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2016 | OriginalPaper | Buchkapitel

3. Banking Confidentiality Versus Disclosure

verfasst von : Dr. Waleed Alhosani

Erschienen in: Anti-Money Laundering

Verlag: Palgrave Macmillan UK

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Abstract

This chapter deals with the well-established doctrine of banking confidentiality, which applies to all banking transactions across the world. The banking sector is the most attractive area for ML activities/transactions and will therefore be analysed in the following chapters. The sector, out of all reporting entities, also submits the majority of SARs/STRs on ML to the national FIU annually, as analysed in Chaps. 6 and 9. The submitting of SARs/STRs can conflict with the principle of banking confidentiality since such reports contain information about a customer’s bank account and financial affairs, which might lead to criminal or civil liability being imposed. The main objective of this chapter is to justify on which legal grounds SARs/STRs can be submitted in a way which does not prejudice the principle of banking confidentiality, ensuring that the principle is respected and safeguarded without it being exploited for ML activities.

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Vorheriges Kapitel Financial Intelligence Units in the UK and UAE to Date

Nächstes Kapitel The Nature of the FIU from the Perspective of International Standards

Zubair Khan Muhammad, ‘An Analysis of Duty of Confidentiality Owed by Banker to its Customers’ [20th April, 2011] 1, available online at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1815825 (accessed on 27th February 2015).

E. P. Ellinger, Eva Lomnicka and C.V.M Hare, Ellinger’s Modern Banking Law (Fifth Edition, Oxford University Press 2011), 171.

R Ponser, mentioned in Ross Cranston, Principles of Banking Law (Second Edition, Oxford University Press 2002), 169.

Ibid.

E. P. Ellinger, Eva Lomnicka and C.V.M Hare (n 145) 172.

Ibid.

Ibid 171 & 172.

Ross Cranston (n 146) 169.

Ibid.

Zubair Khan Muhammad (n 144) 3.

Online banking means electronic means, provided by a bank, such as internet, mobile phones and Automated Teller Machines (ATM). A customer can utilise such means to transfer money between bank accounts, to access his bank account(s) and/or to pay his bills. See, Peyman Akbari, Reza Rostami and Akbar Veismoradi, ‘Study of Factors Influencing Customer’s use of Electronic Banking Services by Using Pikkarainens Model (Case Study: Refah Bank of Kermanshah, Iran)’ (September 2012) Vol., 3 (5) International Research Journal of Applied and Basic Sciences 950. Available online at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2145494 (accessed on 3rd March 2015).

Zubair Khan Muhammad (n 144) 3.

Hemant Kassean, Mridula Gungaphul and Dhiren Murughesan, ‘Consumer Buyer Behaviour: The Role of Internet Banking in Mauritius’ [2012] European Business Research Conference Proceedings 1. Available online at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2131206 (accessed on 3rd May 2015).

E. P. Ellinger, Eva Lomnicka and C.V.M Hare (n 145) 173 & 174.

The DPA 1998 repealed and replaced the DPA 1984.

The term “relevant filing systems” is defined in section 1 of the Act as “any set of information relating to individuals to the extent that, although the information is not processed by means of equipment operating automatically in response to instructions given for that purpose, the set is structured, either by reference to individuals or by reference to criteria relating to individuals, in such a way that specific information relating to a particular individual is readily accessible.”

The term “personal data” means “data which relate to a living individual who can be identified

(a)

from those data, or

(b)

from those data and other information which is in the possession of, or is likely to come into the possession of, the data controller,

and includes any expression of opinion about the individual and any indication of the intentions of the data controller or any other person in respect of the individual” s.1 (1) of the DPA 1998.

[2006] EWCA Crim 1841.

Ibid para 13. See also Francis Aldhouse, ‘DPA section 55: securing convictions’ (February 2007) 4 (2) The Newsletter for Data Protection Professionals 10, available online at: http://www.e-comlaw.com/data-protection-law-and-policy/article_template.asp?ID=351&Search=Yes&txtsearch=going (last accessed on 20th August 2015).

