Bank Confidentiality: Duty and Exceptions - International Law Office

International Law Office

Offshore Services - Jersey

Bank Confidentiality: Duty and Exceptions

September 13 2007

Duty
Exceptions
Substantive Offences


Duty

The law on a bank's duty of confidentiality was clarified in Tournier v National Provincial.

The Court of Appeal held that a bank owes its customer a legal duty of confidentiality not to disclose information to third parties. Any breach of this could result in liability for damages if loss results.

This duty arises between a bank and its customer upon the opening of an account and continues after account closure. It covers all transactions concerning the account and information obtained by virtue of the relationship between the bank and its customer. However, the duty is qualified by some exceptions laid down in Tournier and more recently confirmed in Christofi v Barclays Bank plc.

Arguably, a similar duty of confidentiality is implied in the relationship between an individual and his or her accountant, financial adviser and trustee.

In Jersey, there is no statutory provision giving rise to the bank's duty of confidentiality. The law in this area has evolved through rulings applying the principles laid down in Tournier.

Exceptions

Compulsion by law
The duty to comply with local law overrides the duty of confidentiality. Key legislative provisions require an individual or entity to disclose information as follows;

Prevention of crime
The disclosure of arrangements and suspicions under the 1988 Drug Trafficking Offences Law is not treated as a breach of restriction upon the disclosure of information imposed by statute, contract or otherwise. Police have wide powers of investigation, including ability to apply to the Royal Court for orders requiring the disclosure of information, including confidential information against third parties believed to be connected with drug trafficking offences. It also imposes a statutory obligation to report any suspicion or belief that funds may be derived from drug trafficking and to supply information on that basis.

The 1999 Proceeds of Crime Law extended the reporting obligations to a wider variety of criminal activity. It is a defence to substantive money laundering offences to have disclosed suspicion to the police. Such reporting is not a breach of any restriction on disclosure imposed by statute, contract or otherwise if the suspicion or belief is proved to be mistaken or unfounded.

Under the law the bailiff may order the production of, or access to, specified documents. A production order may be issued to investigate whether someone has benefited from criminal conduct or to identify the proceeds of any criminal conduct.

Under the 1991 Investigation of Fraud Law, the attorney general can investigate suspected serious or complex fraud. Where information requested is held under a duty of confidentiality, disclosure may be given if (i) the person to whom the duty of confidentiality is owed consents, or (ii) the attorney general has authorised the issue of the disclosure requirement.

The 2001 Criminal Justice (International Cooperation) Law allows requests for assistance from foreign territories to be enforced by the attorney general.

The attorney general may issue a notice requiring a financial institution to provide evidence as requested. Under the 2002 Terrorism Law there is a positive obligation on financial institutions to report knowledge, suspicion or reasonable grounds for knowing or suspecting that one of the offences under this law has been committed. Disclosure is protected and is not a breach of any restriction against the disclosure of information. Also, under the 2003 Police Procedures and Criminal Evidence Law a bank may be served by the police with a notice of application for entry and search regarding material subject to a duty of confidentiality.

Regulatory
Under the 1988 Company Securities (Insider Dealing) Law, the Financial Services Commission may appoint an inspector to investigate a suspected contravention of the law. The inspector can require anyone to attend to deliver documents and answer questions.

Banks may be required by the commission to produce documentation or information on customers to enable it to perform its functions under the 1991 Banking Business Law. Confidential client information may be disclosed under Article 32 of the 1998 Financial Services Law under the commission's general power to require provision of information and documents.

Evidence in proceedings
In relation to overseas criminal prosecutions, under the 1983 Evidence (Proceedings in other Jurisdictions) Order, a person believed to hold relevant evidence may be ordered by the Royal Court to produce documents and give evidence. A person served with an order may obtain legal advice before complying and need disclose only evidence falling within the order's precise terms.

In relation to civil proceedings underway, under the 1960 Service of Process and Taking of Evidence Law, overseas courts may request the Royal Court to make orders for disclosure of evidence relevant to foreign proceedings. Under the 1986 Bankers Books (Evidence) Law, the court can make orders for the inspection and copy taking of entries from a bank's records.

Taxation
Since November 2002 Jersey has been party to a tax information exchange agreement with the United States. Under the 2006 US and Jersey Taxation Regulations, the comptroller has the power to require persons other than a taxpayer to provide documents or records believed to contain information relevant to a US taxpayer's liability, amount and residential status. The minimum timeframe for compliance with a request is 30 days.

Duty to the public to disclose
A bank's duty of confidentiality is overridden by potential danger to the state or public duty. In times of war, for example, a bank would have a public duty to disclose information relating to a particular customer to the authorities if it has knowledge of that customer trading with the enemy.

Interests of the bank require disclosure
This would occur, for example, in bank proceedings against a customer claiming overdraft repayment where the bank must state details of the overdraft amount on the face of a summons, which is a public document.

Disclosure permitted with the customer's consent
A customer's consent may be expressed or implied. Express consent should be in writing, stating specifically the purpose for which the consent to make disclosure has been given. An example of implied consent is a reference a bank might be requested to provide to a third party on the customer's behalf.

Substantive Offences

The substantive offences are:

  • assisting another to retain the benefit of criminal conduct;

  • acquiring, possessing or using of proceeds of criminal conduct;

  • concealing or transferring the proceeds of criminal conduct; and

  • tipping off others.

Criminal conduct is defined as conduct constituting an offence carrying a potential sentence of 12 months' imprisonment or more, or would constitute such offence if the conduct had occurred in Jersey.

The substantive offences relevant to financial institutions are:

  • fundraising, including where a person receives property and intends it to be used, or has reasonable cause to suspect that it may be used, for terrorist purposes;

  • use or possession of property for terrorist purposes;

  • funding arrangements; and

  • money laundering.


For further information on this topic please contact Beverley Lacey, Jonathan Speck or David Wilson at Mourant du Feu & Jeune by telephone (+44 1534 609 000) or by fax (+44 1534 609 333) or by email (beverley.lacey@mourant.com or jonathan.speck@mourant.com or david.wilson@mourant.com).



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