THE RECENT POSITION OF LAW AS REGARDS THE LEGALITY OF FREEZING BANK ACCOUNTS BY EFCC AND BANKS.
In recent years, we have heard a lot of cases in which banks, in compliance with orders from the Economic Financial Crimes Commission (EFCC), freeze a particular bank account depriving the bank account owner the right to use such account for withdrawal, deposit and other related activities. The question that always comes to mind is whether or not the banks have the right to freeze their customer’s bank accounts. This question will be the main issue for determination in this article.
It is a matter of common knowledge that a bank owes its customers a duty of secrecy or confidentiality. This means that the details of the bank account and the customer will not be revealed or divulged to a third party, and transactions conducted through the bank account must be kept private from unauthorized persons. This confidentiality rule forms the bedrock of modern banking practice.
With this duty of care, the bank is expected to protect the interests of its customers, howbeit, within the ambit of the law. The duty of care owed to customers can be defied if such defiance is consistent with the law. For example, it is without doubt that the duty may be lawfully avoided where a court of competent jurisdiction orders that the account of a customer be placed on ‘caution’. See the case of EFFIWAT V BARCLAYS BANK (NIG)  2 ALL NLR 26.
In such an instance, the bank is under an obligation to depart from the duty of care without any accompanying liability. However, it is under this guise that many banks have found themselves unwittingly thrust into legal disputes. In Nigeria, Section 34 (1) of the EFCC Act provides that: Notwithstanding anything contained in any other enactment or law, the Chairman of the Commission or any officer authorized by him may, if satisfied that the money in the account of a person is made through the commission of an offence under this Act or any enactments specified under section 6 (2) (a)-(f) of this Act, apply to the Court ex-parte for power to issue or instruct a bank examiner or such other appropriate regulatory authority to issue an order as specified in Form B of the Schedule to this Act, addressed to the manager of the bank or any person in control of the financial institution where the account is or believed by him to be or the head office of the bank or other financial institution to freeze the account.”
This provision is to the effect that the EFCC has been empowered by the law to issue a directive to any bank to freeze the account of any of its customers under investigation. It must be noted that, the directive must however be made only after the Commission has obtained “an order of Court to that effect.” This has received judicial blessings in the case of GUARANTY TRUST BANK V. MR AKINSIKU ADEDAMOLA(2019) 5 NWLR @ PG 30 where the court of Appeal held that:
“Before freezing customer’s account or placing any form of restrain on any Bank account, a bank must be satisfied that there is an order of court. By the provisions of section 34(1) of the Economic and Financial Crimes Commission Act, 2004, the Economic and Financial Crimes Commission has no power to give direct instructions to Banks to freeze the account of a customer without an order of court; so doing constitutes flagrant disregard and violation of the right of a customer.”
The court went further to state that: “…Our financial institutions must not be complacent, reticent and toothless in the face of brazen and reckless violence to the rights of their customers. Whenever there is a specific provision regulating the procedure of doing a particular act, that procedure must be followed.”
In the case of DANGABAR V. FEDERAL REPUBLIC OF NIGERIA (2012) LPELR-19732 (CA), the Court of Appeal upheld the powers of the EFCC under Sections 26, 28 and 34 of the EFCC Act to freeze bank accounts; attach properties and obtain interim forfeiture orders against persons who are under investigation for corruption.
Recently, an Ikeja High Court ordered Diamond Bank Plc to pay a Lagos-based legal practitioner, Adetokunbo Odutola, ₦25 million as damages for unlawfully freezing his bank account. Justice Sybil Nwaka held that the bank failed in its duty of care to Odutola and was so liable for the injury that arose therefrom. The court further held as unacceptable, the bank’s contention that it froze the lawyer’s account on the instruction of Economic and Financial Crimes Commission (EFCC), noting that only a court could make such an order. Justice Nwaka delivered the judgment in a suit marked LD/ADR/800/17 between Odutola as sole claimant and Diamond Bank as the sole defendant.
The suit originally involved three banks as defendants but the first and third defendants settled with the lawyer-claimant out of court, leaving Diamond as the remaining defendant. In his statement of claim, Odutola, who represented himself, sought ₦25m against the bank as both special and general damages he incurred due to the bank’s “negligence and breach of duty of care.” He averred that he “suffered embarrassment, hardship, disgrace and loss of income” following the unlawful freezing of his account. In particular, the lawyer claimed that a cheque he issued was rejected by the bank, his practice was financially affected and he had to resort to borrowing “₦500,000 to repay ₦750,000” from a money lender.
The lawyer further stated that during the blockage, he was “engaged in a brief which would have earned him ₦10million”, but which he lost. But the bank, through its counsel, Olatunji Muritala, countered that the cheque was dishonoured on November 29, 2016, when it got a letter from the EFCC asking it to place a lien on the customer’s account. In her judgment held on December 16, 2019, the judge upheld the lawyer’s claims.
Justice Nwaka held: “The bank went ahead to place PND on the account of the claimant on the instruction of EFCC. The bank ought to have demanded from the EFCC an order of court to that effect… It is not in the power of EFCC to authorize a PND on any customer’s account. The EFCC must not usurp the powers of a court of law. The duty of care owed the claimant by the second defendant (Diamond Bank) is nothing but breached.” The judge said the bank’s inaction of not demanding for an order of court or an official letter authorizing it to place PND on the claimant’s account amounts to negligence. And this negligence is traced to the embarrassment and loss suffered by the Claimant. This is a society whose affairs are supposed to be governed and conducted in accordance with the law. The EFCC and the bank taking law into their hands is nothing but shameful. I am satisfied that the claimant has proved his case on the preponderance of evidence and I so hold. Judgment is hereby entered for the claimant against the second defendant as per his claims”, the judge held.
The implication of the decision of the Court of Appeal in the GTB case and other cases mentioned above is that the legal departments of financial institutions are now having the onus to ascertain that any directive from the EFCC is accompanied by a valid order from the court of law. Any act on the part of the bank which is inconsistent with this decision will land them in trouble. Until a contrary decision is delivered by the Supreme Court, this is the law on the matter.
The banks are also a creation of the law and they are expected to operate within the lenses of the law and not just that they should amend the severed trust between them and their customers, they must also let the EFCC know that things will no longer be the same when it comes to post-no-debit orders or freezing orders.
ABOUT THE AUTHOR
Toheeb Mustapha Babalola is a student of the Faculty of Law, Bayero University, Kano. He is interested in advocacy, academic writing, legal writing and activism. You can reach him via email:firstname.lastname@example.org or contact/WhatsApp:08106244073.