For the better part of the past three years, Martin Kenney and Dr. Alexander Stein of Dolus Advisors in New York have collaborated on a groundbreaking paper, recently published in the Journal of International Banking Law and Regulation (Sweet & Maxwell; Vol 40, Issue 9, August 2025). Titled “Ponzi Banking: The Law and Psychology of Banks that Service Financial Misconduct,” the article examines the complex intersection of law and psychology in cases where banks facilitate fraudulent schemes.
Dr. Stein, an expert in the psychodynamics of fraud and abuses of power, brings unique insights into the mental states that underpin financial misconduct. Over the years, Kenney and Stein have collaborated on numerous conference presentations and co-authored around a dozen articles, applying these insights to challenging asset recovery matters.
Key Focus of the Article:
The paper explores critical issues of interest to courts, lawyers, financial institutions, and victims of fraud:
- Banks and Civil Liability: Banks often avoid civil liability for routine services that enable Ponzi schemes and other financial misconduct, creating significant barriers to justice for victims seeking compensation.
- Interdisciplinary Analysis: The authors provide comparative legal and psychological analyses of six judgments from the US, Canada, and England, examining cases where victims either succeeded or failed in pursuing redress from enabling banks.
- Legal and Psychological Insights: Beyond analyzing legal reasoning, the article explores the key mental states involved in each case. It provides concise overviews of corresponding psychological features, offering recommendations on how courts can more reliably determine the requisite mental state elements to hold banks accountable for harm caused.
- Harmonising Law and Psychology: The paper argues that integrating established jurisprudence with sophisticated psychological understandings of mental states, such as “actual knowledge” or “wilful blind-eye knowledge of the obvious” is a vital step toward addressing power imbalances and enabling victims to recover against institutional enablers. The authors also examine how theories of the mind in law translate into real-world court implications.
Why It Matters:
This article represents an important contribution to both the legal and financial communities. By combining legal analysis with psychological insight, it highlights how interdisciplinary approaches can improve accountability, strengthen access to justice, and support victims of financial misconduct.
Dr. Stein and Martin Kenney hope the paper will be of interest and practical use to legal professionals, financial institutions, and others engaged in tackling fraud. They welcome responses and feedback from readers.
