Recently, Bangladesh Bank (BB) has issued an instruction to all commercial banks advising them to follow Bank Company Act 1991 and amendment thereof up to 2013 while making payment of depositor's money after his/her death.
In fact, with this instruction Bangladesh Bank has unequivocally advised commercial banks to pay depositor's money to the nominee when the depositor dies. This instruction is apparently a very good initiative and may ostensibly reduce the suffering of the people who are required to withdraw money from the account after the death of their near and dear ones.
The reality, however, is not as simple as the BB instruction looks like. While I was working in a private commercial bank in Bangladesh twenty years back, I experienced a very complicated situation over the withdrawal of depositor's money after his death. A person purchased a fixed deposit (FDR) making his wife his nominee. After the death of the FDR purchaser (depositor), the nominee submitted a request for encashment of the said FDR prior to maturity.
While premature encashment was under process, the deceased's other family members came to the bank with succession certificate obtained from the court which clearly indicated the proportionate share for each heir and thus requested the bank to make the payment as per succession certificate.
The matter was then referred to the bank's legal advisor who supported succession certificate, and accordingly payment was made to all heirs as per succession certificate although there was nominee of the depositor.
BANK COMPANY ACT VERSUS SUCCESSION ORDER: Bankers have to face very difficult situation in managing deceased account, especially when nominee is involved. There are different provisions under different laws which are applied in appropriating deceased's wealth. In addition to Bank Company Act, some other laws / acts viz. NI (Negotiable Instrument) Act and Succession rule are also applied in carrying out banking transactions. Even succession rule is found different in different religions.
Succession rule under Muslim Law is different from that of the Hindu Law -- woman's share in father's and husband's property is ensured under Muslim Law, while the same denied under Hindu Law. The succession right of women under Hindu Law is a kind of deprivation and discriminatory in nature. Therefore, time has come to amend the Hindu Law ensuring women's succession right on their father's and husband's property.
Moreover, there is no superseding clause because no law clearly states which one will prevail when conflicting situation arises. Under this situation, bankers are always found in a difficult position in managing deceased account because they are in great dilemma as to whether they should follow section 103 of Bank Company Act or abide by the succession order issued by the court.
RIGHT & RESPONSIBILITY OF NOMINEE: Nominee is the person who is included and endorsed by the account holder or purchaser of FDR in the application of account or FDR wherein the nominee's right to his / her deposit is unequivocally stipulated. By including nominee, the accountholder or purchaser of FDR expresses an absolute intent of paying the money after his / her death to the person nominated. In fact, this is an ultimate wish of the depositor regarding who will be the beneficiary of his / her money after his / her death. So, the depositor's wish is supposed to supersede all other prevailing laws, but in reality, this does not always happen. Furthermore, the nominee's right does not come into effect immediately, more precisely during depositor's lifetime, rather this right becomes effective after the demise of the depositor. Even the nominee does not obtain any operational right on the depositor's account / FDR as the nominee is not allowed to transact in the account. However, the nominee of the local currency (Bangladesh taka) account is quite different from the nominee of the foreign currency account, because the former cannot withdraw during depositor's lifetime while the latter can do so. The banker can make payment to the nominee only after the death of the depositor provided no other beneficial ownership or succession order is submitted to the bank.
NOMINEE & MANDATE: Another confusing area in operating bank's account is the 'mandate' issue. Sometimes, the account holder provides mandate of his / her account to a third person who is entrusted with full authority to operate his/her account on a regular basis. Although both the nominee and the mandated person act as per wish of the account holder, there is difference between the two.
The nominee cannot operate the account while the mandated person can regularly operate the account. Nominee's right can be exercised after depositor's death while mandated person's right becomes effective immediately after the execution of mandate. In fact, the role of the mandate is complementary to the role of main account holder, so mandated person can do whatever the accountholder can do. Complexity arises when the main account holder expires and a succession certificate showing proportionate share of all heirs issued by the court is submitted to the bank.
What the bank will do is a very challenging question. Should the bank allow the mandated person to withdraw money or will it make payment as per succession certificate issued by the court? If the bank allows withdrawal to the mandated person, the heirs may go to the court and bring contempt of court charge against the banker.
Similarly, if bank makes payment to the heirs as per succession certificate, the mandated person may go to the court bringing charge against violation of mandate and can demand compensation. This is really a very challenging and complex legal matter which needs to be resolved at the legal expert level.
JOINT ACCOUNT: Another complicated area is joint account. Special feature of this type of account is that whoever will survive will be the beneficial owner of the account. Even account operation will not be interrupted by one person's death as the surviving account holder will be able to continue transaction in the account.
This seems to be very simple and straight-forward account operation but the reality is different, and when one or both account holders expire, legal complexity arises over the payment of the deceased's money. In this connection, we studied a case where a joint account was opened and operated by either of the two account holders or the survivor. In a fatal road accident, both the account holders died.
Their deaths occurred within an interval of just few minutes. The big question then arose whose heirs will be entitled to receive payment of the joint account -- heirs of the person who died first or later? Although decision came in favour of the person who died later, that decision was taken without giving consideration to the court's succession order. This situation turns more complex when the heirs of both deceased obtain succession certificate from the court.
HANDLING DECEASED ACCOUNT: Handling deceased account is always a very big challenge for the bankers. Continuous correspondence goes on with different parties. More than one law is applied, and court order is also binding.
Therefore, taking decision on the payment of deceased account becomes extremely difficult. As soon as information about the accountholder's death comes to the knowledge of the bank, the account is identified as 'deceased account' which is then barred from any transaction without receiving succession certificate. In spite of the nominee's right to the depositor's money, banker cannot allow withdrawal from this account. In many cases, banker does favour to the nominee by allowing withdrawal if information of account holder's death is not officially received by the bank. Although this practice is contrary to the professional ethics, yet bankers do this as bankers' knowledge of account holder's death cannot be established in the eye of law. Nevertheless, in some cases bankers have to face long legal battle when the successors of the account holders sue the bankers bringing charges of misappropriation of the deceased's money.
The complicated banking practice of handling deceased account cannot be resolved with instructions from Bangladesh Bank. Instead, this may create further confusion and misunderstanding among the depositor's successors and the bankers. If Bangladesh Bank sincerely feels and believes that nominee of the depositor must be entitled to receive money of the deceased account, they must raise this issue to the government and get specific law or amendment enacted allowing bankers to make payment of depositor's money to the nominee superseding any other legal requirement whatsoever.
And there must be arrangement that succession certificate will also be issued based on this new legal requirement as well as the superseding clause therein.
Nironjan Roy CPA, CMA is a banker based in Toronto, Canada.