The 2022 Annual Crime Report indicates that a total of 286 cases of cybercrimes were reported to police. Cybercrimes led to a loss of UGX 19,209,798,000. The country’s banking sector has registered a series of fraud cases over the past year which has reduced public trust in the sector. Earlier this year, Equity Bank officials were charged with fraud.

This fast-growing plague also threatens the survival and economic growth of institutions within the sector due to the losses associated with combating and investigating fraud reports.

Banks have a fiduciary duty to keep clients’ money safe and in return, a client must take reasonable steps like not sharing the PIN to prevent losses. Even when parties perform their duties rightly, fraudulent schemes will manage to access the bank, and clients’ money is lost.

Who is liable for the loss?

Determining the party responsible for the loss largely depends on the type of fraud. Fraud is perpetuated in various forms ranging from arranged sophisticated cybercrimes to embezzlement schemes and forgery.

The precedent set by the Ugandan Judiciary in the case scenarios they have pronounced themselves on will help a great deal in navigating this subject.

1. Insider fraud and embezzlement are perpetrated by employees.

Employees arrange with individuals to manipulate records and authorize fraudulent transactions. Clients are then left shocked when they discover transactions they have not authorized transpiring on their accounts.

The bank is accountable and liable to pay back the client for any losses and damage suffered.

The employee of the bank is accountable to the bank. The bank can subject them to disciplinary procedures and court action thereafter if they deem it necessary.

• Cybercrime and account takeover.

Cybercrime is facilitated by the increased use of e-purchases and online purchases a lot of card details are left exposed to fraudsters who are always planning the next move.

Whereas the verification system is a safeguard to ensure your money is kept safe, users need to take caution while using card details on online sites.

Account takeover fraud is completed through a series of transactions as explained by Justice Mubiru in Aida Atiku versus Centenary Bank. The fraudster starts with the use of compromised credentials before they proceed to make small changes to the account such as the PIN so that the owner can no longer access their account. Finally, they start doing financial transactions and money transactions until the fraud is detected.

1. The Client will be liable if they did not take all reasonable care to keep their records safe.

The case of Aida Atiku versus Centenary Bank further explains that the risk of unauthorized transactions lies with the customer if the bank can establish that the security procedure it has in place is commercially reasonable for providing security against unauthorized payments.

You can trace the fraudsters and commence court action to recover the money you lost.

1. The bank may also be liable if it breaches any duty. The Imposter rule shifts liability to the party who was in the best position to prevent a forgery by exercising care.

Conclusion

The responsibility for losses resulting from bank fraud is contingent upon the specifics of each case. Banks have a fiduciary duty to protect clients’ funds, while clients must exercise reasonable care to secure their own financial information. The balance of responsibility often depends on whether the bank’s security measures are deemed adequate and whether clients have taken appropriate steps to safeguard their accounts.