Banks have a duty to report suspicious transactions related to money laundering and tax evasion. While banks have an obligation to maintain client confidentiality, this duty is superseded by statutory requirements to identify and report transactions they know or suspect involve criminal conduct. Gibraltar law requires bank employees to report suspicious transactions or instructions related to money laundering or criminal acts to the Gibraltar Financial Intelligence Unit. Failure to do so could result in criminal penalties for both the employee and the bank.

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B R I E F I N G O N A N T I - M O N E Y L A U N D E R I N G D U T I E S
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Life after HSBC’S Falciani List
Introduction
Confidential information of some 30,000 accounts belonging to wealthy depositors from the elite to the illicit was leaked this week
by one of HSBC’s former employees: Hervé Falciani. The bank (or its clients) will no doubt see itself embroiled in a cross-
jurisdictional anti-money laundering investigation for the $120bn (£78bn) of assets that it managed for its exclusive clients during
the period of 2005 to 2007. The immediate fear symptoms were palpable after HSBC’s shares fell 2.2% on Monday 9 February
2015 to 607.10 pence (London Stock Exchange).

2. In this briefing note, we will bring to light the general
duties and obligations that financial institutions have
when faced with suspicious transactions. A timely
reminder!
Confidentiality versus Reporting Duties
The concept of banking secrecy (which prohibits
banks from divulging account holders’ information)
is protected by statute in certain jurisdictions, such
as Switzerland or Luxembourg. In Gibraltar, banks
do not enjoy any statutory protection on secrecy, but
have a general duty of confidentiality to preserve
client information.
To protect clients’ information is not, however, an
absolute right; it is subject to other overriding duties
which banks have when identifying and reporting
suspicious transactions or, in some instances,
instructions.
In Gibraltar, banks’ duties fall into two main
categories: (1) common law duty to make reasonable
inquiries (in specific instances); and (2) statutory
duty to identify and report suspicious instructions or
transactions.
The duty to make reasonable inquiries
At common law, banks do not generally have a duty
to question or investigate a client’s instructions or
transactions unless it is put on notice (actual or
constructive) of any wrong-doing or impropriety on
the client’s part. This is logical: a bank has a
contractual duty to comply with a client’s
instructions as long as these do not contradict the
bank’s mandate.
However, if a bank is aware (or has reason to believe)
that the client could be concealing monies from third
parties (e.g. for the purpose of fraudulently dodging
taxes), then it should investigate and question the
instructions. If the bank’s suspicions are founded,
then it should consider whether it has a duty to
report the activity or instruction under any relevant
statutory provisions or to seek legal redress to avoid
any civil liabilities (e.g. by holding funds as
constructive trustee, etc).
The statutory duties to report (or oppose
to) any suspicious transactions
A bank (or its employees) commits an offence if it
knowingly assists a third pay to fraudulently evade
any income tax (section 67 Income Tax Act 2010
(ITA 2010)). Of course, the offence is limited to
income which is taxable in Gibraltar. An underlying
question is thus: does a bank (or its employees) have
a duty to report (or refuse) a transaction or
instruction if it has reason to be believe that the very
purpose of that instruction is to evade non Gibraltar
income tax? Although a bank would not be liable
under the ITA 2010, there are provisions in local
legislation that cater for that scenario.
Indeed, the Crime (Money Laundering and
Proceeds) Act 2007 (CMLPA 2007) makes it an
offence (provided there is knowledge or suspicion)
for a person or entity to enter into an arrangement
(e.g. pursuant to a bank mandate) whereby it allows
for the retention, control, transfer or removal of
proceeds of criminal conduct.
Equally, an employee of a financial business (e.g.
insurers, bankers, depositors, etc) has a duty to report
a suspicious transaction or instruction to the
Gibraltar Financial Intelligence Unit (GFIU) if he:
(1) knows, suspects or has reasonable grounds to
suspect that one of his clients is engaged in money
laundering, or attempting to launder money; and
(2) the information, knowledge or suspicion came to
his attention in the course of his trade or
employment.
As long as the criminal conduct is one which would
be indictable in Gibraltar, the employee has a duty
to report it to the GFIU; it is immaterial whether or
not the act or instruction is done overseas.
If you need any further advice on these or any other
related matters, please contact us.
B R I E F I N G O N A N T I - M O N E Y L A U N D E R I N G D U T I E S 1 3 T H F E B R U A R Y 2 0 1 5
Indeed, Gibraltar, as a jurisdiction, has been (and continues to be)
wrongly accused by foreign media of enabling a platform by which
high net worth individuals (whether legitimate ones or otherwise) can
dodge taxes. Despite the inaccuracy of those allegations, it is inevitable
that the notion of banking secrecy (which Gibraltar, as a common
law jurisdiction, recognises) will be open to attack and criticism by
foreign tax authorities.
Important! This update is only intended as a general statement of recent developments in this area and no action should be taken in reliance on it without specific legal advice.
Christian Rocca
(Partner)
christian.rocca@isolas.gi
Steven De Lara
(Associate)
steven.delara@isolas.gi
Christian is a multifaceted lawyer and practices in the
areas of banking, finance and commercial litigation
in Gibraltar. He regularly advises banks on day to day
matters as well as representing leading UK, US and
Swiss banks in financing and re-financing projects
involving an element of Gibraltar Law.
Steven specialises in cross border insolvency, with a
particular focus in multinational corporate group
proceedings. He often advises banks and leading
financial institutions in fraud related matters.
ISOLAS
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