On 2 February, 2024, the Supreme Court delivered a judgement in the case of Ironbar v Federal Mortgage Finance Ltd (2024) LPELR-62186(SC) wherein it held that next-of-kins do not have beneficial interest in trust assets and Financial Institutions (FIs) should be wary of releasing properties of deceased persons to next-of-kins instead of their personal representatives. About six months later, on 19 July 2024, the Central Bank of Nigeria (CBN) issued the amended Guidelines on Management of Dormant Accounts, Unclaimed Balances and Other Financial Assets In Banks And Other Financial Institutions In Nigeria (the Guidelines) to all Financial Institutions (FIs) in Nigeria, directing FIs to release balances of dormant accounts to next-of-kins and legal representatives of the owners of dormant accounts.
The Guidelines apparently stands in conflict with the judgement of the Supreme Court in relation to release of balances of dormant accounts by deceased persons and places FIs between the devil and the deep blue sea. Adherence to the Guidelines will save FIs from possible CBN’s administrative sanctions on one hand but expose them to litany of litigations from beneficiaries of balances of the dormant accounts on the other hand. This article aims to suggest practical strategies to assist FIs walk the tight ropes of their obligations to the CBN and beneficiaries of balances of dormant accounts and to mitigate their potential liabilities therefrom.
Management and Reclamation of Unclaimed Balances
The objective of the Guidelines is to protect balances in dormant accounts from abuse and mismanagement by predators in FIs whilst also ensuring such balances are invested and delivered to their beneficiaries on request. The Guidelines were issued to address the growing complaints by aggrieved bank customers over unauthorised withdrawals from dormant bank accounts, especially of deceased persons, and the use of such accounts to launder illicit funds.
The Guidelines provide that dormant account balances that have remained with Financial Institutions for a period of ten (10) years and beyond are liable to be transferred to the Unclaimed Balances Trust Fund (UBTF) Pool Account (UBTFPA) by Financial Institutions and in case of banks under liquidation, by the National Deposit Insurance Corporation (NDIC). The UBTFPA is to be managed by the CBN through investment schemes that will ensure their continuous profitability, such as investment in Nigerian treasury bills (NTBs) and other securities as may be approved by the Unclaimed Balances Management Committee established under the Guidelines. The Guidelines guarantee the release of the unclaimed assets and interest generated thereof within ten days of request by the beneficial owners.
Paragraph 5.4 (ii) of the Guidelines however provides that account owners or beneficial owners may submit application to reclaim monies held in dormant account to FIs. Paragraph 14.0 of the Guidelines defines beneficial owner as “An account owner or any other person who enjoys benefits of ownership of an asset/account, including their next-of-kin or legal representatives. In the case of a corporate organization, the natural person(s) that control the company directly or indirectly.” This means that for the purpose of the Guidelines, next-of-kins and legal representatives have the rights and status of the owner of the account to enjoy the benefits of ownership of such account.
The Legal Status of Next-of Kins and Legal Presentative in Respect of Trust Assets
In the recent case of Ironbar v Federal Mortgage Finance Ltd (2024) LPELR-62186(SC), the Supreme Court held that next-of-kins are required only for reference purpose and do not have any beneficial interest in trust assets except they wear two togas of being a next-of-kin and beneficiary. Banks and financial institutions are warned to be wary of according next-of-kins the status of beneficial owners of trust assets. Ogunwumiju JSC held thus:
“Some banks, pension fund administrators, registrars, employers, and insurance companies usually insist they would only attend to next of kin for claims to a deceased person’s estate. They ignorantly exhibit this faulty preference for next of kin in their list of requirements on their various websites and other platforms. Sadly, this ignorance is boldly implemented by the processing staff. They refuse superior legal education on the laws and their application. Some of them would further refuse to attend to, give, or release relevant documents required for estate claims because the personal representatives are not named as next of kin in their record of the deceased regardless of the personal representatives presenting Letters of Administration and grant of probate. This is considered by most personal representatives and beneficiaries as one of the downsides of the process of claiming the estate of a deceased.”
The drafters of the Guidelines may also have assumed that ‘legal representative’ can be legally used interchangeably with ‘personal representative’ in relation to trust assets. We are not aware of any authority that supports this proposition. What the Administration of Estate Laws of various States of the Federation provide is that assets of an estate is vested in personal representatives of the deceased. In Ironbar’s case, the Supreme Court held that personal representatives are the “representatives of the deceased with regards to any property to which he is entitled to an interest not ceasing on his death.”
Without any gainsaying, the directive of the CBN in the Guidelines that balances of dormant account can also be claimed by next-of-kins and legal representatives exposes FIs to possible administrative sanctions by the CBN for failure to adhere to the dictates of its Guidelines if they choose to only release such balances to personal representatives of deceased account owners. Release of such assets to unqualified next-of-kins may create chains of litigations within families of deceased account holders where FIs may be joined for their role in releasing such balances to next-of-kins instead of personal representatives of the deceased. Next-of-kins themselves may also file action in Court to compel FIs to release the balances of dormant accounts to them in line with the Guidelines. Irrespective of the side that takes up an action to enforce a right between next-of-kins/legal representatives and personal representatives, the joinder of FIs may increase their contingency litigation liability portfolio which may hurt their balance sheet in the long run.
Suggested Strategies to Mitigate Liabilities
There is a clear need for FIs to engage the CBN on the possibility of further amending the Guidelines to bring it in conformity with Administration of Estates Law of States and the judgement of Supreme Court in Ironbar’s case. FIs should send a delegation to make a representation to the CBN on the potential liabilities that they may have to incur if the Guidelines, as issued, is implemented to the letter. In the unlikely event that the CBN is unyielding in amending the Guidelines, FIs may approach the Court for judicial interpretation of the Guidelines in relation to their duties under Administration of Estate Act/Laws. FIs may be able to persuade the Court that the Guidelines being a subsidiary legislation and a general legislation on the subject of management of estate properties, cannot override the principal provisions of Administration of Estate Act/Laws which are specific to the subject of management of estate properties. The judgement of the Supreme Court in Ironbar v Federal Mortgage Finance Ltd (2024) LPELR-62186(SC), is expected to weigh in on the possible judgement of the Court. Unless there is an urgent judicial pronouncement on the status of next-of-kin in relation to beneficial ownership of balances of dormant account, the chances of Courts to countenance the argument that FIs were directed by the Guidelines to act in defiance of the judicially interpreted role on next-of-kins in relation to trust assets may be slim.
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