A Critical Examination of How Contract Law is Used by Financial Institutions Operating in Multiple Jurisdictions

Abstract:     
Financial institutions operating in multiple jurisdictions are vulnerable to extraterritorial jurisdictional claims, especially under United States anti-money laundering and economic sanctions laws. A survey shows that banks licensed in Australia have revised their standard form contracts so as to reduce the risks arising from the extraterritorial enforcement of foreign laws. Under the new contracts, customers have purportedly consented ex ante to banks supplying confidential information directly to foreign states and agreed to the freezing of their bank accounts based on a possible breach of foreign law. The contractual provisions are controversial because they circumvent the legal procedures that would otherwise apply in cases of international criminal, civil or regulatory assistance. The legal efficacy and policy implications of the contractual terms are analysed.

Number of Pages in PDF File: 34

Keywords: Extraterritoriality, Money Laundering, Contracts, Financial Institutions

JEL Classification: K12, K33, K42, G20

Accepted Paper Series