INTRODUCTION

One of the questions that keep running in the minds of entrepreneurs, especially those within the Tech eco system in Nigeria is whether the Central Bank of Nigeria ("the CBN") and other regulatory agencies like the Economic and Financial Crimes Commission ("the EFCC") and the Police have the power to freeze the assets of individuals and corporate entities in Nigeria. This question keeps reoccurring because of several instances and reported cases where the CBN froze the bank accounts of individuals and startup tech companies in Nigeria. For example, in October 2019, the Federal High Court ("FHC"), on the application of the CBN, ordered the temporary freezing of the accounts of three companies allegedly involved in the smuggling of rice into the country. Also, on the 4th of November 2020, the CBN obtained an order to freeze the accounts of 19 individuals and a company, Gatefield, all linked to the #endSARS protests for a period of 90 days. Furthermore, on the 17th of August, 2021, the FHC, sitting in Abuja, ordered the freezing of the bank accounts of six companies including Rise Vest Technologies and Bamboo Systems Technology Limited. The foregoing are just minor examples compared to many instances of such, and many more which are yet to arise.

It becomes very important at this stage to examine the powers of the regulatory agencies, especially the CBN to obtain an order freezing the assets of individuals and corporate entities in Nigeria, the scope of such power and the remedies available when such powers are not exercised in proper form.

THE POWER OF THE CENTRAL BANK OF NIGERIA AND THE SCOPE OF SUCH POWER

The CBN is the apex bank in Nigeria. It has regulatory oversight over financial institutions in Nigeria and is responsible for maintaining and promoting a sound financial system in Nigeria.1 Embedded in the duty of maintaining and promoting a sound financial system is ensuring that activities that are calculated to lead to a bad financial system are curtailed, the same way to maintain peace and order in the society, criminality is discouraged, and adequate punishment is prescribed for such.

To this end, the Governor of the Central Bank of Nigeria, who is the face of the Bank is empowered to, based on certain laid down procedures, direct commercial banks and Other Financial Institutions (OFIs) to freeze accounts of persons believed to have been used in transactions involving any criminal offence under any law in Nigeria.

Specifically, Section 97 of the Banks and Other Financial Institutions Act ("BOFIA") provides as follows:

  1. Notwithstanding anything contained in any other enactment, where the Governor has reason to believe that transactions undertaken in any account with any bank, specialised bank or other financial institution are such as may involve the commission of any criminal offence under any law, the Governor may make an ex-parte application for an order of the Federal High Court verifying on oath the reasons for the Governor's beliefs, and on obtaining such court order, direct or cause a direction to be issued to the manager of the bank, specialised bank or other financial institution where the account is situated or believed to be, or in the alternative to the head office of such bank, specialised bank or other financial institution directing the bank, specialised bank or other financial institution to freeze the account.
  2. The manager of a bank, specialised bank or other financial institution in which a direction has been issued on an account under subsection (1) shall, on receipt of such direction, suspend all transactions related to such account for such period as may be specified in the direction.
  3. Where an account has been frozen under this section, the Governor shall refer the matter to the –
    1. Nigeria Police Force;
    2. National Drug Law Enforcement Agency;
    3. Economic and Financial Crimes Commission; or
    4. Any other law enforcement authority or appropriate regulatory authority;
  5. Provided that where the matter relates to the contravention of the provisions of this Act or other enactments administered by the Bank, the Governor may cause such matter to be investigated by the Bank.

From the above provisions of the BOFIA, the following can be deduced:

  1. Anyone who has an account with any bank or other financial institutions in Nigeria can be affected. The relevant words in the section are "where the Governor has reason to believe transactions undertaken in any account..." This means individuals, organisations, corporate entities, and others, maintaining an account with any bank in Nigeria, are subject to this provision.
  2. The CBN Governor, on his own, does not have the power to order the freezing of any account; only the Federal High Court has the power to make such order, after which the CBN can direct any bank, pursuant to the Court order, to freeze the accounts specified in the order. If the CBN makes an attempt to order a commercial bank to freeze the bank account of any person, such order will be invalid.2
  3. The role of the CBN is to bring an ex-parte application with an accompanying affidavit on oath to the FHC for an order to freeze an account.
  4. The grounds upon which the CBN can apply to the Court for an order to freeze an account is if the CBN Governor has reasons to believe that transactions undertaken in such bank account may have involved the commission of any criminal offence under any law in Nigeria.
  5. Where an account has been frozen, the CBN Governor shall refer the matter to the relevant government agency, except where the matter relates to the contravention of the provisions of any enactment administered by the CBN, like the BOFIA Act, the Foreign Exchange (Monitoring and Miscellaneous) Provisions Act.

THE GROUNDS UPON WHICH THE CBN GOVERNOR CAN APPROACH THE COURT FOR AN ORDER TO FREEZE AN ACCOUNT

Of all the points highlighted above from the provisions of Section 97 of the BOFIA, one that deserves a special consideration in this article is the fourth point, which is the ground upon which the CBN governor can approach the Court for an order to freeze an account.

The Act specifically provides that the CBN Governor must have reasons to believe that transactions undertaken in any such bank account "are such as may involve the commission of any criminal offence under any law..." In other words, the power of the CBN Governor to apply for freezing orders, is restricted to only when the CBN Governor believes that the transactions under investigations involve an actual commission of a criminal offence under a written law – not merely a breach/infraction of a CBN directive/manual or circular. Thus, where the CBN applies for a freezing order based on alleged infractions of a circular or directive or manual, the court is not enjoined to grant such order, and if such is granted, it should be set aside for being invalid.

