ST.

AUGUSTINE UNIVERSITY OF TANZANIA

School of Law

The Role of Bankers’ Duty of Secrecy in Promoting Banker-Customer

Relationship

A Dissertation in Partial Fulfillment of the Requirements for the Award of the Degree of

Bachelor of Laws of St. Augustine University of Tanzania

KUBOJA, Joram

LLB 26786

2015
 COPYRIGHT

This dissertation is a copyright material protected under the Berne Convention, the Copyright

and Neighbouring Rights Act, 1999 and other international and national laws. It may not be

reproduced by any means, in full or in part, except for short extracts under fair use, for

scholarly work only, without the written permission of the Deputy Vice Chancellor for

Academic Affairs of St. Augustine University of Tanzania, on behalf of both the author and the

university.

© Kuboja Joram, 2015

ii
 ABSTRACT

The law of banking is concerned not only with the legal framework of banking business but

also with the peculiar legal relationship which subsists between bankers and their customer.

Among other things, the confidentiality or secrecy is one of the most eminent features which

connect and distinguishes the relationship between a banker and a customer.

This study examine the role of bankers’ duty of secrecy in promoting banker-customer

relationship. The study goes further to discuss the confidential nature of the banker-customer

relationship as well as ascertaining the challenges and flaws encountered by banker in

adherence of this fundamental principle of confidentiality.

Chapter one provides for general introduction of the study. It covers the general introduction of

the research, background to the study, statement of problem, objectives of the study,

significance of the study, research methodology and scope of the study.

Chapter two ascertain the theoretical and legal framework of the study. It covers for historical

background, legal and institutional framework governing duty of secrecy in Tanzania and

defines the key terms of the research.

Chapter three describe the nature and quality of duty of secrecy in Tanzania, the role or

significance of duty of secrecy and provides for challenges that bankers are facing in relation to

adherence of duty of secrecy.

The last chapter covers conclusion and recommendations. It makes the overall survey of the

arguments and analysis made in the proceeding chapters. It ends up by providing legislative

solution which will be useful on providing legal solutions to the problems that bankers are

facing in relation to duty of secrecy.

iii
 CHAPTER ONE

GENERAL INTRODUCTION

1.1. INTRODUCTION

The nature of relationship subsists between banker and customer is a contractual relationship

whereby on one side, both parties are vested rights and obligations or duties over the

agreement entered, while in other side, the parties agreed to fulfill obligations vested upon

them. Without regard a kind of relationship subsist between the banker and customer, bankers’

duty of secrecy,1 is a fundamental aspect due to the fact that, in Tanzania despite of being an

implied duty, the duty has a legal basis compared to other duties vested to the banker, therefore

a breach of this duty is not only a breach of a contract but also a breach of law although the

duty is considered to be not absolute inter alia. Violations of the duty may in one way or

another endanger the relationship between the banker and customer, also claims concerning the

violation of duty of secrecy emerge a question of quality and effectiveness of bankers duty of

secrecy in promoting banker-customer relationship.

1.2. BACKGROUND OF THE STUDY

Before nationalization of banks in 1967, the law that governed the banking business in the

country was the Banking Ordinance.2 Later on there was enactment of the Banking and

Financial Institution Act of 19913 which aimed on correcting most of the inadequacies and

strengthen the position of the Bank of Tanzania as the Supervisory Authority. The banker duty

of secrecy was provided under Section 36 of the Act.

In 2006 the Act was repealed and replaced by the new law, the Banking and Financial

Institutions Act, 2006. The duty of secrecy as provided in Section 48 of the Banking and
1
The term "secrecy" is also referred as "confidentiality" therefore the terms are used as synonyms.
2
CAP 430 of the Law of Tanzania.
3
Act No. 12 of 1991

1
Financial Institutions Act, 2006 (CAP 342)4 require the banker to do not disclose any

information relating to its customer except as otherwise required by law, the practice and

usages customary among bankers.

This study aims to provide for implications upon the duty to secrecy and the role of bankers’

duty of secrecy in promoting banker-customer relationship. Also the study will help to

understand how bankers’ duty of secrecy plays a role in promoting banker-customer

relationship.

1.3. STATEMENT OF THE PROBLEM

While in Tanzania and other common law countries the duty of confidentiality of banks is a

strictly enforced requirement, it remain to be not absolute since it is subjected to limitations. In

a modern context, there is a conflict between the need for confidentiality and the need for

disclosure of confidential information for the interest of the banks, customers, and the public.

Recently, economic factors have been given great attention with respect to policy

considerations and in certain circumstances, the duty of secrecy has been treated as having less

importance than the country's interests.

While focusing on the conflict between banking confidentiality versus the disclosure, the study

put more emphasis on significance and role of banking confidentiality in promoting banker-

customer relationship against the disclosure because the banks need be careful and wise when

striking a balance between these two spectrums as any mistake by banks would be costly in

respect to relationship with their customer, thus the need to disclosure emerges a question of

quality and effectiveness of duty of confidentiality in promoting banker-customer relationship

and in this respect the study aims on examine the role of bankers’ duty of secrecy towards

promotion of the banker-customer relationship.

4
Act No. 5 of 2006

2
1.4. OBJECTIVES OF THE STUDY

1.4.1. General Objective

To find out the role of bankers’ duty of secrecy in promoting banker-customer relationship.

1.4.2. Specific Objectives

i) To analyse legal implications of the bankers’ duty of secrecy in promoting banker-

customer relationship.
ii) To understand different types of banker-customer relationship upon which the duty can

be invoked.
iii) To find out challenges and flaws of banker’s duty of secrecy in promoting banker-

customer relationship.

1.5. RESEARCH QUESTION

i) What are legal implications of the bankers’ duty of secrecy in promoting banker-

customer relationship?
ii) What are types of banker-customer relationship upon which the duty of secrecy can be

invoked?
iii) What are challenges and flaws encountered by bankers in relation to duty of secrecy

and promotion of banker-customer relationship?

1.6. SCOPE OF THE STUDY

This study focuses on examining the role of the duty of secrecy toward promotion of banker

and customer relationship at Nyamagana District in Mwanza Region.

1.7. SIGNIFICANCE OF THE STUDY

The study examines the role of bankers’ duty of secrecy toward the promotion of banker-

customer relationship and this has significance to researcher not only on analyzing the

3
implications of duty of secrecy toward the banker-customer relationship but also on describing

how the duty of secrecy promote the relationship between the baker and customer.

