Businessman Hamis Kiggundu threw Diamond Trust Bank (DTB) under the bus following the bank’s illicit and irregular transactions amounting to Shs120 billion on his US dollar and Shilling accounts.
Information between the banking corridors indicates that customers are not taking chances with the uncertain future of DTB and have started withdrawing their money as they quit amidst fear that the bank’s huge fraud scandal it is facing.
The bank has for long been accused by Ham Enterprises of irregularly, fraudulently and illegally deducting monies from the Company’s shillings and US dollar accounts totaling approximately Shs120 billion during a spread period of about ten years they have worked together as lender and borrower.
Ham Enterprises in court papers prove that DTB fraudulently withdrew 34,295,941,533 billion from a shillings account and 23,467,670.61 Million from a United States Dollar Account as per the account statements for a 10-year banking relationship that they had operated those accounts.
Now, the case being processed in court has unsettled customers who according to inside information from the bank have started withdrawing their money. They fear that the ongoing scandal reveals the true colors of the financial institution.
The company has strongly protested the bank’s action in court. Recently, the Commercial Division of the High Court in Kampala set aside regulation 13 of the Mortgage Act 2012 requiring Ham Enterprises (U) Ltd to make a security deposit of 30 per cent of contested money.
“The Mortgage Act was enacted in 2010. However, it was not until 2012 that Regulation 13 under the Mortgage Regulation 2012 that requires payment of a 30 per cent deposit was smuggled into the laws of Uganda as a photocopy to the income tax law which required a taxpayer to pay URA a deposit of 30 per cent on an assessment before they could challenge such assessment at courts of law,” Ham Enterprises said in its appeal.
“Banks have always used this law (Regulation 13) to push their clients to the wall denying them the right to a fair hearing.”
The Commercial Division of the High Court further issued an order restraining Diamond Trust Bank Uganda and Its mother company in Kenya from interfering with commercial properties belonging to Ham Enterprises (U) Ltd and the company proprietor Hamis Kiggundu.
This victory against DTB has placed it in a tight spot and customers are not taking any chances, risking their precious monies with a bank industry player, which they believe is easily collapsing.
In the past with banks like Greenland Bank, customers have lost huge sums whenever a bank collapsed. A repeat of such is what they are not willing to suffer and that matter, they are quitting the bank.
Recently, following numerous media reports indicating that bank is nearing bankruptcy, DTB assured its customers that they are still financially sound and described reports in the media as untrue and malicious. The bank said the Ham Enterprises case could not render it unviable and put it on the verge of collapse and possible takeover by Bank of Uganda.
However, this assurance from the bank has not managed to buy customer confidence. An employee in the bank who asked not to be named to protect her identity and job said most customers quitting the bank are the SMEs who can’t afford to lose their savings or work capital.
“Imagine a kikuubo man, in this COVID time, to lose hundreds of millions. So, there is that panic. We doing all to reassure the customers but looks like the damage has been done. It is not just the Ham issue; disgruntled customers have been making noise and its becoming loud. Of course, we have almost collapsed but we can’t afford to lose customers and these huge deposits at the rate it is happening,” the DTB employee said.
Bank of Uganda has not said a word as it still treats this matter as a rumor but as the sector’s regulator it has to come in at some point to reassure the public and protect the bank and the entire financial sector.
Some bank customers have however not waited for BOU’s intervention as they have already started mass withdrawals in fear for their money.
It should however, be remembered that while speaking to the Parliament committee of COSASE in April last year, the deputy governor Dr. Louis Kasekende said that “Nearly all the banks we closed or sold in Uganda failed because of outright fraud by shareholders, excessive lending of funds to insiders – managers and shareholders, collusion to cover up irregularities between board of directors and the management, and misreporting of the true state of the bank’s financial position, among many factors”. Dr. Kasekende further added that, “The Bank of Uganda only intervenes in a financial institution when it has reasonable belief and evidence that continued operations of that institution pose serious risk of loss to depositors’ funds.”
According to Ham Enterprises letter that terminated all agreements with Diamond Trust Uganda and Kenya: the same reasons given to parliament by Bank of Uganda in support for closure of the now defunct banks are very identical reasons that Ham Enterprises Cited when leaving the Bank.
If DTB loses this Shs120Bn fraud case as it has partially been with; the 30 per cent deposit requirement and A restraining order against attaching any properties, then the Bank is in much trouble.
Court will begin hearing the main application of Ham’s suit starting August 27 before the commercial court.
