Under Dutch Caribbean law a bank, due to its function in society and its position as professional service provider with specific areas of expertise, has a duty of care not only to its clients but also, under certain circumstances, towards third parties. In the past, the Supreme Court has ruled that when a bank becomes aware of possible criminal activities on the part of a client, such as fraud, the bank may be required to investigate the matter further and take appropriate measures. The bank will be acting unlawfully if it fails to do so.
This is confirmed a recent case before the Supreme Court. The case revolved around a so-called Ponzi scheme, whereby the operator of the scheme, the bank’s client in this case, paid returns to its investors from new capital paid to the operator by new investors, rather than from profit earned through legitimate sources. The investors suffered severe losses and, collectively, took legal action against the bank. The legal question at hand was whether the bank had acted wrongfully towards the investors by breaching its duty of care. In its ruling, the Supreme Court held that, under the specific circumstances of the case at hand, i.e. the fact (inter alia) that the client was a private banking customer, without any license to provide investment services, and that there were highly unusual money transfers through his account, the bank breached its duty of care towards the investors as third parties.
The case law suggests that a bank’s duty of care to third parties means that, under certain circumstances, banks will be required to investigate a client’s activities to check whether the client is acting in accordance with regulatory legislation. This investigation must be performed with due care. If a bank’s investigation shows that the client has acted in violation of regulatory legislation it will, in principle, need to take steps to protect the interests of third parties. Which measures are appropriate in any specific case will depend on the circumstances of that case, the bank’s relationship with the client and the interests of third parties that are to be protected.