31 U.S.C. §101 (emphasis added). The rule against superfluities thus compels an interpretation of 31 U.S.C. § 5318(g) that avoids that result - viz., an interpretation under which the safe harbor provision includes reports to both state and federal government agencies such as the Marysville police. Case3:11-cv-06572-CRB Document28 Filed03/02/12 Page15 of 21 -11- 70001/0080/2142561.1 REPLY RE MOTION TO STRIKE Case No.: CV11-6572 (CRB) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 This interpretation is also consistent with legislative intent.

It should also be noted that when American Express reports suspicious activities to the government (SAR filings), which, ultimately, may trigger merchant terminations, it is prohibited from alerting the subject merchant. See USA PATRIOT Act § 326, 31 U.S.C. § 5318(g)(2) (2012). In addition, given American Express’s designation as a bank holding company, as well as its fiduciary obligations to its shareholders, American Express is expected to guard against and terminate merchant acceptance agreements in the face of excessive fraud or credit risks.

The Annunzio-Wylie Anti-Money Laundering Act Immunizes BofA Against the Challenged Claims The challenged claims against BofA are felled not only by § 47(b)’s absolute privilege, but also by the Annunzio-Wylie Anti-Money Laundering Act (the “Act”) which confers absolute immunity on “any financial institution that makes a voluntary disclosure of any possible violation of law … to a government agency ….” 31 U.S.C. § 5318(g)(3)(a). In the Act’s words, neither the institution nor its officer or employee who makes such a disclosure “shall … be liable to any person under … any constitution, law, or regulation of any State” for the disclosure.

To protect reporting financial institutions and their employees, and to encourage honest and open reporting of suspicious activity, the BSA and its implementing regulations prohibit financial institutions and their employees from disclosing SARs, or any information that would reveal the existence of a SAR, in response to subpoenas or otherwise. See, e.g., 31 U.S.C. § 5318(g); 31 C.F.R. § 1020.320(e)(1).

A copy of the Monitor’s Report will be submitted to the Court as a sealed appendix to this letter. I. Background On December 11, 2012, the government filed a criminal Information charging HSBC Bank USA, N.A. (“HSBC Bank USA”)1 with violations of the Bank Secrecy Act (“BSA”), Title 31, United States Code, Section 5311 et seq., namely: willfully failing to maintain an effective anti-money laundering (“AML”) program in violation of 31 U.S.C. § 5318(h) and willfully failing to conduct and maintain adequate due diligence on correspondent bank accounts held on behalf of foreign entities in violation of 31 U.S.C. § 5318(i). The criminal Information also charged HSBC Holdings plc (“HSBC Holdings”)2 1 HSBC Bank USA is a federally chartered banking institution and subsidiary of HSBC North America Holdings, Inc. (“HSBC North America”).

Indeed, such conduct is plainly forbidden by the United States. See 31 U.S.C. § 5318 and regulations thereunder. To the extent that BOC did not anticipate and did not plan for the possible application of Israeli law (or alternatively, the possible 36 At this stage in the litigation, the allegations in the Complaints must be deemed true and Plaintiffs’ have the benefit of every favorable inference from the complaints.

But the Investor Defendants cannot have violated the MTA because they are not subject to that law, which governs money transmission businesses, not investors in such businesses. MTA § 2030 (“A person shall not engage in the business of money transmission in this state [i.e., California], or advertise, solicit, or hold itself 7 The Amended Complaint also makes passing references to two federal anti-money laundering statutes, 31 U.S.C. §5316 and 31 U.S.C. § 5318. See AC ¶¶ 109–10.

That objective would be severely undermined if financial institutions faced potential liability for reporting questionable activity. Accordingly, under federal statute, “[a]ny financial institution that makes a voluntary disclosure of any possible violation of law or regulation . . . shall not be liable to any person under any law or regulation of the United States or any constitution, law, or regulation of any State or political subdivision thereof, for such disclosure . . . .” 31 U.S.C. § 5318(g)(3) (emphasis added). In relying on a SAR to prosecute their claims, plaintiffs flout this federal statute, as well as Second Circuit precedent holding that the statute creates “an unqualified privilege” that “broadly and unambiguously provides for immunity from any law (except the federal Constitution) for any statement” contained in a SAR filing.

That objective would be severely undermined if financial institutions faced potential liability for reporting questionable activity. Accordingly, under federal statute, “[a]ny financial institution that makes a voluntary disclosure of any possible violation of law or regulation . . . shall not be liable to any person under any law or regulation of the United States or any constitution, law, or regulation of any State or political subdivision thereof, for such disclosure . . . .” 31 U.S.C. § 5318(g)(3) (emphasis added). In relying on a SAR to prosecute his claims, the Trustee flouts this federal statute, as well as Second Circuit precedent holding that the statute creates “an unqualified privilege” that “broadly and unambiguously provides for immunity from any law (except the federal Constitution) for any statement” contained in a SAR filing.

That objective would be severely undermined if financial institutions faced potential liability for reporting their suspicions. Accordingly, under federal statute, “[a]ny financial institution that makes a voluntary disclosure of any possible violation of law or regulation . . . shall not be liable to any person under any law or regulation of the United States or any constitution, law, or regulation of any State or political subdivision thereof, for such disclosure . . . .” 31 U.S.C. § 5318(g)(3) (emphasis added). In relying on the SAR to prosecute his baseless claims, the Trustee ignores this federal statute, as well as Second Circuit precedent Case 1:11-cv-00913-CM Document 33 Filed 06/03/11 Page 52 of 77 42 holding that the statute creates “an unqualified privilege” that “broadly and unambiguously provides for immunity from any law (except the federal Constitution) for any statement” in a SAR.