Managing competing claims on frozen accounts

Author: | Published: 1 Feb 2005

In the recent case of Commerzbank Aktiengesellschaft v IMB Morgan plc and others [2004] EWHC 2771 (Ch), the UK's High Court was asked to decide how funds from correspondent accounts that had been frozen due to fraud should be distributed. The court took a pragmatic approach to ensuring fair distribution of payments to those with a legitimate claim, discounting the traditional method of apportioning funds in favour of an alternative approach.

Correspondent accounts are a familiar feature of international banking and facilitate the smooth operation of international funds transfers. Typically, a bank wishing to provide access for its customers to a foreign banking system where it has no, or only a limited presence, will open an account in its own name with a bank in that jurisdiction. The banking relationship is between the banks, although the monies in the account represent the mingled funds of various customers of the account holder bank....