First Community Bank A Kisumu-based firm has scored a big win against First Community bank after the High Court found it culpable for negligence in the case of unknown persons opening accounts in the firm’s name, depositing cheques stolen from the company and withdrawing the money.
In her ruling, Justice Roselyn Aburili ordered First Community Bank to refund Sh1.2 million to Jumbo Foam Mattresses Industries Ltd.
The forgeries were detected after the company’s executives reported suspicious activity to the Banking Fraud unit which discovered that the account was opened by two strangers, Philip Owala Odera Odero and Simon Okumu Majimbo in February 2014.
The court ruled that the lender, First Community Bank, failed to exercise due diligence when the account was opened and allowed it to operate, causing the company loss of money.
The two individuals used forged documents to open the account.
Cheques would vanish from the company and be deposited in the account before being withdrawn. “I am satisfied that the appellant proved on a balance of probabilities that the respondent was negligent in the manner that it handled the entire transaction with the persons who turned out to be fraudsters, leading to the appellant losing substantial sums of money where its cheques were deposited and withdrawn from an account opened and operated by the fraudsters,” Justice Aburili said.
The judge noted that as per the evidence presented before the court, the bank did not conduct a search at the company’s registry or conduct background checks as required when the bank account was opened.
She added that had the lender carried out due diligence on the directors of the company, it would have easily been found out that the individuals operating the account were not the actual directors or even its representatives.
The company lost the case at the lower court, but won after appealing to the High Court.