The tension between bank secrecy and the combating of financial crime

Abstract

Financial crime has resulted in serious implications for the socio-economic fabric of South Africa. As an outcome, the duty of secrecy imposed on banking institutions has become more controversial. This is because it has become increasingly difficult to balance the interests of customers, who may be perpetrators or bona fide victims of financial crime, against the interests of society as a whole. The common law laid the foundation for the duty of secrecy and confidentiality imposed on banks in the interests of their customers. It is, however, acknowledged by the common law that the duty of secrecy is not absolute but is indeed subjected to limitations. Consequently, the duty may be limited when such limitation is in the interests of the public or the banking institution itself, when the law requires it and when consent for the disclosure of personal information has been given. The duty of secrecy subsists in the constitutional dispensation of South Africa and the fact that it can be limited has been incorporated into South African law. In this regard, the South African legal system acknowledges the common law principle that when limiting the duty of secrecy, there ought to be a ground of justification authorising such an invasion. Therefore, the existence of a statute permitting a limitation of the duty of secrecy, is sufficient cause to compel banks to disclose information concerning a client’s account in contravention of the duty of secrecy. One of the rights which are compromised when a bank voluntarily or under compulsion of law discloses private information related to a client’s account is the right to privacy contained in section 14 of the Constitution. However, it is acknowledged in section 36 of the Constitution that the constitutional right to privacy can be “limited in terms of law of general application to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom”. While the state guarantees an individual all of the rights contained in the Bill of Rights, the state holds a greater duty to protect the interests of the public. Therefore, a person’s right to secrecy and confidentiality cannot be interpreted with such strict legalism that it compromises the interest of the community at large. As such, when a customer of a banking institution is implicated in the perpetration of financial crime, they cannot rely on the duty of secrecy to absolve their accounting records, books and other personal information held by the bank from investigation.