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.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.