Evidence Of Allegation Of Financial Fraud Or Crime, Not Sufficient To Freeze Customers Bank Account

By Stanley Maduabuchi Ofoegbu Esq.

The fact that banks and their customers are usually in a
fiduciary relationship cannot be denied. Banks are usually
obligated to their customers in so many ways.

It is a trite law that customers monies in the hands of the
banker are not in the custody or under the control of the customer
and such monies remain the property in the custody and control of
the banker and payable when a demand is made see GTB V DASHUWAR
(2020) LPELR-52435 (CA), WEMA BANK PLC VOSILARU (2008)10NWLR
(PT.1094)150;, JUKOK INT’LTD V DIAMOND BANK (2016)8 NWLR
(PT.1507)55, 80 AT 111 PARAS A-B. It is also the law that the bank
owe a duty of care to its customers and that when such duty is
breached, the bank becomes liable in damages to its customer see
KEYSTONE BANK LTD V MARKETING AND MEDIA LIMITED
(2016)LPELR-41290(CA), ENTERPRISE BANK V DENWIGWE AND ORS
(2018)LPELR-46261(CA) to mention but a few. In addition to the
above, it is also the mandatory requirements of the law that while
the banks exercise duties of care to their customers, such duties
must be exercised within the bounds of law. In other words, the
bank must take into cognizance certain provisions of the law
especially, when they are expressly stated or spelt out in relevant
laws of the land.

The said duties of care no doubt include the freezing of
customer’s bank account with the aim of preserving the money in the
face of fraud or other criminalities that may affect the account.
This is because, all monies kept at the bank are totally under the
custody and control of the bank and the bank is bound to account
for every kobo that go missing from a customer’s account and hence,
the need to freeze same becomes necessary.

QUESTION

Since freezing of customers account is one way of preserving
customer’s money which automatically passes out as a cardinal duty
of care owed to the customer, at what point can the bank
unilaterally freeze or cause a caution to be placed on customers
bank account?

What about directives from the Economic and financial crime
commission requesting for the freezing of a customer’s account
following the suspicion and allegation of fraud or the filing of
criminal financial related charges at the court? Will such
directive on the face of it be valid without more?

Are there liabilities that may flow from the unilateral freezing
of customers account by the bank?

What remedy or remedies are available to a customer whose
account is frozen by the bank?

The law is that a bank has no right or power by itself to freeze
the account of a customer, be it its staff or otherwise, and or to
prevent such a customer with money standing to his credit in his
account from accessing the money. See DIAMOND BANK V UNAKA &ORS
(2019) LPELR-50350(CA). The only exception is where the bank
receives notice of death of a customer, it is under a duty in such
a circumstance to stop withdrawals from the account, and only legal
representatives of the customer duly appointed by law can access
the said account thereafter. Where a bank takes it upon itself to
freeze the account of a customer or restrain the customer from
accessing the said account when he or she has credit therein simply
because of an allegation of fraud made against such a customer, it
will amount to self-help which is illegal and wrongful see DIAMOND
BANK V UNAKA supra, FIDELITY BANK PLC V BAYUJA VENTURES LTD (2010)
LPELR 8873(CA)

Similarly, it is the law that for a bank to freeze, place a
caution or any form of restrain on a customer’s account, it has to
be satisfied that there is a court order to that effect otherwise,
it will be liable for a breach of contract unless there is a
statute that gives it such mandate. See G.T.B PLC V ADEDAMOLA
(2019)5 NWLR (PT.1664)30 AT 43, UBA V MARCUS (2015)LPELR-40397
(CA), OLALEKAN OYERINDE V ACCESS BANK PLC (2014) LPELR 23461(CA) to
mention but a few.

