Detaining Customers: When Is A Good Faith Suspicion Good Enough?

A trial court found that a bank is not liable for detaining and questioning a customer suspected of depositing stolen money because the bank was protected by a federal law allowing financial institutions to investigate suspicious transactions.

John Kwawukume was a customer of JP Morgan Chase Bank. On Mar. 25, 2003, Kwawukume made three cash deposits at the bank. The teller, Kris Krajewski, deposited the first two transactions, but did not process the last one because the bills were marked with purple dye, which usually indicates that money is stolen.

Krajewski asked her supervisor about the questionable bills, and the supervisor called the Federal Reserve Bank to authorize the deposit. The supervisor also called a security investigator for the bank and the New York City police. When Kwawukume attempted to leave the bank, the supervisor asked him to stay until the police arrived, and Kwawukume agreed. The police and FBI arrested and questioned Kwawukume for two hours.

Kwawukume sued the bank for false arrest, defamation, and negligent supervision and training. The bank moved for summary judgment.

The Annunzio-Wylie Act (AWA) provides a safe harbor for financial institutions that report suspicious transactions. The AWA protects financial institutions from liability when the institutions report any possible violation of the law based on a good faith suspicion.

The trial court found that the bank was privileged to investigate Kwawukume based on the purple dye on the bill pursuant to the AWA because the bank's suspicion was based on good faith.

A financial institution is protected from liability for disclosing to the police its good faith suspicion of any violation of the law by customers. A purple stain on money is sufficient to give a bank probable cause to report and investigate a customer.

Source: Security Law Newsletter, 01/01/2007

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