As laudable and mind boggling as the recoveries made vide the whistleblowers policy by the FGN over the last couple of months, it has undoubtedly eroded some very sacred some constitutional and contractual rights of the citizens, especially in the absence of a well defined framework. One of such right is the right to maintain privileged information under the banker-customer relationship. The scope of this article is with respect of the disclosure made by financial institutions in the face of fiduciary duties to their customer and the relevant justification. The extent Banker-Customer relationship was expounded by Lord Alkin LJ in the Locus Classicus of TOURNIER v NATIONAL PROVINCIAL & UNION BANK OF ENGLAND (1924) 1 KB 461 wherein he describes the basic duty of confidence in his judgment as follows:
“ it clearly goes beyond the state of the account, that is whether there is a debit or a credit balance, and the amount of the balance. It must extend at least to all credit balance that go through the account, and to the securities, if any given in respect of the account, and in respect of such matters it must, I think extend beyond the period when the account is closed, or ceases to be an active account…. I further think that the obligation extends to information obtained from sources other than the customers actual account, if the occasion upon which the information was obtained arose out of the banking relations of the bank and its customers, for example, with a view to assisting the bank in coming to decisions as to its treatment of its customers…”
The principles around confidentiality have continued to evolve, in most cases at the expense of the customer, but often to the benefit of the public. After the global financial crisis, politicians in most jurisdictions have resorted to alternative means of securing their funds in a bid to reduce the levels of bank secrecy. Likewise in Nigeria upon the pronouncement of the present administration anti-corruption drive and mandatory implementation of some KYC (Know Your Customer) policies such as the unified Bank Verification Number (BVN), persons and corporations have resorted to ingenious and unscrupulous methods of warehousing funds as an alternative to avoid disclosure. The discovery in a rural town in Kaduna State purportedly belonging to the former GMD of NNPC is a case in point.
Consequently, statutory exceptions have increased in most national laws where public policy is seen to override confidentiality all in a bid to prevent money laundering, tax invasion and even terrorism funding. Contrariwise, in the UK most financial institutions are subjected to legislation designed to protect individuals with regard to the processing and transfer of personal data. The first EU wide directive was passed in 1995 and was implemented in England by the Data Protection Act 1998. A new general Data Protection Regulation is due to come into force in the EU in 2018.
In NOVOSHIP (UK) v NIKITIN (2014) AER, the English Court of Appeal held that banks may enter into confidentiality agreements or undertakings with customers under which express contractual obligations arise. However, regulatory and legal requirements are placing different obligations on banks to request and retain some information and, at the same time, not to keep or misuse information. Accordingly, banks have to try to reconcile a number of different rights and obligations in their day-to-day dealings with their customers and meeting the obligations imposed by law.
It is pertinent at this juncture to give a context with the same happenings in Nigeria with respect to the operations of the EFCC and other sister agencies that has created this conundrum. It is now common knowledge that the EFCC upon receipt of a tip-off from a whistleblower causes a mere letter to the bank demanding the disclosure of sensitive data belonging to the customer and as the cases have revealed that the banks quickly obliges them for fear of the unknown. The position of the Nigeria law with respect of Mandatory disclosure can be found in Section 10(6) of the Money Laundering (Prohibition) Act, 2004 provides thus:
“ …when it is not possible to ascertain the origin of the funds within the period of stoppage of the transaction, the Federal High Court may, at the request of the agency, or other person or authority duly authorized in that behalf, order that the funds, accounts or securities to in the report be blocked” (underlining mine).
Section 34 of the EFCC Act also provides thus:
“ Notwithstanding anything contained in any other enactment or law, the chairman of the commission or any officer authorized by him may, if satisfied that the money in the account of a person is made through the commission of an offence under this Act and/or any of the enactments specified under Section 7(2)(a) to (f) of this Act, apply to the court ex parte for power to issue an order as prescribed in form B of the schedule of this Act, addressed to the Manager of the bank or any person in control of the financial institution of designated non-financial institution where the account is or believed by him to be or the head office of the bank, other financial institution or designated non-financial institutions to freeze the account” (underlining mine).
Within the context of these sections, it is the writer’s contention that the law clearly sets out a condition precedent before such disclosures can be validly made by the bank, which is by presentation of an order of court. A letter from the Chairman of EFCC or any authorized agent cannot with respect suffice in the place of an enrolled order. The Supreme Court in Nigercare Development Co. Ltd v Adamawa State Water Board (2008) 9 NWLR (Pt 1093) 498, at 520 and 521 Para E & C respectively defines a condition precedent as one which delays the vesting of a right until the happening of an event.
It is the writer’s further contention that the concomitant effect of the foregoing is that the banks are under no legal obligation to make disclosures or place a PND on a customers account without an order of court to that effect. The position was enunciated in A.C.B INTERNATIONAL BANK PLC v ADIELE (2013) 3 BFLR pg 30 at 42-43 thus:
“ that inequitable and iniquitous decision was effected by the appellant and amazingly without authorization from the respondent or any court order, dipped in and froze the bank account of the respondent with her and appropriated the money in the respondent saving account. This, is to say the least is arbitrary and a naked abuse of power”
Conceivably the law creates some exceptions for disclosure which will be treated anon, albeit so, the disclosure compelled by the EFCC and other sister agents towards forfeiture of an individual asset contrary to the prescribed procedure by law is illegal and unconstitutional. It will amount to ultra vires its powers for such forfeiture to be embarked by the commission, when the party so alleged to have either laundered monies or acquired monies that are proceeds of crime has not been made a party in any proceeding in court, affording him an opportunity to the order directing the mandatory disclosure. In DIAMOND BANK LTD v GENERAL SECURITIES & FINANCE COMPANY LTD (2008) LPELR- 4035 CA thus:
“Surely, a man deserves to be confronted with his crime before he is condemned. Indeed, by the provisions of Section 36 of the 1999 Constitution, he will not only be notified, he is entitled to be heard after due preparation. He is not only to be informed and confronted with the allegation; he is entitled to be a part of the process of proving the said allegation and is entitled to state his bit before he is condemned”
This position was further reinforced by the decision in FIDELITY BANK PLC v BAYUJA VENTURES LIMITED & ANOR (2013) 1 Banking & Finance Law Report pages 134-135 the Court held thus:
It amounts to nothing more than a resort to self-help, which is unacceptable, and which amounts to lawlessness and brigandage for the appellant to unilaterally freeze the account of the respondents. No one is allowed to resort to self help if not we shall all descend into a state of anarchy” (underlining mine).
On the strength of the foregoing, the writer posits that it is incumbent on the banks to justify the source of the authority, before making disclosures or proceeding to place a lien or PND on a customer’s account. The confidentiality doctrine entails that a bank cannot nilly willy divulge sensitive customer data without the proper authorization, in this case a valid order of court expressly directed at the bank to treat the customer’s account.
The Tournier decision (supra) creates some justifiable exception for disclosure by financial institution, which will be treated in subsequent bulletin of this column, albeit so, the methodology employed by the EFCC is unjustifiable as adjudged by judicial decision and certainly do not fall within the purview of exceptions, as it will be of public interest if the rule of law is conformed with to all and sundry before disclosure for the so-called “public good”. Therefore financial institutions being a rubberstamp at the wave of a mere letter or without being satisfied that the due process of law has been conformed with, gradually kill the sacred contractual doctrine of confidentiality at the behest of the authorities.