The Bank of South Sudan (BoSS) has threatened to suspend Stanbic Bank’s licence over an ongoing dispute involving millions of shillings deposited into a Kenyan airline’s bank account and later reversed.
In a letter to Stanbic, BoSS said it had received a formal notification from the Internal Security Bureau’s (ISB) Financial Intelligence Unit (FIU) concerning the feud between the lender and Air Afrik Aviation, in which it was named as a party.
The regulator ordered Stanbic to cease any further actions or operations that may contravene existing regulations or obstruct ongoing investigations.
“Failure to comply with these directives will result in immediate and decisive action within two weeks of receipt of this letter, including the suspension of Stanbic Bank South Sudan banking licence," Johnny Ohisa Damian, the Governor of BoSS said in the letter.
The lender said in response that it was cooperating fully with the authorities and was committed to providing requisite information to authorised investigative bodies.
“It is our view that the matter is of a civil nature and should be treated as such in any jurisdiction, which calls for the requisite judicial process aligned to a civil dispute,” Stanbic said in response.
Air Afrik, through its managing director Eric Lugalia, accuses Stanbic Bank of freezing its accounts and deducting money without authorisation after 14 months, resulting in the loss of an aircraft leasing deal with the South Sudanese government.
Earlier this month, an international arrest warrant was issued for the country manager of Stanbic Bank's South Sudan branch, Fredrick Owuor Ouko, over the dispute.
Mr Ouko's arrest warrant was issued on January 7, 2025 by the Public Prosecution Attorney. Before that, the prosecutor had issued summons to the bank’s chief executive officer, Joshua Oigara, over the same dispute.
In the letter dated January 17, BoSS asked Stanbic to cooperate with the FIU, the ISB Anti-Corruption Security Division and all relevant investigative and legal authorities by ensuring full disclosure and documentation relating to the allegations and recording of statements from required personnel of the bank.
“The Bank of South Sudan shall not tolerate any breach of trust or regulatory compliance that undermines the integrity of the financial sector in South Sudan,” the letter added.
The dispute
The airline was a customer of the bank and operated an account at its branch in Juba, South Sudan.
On February 5, 2016, the bank received a credit note from BoSS informing it that the airline’s clearing and settlement account at BoSS had been credited with $7.22 million (about Sh931 million).
The lender went ahead and credited Air Afrik’s bank account with the amount.
Stanbic said the airline allegedly carried out high-value transactions on its account, withdrawing a total of $1.1 million (Sh141 million).
The lender said it later realised that no actual funds had been remitted by BoSS as alleged and reversed the funds to prevent further withdrawals since the funds ‘were paid in error”.
In an affidavit filed in court, Mr Owuor said the credit made was only a paper credit transaction that was reflected in the bank’s books for purposes of internal accounting, which is a normal practice in the banking industry, but does not translate to remittance of available funds.
“In normal practice, such funds would reflect as a credit on the customer’s account but would not reflect in the available balance until actual funds had been received, in this case, BoSS wiring the corresponding funds to the nostro account,” he said.
A nostro account is an account that a bank holds with a foreign bank in the currency of the country, where the funds are held.
The airline sought to be paid damages for losses suffered after a plane leasing contract of $20 million with the South Sudan government was terminated after the funds were withheld.
The parties then unsuccessfully tried to resolve the dispute before Air Afrik lodged the complaint with the Central Bank of Kenya (CBK) and later filed a case before the High Court.
The carrier sued Stanbic for allegedly breaching banking regulations after it credited $7.2 million to its accounts, before freezing and reversing the money without a valid court order or a directive from the CBK.
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