Nigerian Banks Face Liability for Freezing Accounts Without Court Orders
Nigeria’s Court of Appeal has ruled that banks can be held jointly liable with law enforcement for freezing customer accounts without a valid court order, raising compliance stakes for financial institutions.
Nigeria’s Court of Appeal has ruled that commercial banks may be held jointly liable with law enforcement agencies for freezing customer accounts without a valid court order. The decision overturns a lower court ruling that had shielded banks acting on directives from the Economic and Financial Crimes Commission.
The judgment stems from a dispute involving NPG Event, Gardens & Parks Limited and Zenith Bank Plc. Zenith Bank had placed a six-month Post No Debit restriction on the appellant’s account following an alleged EFCC directive, blocking all access to the funds.
While the Federal High Court initially dismissed the customer’s claim, citing the EFCC’s statutory investigative powers, the appellate court firmly rejected this defense. Judges Bola, Kwahar, and Onwosi held that a bank cannot feign ignorance of its duty to verify the legal foundation of such directives.
The court reaffirmed that no financial institution or law enforcement agency possesses the legal competence to seize funds, place a lien, or otherwise interfere with a customer’s property without judicial backing. An ongoing investigation or mere allegation of a crime does not automatically suspend a person’s fundamental right to use their property.
This ruling significantly shifts the compliance burden onto Nigerian financial institutions. Banks can no longer rely on the presumption of regularity when receiving instructions from statutory agencies, and must independently ascertain the existence of a court order before restricting accounts.
Failure to conduct this verification exposes banks to joint and several liability for violating a customer's fundamental rights. The court rejected arguments from Emeka Denis Eze, counsel for Zenith Bank, that any procedural defects were solely the EFCC’s responsibility, and awarded general damages of ₦5,000,000 against the bank.
For investors and executives in Nigeria’s banking sector, the decision signals tighter operational risk parameters. Financial institutions will likely need to upgrade their legal compliance workflows to avoid litigation and financial penalties when processing law enforcement requests.
