Today’s article are extracts from my third book…THE MODERN VRANCH MANAGER’S COMPANION. Sometimes, I am compelled to go back to basic banking principles because of some occurrences in the banking environment. Some staff use logic to replace banking principles until the cases end up in court.
Banks have a ritual of ensuring that all new employees sign an oath of secrecy. This is a very critical part of all orientation programs. The oath is often administered by a Legal Officer in the Bank and the documents securely filed for the records. But why do bankers have to bother with this seemingly unnecessary procedure. The answer is – posterity is there to judge bankers because the signed oath will be referred to, when mistakes occur in handling the banker-customer relationship.
A bank owes an implied duty to its customer not to divulge information about its customers to third parties. This confidentiality is not just confined to account transactions – it extends to all the information that the bank has about the customer. But from time to time, mistakes happen and – for whatever reason – banks end up releasing information that they should have kept secret. Sometimes, the resulting breach of confidentiality is little more than technical (in other words, nothing really follows from it), but occasionally it can have major consequences.
Bankers who do not know cannot hide behind the case and take advantage of the exceptional rights of disclosure held in the case.
The “Tournier” Principles
Tournier v National Provincial and Union Bank of England [1924] was a landmark legal case in the United Kingdom. It established the conditions under which banks owed confidentiality to their clients, allowing four circumstances wherein banks were not required to guard privacy: where compelled by (1) law, (2) public duty, (3) the interest of the bank, or (4) where the client had consented, even implicitly, to disclosure. These principles still hold good today.
- Disclosure under the Compulsion of law:
Bankers are compelled by law to disclose information. It can come as:
- An Order to inspect entries in the Banker’s books
- To assist the Police with their enquiries.
- Receipt of Garnishee Order from Court attaching monies in a customer’s account to and payment of a judgement debt.
- Evidence for foreign trials – Evidence (Proceedings in Other Jurisdictions). Disclosure to relevant overseas supervisory authority authorized by Bank of Ghana.
- Writ or Subpoena compelling bank employee to give evidence.
Request from Statutory Bodies:
- Bank of Ghana – the Regulator of Financial Institutions
- Director of the Economic and Organized Crime Office
- Director of the Financial Intelligence Center.
In recent years, cheque fraud has reared its ugly head in Ghana in alarming proportions. Bank staff who process cheques have found themselves facing various internal committees and sometimes externally, explaining the processes involved in the cheque clearing system. Many individual accounts as well as business accounts have been the victims of such cheque fraud.
- Disclosure as a Public Duty
A Bank would be liable to prosecution if certain types of information are not revealed to the governing authorities. It is therefore in its own interests to disclose certain privileged information as a public duty.
Ghana is now giving necessary attention to the fight against money laundering and terrorist financing. Money laundering (ML) has been defined as the process whereby criminals attempt to conceal the illegal origin and/or illegitimate ownership of property and assets that are the fruits or proceeds of their criminal activities. Financing of Terrorism (FT) is defined here to include both legitimate and illegitimate money characterized by concealment of the origin or intended criminal use of the funds. Money laundering and terrorist financing are global phenomena and there has been growing recognition in recent times, and indeed well-documented evidence, that both money laundering and terrorist financing pose major threats to international peace and security which could seriously undermine Ghana’s development and progress”.
For the past decade or more, bankers have been obliged to file STRs (Suspicious Transactions Reports) to the Financial Intelligence Centre for their follow-up. Where the transactions are deemed genuine, the customers are free to carry on with their businesses, but where there are elements of financial crime involved, the authorities take over. It is an offence to fail to report a person’s engagement in any kind of illegal money-laundering when the information is acquired in the course of business if the defendant has knowledge or suspicion or reasonable grounds for knowledge or suspicion.
Statutory Protection should be given if:
- a) The information is in the course of the profession, business or employment.
- b) There are reasonable grounds for knowing or suspecting that another person is engaged in money laundering.
- c) The disclosure is made as soon as practicable after the information comes to the discloser.
It is an offence to fail to report a person’s engagement in any kind of illegal money-laundering when the information is acquired in the course of business if the banker has knowledge or suspicion or reasonable grounds for knowledge or suspicion.
No offence is committed if the information is disclosed as soon as is reasonably practicable after the information came to the banker’s knowledge or there was a reasonable excuse for non-disclosure.
- Where the customer has agreed to the information being disclosed.
It is common for customers to grant bankers the permission to give statement of accounts to Auditors for preparation of audited accounts. In addition, customers request reference to be given to their business partners, with the expectation of benefiting from some financial arrangements such as credit lines.
- Disclosure in the Bank’s Interest
No bank enjoys taking customers to court. As much as possible, depending on the situation, most banks prefer to re-structure loans which have defaulted in repayment. However, there are many instances where some customers wilfully default in repayment of facilities granted to them, resulting in the bank exercising its last resort of taking court action. It therefore, becomes the banker’s duty to issue a writ against a customer in the event of default on a loan. All transactions and matters involving the customer’s banking transactions have to be given out in court. It is not the wish of bankers to publicize the proceedings of court. Unfortunately, such events happen in open courts which are frequented by media personnel resulting in big banner headlines especially when they involve public persons.
Liability
If a bank discloses information about a customer in any circumstances other than those described above, then it has acted wrongly and should, as a general rule, be held liable for the reasonably foreseeable consequences of its action. Some banks seem to think it should make a difference if they disclosed the information by accident – but it does not. If a bank’s carelessness leads to a breach of confidentiality, that does not diminish the fact that the bank acted in breach of the fundamental duty it owed to its customer.
Consequences of a breach of confidentiality
Customers rightly expect high standards from their banks. If they discover that their private information has been wrongly divulged to someone else, they can become very unhappy – even if the disclosure has resulted in little more than “minor” frustration or embarrassment.
Can you imagine how this supposed ‘minor mistake” by a bank can lead to significant problems, particularly if the customer is running a business? There are some cases where simple clerical errors have led to serious business losses. The important point here is for the bank to look at the consequences of its actions for the customer, and to distinguish clearly between “loss” and “distress and inconvenience”.
Both banks and customers need to take a realistic look at any real losses resulting from the bank’s breach of confidentiality. The bank should generally be liable for losses that it could reasonably have foreseen when it disclosed the information.
In some cases, banks fail to pay proper attention to the true costs that customers can incur as a direct result of the breach of confidentiality. The key, therefore, is for both parties to analyze and understand the true effects of the bank’s actions.
Common Mistakes that Bankers Should Avoid
Here are some basic mistakes that bankers make which breach the duty of confidentiality. These inadvertent disclosures when revealed will go a long way to avoid most of the frustrations encountered during the banker-customer relationship.
Having identified the four exceptions that enable bankers to divulge customers’ information to third parties, some bankers still erroneously divulge information without thinking of the consequences. In all things, the “Tournier” principles still run supreme in any court of la
Next week, we shall look at scenarios where bankers breach this duty unknowingly.
To be Continued
ABOUT THE AUTHOR
Alberta Quarcoopome is a Fellow of the Institute of Bankers, and CEO of ALKAN Business Consult Ltd. She is the Author of Three books: “The 21st Century Bank Teller: A Strategic Partner” and “My Front Desk Experience: A Young Banker’s Story” and “The Modern Branch manager’s Companion”. She uses her experience and practical case studies, training young bankers in operational risk management, sales, customer service, banking operations and fraud.
CONTACT
Website www.alkanbiz.com
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