The High Court has issued a decision dismissing civil claims from clients as a result of complying with reporting obligations under the Proceeds of Crime Act.
The High Court emphatically supported the role of the regulated sector in undertaking their statutory obligations under the Proceeds of Crime Act 2002, in the recent case of Shah v. HSBC Private Bank [2009] EWHC 79.
In dismissing claims for breach of contract and breach of confidentiality the Court held that banks do not need reasonable grounds before making a suspicious activity report.
The Court stated that a claimant would have to demonstrate the bank had acted in bad faith before civil liability would be entertained.
HSBC had delayed making payments of US$4million from the accounts of Mr and Mrs Shah, following a suspicious activity report.
An intended recipient of the money in Zimbabwe reported the matter to the Zimbabwean authorities who then froze US$300 million of assets belonging to Mr and Mrs Shah.
The Shahs alleged that HSBC had breached an implied term in the contract to take reasonable care to comply with instructions and had breached their confidentiality.
The Court found that the duty of confidentiality was overridden by the provisions of the Proceeds of Crime Act 2002.
They also found there was no obligation on the bank to provide information about the matter to the client or the Zimbabwean authorities on the basis that it may have exposed the bank to an offence of tipping off.