In May 2016, my colleague Matthew Newton outlined some of the reasons for "de-risking" in the banking industry. One of the reasons he identified was that senior executives of many banks are now keen to demonstrate that they have regained control following criticism of their leadership during the recession.
"De-risking" can be a double-edged sword from a reputational perspective. While banks may want to show regulators and the public that they are distancing themselves from suspected money laundering, they may, in carrying out the "de-risking" process, face claims from their clients that they have unreasonably terminated banking services. Indeed, this was precisely what Mr. Wafic Said, a billionaire philanthropist, alleged his bank, Barclays, had done to him earlier this year. Aggrieved by Barclays' decision to force him to close his personal accounts and those associated with his charities and business ventures, Mr. Said issued legal proceedings for an order compelling the bank to disclose any documents or data explaining its decision.
Mr. Said, a Barclays' client for over 40 years, appeared to be particularly concerned by how certain sections of the media had reported on Barclays' decision. The Times, for instance, suggested in an article on 18 March 2016 that Mr. Said's bank accounts had been closed because Barclays might not be able to satisfy regulators about its anti-money laundering procedures if it kept Mr. Said as a client. Mr. Said could clearly not let such innuendo tarnish his reputation. In March this year, Mr. Said decided to apply to Court for an order pursuant to section 7 (9) of the Data Protection Act 1998 requiring Barclays to disclose its reasons for closing his accounts.
Mr. Said's claim settled earlier this month. As part of the settlement, Barclays apologised and confirmed unequivocally that its decision to close the accounts "was not based on any wrongdoing in relation to any account activity of Mr. Said or any member of Mr. Said's family or any company, partnership or other entity associated with any of those persons, including the Said Foundation and the Said Business School Foundation." Mr. Said accepted the bank's apology and clarification.
In light of Mr. Said's claim, banks should perhaps reconsider the way in which they decide to end banking relationships with their clients and, in particular, whether they should disclose their reasons for doing so from the outset. While banks are no doubt keen to avoid the significant fines that have been imposed on them in recent years by regulators and prosecutors (particularly in the US, for historic weaknesses in their anti-money laundering defences) they would be well-advised to avoid terminating client accounts without prior consideration of what information may ultimately end up before a Court.
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