To the bankers the study has significance because it is a mouth-piece to express challenges and

flaws they encountered in relation to adherence of the duty of secrecy.

To the customers the study has significance because it increase awareness of many customers

who are ignorant of the bank’s practice and the most affected party, to understand their rights

and duties under the principle of confidentiality in banking business.

To the government the study has significance because it describe loop-holes (lacunae) of laws,

regulations and principles established to govern the issue of bank confidentiality. The study

also prescribe the measures to be taken by government on ensuring effective protection of

customer information under the banker duty of secrecy.

1.8. RESEARCH METHODOLOGY

1.8.1. Determination of Type of Research

The research is Qualitative Research which aim to examine the role of bankers’ duty of secrecy

in promoting banker-customer relationship.

1.8.2. Research Design

The researcher employ the descriptive and field research designs. The researcher collect some

part of the data at the field area and using the data acquired to describe characteristics of a

phenomenon.

1.9. SAMPLING DESIGN

1.9.1. Sampling Technique

4
The researcher used the simple random technique in conducting sampling. The random

technique is used in order to select at one/two representative in each visited bank/office.

1.9.2. Sampling Size

The research sample size based on the randomly selection of respondents (according to my

own judgement) but more than three (3) different banks were consulted in order to enable

researcher to get useful information as per focus on the topic or any information that is co-

related to the study

1.9.3. Sample Area

The research has been conducted among banks located at Nyamagana District in Mwanza

Region.

1.10. DATA COLLECTION

During the research, the researcher use both primary and secondary methods of data collection.

1.10.1. PRIMARY DATA

1.10.1.1. Interview

Both structured and unstructured interview applied in obtaining information from sampled

respondent in the field. Direct interviews were made in proving the hypothesis regarding the

practice and usage of bankers toward duty of secrecy. This tool was preferred because it

accorded the interviewer with an opportunity to have discussions with the subjects and get

more details for proving the hypothesis of this study.

1.10.1.2. Observation

Observations is employed as the second field research method to obtain more details for

establishing the legal and practical aspects concerning the role bankers’ duty of secrecy in

5
promoting banker-customer relationship. Observations is important because the researcher has

to use some banking offices as the centre of his study.

1.10.2. SECONDARY DATA

1.10.2.1. Library Search

The library search method was conducted to collect relevant data to the subject matter of the

research from the library of St. Augustine University of Tanzania located in the area of the

study. The data acquired includes published and non-published materials in form of books,

journals, articles, reports, papers and case laws.

1.10.2.2. Internet Sources

The internet had been used to access online information from various websites in order to

obtain all available legislations and relevant material concerning the subject matter.

1.11. DATA ANALYSIS

Both primary and secondary data which are to be collected in this study will be analyzed by

using presentation of data based on qualitative data analysis.

6
 CHAPTER TWO

CONCEPTUAL AND THEORETICAL FRAMEWORK

2.1. INTRODUCTION

The decision of the Court of Appeal in Tournier vs. National Provincial and Union Bank of

England,5 recognised confidentiality as a fundamental pillar of the banker-customer

relationship, existing as an implied term in the banker-customer contract. Tournier case is

generally taken as the starting-point of the history of the banker’s duty of confidentiality.

However there were reported cases concerning banker-customer confidentiality prior to 1924

and prior to Tournier case.6

2.2. BANKER’S DUTY OF SECRECY UNDER THE COMMON LAW

The banker duty of secrecy under the common law is always categorized into two (2): -

i) Banker’s Duty of Secrecy before the Tournier Case or Prior to 1924

ii) Banker’s Duty of Secrecy in Tournier Case

2.2.1. Banker’s Duty of Secrecy Prior to 1924

The earliest reported case concerning the specific issue of confidentiality within the banker-

customer relationship is that of Tassell vs. Cooper.7. In this case a plaintiff, Tassell, a farming

bailiff of Baron De L’Isle and Dudley received a cheque for £180 following the termination of

his employment with the Baron in respect of wheat sold by the plaintiff, but belonging to the

Baron. The Baron, upon terminating Tassell’s visited the London & County Bank in order to

5
[1924] 1 K.B. 461
6
Robert Stokes, The Genesis of Banking Confidentiality, The Journal of Legal History, Vol. 32, No. 3,
Routledge Publisher, 2011. pg. 279
7
(1850) 9 CB 509

7
gain access to Tassell’s account book. The branch manager declined, with the caveat that if the

Baron sought, and gained, the permission of the head office of the bank, he would allow access

to the account book. Baron acquired the permission of the head office and thus he was able to

view the account details of the plaintiff.

The plaintiff, brought a claim that the defendant, Cooper, a public officer with the London &

County Bank, was not to expose or disclose the state or particulars of the said account so to be

kept by them as aforesaid, without the licence or authority of the plaintiff, to any person or

persons, except the plaintiff and the clerks, agents, or servants employed by the said company

in their said business or unless compelled by due course of law so to do.8

The court, however, was not persuaded by the claim that a banker owes a duty of

confidentiality to his customer, with Maule J suggesting that the existence of such a duty was a

'mere allegation of law',9 and that the probability was that the claim was not sustainable. 10 It is,

however, unfortunate that the court was ultimately not required to determine whether such a

duty of confidentiality in fact existed as contended by counsel for the plaintiff.

The next reported case where the judiciary had to consider any duty of confidentiality between

a banker and his customer was that of Foster vs. Bank of London.11 In this case the Bank of

London disclosed the status of Foster’s account to a third party, De Roo & Co., a fellow

customer of the bank and also a creditor of the plaintiff. De Roo & Co. presented a cheque (for

£250) and a bill of exchange (for £198) drawn in their favour by Foster, only to be informed by

the defendant bank that there were insufficient funds available to meet the cheque and bill.

8
ibid, at 514.
9
ibid, at 529.
10
ibid, at 532.
11
(1862) 3 F. & F. 214

8
Upon pressing, De Roo & Co. discovered the amount of the deficit, which was relatively

insignificant in relation to the value of the cheque and bill, and thus inquired as to whether, if

they themselves paid money into the account of the plaintiff, they could draw on the cheque

and bill. Upon being informed that this would be possible, De Roo and & Co. paid the

necessary sum of £104 into Foster’s account, and both the cheque and the bill were honoured.

These payments left Foster unable to meet other claims in respect of his business, and he was,

as a result, financially ruined.

