No Valid Claim Against Bank Where it Made Bank Secrecy Act Reports

No Valid Claim Against Bank Where it Made Bank Secrecy Act Reports

      In a decision rendered early last month by the Kentucky Court of Appeals, it rejected claims by bank customers that, when the bank made reports required by the Bank Secrecy Act relating to suspicious activities, the bank could be held liable to its customers. Rather, the court found that the bank enjoyed absolute immunity. Ventura v. Central Bank, No. 2015-CA-001407-MR, 2017 WL 461256 (Ky. App. Feb. 3, 2017).

      The Venturas own and operate Miguel’s Pizza and Rock Climbing Shop, a fixture of the rock climbing community in Kentucky's Red River Gorge. Central Bank, which handled the Ventura’s accounts, had made reports based upon the apparent manipulation of cash deposits. Special cash transaction reporting obligations arise when $10,000 or more is deposited. Additional rules under the Bank Secrecy Act require reporting if it appears that a bank customer is manipulating their deposits such as by making repeated deposits just below the $10,000 threshold. Eventually Central Bank would close the Ventura’s account. The Venturas were indicted on charges of violating the Bank Secrecy Act, but ultimately were acquitted by a jury. Thereafter, they filed this action against Central Bank, asserting a variety of claims based upon the reports that the bank had filed as required by the Bank Secrecy Act.

      The trial court, based upon the safe harbor preemption provided by the Bank Secrecy Act, dismissed the complaint, and this appeal followed. The Court of Appeals would likewise find that Central Bank employed absolute immunity from the claims being made. Specifically, the Bank Secrecy Act provides:

Any financial institution that makes a voluntary disclosure of any possible violation of law or regulation to a government agency or makes a disclosure pursuant to this subsection or any other authority, and any director, officer, employee, or agent of such institution who makes, or requires another to make any such disclosure, shall not be liable to any person under any law or regulation of the United States, any constitution, law or regulation of any State or political subdivision of any State, or under any contract or other legally enforceable agreement (including any arbitration agreement), for such disclosure or for any failure to provide notice of such disclosure to the person who is the subject of such disclosure or any other person identified in the disclosure.

Based thereon, there could be no claim against the bank.