Equity Bank cleared in sh34.4 million mobile banking fraud case

The Commercial Division of the High Court has ruled that Equity Bank Uganda is not liable for the sh34.4 million that was fraudulently withdrawn from a customer’s account using the mobile banking platform.

Justice Patience Rubagumya delivered the decision on Nov. 21, reversing a lower court ruling that had found the bank responsible. Rubagumya held that the evidence presented did not prove any negligence on the part of Equity Bank.

The bank had appealed the initial decision, arguing that the chief magistrate erred in holding it responsible for the loss. The dispute originated from a suit filed by customer Augustine Bamwite Muhindo, who holds an account at the bank’s Church House branch.

Court records indicate that sh34.4 million was withdrawn from Muhindo’s account through the bank’s Eazzy mobile platform between Dec. 22 and Dec. 25, 2022. Muhindo told the court he only discovered the transactions on Jan. 2, 2023.

Muhindo had previously claimed that his MTN number registered to the account had been blocked on Dec. 17, 2022, after he reported his phone stolen. He argued that the illegal debits were a result of the bank’s negligence and a breach of the banker-customer relationship. The magistrate initially agreed with Muhindo, awarding him a refund, damages, and interest.

However, the High Court focused on the customer’s actions. Justice Rubagumya ruled that Muhindo failed to exercise due diligence by not promptly notifying the bank about the loss of his phone and SIM card before the fraudulent transactions took place.

“In my view, considering that Muhindo had not notified the appellant (Equity Bank) about the loss of his phone and SIM card, the bank’s primary mandate was to obey its customer’s orders,” Rubagumya wrote. “Therefore, the respondent failed to exercise reasonable due diligence… and this negligence cannot be attributed to the appellant.”

Equity Bank, represented by lawyer Fahim Matovu, had argued that Muhindo never informed them of the phone loss and insisted its system showed the registered number was active, as it sent one-time passwords during registration. The bank stated its platform requires a personal identification number for transactions, refuting the claim of negligence.

Justice Rubagumya concluded that the trial magistrate erred in law and fact by holding the bank negligent. The appeal was allowed, and the previous orders against the bank were set aside.