Mistake in Bank Transfer: The Position of Law in Nigeria

INTRODUCTION

‎Modern system of banking is hinged upon a speedy technology where customers exchange transactions without knowing or physically seeing each other. Usually, this kind of  banking transactions is fraught with problems and many challenges including where a transfer is  in error, usually in an instant Fund Transfer (EFT).

‎In Nigeria where lots of people are hungry, and in eagerness to get rich, a money mistakenly transfer by an unknown account is often regarded as a “manna” from heaven and it is  normal to use such money  without recourse to heavy consequences that may accompany the usage. Inarguably, This disesteemed practice led many   people to prison for their ignorance to the position of the law in Nigeria.

‎Therefore ,this article tends to provide the general position of the law in Nigeria with regards to the erroneous transfer ; in trying to achieve that, the article will discuss the legal  Duties of the sending and receiving entity and the duty of the receiving bank owner upon receiving a credit in error and the effect of using the erroneous transferred money by the account owner under the relevant Nigerian laws .

‎Meaning of a Bank as a Financial Institution

Bank means an institution that embark in Banking business. According to section 131 of Bank and Other Financial Institutions Act, 2020  (BOFIA 2020),  Banking business is  the business of receiving deposits on current account , saving deposits account or other similar account, paying or collecting cheques, drawn by or paid in by customers , provision of finance consultancy and advisory services relating to corporate and investment matters, making or managing investments on behalf of any person whether such businesses are conducted digitally, virtually or electronically …

‎Similarly, Bank is a  licenced institution that provides financial services. Thus,  in the case of PATIL V. F.R.N.(2016) 8 NWLR (Pt. 1515) 483  the court held that:

‎”… the word ‘bank’ means an organization that provides financial services. It is a financial establishment for the deposit, loan, exchange or issue of money and for transmission of funds”. See the following cases Lingo (Nig.) Ltd. v. Nwodo(2004) 8 NWLR (Pt. 874) 30 and A.D.H. Ltd. v. A.T. Ltd.(2006) 10 NWLR (Pt. 989) 635

‎However, in Nigeria a bank must be licensed by the Central Bank (CBN) before embarking on banking business.see generally sections 3 and 4 of BOFIA 2020.‎

‎Transfer In Error: The Position Of The Law In Nigeria:

‎Transfer in error usually occurs in an instant  end-to-end (inter-bank) Electronic Fund Transfer (EFT). An instant Fund Transfer is when a  transfer  between the sending and receiving entities  is made within sixty seconds. See Clause 13.0 (paragraph 13.2) of the CBN Regulation On Instant (Inter-bank) Electronic Funds Transfer Services in Nigeria, 2018.‎

‎However, the supreme court in the case of AWUSE V. ODILI(2003) 18 NWLR (Pt. 851) 116  held that:

‎  “The word “erroneous” means incorrect or mistaken. (P. 179, para. G)”.

‎Therefore,  an erroneous transfer is the transfer made by the sending entity to the receiving entity in mistake. Or is an incorrect transfer  carried out  by the sending entity to the receiving entity.‎

‎So, as the receiving entity where an  receive an erroneous transfer is received ,  the law is settled that,The customer has a duty to inform the bank (receiving entity) to reverse the erroneous transfer. The CBN regulations On Instant (Inter-bank) Electronic Funds Transfer services‎In Nigeria, 2018 Provides under Clause 5.4 that:

the customer has the responsibility to:‎

    1.Provide accurate beneficiary account details for every EFT instruction.

  2.‎Report problems arising from EFT transactions promptly to the Sending/Receiving Entity.

‎3. Whenever a credit has been erroneously applied to the customer’s ‎account with the Receiving Entity, the customer shall promptly notify the ‎Receiving Entity and authorize the reversal of such erroneous credit.

‎4. Where the customer account is unfunded, the customer shall provide ‎funds within 24 hours, failure to provide funds shall be a ground for ‎watch-listing of the customer in the banking industry, Credit Bureau and ‎reporting to law enforcement agencies.

‎‎Equally, it is the duty  of the receiving entity to resolve such dispute resulted from the mistakes. See Clause 5.2 paragraph 12 of the CBN regulations On Instant (INTER-BANK) Electronic Funds Transfer Services in Nigeria, 2018.

