The ability of the Central Bank of Nigeria (CBN), other regulatory organizations like the Economic and Financial Crimes Commission (EFCC), and the Police to freeze the assets of individuals and corporate entities in Nigeria is one of the persistent questions that entrepreneurs, particularly those working within the Nigerian tech ecosystem, have asked countless times. This inquiry keeps coming up as a result of numerous instances and documented cases in which the CBN has frozen the bank accounts of Nigerian individuals and start-up tech companies.
At this point, it is crucial to examine the regulatory agencies’ authority, particularly the CBN’s ability to obtain an order freezing the assets of Nigerian citizens and corporate entities, as well as the extent of that authority and the remedies available when those powers are not used properly.
What's in this guide?
The Powers of the CBN
The CBN has powers to maintain and advance a stable financial system in Nigeria, it also has regulatory oversight over the country’s financial institutions. To maintain and promote a sound financial system, it is important to make sure that activities that are intended affect the economy negatively are discouraged, just as it is important to discourage criminal activity and prescribe appropriate sanctions for it to maintain peace and order in society.
Section 97 of the Banks and Other financial institutions Act (BOFIA) provides that Anyone in Nigeria who has an account with a bank or other financial institution may have their account frozen by the CBN or any other regulatory authority.
According to Section 97 BOFIA, only the Federal High Court alone has the authority to order the freezing of any account; the CBN Governor or any other regulatory agency cannot do so on their own without a court order.
However, the CBN and other regulators can instruct any bank to freeze the specified accounts following the court order.
If the CBN Governor has grounds to suspect that transactions in a given bank account may have involved the commission of a crime under any Nigerian law, the CBN may ask a court for an order to freeze that account by submitting an ex-parte application to the Federal High Court for an order to freeze an account along with an affidavit made under oath.
The CBN Governor must notify the appropriate government agency when an account has been frozen, unless the issue is related to a violation of a law that the CBN administers, such as the BOFIA Act or the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act.
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Ground and Purpose of the order
According to the Act, the CBN Governor must have grounds for suspecting that any such bank account’s transactions “may involve the commission of any criminal offence under any law.”
To put it another way, the CBN Governor can only request a freezing order if they believe that the transactions under investigation involve the actual commission of a crime against a written law, not just a violation of a CBN directive, manual, or circular.
Also, BOFIA clarified that an order freezing the bank accounts of anyone suspected of being involved in illegal transactions must be done to investigate the transactions in question. According to Sections 97(3) and (4) of the BOFIA, the CBN Governor must refer a case involving a frozen account to the appropriate law enforcement agency for an investigation into any potential criminal activity. If this is not followed, it will be considered a legal violation and may result in a claim for damages and the enforcement of fundamental rights against the CBN.
Duration of the Order
The Federal High Court (Civil Procedure) Rules, 2019, provide in Order 10 Rule 1 that an order made on motion ex-parte may not, unless the Court otherwise directs in the interest of justice, orders made on motion ex-partes have a duration of no more than 14 days following when an individual affected by the order has approached the court to have it discharged or varied.
BOFIA does not provide for a time-frame for an order freezing a bank account to be in existence. The FHC Rules thus stipulate that an ex parte order has a 14-day life span.
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What to do if your account has been frozen
According to court rules, a person who is impacted by such an order may apply to the court within 14 days of the order’s issuance to have the account freezing order lifted. Once applied, the court has the option of dissolving the order, making it absolute, adjourning the case, allowing additional evidence to be presented in favour of or against the order, and changing the order’s terms to better suit the merits of the situation.
The person who is affected may appeal the order to the Court of Appeal if an application to modify or discharge an order if denied at the court of the first instance.
Conclusion
Although it is established that the CBN has the authority to request an order from the court to freeze accounts that are believed to have been used for illegal transactions, the court must be guided by the need to ensure that investigations into alleged criminal activity are not impeded and that law-abiding citizens are not denied access to their property.
As a result, it must strictly examine the facts presented to it before making any decisions.
Frequently Asked Questions (FAQs)
Can I undertake a fundamental right claim when my account is frozen?
Yes, a fundamental right claim can be brought before the State High Court against the CBN or any regulator that froze your account. This suit can be brought if you believe that the CBN did not follow the prescribed procedure or had no grounds to freeze your account in the first place. You can also claim damages in your application.
Is it the federal High Court alone that can order an account to be frozen?
No, it depends on the subject matter of the case. If you commit simple offences like fraud, the police can bring an application to have your account frozen at any court, including a magistrate court.
