KAMPALA, Uganda The Commercial Division of the High Court has ordered Stanbic Bank to refund at least Ugx 340 million to a customer who erroneously paid over Ugx 2 billion through the bank’s online system.

In her ruling, Justice Caroline Kakooza Sabiiti found that Stanbic Bank had failed to implement robust fraud detection and prevention measures to safeguard its system and customers.

This came after the plaintiff, Abacus Parenteral Drugs , instituted this suit against the defendant, Stanbic Bank, for negligence and breaching its statutory obligations, leading to the loss of UGX 2,203,503,381 (two billion two hundred three million five hundred three thousand three hundred eighty-one Uganda shillings). after the bank allowed the funds to be paid into erroneous accounts.

The plaintiff sought a declaration that the defendant acted negligently and in breach of its statutory and contractual obligations in wrongfully debiting the plaintiff’s account number 9030005623935, causing financial loss; an order compelling the defendant to refund the sum of UGX 2,203,503,381 in general damages, exemplary damages, interest, and costs of the plaintiff’s on the 12th of May 2010 applied for and obtained from the defendant’s online banking services in respect of the account.

The plaintiff authorised Mr Arthur Moses Buyemba and Mr Rao Venkato Chakka Subba to
utilised the online service on its behalf. However, upon an audit of the accountant’s transactions, the plaintiff discovered that between the months of November 2015 and March 2018, the defendant honoured a number of payments over the account, and resultantly, a total sum of UGX 2,220,350,381 was debited without the plaintiff’s knowledge and authorisation.

The plaintiff further discovered that all the recipient accounts were held with the defendant, which had the true beneficiary bank names before effecting the wrong withdrawals. The plaintiff averred that it had suffered great financial loss.

However, upon an audit of the account transactions, the plaintiff discovered that between the months of November 2015 and March 2018, the defendant honoured a number of payments over the account, and resultantly a total of UGX 2,203,503,381 was debited without the plaintiff’s knowledge. and authorisation

The plaintiff further discovered that all the recipient accounts were held with the defendant, which had the full particulars of the beneficiary accounts and should have ascertained the true beneficiary bank names before effecting the wrong withdrawals. The plaintiff averred that it had suffered great financial loss.

The defendant denied liability and contended that the plaintiff was given the take on documents that clearly placed the risk of operation of the online banking systems upon the plaintiff and that the online services are an STP (straight-through process) where the authority to initiate, verify, and confirm the transaction on the customer’s account sits with the owner of the account. Further, the defendant provided an online technology platform that enabled the customer to be in full charge of all.

The defendant also stated that the plaintiff was contributorily negligent while using officers who could have abused their mandate, failing to detect the payments in question for a long time despite having online viewing rights and access to their account, and making payments, and further prayed that the suit be dismissed with costs.

However, the judge also found out that Abacus Parenteral Drugs Limited was also negligent in its actions, as it allowed the sharing of passwords among its officials who had been allowed to transact on its behalf. ” The merging of the initiator and authoriser roles in a financial payment system was a significant and foreseeable risk, which the plaintiff was grossly negligent in and contributed to the financial loss.

Justice Cornelia Kakooza ordered Stanbic Bank to pay UGX 339.5 million with an 18 per cent interest per annum until full payment to Abacus Parenteral Drugs Limited.