From the above, it is obvious that a bank cannot unilaterally
freeze a customer’s account without the consent of the said
customer and without an order from the court to that effect. The
mere fact that there is an allegation of fraud or that fraudulent
activity is associated with the customer’s account will not justify
the bank to unilaterally freeze the customer’s account. It is also
immaterial that the need for freezing same was or appeared urgent,
compelling and was done for the overall interest of the customer.
It is also of no moment that the conduct of the bank was morally
justified and gracious for the benefits of the customer. Once it is
established that the said freezing was carried out in the absence
of a valid court order, the said act no matter how morally good
becomes wrongful and illegal unless it was carried out with the
permission of the customer. In UNITY BANK PLC V OLATUNJI (2O15) 5
NWLR (PT.1452) 203, AROGUNDADE V SKYE BANK(2020) LPELR-52304 (CA)
The courts while condemning the unilateral freezing of customers
account held inter alia (among others) that though  the said
act of the bank may be morally good, a moral action may not
necessarily be a legal action. The action of the bank may receive a
moral approval but not a legal approval. An action receives a legal
approval because there is a Law that backs up such action. When
morally an action is fine but there is no law backing such action,
the action will be illegal because morality and law are not
synonymous.

It is not in doubt that the current administration claim to be
fighting corruption. Whether the fight against corruption is indeed
yielding any positive results and whether the fight is general or
selective is not the issue here. However, the facts remain that
findings reveal that the economic and financial crime commission
the body saddled with the responsibility of fighting financial
crime has formed a habit of writing and directing banks to get the
account of suspects frozen for alleged financial fraud. Further
findings also show that most banks honour such unscrupulous and
shameful directives without asking relevant questions. As a result
of these, it becomes necessary to examine the legality or otherwise
of such orders.

Section 34 of the EFCC Act 2004 empowers the commission to apply
to the court via exparte application to obtain an order before
proceeding to freeze an account belonging to a customer of a bank.
In otherworld’s, the commission cannot unilaterally write to any
bank requesting the said bank to place a caution or freeze an
account belonging to a customer simply because the customer is or
may be prosecuted for fraudulent financial crimes without a valid
order of the court first sought and obtained. In not one or two or
even three cases, the court has severally deprecated and condemned
such demonic and illegal acts of the commission in consonance with
various banks. See AROGUNDADE V SKYE BAMK supra, GTB V JOSHUA
(2021) LPELR- 53173 (CA) GTB V ADEDAMOLA supra to mention but a
few. Accordingly, the commission cannot on its own write to the
manager of any bank requesting for the freezing of any account
simply because there is an evidence of fraud connected with such
account. Where it does, the bank is required by law to pay deaf
ears to such orders in the absence of any valid court order
attached to the said application or request. Also, the mere fact
that a request is accompanied with a supposed valid order of a high
court or that of a federal high court may not totally exonerate a
bank from liabilities from unlawful freezing of bank account. This
is because, the bank being the custodian of customers account owe
the said customer a duty to investigate if the said order of the
court attached to the application for freezing is indeed genuine if
not for anything, for the fact that things have fallen apart and
the center is on the run.

Liabilities for wrongful freezing

Where a bank unilaterally freezes or restrains a customer from
accessing his account without a valid court order, such a bank
becomes liable for the tort of negligence among others. The
customer is entitled to an award of damages as a form of
compensation. The court may also demand that a written apology be
addressed to the customer if the customer prays for same. Where a
third party is instrumental to the freezing, the customer can elect
to sue both the bank and the third party, claiming damages jointly
and or severally in a single suit. The above cited cases are
instructive in this point.

Way forward

1. Where a bank freezes the account of a customer, the customer
   should approach the bank for a possible explanation.
2. Where there is no court order directing same, the customer
   should demand for immediate release of the account from all form of
   restraint.
3. Where oral application fails, the customer should urgently
   brief a legal practitioner who will cause a demand notice to be
   served on the bank having specific time frame. The said notice will
   be a concrete evidence against the bank in addition to oral
   evidence should the matter proceed to court.
4. The legal practitioner should filed processes against the bank
   and any other person who is instrumental to such illegal act
   claiming general, special and punitive or exemplary damages.

In conclusion, the law is trite that where the law provides for
the method of doing an act, failure to abide by such law renders
the decision a nullity which can ground an action in damages. See
UNTH MGT.BOARD & ANOR V HOPE CHINYELU NNOLI (1994)8 NWLR (PT.363)
376. Accordingly, it is expected that banks and other financial
institution should buckle up.

Written By Stanley Maduabuchi Ofoegbu Esq.

