BANK ACCOUNT FREEZING WITHOUT A COURT ORDER: DUTY OF THE BANK

Introduction

The freezing of an account entails the placement of certain restrictions/ban on the account, thereby disallowing ?the account owner full access, use and enjoyment of same. There are different government agencies empowered by law to freeze?bank accounts, such as the Central Bank of Nigeria, Economic and Financial Crimes Commission (EFCC) and other anti-graft agencies, however due legal process must be followed for the act to be lawfully done. The practice is to direct the bank where the account is domiciled to place the restriction. The category of ?accounts that can be blocked include ?personal, corporate and government owned accounts. See the case of UBA Plc V. A-G Benue State & Ors (2022)[1]. I have in this article, considered the duty of the bank to ensure that the freezing of an account is properly done, especially as it relates to the requirement of obtaining an order of court authorizing or extending the restriction.

Order of Court

The Court of Appeal has in the recent case of Polaris Bank Ltd V. Yayamu Global Services Ltd & Anor (2022)[2] held that it is settled and sacrosanct that for a bank to freeze, place a caution or any form of restraints on its customer's account, there must be a Court order. Where the bank suspects that an unlawful transaction is been carried out on an account, it is required to notify the relevant law enforcement agency, which shall upon the procurement of a court order direct the bank to freeze such account. Doing otherwise will amount to the bank taking the laws into its own hands. See the case of ?GTB v. Registered Trustees of Network of People Living with HIV AIDS in Nigeria (NEPWHAN) (2021)[3].

?

The EFCC is required to seek and obtain an Order of court before directing that an account of a bank customer be frozen. This is in line with s. 34 of the EFCC Act and a plethora of judicial authorities in this regard. Where an account is frozen/restrained without a court order first sought and obtained, the fundamental right of the customer is deemed breached and as such both the authorizing authority ?and the bank, may be liable. See the case of Guaranty Trust Bank v. Mr. Akinsiku Adedamola (2019)[4]. The Customer can in such cases claim damages from both EFCC (or the relevant authorizing authority) and the bank. Similarly, in Blaid Construction Limited & Mrs. Ochuko Momoh v. Federal Republic of Nigeria[5] and United Bank For Africa, Plc V. Eriba Jude-Bela Eje & Ors (2022), the Court held that the conduct of the bank to unilaterally freeze its customer’s bank account is illegal and in breach of the banker-customer relationship between the parties. Where there is a wrong there is a remedy, thus damages may be awarded in favor of the customer against the bank.

Duty of the Bank

The bank is estopped from feigning ignorance or claiming that it had no duty to confirm if the directive to freeze an account is made pursuant to a court’s order. In GUARANTY TRUST BANK PLC v. ODEYEMI OLUYINKA JOSHUA (2021)[6], the Court of Appeal held that the bank must ensure that there is an order of Court before it proceeds to freeze the account of any person. It further held that without an order of Court, the EFCC cannot direct the freezing of the account of any person and where EFCC has not fully complied with the provisions of the law, the bank had no business obeying an unlawful directive.?

Furthermore, and in line with section 34 of the EFCC Act, section 15 of the Money Laundering (Prevention and Prohibition) Act, 2022, requires that a Court Order must be sought and obtained before a competent authority can place surveillance on the bank account of any person in a bid to identify and locate proceeds, properties, objects or other things related to the commission of an offence under the Act or any other law.

Current Position

However, by virtue section 7 of the Money Laundering (Prevention and Prohibition) Act, 2022, it appears that the EFCC is permitted to place a temporary stoppage on a suspicious transaction or account for a period not exceeding 72 hours, prior to when a court order is obtained, and the bank is compelled by law to comply with such stop order. Where no order of court to block the account or transaction is obtained after the expiration of the temporary stoppage, the restriction on the account must ?be lifted and transaction processed. This is in line with the Court of Appeal’s decision in the case ?UBA PLC v. A-G Benue State & ORS (2022). Also in United Bank For Africa, Plc V. Eriba Jude-Bela Eje & Ors (2022)[7], the appellate Court held that “it is not in doubt that the 3rd Respondent has the powers to place a stop order or freeze an account suspected to be involved in financial crime for 72 hours, without a Court order. Upon the expiration of the 72 hours and where the commission is not done with its activities in respect of the account, a Court order has to be obtained to extend the life of the order freezing the account. Where the required Court order is not made available, the stop order or freezing the account lapses and the financial institution is obliged to unfreeze the account”.

Conclusion

The position in UBA PLC v. A-G Benue State & ORS (2022) and United Bank For Africa, Plc V. Eriba Jude-Bela Eje & Ors (2022), ?appears to be a slight departure from the earlier decisions of the Court cited above, in that it upholds the power of EFCC to restrict an account for a period not exceeding 72 hours, without an order of Court. Be it as it may, the bank has a duty to ensure that after the passage of the said 72 hours, no further restrain is placed on the account unless it confirms that an order of court has been obtained in that regard. See the case of United Bank For Africa, Plc V. Eriba Jude-Bela Eje & Ors (2022).

Merit Okafor is a lawyer at AELEX . Her areas of practice include Banking & Finance, Capital Markets, Project Finance & Development, and Corporate Commercial.

[1] LPELR-58695(CA).

[2] Lpelr-57376(CA)

[3] LPELR 54609 (CA)

[4] 5 NWLR @ pg. 30

[5] FHC/ABJ/CS/132/2019

[6] LPELR 53173(CA)

[7] LPELR-57973(CA)