In Parvizi v Barclays Bank Plc (2014), the High Court struck out a claim in contract and held that Barclays was not in breach of that contract in freezing a customer's accounts and denying him access to his funds. The evidence established a clear belief by the bank of a relevant suspicion of money laundering and it was not possible to conclude that the suspicion was simply fanciful.
Mr Parvizi, a customer of Barclays and a professional gambler, made a claim against Barclays for breach of contract after Barclays had denied him access to his money at what was claimed to be a critical time. Barclays argued that it had good reason to freeze Parvizi's account because it had detected suspicious activity in the account and put forward evidence from an analyst in its anti-money laundering team to support this contention.
The analyst, Ms Walley, was responsible for evaluating the potentially suspicious activity in the account after receiving a 'red flag' from a branch of Barclays. Ms Walley's witness statement set out the basis for her suspicions which, amongst other things, arose from the fact that she had been unable to trace the source of several large transfers of moneys, had noted significant gambling activity and had seen that Parvizi was under investigation by the FCA. As a result, Ms Walley made a report to SOCA.
Master Bragge considered the tests described in R v Da Silva (2006) EWCA Crim 1654 and Shah v HSBC Private Bank (UK) Ltd (2012) EWHC as to what amounts to a suspicion in the context of the disclosure of suspected money laundering activity under Part 7 of the Proceeds of Crime Act 2002. These set out that the relevant threshold is that "the defendant must think that there is a possibility, which is more than fanciful, that the relevant facts exist. A vague feeling of unease would not suffice. But the statute does not require the suspicion to be ‘clear’ or ‘firmly grounded and targeted on specific facts’, or based upon ‘reasonable grounds'." Master Bragge also concluded from these cases that it is "for the bank…to establish the primary fact of the suspicion in order to justify not following the customer's instructions".
The Master considered Ms Walley's evidence and acknowledged that although her handwritten notes and other documentation were open to criticism, these were never intended to be pored over by lawyers and gave Ms Walley the benefit of any doubt. Although Ms Walley's reasoning in support of her suspicion was also attacked "with some legitimacy" by Mr Parvizi's legal team, the Master concluded that Ms Walley's evidence established "a clear belief by her of a relevant suspicion" which he was not able to conclude was "simply fanciful". The Master therefore concluded, although not without some hesitation, that Mr Parvizi had no real prospect of success at trial and allowed Barclays' application to strike out Mr Parvizi's claim.
This case serves as a useful reminder of the hurdles that a bank must overcome if it is to successfully defend its actions when freezing a customer's account on suspicion of money laundering. Given the massive penalties financial institutions (and individuals) face should money laundering be allowed to continue on their watch, it will be a relief to those institutions (and to the compliance personnel working for them) that the courts are upholding decisions to suspend access to customers' accounts where there is a genuinely held suspicion of money laundering even where that suspicion later turns out to be wrong.
The decision should, however, also prompt financial institutions to check that AML are properly recording any and all decisions to ensure that the suspicion of money laundering is properly documented.