Central bank loses appeal on blocked accounts

The Bank of Namibia has lost a Supreme Court appeal about a senior bank official’s decision to block the bank accounts of six close corporations doing business in northern Namibia.

Only the central bank’s board of directors and governor have the power to instruct a bank to block accounts under investigation for alleged violations of the Currency and Exchanges Act of 1933 and the Exchange Control Regulations of 1961, the Supreme Court found in a judgement delivered on Friday last week.

In the judgement, the court dismissed an appeal by the Bank of Namibia (BoN) against a decision of judge Shafimana Ueitele that was delivered in the Windhoek High Court at the end of May last year.

Ueitele in his judgement reviewed and set aside decisions taken by an acting director of foreign exchange of the BoN in March 2023 to block access to the bank accounts of the close corporations Nemi Investments 104, Nemi Investments 105, Rani Traders, Rundu Cash and Carry, Dharani Traders and Oshana Cash and Carry.

The decisions to block access to the accounts were taken because of suspicions that the close corporations were contravening the country’s exchange control law and regulations by dealing in foreign currency.

The main issue dealt with in the Supreme Court’s judgement, written by acting judge of appeal Theo Frank, was whether bank official Penelao Kapenda, who directed that access to the accounts should be blocked, had the delegated powers to make such a decision.

In March 1991, the minister of finance at the time delegated his powers to carry out the function of exchange control to the central bank, Frank recounted in the appeal court’s judgement.

In terms of the current Bank of Namibia Act of 2020, the BoN’s board of directors is the bank’s ultimate decision-maker, and the bank’s day-to-day operations are within the ambit of the governor, who may delegate tasks to other employees of the bank with the board’s approval. The power given to the BoN to block access to bank accounts may have far-reaching harmful effects on persons whose accounts are subject to blocking orders, Frank noted.

He said: “It thus seems from a practical day-to-day position that it was impractical for the board of BoN to administer the powers and functions of the forex regulations and that it would be more expedient if this was done under the supervision and control of the governor. In view, however, of the discretion to block accounts and the potential deleterious effect of such blocking on the account holders, no delegation other than to the governor can be implied in the delegation from the minister to the bank.”

Frank continued: “In short, the delegation to BoN by the minister of finance in respect of the forex regulations can only justify the exercise of such powers and functions by the board or the governor (the chief executive of BoN) and by no one else.”

Nothing would prevent the BoN’s governor from receiving reports from the bank’s director of exchange control for his consideration, “but the discretion to block an account must remain with the board or the governor”, Frank stated.

Chief justice Peter Shivute and deputy chief justice Petrus Damaseb agreed with Frank’s judgement.

Legal counsel Natasha Bassingthwaighte and Tuhafeni Muhongo represented the BoN in the appeal.

The six close corporations were represented by Sisa Namandje and Matilda Jankie.