WhatsApp 08068515340 email; ofoegbustanley72@gmail.com,^[1] Abuja.

By Stanley Maduabuchi Ofoegbu Esq.

The fact that banks and their customers are usually in a
fiduciary relationship cannot be denied. Banks are usually
obligated to their customers in so many ways.

It is a trite law that customers monies in the hands of the
banker are not in the custody or under the control of the customer
and such monies remain the property in the custody and control of
the banker and payable when a demand is made see GTB V DASHUWAR
(2020) LPELR-52435 (CA), WEMA BANK PLC VOSILARU (2008)10NWLR
(PT.1094)150;, JUKOK INT’LTD V DIAMOND BANK (2016)8 NWLR
(PT.1507)55, 80 AT 111 PARAS A-B. It is also the law that the bank
owe a duty of care to its customers and that when such duty is
breached, the bank becomes liable in damages to its customer see
KEYSTONE BANK LTD V MARKETING AND MEDIA LIMITED
(2016)LPELR-41290(CA), ENTERPRISE BANK V DENWIGWE AND ORS
(2018)LPELR-46261(CA) to mention but a few. In addition to the
above, it is also the mandatory requirements of the law that while
the banks exercise duties of care to their customers, such duties
must be exercised within the bounds of law. In other words, the
bank must take into cognizance certain provisions of the law
especially, when they are expressly stated or spelt out in relevant
laws of the land.

The said duties of care no doubt include the freezing of
customer’s bank account with the aim of preserving the money in the
face of fraud or other criminalities that may affect the account.
This is because, all monies kept at the bank are totally under the
custody and control of the bank and the bank is bound to account
for every kobo that go missing from a customer’s account and hence,
the need to freeze same becomes necessary.

QUESTION

Since freezing of customers account is one way of preserving
customer’s money which automatically passes out as a cardinal duty
of care owed to the customer, at what point can the bank
unilaterally freeze or cause a caution to be placed on customers
bank account?

What about directives from the Economic and financial crime
commission requesting for the freezing of a customer’s account
following the suspicion and allegation of fraud or the filing of
criminal financial related charges at the court? Will such
directive on the face of it be valid without more?

Are there liabilities that may flow from the unilateral freezing
of customers account by the bank?

What remedy or remedies are available to a customer whose
account is frozen by the bank?

The law is that a bank has no right or power by itself to freeze
the account of a customer, be it its staff or otherwise, and or to
prevent such a customer with money standing to his credit in his
account from accessing the money. See DIAMOND BANK V UNAKA &ORS
(2019) LPELR-50350(CA). The only exception is where the bank
receives notice of death of a customer, it is under a duty in such
a circumstance to stop withdrawals from the account, and only legal
representatives of the customer duly appointed by law can access
the said account thereafter. Where a bank takes it upon itself to
freeze the account of a customer or restrain the customer from
accessing the said account when he or she has credit therein simply
because of an allegation of fraud made against such a customer, it
will amount to self-help which is illegal and wrongful see DIAMOND
BANK V UNAKA supra, FIDELITY BANK PLC V BAYUJA VENTURES LTD (2010)
LPELR 8873(CA)

Similarly, it is the law that for a bank to freeze, place a
caution or any form of restrain on a customer’s account, it has to
be satisfied that there is a court order to that effect otherwise,
it will be liable for a breach of contract unless there is a
statute that gives it such mandate. See G.T.B PLC V ADEDAMOLA
(2019)5 NWLR (PT.1664)30 AT 43, UBA V MARCUS (2015)LPELR-40397
(CA), OLALEKAN OYERINDE V ACCESS BANK PLC (2014) LPELR 23461(CA) to
mention but a few.

