Equity Bank Ordered to Refund Millions of Money Their Customer Lost Through Mobile Banking Fraud

A bank account that once held more than Shs27 million had, within months, been reduced to just Shs27,100.

When Irene Birungi walked into an Equity Bank branch in October 2020 expecting to make a routine transaction, she instead found herself at the centre of a legal battle that would stretch nearly six years and test where responsibility lies when customers lose money through digital banking.

This week, the High Court delivered a clear answer.

In a judgment that could shape future disputes over electronic banking fraud, High Court judge Anna Mugenyi dismissed an appeal by Equity Bank and upheld an earlier decision ordering the bank to refund Birungi more than Shs25 million lost from her account, together with interest and damages.

At the heart of the case was a simple but consequential question: Had Birungi authorised the transactions, or had the bank failed to safeguard her money?

Judge Mugenyi concluded that the evidence favoured the customer.

“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.

Court records show that Birungi opened her account at Equity Bank’s Katwe branch on December 30, 2019, initially depositing Shs500,000 before later crediting another Shs27 million. On July 7, 2020, she withdrew Shs2 million, leaving a healthy balance.

Three months later, however, almost all the money had disappeared.

Believing the withdrawals were unauthorized, Birungi sued the bank before the Mengo Chief Magistrate’s Court in 2020. The court ruled in her favour, ordering Equity Bank to refund the Shs25 million at an annual interest rate of eight percent and to pay an additional Shs5 million in general damages.

The bank challenged that decision in the High Court.

In its defence, Equity Bank argued that the loss stemmed not from any weakness in its systems but from Birungi’s own actions.

According to the bank, officials from Airtel Uganda approached Birungi in October 2020 to conduct a SIM swap linked to her registered mobile number. During that process, the bank claimed, she voluntarily shared her phone number, National Identification details and bank account information.

Equity Bank maintained that those individuals then downloaded its Eazzy Banking application, completed self-registration using Birungi’s phone number and ultimately carried out the disputed withdrawals.

The bank therefore argued that Birungi’s decision to share her banking information with third parties amounted to negligence and made her responsible for the loss.

But the High Court found a critical gap in that argument.

Judge Mugenyi noted that the bank had failed to produce evidence showing Birungi had expressly agreed to be enrolled onto its digital banking platform.

“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.

The judge said that burden rested squarely with the bank.

“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.

The judgment also highlighted Birungi’s pattern of banking, observing that she primarily carried out transactions physically at the branch rather than through digital platforms.

Without documented proof that she knowingly activated mobile banking, the judge said, the bank could not shift responsibility to its customer.

“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 court further emphasized 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.

In the end, the High Court upheld the lower court’s decision in its entirety.

Equity Bank was ordered to refund Birungi Shs25 million together with eight percent annual interest dating back to 2020, pay her Shs5 million in general damages and meet the costs of the suit.

The ruling is likely to resonate beyond the parties involved. As banks continue expanding digital financial services, the judgment reinforces the principle that financial institutions bear the responsibility of proving customers knowingly consented to mobile banking services before liability for fraudulent electronic transactions can be shifted to account holders.

Months ago, Equity Bank Uganda was Ordered to Pay Millions to Indian Company Over Mukwano’s Documents Shipping Deal as detailed HERE.