A senior official from the Bank of South Sudan confirmed that Stanbic Bank credited Air Afrik Aviation with $7.2 million in 2016 but later withheld the funds, claiming insufficient funds in a nostro account unrelated to the transaction. This led to a legal case from Air Afrik against Stanbic for freezing the funds, alleging breach of banking regulations and financial losses due to the termination of a leasing agreement worth $20 million.
A senior representative from the Bank of South Sudan (BoSS) has disclosed that Stanbic Bank improperly withheld a payment of $7.2 million intended for Air Afrik Aviation. The sum was credited to the airline’s accounts in 2016, yet Stanbic Bank froze these funds, citing insufficient balance in the corresponding nostro account, which the official clarified was unrelated to the transaction at hand. Mr. Chan Andrea Chan, who currently directs financial market operations at BoSS, stated that Stanbic Bank should have refrained from crediting the account of Air Afrik until ensuring that sufficient funds were available in the nostro account. “I reiterate that the nostro account had no connection with the subject transaction for the transfer of $7.2 million,” he asserted during testimony in a legal proceeding initiated by Air Afrik against Stanbic Bank for freezing the funds. This action allegedly resulted in the termination of a crucial plane leasing contract with the South Sudan government, for which Air Afrik could not fulfill its commitments. Mr. Chan elaborated that Stanbic Bank did not reject the credit advice for the airline, and it took the bank three days to execute the credit into Air Afrik’s account. Furthermore, he remarked that the procedure adopted by Stanbic was inappropriate: “If the funds were not sufficient, Stanbic Bank should either have returned the funds to BoSS immediately or requested for replenishment of their nostro account…” The airline filed the lawsuit in 2018, claiming damages from losses incurred after its leasing contract worth $20 million was canceled when the funds were withheld. Stanbic Bank, in its defense, claimed that the reversal occurred due to the lack of funding in the government’s credit note, asserting it could not utilize its own resources to cover the airline’s obligations.
In 2014, Air Afrik Aviation entered into a leasing contract with the Ministry of Defence and Veteran Affairs of South Sudan. The contractual agreement mandated financial transactions predicated on timely payments, articulated via a credit system. The issue arose in 2016 when a substantial $7.2 million, recognized as payment for the leasing services, was credited to Air Afrik’s accounts but subsequently frozen by Stanbic Bank. The airline contended that the withholding of funds directly resulted in the annulment of their leasing agreement, triggering a legal dispute regarding the processes employed by Stanbic in handling the transaction.
The testimony from Mr. Chan highlights procedural discrepancies in Stanbic Bank’s handling of the transaction involving Air Afrik Aviation. Despite the credit being applied to the airline’s account, the subsequent freezing of funds without just cause has raised significant concerns about banking practices concerning transaction transparency and client relations. The ongoing litigation underscores the financial implications of such actions and the importance of adherence to banking regulations.
Original Source: www.theeastafrican.co.ke
