The High Court has issued a landmark ruling upholding a magistrate's directive that compels Absa Bank to reimburse a sum exceeding Sh191,000 to a customer, Tamina Ibrahim.
The ruling stems from a six-year-old incident in which the money was erroneously credited to the wrong customer's account.
The ruling, delivered by Justice Nixon Sifuna, emphasizes the bank's obligation to exercise due diligence and ensure the accuracy of transactions, even when customers share the responsibility for errors.
The case stems from Tamina's intended receipt of Sh191,869 from Network Sacco, an institution in which she was a member.
The Sacco had entrusted her details to Co-operative Bank for the purpose of transferring the funds to her Absa Bank account.
While her name was correctly provided, an incorrect account number led to the money being deposited into another customer's account within Absa Bank.
Justice Sifuna, in his ruling, underlined the bank's role as the final destination of the funds and, consequently, its obligation to ensure that payments are directed accurately.
"The receiving bank (ABSA), for its part, being the final destination of the money, has a duty to ensure the money is paid to the correct person and the correct account," Sifuna ruled.
This assertion underscores the inherent responsibility of financial institutions to act diligently in safeguarding their customers' financial interests.
Furthermore, the judge highlighted that banks, by virtue of their professional obligations, are expected to exercise due diligence in their operations.
When such diligence is lacking and results in financial losses or harm to customers, the bank must be held accountable for the consequences.
In this case, the failure to verify the accuracy of the account number led to an inadvertent transfer, ultimately causing distress to Tamina Ibrahim.
Justice Sifuna also noted that, upon being informed of the error, Absa Bank initially committed to suspending the incorrect account, preventing any withdrawals.
However, the bank later reneged on its promise and released the funds, asserting its inability to rectify the situation.
The judge deemed this action inconsistent with the bank's duty to rectify its mistakes promptly.
The High Court's ruling serves as a clear reminder to financial institutions of their responsibility to exercise due diligence in safeguarding customer transactions.
It reaffirms that banks must take all necessary measures to ensure the accuracy of fund transfers, regardless of any contributing errors from their clients.
In this case, the six-year dispute has finally been resolved, with Tamina Ibrahim set to receive her rightful funds from Absa Bank.