UK: Shah v HSBC Concludes In Vindication For Banks

Banks, other financial institutions, money laundering reporting officers ("MLROs"), law firms, accountancy firms, insurers, auditors and any other professional body charged with reporting obligations in relation to suspected money laundering or other organised crime will no doubt welcome the recent decision of the High Court in Shah v HSBC Private Bank (UK) Ltd.

This decision emanates from four and a half years of protracted litigation and provides clarity and certainty for professional bodies in seeking to comply with their reporting requirements under the Proceeds of Crime Act 2002 ("POCA"). In summary, the decision confirms that a bank may delay a customer's payment instructions, and refuse to provide information, in circumstances where money laundering is suspected and a report has been made to the Serious Organised Crime Agency ("SOCA").

The Facts

The Claimants, Mr and Mrs Shah, were account holders with the Defendant, HSBC Private Bank (UK) Ltd ("HSBC"), since 2002. In July 2006, Mr Shah transferred approximately US$28,000,000 to HSBC from an account held with Credit Agricole Indosuez (Suisse) SA ("CAI"), due to concerns about potential fraud on his CAI account. The money was to be held by HSBC on a monthly rolling deposit and ultimately returned to the CAI account.

During the period from September 2006 to March 2007, Mr Shah instructed HSBC to make four transfers. HSBC refused to do so, informing Mr Shah that it was "complying with its UK statutory obligations". The true reason that HSBC refused to make the transfers was because it suspected that the funds were the proceeds of crime. HSBC provided a Suspicious Activity Report ("SAR") to SOCA, informing SOCA of its suspicions and requesting permission to perform the transactions. SOCA ultimately granted HSBC permission to make the transfers, however, the time it took SOCA to consider each of the proposed transactions caused a delay.

Mr Shah's second payment instruction to HSBC was for a payment of US$7,282.50 owed to Mr Kabra, an ex-employee of Mr Shah in Zimbabwe. When HSBC refused to make this transfer and Mr Shah failed to pay Mr Kabra, Mr Kabra reported Mr Shah to the Zimbabwean police and told them that Mr Shah was the suspect of money laundering. The Zimbabwean police executed a warrant and conducted a search on Mr Shah's property in Zimbabwe. The Reserve Bank of Zimbabwe ("RBZ") asked Mr Shah to explain the investigations which were being conducted in the UK. However, HSBC refused to provide any further information stating only that they were complying with their statutory obligations. Therefore, Mr Shah was not able to respond to RBZ's queries and the Zimbabwean authorities froze and seized Mr Shah's investments in that country, causing him alleged losses of US$300 million.

Accordingly, Mr and Mrs Shah claimed that HSBC had breached its contract with them, causing damages of the alleged sum, by:

1. failing to process the payments in accordance with the instructions provided; and

2. failing to provide Mr Shah with information about the investigations that had taken place.

HSBC defended each of these claims on the following basis:

  • There was an implied term in the contract between the parties which entitled HSBC to refuse to process instructions, if it suspected that the particular transactions constituted money laundering, without the consent of SOCA under section 335 of POCA
  • Mr and Mrs Shah were not entitled to information about HSBC's dealings with SOCA. In any event, there was an implied term in the contract between the parties which permitted HSBC to refuse to provide such information, if to do so might cause HSBC to be in breach of a legal or other duty, including sections 333 or 342 of POCA (offences against tipping off or otherwise prejudicing an investigation). (Section 333 of POCA is the section which applied at the material time although it has since been repealed and replaced by sections 333A to 333E.)

The effect of POCA on the relationship between banker and customer

Under POCA, financial institutions risk criminal prosecution if they fail to report suspicious transactions, or if they report such transactions and nevertheless carry out the subsequent transaction without the required consent. Commenting on the effect such provisions have on the contract between a bank and its customers, Supperstone J stated that "It is plain that POCA has intervened in the contractual relationship between banker and customer in a way which may cause the customer prejudice" but that this is "a price Parliament had deemed worth paying in the fight against money laundering".

Implied Term 1 - Entitlement to refuse to process a transaction

As stated above, HSBC submitted that there must be an implied term in the contract between a bank and its customers which would entitle the bank to refuse to process a customer's instructions, if it suspected that the transaction constituted money laundering, without the consent of SOCA under section 335 of POCA. Counsel for Mr and Mrs Shah submitted that such a term should not be implied because it is "ridiculously wide", a customer would not regard it as obvious, the term is not capable of clear expression and some banks do have express terms to cater for this situation. Despite these contrary arguments, given that a bank has no alternative but to report and seek appropriate consent in relation to any instructions it received that are suspicious (or risk criminal prosecution), Supperstone J held that the term contended by HSBC is to be implied by reason of the relevant statutory provisions.

