Revolut ruling puts bank account closures back in focus

Mike Hawthorne of Pinsent Masons said the case will be of interest to UK banks considering the increased scrutiny there is on how they handle bank account closures following Nigel Farage’s dispute with Coutts over the closure of his account by the institution last summer.

In the case before the High Court, Revolut closed the account of Ildar Uzbekov based on hundreds of online articles which included allegations of money laundering, but which Uzbekov claims are untrue and amount to a smear campaign conducted against his Russian father-in-law by business rivals.

Uzbekov, who has lost all his bank accounts in the UK and cannot open new ones, considered that Revolut was responsible for a breach of its contract with him by attempting to terminate his account without notice, and that the company had no good reason to suspect that he behaved fraudulently, to believe that information he provided was incorrect or not true, or to believe that his continued use of his account could damage Revolut's reputation or goodwill. He asked the High Court to make declarations to that effect.

Revolut said that it was not in a position to assess the truth of the matters in the press, but that the existence of the reports was sufficient to give it good reason to suspect that the accounts might be used for money laundering.

The judge considering the case, Mr Justice Chamberlain, struck out Uzbekov’s claim as an abuse of process on the grounds that the costs to the parties of fighting the claim, and the court resources it would use, were not warranted by the utility of the declarations.

Specifically, Mr Justice Chamberlain considered that as Uzbekov was not seeking damages against Revolut and that there was no prospect of Revolut re-opening his account, the declarations would not achieve anything as between Uzbekov and Revolut. He further considered that the most the declarations could do would be to record that Revolut had wrongly closed the account based on a misunderstanding of the seriousness of the reported material. He said the court would not rule on the truth of the underlying material, so even if the court made the declarations, Uzbekov could not use those declarations to prove to third parties that the smear campaign is untrue.

The judge said: “A judgment against Revolut (whether coupled with a declaration or not) would not bind any third party. Even insofar as it had some precedential value, it would be unlikely to determine whether another UK bank, applying its own terms and conditions (which are not in evidence and may well differ from those of Revolut) had acted wrongfully in terminating his account with that bank on the basis of whatever information was available to it at the relevant time (which may differ from that available to Revolut in 2020).”

Mr Justice Chamberlain also considered that there are other ways in which Uzbekov can seek, or could have sought, to vindicate his reputation – including by raising defamation claims against the authors of the online reports he complains of.

Hawthorne said the case will be interesting to people who are following the UK Treasury’s intended rule changes on bank account closures – but that he believes the outcome of this case would not have been different, even if those proposed reforms had been in effect.

“The rule changes are quite modest in scope,” Hawthorne said. “They are likely to require financial firms to explain to customers their reasons for closing accounts, save where pre-existing legislation prevents this, which broadly covers suspected financial crime, money laundering and terrorist financing. There will also be a 90-day notice period before the firm can close the account. The rule change is only likely to assist customers where the financial firm wants to close the account for some kind of reputational reason. The proposed rule change does not address the difficulties faced by people who lose access to financial services due to suspicions of criminality which they consider to be unfounded.”

“Even if the proposed new rules on account closure had been in force and covered the circumstances in this case, the outcome would almost certainly have still been the same. Revolut may have been more strongly prompted to explain its reason for the account closures, but it could still have refused to comment if it thought that an explanation could compromise any law enforcement action. In any case, Uzbekov knew all about the articles so it would not have been news to hear that Revolut was relying on them for the closure,” he said.

“Revolut was not motivated by reputational reasons, save that banking someone who had so much negative publicity might reflect badly on it, but that was a secondary consideration behind its primary conclusion that there were reasons to suspect money laundering. If Revolut had been obliged to explain its decision I have no doubt that it could have done so in a way that said nothing about the political motivations behind the smear campaign or about the connections to Russia amongst some of the actors. Possibly Revolut would have given a longer notice period, although its view on money laundering would have entitled it to close the accounts forthwith. In any case, Uzbekov’s grievance was that he cannot open any accounts in the UK, not that he needed longer to find a new bank account,” he said.

“Finally, the judge refused to allow the case to continue as a matter of public interest on the ground that the FCA has already investigated de-banking and is now carrying out follow-up investigations. The judge considered that to be the correct forum for any future public scrutiny of the issue. There is no reason to think that a different judge would take a different view on this after the rule change comes into force and after the FCA concludes its investigations,” Hawthorne added.