Cakes and liability

Apart from it being the first day of summer (and it’s still perishing), today heralds the coming into force of the part of the Serious Crime Act 2015 which amends section 338 of the Proceeds of Crime Act.  (I know, I know: it’s tough to get all of that iced on a celebratory cake, but we’ll try.)  I have talked before about the significance of this amendment, but now that it’s really here, it bears revisiting.

In short, s338 is the part of PoCA that talks about “authorised disclosures” (more generally referred to as suspicious activity reports, or SARs).  Thanks in no small part to the 2012 case of Shah & Anor v HSBC Private Bank (UK) Limited, it was realised that making a SAR – above and beyond the inherent scariness of saying “we think our client is a crook” – carried with it certain risks, particularly if the reporting institution had fiduciary or other duties to the client named in the SAR.  As Shah demonstrated, it was difficult to navigate the reporting waters if a consent SAR was made and there was a subsequent delay which the client could claim, in the civil courts, had disadvantaged them.  Today’s amendment seeks to address and clarify the situation for all concerned.

It is only a tiddly paragraph, this amendment, found at s37 of the Serious Crime Act 2015: “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 that is the nub of it: this amendment provides statutory protection from civil liability to those who make a SAR in good faith and delay a client’s transaction while awaiting consent from the National Crime Agency (NCA).  Perhaps rather belatedly, given that we’re now on the Fourth one, this amendment incorporates the obligation set out in Article 26 of the Third Money Laundering Directive that AML legislation should protect those making disclosures in good faith from “liability of any kind”.

So there we have it: welcome to a bonny new amendment.  Slice of cake, anyone?

This entry was posted in AML, Legislation, Money laundering and tagged , , , , , , , . Bookmark the permalink.

2 Responses to Cakes and liability

  1. Roy McCarthy says:

    Wasn’t the concept of ‘in good faith’ one of the legal arguments in Shah? A pity the phrase wasn’t omitted entirely from the amendment.

  2. Indeed, it’s a very slippery beastie, “good faith”. There are all sorts of attempts by law firms to give guidance on the matter (e.g. http://www.traverssmith.com/media/1333036/good_faith___what_does_it_mean_july_2013.pdf), but the general feeling is that – if possible – it’s better to spell out exactly the standard of behaviour expected, rather than relying on varying and changing interpretations of “good faith”.
    Best wishes from Susan

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