Stanbic Pays Sh32M for Blunder That Cost Customer Lucrative Tender Deal as Bank Warns of New Wave of Fraud

Lender faces double blow as Court of Appeal upholds damages award while midnight fraud cases surge among millennials

Stanbic Bank Kenya is grappling with a costly legal defeat and rising fraud incidents, highlighting the evolving challenges facing the banking sector in an increasingly digital landscape.

The Court of Appeal has upheld a Sh32.4 million damages award against the bank for a clerical error that cost Kenya Haulage Agency Limited a lucrative government contract.

The case, which dates back to 2011, centered on a seemingly minor mistake that had major financial consequences.

The Costly One-Day Error

The trouble began when Kenya Haulage Agency Limited bid for a Kenya Ports Authority (KPA) tender to supply 10 pneumatic rubber fenders.

The company instructed Stanbic Bank to issue the required tender security of Sh250,000, valid for 120 days as specified in the tender documents.

However, the bank issued a bid bond valid for only 119 days instead of the required 120 days.

This single-day discrepancy proved fatal, as KPA disqualified the company’s bid for non-compliance with the mandatory bond validity period.

In their June 5, 2025 judgment, Court of Appeal Justices Agnes Murgor, Pauline Nyamweya, and George Odunga ruled that the bank’s error was both foreseeable and directly caused the client’s loss.

“The loss of the actual tender was not only foreseeable but also a proximate loss in the circumstances, given the appellant’s actual knowledge as regards the purpose of the bank guarantee,” the judges stated.

The court found that Stanbic Bank owed a duty of care to its client and that the failure to follow express instructions amounted to negligence.

Kenya Haulage Agency had already secured goods for delivery and stood to make a profit of $250,860 (Sh32.4 million) from the contract.

A New Breed of Fraud

As Stanbic deals with the fallout from this legal setback, the bank is simultaneously warning customers about a surge in sophisticated fraud schemes targeting digital banking users.

Abraham Ongenge, Head of Personal and Private Banking at Stanbic Bank, revealed that fraud incidents are increasingly occurring during late-night hours, particularly between midnight and 1 AM on Friday and Saturday nights.

The primary targets are millennials – individuals born between 1981 and 1996 – who are more likely to be out socializing and using digital payment platforms.

“We are seeing a lot of fraud attempted on digital channels through some form of social engineering,” Ongenge explained during a recent media briefing.

“The consequence is that customers are losing money through tactics like people calling and posing as bank employees, asking for personal information to access accounts.”

The fraud patterns reveal how criminals are adapting to modern banking habits.

Many incidents involve social engineering tactics where unsuspecting customers in social venues are tricked into revealing passwords and other confidential information.

After millennials, baby boomers – those born between 1946 and 1964 – are the next most targeted group due to their substantial savings.

The fraud wave has also infiltrated the corporate sector, with criminals impersonating bank CEOs to deceive companies.

These sophisticated schemes involve fake emails that appear to come from bank executives, instructing firms to redirect payments to fraudulent accounts.

“They are changing email addresses and posing as chief executive officers, informing companies about changes of accounts and asking them to pay money into different accounts,” Ongenge warned.

The twin challenges facing Stanbic Bank – the legal defeat and rising fraud incidents – underscore the complex operational environment in which modern banks operate.

The Court of Appeal ruling serves as a stark reminder that even minor administrative errors can have significant financial consequences, while the fraud surge highlights the need for continuous investment in customer education and security technology.

As Ongenge noted, “The journey of banking has changed. We cannot move out of digital spaces. We have to be more responsible in investing in awareness and technology that allows us to protect our customers.”

The Sh32.4 million judgment against Stanbic Bank, combined with the rising costs of fraud prevention and customer protection, illustrates the mounting pressures on financial institutions to maintain operational excellence while adapting to an increasingly digital and risky environment.