Building Your Case Against The Bank

by Tal J Lifshitz | October 2019

Charles PonziWe’ve previously written about banks and Ponzi schemes and potential liability for aiding and abetting. Now let’s assume a lawsuit has been filed. Banks have a treasure trove of information readily available to them. Because the government requires it.

Any information related to internal investigations, fraud alerts, and suspicious activity monitoring will be readily available because banks are bound to comply with the Bank Secrecy Act (“BSA”), a federal statute designed to detect and prevent money laundering. The anti-money laundering provisions of the BSA require banks and other financial institutions to investigate and file suspicious activity reports (called SARs), which are used by the government in furtherance of law enforcement and intelligence interests. See 31 U.S.C. §§ 5311, 5318(g)(1). The BSA further requires nationally-chartered banks to develop internal policies, procedures, and controls to ensure compliance with its SAR-reporting duties. See id. § 5318(h)(1). As part of those internal procedures, the BSA requires banks to “maintain a copy of any SAR filed and the original or business record equivalent of any supporting documentation” for five years which “shall be identified and maintained by the bank as such . . . .” 31 C.F.R § 1020.320(d). Although the supporting documentation is not actually filed along with the SAR, banks are required to make such documentation available to law enforcement agencies upon request. See id. While SARs may be confidential in litigation, the underlying documents and investigatory materials are not.

If any SAR was filed in connection with the accounts at issue in a particular lawsuit, the bank would have ready access to all of the underlying materials in a central location so that such documentation could be made available to law enforcement upon request. Clearly, the burden associated with producing such documents to victims’ attorneys is negligible at best. Any documents already produced to another government agency conducting a fraud investigation, like the SEC, would be similarly ready to produce to the victims’ attorneys immediately, as they’ve already been gathered and produced recently.

Kozyak Tropin & Throckmorton

Tal Lifshitz
Tal concentrates on complex litigation while specializing in class actions, financial fraud, and Ponzi schemes. Prior to joining the firm he served as a judicial law clerk to the Honorable Kenneth A. Marra, and currently serves as a Director of the Board for the South Florida Chapter of the Federal Bar Association.

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