Global payment company MasterCard and a regional bank I&M are being sued, alongside the Rwanda government, for Sh20 billion by 150 Rwandese cardholders who claim they were arrested and detained without trial and their cash and personal property confiscated following “false accusations” of bank fraud, money laundering and false enrichment.
The applicants have filed the suit before the East Africa Court of Justice (EACJ) based in Arusha, Tanzania seeking a declaration that their arrest and detention by Rwanda Investigation Bureau infringed on their constitutional rights.
In the suit filed by Ssemakula Ali Abaas and Nyinawumuntu Leatitia on behalf of the 150 other users of the Prepaid Mastercard Multicurrency Card issued by I&M Bank (Rwanda).
The applicants are represented by Joseph McDonald of McDonald and Company Advocates of Nairobi, Kenya.
“The dispute at hand centres on a group of Rwandan Citizens/Residents who entered into a Bank/Customer relationship with I&M Bank Rwanda PLC when the bank issued them with a Mastercard Multi-Currency card,” said McDonald, a Kenyan advocate.
The Card could hold up to 17 different currencies and one of the benefits as advertised in the bank’s website was that a card holder could shift one currency to another within the card’s sub-wallets.
Said McDonald. “A comparison between the rates offered by the bank and those on the MasterCard platform revealed that the latter offered favourable rates. The group would then develop the practice of shifting currencies within the card’s sub-wallets i.e. from AED to EURO and back to AED, resulting in a 10 percent profit. This activity essentially leveraged price differences across markets, a practice known as arbitrage. As a matter of fact, I&M had run a commercial advertisement that gave customers 10 percent discount on the usage of their multicurrency card.”
On or around January 2023, the Rwanda Investigation Bureau arrested the over 150 individuals on allegations of bank fraud, money laundering and illicit enrichment.
The applicants claim that they were detained without trial for more than three months, were denied bail, were extorted/ forced to transfer money to escrow accounts, their properties confiscated and their family members and friends were also detained and tortured to give information.
Background
In May 2023, I&M Bank Rwanda unit announced it lost $10.3 million to fraudulent customer withdrawals between November 1 2022 and January 17 2023, triggering investigations in an attempt to recover the amount.
The amount was more than the $7.6 million net profit that I&M Group had generated from the Rwandan market in the financial year ended December 2022.
The I&M Group in its Annual Report and Audited Financial Statements for 2022 disclosed the incident of “fraud” in Rwanda as follows:
“Subsequent to year end, management of I&M Bank (Rwanda) PLC discovered incidents of fraudulent withdrawals through customer wallets amounting to USD 10.3 million during the period 1 November 2022 to 17 January 2023. As of the date of these financial statements, some recoveries have been made and investigations are still ongoing.”
I&M Bank (Rwanda) had in 2019 rolled out the multi-currency Mastercard prepaid debit card enabling users to load funds in 15 different currencies with no foreign exchange fees.
“The MasterCard Multi Currency card built on MasterCard’s goal of expanding products for under-banked consumers in sub-Saharan Africa,” MasterCard said in a press release during the launch.
The I&M Platinum Multi Currency card enables users to load funds in a specific currency, locking in the exchange rate for future online and point of sale transactions, the release said.
“Being able to lock in an attractive exchange rate for purchases is an additional way the I&M Bank makes using the card a way to help cardholders save money. With such a diverse culture and so many currencies, being able to select the one you plan to use without additional currency conversions is not only a cost savings capability, but a convenience,” said Robin Bairstow, then the I&M Bank Rwanda CEO.
“As pioneers of innovation in the banking industry in Rwanda, this is one of a series of solutions that we will be launching in the near future.”
Bairstow said consumers needed not open a bank account to obtain the new card.
But the cardholders insist they did not commit fraud or engage in any criminal activity.
“I have never impersonated in requesting for the card, using it or committing any fraud to acquire it. I fulfilled the requirements in a right way, the card was issued to me at the price of RWF 35,000,” said the Abaas, the first applicant in the suit.
“Concerning what the prosecution says that I&M Bank issued cards (Master cards) of the type “MULTI CURRENCY PREPAID CARD” in order to facilitate its customers, notably transborder businessmen or international travelers to be able to use the local currencies of the countries they reach, exchange on their own using I&M Bank platform, this is not true, since it was issued to whoever needed it, and everyone who received it was allowed to use it and the Bank never required for documents to prove that the person travels abroad or does any transborder business for them to be issued the card.”
Contrary to claims by the bank, Abaas said, the interest (profit) was “generated after selling the money (RWF) into other currencies, and it was legal as the forex rate was provided by the Bank solely and it could modify the rate in its sole discretion. Therefore, it is not clear how the bank can determine and monitor the rate and then say that it has undergone fraud.”
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