Suspicious activity reports inspection granted by the High Court

In Lonsdale v National Westminster Bank plc (October 2018), the court granted the claimant, Mr Lonsdale, the opportunity to inspect the suspicious activity reports (“SARs”) submitted by his bank, National Westminster Bank PLC (“NatWest”) to the National Crime Agency (the “NCA”) relating to his accounts held with the Bank.

THE FACTS

Mr Lonsdale held seven accounts with NatWest. On 10 March 2017, NatWest froze one of those accounts for eight working days, reflecting the time it would have taken them to seek consent from the NCA following the submission of a SAR. By late 2017, NatWest had submitted several SARs to the NCA in relation to suspicious activity concerning all of  Mr Lonsdale’s accounts, that resulted in NatWest freezing  all of his remaining accounts. Following closure of his accounts, Mr Lonsdale brought claims against NatWest alleging a breach of contract, breach of the Data Protection Act 1998 and defamation against NatWest for submitting the SARs that related to him. Additionally, Mr Lonsdale also made an application for an order requiring NatWest to disclose the SARs for inspection, as the reports had been referred to in NatWest’s defence and counterclaim.

THE CASE

The court granted Mr Lonsdale’s application for an order to grant disclosure and inspection of the SARs on the following basis:

  • the Civil Procedure Rules granted the right of inspection of a document, where such document is mentioned in a statement of case or a witness statement (as was the case here);
  • there was no evidence to support the NatWest’s submissions that any order to inspect the document would have had the effect of requiring it to commit an offence under section 333A or 342 of the Proceeds of Crime Act 2002 (“POCA”), respectively the offences of ‘tipping off’ and making ‘a disclosure which is likely to prejudice the investigation;
  • there was no evidence that there was still a requirement for the SARs, submitted around 16 and seven months earlier, to be still kept confidential; and
  • inspection was necessary for the fair disposal of the claims. The content of the SARs was relevant to the assessment of whether NatWest’s employees had a relevant genuine suspicion, which was the key issue in the contract claim. Furthermore, the SARs were the primary communication alleged to be defamatory.

NEXT STEPS

Section 338(4A) POCA makes clear that where an authorised disclosure is made in good faith, no civil liability arises in respect of the disclosure on the part of the person by or on whose behalf it is made and therefore in this case was unlikely to affect the general protection provided by section 338 POCA. Firms should be reassured by existing caselaw on the meaning of suspicion, in particular, the grounds for  suspicion must be warranted, an individual must think that there is a possibility which ‘is more than fanciful that the other person was or had been engaged in criminal conduct’and therefore are not required to have any expertise in investigation of the criminal activity.[1]

Ordinarily, a firm and its Money Laundering Reporting Officer (“MLRO”) bear responsibility for any defamatory remarks made in a SAR. In light of section 338(4A) POCA, the MLRO should continue to make disclosures wherever knowledge or suspicion of money laundering has arisen. NCA guidance makes plain that a SAR should contain as much factual information as possible (e.g. details of the person(s) involved and the whereabouts of the property) and should be clear and concise. Speculation, conjecture and derogatory remarks, should naturally be avoided.

Therefore, firms should not shy away from their reporting obligations, as long as the reasons for suspicion are justified with reference to accurate facts and events and expressed in neutral language the risk of the reports being used against the firm, such as for claims in defamation, will be reduced if the report were to be subsequently disclosed at a later date.

For more information on or any guidance or advice on commercial contracts, Cleveland & Co external in-house counsel, your specialist outsourced legal team are here to help.

 

 

 

[1]R v Da Silva (2006)

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