Tirupati sues ‘fraudulent’ KCB Bank alongside negligent Bank of Uganda, FIA
The banking sector in Uganda has yet again been hit by a fraud and money laundering claim, this time the affected commercial bank is KCB Bank, the regional financial institution.
In the latest development, Tirupati Development (U) Limited, through their lawyers Aegis Advocates and Kirunda & Wasige Advocates, are suing KCB Bank Uganda Limited (2nd defendant) and KCB Bank Kenya Limited (3rd defendant), Bank of Uganda (BOU) (1st Defendant) and the Financial Intelligence Authority of negligence (FIA) (4th defendant).
According to the suit submitted to the high court of Uganda at Kampala (civil division), Civil Suit No. 015 of 2022, Tirupati says KCB Bank breached the loan contract, fiduciary duty, was deceitful, negligent, and fraudulent and laundered money using their bank accounts.
The Bank of Uganda and Financial Intelligence Authority as regulators of the financial sector have been dragged into this suit for negligence, breach of statutory duty and misfeasance in public office. Tirupati believes that as bank customers, they have not been protected by the central bank.
Tirupati gets $7m loan from KCB Bank
According to the plaint on the 17th July 2012, the 2nd and 3rd Defendants agreed to advance to the Plaintiff a syndicated loan facility from the 2nd and 3rd Defendants for a total of US$ 7,000,000.
At the time, the Plaintiff held only one account with the first Defendant vide, Account Number 2201449317 registered in the Plaintiff’s name.
As collateral for this facility, the Plaintiff agreed to and did provide the 2nd and 3rd Defendants a series of certificates of title to its properties.
While the Defendants had agreed to disburse a total sum of USD 7,000,000, the total sum disbursed was in fact USD 6,990,000 was in fact disbursed.
The bank agreed to charge the Plaintiff’s loan negotiation fees in the sum of 0.5% of the loan amount. This amounted to US$35,000.
And during the contracting period, all principal and interest payments with respect to the loan facility were to be made through the Plaintiff’s US Dollar current account 2201449317.
It is worthy to note that from onset KCB Bank was breached the loan contract; first by failing to disburse the agreed amount of USD 7,000,000, debiting the plaintiff’s account with loan negotiation fees above the agreed amount, and refusing to provide the Plaintiff with a breakdown of how the loan negotiation amount charged was arrived at.
Fraud and money laundering claims
In what Tirupati describes as committed fraud and conspiracy to defraud, KCB Bank refused to give the Plaintiff records of bank statements, failed to explain existence of an unknown US Dollar account operated on behalf of the Plaintiff, the unauthorized transactions on the Plaintiff’s accounts, money fraudulently taken from the Plaintiff’s accounts, the unlawful charge of inexplicable penalty interest on transactions that were not known by the Plaintiff, inconsistent loan statements and balances and refusal to release Plaintiff’s titles.
On noticing that KCB Bank was conducting irregularities on its bank accounts, the Plaintiff wrote a series of letters to the 2nd and 3rd Defendants raising the issues observed but the bank failed to provide an explanation. This inhibited the Plaintiff’s ability to understand the true extent of her debt causing the plaintiff not to meet her loan obligations.
In so doing, the bank misappropriated and occasioned the disappearance of the Plaintiffs funds in the sum of US$ 995,466.78 deposited on the Plaintiffs current accounts 2150226057 and 1059906732 to aid her loan repayments.
Uncharacteristic of banking norms, Tirupati says that in August 2016, the two sister banks opened and operated two separate US Dollar-denominated loan accounts in their names without their knowledge or consent -these were account numbers 1059906732 with KCB Bank Kenya and account number 2150226057 with KCB Bank Uganda.
In a similar manner, in January 2017, KCB Bank Uganda opened and operated another new US dollar current account No. 2290351628 in the names of the Tirupati Development (U) Limited, the plaintiff, without the plaintiff’s authorization, consent or knowledge.
It is these accounts that the Plaintiff used for money laundering. Allegedly, the bank facilitated the unauthorized use of the Plaintiff’s accounts to transact in varying amounts between 2014 and 2021 totaling to US Dollars 79,900,000 and 62 similar transactions totaling UGX. 315,992,747 which transactions bore no relationship to the Plaintiff or its businesses for the period evaluated but appear in the names of the Plaintiff.
These transactions, according to Tirupati, confirm that the 2nd and 3rd Defendants failed to manage the risk of financial crime and IT fraud when they maintained separate ledgers for the Plaintiff’s accounts.
Tirupati also believes that the banks utilized her accounts in the manner that made any audit trail difficult to avoid scrutiny by regulators and law enforcement in the two jurisdictions of Uganda and Kenya.