On 9th April 2024, the Commercial Court of Uganda ruled that banks can be held partially liable for online fraud suffered by customers. Justice Cornelia Sabiiti in Abacus Parenteral Drugs Limited v Stanbic Bank Ltd. (Civil Suit No. 0322 of 2022) highlighted the balance of responsibilities between banks and their customers in safeguarding against fraudulent online transactions.
The core of the Plaintiff’sargument centered around the bank’s failure to verify beneficiary details prior to executing transactions. The court found that the Bank breached its contractual obligations by honoring payment instructions that were based on incorrect beneficiary details. Court emphasized the banks’ duty to reject any erroneous instructions.
However, the Court held that Abacus Parenteral Drugs Limited acted negligently by allowing a single individual to both initiate and approve transactions contrary to its contractual obligation to implement appropriate internal control measures. The Court invoked the principle of contributory negligence, holding that Abacus Parenteral Drugs Limitedbore significant responsibility for not detecting anomalies in the transaction records, leading to substantial financial losses. Court apportioned blame, assigning 80% to Abacus Parenteral Drugs Limitedfor its negligence and 20% to Stanbic Bank for failing to implement robust security features in its online banking systems.
This case marks a significant development in the law on apportionment of liability for online fraud suffered by bank customers. The judgment may be downloaded here…