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
"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
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.
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 Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
On March 7, 2017, it will be one year since the U.K. Financial Conduct Authority's senior managers and certification regime came into force, heralding a new era of personal accountability in the financial sector.
On January 31, 2017, the FCA published a final notice issued to Deutsche Bank AG and fined the bank Ł163 million for failing to maintain an adequate AML control framework between January 1, 2012 and...
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).