UBA Ordered to Compensate Customer Shs 128 Million for Fraudulent Withdrawal

A landmark ruling by the High Court in Mbale has seen United Bank for Africa (UBA) Limited ordered to pay a substantial sum of over Shs 128 million to a Ugandan national, Michael Wilson Mazuno. The funds in question were compensation for severe injuries Mazuno sustained while working as an armed security guard in Afghanistan. An impostor managed to open a bank account in Mazuno’s name at UBA and subsequently withdrew the entire compensation amount.

Justice Farouq Lubega, presiding over the case, ruled that UBA must pay Mazuno Shs 108.23 million, representing the exact amount of the fraudulently withdrawn compensation. Additionally, the bank is required to pay Shs 20 million in general damages for the distress and inconvenience caused. The court also stipulated that UBA must cover the legal costs of the suit and pay interest on the total award at a rate of 8% per annum until full payment.

Mazuno had initiated legal action against UBA in 2024, alleging negligence, fraud, breach of duty of care, and conversion. He contended that the bank failed to conduct adequate identity verification and Know Your Customer (KYC) checks when the fraudulent account was opened using his name and National Identification Number (NIN), but a different photograph.

Despite UBA’s defense that Mazuno was not their customer and thus they owed him no duty of care, Justice Lubega rejected this argument. The judge asserted that a bank’s duty of care can extend to third parties in cases of foreseeable harm resulting from negligence or unlawful conduct. The court highlighted several “red flags” that UBA should have heeded, including the account being opened shortly before a large deposit, the withdrawal of the entire sum despite daily limits, and evidence of disciplinary action against bank staff involved.

“I find that the defendant Bank acted fraudulently in opening Bank Account No. 0768025176 without properly verifying the identity and physical address of the purported account holder,” the judgment stated. This ruling underscores the critical importance of robust security protocols and diligent customer verification in the banking sector.

Source: The Observer (Uganda) https://observer.ug/news/united-bank-for-africa-ordered-to-pay-customer-shs-128m-over-fraudulent-withdrawal