Liability in Defamation and Negligence Following Breach of Bank Secrecy

DOIhttps://doi.org/10.1108/eb025978
Published date01 April 2000
Date01 April 2000
Pages150-155
AuthorPaul Latimer
Subject MatterAccounting & finance
Journal of Financial Crime Vol. 8 No. 2 Briefings
BRIEFINGS
Liability in Defamation and Negligence Following
Breach of Bank Secrecy
Paul Latimer
BANK SECRECY IS IN CONFLICT WITH
MARKET REGULATION
Laws regulating securities markets such as the
Securities and Exchange Commission laws in the
USA, the Financial Services and Markets Act 1999
(UK),
the Australian Corporations Law and the
Australian Securities and Investments Commission
Act 1989 (Commonwealth) (hereafter ASIC Act)
and their parallels around the world seek to achieve
market integrity, investor confidence and an
informed market as a result of disclosure of informa-
tion relevant to the market. These laws should result
in the efficient operation of the market and a com-
petitive market. They aim to ensure that the market
reflects the forces of genuine supply and demand,
and that imperfections in the market such as fraud,
or mismatch or non-disclosure of information, are
corrected.
Hence in the words of the ASIC Act, the purpose
of market regulation by the Australian Securities
and Investments Commission (ASIC; hereafter
'Commission') is to:
'(a) maintain, facilitate and improve the perfor-
mance of the financial system and the entities
within that system in the interests of commercial
certainty, reducing business costs, and the effi-
ciency and development of the economy; and
(b) promote the confident and informed partici-
pation of investors and consumers in the financial
system'.
Securities regulation laws clash with the confidential-
ity of the banker/customer contract. The confidential
nature of the banker/customer contract is founded in
the law of agency, under which the agent owes its
principal a duty of confidentiality. Equally, the
banker/customer contract imports the confidentiality
of the bank as the fiduciary. Hence under the rule
of bank secrecy, the customer is entitled to expect
discretion on the part of the bank and that its bank
will keep matters concerning the customer's financial
affairs confidential.
The bank's duty of secrecy was confirmed in
Tournier's case, subject to four exceptions, of which
two are relevant here:
(a) disclosure under compulsion of law
(b) duty to the public to disclose.
Disclosure under compulsion of law
Disclosure of information held by a bank by com-
pulsion of law recognises that one of the purposes
of the Commission is to obtain information to
inform the market and to enable it to carry out its
functions. Securities regulation laws generally
authorise disclosure of the Commission of bank
records in the form of 'books' and 'accounts' as
narrowly defined. The Commission is authorised to
serve a notice requiring a person (including a
bank) to appear for examination in private with a
lawyer. It may examine a book without charge,
and serve notice to produce books including specified
books about futures contracts or about financial
services. 'Books' are defined in s. 5 of the ASIC
Act to include:
'(a) a register;
(b) financial reports or financial records, however
compiled, recorded or stored;
(c) a document;
(d) banker's books; and
(e) any other record of information'.
In addition, and more specifically, Australian legis-
lation requires the bank to 'disclose to the Com-
mission every account kept at the bank in the name
of the person to whom the order relates, and every
account that the banker reasonably suspects is held
or kept at the bank for the benefit of that person'.5
Journal of Financial Crime
Vol.
8.
No.
2,
2000.
pp.
150-155
© Henry Stewart Publications
ISSN
0969-6458
Page 150

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