The plaintiff (Forster) brought claims to a court, that the Bank of London had wrongfully

disclosed to a third party the state of his account and second, that the bank had rendered him

false account statements.12

The court in deciding whether there was existence of the duty of a banker in no way to disclose

the state of his customer’s account, Erle CJ suggested that in the situation, where a bank is

presented with a cheque in respect of which there are insufficient assets available to meet it, the

bank ought to say merely ‘not sufficient assets’ and reveal nothing more regarding the state of

the customer’s account and that he was not aware of any law against that and consequently

found in favour of the plaintiff.” 13

Later on, the duty of confidentiality between a banker and his customer was discussed through

the decision and reasoning of the court in case of Hardy vs. Veasey.14 In this case the plaintiff

had an account with the defendant bank, in respect of which the plaintiff was overdrawn. The

bank manager was presented with cheques which there were insufficient funds to honour.

Concerned, the bank manager consulted the plaintiff, who promised to credit his account that

same day.

12
ibid, at 216
13
ibid, at 217
14
(1868) LR 3 Ex. 107

9
On the strength of this promise, the bank manager paid cheques presented to him during that

day, although unfortunately, the plaintiff did credit his account that day but the amount credited

was still insufficient to honour the outstanding cheques. The bank manager then, without the

consent of the plaintiff, communicated the state of the plaintiff’s account to a third party (Local

Money lender), with a view to obtaining financial assistance for the plaintiff.

The plaintiff contended that the bank had agreed (as part of the contract) never to disclose

information regarding the account, unless the bank had reasonable or proper justification for so

doing. In this case Kelly CB observed upon the existence of legal duty of confidentiality

between banker and customer but unable to comment on whether the duty is existed or

otherwise, although allowed an action to be maintained by a customer against his bankers.15

In making a comparison between both cases prior to 1924, it is understandable that the court in

Hardy case felt an existence of duty of confidentiality owed by a banker to his customer though

recommended that the area was one well worthy of consideration, 16 whereby the other two

cases prior to Hardy case denied the existence of such a duty. Hardy case made early

foundation to a new and developed principles concerning the duty of secrecy in common law.

2.2.2. Banker’s Duty of Secrecy in Tournier Case

The facts briefly the plaintiff was a customer of the defendant bank. A cheque was drawn by

another customer of the defendant’s in favour of the plaintiff who instead of paying it into his

own account endorsed it in favour of another person who had an account at another bank. On

return of the cheque to the defendant the manager enquired from the other bank to whom this

cheque had been paid and the information given was that it was paid to a bookmaker. That the

information was disclosed by the defendant to a third party.

15
ibid, at 110
16
ibid, at 111

10
The plaintiff brought an action against the bank and the holding of the court was that, the

disclosure constituted a breach of the defendant’s duty of secrecy to the plaintiff although the

information was acquired not through the plaintiff’s account but through the drawer of the

cheque. Also the information was none the less acquired by the defendants during the currency

of the plaintiff’s account and in their character as bankers.

It was held in that case that; it is an implied term of the contract between a banker and its

customer that the banker will not divulge to third persons without the consent of the customer

express or implied either the state of the customer’s account or any of his transactions with the

bank or any information relating to the customer, 17 acquired through the keeping of the

customer’s account unless the banker is compelled to do so by order of a court, or the

circumstances give rise to a public duty of disclosure or the protection of the banker’s own

interests require disclosure. The classic statement is by Bankes L.J who stated that:-

“In my opinion it is necessary in a case like the present to direct the jury what
are the limits and what the qualifications of the contractual duty of secrecy
implied in the relation of banker and customer. There appears to be no
authority on the point. On principle I think that the qualifications can be
classified under four heads:- 18
(a) Where disclosure is under compulsion by law;

(b) Where there is a duty to the public to disclose;

(c) Where the interests of the Bank require disclosure;

(d) Where the disclosure is made by the express or implied consent of

the customer.

2.3. BANKER’S DUTY OF SECRECY IN TANZANIA

17
Tournier Case, Judgment of Scrutton L.J at pg. 479
18
ibid, Judgment of Bankes L.J at pg. 472

11
It is well known that the origin and the basis of the banker duty of confidentiality is attributed

to Common Law from the general principles laid down in the case of Tournier vs. National

Provincial and Union Bank of England. In this regard the banker duty of secrecy in Tanzania is

rooted under that of the Common Law as established in a case of Tournier due to the fact that

Section 2 (3) of the Judicature and Application of Laws Act,19 provides for application of

common law, the doctrines of equity and the statutes of general application by the High Court

in exercises its jurisdiction in both civil and criminal matters.

In Tanzania the recognition of fundamental duty of confidentiality was provided in a case of

Intercom Services Limited & Other vs. Standard Chartered Bank Limited.20 In this case

Visram J., found the bank guilty of violating its duty of confidentiality. He discussed the law at

great length and analyse the banker’s duty of confidentiality and the duties of a collecting bank

and to an extent the duties of a paying bank in as far as the cheque is concerned. Visram J

holding the decision of the Tournier case that it is an implied term of that contract that the

banker will not divulge to third persons.21

2.4. LEGAL FRAMEWORK

Soon after independence the law that governed the banking business in the country was the

Banking Ordinance. Later on there was enactment of the Banking and Financial Institution Act

of 1991 which aimed at correcting most of the inadequacies and strengthen the position of the

Bank of Tanzania as the Supervisory Authority. The duty of secrecy under the Act was

provided under Section 36 of the Act.22

19
CAP 358 R.E. 2002
20
[2002] 2 E.A 391
21
ibid, at 441
22
See Section 36 of the Banking and Financial Institution Act of 1991

12
Currently, the banking system in Tanzania is governed by The Bank of Tanzania Act, 2006

hereinafter referred as BOT Act,23 and The Banking and Financial Institutions Act, 2006

hereinafter referred as BAFIA.24 The Bank of Tanzania Act established the Bank of Tanzania

(BOT) as a body corporate functions as central bank and having licensing, regulatory and

supervisory powers.25 The BOT operates as a banker and act as a fiscal agent of the

government with powers to accept deposit and effect payments for the account of the

Government or public authority.26 The Act provides for fundamental duty of secrecy by the

banker’s under Section 16 of the Act.27

The Banking and Financial Institutions Act, 2006 is legislation enacted to regulate functions of

banks and financial institutions operates and conducting banking business within a country.

