Between a Cop and a Customer

Date01 January 1996
Publication Date01 January 1996
AuthorSimon P. Robert‐Tissott
SubjectAccounting & finance
Journal of Financial Crime Vol. 3 No. 3 Civil Litigation
Between a Cop and a Customer
Simon P. Robert-Tissott
Gone are the days when a bank could concentrate
on providing a reliable service to its customer, and
maintain that as part of that service it could guard
the confidentiality of all information learnt in the
course of the customer's banking. Formerly, a cus-
tomer could be relatively confident that informa-
tion about his or her business affairs would not be
disclosed save in fairly limited circumstances, and
the bank would not trouble itself as to how these
affairs were conducted. Current legislation and
regulation requires a bank to be aware of the com-
mercial background to its clients' dealings and, in
certain circumstances, to take steps to report crimi-
nal conduct or to account to third parties.
The change in culture expected of banks comes
from two sources. First, the use of banking infor-
mation to combat crime and, at the same time,
protect the stability of the financial system from
being undermined by the product of criminal
activity; and secondly, the need for banks to be
responsive to customers' particular needs in pro-
viding them with the more sophisticated financial
products that are now part of regular banking busi-
This has led to extensive statutory provisions
requiring clients to be properly identified, and ade-
quate systems of control to be put in place, some
of which are backed by criminal sanctions.
However, at the same time, criminal and civil
liability has been developing based upon the state
bank's knowledge. This leads to a dilemma. A
bank can be damned if it does not have systems in
place to discover particular financial activities, but
potentially liable if it learns too much of certain
client activities.
The Bank of England has let it be known that it
expects banks to:
'know your customer'
comply with all relevant laws
cooperate with law enforcement agencies; and
ensure that all staff are adequately trained and
the necessary procedures are in place.
Likewise, the Securities and Investments Board
general principles include the requirement that
members of self-regulatory organisations (most
major banks) should know their customers.
'Evidence Notes to the Money Laundering Regula-
tions 1993' offer practical guidance in such matters
as identification procedures and record keeping.
Potential criminal liability
The most wide-ranging criminal sanctions for
being concerned with and failing to report criminal
activity are contained in the money laundering
provisions of the Criminal Justice Act 1988 as
amended in 1993.
A bank would commit an offence under
s. 93A(1) if it knows or has reasonable
grounds to suspect that a person has been
engaged in criminal conduct,
and is concerned in an arrangement whereby
the criminal's retention or control of the pro-
ceeds of
criminal conduct is facilitated,
or the monies are used to acquire property
for the criminal's benefit by way of invest-
or to secure that funds are placed at the
criminal's disposal.
A bank will have a defence if it discloses its
suspicions to a constable as soon as reason-
ably practicable (s. 93A(3)(b)).
A bank will be safe it it did not know that any
arrangement related to criminal proceeds, but in
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