5. banking secrecy

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  • 7/27/2019 5. Banking Secrecy



  • 7/27/2019 5. Banking Secrecy


    General rule

    Tournier v. National Provincial & Bank ofEngland

    - the bank disclosed the pltfs default in

    payment and also his attitude as agambler to two directors in the companywhere pltf work. Pltf was terminated fromwork.

    Held: Bank has a duty not to disclose theirclients affair and a/c; the bank was liablefor slander & has to pay damages to the


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    Bankers duty of confidentiality is not absolute - abank can legally disclose information about itscustomer:

    where the bank is compelled by law to disclose

    the information if the bank has a public duty to disclose the


    if the banks own interests require disclosure;

    and where the customer has agreed to the

    information being disclosed.

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    General rule

    S.97(1) of BAFIA- no director/officer (employee & CEO), external

    bureau, agent appointed by institution, all personswho have access to the records (eg. lawyers,

    auditors) can breach banking secrecy (give,produce, divulge, reveal, publish, disclose ormake record any information relating to affair ora/c of customer).

    -during or after the tenure of employment

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    Wako Merchant Bank (Spore) Ltd v. Lim Lean Heng [2003]5 mlj 233

    -the intention of the parliament to incorporate s.97 is toprotect a customers secrecy of his affairs and account

    Maju Holding SB v. Kamala Devi Ramadas [2003] 2 mlj 36

    - appellant entered into contract to buy share of IpmudaBhd. Appellant has cancel the contract when he found outthat respondent is not the actual owner of the shares.

    -the appellants application to disclose the respondents infowas set aside as it was contrary to s.97(1)

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    S. 96 OF BAFIA

    Protects the CB (BNM) and the minister in makinginvestigations, inspections, examinations, etc. butemphasizes that they cannot specifically enquire into the

    affairs of any individual customer of any licensed institution

    permit to investigate

    limit the area of investigation

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    S. 97(2) of BAFIA

    Where documents already lawfully available to thepublic from any source other than the licensedinstitution, so banking secrecy shall not apply eg.

    document from Msian Anti-Corruption Comm. Banking secrecy also does not apply to any info in

    the form of a summary or collection of info whereinfo relating to any particular institution or any

    particular customer cannot be ascertained from it. S.97(3) no further disclosure after breach

    of s.97(1)

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    S.98 of BAFIA Disclosure to CB, officers of CB, Advisory

    Panel or any person appoint by CB for theexercise of their powers or discharge oftheir duty.

    Disclosure to those rendering professionalservice to the CB - authorised in writing

    by CB to obtain info for the purpose of hisservices to CB

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    S.99 of BAFIA disclosure is permitted in thefollowing situations;

    a)Customer/personal representative gives writtenconsent to disclose the info

    Tan Lay Soon v. Kam Wah Theatre (MUF Bhd.,intervener) (1992) 2 MLJ 432

    Fact: P sue D for breach of contract on certain land.The land has been charged by D to a bank. P want

    the bank to disclose the amount owed under thecharge.

    Held: Bank has already commenced proceedings andobtained an order for sale, it had already disclosePs a/c in the proceeding; so did not breach duty ofsecrecy.

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    b)Customer is adjudged as a bankruptinside or outside Malaysia(RM30,000).

    c)The info is for a bona fide credit enquiry

    d) In criminal/civil proceedings betweenbank and customer or between bank andtwo or more parties making adverse claims to money in a customers a/c wherebank seek relief by way of interpleader.

    e) Bank is serve garnishee order

    f) To external bureau or agent appoint by

    bank with prior written consent of CB.

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    g) Disclosure is required or authorizedunder any other provision of BAFIA.

    h) Disclosure authorized under Federal law

    for police officer to investigate any offenceunder such law but limited to the a/c andaffairs of person suspected of the offence.

    i) Disclosure is authorized in writing byCB.

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    S.99(2) of BAFIA

    Disclosure for the purpose of proceeding in court to be held in camera secret btwn the court andthe parties

    S.99(3) of BAFIA

    Without consent of the court,

    Cannot publish the identity (name, add., photos) ofthe parties

    During proceedings or at any time after theproceedings concluded.

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    S.100 of BAFIA

    Banking secrecy cannot limit the powers conferredupon the h/ct by the Bankers Book (Evidence) Act1949 to prohibit obedience to an order made

    under the Act The power of H/Ct does not extend to allow the

    bank to give evidence outside of Msia

    Refer to cases:

    AG of Hong Kong v. Zauyah Wan Chik

    AG of Hong Kong v. Lorrain Esme Osman (1994) 3MLJ 480

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    APPEAL: (Per Gopal Sri Ram JCA) As s97 of the BAFIA was not expressed tohave extra-territorial effect, a disclosure

    of confidential information in the courts ofHong Kong made in contravention of itcould not found criminal liability inMalaysia. Therefore, the respondents

    would not be criminally liable if they wereto give evidence in Hong Kong upon thematters covered by the letters of request

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    For an alleged breach of confidence thatoccurred abroad to be actionable inMalaysia, it must first be actionable if the

    particular disclosure were made inMalaysia in the same circumstances inwhich it was made in the foreign country,and secondly the disclosure of the

    confidential information must not bejustifiable by the law of the country inwhich the alleged breach of confidenceoccurred.