The Act provides for the banker duty of secrecy under Section 48 of the Act.28

The two (2) legislations, this means that the BOT Act and BAFIA are the legislations which

directly provides for and deals with the duty of secrecy of bankers in sense that the legislations

prohibit disclose of any information relating to its customer except or otherwise required by

law or the practice and usages customary among bankers. The Acts do not cover other

qualification for disclosure which are provided under the Tournier case which means the

consent of customer and public duty qualifications.

Other legislations which indirectly deal with the banker duty of secrecy are such as the

Evidence Act, the Income Tax Act, the Prevention of Terrorism Act, 2002 etc. Most of these

legislations provides for disclosure of customer information under the public interest or duty

qualification.

23
Act No. 4 of 2006
24
Act No. 5 of 2006
25
See Section 4 of the Banking and Financial Institutions Act, 2006
26
See Section 31 of the Bank of Tanzania Act, 2006
27
See Section 16 of the Bank of Tanzania Act, 2006
28
See Section 48 of the Banking and Financial Institutions Act, 2006

13
2.5. INSTITUTIONAL FRAMEWORK

Different institutions are vested power to ensure the duty of secrecy is observed by the bankers

and financial institution within the country. These institutions includes the followings:-

2.5.1. Bank of Tanzania

The BOT is a main public institution which vested with supervisory power to all banks and

financial institutions within the country. This means that the BOT is a body which its functions

is to ensure the laws, regulations, principles, rights and obligations (duties) under the banking

business are conformed and observed by the bankers and financial institutions which including

the duty of secrecy in banking business.29

2.5.2. Tanzania Institute of Bankers

The Tanzania Institute of Bankers (TIOB) is a body established by the bankers to act as a

regulatory and disciplinary body for the banking profession and to promote professional

integrity and ethics among its corporate and individual members and therefore to set standards

for the banking profession.30 The TIOB enacted a code known as the Code of Ethics for

Bankers as well as the Guidelines on Disciplinary Procedure for Bankers.

The TIOB requires existing Codes of Conduct or Staff Regulations and Standing Orders

applied by all corporate members to be consistent with the Code of Ethics for Bankers. In order

to ensure the enforcement of the Code all corporate members in their capacity are required to

report to TIOB any breaches committed by individual members as employers of bank staff. The

Code was enacted on adherence of the following fundamentally principles:-

1. Integrity 2. Confidentiality 3. Loyalty 4. Legality

29
See Section 31 and Section 33 of the Banking and Financial Institutions Act, 2006
30
TIOB was established in 1993 under the Companies Act (CAP 212) of the laws of Tanzania. The Institute has
39 corporate members who are banks incorporated to conduct business in Tanzania.
visit http://www.tiob.or.tz/index.php/archives/corporated-member-s-list accessed at 17 December, 2014

14
Generally, the principles in the code restrain members of the institute from using confidential

information for personal gain or abuse of office as well as restrain members from divulging

information to third parties except with the consent of the employer or customer, or where it is

required by law or in conformity with public duty arising in the proper course of business.

2.6. DEFINITION OF TERMS

2.6.1. A Bank / Banker

Frequently the two words "bank" and "banker" are used interchangeably without a careful

meaning of what they stand for. A "Bank" means a general contribution received from the

public, in exchange for which credit is created, and that the business of a "Banker" is to create

credit.31 Also the term bank is strictly used to refer to corporate body while the term banker

may mean both the institution and the individuals that work with the corporation.32

Dr. H. L. Hart, in his book Law of Banking, defines a "bank" as a person or company

carrying on the business of receiving money and collecting drafts for customers subject to the

obligation honoring cheques drawn upon them from time to time by customers to the extent of

the amount available on their current account.33

Some statutes also helped to define the word "bank" in their various interpretation sections, for

instance, the BAFIA define a term "bank" to means an entity that is engaged in the banking

business,34 whereby the same meaning used in defining the term bank under the BOT Act. Also

the term "banking business" is defined by the Act to mean the business of receiving funds from

the general public through the acceptance of deposits payable upon demand or after a fixed

31
Henry M. Dunning, The Theory and Practice of Banking, Volume I, 2nd Edition, London (UK), John King &
Company Limited Printers, 1866. pg. 113
32
See www.thelawyerschronicle.com/basics-of-banker-customer-relations accessed on December, 2014
33
H. L. Hart, Law of Banking, Volume I, 4th Edition, London, 1931. pg. 1
34
Section 2 of the Banking and Financial Institutions Act, 2006. Different from other jurisdictions, in Tanzania
Legislations, the terms "Bank" (bank with capital B) and "bank" are used to mean two different entities,
whereby a former is used to mean the National Central Bank i.e. The Bank of Tanzania while a later is used to
mean other financial institution conducting banking business.

15
period or after notice, or any similar operation through the frequent sale or placement of bonds,

certificates, notes or other securities, and to use such funds, in whole or in part, for loans or

investments for the account of and at the risk of the person doing such business.

In another hand the term "Banker" as defined under the Black’s Law Dictionary means a

person who engages in the business of banking,35 while Section 2 of the Bill of Exchange

Act,36 defines the tem banker to include a body of persons whether incorporated or not who

carrying on business of banking.

In the light of judicial decisions on the definition of the banker, Lord Denning while

distinguishing between a money lender and banker, he points out three characteristics features

of a banker in a case of United Dominion Trust Ltd vs. Kirkwood,37 as follows:-

i) A banker accepts money from and collects cheques from their customer
and place them to their customer;

ii) Honours cheques or orders drawn on her by her customers when presented
for payment and debit her customer account accordingly;

iii) Keep current accounts in which the credits and debits are entered.

Therefore in this regard the essential feature of a "Banker" is this, that when his customers,

place money with him, it becomes his absolute property, to deal with as he pleases, and he is in

no way accountable to them for the purpose he applies the money to. The customers of a

banker cede to him absolutely the property in their money, and receive, in exchange for it, only

a right to demand an equal sum at a future time.38 This definition however covers a bare

minimum leaving other services provided for by the bank which are not covered under the

definition, for example; financial business and mortgage business.

35
Bryan A. Garner (Ed), Black’s Law Dictionary, 9th Edition, USA, Thomson Reuters, 2009. pg. 164
36
Act No. 3 of 1969, CAP 215 of R.E. of 2002
37
[1966] 2 QB 431
38
Dunning, The Theory and Practice of Banking, pg. 109

16
2.6.2. A Customer

The statutes do not define who a customer is. For example the BAFIA attempt to define who a

bank is but not who a customer is. Other statutes like the Bills of Exchange Act, the Foreign

Exchange Act or the Bank of Tanzania Act do not define a customer.