In Nigerian jurisprudence, an act is only adjudged in law as being a criminal offence, where that act is prohibited by a written law (i.e. a legislation passed by either the National Assembly or a State House of Assembly). This principle is enshrined in Section 36(12) of the 1999 Constitution as amended, which provides that:

Subject as otherwise provided by this Constitution, a person shall not be convicted of a criminal offence unless that offence is defined and the penalty thereof is prescribed in a written law, and in this subsection, a written law refers to an Act of the National Assembly or a Law of a State, any subsidiary legislation or instrument under the provisions of a law. 3

It is based on this principle that a Federal High Court vacated an ex-parte order of the same Court ordering the freezing of the bank accounts of six different companies in Nigeria.4 The Court had earlier granted the application of the CBN to freeze the bank account of the companies for alleged infraction of several circulars of the CBN, especially one prohibiting dealing in cryptocurrencies. The application to vacate the said order was filed by Rise Vest Technologies Limited, one of the affected companies, arguing that CBN had no evidence that it engaged in unlawful conducts against any written law in Nigeria. Ruling on the application, Taiwo O. Taiwo held that the CBN could not rely on a circular to freeze the bank account of a company; that the CBN failed to provide any law showing that it is illegal to deal in cryptocurrency in Nigeria, adding that the CBN circular prohibiting dealing in cryptocurrencies of February 5, 2021, is not a law. The judge further held that although the CBN has the power to investigate any infraction, the infraction must relate to BOFIA or any other enactment administered by the regulator.

In the words of the judge:

I have perused the counter affidavit of the respondent and I see that the reason for freezing the account of the applicant is based on the alleged infraction of the circular of the CBN. The law is trite that any conduct that must be sanctioned must be expressly stated in a written law... Being unknown to law, circulars cannot create an offence because it was not shown to have been issued under an Act, Law or Statute.

PURPOSE OF A FREEZING ORDER

When the purpose of a thing is not known, abuse is inevitable. The relevant Act, BOFIA, did not leave us in doubt as to the purpose of an order freezing the bank accounts of any person suspected to have been involved in transactions violating the law, and that purpose is to conduct investigation into the transactions involved in the account. Section 97(3) and (4) of the BOFIA provides that where an account has been frozen, the CBN Governor shall refer the matter to the relevant law enforcement agency for investigations into the alleged criminality. If this is not complied with, it will amount to a breach of the law and may give rise to an action for the enforcement of fundamental rights and damages against the CBN.

LIFESPAN OF A FREEZING ORDER

The BOFIA does not provide for a specific duration of an order freezing a bank account, but the Federal High Court (Civil Procedure) Rules, 2019 provides 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, last for more than 14 days after any person affected by the Order has applied for the Order to be varied or discharged, or another 14 days after application to vary or discharge the Order has been argued. Thus, by the provision of the FHC Rules, the life span of an order made exparte is 14 days. However, based on BOFIA, the order will last till the time the Court had given or such an extended time, until the conclusion of the investigation.

STEPS TO TAKE IF YOUR ACCOUNT IS FROZEN BY THE CBN OR ANY OTHER RELEVANT REGULATORY AGENCES

While it has been established that the purpose of an order freezing the bank accounts of persons is to allow investigations to be made, the truth is that the affected parties are denied access to their properties. A person who is affected by such an order can, by the Rules of Court, apply to the Court to discharge the order freezing their account within 14 days of making of the order. On the application of the affected person, the Court may either discharge the Order as was seen in the application by Risevest Technologies Limited, or the Court may make the order absolute, adjourn or permit further evidence to be produced in support of or against the order and the Court may modify the terms of the Order so as to meet the merits of the case.

Where an application to vary or discharge an Order is refused, the person affected may file an appeal against the Order to the Court of Appeal.

Also, the affected person may want to embrace the window to apply for the enforcement of their fundamental rights as was seen in the case of G.T.B. Plc v. Adedamola.5

CONCLUSION

While it is established that the CBN is empowered to bring an ex-parte application before the Court for an order to freeze accounts suspected to used for illegal transactions, the Court must be guided by the need to ensure that on one hand, investigations into alleged criminal activities are not frustrated, and on the other hand, that law abiding citizens are not denied access to their property, and thus, must strictly interrogate the facts presented before it, prior to giving an order freezing the bank accounts of any person or corporate institution.

Footnotes

1. Section 2(d) of the Central Bank of Nigeria Establishment Act.

2. G.T.B. Plc v. Adedamola (2019)5 NWLR (PT 1664) 30.

3. The following cases have given judicial blessing to the above constitutional provisions: Aoko v Fagbemi (1961) 1 ALL NLR 40,

4. The Cable Newspaper, October 26, 2021 – 'A Mere Circular is not Law – Court Faults CBN, Unfreezes Risevest's Accounts https://www.thecable.ng/court-unfreezes-rise-vests-accounts-says-cbn-circular-to-banks-not-a-law#:~:text=The%20Central%20Bank%20of%20Nigeria,days%20over%20alleged%20forex%20infractions.

5. Supra.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.