Confidentiality is a Cornerstone of the Bank-Customer Relationship - Coursework Example

Confidentiality is a Cornerstone of the Bank-Customer Relationship Students Name Institutional Affiliation Confidentiality is a Cornerstone of the Bank-Customer Relationship Introduction A bank’s duty in offering confidentiality to customers implies an agreement made between the two parties. This confidentiality clause does not only apply to the financial statement information, but to all information that the bank can access (Ombudsman News, 2005). Since once in a while mistakes can happen, information may be leaked which leads to breach of contract and it can lead to a legal suit for damages (Ombudsman News, 2005). Therefore, in this paper we seek to provide the justification instances under which the bank and customer confidentiality clause can be breached without calling for a legal suit on behalf of the customer. Some of the instances as revealed in this paper which are the only four legal justifications allowed in the modern world today include offering a duty to the public, disclosure due to permission by the customer consent, compulsory by the law and the banks interest in requiring disclosure of information (Mourant, 2009). Confidentiality breach should happen when justified. Justifications for the breach of confidentiality Duty to the public to disclose A bank’s duty in protecting the interest of a customer in the face of confidentiality can be overridden by the inhibiting threat that has either been posed to the public duty or the state (Mourant, 2009). In war times, for example, the banks will be mandated to reveal or provide confidential reports about its customer as a matter of public duty. This function can also be met by the state when it requires crucial information regarding persons so as to curb an arising peril that is a threat to the country (Kate, 2014). Even though confidentially is a key element of a better strategy in ensuring a customer and bank relationship is maintained, confidentially clause can be breached under legal obligations. Banks therefore can breach the confidentiality clause of their customers and provide relevant information to the authorities about their clients to prove whether they are collaborating with enemies or not (Kate, 2014). This breach of contract in confidentiality is justified as a bank's duty to the public to disclose such confidential data (Kate, 2014). Disclosure permitted with the consent of the customer A bank customer’s agreement or consent towards confidentiality clause can also be expressed as a justification authority to the bank to provide their confidential information (Mourant, 2009). For example, lawyers can be allowed to reveal confidential information about their clients which is justified under certain policies. If these lawyers aren’t keen enough, they can also breach the contract where the client has stipulated only certain information can be revealed, this strategy also takes place in banks (Chadbourne, 2002). The consent of a customer plays a big role in justifying the breach of confidential information from the bank. An express signed agreement by the customer to the banks marks a clear consent for the banks’ role to breach confidential information of the client by disclosing it to any third party (Chadbourne, 2002). An example of an express consent by a customer in a bank provides a reference link to share information of the customer once needs arise on their behalf to third parties. This type of breach of confidentiality contract is appropriate in the modern world today as it has the consent of the customer (Chadbourne, 2002). Bank interest in requiring disclosure Another response on behalf of the bank that may lead it to disclose confidential information is though the interest of the bank (Mourant, 2009). The bank has its duty to protect its reputation in the market, hence when a duty has risen and it requires the bank to breach the confidentiality clause with customers, the bank will have no otherwise but to engage in the act. This obligation may take place as a result of, for example, a proceeding filed by the bank management in response to customers whom have claimed to the bank authorities that they have already repaid their overdrafts (Sauter, 2005). This will take another step where the bank has to provide some statements that go in line with the proceeding on the suit. The bank must therefore table all the statements, including the financial statements of the customer in the face of an ongoing summons in order to prove that the customers are wrong (Sauter, 2005). It is from this situation that the confidentiality clause between the customer and the bank will be breached so as to solve the existing problem between the two parties. Though the breach of confidentiality that is a cornerstone between banks for customer relationship will have been breached, in this situation, it is justified thus mostly applicable in the world today in solving such predicaments when they rise again (Sauter, 2005). Compulsory by the law Banks are allowed to breach the