Martin Kenney and Alexander Stein co-author new paper on the law and psychology of banks that service financial misconduct
“Ponzi Banking: The Law and Psychology of Banks that Service Financial Misconduct” is a groundbreaking work which addresses complex issues of interest and import to courts, legal practitioners, financial institutions, and victims of fraud. Just published in The Journal of International Banking Law and Regulation.
Banks often evade civil liability for routine services that enable Ponzi schemes and financial misconduct, creating significant barriers to justice for victims seeking compensation.
Journal of International Banking Law and Regulation, 40(9):317-336 Aug 2025
Co-authored by Martin Kenney, Head of Firm at MKS Law, and fraud psychodynamics expert, Dr Alexander Stein of Dolus Advisors, this article provides interdisciplinary, multijurisdictional analysis of this issue through legal and psychological examination of six judgments from the US, Canada, and England and Wales involving victims who succeeded or failed in seeking compensation from enabling banks.
When determining civil liability, courts assess not only facts and law but also mental states — actual knowledge, wilful blindness, reckless disregard, and fraud risk awareness — of financial institution leaders and employees assisting primary wrongdoers.
Even where courts agree on intentional tort elements, approaches to mental state concepts remain confused, vague, or inconsistent across jurisdictions, complicating culpability assessments and hindering bank accountability.
Beyond analysing each judgment’s legal reasoning, the authors explain key mental states in each case and provide concise overviews of corresponding (and often conflicting) psychological features, recommending how courts can more reliably determine requisite mental state elements for holding banks accountable for harm caused.
The authors argue that harmonising established jurisprudence with sophisticated psychological understandings of mental states — theories of mind in law and their real-world court implications — represents a vital step toward redressing power inequities and helping fraud victims recover against institutional enablers when legally permitted.
