On 19 June 2015 the High Court handed down its judgment in Elaine Hmicho v Barclays Bank PLC [2015] EWHC 1757 (QB).
This is an important judgment for all financial institutions to be aware of as it provides useful guidance in relation to the concepts of ownership and control in the context of international sanctions.
The judgment followed an application made by Mrs Hmicho in relation to Barclays’ decision to freeze her accounts following her husband’s designation under the EU sanctions against Syria.
Mrs Hmicho sought an interim injunction forcing Barclays to unfreeze her accounts.
Whilst Mrs Hmicho was not a designated person pursuant to the EU sanctions against Syria, payments in and out of her accounts led to Barclays having “reasonable cause to suspect” that the funds within Mrs Hmicho’s accounts were owned or controlled by Mr Hmicho.
Mrs Hmicho’s application was refused.
The Court stated that it “cannot have the necessary ‘high degree of assurance’ that Barclays is not entitled to hold the reasonable suspicion that the funds in the accounts which are the subject of Mrs Hmicho’s application belong to, or are owned or controlled by, Mr Hmicho”.
In addition, the Court stated that the “balance of convenience …. rests very firmly on Barclays’ side rather than that of Mrs Hmicho” and it would not have been appropriate for the court to make an order requiring Barclays to take action which might render it criminally liable.
This case provides useful guidance in respect of the application of concepts of ownership and control in the context of international sanctions, where a non-designated third party individual, in this case a spouse, is involved.
Importantly, this judgment acknowledges that the risk of a financial institution committing a criminal offence pursuant to sanctions legislation outweighs the inconvenience to a person whose funds are frozen in compliance with such legislation.
Additionally, the judgment highlights the importance of carefully monitoring accounts of designated individuals and identifying where funds may be linked to them but which are not held in their name.
Whilst there has been guidance on ownership and control provided at both an EU and domestic level with respect to legal entities, there has, unfortunately, been very little guidance on designated individuals exercising control over other individuals.
Whilst the mere fact an individual is related to a designated person is insufficient to warrant a freeze of funds, it should not be assumed that an absence of designation provides a financial institution with any defence to a potential criminal breach.
A full case report is available here: International sanctions case update: Elaine Hmicho v Barclays Bank PLC
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