From the above, it is obvious that a bank cannot unilaterally
freeze a customer’s account without the consent of the said
customer and without an order from the court to that effect. The
mere fact that there is an allegation of fraud or that fraudulent
activity is associated with the customer’s account will not justify
the bank to unilaterally freeze the customer’s account. It is also
immaterial that the need for freezing same was or appeared urgent,
compelling and was done for the overall interest of the customer.
It is also of no moment that the conduct of the bank was morally
justified and gracious for the benefits of the customer. Once it is
established that the said freezing was carried out in the absence
of a valid court order, the said act no matter how morally good
becomes wrongful and illegal unless it was carried out with the
permission of the customer. In UNITY BANK PLC V OLATUNJI (2O15) 5
NWLR (PT.1452) 203, AROGUNDADE V SKYE BANK(2020) LPELR-52304 (CA)
The courts while condemning the unilateral freezing of customers
account held inter alia (among others) that though  the said
act of the bank may be morally good, a moral action may not
necessarily be a legal action. The action of the bank may receive a
moral approval but not a legal approval. An action receives a legal
approval because there is a Law that backs up such action. When
morally an action is fine but there is no law backing such action,
the action will be illegal because morality and law are not
synonymous.

It is not in doubt that the current administration claim to be
fighting corruption. Whether the fight against corruption is indeed
yielding any positive results and whether the fight is general or
selective is not the issue here. However, the facts remain that
findings reveal that the economic and financial crime commission
the body saddled with the responsibility of fighting financial
crime has formed a habit of writing and directing banks to get the
account of suspects frozen for alleged financial fraud. Further
findings also show that most banks honour such unscrupulous and
shameful directives without asking relevant questions. As a result
of these, it becomes necessary to examine the legality or otherwise
of such orders.

Section 34 of the EFCC Act 2004 empowers the commission to apply
to the court via exparte application to obtain an order before
proceeding to freeze an account belonging to a customer of a bank.
In otherworld’s, the commission cannot unilaterally write to any
bank requesting the said bank to place a caution or freeze an
account belonging to a customer simply because the customer is or
may be prosecuted for fraudulent financial crimes without a valid
order of the court first sought and obtained. In not one or two or
even three cases, the court has severally deprecated and condemned
such demonic and illegal acts of the commission in consonance with
various banks. See AROGUNDADE V SKYE BAMK supra, GTB V JOSHUA
(2021) LPELR- 53173 (CA) GTB V ADEDAMOLA supra to mention but a
few. Accordingly, the commission cannot on its own write to the
manager of any bank requesting for the freezing of any account
simply because there is an evidence of fraud connected with such
account. Where it does, the bank is required by law to pay deaf
ears to such orders in the absence of any valid court order
attached to the said application or request. Also, the mere fact
that a request is accompanied with a supposed valid order of a high
court or that of a federal high court may not totally exonerate a
bank from liabilities from unlawful freezing of bank account. This
is because, the bank being the custodian of customers account owe
the said customer a duty to investigate if the said order of the
court attached to the application for freezing is indeed genuine if
not for anything, for the fact that things have fallen apart and
the center is on the run.

Liabilities for wrongful freezing

Where a bank unilaterally freezes or restrains a customer from
accessing his account without a valid court order, such a bank
becomes liable for the tort of negligence among others. The
customer is entitled to an award of damages as a form of
compensation. The court may also demand that a written apology be
addressed to the customer if the customer prays for same. Where a
third party is instrumental to the freezing, the customer can elect
to sue both the bank and the third party, claiming damages jointly
and or severally in a single suit. The above cited cases are
instructive in this point.

Way forward

1. Where a bank freezes the account of a customer, the customer
   should approach the bank for a possible explanation.
2. Where there is no court order directing same, the customer
   should demand for immediate release of the account from all form of
   restraint.
3. Where oral application fails, the customer should urgently
   brief a legal practitioner who will cause a demand notice to be
   served on the bank having specific time frame. The said notice will
   be a concrete evidence against the bank in addition to oral
   evidence should the matter proceed to court.
4. The legal practitioner should filed processes against the bank
   and any other person who is instrumental to such illegal act
   claiming general, special and punitive or exemplary damages.

In conclusion, the law is trite that where the law provides for
the method of doing an act, failure to abide by such law renders
the decision a nullity which can ground an action in damages. See
UNTH MGT.BOARD & ANOR V HOPE CHINYELU NNOLI (1994)8 NWLR (PT.363)
376. Accordingly, it is expected that banks and other financial
institution should buckle up.

Written By Stanley Maduabuchi Ofoegbu Esq.

WhatsApp 08068515340 email; ofoegbustanley72@gmail.com,^[1] Abuja.