The Co-operative Bank of Kenya has won a case challenging its reversal of Ksh10 million ($77,519.37) deposited in a client’s account without proper documentation, the latest decision that could weigh the validity of anti-money laundering law with rights of individuals.
The case is about an account holder who received the money but couldn’t provide sufficient proof of documents of why the money was wired.
At the centre of the legal tussle was a Mr George Ng’ang’a Mbugua (Petitioner) an Advocate of the High Court of Kenya who practices under Mbugua Ng’ang’a& Co Advocates, and Co-operative bank (Respondent).
Mr Mbugua operates an account at Co-operative bank’s Nairobi Business Centre Branch. And court documents show that, on or about October 19, 2023, the bank received into the advocate’s account a sum of Ksh10 million ($77,519.37) payable to Mr Mbugua from the County Government of Murang’a. The bank asked Mbugua to furnish supporting documents for the funds, part of a legal requirement to prevent money laundering.
Kenya’s Proceeds of Crime and Anti-Money Laundering Regulations, 2023 (POCAML Regulations) require reporting institutions including banks to file reports to the Financial Reporting Centre (FRC) all cash transactions equivalent to or exceeding $15,000.
Normally, banks can withhold actual disbursement not because the account holder is guilty of money laundering but as a compliance requirement for accountholders to provide supporting documents for deposits equivalent to or more than $15,000.
According to the court documents, Mbugua furnished a copy of a fee note, decree and payment voucher for the part payment, but he did not provide a copy of the contract-letter of engagement which the bank had also requested.
According to the bank, the documents furnished by Mbugua were found to be insufficient to support the amount credited in his account.
As a result, due to lack of sufficient supporting documents, the bank reversed the entire amount of Ksh10 million ($77,519.37) to the source (the County Government of Murang’a).
Mr Mbugua (Petitioner) then filed a Constitutional petition in the High Court dated October 27, 2023, seeking accusing the bank of violating his rights to a fair administrative action, right to property, right not to be arbitrarily deprived of such property, consumer rights.
He also sought compensation equivalent to the actual loss of Ksh10 million ($77,519.37) that he had incurred as a direct result of the impugned action of the Bank.
Additionally, the advocate sought for an award of Ksh 5 million ($38,759.68) in general damages as a conservative estimate compensation for the wrong suffered at the hands of the Bank.
Co-op bank’s lawyer Paul Wanga submitted that under the Prevention of Crimes and Anti-Money Laundering Act (POCAMLA) and the regulations and guidelines made thereunder, the Bank was simply complying with the law when dealing with high-value transactions.
He argued, the Bank was obligated to enquire, under the “Know Your Customer (KYC)” principle, the source of the funds as well as the purpose of the payment.
The Bank also argued that it acted reasonably, diligently and in good faith by reversing the money to the County Government of Murang’a after unsuccessfully engaging the Petitioner (Mbugua) on a number of occasions.
Justice Peter Mulwa, on March 13, 2025, said Co-op bank’s response and arguments were valid because the Bank reversed the money after reasonable request for supporting documentation and that the reversal decision was proportionate, and in compliance with POCAMLA.
“In conclusion I find that the Bank’s actions were reasonable, and there was no violation of the Petitioner’s constitutional rights. It follows this petition fails in its entirety and is dismissed. Each party to bear their own costs,” said the Judge.
The Court also stated that the right to property under Article 40 of the Constitution of Kenya is not an absolute right and may be limited by the need to protect the public interest, including the fight against money laundering and the prevention of economic crimes.
POCAMLA requires that whenever a reporting institution or supervisory body becomes aware of suspicious activities or transactions which indicate possible money laundering, terrorism financing or proliferation financing activities, it shall report to the Financial Centre within two days after the suspicion arose.
These regulations also provide that a person intending to carry monetary instruments equivalent to or exceeding $10,000 to or from Kenya shall, before doing so, declare the particulars concerning that conveyance to the Customs Officer.
The Customs Officer shall then immediately, but not later than five days, submit the declarations to the Financial Reporting Centre.
Sufficient information shall be disclosed by the reporting institution or supervisory body indicating the nature of and reason for the suspicion and provide additional supporting documentation to the Centre.
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