With a significant court ruling shaking the financial world, we sit down with Priya Jaiswal, a renowned authority in banking law and financial regulation, to dissect the recent developments in the Jeffrey Epstein-related lawsuits against BNY Mellon and Bank of America. This interview explores the subtle yet critical legal distinctions that determine a bank’s liability, delves into the evidence required to move a case from allegation to litigation, and examines the internal compliance mechanisms that are now under intense scrutiny. We will also touch upon the practical next steps in this high-stakes legal battle and what it signals for the future of financial institution accountability.
A federal judge dismissed all claims against BNY Mellon but allowed some against Bank of America to proceed. What legal distinctions might lead to such a split decision when multiple banks are accused of enabling a criminal enterprise? Please detail the nuances involved.
It’s a fascinating and crucial distinction that really gets to the heart of corporate liability. In cases like these, the court isn’t just looking at whether the banks had a relationship with a bad actor. Instead, it’s examining the nature and depth of that relationship as alleged by the plaintiff. For a claim to survive against a bank, the plaintiff must present plausible facts suggesting the institution had specific knowledge of the criminal activity and somehow facilitated or benefited from it. In this instance, the judge must have found the amended complaint against BNY to be too “conclusory,” essentially lacking the specific factual matter to connect the bank’s actions directly to Epstein’s crimes. For Bank of America, however, the plaintiff seemingly provided enough detail in the Dec. 29 amendment to suggest a more direct link, at least enough to proceed on two specific claims, even if others were dismissed.
The court permitted claims that Bank of America was a “knowing beneficiary” and obstructed trafficking law enforcement to proceed, while dismissing claims about AML and KYC failures. What specific evidence typically separates these types of allegations, and why might one be harder to dismiss than the other?
This is where the legal theory gets very granular. Claims about general AML and KYC failures are often harder to sustain because you have to prove the bank’s entire compliance program was systemically deficient in a way that directly enabled a specific crime. It’s a broad allegation. In contrast, a “knowing beneficiary” claim is much more pointed. To support it, a plaintiff would need to present evidence suggesting the bank didn’t just passively handle tainted money but understood its source and profited from it in a direct way—perhaps through unusually high fees or by providing bespoke services to maintain the lucrative relationship. The obstruction claim is similar; it implies an active or purposeful failure, such as deliberately not filing a SAR despite seeing clear red flags, which directly hindered law enforcement. These are allegations of intent and action, not just negligence, which makes them stickier and harder for a court to dismiss at an early stage.
Plaintiffs sometimes have to amend initial complaints after they are deemed too “conclusory.” From a legal standpoint, what specific details—like transaction patterns or internal records—are necessary to transform a general accusation into a plausible claim that can survive a motion to dismiss?
Moving from “conclusory” to “plausible” is the most critical hurdle in early-stage litigation. A general accusation might say, “The bank knew about the trafficking and did nothing.” That’s a conclusion. To make it plausible, you need to pepper the complaint with concrete facts. This could include detailing specific transaction patterns—like frequent, structured cash withdrawals or payments to individuals in multiple jurisdictions with no apparent business purpose. It could mean citing specific accounts, like the one allegedly opened in a victim’s name without proper due diligence, as the amended complaint claims. Referencing internal communications, if available, or showing how specific transactions directly aligned with publicly known facts about the criminal enterprise strengthens the claim immensely. The judge’s initial skepticism and the subsequent Dec. 29 amendment show this process in action; the plaintiff had to add more “who, what, when, where, and how” to survive the motion to dismiss.
The complaint alleges a purposeful failure to file suspicious activity reports (SARs) despite numerous red flags. Could you walk me through the typical process and internal thresholds for a bank to identify red flags and ultimately decide to file a SAR for potential trafficking?
Certainly. The process begins with automated transaction monitoring systems that are programmed to flag anomalies based on a customer’s profile—things like sudden large wire transfers, a high volume of cash activity, or payments to high-risk jurisdictions. Once a transaction is flagged, it’s escalated to a human analyst. This is where judgment comes in. The analyst reviews the customer’s entire relationship, looking for context. Red flags for trafficking might include payments for travel and lodging for multiple young women, accounts opened in others’ names, or transactions that are completely inconsistent with a client’s stated business. If the analyst can’t find a legitimate explanation, they draft a narrative for a SAR, which is then reviewed by a manager or a committee before being filed with FinCEN. The allegation here is that BofA saw these “numerous red flags” but purposefully broke that chain of escalation, deciding not to file, which is a very serious claim.
Bank of America’s statement highlights that the facts have not yet been reviewed at this stage of the litigation. What are the next practical steps in this process, and what kind of discovery will be crucial for the bank to build its defense against the remaining claims?
That’s a standard but important statement. We are still at the very beginning. The court has simply said two of the claims have enough merit on paper to proceed. The next phase is discovery, which is the real battleground. The plaintiff’s lawyers will seek to obtain a vast amount of information from the bank. This will include internal emails, compliance reports, account statements, and records of any internal investigations related to Epstein’s accounts. They will also want to depose bank employees who managed the relationship or worked in compliance. For its defense, Bank of America will focus its discovery on disproving that it had actual knowledge of the trafficking. They will highlight their compliance procedures, show evidence of any due diligence they did perform, and argue that the transactions, while perhaps unusual, did not definitively point to sex trafficking from their perspective at the time. The entire case will hinge on what those internal records from that period actually say.
What is your forecast for financial institutions facing litigation related to client crimes?
I anticipate we are entering a new era of heightened scrutiny and liability. For decades, the focus was primarily on regulatory fines for compliance failures. Now, we are seeing a powerful shift toward civil litigation from victims, which brings a completely different kind of reputational and financial risk. Cases like this set a precedent, and the plaintiffs’ bar is becoming incredibly sophisticated in using banking laws to hold institutions accountable not just for what they did, but for what they should have known and failed to stop. My forecast is that banks will have to invest even more heavily in advanced monitoring technologies and, more importantly, in fostering a corporate culture where escalating concerns is not just encouraged but mandated. The defense of “we didn’t know” will become increasingly difficult to sustain in the face of demonstrable red flags. The financial and moral stakes have simply become too high.
