The DFCU Bank has suffered a significant legal setback after the High Court of Uganda ruled that it illegally froze a customer’s bank account and unlawfully withheld more than Shs80 million for over two years.
In a detailed ruling delivered on February 23, 2026, at the Civil Division in Kampala, Justice Joyce Kavuma found that the bank’s continued restriction of Mr. Ainebyoona Bob’s account was unjustified, procedurally flawed, and in breach of both statutory obligations and the banker-customer relationship.
The court ordered DFCU to immediately unfreeze Account No. 01071157642434 within seven days and awarded costs of the application to the applicant.
How the Dispute Began
According to court records, Ainebyoona held a Dembe Account with DFCU Bank and enjoyed what he described as a good working relationship with the bank until he attempted to withdraw money from his account at the Naalya branch.
He was redirected to the Ndeeba branch and later to the bank’s head office. It was there, he claimed, that he was detained and arrested by police over allegations of theft involving Shs13.1 million linked to MKASH.
He was subsequently charged in Criminal Case No. 0655 of 2020 at the Chief Magistrate’s Court at Buganda Road.
However, in December 2023, he was acquitted of all charges. The trial court found no criminal liability on his part and determined that the impugned Shs13.1 million had been proceeds from the sale of bitcoins by a co-accused.
Despite the acquittal, DFCU maintained a freeze on his account, which held Shs80,450,748.
Bank’s Defence Falls Apart
In its defence, DFCU admitted that Ainebyoona was its customer but argued that the account had been restricted after internal investigations revealed suspicious or potentially fraudulent transactions.
Through an affidavit sworn by its Acting Head of Financial Crime Management, the bank insisted that criminal acquittal did not extinguish its regulatory duties, especially where “strong grounds” remained that the funds could be proceeds of unlawful activity.
The bank leaned heavily on its obligations under the Anti-Money Laundering Act, arguing that financial institutions must act vigilantly to prevent money laundering and dissipation of suspicious funds.
But the High Court found critical gaps in that defence.
Justice Kavuma noted that while banks are indeed empowered to freeze accounts where suspicious activity is detected, the law requires them to report such suspicions to the relevant authorities within strict timelines—specifically within 48 hours or two working days.
The court found no evidence that DFCU had reported the alleged suspicious transaction to the Financial Intelligence Authority as required by law.
“It is inconceivable,” the judge observed, “for the respondent to keep holding the applicant’s money on grounds of a continuing obligation to report when in fact they have not reported to the relevant authority.”
The court concluded that DFCU had invoked the Anti-Money Laundering law as a shield while failing to comply with its mandatory reporting provisions from the outset.
Fraud Allegations Not Proved
The ruling further emphasised that allegations of fraud carry a heavy burden of proof.
Although DFCU repeatedly claimed the funds were suspicious, the judge found that the bank presented no fresh evidence to substantiate its assertions beyond the matters already resolved in the criminal trial.
Citing established case law, the court reiterated that fraud cannot be inferred; it must be strictly proved. The bank’s claims of “strong grounds” were described as unsubstantiated and incapable of withstanding judicial scrutiny.
Justice Kavuma warned that allowing banks to maintain indefinite restrictions based on unproven suspicions would effectively permit them to operate as “parallel tribunals,” undermining constitutional protections.
Violation of Property Rights
The court also linked the matter to Article 26 of Uganda’s Constitution, which guarantees the right to property.
By continuing to withhold Ainebyoona’s money long after his acquittal—and without complying with statutory procedures—the bank was found to have breached both the law and its contractual obligations under the banker-customer relationship.
While the judge acknowledged that DFCU initially acted prudently in freezing the account pending investigations, she held that the prolonged restriction—lasting more than two years—went beyond what the law permits.
“The continued freezing of the applicant’s account and withholding of his funds is unjustified and unlawful,” the ruling stated.
Damages Denied, But Costs Awarded
Although Ainebyoona sought general damages for financial loss and suffering, the court declined to award them. Justice Kavuma ruled that damages could not be granted in the absence of specific evidence demonstrating quantified loss resulting from the freeze.
However, the applicant was awarded costs of the application, meaning DFCU will bear the legal expenses incurred in the case.
A Blow to Banking Compliance Practices?
The ruling sends a strong signal to financial institutions about the limits of their anti-money laundering powers.
While affirming that banks have a duty to scrutinise suspicious transactions, the court underscored that such powers must be exercised within the confines of due process, statutory timelines, and evidentiary standards.
For DFCU Bank, the judgment represents a costly legal defeat and a judicial rebuke over its compliance practices.
For customers, it reinforces the principle that financial institutions cannot freeze accounts indefinitely without lawful justification and procedural compliance.
Unless appealed, the bank must unfreeze the Shs80 million account within seven days of the ruling—bringing to an end a protracted dispute that began with a failed withdrawal attempt and culminated in a decisive High Court victory for its customer.