The United States Uniform Commercial Code (UCC) defines a customer as any person

having an account with a bank or for whom a bank has agreed to collect items, and it includes a

bank having an account with another bank.39

In common parlance the term a customer means a person who has an account with the bank

(either a deposit or a current account) as provided in a case of The Great Western Railway

Co. vs. London & County Banking Co. Ltd. (HL),40 in this case a man had been for some

years in the habit of getting crossed cheques exchanged for cash at a bank where he had no

account, and which charged him nothing for the accommodation. Held, by the House of Lords

reversing the judgment of the Court of Appeal, that he was not a customer.41

A person becomes a customer of a bank when an account is opened is for him and at the same

time a contract is formed. For a person to be a customer it matters not, that the duration of the

relationship is short or protracted, in other words the duration when an account has been held is

immaterial to the question of whether the status of the customer has been achieved. The

position provided in the case of Commissioner of Taxation vs. English, Scottish and

Australian Bank.42 Thus in order to constitute a customer, a person should satisfy two

conditions which are such as:-

39
In a case of Oku vs. Banigo (2003) FWLR (Pt. 175) p.422, It was held that; a bank may also be a customer of
another bank, as to where a clearing bank regularly collects cheque sent to it by a non-clearing bank on behalf
of that banks customer, or where a domestic clearing bank collects cheques for a foreign bank
40
[1901] A.C 414
41
ibid, at 420 – 421
42
[1920] A.C 683

17
 i) He should have an account with the bank, whether fixed, savings, or current.
i) The dealings should be of banking nature. These dealings have to be
distinguished from other dealings which are of casual nature e.g. occasionally
getting a cheque encashed or purchasing stamps, or depositing valuables for safe
custody.

A person remains a customer, even if he/she is indebted to the bank, 43 or if the bank performs

other functions other than holding money for him/her, such as safe keeping of goods or

documents,44 giving investment advice,45 selling securities,46 advising on company takeover

and mergers, selling insurance services,47 and all other things which, in an era of financial

conglomerates, banks will do for their customers.

2.6.3. The Banker-Customer Relationship

As we already understand the concept of a bank / banker and a customer under a scope of the

law of banking, there is a fundamental relation which links or connects these two (2) parties

which is often known as a banker-customer relationship. In other words the banker-customer

relationship is a relation created between a bank / banker and customer.

2.6.4. Nature of Banker-Customer Relationship

The relationship of a banker and its customers is one which is essentially rooted in contract and

along with relevant legislation and regulations (for example; the BAFIA and the BOT Act) but

fundamentally is that of debtor (banker) and creditor (customer). The universal formula for the

relation of banker and customer was based on Foley vs. Hill,48 a case which defined a relation

as that of debtor and creditor with the superadded obligation of honouring the customer's

cheques when there was a sufficient and available credit balance.

43
Clarke vs. London and County Bank [1897]1 Q.B. 552
44
See Section 24 (1) (m) of the BAFIA
45
ibid, Section 24 (1) (j); See also a case of Woods vs. Martins Bank (1959) A.C. 25
46
ibid, Section 24 (2) (a)
47
ibid, Section 24 (2) (b)
48
(1848), 2 H. L. C. 28

18
Generally, the relationship of banker and customer is commenced by the customer signing the

banker’s standard form of contract as it relates to the operating of the client’s account which

when signed by the customer, becomes a contractually binding agreement. This nature of the

contract between banker and customer is described in a leading case of Joachimson vs. Swiss

Bank Corporation.49

2.6.5. Classification of Banker-Customer Relationship

The relationship between a banker and a customer depends upon the nature of service provided

by a banker. Accepting deposits and lending and/or investing are the core banking businesses

of a bank. In addition to its primary functions, it deals with various customers by providing

other services like safe custody services, safe deposit lockers, and assisting the clients by

collecting their cheques and other instruments.

In this regard the relationship between a bank and its customers can be broadly categorized into

General Relationship and Special Relationship.

2.6.5.1. General Relationship

(i) Debtor / Creditor Relationship

When a 'customer' opens an account with a bank and signing the form he enters into an

agreement/contract with the bank. When customer deposits money in his account the bank

becomes a debtor of the customer and customer a creditor. 50 In some circumstance the position

can shift whereby the banker can acquire the position of creditor while a customer acquire a

position of debtor, for instance, when the customer the account is overdrawn or the banker

lends money to the customer.

2.6.5.2. Special Relationship

49
(1921) Vol. 3 A.B. 110. Judgment of Lord Atkin at pg. 127
50
Op. cit. Joachimson Case

19
This is a relationship exists between banker and customer which is created out of the

principally debtor/creditor relationship. Special Relationships include but not limited to the

following:-

(i) Agent / Principal Relationship

Thus an Agent is a person, who acts for and on behalf of a Principal under the latter’s express

or implied authority. The acts done within such authority binds the principal and therefore

principal is liable for the acts of the agent. Banks collect cheques, bills, and makes payment to

various authorities on behalf of customers. Banks also abides by the standing instructions given

by its customers. In all such cases bank acts as an Agent of its customer (principal).51

(ii) Bailee / Bailer Relationship

Banks secure their advances (loans) by obtaining physical possession of tangible securities

such as bonds, shares etc. from their customers. While taking physical possession of securities,

the bank becomes Bailee and the customer Bailor. Banks also keeps articles, valuables,

securities etc. of its customers in Safe Custody and acts as a Bailee. As a Bailee the bank is

required to take care of the goods bailed.

(iii) Trustee / Beneficiary Relationship

In case of trust, banker-customer relationship is a special contract. When a person entrusts

valuable items with another person with an intention that such items would be returned on

demand to the keeper the relationship becomes of a trustee and trustier. Customers keep certain

valuables or securities with the bank for safekeeping or deposits certain money for a specific

purpose (Escrow accounts) the banker in such cases acts as a trustee while a customer become

beneficiary.

(iv) Lessor / Lessee Relationship

51
Capital and Counties Bank vs. Gordon, [1903] A. C. 240.

20
Providing safe deposit lockers is as an ancillary service provided by banks to customers. While

providing Safe Deposit Vault/locker facility to their customers’ bank enters into an agreement

with the customer.

