Civil Reference No. 7 of 2004
Power Roads Tanzania Limited held a current account at Bank of Africa Tanzania Limited's Mtoni branch. On 16 December 2014 the Tanzania Revenue Authority (TRA) transferred USD 636,860.00, being decretal sums owed to the appellant under a Tax Revenue Appeals Board (TRAB) judgment, intended for credit into that account. The bank did not credit the funds, instead treating the transfer as suspicious (the account had been largely dormant for over two years, had a minimal balance, received no advance notice, and lacked supporting documentation), and it internally reported the matter. The bank also discovered a discrepancy: the swift message named 'Power Roads Tanzania Ltd' as beneficiary while the account was held by 'Power Roads (T) Ltd'. The funds were remitted back to the TRA, which re-transferred them on 23 December 2014, but the bank still could not release them because it had reported the transaction to the Financial Intelligence Unit (FIU), which ordered suspension of all activity, and later the account was frozen by a Resident Magistrate's Court order for two months, with the funds finally credited on 2 April 2015. The appellant claimed that this delay caused it to lose an equipment-supply contract with Mantrac Tanzania Limited (intended for lease to Kalago Enterprises), resulting in loss of expected income of USD 819,568.00 and foreign exchange loss of TZS 119,092,820.00. The High Court dismissed the suit, finding the bank's suspicion and subsequent conduct justified and protected by statutory immunity for good-faith reporting under the Anti-Money Laundering Act (AMLA). The appellant appealed.
(1) Whether the High Court erred in holding that the respondent bank's withholding of the appellant's funds was lawful. (2) Whether the trial judge failed to properly evaluate the evidence, leading to erroneous findings. Subsumed within these was the central question of whether the respondent duly complied with its statutory reporting obligations under section 17 of the Anti-Money Laundering Act, and whether its conduct was protected by the good-faith immunity under section 22(1) of the AMLA, including whether bad faith or malice could be attributed to the bank despite not having been pleaded.
The appellant argued that the bank was aware of the source and intended beneficiary of the funds, failed to conduct proper due diligence as required under section 17(1) of the AMLA and regulation 23 of the 2012 Anti-Money Laundering Regulations, and that its suspicion over the transaction was unreasonable. It contended that the reporting to the FIU was a negligent misstatement and that malice or bad faith should be imputed from the bank's conduct, particularly because the bank returned the funds to the TRA before or without proper basis for reporting to the FIU, and because it was aware of the immunity under section 22(1) of the AMLA yet acted without justification. The appellant urged the Court, as first appellate court, to re-evaluate the evidence and draw its own inferences of fact, relying on precedent for such re-appraisal. The respondent argued that its actions fully complied with its statutory reporting obligations under section 17 of the AMLA, that the history of the appellant's dormant account with a sudden colossal, undocumented credit reasonably raised suspicion, and that the reporting to the FIU was not a negligent misstatement. It further contended that the appellant neither pleaded nor proved bad faith or malice, and that such an unpleaded issue could not properly form the basis of liability.
The Court of Appeal dismissed the appeal, upholding the High Court's decision that the bank was justified in withholding the funds. The Court found that the bank had reasonable grounds to suspect the transaction at the outset given the account's history, sudden large uncredited deposit, absence of prior notice, absence of supporting documents, and name discrepancy between the account holder and the stated beneficiary. However, the Court did note some procedural shortcomings in the bank's compliance with section 17(1) of the AMLA — namely a roughly 48-hour delay in reporting to the FIU and returning funds to the TRA before lodging a report, along with insufficient evidence of due diligence measures under section 17(1)(a) and regulation 23(m). Despite these observations, the Court held that these lapses did not amount to bad faith or malice sufficient to negate the statutory immunity under section 22(1) of the AMLA, especially because the appellant had never pleaded bad faith or malice in its Amended Plaint nor filed a reply to the Amended Written Statement of Defence contesting the bank's assertion of lawful compliance. Citing the Civil Procedure Code (Order VI rule 10 and Order XIV), the Court held that malice or bad faith must be specifically pleaded to give fair notice to the opposing party, and a court cannot decide a case based on an unpleaded issue. Since the freezing of the account and suspension of the transaction were compelled by lawful orders from the FIU, the Director of Criminal Investigations, and the Resident Magistrate's Court, the Court concluded that the bank's withholding of funds was fully justified. Both grounds of appeal failed, and the appeal was dismissed with costs to the respondent. The Court also dismissed a preliminary objection regarding the timeliness of the appeal, finding a minor typographical discrepancy in the Registrar's notification letter to be a harmless, non-prejudicial error not warranting invalidation of the certificate of delay.
The judgment clarifies the scope and application of the statutory immunity for banks and financial institutions under section 22(1) of the Anti-Money Laundering Act, confirming that good-faith reporting of suspicious transactions protects reporting persons from civil liability even where there are procedural imperfections in compliance with section 17, provided such imperfections do not amount to proven bad faith or malice. It reinforces the principle that allegations of malice or bad faith must be specifically pleaded under Order VI rule 10 of the Civil Procedure Code, and that courts cannot adjudicate on unpleaded issues, thereby underscoring the primacy of pleadings in defining the scope of trial and appellate review. The case also illustrates the standard for reporting persons' due diligence obligations under section 17(1) of the AMLA and regulation 23 of the 2012 Regulations, while affirming that minor administrative or clerical errors (such as in Registrar notifications) will not invalidate procedural compliance with appellate timelines under rule 90 of the Court of Appeal Rules, provided no prejudice results to the opposing party.
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