A few days ago, the Central Bank of Nigeria (CBN) obtained an interim order from the Federal High Court, Abuja Division to freeze eleven bank accounts of five companies and one individual for 45 days. The order empowers the apex financial regulatory body to conduct investigations into suspicious activities including money laundering and illegal forex transactions.
This is coming at a time when the call is getting louder about the need for relevant authorities to beam their searchlight on banks that toy with bank deposits of deceased customers. This can signal the start of an investigation into their activities, and also serves as a reminder of the cultural morality that compels us to respect the dead. And when the inevitable occurs, it alters, creating maddening circles of confusion and misery in the family of the deceased.
The initial response upon death presents uncertainty, flagrant and audacious disruption of order typified by the stress of access and needless hassles in trying to recover the deceased person’s investments either in banks, shares, among others.
What cannot be ignored is that in Nigeria, there are massive funds trapped in bank accounts belonging to deceased persons or people who have become incapacitated, and therefore, cannot by themselves, access their bank deposits or stocks. It is more worrisome when such investments cannot be claimed by beneficiaries either because they don’t know that the account holder had such investments or the procedures for accessing them are very cumbersome.
According to financial experts, there are three events that automatically terminate the operation of an account with the bank, namely, death, bankruptcy, and insanity. Named beneficiaries or unnamed beneficiaries who make claims on behalf of persons affected by these three conditions, must be armed with either a Will or Letter of Administration. Wills have been subject to lengthy disputations by family members, whether wealthy or otherwise. Because of this fear, the person dies intestate (without a Will).
The magnitude of this problem can be categorised as social, ethical, legal as well as regulatory. There are also religious and cultural issues surrounding the Will system. The majority of Nigerians don’t have Wills either because they don’t have enough money to will or they don’t believe in the Will system. Some believe that a Will exposes them to their next of kin, who may want to kill them to acquire their assets. These go to show that people are secretive and not willing to disclose their accounts, and so, no proper documentation is kept.
Processing Letter of Administration for exchange is a tedious task. The letter is not easy to procure given the probate system we operate which creates problems for those who may have been struggling for years to obtain such a letter. Some abandon it because of frustration. The process should be made a lot simpler to help those who may not be able to afford the huge statutory fees or unable to endure the administrative bottlenecks. The bottom line is the need for the monies in the accounts of deceased persons to be utilised for the purposes of the estate or the beneficiaries.
However, as far as regulations are concerned, the relationship is between the bank and the customer, and not any other third party. But upon death, the next of kin is contacted under some legal instructions or regulatory requirements. This poses its own problems. This scenario plays out when the deceased, who hitherto may have used their sibling as next of kin, forgot to change such a name after marriage to either the name of his wife or children if they are of age.
Legal experts hold the following views about next of kin: that s/he may not necessarily be the beneficiary of the account; that s/he does not, by so named, become a beneficial interest or holder of that account but can be contacted in certain situations with no beneficial interest so conferred on. For instance, next of kin can be contacted during medical emergencies when the account holder may not be able to take certain decisions for himself. Also, the next of kin may be able to give consent on the account holder’s behalf.
Nevertheless, there are instances when the rights and obligations of the next of kin may be confusing. There are bank account opening documents where next of kin is presented as having the right to access deposits or any other assets of a deceased person. Sometimes, the interpretation depends on the definition, rights and obligations assigned to the next of kin in that account opening document that was signed off by the deceased customer. It is important for banks to state clearly who the beneficiary or beneficiaries should be in account opening documents.
Unless the bank has express information about the death of a customer, it becomes difficult to deal with. Banks are careful in paying beneficiaries because that customer believed to be dead may well be alive and may not have intended that anyone should know they have such an account. In some cases, the bank may know that its customer is dead and still goes ahead to require proof of death, and sometimes, death certificates are not issued to bereaved families. Such situations have constituted a problem in dealing with deposits of the deceased. In all this, the bank has a confidential duty to protect the information relating to an account.
We must begin to fix how the bank should become aware of a customer’s death. There is a duty on the bereaved to notify the bank of its customer’s death. This can be done either through an express or constructive notice which also informs the bank about its responsibilities towards the beneficiaries. Without such information, the bank may not reconcile the account belonging to a deceased person. It is about balancing the legal difficulties that could be faced by a population that is bedeviled by insufficient knowledge and poverty, and the need to maintain banking privacy.
Banks operate under certain set rules and regulations, given their oath of secrecy and ethical responsibilities of confidentiality. There are regulations, that from time to time, require banks to contact account holders to find out why their accounts are inactive or dormant. And in the absence of any response, the beneficiary or next of kin is contacted. This is in accordance with banking regulations which stipulate that any account that does not record any transaction – debit or credit – for about six months, becomes inactive. Beyond six months to after one year, the account becomes dormant, and no withdrawals are made except certain documentation is done. But a lot of banks never go by such rules.
Many banks believe there is no incentive in looking for customers – dead or alive – especially customers with small balances. In fact, some banks dismiss any member of staff who informs family members of a deceased customer to commence processes of accessing the account. Sometimes, when small accounts of the deceased are aggregated, the amount becomes huge, but some banks invest it in the interbank market, money market, and some other financial transactions. They make income and profit from it. Many banks rather prefer to contact only big customers whose accounts are inactive with the hope of getting more funds.
Investigations reveal that some banks cleverly push dead customers’ deposits to dormant accounts to avoid interest payments. During the last bank consolidation exercise, some of such deposits were said to have been converted in order to meet the N25b minimum paid-up capital. The transactions were reversed after consolidation partly because there was no real inflow of funds into the banks. The after-effect is the seeming distress in the system.
There is a need for amendment of some of the extant laws governing this subject matter. Judicial intervention that can establish a commercial court is necessary to deal with some of the issues. People should be encouraged to have joint accounts to avoid the rigors of having to obtain Letters of Administration or Wills. In this case, whoever survives the other, automatically gets paid the contents of the account except there is a contrary instruction.
It’s important to strengthen regulations to compel banks to be transparent about their information in dealing with, and reporting issues of deceased customers and resolving them. Returns should be rendered to the CBN which will now have the responsibility of asking questions periodically about the status of the returns of the deceased customer’s account with a given bank.
Part of the regulations also has to indicate that every bank customer should update their account information regularly. It is commendable that complaints of heirs to the deceased are initiated in the Consumer Protection Department.