[2003] EWCA Civ 1746.

‘The Durant Case and its impact on the interpretation of the Data Protection Act 1998’, Information Commissioner’s Office 27/02/06; available online at: http://www.ico.gov.uk/upload/documents/library/data_protection/detailed_specialist_guides/the_durant_case_and_its_impact_on_the_interpretation_of_the_data_protection_act.pdf (accessed on 25th August 2015).

[2003] EWCA Civ 1746 (n 163) para 28.

Ibid para 48.

(N 159).

(N 165).

(N 163).

S.42 of the DPA 1998, for further information, see http://66.102.9.132/search?q=cache:QmVMbxrTq-kJ:www.ico.gov.uk/for_organisations/data_protection_guide/the_role_of_the_information_commissioners_office.aspx+right+to+request+an+assessment+by+the+ICo&cd=1&hl=en&ct=clnk&gl=uk (last accessed on 19th August 2010).

S.43 of the DPA 1998.

‘The role of the Information Commissioner’s Office’, available online at: http://66.102.9.132/search?q=cache:QmVMbxrTq-kJ:www.ico.gov.uk/for_organisations/data_protection_guide/the_role_of_the_information_commissioners_office.aspx+right+to+request+an+assessment+by+the+ICo&cd=1&hl=en&ct=clnk&gl=uk (last accessed on 22nd August 2010).

Article 47 (1–3) of the Swiss Federal Act on Banks and Savings Banks 2009 (known as the Banking Law of 1934) provides that:

1: Imprisonment of up to three years or fine will be awarded to persons who deliberately:

B: Disclose a secret that is entrusted to him in his capacity as body, employee, appointee, or liquidator of a bank, as body or employee of an audit company or that he has observed in this capacity;

B: Attempts to induce such an infraction of the professional secrecy.

2: Persons acting with negligence will be penalized with a fine of up to 250,000 francs.

3: In case of a repeat within five years of the prior conviction, the fine will amount to 45 day rates at a minimum.

Ross Cranston (n 146) 170 & 171.

Fayyad Alqudah, ‘Banks’ duty of confidentiality in the wake of computerised banking’ (1995) 10 (2) Journal of International Banking Law 50, 51.

Ross Cranston (n 146) 171.

[1924] 1 KB 461.

Prior to 1924, there were only three reported cases which dealt with banking confidentiality, namely (1) Tassell v Cooper [1850] 9 CB 509, (2) Foster v Bank of London [1862] 3 F. & F. 214 and (3) Hardy v Veasey (1867–68) L.R. 3 Ex. 107. For further details about the development of the principle of banking confidentiality, see Robert Stokes, ‘The Genesis of Banking Confidentiality’ (2011) 32 (3) The Journal of Legal History 279, 279–294.

(N 177) 485 para 23.

Alastair Hudson, The Law of Finance (Second Edition, Sweet & Maxwell 2013), 899.

Charles Proctor, The Law and Practice of International Banking (Oxford University Press 2010), 678.

Ross Cranston (n 146) 172.

Fayyad Alqudah (n 175) 50.

Ross Cranston (n 146) 172.

Charles Proctor (n 181) 679.

E. P. Ellinger, Eva Lomnicka and C.V.M Hare (n 145) 178.

Ibid 177.

Ibid.

(N 177).

Ibid 473 para 11 and 480 para 18.

Zubair Khan Muhammad (n 144) 3.

[1990] 1 AC 109.

Ibid 281.

Zubair Khan Muhammad (n 144) 2.

(N 194) 282.

E. P. Ellinger, Eva Lomnicka and C.V.M Hare (n 145) 179.

Wadsley Joan, ‘Bank’s confidentiality: a much reduced duty’ (1990) 106 (Apr) Law Quarterly Review 204, 205.

(N 177).

Ibid 473 para 1.

