Mere suspicion sufficient for banks to delay transactions - Proceeds of Crime

28/01/2009

The Claimant suffered substantial loss as a result of the Defendant Bank delaying the execution of four transfers from the Claimant's account, offering no explanation other than that of compliance with their statutory obligations. As a result, rumours circulated that the Claimant was involved in money laundering activities and their reputation was unjustly stigmatised.

The Claimant's original claim was made on the basis of (i) HSBC failing to comply with the instructions in respect of the four transactions; (ii) HSBC's failure to provide information and to forward bank statements; and (iii) a claim for damages suffered as a result of the Defendant's action, resulting in seizure and termination of assets held offshore. Their Claimant later sought to amend their claim against the Defendant to include a duty to take reasonable care in maintaining the Claimant's accounts and in complying with instructions including the making of disclosures by way of Suspicious Activity Reports.

Under the Part 7 of the Proceeds of Crime Act 2002 ("POCA"), where a person through the course of their trade, profession, business or employment comes to suspect property of being criminal in nature, they are obliged to report such suspicion to the relevant authority in accordance with section 338 of POCA. That person makes such disclosure under the auspice of protection, where the information causes them to (a) know or suspect; or (b) gives them reasonable grounds for knowing or suspecting that such property is proceeds of crime. Where such authorised disclosure is made, the person making the disclosure is by law, not permitted to inform or "tip off" the suspected party.

In this instance, Hamblen J. found that authorities had established the word suspicion to be a "purely subjective matter" and that it did not matter whether there were reasonable grounds for that suspicion, provided it was a genuinely held suspicion "thought to be based on possible facts".

Thus, where a banker has a suspicion ("which is something less than proof") they are obliged and entitled to make such authorised disclosure to the appropriate authority without the "superadded requirement of reasonableness" which would put them "in an impossible position" which could result in a "breach of duty even though he was acting as the law compelled him to". The only challenge that could be brought in the face of this "mens rea of suspicion alone", would be to challenge the good faith of such suspicion.

The Court in this instance, found in favour of the Defendant stating that they were permitted to delay customer transactions in accordance with POCA, on the basis of "mere suspicion" and that a subjective interpretation of this was intended by the legislature for the purpose of "good practice". They Court also found that a the bank was not in breach of its duty to the client by failing to execute payment instructions and/or failing to provide a reason for doing so, where such actions were triggered by an authorised disclosure in accordance with POCA.

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