Being sued after reporting to SOCA
There is an interesting legal case which has been rumbling around the courts for some years now - and looks likely to do so for a few years more.
The facts are pretty simple. A business customer of a bank instructed the bank to make payments to various persons overseas. (I am using "person" here to include a business as well as an individual.) The bank made a report to SOCA seeking consent to make those payments under the money laundering regime. Pending receipt of that consent the bank did not make the payments.
When the monies failed to arrive when they were due the persons to whom the payments should have been made got very concerned and lost faith in the bank's customer. As a result the bank's customer lost valuable opportunities and its reputation was damaged.
It is now accepted that the payments, had they been actioned on time, would not in fact have involved any money laundering.
The customer sued the bank for its loss.
What takes this out of the ordinary is the size of some of the numbers. The claim against the bank is for US $300 million in damages. Four payments were involved. The total value of them was about US $38 million.
Initially the bank responded to the claim for damages by saying, in effect, "We had a suspicion - the law required us to do what we did. So tough!".
The customer responded by saying, in effect, "There were no grounds for any suspicion - you ought not have had a suspicion - your failure to make the payments as instructed has cost us dear and you have to bear that cost."
When the matter first came to court the customer's claim was summarily thrown out (without full evidence being produced), on the basis that the customer could not tell the bank whether or not it "ought" to have had a suspicion - and therefore the claim was bound to fail and the court would not entertain it at all.
The customer appealed and had the claim re-instated on the basis that it was proper to oblige the bank to show in court at least that it actually did have a suspicion.
The bank has now disclosed its internal procedures for reporting suspicions and the bank's MLRO has personally made a witness statement saying that, on the information he received from more junior staff, he genuinely did have a suspicion. The bank has also said that the paperwork would have been through at least two other people on the way to the MLRO and they also must have had a suspicion or they would not have referred it up the 'chain of command' to the MLRO.
But the bank has refused to give the names of anyone involved at the bank other than that of the MLRO himself.
The customer says, in effect, "How can I check if these other people genuinely had a suspicion if I cannot get them into the witness box because I don't know who they are?"
So the latest round in court has been about the customer asking the bank to disclose the names of the staff involved - and the bank's refusal to do that.
The judge has ruled that the bank must disclose how many different individuals in the bank were involved and in which departments they worked but, for now at least, the bank is not obliged to disclose their names.
The point is that the bank's argument, in part, was that its suspicion was obviously in good faith because a number of different people shared it. So the bank has to disclose a bit more about how many people shared it in order to back that up.
In the latest judgment the judge is thinking aloud about the pro's and con's of requiring details to be produced in court about reports of money laundering suspicions.
If you are interested the judgment is online HERE. Not the easiest of reads, though!