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Dilemma resolved

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30 April 2009 / Daren Allen , Nick Marsh
Issue: 7367 / Categories: Features , Banking , Commercial
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Daren Allen & Nick Marsh consider a bank's conflicting obligations when it suspects money laundering

In the recent case of Shah v HSBC Private Bank (UK) Ltd [2009] EWHC 79 (QB), [2009] All ER (D) 204 (Jan) the court considered a bank's potentially conflicting exposure, when it suspects money laundering. On the one hand it may be liable to criminal prosecution if it proceeds with a transaction without consent, yet on the other it has a contractual obligation to its customers to comply with instructions.

Shah v HSBC can be summarised as follows:

      
      ●     The claimants, who were resident in Zimbabwe, held an account with HSBC Private Bank (UK) Limited.

      
      ●     Between 20 September 2006 and 28 February 2007, the bank delayed execution of four separate payment instructions given by the claimants, including an instruction to transfer approximately US$28m.

      
      ●     In each case the bank suspected that the funds in the claimants' account were criminal property. Before the bank proceeded with each transaction, it made an authorised

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