‎And where a complaint is received from the sending entity to the receiving entity it is the duty of receiving entity to reverse such an erroneous transfer . The said CBN regulation  provides under clause 5.3 paragraph 8 that:

‎” upon receipt from a customer of a notification of an erroneous credit and necessary reversal authorization, the Receiving Entity shall reverse the erroneous credit”

‎Additionally, in a order to quietly resolve the issue of erroneous transfer, The CBN regulations provides under Clause 10.4 that where a customer made a transfer in error:

‎ 1.   where the beneficiary is known to the complainant, the Sending entity shall encourage the complainant to contact the beneficiary for an amicable settlement;

‎2. Where the beneficiary is not known to the complainant or a known beneficiary refused to effect a refund to the complainant, the Sending entity having received a tenable claim from customer shall notify the receiving Entity who shall place a lien on the amount in the account of the beneficiary and thereafter obtain the consent of the beneficiary to ‎execute refund;

‎3. where the beneficiary does not give consent, the internal auditors of ‎the Sending and Receiving Entities shall mediate between the two ‎customers within 2 weeks of the complaint to resolve the issue, and their ‎decision shall be final. Accordingly, the lien on the amount in the ‎beneficiary’s account shall not last more than 2 weeks;

‎However, where the receiving account used the money mistakenly transferred to his account, the Bank has a power to  put a lien on the account, or in the event of account abandonment,report the account to law enforcement agencies.  This position can be gleaned from the wordings of paragraph 4 of the clause 10 under the CBN Instant fund Transfer regulations.‎

‎In addition to the above regulations, any person who uses a money erroneously transferred to his account may be charged for committing a criminal offence under the relevant Nigerian legislation.

‎For example, under Section 383 of the criminal code provides:

‎383. (1) A person who fraudulently takes anything capable of being stolen, or fraudulently converts to his own use or to the use of any other person anything capable of being stolen, is said to steal that thing.‎

‎(2) A person who takes or converts anything capable of being stolen is deemed to do so fraudulently if he does so with any of the following intents-

‎(a) an intent permanently to deprive the owner of the thing of it;

‎(b) an intent permanently to deprive any person who has any special property in the thing of such property;‎

‎(c) an intent to use the thing as a pledge or security;

‎(d) an intent to part with it on a condition as to its return which the person taking or converting it may be unable to perform;‎

‎(e) an intent to deal with it in such a manner that it cannot be returned in the condition in which it was at the time of the taking or conversion;‎

‎(f) in the case of money, an intent to use it at the will of the person who takes or converts it, although he may intend afterwards to repay the amount to the owner.‎

‎Hence, where a person uses a money mistakenly transferred to his account,he is deemed to have stolen the money  because he deprives the owner, even where he intends to repay the amount later, the crime which attracts three years imprisonment. See section 390 of Criminal Code 390. ‎

‎Also, Section 15(1) of the Economic Financial Crime Commission Act, provides that :

“person who willfully provides or collects by any means, directly or indirectly, any money by any other person with intent that the money shall be used for any act of errors commits an offence under this Act and is liable on conviction to imprisonment for life”.‎

‎Now, in this era where kidnapping, banditry and illegal money transactions is prevalent , it is very likely that a money , a proceed of a crime, could be knowingly transferred to an account with the intention to move it to another in order to evade the hook of security forces. So, where the account owner uses such money, he will be charged under the above section for indirectly collecting money to facilitate a crime.

‎Moreover, Under Section 18(2)(d) of the Money Laundering (Prevention and Prohibition) Act, 2022 provide that:

‎‎” Any person or body corporate, in or outside Nigeria, who directly or indirectly…acquires, uses, retains or takes possession or control of any fund or property, intentionally, knowingly or reasonably ought to have known that such fund or property is, or forms part of the proceeds of an unlawful act, commits an offence of money laundering under this Act”.‎

‎Under the money laundering Act, the unlawful act referred  to including, theft (stealing), a crime that attract imprisonment under the various Nigerian laws and knowledge, intent and suspicion form part of the element of establishing this offence. See generally section 18 of the money laundering Act.

‎Therefore, the position of law in a Nigeria is that, it is a crime to use a money transferred in error to an account without knowing the sender or purpose of sending the money, and same act can land someone into prison.

‎Conclusion

‎As has been exposed above, to err is human; so error in transfer is normal, but for the recipient to use the money is abnormal and unlawful under the relevant legislation in Nigeria.

This article highlights the position of the law regarding a mistaken instant Inter-bank transfer in Nigeria, the duties of the receiving entities along side that of sending entity and legal consequences of using the transfered money under the Nigerian legislation.

‎It is therefore, submitted that, whoever uses the money transfers erroneously to his account commit a crime in Nigeria and hence, there is a punishment.

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