header-logo header-logo

Torn?

03 August 2012 / Simon Goldstone
Issue: 7525 / Categories: Features , Banking , Commercial
printer mail-detail

How do banks juggle duty to their customers with money-laundering obligations, asks Simon Goldstone

A bank is contractually obliged to honour its customers’ transaction requests, provided that sufficient funds are in the customer’s account; a bank is obliged by statute not to deal in the fruits of money-laundering, and faces prosecution under the Proceeds of Crime Act 2002 (POCA 2002) if it does so.

Shah v HSBC Private Bank Ltd [2012] EWHC 1283 (QB), [2012] All ER (D) 155 (May) gave a stark illustration of the potential for conflict between these duties: the defendant bank refused to execute certain transactions, on the basis that it suspected the account contained laundered money; those refusals led to the customer sustaining losses; the customer sought to recover those losses—around $300m—in an action for breach of contract.

The recent judgment of Mr Justice Supperstone shows how the courts will assess the bank’s attempts to navigate a safe path between those conflicting duties. In this article I consider the case of Shah and its practical and legal implications.

The transaction

If you are not a subscriber, subscribe now to read this content
If you are already a subscriber sign in
...or Register for two weeks' free access to subscriber content

MOVERS & SHAKERS

Birketts—trainee cohort

Birketts—trainee cohort

Firm welcomes new cohort of 29 trainee solicitors for 2025

Keoghs—four appointments

Keoghs—four appointments

Four partner hires expand legal expertise in Scotland and Northern Ireland

Brabners—Ben Lamb

Brabners—Ben Lamb

Real estate team in Yorkshire welcomes new partner

NEWS
Robert Taylor of 360 Law Services warns in this week's NLJ that adoption of artificial intelligence (AI) risks entrenching disadvantage for SME law firms, unless tools are tailored to their needs
The Court of Protection has ruled in Macpherson v Sunderland City Council that capacity must be presumed unless clearly rebutted. In this week's NLJ, Sam Karim KC and Sophie Hurst of Kings Chambers dissect the judgment and set out practical guidance for advisers faced with issues relating to retrospective capacity and/or assessments without an examination
Delays and dysfunction continue to mount in the county court, as revealed in a scathing Justice Committee report and under discussion this week by NLJ columnist Professor Dominic Regan of City Law School. Bulk claims—especially from private parking firms—are overwhelming the system, with 8,000 cases filed weekly
Charles Pigott of Mills & Reeve charts the turbulent progress of the Employment Rights Bill through the House of Lords, in this week's NLJ
From oligarchs to cosmetic clinics, strategic lawsuits against public participation (SLAPPs) target journalists, activists and ordinary citizens with intimidating legal tactics. Writing in NLJ this week, Sadie Whittam of Lancaster University explores the weaponisation of litigation to silence critics
back-to-top-scroll