Bank of China appeals disclosure order in counterfeit case

Shanghai: The Bank of China is appealing a decision by a New York court to fine it USD 50,000 a day for withholding information about counterfeiters' bank accounts in China.

The appeal, filed Tuesday, is the latest twist in a five-year legal saga that pits one of China's largest state banks against Western luxury brands seeking new, more powerful tools to fight rampant counterfeiting.

Bank of China says it is fighting to maintain client privacy as a matter of national sovereignty.

Gucci, along with other Kering Group brands, is seeking USD 12 million from the bank to cover damages inflicted by a counterfeiting ring it says sold fake handbags and wallets to US consumers.

Using records provided by JPMorganChase, Gucci traced USD 530,000 in transfers from US-based counterfeiters to Bank of China accounts in China.

The Bank of China has repeatedly refused to provide information about those accounts or freeze the counterfeiters' funds for Gucci.

Instead it secretly froze over USD 890,000 of the accused counterfeiters' money to cover its own legal costs in the fight with Gucci, Chinese court documents show.

The case highlights the incompatibility between Chinese and US legal systems and could have far-reaching implications for the ability of US courts to extract information from Chinese banks operating in America.

That legal firewall has helped Chinese banks serve as safe havens for counterfeiters, who use them to process credit card payments for fakes, often sold online, and move their money around the globe.

The Bank of China, and other Chinese banks embroiled in similar litigation in the US, argue that complying with US court orders to disclose client information would violate Chinese bank secrecy laws and subject them to civil and criminal penalties in China.

They have so far failed to provide undisputed evidence that those penalties are, in practice, significant.

On September 29, New York District Court Judge Richard Sullivan ruled that the US has jurisdiction over the Bank of China, which has four US branches.

He ordered the Bank of China to comply with subpoenas for documents related to the accused counterfeiters' bank accounts, even though the accounts are in China.

The bank refused, and Sullivan said if the bank did not provide the records by December 7, he would begin imposing a USD 50,000-a-day contempt fine.

The court "will not tolerate any further attempt by BOC to delay these proceedings and thwart Plaintiff's efforts to access account information that is essential to the prosecution of Plaintiffs' claims against rampant counterfeiters who have consciously used BOC to facilitate their illegal schemes," Sullivan wrote in a November 30 order.