The new outbreak of SARs – a potential fightback?
At the moment most of the usual financial media outlets are focussed on the Barclays Qatari trial which is currently being heard at Southwark Crown Court.
This is perhaps understandable given the seniority of the Defendants standing trial, the enormous amounts of money and bonuses that are being bandied about in relation to it and the suggested collusion of the highest ranking officials in a foreign state.
There is, however, another trial which is playing out at moment in the High Court that is perhaps of more general interest to the average business person in the street.
An unnamed foreign exchange and payments company is suing RBS for several millions of pounds of damages for breaching its banking mandate and the duty of care it owed to the company by the freezing of its main trading account. This was in conjunction with submitting a Suspicious Activity Report to the National Crime Agency regarding concerns the bank had in relation to some of (presumably hundreds of) the payments company’s clients being involved in a suspected “boiler room” fraud.
Over the last few years the stratospheric increase in the number of SARs being submitted (464,000 last year alone) by the nominated officers at banking and other financial/professional institutions is of little surprise when the only message that seems to have got through the confusion as to what their obligations and duties are, is that the nominated officer could be held personally criminally liable if they fail to make a report having been on notice of potential suspicious activity and those suspicions then subsequently prove to have been merited. When faced with such serious consequences, particularly when one’s own head is on the block, it is in most humans’ nature to shoot first and ask questions later.
It is of course necessary to have in place a regime that seeks to prevent money-laundering, the financing of terrorism and to protect the victims of fraud. However, in the circumstances where the agencies that are tasked with dealing with SARs are under-funded and under-resourced; the quality and justification for some of the reporting being questionable and with the number of SARs submitted continuing to increase, it is perhaps not before time that a bank should be held to account for its actions.
I note the lawyers for RBS have trotted out the usual line that the freezing of accounts and submission of SARs “may cause customers hardships, but that is the price parliament has deemed worth paying in the fight against crime”.
For any legitimate business or individual that has gone through the financial and psychological maelstrom of having their banking facilities stopped and access to their monies denied, sometimes upon the basis of nothing more than vindictive rumour and gossip having been published in order to sell more newspapers, calling this a “hardship” is somewhat understating the experience and the severe consequences it can have.
This is even more so since the Criminal Finances Act 2017 extended the moratorium period to up to six months within which the prosecuting authorities can continue to freeze accounts to allow them to investigate the suspected criminality.
Historically, when proceedings have been brought against banks arising from the fallout caused by the submission of a SAR, the Courts have generally sided with the bank and provided a wide discretion as to whether a bank had the justification to take the action that it did.
I do not know all the specific facts and details of the current case against RBS, and it may be that the bank was completely justified to do as it did, but it will be interesting to see what transpires.
Ben Brocklehurst is a vastly experienced Lawyer with particular expertise in defending high value white collar crime and related Restraint/Confiscation proceedings.
0207 842 1631