There is a duty upon a bank to maintain the confidentiality of its customers’ account details, Bank Confidentiality Regulations. Although the duty of confidence in lending goes back many centuries 4 , in Anglo-Australian law it is rooted in the common law and in equity 5 . The law on the subject was laid down in Tournier v National Provincial and Union Bank of England. 6 Banks L.J. found that the duty was a legal one arising out of contract but that it was not possible to frame an exhaustive definition of the duty. 7
1 Owen J. in the Southern District Court of New York refusing to defer the jurisdiction of that court to a Hong Kong court in respect of funds held by a bank in its Hong Kong branch on behalf of one of its customers andfinancial privacy laws. The judge then ordered payment of those funds to the U.S. Court. See Nanus Asia Co. Inc. v Standard Chartered Bank [1990] 1 HKLR 396 at 397. 2 Per Viscount Dilhorne in Re Westinghouse Uranium Contract [1978] AC 547, 631 3 For the purposes of this article the terms “duty of confidentiality” and “duty of secrecy” are used interchangeably and refer to the duty imposed upon banks to maintain the confidentiality of their customers’ records.
4 There are oblique references to this duty in the Hammurabic Codes. The first definitive provisions
pertaining to bank secrecy is found in the Rules of the Banco Ambrosiano Milano of 1593. See R.E.
Huhs, “To Disclose or not to Disclose Customer Records” (1991) 108 BLJ 30.
5 Lee Aitken, “The Bank’s Duty of Confidence in Transnational Proceedings” (1994) Journal of
Banking and Finance Law and Practice 109, 110 says: “The duty appears to have both a contractual
and an equitable basis; that is, the duty of a bank to keep confidential the details of its client’s business
may be derived from both the general equitable obligations generated by the relationship and the actual
terms of the contract, express or implied, governing that relationship”.
6 [1924] 1 KB 461. 7 Ibid at 472.
Bank Confidentiality Regulations Conclusion
There is no doubt that the protection of bankers’ secrecy should not provide a method to criminal elements to facilitate fraud and the money laundering of illegally obtained funds 70 .
The banking system and the technology utilised by it to move funds instantly from ne jurisdiction to another cannot be allowed to become a tool which enables criminals to achieve their ends. An inevitable consequence of the need to guard against the misuse of the banking system by criminals will be that the duty imposed on banks to maintain the confidence of their clients’ account details will, in some instances, be eroded.
Courts in the United States, however, have sometimes adopted a heavy handed approach to securing documentation from branches of banks situated in other countries. This approach has caused offence to countries such as the United Kingdom which, not surprisingly, guards its sovereignty jealously and expects other countries,including the US, to abide by the norms of international comity.
and manifests a good faith endeavour to make the information available, it may well be able to avoid the imposition of penal sanctions by the United States tribunal.” 68 See S.W. Waller: “The Twilight of Comity” (2000) 38 Columbia Journal of Transnational Law 563
at 570. 69 R.A. Spehr (supra) at 21. 70 This was acknowledged by Georges C.J. in the Bahamian case of Royal Bank of Canada v Apollo Development Ltd who said: “The policy of preserving bank secrecy in the Commonwealth as enshrined in its laws must be scrupulously observed. Of equal importance is the need to ensure that it does not become a screen for facilitating fraud.”
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It is submitted that the use of letters rogatory rather than subpoenas duces tecum to secure information will go a long way to avoiding friction. Where, however, the use of letters rogatory is not appropriate, then in the interests of preventing criminal elements from achieving their ends the use of subpoenas should be countenanced but subject to the good faith provisions of the Restatement. This will ensure that innocent parties such as banks do not find themselves caught up in an intolerable Scylla and Charybdis situation as has happened in the past.
With the exception of a few rogue states, the desire to combat crime is an international one and in most instances the cooperation of the courts in other countries to secure the desired information will be forthcoming. In this regard I can do no better than repeat what was said by Cruden J. more than a decade ago in the High Court of Hong Kong:
I am content to record that this Court will always take whatever effective steps are legally available to it under Hong Kong law, to deal with illegal or morally reprehensible commercial conduct. The only limits on the court’s powers are those imposed by Hong Kong law and at times by the sufficiency of the evidence adduced. Where a conflict of laws situation does arise, in this area as in others, the dispute should be approached in a spirit of judicial comity rather than judicial competitiveness. Whatever the approach of other courts, this is the sympathetic approach followed by this Court in the present proceedings.
Bank Confidentiality Regulations
