Big Story: Tirupati Dev’t Drags Bank Of Uganda, KCB To Court Over Money Laundering, Fraud

The management of Tirupati Development Uganda (TDU) has dragged KCB Uganda and KCB Kenya, accusing both banks of among other misdeeds, money laundering and fraudulently debiting the company accounts under the auspices of clearing a loan of USD70,000 which they secured from the bank.

Documents filed in court through their lawyers of Aegis Advocates and Kirunda & Wasige Advocates, the Plaintiffs, Tirupati Development Uganda Limited, accuse KCB bank Uganda (Defendant 2nd) and KCB bank Kenya (Defendant 3rd) of ten which include; Breach of contract, Negligence; conversion, detinue, deceit, breach of fiduciary duty, breach of statutory duty, money laundering, fraud and conspiracy to defraud injurious breach of public policy.

The Plaint filed in court by Tirupati Development vide High Court Civil Suit No.015 of 2022, also includes the Bank of Uganda as the 1st Defendant and the Financial Regulatory Authority, since the two institutions are the regulatory authorities that govern the operation of commercial banks and other financial institutions in the country.

The affidavit filed on court record by Tirupati Development indicates that on July 17th, 2012, KCB Uganda and KCB Kenya entered into an agreement to extend a syndicated loan facility to the real estates company worth USD7,000,000.

Tirupati Development Uganda at that time operated only one account with KCB Uganda, Account Number 2201449317 registered in the company name.

The Company provided both banks with several certificates of title to properties it owns, the same having been stipulated in the agreement between the parties and listed therein when they were executing the agreement.

According to the loan agreement signed between Tirupati, KCB Bank Uganda and KCB Bank Uganda, both parties agreed that USD5,140,000 was to be disbursed to Tirupati on account of the syndicated loan facility between July 2012 and August 2013.
They also agreed that another disbursement of USD1,584,000 between September 2013 and August 2014 was to be made and the final disbursement of USD276,000 to be transferred on their account in September 2014.

However, whereas both banks agreed to transfer a total USD 7,000,000, what was actually transferred to the Tirupati account USD 6,990,000, which brought about a discrepancy in their agreement.

When Tirupati raised the matter, KCB Uganda and KCB Kenya agreed to charge the company loan negotiation fees to the tune of 0.5% of the total loan amount, which amounted to USD35,000 as per the Loan Agreement executed between the parties.

To their understanding, Tirupati was convinced that throughout the contracting period, all principal and interest payments for the loan facility were to be made through the company’s US Dollar current account number 2201449317.

To their disappointment however, Tirupati argues that the two banks breached the agreement by not honouring their commitments when they failed to transfer the agreed amount of USD 7,000,000 and instead disbursed USD 6,990,000.

Tirupati also argues that the banks acted fraudulently by debiting the company’s account with loan negotiation fees exceeding the amount they had agreed upon.

The company also told court that the banks failed and wilfully refused to provide Tirupati with a detailed breakdown of how the loan negotiation amount charged was arrived at why the company was not duly informed by both banks.

The company also argues that both KCB Uganda and KCB Kenya in August 2016, opened and started operating two separate US Dollar-denominated loan accounts in the names of Tirupati Developments Limited without seeking the company’s consent or informing them about the move.

The impugned accounts were: Account number 1059906732 with KCB Kenya and Account number 2150226057 with KCB Uganda.

As if that wasn’t enough, Tirupati argues that in January 2017, KCB Uganda opened and started operating another US dollar current account Number 2290351628 in the company’s name without informing them or seeking their consent.

Tirupati told court that they noticed the anomaly in 2018 and formally raised complaint to both banks about the several suspicious transactions on its current and loan accounts, but didn’t receive any reasonable explanation for the banks.

Thereafter the company made continuous demands for a forensic audit and reconciliation of accounts to ascertain the status of their loan repayments, and requested for the issuance of bank statements.
But none of their requests was honoured by both banks, which raised even more suspicion and consequently made it difficult for Tirupati to service the loans.

Following a forensic audit of their accounts, the company discovered that both banks had used fictitious accounts to execute at least 1,541 fraudulent transactions of colossal sums of money between 2014 and 2021, which totaled to USD79,900,000.

The acts of both banks not only breach the dictates of the Financial Regulatory Authority but also amounted to a conspiracy to defraud, which made Tirupati susceptible to suffering loss and damages occasioned by both banks.

It is for that reason that the company dragged both banks to the High Court, praying for a declaration that both KCB Uganda and KCB Kenya committed offences of money laundering through the fictitious loan accounts they opened up in Tirupati’s name, hence they are liable to compensate the company for the losses suffered through their fraudulent acts.

The charges against KCB Uganda and KCB Kenya include; Breach of contract, Negligence, conversion, detinue, deceit, breach of fiduciary duty, breach of statutory duty, money laundering, Fraud and conspiracy to defraud and injurious breach of public policy;

The company also prays to court for an order directing both KCBB Uganda and KCB Kenya to surrender the title deeds that were provided as security to them as consideration of the money funds received from Tirupati through their loan accounts.

The company also prays to the High Court to issue an order directing KCB Bank Uganda and KCB Kenya to be denied any and all the proceeds of the legally offensive and injurious practises pleaded in this suit, and another order sanctioning them to pay fines under the attendant anti-money laundering laws.

The company also prays to court for a declaration that both KCB Uganda and KCB Kenya neglected their duty to efficiently and professionally manage the risk of financial crime exposure to their client (Tirupati) after they callously executed fraudulent transactions on a client’s accounts well knowing that what they were doing was illegal.

Tirupati Development also seeks a court order sanctioning both KCB Uganda and KCB Kenya in a bid to compel the banks to pay the highest possible independent of cumulative fines provided for in the law
because of their fraudulent activities.

In their plaint, Tirupati Development prays still that court holds both Bank of Uganda and the Financial Regulatory Authority liable for negligence of their duty as the watchdog and regulatory authorities that are mandated to protect local investors from being exploited by commercial banks.

It should however be noted that this is not the first time for Ugandan investors to drag Kenyan commercial banks to court over fraudulent activities.

City businessman Hamis Kiggundu is currently battling a court case in which he accuses Diamond Trust Bank Uganda and Diamond Trust Bank Kenya of illegally grabbing his debiting his Ham Enterprises accounts without his consent under the auspices of clearing a loan he had secured from the same bank.

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