Appeal Court Ruling Highlights Compliance Boundaries for Banks in Financial-Crime Referral

 The Court of Appeal in Abuja has overturned a Federal Capital Territory High Court ruling that held Fidelity Bank Plc liable in a fundamental-rights case arising from an investigation involving the Economic and Financial Crimes Commission.

 A three-member panel, led by Justice Adebukola Banjoko, delivered judgment recently, allowing the bank’s appeal and reversing the lower court’s decision, which had awarded N10 million against Fidelity Bank, the EFCC and former EFCC chairman Abdulrasheed Bawa

 The case followed the arrest and detention of Michael Kundera in May 2023. Kundera had alleged that his detention breached his constitutional rights.

 Fidelity Bank argued that it should not have been held responsible for the alleged rights violation because its role was limited to submitting a petition to the EFCC concerning suspected financial misconduct involving entities that had obtained a N100 million loan procurement order from the bank for a specific project.

 The bank maintained that the funds were allegedly diverted for personal use and that Kundera was not the subject of its petition.

 The appellate court found that there was insufficient credible evidence linking Fidelity Bank to any infringement of Kundera’s fundamental rights. It also held that the claimant had not established a sufficient basis for the reliefs granted by the trial court.

 From a compliance perspective, the ruling highlights the importance of clearly defined roles when financial institutions identify and report suspected misconduct to law-enforcement agencies.

 Banks rely on customer due diligence, transaction monitoring and internal investigations to identify potentially suspicious activity. The decision underscores the distinction between detecting and reporting financial-crime concerns and participating in subsequent law-enforcement action.

 For compliance teams, maintaining comprehensive records of internal reviews, supporting documentation, suspicious-activity reports and communications with investigators remains critical. Clear escalation procedures can also help demonstrate that regulatory and law-enforcement referrals were made on the basis of documented concerns.

 The ruling provides a reminder that effective compliance requires both robust financial-crime reporting and disciplined documentation of the basis for regulatory referrals.