The announcement that permission to appeal has been granted in the case of N v Royal Bank of Scotland PLC (2019) EWHC 1770 (Comm) might offer ray of hope to companies and individuals whose banking facilities had been frozen or terminated because of suspicions held by the bank that the accounts were being used for fraud and money laundering.


By way of a reminder about the background to the initial decision in this case, the Claimant (“N”) provides foreign exchange and payment services to its customers. N held approximately 60 active accounts with the Defendant bank (“RBS”). These comprised four main accounts and separate client sub-accounts in various currencies. The main accounts had a high volume of transactions and an annual turnover of around £700 million. The transactions on the main accounts included payment into and out of the sub-accounts, third party credits and a large volume of transactions to and from N’s currency accounts relating to FX activity.

It was not in issue between the parties that the terms governing their contractual relationship of included two key clauses:

  1. Clause 9.4 of RBS’s Account Terms (“the Terms”) which provided RBS “will give the Customer not less than 60 days’ written notice to close an account, unless [it] considers there are exceptional circumstances”; and
  2. Clause 13.1 of the Terms provided RBS “shall have no liability for, and may delay or refuse to process or proceed with processing any payment if (i) in its reasonable opinion it is prudent to do so in the interests of crime prevention or in compliance with laws including sanctions laws or regulations, or (ii) such delay or refusal is a consequence of checks carried out as part of the proper operation of [its] pay processing systems”.

RBS froze ten of N’s sub-accounts which it suspected were being used for fraud or to hold the proceeds of crime following which an attempt was made to make a payment of £500,000 through one of the main accounts "in an apparent effort to circumvent the freeze on the frozen sub-accounts.". RBS’s investigations showed that there had been a mixing of funds between the suspect sub-accounts and N’s main accounts and consequently RBS took the decision to freeze the main accounts and terminate the customer relationship with immediate effect.

N commenced these proceedings challenging the lawfulness of that action on the part of RBS.

The High Court proceedings

In the course of the High Court proceedings, N argued that there were several other avenues RBS could have pursued without having to terminate the contact with immediate effect, for example:

  • Ring-fencing the suspect funds
  • Manually operating the account
  • Preventing further credits to the account (to avoid further evasion of the freeze)
  • Breaking the account (if necessary with NCA consent)
  • Seeking consent on a daily basis by way of an omnibus SAR
  • Adopting a cooperative approach to the exit of the relationship by working with N over the suspect account.

The Court rejected these arguments, largely on the basis that the level of justified concern was at much too high a level for any of the alternatives to be reasonably pursued. The £500,000 attempted payment was evidence of the actions which N and its clients appeared willing to take in order to circumvent the bank's initial freeze and a measure of the seriousness of the situation.


The Court found that RBS had been entitled to terminate its relationship with N without notice. It considered that RBS had:

  1. Investigated the issue of mixed funds and rightly taken it into account when deciding to terminate the banking facilities;
  2. Taken account and properly weighed up the potential risks to N’s business; and
  3. Considered, rationally and in good faith, that there had been exceptional circumstances for closing the accounts without notice.

The Court concluded that, whilst RBS’s decision to terminate the relationship without notice had major consequences for N, it was nevertheless a proper response in the circumstances and therefore RBS was entitled to take the steps it took under the Terms of the banking facilities provided.


The initial decision will have been welcomed by banks facing increasing pressures when it comes to anti-fraud and money laundering protection in the financial industry. The judgment empowers financial institutions to take matters into their own hands and not to rely on law enforcement to take action (for example, refusing consent in response to a SAR or in the form of Account Freezing Orders and the like). However, whilst the Court did find in favour of RBS, the fact is that cases such as this will always need to be considered on their specific facts. It should also be remembered that RBS did take intermediary steps prior to terminating the relationship, such as freezing the sub-accounts, and the decision itself came after careful consideration by RBS’s director of financial crime and group money laundering reporting officer in consultation with others.

Most banking contracts will include a clause allowing the bank to immediately terminate the banking relationship in exceptional circumstances. Businesses wanting to avoid such a clause being exercised should take reasonable steps to ensure that they undertake adequate on-boarding, due diligence and KYC checks in order to ensure that they manage money laundering risk their end. And in the meantime watch this space for a Court of Appeal decision which might provide some more general guidance for parties facing frozen accounts and terminated banking facilities.