A senior official of the Bank of South Sudan (BoSS) has confirmed that Stanbic Bank credited the accounts of an aviation firm with $7.2 million (KSh929.14 million) in 2016 but withheld the money from the would-be beneficiary over claims of insufficient funds.
Mr Chan Andrea Chan added that although Stanbic alleged that it could not pay the beneficiary — Air Afrik Aviation — because their nostro account had insufficient funds, the said account had no connection whatsoever with the funds.
A nostro account refers to a bank account held in a foreign country by a domestic bank, denominated in the currency of the overseas country.
The witness, who is currently the director of financial market departments at BoSS, said Stanbic should have withheld the credit into the airline’s bank account until their nostro account was credited with sufficient funds, “to clearly justify any possible connection between beneficiary and the nostro account”. Mr Chan was testifying in a case where Afrik has sued Stanbic for freezing the 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 told Justice Nixon Sifuna.
Afrik claimed that the reversal of the funds led to the termination of a plane leasing agreement with the government of South Sudan as the airline could not execute its obligations under a leasing agreement dated September 4, 2014.
Mr Chan, who was in charge of overseeing the front, middle, and back office foreign transactions at BoSS told the court that Stanbic did not reject and decline the credit advice but went ahead and credited the beneficiary account with the amount.
He said it took Stanbic about three days to credit the airline’s bank account from the date of credit advice.
“A nostro account generally handles funds for different transactions. If the funds were not sufficient, Stanbic Bank should either have returned the funds to BoSS immediately or requested for replenishment of their nostro account with the equivalent of $7.2 million to be credited to the Plaintiff and meanwhile not credit the customer’s account,” he said.
The carrier sued Stanbic in 2018 over an alleged breach of banking regulations after crediting $7.2 million into its accounts, before freezing and reversing it without a valid court order.
The airline sought to be paid damages for losses suffered after a plane leasing contract of $20 million(Sh2.58 billion) with the South Sudan was terminated after the funds were withheld.
The airline says the money had been deposited for a plane-leasing contract it signed with the Ministry of Defence and Veteran Affairs of South Sudan in September 2014.
Stanbic has denied the claims and reversal stating that the transaction was reversed after realising that the credit note from the South Sudan government did not have funds and the lender could not use its own money.