These exceptions were confirmed in Christofi v Barclays Bank Plc [2000] 1 WLR 937. In addition, Tournier was applied in Christofi v Barclays Bank Plc [1998] 1 W.L.R. 1245, but distinguished in Brandeaux Advisers (UK) Ltd v Chadwick [2010] EWHC 3241 (QB).

(N 177).

Ross Cranston (n 146) 174.

Ibid 174 & 175.

Arun Srivastava, ‘UK Part II: UK law and practice’ in Mark Simpson, Nicole Smith and Arun Srivastava (eds), International Guide to Money Laundering Law and Practice (Third Edition, Bloomsbury Professional 2010), 27 at 50.

Alastair Hudson (n 180) 901.

[1969] 1 WLR 1204.

[1973] QB 519.

Pursuant to s.3 of the Bankers’ Books Evidence Act 1879, a bank has to provide a copy of the relevant entry and under s.4 it has to be shown that the entry is a normal bank entry and this can be done by way of an affidavit from a bank officer. The affidavit will confirm that the original and the copy match since this is required under s.5 of the Act. S.6 of the Act provides that a bank does not have to produce evidence or its book, except where a judge has ordered this for a special cause.

Ross Cranston (n 146) 176.

[1880] 14D 197.

[1895] 2 QB 669.

E. P. Ellinger, Eva Lomnicka and C.V.M Hare (n 145) 181.

[1972] 2 QB 512; cf. Sommers v Sturdy [1957] 10 DLR (2d) 269.

[1980]1 WLR 1274.

Ibid 1282 para 30.

Owen v Sambrook [1981] Crim LR 329; R v Nottingham Justices, ex parte Lynn [1984] 79 Crim App Rep 234.

[1980] Crim LR 305.

This particular offence will be analysed in Chap. 8.

(N 213).

[1992]1 WLR 437.

[1980]1 WLR 884.

In the case of Barker v Wilson, the Court considered the meaning of the phrases “bankers’ books” and “an entry in a banker’s book.” Bridge LJ stated that “it seems to me that clearly both phrases are apt to include any form of permanent record kept by the bank of transactions relating to the bank’s business, made by any of the methods which modern technology makes available, including, in particular, microfilm.” Ibid 887 para 21.

Such as s.337 (1) and s.338 (4) of POCA 2002, which will be critically analysed in Chap. 8.

S.330, s.331 and s.332 of POCA 2002, see Chap. 8.

Such as in the UAE, as will be critically assessed in Chap. 5.

Joy Tan, ‘Can we still bank on secrecy?’ (2011) 26 (9) Journal of International Banking and Finance Law 564, 564, See pp 136-138 in Chap. 5.

There are other tools which can prevent/detect ML or at least mitigate the consequences of it. For instance, the proceeds of crime can be confiscated and assets can be recovered, information can be exchanged between countries and a cash declaration system can be used. For detailed information about the confiscation of crime proceeds and assets recovery, see Nicholas Ryder, Financial Crime in the 21st Century: Law and Policy (Edward Elgar Publishing Limited 2011), 178–213. See also Jonathan Fisher, ‘UK Part IV: Confiscating the Proceeds of Crime’ in Mark Simpson, Nicole Smith and Arun Srivastava (eds), International Guide to Money Laundering Law and Practice (Third Edition, Bloomsbury Professional 2010), 145 at 186.

The cash declaration system will be illustrated from the perspective of the FATF in (n. 498) of Chap. 4. For the UAE system, see (n. 629) of Chap. 5; and for the UK system, see (n. 1001) of Chap. 8.

[1920] AC 956, 965.

(N 177).

Paul Latimer, ‘Bank secrecy in Australia: terrorism legislation as the new exception to the Tournier rule’ (2004) 8 (1) Journal of Money Laundering Control 56, 58.

Ross Cranston (n 146) 178.

Charles Proctor (n 181) 696.

Zubair Khan Muhammad (n 144) 6.

Paul Latimer (n 231) 58.

