The Bank of South Sudan’s official has disclosed that Stanbic Bank transferred $7.2 million to Air Afrik Aviation in 2016 but later withheld the funds, claiming insufficient balances in an ancillary account. Air Afrik has since initiated a legal dispute against Stanbic for wrongful fund reversal, which led to the termination of a crucial leasing agreement. Court testimonies suggest that there was no proper linkage between the nostro account issues and the intended transfer, raising significant questions about banking practices and client obligations.
A senior official from the Bank of South Sudan (BoSS) has confirmed that Stanbic Bank transferred $7.2 million (approximately KSh 929.14 million) to Air Afrik Aviation in 2016, but subsequently withheld these funds, citing concerns of insufficient balances in an associated account. Mr. Chan Andrea Chan, the director of financial market departments at BoSS, explained that while Stanbic claimed it could not disburse the funds due to issues with their nostro account, there was no direct relation between this account and the $7.2 million involved in the transaction. Mr. Chan highlighted in court proceedings that Stanbic should have refrained from crediting the airline’s account until their nostro account received adequate funds. “I reiterate that the nostro account had no connection with the subject transaction for the transfer of $7.2 million. These are issues to be dealt with between Stanbic and BoSS in the general course of doing the business of banking,” he stated before Justice Nixon Sifuna. Air Afrik asserts that the freezing of its funds by Stanbic resulted in a significant breach of their leasing agreement with the South Sudan government, impeding their ability to fulfill contractual obligations under a leasing agreement that was signed in 2014. According to testimony presented, Stanbic Bank did not reject the credit advice and allowed the beneficiary account to be credited before freezing the funds days later without a valid court order. Mr. Chan remarked that if the funds had indeed been insufficient, Stanbic ought to have returned the funds to BoSS promptly or requested replenishment to the nostro account equivalent to the credited amount. The airline, which initiated legal action against Stanbic in 2018, seeks compensation for financial damages incurred following the termination of a $20 million leasing contract with the South Sudan government due to the fund restrictions. Stanbic Bank contests these claims, asserting that the reversal of the transaction was necessary upon realizing the South Sudanese government’s credit note lacked adequate funding. In summary, this case underscores significant issues surrounding banking practices and obligations, particularly concerning the handling of financial transactions and agreements between offshore and domestic banking entities.
The case concerns a legal dispute between Air Afrik Aviation and Stanbic Bank regarding a significant transaction in which $7.2 million was intended for the airline’s operations but was subsequently withheld due to banking regulations and issues with the related nostro account. A nostro account is held by a domestic bank in a foreign country, and complications related to adequate funding for such accounts can lead to substantial challenges in international transactions, particularly for businesses reliant on timely and complete fund transfers. The implications of Stanbic’s decision to freeze the funds after their initial transfer point to potential systemic issues within the banking operations affecting business contracts.
The situation delineated in this case exemplifies critical challenges in banking operations, notably regarding the management of funds and adherence to financial regulations. It raises essential questions about the responsibilities of banks in processing international transactions and the impacts of procedural delays or miscommunications on clients, with particular emphasis on how such actions can disrupt business operations and contracts. As the case progresses through legal channels, the outcomes may further clarify the responsibilities banks hold in relation to managing and disbursing funds to clients and the ramifications of reversing such transactions without proper legal backing.
Original Source: www.theeastafrican.co.ke
