
58 Operational Risk Control
3.5 Crossborder legal risk and bankruptcy laws
Here is an example of cost of transborder legal risk. In the early 1990s, two banks,
one operating in London the other in New York, were ordered by one of their clients
to transfer $5 million from one institution to another. This was done by cable, and
there was fraud. The case went to court. In the end, it cost $6 million in legal fees, and
there was no solution to the legal issue behind the court action.
This case illustrates what makes crossborder legal conflict so complex. Legal risk,
and other operational risks, are augmented by the fact that in a globalized economy
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