Banking Law Confidentiality - Essay Example

This rule was primarily established to protect customers' right to privacy and enhance their security. It should be noted, however, that the banker's duty of confidentiality is not absolute or impenetrable. In the English Common Law, safeguards, thru the Tournier principles, are provided in order to ensure that obstruction of justice is forestalled. Based on the case of Tournier v National Provincial and Union Bank of England (1924), a bank can legally disclose information about its customer, conditions of which are as follows ("The banker's duty of confidentiality to the customer"): Many argue that client confidentiality has many loopholes and impedes investigation conducted by the police and other public bodies since the right of these administrative agencies to order disclosure is limited.

This duty is also criticized for acting as a "cloak" for criminal activities (Cranston). Overriding client confidentiality without court order can only be obtained for the purpose of detection of crime or the apprehension or prosecution of offenders. The standard procedure for obtaining information under this directive is through a letter addressed to the bank's Controller of Information. Should the Controller of Information deem that the grounds mentioned are unsatisfactory then the bank is not obligated to disclose information about its customer ("Legal Update").

However, this does not provide a strong justification as to how the duty of confidentiality as a form of interference in pursuing administrative tasks. This is because a court order may be obtained for the required disclosure. Provided that the local court, in view of the balance of probabilities, deems that a criminal offence has been committed, then a court order is issued for the release of bank information (Cotterill).This procedure is also a form of check on the potential abuses of power by police, investigators, regulatory agencies and other government officials.

This has happened previously in Switzerland during the Nazi regime. Nazi agents bribed bank employees to violate the confidentiality of bank clients. When the identities of depositors were revealed, the agents demanded their assets under duress. The agents threatened that the depositors' relatives in Germany would be reprehended (Cranston). To prevent this and other forms of abuse of power and corrupt practices from affecting the banking system and compromise the security and rights of clients, consent from the judiciary through the release of court orders is required.

Furthermore, the English Common Law recognizes that disclosure of client information, where the Tournier principles do not apply, may result in serious losses specifically if the customer is running a business. This is because business information is deemed to be commercially sensitive based on its market value (Cranston). It may also cause distress, embarrassment or inconvenience of customers. In such