The relationship between the bank and the customer is that of lessor and lessee. Banks lease

(hire lockers to their customers) their immovable property to the customer and give them the

right to enjoy such property during the specified period i.e. during the office/ banking hours

and charge rentals. Bank has the right to break-open the locker in case the locker holder

defaults in payment of rent. Banks do not assume any liability or responsibility in case of any

damage to the contents kept in the locker. Banks do not insure the contents kept in the lockers

by customers.

In respect of this study the duty of secrecy in Tanzania can be invoked and applied to both

general and specific banker-customer relationship as shown hereinabove. The rationale of this

is to protect any valuable information of the customer against wrongful disclosure by the

bankers.

2.7. CONCLUSION:

Banking secrecy is the heart and soul of the trust the client attributes the banker. The act of

depositing a client’s money in the hands of the banker can be deemed as an expression of

confidence unparalleled in normal commercial relations. The basis of this trust the client gives

the banker is largely based on the existence of the obligation to banking secrecy.

21
 CHAPTER THREE

ANALYSIS OF RESEARCH FINDINGS

3.1. INTRODUCTION

After working with the historical and legal framework of duty of secrecy in Tanzania, this

chapter in details will provides for the legal implications of the duty of secrecy in Tanzania and

the roles of the duty in promoting banker-customer relationship.

3.2. LEGAL IMPLICATIONS OF DUTY OF SECRECY IN TANZANIA

3.2.1. Basis of Duty of Secrecy in Tanzania

In Tanzania, the banker duty of secrecy is rooted in both statutory laws and the common law.

In addition to this, there is there is an operation of the Code of Ethics for Bankers which was

enacted by the Tanzania Institute of Bankers (TIOB) to govern and regulate ethics in a

business of banking as it already been shown.

3.2.1.1. Statutory Laws

Under the statutory law as it already been specified, different statutes enacted within the

country provides for the prohibition for the banks or financial institutions not divulge any

information relating to its customers or their affairs except in circumstances in which, in

accordance with the law or practices and usages customary among bankers, it is necessary or

appropriate for the bank or financial institution to divulge such information.52

52
Section 48 (2) of the Banking and Financial Institutions Act, 2006 confers the adherence of duty of secrecy to
every director and every member of any committee, auditor, advisor, manager, officer, and employee of a bank
or financial institution.

22
3.2.1.2. The Common Law

The bank's duty of secrecy at common law is implied in the contract between the bank and the

customer.53 However, the contract is not always the issue, for example, many contracts does not

confer protection in a situation where a third party has obtained confidential information and

has divulged this, whether advertently or inadvertently or with consent. 54 Instead, equity

protects the duty of confidentiality independently of the contract. Equity also offers aid since

the courts are entitled to grant an injunction, thus indirectly buttressing any duty of contract.

3.2.2. Scope and Duration of the Duty of Secrecy

When examining a bank's duty of secrecy, it is important to make recourse to the Section 48 of

the BAFIA as well as the seminal case of Tournier vs. National Provincial and Union Bank of

England (Supra), whereby banks are obliged to treat information of customer as secret. The

obligation is not only limited to information that the bank knew from the condition of the

account of the customer, but extends to all information derived from the banking relationship

between the banker and the customer.55

Under Section 48 (4) of the BAFIA duty of secrecy cover all information related to affairs of

any individual customer, a record contained in or related to a report of examination and a

record that contains trade secrets, commercial or financial information, furnished in confidence

that relates to the business, personal or financial affairs of any person, 56 examples of these

information includes a name of the customer who is paying or receiving payment, personal

information about who their employer is, information about the customer’s bank balance as

well as credit status.57

53
op. cit. Tournier Case
54
Waleed Alhosani, Banking Confidentiality Versus Disclosure, Paper presented to Bangor University - School of
law, 2012. pg. 6
55
Proctor Charles, the Law and Practice of International Banking, Oxford University Press, 2010. pg. 678
56
See Section 48 (4) of the Banking and Financial Institutions Act, 2006
57
Cranston Ross, Principles of Banking Law, pg. 172

23
In regarding with duration, no any legislation provides for the duration of the duty, this means

that neither BAFIA nor BOT Act provides for duration of the duty of secrecy but from the

common law standing point especially in the Tournier’s case the bank’s duty of secrecy

remains in existence even upon the closure of the customer's account or when it ceasing to be

active.58 Furthermore, the obligation of confidentiality also remains in existence, even after the

customer's death of customer.59 Information gained during the currency of the account remains

confidential unless released under circumstances bringing the case within one of the classes of

qualifications referred hereinabove.60

On the other hand, the duty of confidentiality is limited to or it does not extend to information

gained after the termination of the banker-customer relationship as well as to information

acquired prior to the beginning of the banker-customer relationship.

However, a bank has still to be extremely careful in these situations due to the fact that the

bank may have given an express undertaking to the customer to keep information confidential,

that any information obtained prior to the commencing of banker-customer relationship could

still be classified as falling within the scope of the duty of confidentiality and that the bank

may receive information under conditions which fall within the scope of the general law of

confidence.

3.2.3. Consequences for Breach of the Duty of Secrecy

The adherence of duty of secrecy is vested upon every director and every member of any

committee, auditor, advisor, manager, officer, and employee of a bank or financial institution.61

58
Tournier case, at 473; See Also Proctor Charles, The Law and Practice of International Banking, pg. 679
59
Ellinger E. P., Lomnicka Eva, and Hooley Richard, Ellinger's Modern Banking Law, 4th Edition, Oxford
University Press, 2006. pg. 170
60
Tournier case, at 472
61
See Section 48 (2) of the Banking and Financial Institutions Act, 2006

24
The law provides that, breach of the duty of secrecy by any person is to commit an offence and

such person shall be liable on conviction to a fine not exceeding twenty million shillings or to

imprisonment for a term not exceeding three years or to both.62

3.2.4. Exceptions to the Bank's Duty of Secrecy

The Tournier case clearly illustrates that there are four exceptions with regard to the bank’s

duty of secrecy. Indeed, these qualifications to the duty of secrecy are virtually accepted in all

jurisdictions around the world. Accordingly, the duty of confidentiality will not arise if any of

these qualifications apply. In a case Bankes LJ presented to the jury what are the limits and

what the qualifications of the contractual duty of secrecy in the relation of banker and customer

whereby the qualifications were classified under four heads to include the followings:-

(e) Where disclosure is under compulsion by law;

(f) Where there is a duty to the public to disclose;

(g) Where the interests of the Bank require disclosure;

(h) Where the disclosure is made by the express or implied consent

of the customer.

