We can go on together - with suspicious minds: Shah v HSBC

In Shah & Anor v HSBC Private Bank (UK) Limited [2012] EWHC 1283 (QB), the High Court dismissed Mr Shah’s US$300m action against HSBC for losses that he argued were caused by delays in executing his payment instructions. Those delays were due to HSBC raising internal suspicions over Mr Shah’s source of funds and filing a Suspicious Activity Report (SAR) and seeking the consent of the Serious and Organised Crime Agency (SOCA) to proceed with the transaction. This decision of Mr Justice Supperstone has been widely welcomed by money laundering compliance professionals at financial firms. Ben Ko and Charles Thomson of Baker & McKenzie summarise the history of this long-running litigation, examine the key findings of the judge and set out practical steps firms can take in light of the decision.

Ben Ko (+44 (0) 20 7919 1733, ben.ko@bakermckenzie.com) and Charles Thomson (+44 (0) 20 7919 1879, charles.thomson@bakermckenzie.com) are associates at Baker & McKenzie LLP in London.

Facts

Mr Shah, a businessman with Zimbabwean interests, together with his wife brought a $300m action against his bank, HSBC, for damages caused by delays in executing four instructions to transfer funds from his account. The bank delayed processing the transfers because its nominated officer, Mr Wigley, suspected that the funds were proceeds of crime and, in the usual way and in accordance with the reporting regime in the Proceeds of Crime Act 2002 (POCA), delayed processing the transfers and filed a SAR. HSBC did not tell Mr Shah the precise reason for the delay and simply explained that it was “complying with its UK statutory obligations”. SOCA did provide its consent in respect of three of the transfers (Mr Shah cancelled one of the instructions) and they were executed shortly thereafter. Mr Shah claimed that the losses occurred when the intended transferee of one the payment instructions, an ex-employee of Mr Shah, tipped off Zimbabwean authorities that Mr Shah was being investigated for money laundering. Mr Shah submitted that this caused the Zimbabwean authorities to become suspicious and led them to freeze and then seize his assets, resulting in losses of over $300m.