The court in Kampala last month ruled that a customer was negligent in how they handled their information, which led to a loss of whooping UGX 56Million in a recent ruling vide Atiku Aidah V centenary Bank. Justice Stephen Mubiru, in his ruling, revisited the bank-customer relationship and the duties plus obligations born from such a relationship.
The brief background of the case.
In Jan 2020, the plaintiff opened and operated a savings account with the defendant bank, and some funds were withdrawn allegedly without her consent hence the suit.
New Obligations to Bankers and Customers.
The Bank of Uganda Consumer Protection Guidelines 2011 provides some critical principles under Consumer Protection Guidelines, among others include: -
• Guideline 5 on fairness, reliability, and transparency Reliability
• Guideline 7 on protecting an account of a consumer, such as securing the consumer's PIN and advising the consumer on how to deal with them to change her PIN regularly.
Security advice shall be provided at the opening of the account, and the control mechanisms shall be provided to the customer. The bank should provide the customer with regularly updated information on how to access digital banking services, including details about their customer ID, selection of appropriate passwords and the availability of additional authentication or security options, how to maintain their security, and their liability for unauthorized transactions will be.
The banking business has gotten more sophisticated as bankers have to find ways to deal with fraud. Given the literacy rates in Uganda, so many people may need financial assistance while opening and operating bank accounts. The notion of seeking independent advice, whether legal or non-legal, in these transactions should be cautioned those who they seek to rely on independently are solely left to their discretion.
If the bank recommends an independent advisor, the customer may claim the bank comprised the advisor; if otherwise, then a customer.
The duty is that banks have a duty to put in place robust fraud detection and prevention solutions to protect their assets, systems, and customers.
• They have a duty to take reasonable measures to ensure that their digital banking systems and technology are secure and are regularly reviewed and updated for this purpose.
• Banks should know when a suspicious transaction or withdrawal takes place.
• They should ensure that transactions on their digital banking services can be traced and checked as long as their systems receive them.
With the prevalence of technology and digital banking, banks should endeavor to educate all their consumers and staff concerning digital banking. Warning signs and dangers lurking in digital banking would help this vulnerable group and potentially assist in preventing account takeovers.
Guideline 8(2 & 3) of the Bank of Uganda Consumer Protection Guidelines 2011 provides that banks should inform the customer of the applicable terms and conditions relating to the use of digital banking services, including any fees and charges, and the current transaction limits that apply to digital banking services, which limits may change from time to time and are available upon request.
Furthermore, customers should be informed of the procedures they must follow to report unauthorized access to their confidential personal information, accounts, or disputed transactions using digital banking services and be provided with adequate and convenient means to notify the bank of security incidents and easily accessible contact points to report such activity as soon as they become aware of it.
Defined period for which when comes to open, the banks should at least allow customers who so wish even to take home the documents to peruse before can open accounts so that they are acquainted with the terms and conditions and their consequences.
In Atiku Aidah V Centenary Bank, the learned judge reaffirmed that customers must find independent advisors before making financial decisions because this enables them to make decisions when they are sure, especially in a matter as delicate as this containing finances( Emphasis ours). In that case, the plaintiff came to the bank with her daughter supposedly to aid her with the reading and comprehension of the said bank documents.
The customer should make financial decisions based on reliable financial advice. Thus, it was assumed the daughter had read and interpreted the terms of all the accounts for the plaintiff, including Internet Banking.
The banks were ordered not to put customers under pressure while about to make financial decisions, although in the instant case, the defendant bank didn’t at any point put or rush the plaintiff into signing any documents about her account. We believe that the counsel didn’t invite the court to discuss the guidelines and that he contends the bank was negligent in pursuing a better outcome.
On a closer look at the guidelines furthermore, Principle 6 Of Bank of Uganda consumer protection guidelines 2011 Para 2- Information and advice to a consumer explained clearly in the language the customer understands.
Page 8, paragraph 5, Bank of Uganda consumer protection guidelines 2011, provides that it is the duty of the Bank of Uganda to monitor these Financial Consumer Protection Guidelines to ensure that all financial services providers are meeting their obligations and achieving service standards-Emphasis by the court as well on page 8 of the judgment.
The critical rationale is that under the Financial Institutions Act 2004 and the Bank of Uganda Act, the Bank of Uganda has the power to oversee all Financial Institutions. Thus, the consumer cannot sue the Bank of Uganda but can sue them together following guidelines.
Overall, the advancement of technology in the modern era is inevitable, and all sectors, especially the banking sector, have evolved to cope, and internet banking has taken the economy by storm. With Digital banking at its peak, fraudsters have found this a vast potential upon which their businesses flourish. So, it is crucial that the countries enact legal frameworks to try to improve safety online.
It’s the regulators' prime duty to ensure compliance with several guidelines meant to protect customers, but also, the customers must take steps to ensure their safety online by doing the already discussed above.
The Authors Simon Nyakoojo and Ambrose Muganga Ibabaza are Senior writers at The Judicial Sound Exponent. For inquiries, comments, and reviews concerning this article, E-mail us via [email protected] and [email protected]