In other words the limits or exceptions to the banker duty of secrecy as provided by Bankes LJ

includes qualifications such as compulsion by law, public interest, bank interest and express or

implied consent of the customer.

3.2.4.1. Compulsion by the Law

It is a situation whereby a law require the banker to divulge information. The court during a

legal proceeding can legally oblige a bank to divulge information about its customer account,

and this is a common example to illustrate an obligation through compulsion by the law. 63

Judges or Magistrates will sometimes require disclosure of customer information or affairs in

62
See Section 48 (6) of the Banking and Financial Institutions Act, 2006
63
Hudson Alastair, the Law of Finance, 1st Edition, Sweet & Maxwell', 2009. pg.779; See Also Bucknell vs.
Bucknell [1969] 1 WLR 1204 and Eckman vs. Midland Bank Ltd [1973] QB 519

25
order to reach a decision and for the purpose of establishing the truth. Section 48 (1) of the

BAFIA provides for the disclosure under compulsion by the law as the first instance exception

toward banker duty of confidentiality.64

Various legislations sets out different provisions and procedures which require the banks to

divulge information or affairs relating to their customers. All these legislation sets

circumstances under which the banks shall be required to divulge such information or affairs

relating to their customers’ accounts. Most but not the least of these Legislations includes: -

3.2.4.1.1. The Evidence Act.65

The Evidence Act sets out the procedures for providing evidence relating to banker’s book and

any transactions or accounts therein recorded.66 The Evidence Act provides for what constitutes

the banker book.67A bank does not have to provide evidence or its book, but only if the judge or

magistrate has made an order for a special cause. If the court summons a bank, then a bank

must respond and provide the requested information about its customer’s account.

Pursuant to Section 77 and 78 of the Evidence Act, a bank has to provide a copy of the relevant

entry to the court and such entry must be an ordinary bank entry made in the usual and

ordinary course of business and that the book have to be in the custody or control of the bank.

The proof of the entry has to be given by way of an affidavit of a bank officer or partner, this

means that the affidavit will confirm that the original entry and the copy entry matches.

64

See Section 48 (1) of the BAFIA; the provision provides that:- "every bank or financial institution shall observe,
except as otherwise required by law, the practices and usages customary among bankers, and in particular, shall
not divulge any information relating to its customers or their affairs except in circumstances in which, in
accordance with the law or practices and usages customary among bankers, it is necessary or appropriate for
the bank or financial institution to divulge such information."; See Also Section 48 (4) of the BAFIA
65
Act No. 6 of 1967, CAP 6 of Laws of Tanzania.
66
See PART IV (Section 76 – 82) of the Evidence Act.
67
See Section 76 of the Evidence Act; the provision provides that; “banker’s book” include ledgers, cash books,
account books and any other records used in the ordinary business of the bank or financial institution, whether
the records are in written form or a data message or kept on an information system including, but not limited to
computers and storage devices, magnetic tape, micro-film, video or computer display screen or any other form
of mechanical or electronic data retrieval mechanism.

26
3.2.4.1.2. The Foreign Exchange Act.68

Among other functions of the banker is to carry on the business of buying and selling specified

foreign currency and offering Foreign Currency Account (FCA) to its customers. In such

kind of business bankers are prohibited to disclose customer information unless it is provided

by law or ordered by court to do so as it is provided under Section 8 (1) of the Foreign

Exchange Act.69

3.2.4.1.3. The Prevention of Terrorism Act, 2002.70

The Prevention of Terrorism Act is a legislation enacted for purpose of combating terrorist’s

activities and suppressing terrorists financing system. Generally the Act criminalizes any act

relating to terrorism activities in Tanzania.71 In respect of Section 41(2) of the Prevention of

Terrorism Act 2002,72 the law requires commercial banks and financial institutions to disclose

statements of the accounts of customers to police officers, 73 when suspecting that certain funds

were intended to be used in favour of terrorists operation.74

68
Act No. 1 of 1992
69
See Section 8 (1) of the Foreign Exchange Act; the provision provides that; “Except for the purposes of this Act
or when ordered to do so by a court, no person exercising any functions under this Act shall, whether within or
outside the United Republic, disclose any information relating to any person, firm or business which came into
his possession or knowledge in the exercise of these functions.”
70
Act No. 21 of 2002, CAP. 19 of Laws of Tanzania
71
See Section 4-10 of the Prevention of Terrorism Act, 2002
72
Section 41(2) of the Prevention of Terrorism Act, 2002 provides that:- Every financial institution shall report,
every three months, to the police officer and anybody authorised by law to supervise and regulate its activities:-
(a) that it is not in possession or control of any property owned or controlled by or on behalf of a terrorist group;
(b) that it is in possession or control of such property, and the particulars relating to the person, accounts, and
transactions involved and the total value of the property.
73
Section 3 of The Prevention of Terrorism Act, 2002; the provision provides that; “Police means a police officer
of or above the rank of Assistant Superintendent of police.”
74
Kevin Mandopi, Anti-Terrorists’ Financing: Does it Undermine Privacy of the Customer of a Bank, Law
Reformer Journal, Volume 3 Number 1, The Law Reform Commission of Tanzania, 2011. pg. 47

27
3.2.4.1.4. The Anti-Money Laundering Act, 2006.75

This is the Act enacted for purpose of prevention and prohibition of money laundering. The Act

also provides for the disclosure of information in respect of money laundering and in that

regard it established a Financial Intelligence Unit (FUI) and the National Multi-Disciplinary

Committee on Anti-Money Laundering. According to the Anti-Money Laundering Act, 2006

banks and financial institutions are at liberty to disclose information of its customers’ accounts

relating proceeds of a predicate offences.76

3.2.4.1.5. The Income Tax Act.77

In respect of Section 138 (1) of the Income Tax Act, the provision provides for power of the

