Businessman loses second round of money laundering claim against HSBC

17 October 2011

International businessman Jayesh Shah has failed to force HSBC Private Bank UK to identify the employee who reported him for suspected money laundering.

Shah is extremely wealthy, with assets and interests in several countries, including Zimbabwe. In 2006 and 2007 he transferred about $40 million from a French bank to his HSBC London account, and attempted to use it to make four direct credit payments to various parties. An HSBC employee considered the transactions suspicious, and filed a report to the bank’s nominated compliance officer.

The latter held up the payments. Three of them were later processed as per Shah’s instructions, but the fourth was cancelled by Shah while the Serious Organised Crime Agency examined the transactions.

The non-arrival of this last payment upset its intended recipient. Apparently he then leaked HSBC’s money laundering suspicions to the authorities in Zimbabwe, where much of Shah’s wealth is, or was, situated. They first froze and then seized $300 million of his assets. His litigation against HSBC aims to recover this amount, alleging irrationality, negligence and a breach of duty to keep him informed.

Earlier hearings have brought mixed comfort for Shah. He initially lost in the England & Wales High Court, which ruled that a bank is absolved of any liability for the effects of filing a suspicious activity report (SAR) even if the suspicion was unreasonable.

But in 2010 Shah persuaded the England & Wales Court of Appeal that the bank could be liable after all. The EWCA ruled that the bank had to prove that the suspicion it held was of money laundering, rather than just of something “fishy” – a decision that incidentally prompted the Law Society to issue new guidance on the filing of SARs.

However, the court (under Mr Justice Coulson) did not order HSBC to name the bank officials concerned.

Since then, Shah has been trying to get the information he needs to discover exactly why HSBC – or rather, one of its employees – reported the transactions. He appears to have been on very poor terms with at least two of its staff, and has suggested that they may have blocked the transactions out of malice.

Thus this most recent Appeal Court hearing was aimed at finding out just who called in HSBC’s money laundering reporting officer and triggered the chain of events.

The bank has disclosed a series of internal documents generated during the SAR process. But it redacted out all the names of the people concerned (except for the compliance officer himself, one Wigley, who had himself handled Shah’s subsequent complaints).

This, the bank claims, fulfils its “standard disclosure duty” under civil procedure rules. Earlier case law, especially the Peruvian Guano case, suggested that its duty might extend to naming all the persons involved.

But the Court of Appeal ruled that subsequent legislation had superseded the Guano decision. It decided that Shah’s demand for the bank official’s name was a mere “fishing expedition” based on “speculation and surmise” rather than any real suspicion of bad faith. Accordingly it rejected his appeal (Shah & Anor v HSBC, EWCA Civ 1154, 13 October 2011).




BAILII (October 2011 decision)

BAILII (EWCA judgement, 2010)



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