Where the law still provides protection for confidentiality, the holiest of holies has always been the duty of our banker to keep our banking affairs secret. Enshrined in banking tradition, the basic principles were accepted and restated by the Court of Appeal in the case of Tournier in 1924.
In 1989, however, the government's Jack Committee on Banking reported that the many statutory exceptions to this rule amounted to a 'massive erosion' of it. The government replied, rather navely, that 'these exceptions affect only . . . customers who use the banking system for dishonest purposes . . . the government only enacts such exceptions when necessary and where the benefits outweigh any possible disadvantages'.
The reality seems rather different. Until the Drug Trafficking Offences Act 1986, statutory disclosure was permitted only rarely and then with strict safeguards. For instance, disclosure under the Taxes Management Act may be ordered when a bank customer is suspected of tax evasion - but only when a Commissioner of Inland Revenue has ruled that a proper case has been made for disclosure. This requires real evidence against the customer and prevents a 'fishing expedition' by the Revenue acting only on suspicion.
Drug trafficking was said to be a special case, where there was a clear need to track down offenders and prevent money-laundering. The Act made it an offence for a bank official to handle a transaction he or she regarded as suspicious without reporting it to the police. This was a startling inroad into banking confidentiality and left serious questions unanswered. What amounts to suspicion? How can a bank clerk know that a doubtful transaction relates to drugs, which must be reported, as opposed to any other crime, which at present need not?
The Prevention of Terrorism Act 1989 again contained provisions against money laundering and created offences for those who took part in financial transactions relating to terrorism as defined by the Act. Such people would again be guilty of an indictable offence if they had reasonable grounds to believe that funds being transferred related to terrorism, unless this were 'connected solely with the affairs of the UK other than Northern Ireland'. Welsh-nationalist and animal-rights terrorists, both known to have planted bombs, were excluded for reasons never clarified. Again, the government promised no extensions.
Now we have the current Criminal Justice Bill, which will be debated in its second reading today. This contains an extension to the erosion of banking confidentiality so Draconian that it makes all that has gone before seem as nothing. If it is passed into law, an official of a bank, building society, stockbroker's or whatever who is 'concerned in an arrangement' and suspects that his customer is 'a person who is or has been engaged in criminal conduct or has benefited from criminal conduct' and who fails to report it, is guilty of an indictable offence.
But, and here's the rub, 'criminal conduct' is defined, apart from drug trafficking and terrorism, as 'any offence triable on indictment'. This definition covers all forms of serious crime, including tax evasion. This may be just as reprehensible as other crime, but it is far more difficult to detect. How is the bank official to do so? If he merely suspects his customer of not paying his taxes, he faces the possibility of 14 years' imprisonment. The only help he will have is the operation of the account itself. Where this is erratic, there may be many reasons for it.
Many officials will take the easy (and safe) way out: reporting every irregularity that might conceivably relate to crime of any kind. The financial affairs of many innocent people will be investigated needlessly. It will mean the days of Big Brother are truly here. 'Banking confidentiality' will become a mockery. The protection it has always afforded from prying strangers will be a thing of the past.
It is all too easy, but quite wrong, to oblige bank and other officials to detect crimes (a skill for which they have no training), and so to jeopardise our right to confidentiality. Today's second reading of the Bill affords a last opportunity for amendments to be made.
The author is banking consultant to Watson, Farley & Williams, solicitors, and a former chief legal adviser to Lloyds Bank, but the views expressed are his own.Reuse content