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 requests
Mr Shah was a Zimbabwean national
