DFCU Bank has suffered a major legal setback after the High Court of Uganda ruled that the lender illegally froze a customer’s 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 held that the bank’s continued restriction of Mr. Bob Ainebyoona’s account was unjustified, procedurally flawed, and in breach of both statutory obligations and the banker–customer relationship.
The court ordered DFCU to unfreeze Account No. 01071157642434 within seven days and awarded costs of the application to the applicant.
Court records show that Ainebyoona operated a Dembe Account with DFCU and enjoyed what he described as a cordial banking relationship until he attempted to withdraw funds at the Naalya branch.
He was redirected to the Ndeeba branch and later to the bank’s head office, where he was allegedly detained and arrested by police over accusations of theft involving Shs13.1 million linked to MKASH transactions.
Ainebyoona was charged in Criminal Case No. 0655 of 2020 before the Chief Magistrate’s Court at Buganda Road. However, in December 2023, he was acquitted of all charges after court found no criminal liability on his part. The trial court ruled that the disputed Shs13.1 million was proceeds from the sale of bitcoins by a co-accused.
Despite the acquittal, DFCU maintained a freeze on Ainebyoona’s account, which held Shs80,450,748.
In its defence, DFCU admitted Ainebyoona was its customer but claimed the account was restricted following internal investigations that revealed suspicious or potentially fraudulent transactions.
Through an affidavit sworn by its Acting Head of Financial Crime Management, the bank argued that criminal acquittal does not extinguish a financial institution’s regulatory obligations, particularly where there are “strong grounds” to believe funds may be proceeds of crime.
The bank relied heavily on the Anti-Money Laundering Act, arguing that it was duty-bound to prevent the dissipation of suspicious funds.
However, Justice Kavuma found fatal gaps in that argument. She noted that while banks may freeze accounts where suspicious activity is detected, the law requires such suspicions to be reported to the Financial Intelligence Authority within 48 hours or two working days.
The court found no evidence that DFCU ever made the mandatory report.
“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 further stressed that allegations of fraud must be strictly proved. Despite repeated claims that the funds were suspicious, DFCU failed to present fresh evidence beyond matters already resolved in the criminal trial.
Justice Kavuma warned that allowing banks to maintain indefinite restrictions based on unproven suspicions would permit them to operate as “parallel tribunals,” undermining constitutional safeguards.
Violation of Property Rights
The ruling also invoked Article 26 of the Constitution of Uganda, which guarantees the right to property. The prolonged freezing of Ainebyoona’s funds—long after his acquittal and without statutory compliance—was held to be unlawful.
While acknowledging that the initial freeze may have been prudent, the court found that the more than two-year restriction exceeded what the law permits.
Although Ainebyoona sought general damages, the court declined to award them due to lack of specific proof of quantified loss. However, he was awarded costs, meaning DFCU will bear the legal expenses.
A Strong Signal to Banks
The judgment sends a clear warning to financial institutions: anti-money laundering powers must be exercised within the bounds of due process, strict timelines, and evidentiary standards.
Unless appealed, DFCU must unfreeze the Shs80 million account within seven days—bringing to an end a protracted dispute that began with a failed withdrawal and culminated in a decisive High Court victory for the customer.