Banks and your Privacy
System of banking seems to have evolved from the very inception since the currency was first time introduced, which ultimately became the medium of exchange. However, banking system that we have today is more as a result of concerted events that occurred since 14th century after Lambardy merchants established money markets in England and different laws were set in motion to not only protect the interest of customers but to also regulate the money markets.
By the start of 19th century commercial bank were established almost all across the world. After the First World War serious financial crises was observed and banking industry was seriously affected. World had realized the importance of banking and resultantly a First Financial Conference 1920 was held in Brussels in which 39 major countries participated. It was recommended that each country shall establish a Central Bank for itself with purpose to regulate the following:
- Regulate the monetary system in country
- Regulate the credit system in country
- to foster growth in the best national interest with a view to securing monetary stability
- fuller utilization of the country’s productive resources
In 1947, Pakistan having become a separate dominion did not have a State Bank for itself. The Leaders of the time fully understood that without a Central bank, a sound and effective banking system cannot be ensured in Pakistan which is important for progressive economy of Country. Thus in 1948, State Bank was established by virtue of State Bank of Pakistan Order, 1948. Within one year, Banking Companies (Control) Ordinance, 1949 was introduced by virtue of which not only the duties and obligations of banks were established but also the legal rights of customers dealing with banks were created. Later, Ordinance of 1949 was replaced by Banking Companies Ordinance, 1962, which as such is more comprehensive and detailed law to protect the rights of the customers engaged with the bank. Several duties were imposed on bank and its officials. All this was eventually done to attract public confidence in the banking system of country. One of the essential duty with the bank under the laws of Pakistan emanating since, is to maintain secrecy of customer information.
Bank duty to maintain secrecy of customer
Bank’s duty to maintain secrecy of customer’s information is not moral but legal one. Section 33A of the Banking Companies Ordinance, 1962 has imposed legal duty upon the bank and its officials to not to disclosed customer’s information to any person. In this regards State Bank of Pakistan has issued different Prudential Regulations to ensure that banks strictly comply the legal duty. It is a settled principle of law that where there is a duty, there is a right. It means that duty imposed upon bank eventually creates a legal right in favor of a customer. So in any case where private information of account holder / customer is disclosed, any loss or damage caused to the customer shall be repayable by bank for such breach. However, it is important to learn that such duty upon the bank though an essential one, is not absolute but a qualified duty. Bank can divulge personal information of its customers in certain circumstances.
Circumstances where bank can disclose information
Bank can disclose information of account holders in certain circumstances. These circumstances have been explained in Tournier Case [1924] 1 KB 461 as follow:
- Where disclosure is made under compulsion of law
- Where there is a duty to the public to disclose
- Where the interests of the bank requires disclosure
- Where the disclosure is made by the express or implied consent of the customer.
This principle has an effect in Pakistan and same has been applied by High Court of Lahore in A.D. Tahir Case cited as 2004 CLD 1680 Lahore. Lahore High Court based on the foregoing principle held that in case otherwise than in which you have given express or implied consent to disclosure of information to third party, your personal, private and financial information can still be disclosed by bank but such disclosure shall be either upon the orders of the court or where the law directs the bank to provide your information to Taxing Authorities or Law enforcement Agencies or where it becomes a matter of public importance to share that information and not otherwise. Your bank without your express or implied consent shares information in routine with following bodies or authorities:
When can Bank Share Your Personal Information with State Bank of Pakistan?
In order to protect the banking industry in Pakistan, State Bank established Electronic Credit Information Bureau (eCIB), the purpose of which is to develop a credit profile of all customers of bank. All the scheduled banks in Pakistan on weekly basis report in the prescribed manner the credit profile of their customers to eCIB of State Bank of Pakistan. The purpose of eCIB is to allow the bank to make informed decision while offering loan to customers. Regardless, that information is provided without your permission but its statutory requirement on the bank to disclose such information. Having said, that any loss that may be caused to you as result of wrongful information provided by the bank, you have the right to proceed against bank and also further your claim of damages.
When can Bank Share Your Personal Information with FBR?
Recently, by virtue of amendment in the Income Tax Ordinance, 2001, Section 165A and 165B where introduced. In terms of these amendments, banks are now under statutory obligation to report to FBR as such the highest Income Tax Authority in Pakistan certain transactions that take place in your account. For instance, a person containing particulars of cash withdrawals exceeding fifty thousand Rupees in a day and tax deductions thereon, a person aggregating to Rupees one million or more during each preceding calendar month or containing particulars of deposits aggregating rupees ten million or more made during the preceding calendar month, a person receiving profit on debt exceeding five hundred thousand rupees and tax deductions thereon during preceding financial year. Your bank will in the prescribed manner disclose this transaction to FBR.
When Can Bank Share Your Personal Information with Law Enforcement Agencies?
Your information may also be divulged by the bank to NAB, FIA and other law enforcement agencies in the Public Interest.
It is important for the bank in all above cases to supply accurate and correct information. Nevertheless, disclosure of information in circumstances other than above mentioned to any third-party, bank shall become liable for any loss or damage caused to customer. If you think your information has been disclosed to third person and you have been aggrieved by the act of illegal disclosure by your bank, there are several speedy forums where you can approach for redressal of your grievances.