The Royal Bank of Scotland (RBS) is being sued by an unnamed British payments company over allegations that RBS froze accounts on suspicion of illegal activity by the company’s clients, according to a report in the Financial Times.
The payments company, which was not named for legal reasons, said at least two of its accounts were frozen in October of 2015 after RBS filed suspicious activity reports (SARs) to the National Crime Agency (NCA) in the U.K.
The company is suing for breach of contract and negligence, stating the bank violated its obligations to a customer and its duty as a bank. RBS has denied the claims.
Paul Downes, who represents the company, said on Wednesday (Jan. 30) that the move hurt the company and “the very machinery with which it did business.” The result, Downes said, was that the company lost significant amounts of money.
“It was the equivalent of walking into a dealing room in the city, going to the fuse box and turning the power off,” he said.
U.K. law states that banks and other financial service companies — as well as lawyers, accountants and estate agents — all have to file SARs if they feel an organization is involved in suspicious activity like money laundering, financing terrorism or other questionable activities.
In 2017, 464,000 SARs were filed, which experts criticized as a sign that the filers were more worried about getting in trouble themselves than spotlighting crime.
When RBS froze the account, Downes said, the company had already severed its relationship with most of the clients suspected in any wrongdoing, adding that it filed its own reports to the NCA and cooperated with authorities.
Downes pointed out that the company wasn’t the only entity involved with the alleged money launderers.
“There [were] other professionals involved with these suspected fraudsters who [were] not batting an eyelid,” Downes said. “There is a reason why these fraudsters are successful — it’s because they are plausible; they are able to deceive.”
Downes blamed the frozen accounts on “chaotic communication, misinformation, miscalculation and, at times, lamentably poor judgment.”
The trial is expected to last four weeks.