The High Court in Kampala has dismissed a commercial case filed by Entebbe Municipality Mayor Fabrice Brad Rulinda against Stanbic Bank over a disputed deposit of $73,262.50 (more than 273 million shillings) linked to the M23 rebel group in the neighbouring Democratic Republic of Congo.
The judgement delivered electronically on Monday by the Commercial Division of the High Court Judge Stephen Mubiru shows that Rulinda operated a dollar account at Stanbic Bank’s Bugolobi Village Mall branch.
That as a result, on August 10th 2017, M/S Green Global Corporation transferred $422,957.50 to his account, followed by an additional $73,262.50 on 11th August 2017. Shortly after, Stanbic Bank reversed the smaller deposit and returned it to the sender.
Rulinda then sued the bank, claiming the reversal was made without his consent and that it breached his banking contract. He sought recovery of the funds, interest, general damages, and legal costs.
But Stanbic Bank, represented by the law firm M/s Kyagaba & Otatiina Advocates (Dentons), responded that the transactions were unusual and later deemed suspicious.
The bank through its lawyers reported the matter to the Financial Intelligence Authority after Rulinda failed to provide documentation verifying the source and purpose of the funds.
The bank also stated that Green Global Corporation requested the reversal of the $73,262.50 deposit after discovering the funds were part of an alleged investment scam.
But Stanbic Bank maintained that it acted according to established banking practice and in compliance with statutory obligations.
Justice Stephen Mubiru in his decision examined the Anti-Money Laundering Act, noting that money laundering is the process of concealing the origin of funds derived from criminal activity.
He said the court considered the Principle of Wilful Blindness, which treats someone who deliberately avoids checking the source of funds as having knowledge that the money is linked to criminal activity.
The evidence before the Commercial Court shows that Rulinda offered multiple explanations for the funds, including transactions in gold, oil, transport, and construction.
The court however found these explanations inconsistent and noted that the funds were connected to the M23, a rebel group in eastern DRC sanctioned by the United Nations for human rights abuses and attempts to undermine state authority.
According to Judge Mubiru, Rulinda did not take reasonable steps to verify the source of the funds and that the circumstances of the transaction provided strong circumstantial evidence that the money was criminal property.
The funds were handled in a way that suggested they were derived from unlawful conduct, even though the exact predicate crime was not proven.
Mubiru also addressed the bank’s role in this saga .While Stanbic reversed the $73,262.50 deposit without a court order, this action was taken after receiving instructions from the sending bank and due to the suspicious nature of the transaction.
But to Justice Mubiru , this reversal went beyond the bank’s protective powers and was technically a breach of the banking contract, but the contract itself could not be enforced because it involved funds linked to money laundering.
According to the Judge, contracts or agreements connected to criminal activity are not legally enforceable.
The court referred to the legal principle “ex turpi causa non oritur actio,” meaning no action can arise from a dishonourable cause, implying that Rulinda could not claim the reversed funds, interest, or damages.
Judge Mubiru confirmed that the Rulinda’s conduct amounted to money laundering because he knowingly handled funds likely derived from criminal activity and deliberately avoided verifying their source. It also noted that any legal claim based on money laundering is barred by law and public policy.
Accordiningly, the Court ruled that Rulinda cannot maintain a claim against Stanbic Bank, and the suit was dismissed with orders that Rulinda should pay costs of the case to the bank .
