“FIA acted illegally by failing to comply with mandatory statutory provisions. The decision to freeze was procedurally improper, and the freezing without a court order for an inordinate period was irrational and disproportionate,” Justice Teko ruled.
However, despite these findings, the company did not get its money back immediately.
Justice Teko explained that another High Court judge had already issued a valid order freezing the same funds in a separate case at the Anti-Corruption Court.
He said he could not overturn that order because courts of equal level cannot cancel each other’s decisions.
As a result, the freeze remains in place, but the company has been advised to challenge it through the proper legal channels, such as an appeal or review.
On compensation, the court declined to award damages to BMS. Justice Teko explained that judicial review cases focus on whether a decision was lawful, not on awarding money.
“Judicial review is concerned with the legality of administrative action, and not with the vindication of private rights through compensatory relief,” he said.
Justice Teko’s ruling could have implications for how FIA and other government agencies handle account freezes, which have become a popular tool for ‘fighting’ organisations and individuals critical of the government.