Implied Term 2 - Tipping off

HSBC contended that Mr and Mrs Shah were not entitled to information sought about its dealings with SOCA and the investigations being conducted. HSBC further submitted that there must be an implied term in the contract between a bank and its customers which permitted HSBC to refuse to provide such information, if to do so might cause HSBC to be in breach of a legal or other duty, including sections 333 or 342 of POCA (offences against tipping off or otherwise prejudicing an investigation).

Counsel for Mr and Mrs Shah opposed this contention, submitting instead that there is a contractual duty implied into the contract between a bank and its customer to provide information and to keep the customer informed about why its instructions are not being complied with. It was submitted that HSBC's failure to do so in this case constituted a breach of this duty. Supperstone J disagreed, stating that an implied term such as that posited by Mr and Mrs Shah would be unworkable because in most cases a bank would not know whether its disclosure had triggered an investigation or may do so in the future. Supperstone J stated that, in his view, had HSBC provided Mr Shah with the information sought, it would have been admitting that it had submitted a SAR to SOCA and may have subsequently alerted Mr Shah, or another third party, to the possibility of an investigation, which would in all likelihood have prejudiced that investigation.

Supperstone J agreed with HSBC's submission that there is an implied term in a contract between a bank and its customer which permits the bank to refuse to provide information in circumstances where, to do so, might constitute a breach of ss333 and 342 of POCA.


As stated above, under POCA, professional institutions are required to report suspicions of money laundering. Therefore, a central issue to be determined in this case was whether HSBC's nominated officer, Mr Wigley suspected that Mr Shah was involved in money laundering and that the monies in question were the proceeds of criminal activity. Mr Wigley said that there were seven factors which gave rise to his suspicion: (1) Someone in the Relationship Team of HSBC (who had knowledge of the customer) had formed a suspicion which had been independently considered and confirmed by the Compliance Department; (2) & (3) the movement of funds from CAI to HSBC and back again, and Mr Shah's explanation for this; (4) the size of the transaction; (5) previous concerns about activity on Mr Shah's account; (6) uncertainties about the original source of the funds; and (7) Mr Shah's connections with Zimbabwe (the amount of funds were abnormally high for Zimbabwe, which is also a high risk country).

Mr Wigley was required to give evidence over a period of six days. The judgment states that he was cross examined in great detail and at some length. In relation to his evidence, Supperstone J held that he was "left in no doubt that Mr Wigley honestly and genuinely suspected that the funds were criminal property when he submitted his report to SOCA".


As a result of the Zimbabwean authorities freezing and seizing Mr Shah's investments, Mr Shah alleged that he suffered losses of US$300 million. Mr Shah said that these losses were caused by HSBC's delay in performing the various transactions in accordance with Mr Shah's instructions and for failing to provide the information sought. Supperstone J disagreed that HSBC's conduct caused Mr Shah's alleged losses, finding that the Zimbabwean authorities were investigating Mr Shah prior to September 2006, and it was their pre-existing concerns which led to the freezing and seizure of Mr Shah's assets. In addition, it was held that Mr Shah was a wealthy man and could have paid the small amount owed to Mr Kabra from other sources, thereby avoiding any delay to this particular payment.


Banks can now breathe a sigh of relief after four and a half years of uncertain litigation which could have exposed them to civil claims for simply complying with their anti-money laundering obligations. The decision is obviously a much welcomed, although perhaps somewhat unsurprising result. It is hard to see how a court could justifiably criticise a bank for simply complying with such important statutory obligations, aimed at the investigation and prevention of crime. However, this does not mean that the decision will not have an impact on the way in which banks and MLROs in particular deal with suspicious activity in future. Mr Wigley, the MLRO in this case, was subject to a gruelling six days of cross-examination during which his conduct was examined in forensic detail, a consequence which cannot be taken lightly. This will surely encourage banks and MLROs to be even more cautious when discharging their reporting obligations. The decision also provides useful guidance to other professional bodies faced with similar obligations to report incidents of suspected money laundering or other organised crime. The reporting obligations under POCA apply to the entire regulated sector, including tax advisors, insolvency practitioners, insurance intermediaries, auditors, accountants and, more generally, any business involved in financial or real estate transactions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions