THIS has been a tumultuous week for CIMB Group Holdings Bhd, the parent of CIMB Bank Bhd and CIMB Bank Islamic Bhd, which is embroiled in a legal suit from a group of 12 customers after their accounts were frozen owing to a recent system glitch.

On Tuesday (March 1), the banking counter slumped 42 sen or 7.35% to close at RM5.29 with 71.69 million shares traded – its biggest intraday loss since March 2020 – after the banking group posted a credit loss of RM280.9 mil last year due to a processing error that saw excess funds deposited in some customer accounts.

The following day, the stock fell a further 26 sen or 4.91% to close at RM5.03 – also amid a heavy volume of 66.92 million shares.

Malaysia’s second-largest bank which counts sovereign wealth fund Khazanah Nasional Bhd as its largest shareholder discovered the problem that is related to a third-party remittance service this year, according to group CEO Abdul Rahman Ahmad in confirming a report by Bloomberg News.

“The group is taking steps to recover the duplicate payments from the affected customers and an “additional and lower final provision amount may be taken in 1Q 2022” depending on the recovery,” Bloomberg cited Abdul Rahman as saying while releasing the lender’s 4Q FY2021 and full year FY2021 results.

CIMB’s technical glitch comes as Southeast Asian banks come under scrutiny over issues with their digital infrastructure.

In December last year, about 790 customers of Singapore’s Oversea-Chinese Banking Corp lost a total of S$13.7 mil (RM42.24 mil) in scams. A month earlier, thousands of DBS Group Holdings Ltd’s customers were unable to log onto its online and mobile platforms.

Back to the legal suit, the group of 12 filed the writ of summons through Messrs Nazmi Zaini Chambers at the Kuala Lumpur High Court registry on Monday (Feb 28) by naming CIMB Bank and CIMB Bank Islamic as the first and second defendants respectively.

The Star named the 12 plaintiffs as Ahmad Sharil Nor Rasit, Azwani Aziz, Nor Amirah Suria, Nor Sazliana Sazali, Mukmin Mohd Ibrahim, Siti Roziana Abdullah, Muhamad Haris Fadhillah Yaacob, Muhammad Azizi Aziz, Muhammad Azizul Aziz; and three companies, Ai Smart Perfect Services, Ai Smart PS Trade and Harmonian Altra Trading.

In the statement of claim sighted by the mainstream newspaper, the plaintiffs said between Jan 26 and 28, they were made aware that their accounts have been frozen or earmarked by the defendants.

Between Jan 31 and Feb 4, the plaintiffs contacted the defendants’ branches for clarification.

They claimed to have been either collectively or individually informed that they were suspected of being involved in illicit or suspicious activities through transactions involving the accounts and the freeze was imposed for the purpose of further investigations; that the amounts frozen or earmarked were part of the floating transaction pending clearance of the transaction to the bank accounts; and that the defendants’ online banking system was in the process of technical maintenance.

The defendants sent a reply to the letter of demand (LOD) dated Feb 21 through Messrs Shearn Delamore & Co whereby they stated that – pursuant to Clause 12 of the Bank’s Savings Account Terms and Conditions and Clause 14 of the Bank’s Current Account Terms and Conditions – the bank has a right to exercise rights to debit or to offset erroneous credit from the plaintiffs’ accounts; and to combine or consolidate their other accounts up to the amounts of the duplicate credits after giving the plaintiffs seven days’ prior notice.

The plaintiffs are therefore seeking a declaration from the court that the terms and conditions pertaining to the savings and current accounts which provided the defendants with exclusive rights to freeze or earmark the accounts are not enforceable and have prejudiced them.

They want a specific performance order on the defendants to immediately discharge or unfreeze the accounts, an order for monetary damages due to breach of contract and duty of care, and exemplary damages.

The plaintiffs are also seeking reimbursement of their solicitors’ costs amounting to RM10,800, cost of the legal action, and other reliefs deemed just and expedient by the court.

Case management has been fixed for March 15. – March 3, 2022

https://focusmalaysia.my/from-atms-to-high-court-cimbs-technical-glitch-should-be-a-lesson-to-all-banks/