confidentiality contract with their customers in order to comply with the laws and regulations that override it (Mourant, 2009). It is from this situation that customers suffer the loss of their information to third parties as a result of orders that are beyond the banks reach hence they have to obey and follow them. In response to the obligation mandated by the law, banks respect this mandate through four exemptions which are crime prevention, evidence in proceeding, taxation and regulatory (Mourant, 2009). In these situations banks can breach the confidentiality cornerstone of relationship with its customers. i. Taxation According to research, the state of New Jersey has obtained a large signatory to a quite large number of tax information from the banks. The banks have been keeping tax information in their database, hence it is through them that tax reports and individual compliance tax reports can be obtained from (Mourant, 2009). For example, in the United States, the comptroller has been given a lot of power to obtain any information they seek from other persons beyond the taxpayer hence banks are now liable to provide confidential data of their customers to the tax department (Mourant, 2009). Banks have no otherwise to breach confidentiality contract in this scenario, but it is justified by the law. ii. Regulatory In this scenario an appointed individual may be requested to carry out an investigation after a suspected flouting of the law. It is through this process that banks will fall victim of the regulatory measures hence they will be answerable for the body carrying out research (Mourant, 2009). The banks must therefore come forward to the investigation rooms with evidence documents to provide more information about the case being investigated. The information required by the investigative team may contain confidential information about their customers (Mourant, 2009). Though in this scenario it is justified, they would have breached the confidentiality element by revealing certain data to the investigating team. iii. Evidence in proceeding The rise of this scenario will lead to breach of confidentiality between banks and its customers as a result to provide evidence (Mourant, 2009). Banks in the United States and other nations in the world may be ordered by high courts to provide relevant documentation regarding certain individuals who have been prosecuted. Therefore, the banks will not have another alternative rather than to imply to the orders ordered by the court hence breaching confidentiality clause agreed upon by the two parties while creating an agreement (Mourant, 2009). iv. Crime prevention A breach of confidentiality comes to happen once more as a result of a compulsory requirement of the law in the situation when security bodies are preventing a crime from happening (Mourant, 2009). The disclosure of financial information regarding the customer will appropriate contribute to preventing crimes from happening once banks have obeyed the command from authorizes in providing information. The information can help to reveal where the organized crimes source of money come from. In supplying customer confidential information, the bank would have breached the contract, but it is justified and legal within the law (Mourant, 2009). This command is widely used in the world today. Conclusion Even though confidentially contract between a bank and a customer display the cornerstone of a bank to customer relationship, in certain instances it needs to be breached. Some of the available instances that provide justification to breach the contract are as enumerated in this paper (Sauter, 2005). As a result in offering a duty to the public, disclosure due to permission by the customer consent, compulsory by the law and the banks interest in requiring disclosure are the main justification that banks are legally bound to breach confidentiality contract with their customers (Mourant, 2009). Therefore, banks should observe and respect confidentiality agreements with is customer as it is the cornerstone in creating a relationship. A confidentiality agreement needs justification to be breached failure to it there will be a suit for damages. References Chadbourne. (2002). Banker Confidentiality Obligations, Project Finance Newswire. Retrieved from http://www.chadbourne.com/Banker_Confidentiality_Obligations_12-2002_Projectfinance/ Kate, Gaskell. (2014). How much is a bank’s duty of confidentiality worth to its customer? Retrieved from http://blogs.lexisnexis.co.uk/loanranger/how-much-is-a-banks-duty-of-confidentiality-worth-to-its-customer/ Mourant, O. (2009). The Duty of Confidentiality: The rule and four exceptions. Retrieved from http://www.mourantozannes.com/media/453284/the%20duty%20of%20confidentiality%20the%20rule%20and%20four%20exceptions.pdf Ombudsman News. (2005). The Banker's Duty of Confidentiality to the Customer. Retrieved from http://www.financial-ombudsman.org.uk/publications/ombudsman-news/45/45_bankers_duty.htm Sauter, E. (2005). Breach of the Bankers Duty of Confidence, New law Journal, pp.330-331. Read More