Zanu-PF linked businessman loses $300m HSBC lawsuit

LONDON, United Kingdom - A Zimbabwean businessman with links to Robert Mugabe's Zanu-PF has failed in a US$300 million lawsuit against a British bank which reported his request to transfer nearly US$28 million to his other account in France to authorities.

Jayesh Shah sued HSBC in 2006 after the bank reported his requested transfer as "suspicious" to the Serious Organised Crime Agency (SOCA), which had the effect of temporarily freezing his account.

Shah and his wife argued at the Court of Appeal in London that as a consequence of HSBC's decision, they had been stigmatised in Zimbabwe and suspected of criminal activity.
Shah claimed his assets in Zimbabwe had been seized and frozen by authorities.

The case was closely watched by other banks who were concerned that they could be exposed to legal action by customers for simply complying with their obligations under the Proceeds of Crime Act.

Jayesh Shah and his wife Shaleetha Mahabeer sued HSBC in 2007 for more than $300 million, claiming that delays in executing four transfers from their account for over $38 million caused the losses. They said they were stigmatized in Zimbabwe and suspected of money launderingbecause of HSBC, causing authorities there to freeze and seize their assets.

The Zimbabwean police were alerted by a former employee of the couple who didn't receive a payment, the court said today. The ex-employee told police that Shah was suspected of money laundering in the U.K., leading them to seize his investments.

The banking sector files thousands of suspicious activity transactions or SARs to SOCA each year.

Ruling in favour of HSBC, Mr Justice Supperstone found that it was not the bank's delay in executing the payment instructions and its failure to provide information but the Zimbabwean authorities' own pre-existing or independent concerns that led to the losses by Shah and his wife.

The judge also said in his ruling that "in my judgment Mr Shah was able to, but did not, take reasonable steps to mitigate or avoid his loss".

Shah, a customer with HSBC Private Bank for eight years, first transferred $28 million to his HSBC account in London from an account at Crédit Agricole, the French bank.

When he tried to transfer most of the money back to Crédit Agricole in 2006, he was told by HSBC that "it could not effect the transaction because it was complying with its UK statutory obligations" as the bank had made a Suspicious Activity Report to a regulatory authority.

HSBC told Shah that it was complying with its statutory obligations but declined to provide any further information to them or their solicitors.

Shah, who has business interest across Southern and Central Africa, had filed the huge claim for losses and reputational damage which he said resulted from HSBC's actions.

Daren Allen, partner at Berwin Leighton Paisner, who acted for HSBC in the case, said there had been considerable debate about the obligations owed to the customer of a bank when it had made a suspicious activity report to the SOCA.

He said the court decision would "be welcomed by firms who feared they may be liable for damages for simply complying with their legal obligations under the Proceeds of Crime Act".