In a recent New York Court of Appeals decision, the court found that a New York trial court had personal jurisdiction over a foreign bank in an action alleging the foreign bank was part of a money-laundering scheme perpetrated by the plaintiffs’ employees, because the foreign bank’s intentional and repeated use of New York correspondent bank accounts to launder the illegally obtained funds. InRashid v. Pictet & Cie, 2016 N.Y. Lexis 3569 (Ct. App. N.Y. November 22, 2016), Plaintiffs sued a Swiss Private Bank, its clients relation manager and eight general partners for concealing ill-gotten money by a scheme orchestrated by three of plaintiffs’ employees. The complaint alleges that corrupted employees had the help of a banker to set up an offshore fictitious company to receive bribes and kickbacks and the banker managed the bank accounts where the bribes and kickbacks were deposited. The defendant foreign bank orchestrated the wiring of bribes from vendors to defendant’s New York correspondent bank account. There were 15 transfers through the correspondent bank account.
The court reasoned that “the quantity and quality of a foreign bank’s contacts with the correspondent bank must demonstrate more than banking by happenstance.” The court found that the correspondent account was crucial to a course of repeated banking activity and was not merely “adventitious”. Therefore, the correspondent banking activity was sufficient to establish a purposeful course of dealing constituting the transaction of business in New York under CPLR 302 (a) (1).
Moreover, a purposeful course of dealing must also involve a cause of action where there is an “articulable nexus or substantial relationship between the business transaction and the claim asserted.” The court noted that the claim need only be “in some way arguably connected to the transaction.” Here, the money laundering could not proceed without the use of the correspondent bank account through which the laundered funds would pass and the claims require proof that the bribes and kickbacks were paid. Thus, the cause of action arose from the contacts with New York.
Finally, the exercise of personal jurisdiction under the New York long-arm statute must comport with federal due process requirements. The “minimum contacts” test rests on whether a defendant’s conduct and connection with New York are such that it should reasonably anticipate being haled into a court there. The court held that here defendant’s maintenance and repeated use of a New York correspondent bank account “to achieve the wrong complained of in this suit satisfies the minimum contacts component of the due process inquiry.” Also, the maintenance of the suit in New York would not “offend traditional notions of fair play and substantial justice” because the “burden of litigation in New York is reduced by ‘modern communication and transportation'”, the complaint implicates the fraudulent use of New York’s banking system of great importance to the State, and New York courts provide plaintiffs a greater possibility of relief.
In essence, foreign parties substantially utilizing the correspondent banking system in New York may subject themselves to suit in New York if the claims arise from use of that banking system.