Photo/courtesy.
The High Court has upheld a Sh350,000 compensation award against Family Bank Ltd, finding that the lender failed to secure a customer’s account promptly after she reported unauthorised mobile banking transactions.
In a judgment dated 2 July 2026, Justice Benard Murunga dismissed the bank’s appeal and affirmed that Family Bank’s duty of care was fully engaged the moment Lucy Wamaitha Kiarie flagged suspected fraud on her account.
Between 7 and 10 February 2022, Kiarie’s account was emptied through withdrawals totalling Sh720,000. Police later recovered Sh40,000, and the bank refunded Sh150,000 after she filed suit, leaving the disputed balance that formed the basis of her claim.
Family Bank argued that the transactions had been authenticated using Kiarie’s correct PIN and that customers bear responsibility for keeping their credentials confidential. The court agreed only up to a point: it ruled that the bank was not liable for the initial compromise of the PIN but for what happened afterwards, specifically its failure to prevent further withdrawals once the fraud report came in.
Central to that finding was the bank’s own admission that its internal procedures required an account to be frozen immediately upon receiving a complaint, a step it did not take in Kiarie’s case.
The judgment also upheld the Small Claims Court’s earlier finding that Kiarie had proved her claim on a balance of probabilities, rejecting the bank’s objections over the burden of proof and its handling of transaction records.
The ruling extends a pattern building in Kenyan courts, where banks are increasingly being held to account not for how fraud begins but for how quickly they act once notified.
A similar dispute involving Kingdom Bank saw the High Court and later the Court of Appeal side against the lender for failing to demonstrate it had taken steps to recall funds after a customer flagged a wrongly sent transaction.
With the Central Bank of Kenya separately developing a formal fraud compensation framework for rollout this year, the Family Bank judgment adds to a growing body of precedent that response time, not just root cause, is what determines liability.
