Failure of client to furnish the bank with required documents may lead to closing of the account

October 2, 2019
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A bank decided unilaterally to close the accounts of three companies and their shareholders because of “red flags” that caused it to fear that these accounts were involved in money laundering. The bank gave a 14-day warning to the customers.
The Supreme Court held that the bank was allowed to close the account. A banking corporation is required to provide certain banking services to anyone interested, including opening a recurring account. Where there is probable cause, a banking corporation may refuse to provide services to the client, including in cases of customer misconduct or negligence in the management of the account, specific behavior and attitude towards the bank officials, including unfair and even aggressive and violent behavior, or apprehension of money laundering or financing of terrorism, including in the event of non-cooperation of the client with regard to disclosure obligations imposed on the bank under the anti-money laundering legislation. Here, the company was founded in the Virgin Islands and is located in the Isle of Man – jurisdiction known as “tax havens”; a criminal investigation was opened with regard to the company’s shareholder; there was a lack of responsiveness to demands for submission of documents required by the bank; and there were money transfers, the business logic behind them was unclear. Thus, the bank’s decision to close the account was reasonable.