Equity Bank Ordered to Pay Customer UGX25M Lost Through Mobile Banking

High Court judge Anna Mugenyi has dismissed an appeal by Equity Bank in which it had sought the annulment of a decision of Mengo Chief Magistrate Talisuna Patrick Ngereza requiring the bank to pay its client Irene Birungi at least Shs25million she had lost through mobile banking. In her ruling, Judge Mugenyi said the bank had failed to convince court that Birungi lost her money willingly or through negligence.

“On the totality of the evidence, this Court finds that the Appellant failed to demonstrate that the disputed withdrawals were authorized by the Respondent or that they resulted from any proven negligence on her part.

“In the absence of satisfactory proof that the respondent authorised the transactions or negligently enabled them, the loss must fall upon the institution that controlled the payment system through which the funds were transferred…liability in electronic banking fraud ultimately rests upon the party best positioned to prevent the loss,” she ruled.

According to court records, on December 30th, 2019, Birungi opened an account with Equity bank branch of Katwe and deposited Shs500,000. She also made another transaction of Shs27million from which on July 7, 2020, she withdrew two million.

However, on October 12, 2020, she went to the bank to make some transactions, but she was surprised to be informed that her account only had a balance of Shs27,100. She filed a suit at the Mengo magistrate court in 2020 which ruled in her favour. The court ordered that Equity Bank pays back the Shs25million at a rate of 8%. It also awarded her damages of five million. Dissatisfied, the bank appealed the decision in the high court.

In its defence, Equity Bank said that sometime in October 2020, Birungi was approached by officials of Airtel Uganda who requested her to do a SIM swap for mobile number registered in her name. She willingly handed over to them her phone number, national identification details and bank account details.

The bank said that the officials downloaded the bank’s mobile application using Birungi’s phone and carried out self-registration on the bank’s mobile app known as Eazzy banking app.

The bank said it is those officials that could have been the persons who withdrew the money from Birungi’s account, as all the transactions were carried out using the bank’s mobile application which was registered on Birungi’s phone number registered in her name.

The bank therefore opined that it was Birungi’s negligence in sharing her bank account details with third parties which cost her the money. In her ruling however, the judge held that Equity Bank failed to show any evidence that indeed Birungi had personally allowed to be enrolled on the mobile app.

“Because of the high risks associated with banking products such as mobile banking and digital payments, it is imperative that a customer being registered in such a platform has to expressly consent to the said service by filing a form and the bank must have explained to the customer the risks associated with such a platform, like fraudsters getting access to the above accounts in case information such as the PIN are shared,” the ruling reads.

It adds that Equity bank was under a duty to demonstrate the process through which a customer was enrolled onto the platform and that she consented to such enrolment.

“The Appellant did not provide any documentary evidence during trial to prove that the Respondent consented to register or be registered to the EAZZY banking App, such as a consent form that was signed by her or any signed application form or terms of service showing the Respondent knowingly opted into mobile banking,” the ruling goes on.

“For a customer who primarily transacted physically at the branch and who disputed the use of digital banking, activation of a digital platform by or through the bank, without proof of explicit and documented customer enrolment and adequate explanation of the attendant risks, would fall short of the standards of fairness, reliability and transparency required under the Financial Consumer Protection Guidelines.”

The judge added that where a financial institution seeks to rely upon customer negligence arising from misuse of a digital banking platform, it must first demonstrate that the customer was properly enrolled onto that platform and adequately informed of the attendant risks. The judge ordered that the bank pays Birungi her Shs25million with interest of 8% from 2020 and another Shs 5million in damages. She also ordered that Equity bank meets the cost of the suit

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