Mourant, ‘The duty of confidentiality: The rule and four exceptions’, June 2007, available online at: www.mourant.com (last accessed on 16th August 2010).

E. P. Ellinger, Eva Lomnicka and C.V.M Hare (n 145) 189.

S.21 A of the Terrorism Act 2000 is applied where there is a terrorism suspicion and s.330, s.331 and s.332 of POCA 2002 apply where there is a suspicion of ML.

See Staughton J in Libyan Arab Foreign Bank v Bankers Trust Co, [1988] 1 Lloyd’s Rep 259.

Ross Cranston (n 146) 170 & 179.

Charles Proctor (n 181) 693.

Ross Cranston (n 146) 175.

100

[1938] 5 LDAB 163.

101

Ibid.

102

E. P. Ellinger, Eva Lomnicka and C.V.M Hare (n 145) 192.

103

Zubair Khan Muhammad (n 144) 7.

104

Ibid.

105

Ross Cranston (n 146) 179 & 181.

106

The Banking Code (March 2008), available online at: http://www.bankingcode.org.uk/pdfdocs/PERSONAL_CODE_2008.PD (accessed on 9th June 2014).

107

Cartwright Peter, Consumer Protection in Financial Services (International Banking, Finance & Economic Law 1999), Kluwer Law International, 93 & 94.

108

Financial Conduct Authority, ‘The Banking Conduct Regime’, available online at: http://www.fca.org.uk/firms/being-regulated/banking/Conduct-regime (accessed on 30th October 2014); Lending Standards Board, The Lending Code, Setting standards for banks, building societies and credit card providers (March 2012, revised 1st May 2012), available online at:

http://www.lendingstandardsboard.org.uk/docs/lendingcode.pdf (accessed 7th March 2014).

109

Furthermore, banks have also to comply with the DPA 1998.

110

(N 177).

111

Ibid.

112

Circular No. 257/1976 stipulates that:

So far as divulging information about customers’ affairs is concerned, banks are free to rely on one of the two exceptions. They may rightly demand a court order before they release information or they may at their discretion pass the required details under private and confidential cover to the Managing Director of the Board who will act as an intermediary. In the latter case the Board will protect the bank from any possible legal action which might arise at a later date.

113

Nevertheless, the law does not contain any provision which deals with the banker’s duty of confidentiality.

114

Article 379 of the UAE Penal Code 1987 provides that:

1: Punishment by detention for a period of not less than one year and by a fine of not less than Arab Emirates Dirham (AED) 20,000 or by either of these two penalties, shall apply to any one who is entrusted with a secret by virtue of his profession, trade, position, or art and who discloses it in cases other than those lawfully permitted, or if he uses such a secret for his own private benefit or for the benefit of another person, unless the person concerned permits the disclosure or use of such a secret.

2: A penalty of imprisonment for a period not exceeding five years shall apply to a culprit who is a public official or in charge of a public service, and has been entrusted with the secret during, because of or one the occasion of the performance of his duty or service. AED20,000 is about £3300.

115

(N 177).

116

Ibid.

117

Dubai Court Judgment, Criminal Division, case No. 2548/2011.

118

Which is about £21,300.

119

(N 260) and the Appeal Court in Dubai affirmed the conviction on 5 October 2012.

120

Ibid.

121

Article 15 of the FLMLC 2002.

122

Article 20 of the FLMLC 2002 which will be illustrated in (n 623) of Chap. 5.

123

(N 177).

124

Zubair Khan Muhammad (n 144) 9.

125

(N 177).

126

Ibid.

Titel: Banking Confidentiality Versus Disclosure
verfasst von: Dr. Waleed Alhosani
Verlag: Palgrave Macmillan UK
Buch: Anti-Money Laundering
Print ISBN: 978-1-137-59454-9

Electronic ISBN: 978-1-137-59455-6

Copyright-Jahr: 2016
DOI: https://doi.org/10.1057/978-1-137-59455-6_3

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