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PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.
Make Sure Your Bank Knows You
Under the Proceeds of Crime Act 2002 (POCA), a bank is required to inform the authorities about any transaction that it suspects might be connected with money-laundering or the proceeds of crime. Whilst the bank is awaiting consent from the authorities, the relevant account will be frozen and payments cannot be made.
In a recent case, the referral of a series of transactions to the authorities, under POCA, caused the depositor to suffer substantial losses because its account was frozen for a time. The depositor sued the bank.
In court, it was held that there is no discretion as to whether or not a disclosure should be made of a bank’s suspicions that transactions may be ones involving the proceeds of crime. The bank has no choice in the matter. Suspicion is subjective and the fact that it may be ill-founded or not based on reasonable grounds is not relevant as long as the suspicion is genuinely held. In this case, the bank had acted promptly in making the disclosure and had released the money promptly when payment was authorised. There was no breach of the bank’s contract with its customer, nor had there been a breach of confidence as a result of the disclosure.
The bank was not therefore liable to the depositor for any loss suffered.
“Make sure that your bank knows you as well as possible and has full information relating to the transactions you undertake, especially where the transfer of funds is time-sensitive,” says John Keeble. “This is particularly important if there is even the slightest possibility that a transaction could appear unusual and might give grounds for a referral. Normally, the delay involved is just a few days but, unless the bank has acted improperly, any resultant losses will be the account holder’s bad luck.”