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    S.101 of BAFIA Disclosure on examination by Relevant Overseas

    Supervisory Authority

    Books, account and transactions

    Representative office in Msia of a foreigninstitution or subsidiary/associate of foreigninstitution.

    Permission from CB

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    Disclosure By Compulsion of Law

    Bankers Book (Evidence) Act 1949

    S.4(2) bank officer shall give evidence

    verbally or with affidavit

    S.7(1) a party to the proceeding may

    exam and take a copy of notefrom bankers book

    Evidence Act 1950

    S.90C apart from s.90A & 90B, BB (evidence)Act 49 is also used as an evidence in anyprocedure

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    Evidence Act 1950

    -S90A - document produced by a computer, or astatement contained in such document, would beadmissible in any suit or proceeding as evidence

    of any fact stated therein.

    - The admissibility of the computer document ismade subject to the condition that the documentwas produced in the course of the ordinary use of

    the computer for that purpose.

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    - It can be proved by a certificate given by aperson responsible for the management of theoperation of the computer or for the conduct ofthe activities it was used for.

    - 90B allows the court to draw inferences from

    circumstances relating to evidence admissible undersection 90A, including the manner and purpose ofits creation and its contents, the purpose of its

    production in evidence, and the physicaleffectiveness of the computer, equipment andother devices used in creating the document,when evaluating the probative value of such


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    Companies Act 1965

    S.218 - winding up

    - disclosure of info for the purposeof proceeding

    Income Tax Act 1967

    S.80 Company Director has an access tothe documents

    Internal Security Act 1960 (repelled)

    S.76 police officer shall make a search at the bankpremise at any time get a copy of banking

    secrecy w/out any charges

    - Security Offences (Special Measures) 2012 Act


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    Kidnapping Act 1961

    - S7 -The Public Prosecutor may, order direct anybank in Malaysia not to pay any money out of a/cnor to pay cheques drawn on such bank accountfor a specified period not exceeding one month ifhe is satisfied that the money will be use forpayment of ransom

    - Any officer of a bank who complies with an order

    of the PP shall be relieved of any liability inrespect of the payment prohibited by such order.

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    A bank which fails to comply with an orderof the PP shall be guilty of an offence andliable on conviction to a fine not exceeding

    five thousand ringgit. S8 - PPs power to order inspection of

    books, accounts,receipts, vouchers orother documents.

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    Anti Money Laundering & Terrorism Act 2001

    Part III - disclosure is required to enable

    information sharing between competentauthorities and the regulated institutions.

    Part IV - disclosure is also critical to enable banks

    and other regulated institutions to comply withthe reporting requirements under the Act.

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    Dangerous Drugs (Forfeiture of Property)Act 1988 Part IV power of entry,search and seizure.

    The Whistle Blower Protection Act 2010(Act 711) Part III (Whistle Blower

    Protection) National Feedlot Centre case.

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    MM2H (Malaysia My 2nd Home).

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    Banking SecrecyAmerica

    The Bank Secrecy Act of 1970 ( or known asthe Currency and Foreign TransactionsReporting Act) requires financial institutions inthe United States to assist U.S. government

    agencies to detect and prevent moneylaundering.

    It requires financial institutions to keep records ofcash purchases of negotiable instruments, and

    file reports of cash purchases of these negotiableinstruments of more than $10,000 (dailyaggregate amount), and to report suspiciousactivity that might signify money laundering, taxevasion, or other criminal activities.

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    It is an implied term of the contract betweencustomers and their banks and building societiesthat these firms will keep their customersinformation (all the information that the bank has

    about the customer) confidential. consequences of a breach of confidentiality

    whether the customer has experienced a true(and reasonably foreseeable) financial loss; or

    the real extent to which the customer hassuffered distress, embarrassment, orinconvenience.

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    Swiss Banking Actof 1934

    banks are allowed to protect personal informationabout their customers, through the use ofnumbered bank accounts (a normal bank account

    where the name of the bank client is replaced bya number or a code word; the account holder isonly known to a restricted number of bankemployees and the name of the client does not

    appear in documents such as bank accountstatements.

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    the principle of bank secrecy is considered asprivate banking.

    It has been accused by NGOs and governmentsof being one of the main instruments of

    underground economy and organized crime, onlyhelp legalized tax evasion, money laundering .

    Under the principle of bank secrecy, privacy isstatutorily enforced, with Swiss law strictly

    limiting any information shared with third parties,including tax authorities, foreign governments oreven Swiss authorities, except when requestedby a Swiss judge's subpoena.

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    only permits a bank to share informationwith others in cases of severe criminalacts, such as identifying a terrorist's bank


    Any bank employee violating a client'sprivacy is punished quite severely.

    Many offshore banks, located in taxhavens such as in the Cayman Islands andPanama, also have strict privacy laws.

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    Tax heaven means:

    -nil or nominal taxes;

    -lack of effective exchange of tax information withforeign tax authorities;

    -lack of transparency in the operation of legislative,legal or administrative provisions;

    -no requirement for a substantive local presence;and

    -self-promotion as an offshore financial center.

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    An offshore bank is a bank located outside thecountry of residence of the depositor, typically ina low tax jurisdiction (or tax haven) that providesfinancial and legal advantages. These advantages

    typically include: greater privacy (see also bank secrecy, a

    principle born with the 1934 Swiss Banking Act)

    low or no taxation (i.e. tax havens)

    easy access to deposits (at least in terms ofregulation)

    protection against local political or financialinstability