By Q. Kiptoo
Abstract
This
paper will address in extenso the banks duty of confidentiality as it relates
to the banker-customer relationship; thereafter the writer will address the
exceptions to this duty.
‘It
is an implied term of a banker’s contract with the customer that the bank shall
not disclose his account or the transaction relating thereto except in certain
circumstances’[1].
The
duty of confidentiality in a banker-customer relationship is a legal and
fundamental duty. It covers all information acquired about the customer and the
account at the beginning of the relationship, during the currency of the
relationship and even after the closure of the customer’s account[2].
The dilemma that this arouses is that before a customer opens an account he
submits information about himself, this occurs before the beginning of the
relationship. The only logical conclusion is that this information to is
covered under a duty of confidentiality as it is most likely to be the same
information that the bank will have about the customer during the relationship[3]
It
is perhaps an implied duty because it is not possible to pick out all the
scenarios under which this duty applies so as to set a general express
rule. It is trite law that this duty is
not absolute, it is subject to certain exceptions which are;
1. Disclosure
by compulsion of law
The
obligation to comply with local laws overrides this duty. This exception acts as a tool of truth
seeking when the law feels that it is in the interests of justice or better yet
the public interest[4]
. These instances include the detection of crime, taxation reasons and
regulation[5].
In
Kenya the Evidence Act empowers the court in any legal proceedings to order the
disclosure of records in a banker’s books records of which may relate to
customer account information[6].
The Banking Act[7]
also mandates all banks to submit annual reports to the Central Bank of Kenya[8].
These provisions are meant to curb money laundering which goes hand in hand
with drug trafficking, terrorism and corruption[9].
Furthermore, for taxation purposes the Kenya Revenue Authority for tax purposes
may request for information relating to customers information and banks are
required to comply[10].
The compliance must be within the court order or request anything revealed in
excess and the bank will be liable, worthy of notice is that the failure to
produce the information requested constitutes an offence.
2. Disclosure
in the Banks Interest
A
bank may disclose if it is in their interest to cover/explain/represent
themselves, however this disclosure must be limited strictly to information
related to the banks interest[11]. Disclosure
may occur when a bank is issuing a writ of an overdraft and it states the
amount of the overdraft on the writ, when it sues a customer it produces the
account details[12]
however the best example was outlined in the case of Sunderland v Barclays Bank[13],
where the bank sought to explain why it had adopted its policy to a husband who
was defending his wife and Judge Parcq ruled in his wisdom that such disclosure
was in the banks interest, amidst other factors
3. Disclosure
with Customer’s Consent
Information
may also be disclosed if a customer chooses or authorizes the bank to disclose
his/her information. The bank should on the other hand observe that they
disclose only within the confines of the authority given. As there are 2 sides
to a coin so are there two types of consent;
Express
consent: This type of consent should necessarily be in writing and state the
reasons as to the disclosure. However, acts that may constitute express consent
include when a customer gives particulars of his bank to a third party in
respect of a transaction and when he directs the bank to reply when an enquiry
is received[14].
Implied
consent: This occurs when a customer conducts himself in such a way that it
leads the other party to believe that a third party has been consented to be
privy to the information. For example when customer draws a third party to
his/her own discussions with the bank.
The
best example of a violation of the rules of confidentiality by disclosure
without the customers consent is to be found in the Solomonic ruling of Judge
Visram in the decision of Intercom Services Limited & Other v.
Standard Chartered Bank Limited[15].
4. The
duty to the public to disclose
The
operations of a bank are closely related to the public, this can be evidenced
by how money kept in banks affect the economy and this can also be interpreted
from the government attempts at implementing banking policies further the bank
also provides a paying system to the public thus it follows that it is
reasonable[16]
for the public disclosure when it is necessary.
It
is undisputed that a customer does have a right to privacy however when the
account is related to possible unlawful activities then the national security
and public interest prevail over this right[17].
Bibliography
Books
1. G.
Njaramba, Law of Financial Institutions in Kenya, 2nd edn , Law Africa
publishers, 2013,
Articles
2. Abdulah
S, 'The Bank's Duty of Confidentiality,
Disclosure Versus Credit Reference Agencies; Further Steps For Consumer
Protection: 'Approval Model'', (2013) 19(4) Web JCLI,
3. Mourant
O, The Duty of Confidentiality: The Rule
and Four Exceptions
Acts
of Parliament
4. Evidence
Act
5. Banking
Act
Decisions
6. Tournier v National Provincial and
Union Bank of England [1924] 1 KB 461
7. Price Waterhouse v BCCI Holdings
(Luxembourg) SA; CA 1992
8. Intercom Services Limited &
Other v. Standard Chartered Bank Limited
9. Sunderland v Barclay Bank
Internet
Sources
[1] Judge
Scruton, Tournier v National Provincial
and Union Bank of England [1924] 1 KB 461
[2] Judge
Bankes, Tournier v National Provincial and Union Bank of England [1924] 1
KB 461
[3] Abdulah
S, 'The Bank's Duty of Confidentiality,
Disclosure Versus Credit Reference Agencies; Further Steps For Consumer
Protection: 'Approval Model'', (2013) 19(4) Web JCLI, pg 3
[4] Abdulah
S, 'The Bank's Duty of Confidentiality,
Disclosure Versus Credit Reference Agencies; Further Steps For Consumer
Protection: 'Approval Model'', (2013) 19(4) Web JCLI, pg 4; See also Judge
Miller in Price Waterhouse v BCCI
Holdings (Luxembourg) SA; CA 1992
[5]
Mourant O, The duty of confidentiality:
The rule and four exceptions, pg 2
[6]
Sec 179
[7]
Chapter 88
[8]
Sec 23
[9] G.
Njaramba, Law of Financial Institutions
in Kenya, 2nd edn , Law Africa publishers, 2013, Pg 123
[10] G.
Njaramba, Law of Financial Institutions
in Kenya, 2nd edn , Law Africa publishers, 2013, Pg 124
[11] http://uk.practicallaw.com/books/9781847666949/ch11-England?source=relatedcontent
(Accessed on 9/11/2015)
[12] G.
Njaramba, Law of Financial Institutions
in Kenya, 2nd edn , Law Africa publishers, 2013, Pg 125
[13] (1938)
5 LDAB 163
[14] G.
Njaramba, Law of Financial Institutions
in Kenya, 2nd edn , Law Africa publishers, 2013, Pg 125
[15]
Civil Case No. 761 of 1988 E.A. L. R 2002 Vol. 2 391
[17] G.
Njaramba, Law of Financial Institutions
in Kenya, 2nd edn , Law Africa publishers, 2013, Pg 124
Nice one
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