Cornerstone of the Bank Customer Relationship - Coursework Example

Running Head: Cornerstone of the Bank – Customer Relationship Pg 1 Cornerstone of the Bank – Customer Relationship Author’s Name Institution Affiliation Location of the Research Running Head: Cornerstone of the Bank – Customer Relationship Pg 2 Introduction Abstract Confidentiality is indeed the cornerstone of every bank because the customer trusts them with some of their most vital and confidential information. However, in some scenarios, the bank does have the liberty to disclose vital information of the customer when it has to do with money laundering, liquidation of business, Inland Revenue Department or the Ministry of Social development. (A Bank’s Duty of Confidence, 2012) It is most crucial for any bank to maintain the right balance between the customer and the bank themselves so as to carry out their duties in a harmonious way. In this essay, an attempt is being made to investigate such issues and find out when and how much information should a bank disclose while keeping in mind the safety of the customer as well as well as the confidentiality factor of the bank. Keywords: Confidentiality, Trust, Information, Safeguard, money- laundering, balance Background Summary It is a well known fact that a bank is highly responsible for the safety of a customer’s identity, information and his assets and therefore has to exercise great caution when dealing with the same. However, in certain situations it is impossible for a bank to Running Head: Cornerstone of the Bank – Customer Relationship Pg 3 withhold information when the need arises. For example, sometimes a bank is compelled to come out with information when it is to do with the law with regard to liquidating of any business, money laundering and the like. In instances where crime is involved, the bank has the responsibility to disclose sensitive information to protect the interests of the wider public. Sometimes a bank has to safeguard its own interests by taking legal action against a particular customer in order to defend itself in a court of law. In certain cases, the customer does not mind his information being disclosed and gives permission to the bank to do so. However, if the consent of the customer has been overstepped by the bank divulging other information of the customer then it is held liable for breaching the duty of confidence. The bank is obliged to safeguard every bit of confidential information of their customers and in case the customer’s confidence is breached by the bank divulging such information, that should not have been given and the customer suffers heavy losses due to it, then the bank has to compensate the customer with the payment of compensation for all the inconvenience and trauma caused for no fault of the customer. The bank plays a dual role in the confidence vote of its customers – on one hand is the duty of confidence that covers all its customers and the information about them and on the other we have a 1993 Privacy Act that covers the personal information of its customers. If any of the above are breached the bank has to make good the damage to the customer. Running Head: Cornerstone of the Bank – Customer Relationship Pg 4 According to (Mourant Ozannes. 2014) involving International Trusts and Litigation with regard to section 117 of the UK Companies Act of 2006, the private registers of the customers should never be given access to, if the request is not a valid one. In case access is given on a weak plea, the judgment and implications would have to be borne by the bank. According to (Chadbourne, 2002) The bank has the obligation of not divulging sensitive information in order to protect financial businesses between a borrower and lender, unless both parties mutually trust each other under all circumstances and agree to share such sensitive information with each other. In such a case, the lender has to expressly agree to keep all such sensitive information secret and confidential and only then the bank grants access to it. However, in the course of time, if such confidentiality is breached and information misused, then the bank does not become the liable party for judgment, but the party who breached it and severe action will be meted out to this party. (Chadbourne, 2002) states that even though banks in New York understand that they do have a fiduciary duty towards all their depositors of not divulging sensitive information, but the law governing it is a weak one and may be overridden according to the circumstances with regard to public policy that favors the divulging of such confidential material. Kate Gaskell (2014) sheds light on the confidentiality quotient of the bank and what its worth to a customer. Gaskell states that any disclosure of sensitive information of a customer is liable for penalty because it is a breach of trust and confidentiality. The author goes on to state that there are four areas where a banker’s duty of confidence is Running Head: Cornerstone of the Bank – Customer Relationship Pg 5 applicable and these are – 1) Disclosure under law, 2) When there is a duty to disclose to the public, 3) In case the interests of the bank need a disclosure and finally 4) When the customer expressly consents to disclosure. Though it is a well known fact that the bank can legally share a customer’s confidential information if necessary, yet how much can they share so as not to enter into a breach of trust is what is most important. In a court of law there is a framework set in place when equitable obligation of confidence has been breached. In lieu of breaches of confidentiality three ground rules have to be followed – 1) Information should have the quality of confidence, 2) Information imparted should have had the obligation of confidence and 3) Unauthorized using of confidential matter that becomes detrimental to the party in confidence. Conclusion ‘Duty of Confidentiality’ is also widely referred to as ‘Bank Secrecy’ (Paolo S. Grassi and Daniele Calvarese, 1995) and is set within a framework to build trust and avoid corruption among individuals and businesses. Switzerland is considered to have the best and unrivalled bank secrecy laws in the world, but other countries too are not so very far behind. By bank secrecy it is meant that the bank has an obligation to protect the sensitive or confidential matters of all its customers. However, this confidentiality is not rigid or static but is open to change or revisions ‘subject to developments in areas like criminal law, tax law, trust and wills and generally the whole civil structure.” ((Paolo S. Running Head: Cornerstone of the Bank – Customer Relationship Pg 6 Grassi and Daniele Calvarese, 1995) as quoted by Hanspeter Dietzi, Schweizerischer Bankverein, 32. By adapting an attitude of change banks can hope to lend better protection to its customers by making them gain their trust and confidence in them. Analysis and Evaluation The Duty of Confidentiality is structured and framed to protect and earn the trust of all bank customers and to protect them from discerning criminals by safeguarding their interests. However, in the modern world breach of trust and corruption is still rampant and needs to be curbed by more stringent rules and regulations. Bank employees have the same responsibility as the bank itself to safeguard the confidential information of the customer and if breached they have to take the responsibility that goes with it. As long as rules are lax or overlooked, misunderstanding and heavy losses could be incurred. Therefore, before employing a worker intensive and hands on training should be made a top priority in all banks to ensure that confidentiality is indeed the cornerstone of any bank – customer relationship. References Chadbourne (2002) Article - Banker Confidentiality Obligations. Project Finance Newswire. Retrieved from the web from: http://www.chadbourne.com/BankerConfidentialityObligation12-2002Projectfinance/ Kate Gaskell (2014) How much is a Bank’s Duty of Confidentiality worth to its customer? Retrieved from the web from: http://blogs.lexisnexis.co.uk/loanranger/how-much-is-a-banks-duty-of-confidentiality-worth-to-its-customer/ Mourant Ozannes. (2014) International Trusts & Client Briefing. Corporate, Litigation, International Trusts & Private Client. Retrieved from the web from: http://www.mourantozannes.com/media/453284/the%20duty%10of%20confidenti ality%20rule%20and%20four%20exceptions.pdf Paolo S. Grassi and Daniele Calvarese, (1995)as quoted by Hanspeter Dietzi, Schweizerischer Bankverein, DER MONAT, Nov.1990, at 32.Published in: International Law Review, Vol. 7, pp. 329 – 372) Retrieved from the web from: http://www.google.ae/url?sa=t&rct=j&q=&esrc=s&source=web&cd=10&ved=0CEsQFjAJ&url=http%3A%2F%2Fwww.csnlaw.com%2Fpubblications%2Fsecondo.doc&ei=LQbrVJCJCdLsaObVgJAL&usg=AFQjCNEUTmx-VQ5YqfGjxj71Ka2_5VVZTg The Banking Ombudsman Scheme. (2012) A Banks Duty of Confidence. Retrieved from the Web from: https://bankomb.org.nz/news-andpublications/quick-guides/item/a-bank-s-duty-of-confidence Read More