Frozen but not forfeit: the Royal Court orders release of investment distributions in Neneb v HSBC

When a bank files a suspicious activity report and law enforcement withholds consent, a customer’s funds can sit frozen for years with no charge ever brought. The Royal Court of Guernsey’s decision in Neneb Pte. Ltd v HSBC Management (Guernsey) Ltd [2026] GRC 069 is a reminder that this is not a dead end. An account holder can go to court, put the provenance of the money in evidence, and, if it proves its case on the balance of probabilities, compel the fund holder to pay out.

Background

Neneb Pte. Ltd, a Singapore company ultimately owned by the Mexican businessman Carlos Hank Rhon, invested in two Guernsey private equity structures administered by HSBC: Vintage I Secondary LP and HSBC European Private Equity Syndicate III (HEPES III). In June 2016 HSBC’s Money Laundering Reporting Officer filed a suspicious activity report (SAR) with the Guernsey Financial Intelligence Unit (the FIU), prompted by historic adverse media suggesting that Mr Hank Rhon might have been involved in money laundering, bribery and corruption.

With a SAR on file and the FIU declining consent to release the money, HSBC stopped paying distributions. Declared but unpaid sums ran to roughly USD 1.7m in Vintage I and EUR 4.1m in HEPES III. Neneb brought a private law action in the Royal Court. By the time of trial the parties had narrowed the dispute to a single question: the provenance of the funds. HSBC adopted a neutral position, assisting the court as amicus curiae rather than contesting the claim.

The legal framework

The claim was brought under the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law 1999 (the POC Law), which defines criminal property broadly as property constituting or representing a person’s proceeds of criminal conduct, whether directly or indirectly. The architecture of the regime is familiar across the Channel Islands: a financial institution that suspects it holds criminal property protects itself by disclosing to the FIU and seeking consent before dealing with the funds. Absent consent, it is caught between its customer and the risk of committing a money laundering offence.

The Royal Court drew the governing principles together from a line of authority culminating in Abdullayev [2025] GRC 069. The key points are these:

• The right remedy is a private law action against the fund holder. This was established in Garnet Investments, which held that suing the entity holding the funds — rather than judicially reviewing the FIU — allows the evidence to be fully explored with both fund owner and fund holder represented.
• A two-stage test applies. First, the fund holder must show the suspicion behind the SAR was reasonable and “more than fanciful”. Second, the burden shifts to the account holder to prove, on the balance of probabilities, that the funds are not and do not represent the proceeds of crime.
• The standard is the ordinary civil standard, and the burden on provenance rests with the account holder throughout.
• The tracing exercise is practical, not forensic. It is “a layman’s review”, not a forensic accountant’s reconstruction, and the court looks for a nexus of identity between the funds and identified criminal proceeds — “not simply of consequence, or subsequence, or mere context”.
• The account holder need only answer the suspicion raised, not disprove every alternative version of events.

A notable feature of Guernsey procedure also shaped the decision. Under the Royal Court (Reform) (Guernsey) Law 2008, the presiding Judge rules on the law while the Jurats are the sole judges of fact. Here the Judge directed the Jurats and then delivered their unanimous findings on provenance.

The decision

The Jurats found, on the balance of probabilities, that the invested funds were not and did not represent the proceeds of crime, and the court made a declaration to that effect. HSBC was ordered to pay the distributions currently due and any future distributions, in accordance with the agreed investment terms, within 28 days.

The reasoning turned on the quality of the evidence. The money was traced to the 2004 sale of Mr Hank Rhon’s shareholding in Laredo National Bancshares to BBVA, a roughly USD 850m transaction subject to United States Federal Reserve approval, with USD 300m wired into the relevant HSBC account in May 2005 and no external funds introduced thereafter before the investments were made. By contrast, the SAR rested on historic media reports; it did not particularise which funds were tainted, what crime had been committed, or when and where, and none of the allegations had led to any criminal investigation or prosecution. The court also noted the FIU’s own position by 2026: consent was refused only because there was no longer a law enforcement interest, leaving the bank to risk-assess the matter itself.

Key takeaways

• A SAR and a refusal of consent do not determine the status of funds. They freeze the position; they do not establish that money is criminal property. The court decides provenance on evidence.
• The private law action is the route out of a consent impasse. Where funds are frozen with no prospect of formal enforcement action, suing the fund holder lets the account holder have the status of the money adjudicated.
• Adverse media alone is thin. Unparticularised suspicion drawn from historic press coverage, unconnected to any identified crime, proceeds or prosecution, carried little weight against a documented and regulated source of funds.
• Provenance is proved to a practical standard. The account holder is not required to account forensically for every dollar back to a “year zero”; a credible, evidenced chain from a legitimate source will discharge the balance-of-probabilities burden.
• A neutral fund holder is a recognised stance. HSBC’s amicus role, consistent with earlier Guernsey authority, allowed the provenance question to be tried without the bank taking an adversarial position against its customer.

What should you do?

• Allow for the passage of time in the evidence. The court expressly accepted that an account holder cannot be criticised for not retaining decades-old records where there was no reason or obligation to keep them, and will have regard to the real difficulties of gathering evidence from third parties and distant events. Advising clients early to preserve source-of-funds and source-of-wealth documentation remains the best protection.
• Build the provenance case around identity, not inference. The decisive question is whether the funds can fairly be said to stand in the place of identified criminal proceeds. Marshal documentary and expert evidence establishing the legitimate transaction and the chain of funds, rather than merely rebutting reputational allegations.
• Engage with the FIU’s current position, not just the original SAR. The FIU’s stance can shift over time; here its later communication effectively returned the risk assessment to the bank and was a factor the court weighed.
• For institutions, a SAR should be capable of articulation. The judgment underscores the value of a SAR that can identify the suspected funds, conduct and timing. A report resting on generalised adverse media, at odds with the institution’s own earlier due diligence, is vulnerable when tested in court.
• Consider the neutral/amicus position for the fund holder. Where the institution has no positive case on provenance, a neutral stance allows the court to resolve the issue while managing the institution’s own money laundering exposure.

To discuss matters raised in this article, please contact the F&F LLP Dispute Resolution Team – Rebekah Johnston, Richard Harrington, Robin Gist, Aimee Brown, or Kirsty Hart.