Lessons from Shah when making STRs

The regulator is on the warpath about why some firms make what it sees as suspiciously few Suspicious Transaction Reports (STRs) and plans to conduct spot checks. Sara George and Joe Gosden ask how reasonable ‘reasonable grounds to suspect’ need to be and when is making an STR advisable?

Sara George is a partner in the regulatory litigation practice and Joe Gosden a trainee, at law firm Stephenson Harwood. To contact them email sara.george@shlegal.com and joe.gosden@shlegal.com.

The eagerly awaited judgment in Shah and Another v HSBC Private Bank (UK) Ltd [2010] EWCA Civ 31 was handed down on 16 May 2012. The judgment, entered in favour of HSBC has elicited a collective sigh of relief from financial institutions large and small. Nonetheless, the case has demonstrated that compliance with the UK’s anti-money laundering regime is not without litigation risk. Although the case concerned the making of suspicious activity reports (SARs) to the Serious Organised Crime Agency (SOCA), the principles have application for regulated firms and the Financial Services Authority in relation to the obligation to make STRs relating to transactions that might constitute market abuse.