Money laundering suspicion – update


In our previous article ‘No liability for negligent money laundering suspicion’ we reported the first instance decision in Shah v HSBC Private Bank [2009] EWHC 79 (QB). In that matter, the bank succeeded in striking out a claim against it for damages for wrongfully forming a suspicion of money laundering which resulted in an authorised disclosure report to SOCA. The court had held that the suspicion need not be rational, subject to the existing case law holding that the suspicion must be “non-fanciful and settled” and not a mere feeling of unease.

The claimant has successfully appealed to the Court of Appeal. It has held that certain issues are arguable and should therefore be determined at a trial. Those issues are:

  • whether a bank has a duty to act with reasonable speed in making its report;
  • whether a mistake by the bank can vitiate suspicion;
  • whether the customer is entitled to information about the suspicion and the reporting after SOCA has indicated that a transaction can proceed or after any investigations have completed;
  • whether the bank can prove that its suspicion was “non-fanciful and settled”. If applicable, that might involve consideration of reliance on computer generated suspicion; and
  • whether damages can be awarded for the “stigma” suffered by the customer.

Comment: The facts of the case appear to be extreme in that the bank’s suspicion was highly questionable and the amount of consequential damages claimed is US$331 million. The determination of the claimant to pursue the matter will at least serve to clarify a troublesome area of law and practice. Whether it will finally leave bankers and reporting officers more comfortable or less remains to be seen.

Paul Howcroft, Partner, Fladgate LLP

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