Commissioner or any officer who is authorised in writing by the Commissioner concerning

with full and free access to any premises, place, acquire any information, document or other

asset as to affords as evidence that may be material in determining the tax liability of any

person without any prior notice or as permitted by a search warrant granted by a district or

resident magistrate’s court.78

Generally the disclosure under the compulsion by the law requires obtaining no consent of

customer by the bank compelled to do so, therefore such obligation substitute the customer’s

consent. It should be noted that an order to inspect without serving any prior notice to a party

does not happen frequently. However, there is a principle that the order can be made but it

would only sustain for a limited and reasonable period of time.79

75
Act No. 12 of 2006
76
See Section 21 of the Anti-Money Laundering Act, 2006; the provision states that; - “The provision of this Part
shall have effect, notwithstanding any obligation as to secrecy or other restrictions, upon the disclosure of
information imposed by any law or otherwise.” See Also Section 63A of the Proceeds of Crime Act.
77
CAP. 332 R.E. 2006
78
See Section 138 of the Income Tax Act, ibid
79
Owen vs. Sambrook [1981] Crim. LR 329; See Also R vs. Nottingham Justices, ex parte Lynn [1984] 79 Crim.
App. Rep. 23

28
Moreover, there is no obligation on a bank to inform its customer that a disclosure has been

made since a notification could possibly impede any investigation. Any act which amounts to

informing a customer that a disclosure is made is to commit the tipping off offence.80 In a case

of Bankers Trust Co vs. Shapira,81 it was held that; it is a strong thing to order a bank to

disclose the state of its customer's account and the documents and correspondence relating to

it. It should only be done when there is a good ground for thinking the money in the bank is the

plaintiff’s money-as, for instance, when the customer has got the money by fraud-or other

wrongdoing-and paid it into his account at the bank.

3.2.4.2. Public Interest / Duty

The public interest disclosure compose another exception noted in the Tournier case. The duty

to disclose information under public interest is the least specific and most controversial of the

four qualifications due to the fact that the qualification may appear to be narrow, but there is

elasticity in the concept of public duty which lends to a large degree of flexibility, if not

vagueness, in its application 82

The Public interest exception was first established in a case of Weld Blundell vs. Stephens.83

In Tournier’s case, it was considered that there is a qualification to the banker’s duty of

confidentiality when there is a higher duty to prevent fraud or crime. Also it was stated that a

disclosure of confidential information is justified ‘where there is a duty to the public to

disclose’, such as where “danger to the state or public duty may supersede the duty of the agent

to the principal.”84

80
See Section 20 of the Anti-Money Laundering Act, 2006
81
[1980] 1 WLR 1274 CA
82
David Chaikin, Adapting the Qualifications to the Banker’s Common Law Duty of Confidentiality to Fight
Transnational Crime, Sydney Law Review, Vol. 33, No. 265, 2011. pg. 227
83
[1920] AC 965
84
Tournier case, at 473; (Bankes LJ cited Viscount Findlay’s view in Weld Blundell vs. Stephen.)

29
The public interest qualification will generally be confined to the type of disclosure which

would be of interest to a proper authority,85 for example, banking regulators or in the case of a

crime to the police, or in the case of a breach of corporations’ law to the corporate regulator. 86

In this regard in Tanzania bankers are capable to disclose information under the umbrella of

public interest when required to do so by the authorities such as FIU, TIOB and BOT in order

to prevent fraud or predicate offence such as money laundering, terrorist financing etc. 87 Thus

the public interest exception may overlap with the previous exception of compulsion by the

law. Hence, legislation may oblige bankers to disclose confidential information in certain

circumstances, this surely does not mean that the public interest exception is impractical.

3.2.4.3. The Interests of the Bank

This qualification applies to cases where disclosure is necessary to protect the legal rights of

the bank. This means that the bank has the right to disclose such information when and to the

extent to which it is reasonably necessary for the protection of the bank’s interests, either as

against their customer or as against third parties in respect of transactions of the bank for or

with their customer.

Formulation of this qualification is limited to situations where disclosure is ‘reasonably

necessary’ to protect the bank’s interests. In a situation where a bank is subjected to a legal suit

by a customer, the bank will be entitled to reveal the confidences of that customer so as to

protect its legitimate interests. Since it is the customer who is disclosing the existence of the

confidential relationship to the public through litigation, the bank is entitled as a matter of

fairness to protect its own interests by revealing confidences that are part of its defence.

85
Cranston Ross, Principles of Banking Law, pg. 179
86
See, Re: A Company’s Application [1989] 2 All ER 248
87
See Section 6 of the Anti-Money Laundering Act, 2006 and Also Section 41 (3) of the Prevention of Terrorist
Act, 2002

30
The interests of the bank qualification to the duty of confidentiality is not limited to disclosures

involving customer litigation, but also disclosures against third parties in respect of

transactions of the bank for or with the customer. 88 The rationale for disclosure of confidential

information in third party litigation is that a bank should have a ‘right to defend itself against

potential liability to a third party which is attracted by virtue of its having processed the

customer’s transactions’ as well as ‘to vindicate their legal rights against third parties.’89

3.2.4.4. Consent of the Customer

The bank cannot breach its contractual duty of confidentiality by disclosure of information or

documents if the customer consents to disclosure.90 The consent qualification may be regarded

as an example of a waiver by a customer of the rights enjoyed in a banker-customer contract. 91

The consent of customer can be obtained whether expressly or impliedly.

3.2.4.4.1. Express Consent of a Customer

A customer can expressly have an agreement with a banker that in a certain circumstances the

banker can divulge confidential information of his or her account. When a customer gives his

express consent to divulge confidential information by his bank, this will release the bank from

responsibility for breach of duty of secrecy. Different banks practice different methods of

acquire express consent of a customer whereby the customers can express consent orally such

as when information is collected over the telephone, in writing such as when completing and

signing an application or consent form, and electronically such as when applying through a

computer or electronic communicating device. Indeed, express consent in writings is a

preferred form by bankers as a matter of prudence.92

88
Tournier’s Case, at pg. 486
89
Hassneh Insurance Co. of Israel vs. Mew [1993] 2 Lloyd’s Rep 243, 249
90
Alan Tyree, Banking Law in Australia, 6th Edition, LexisNexis Butterworths , 2008, pg. 186
91
David Chaikin, pg. 288
92
For instance, Clause 10 of the Terms and Conditions for Operating with CRDB Bank provides for express
consent of the customer upon disclosure of his or her information to TBA approved credit reference bureau
information relating to the account maintained at the Bank.

31
3.2.4.4.2. Implied Consent of a Customer

Implied consent is such a consent given by a customer through his or her conducts. In case of

Sunderland vs. Barclays Bank Ltd,93 it was held that there was an implied consent to

disclosure where the conduct of the customer was inconsistent with maintaining the duty of

confidentiality. Since it is very difficult to determine whether the conduct of a customer

amounts to an implied consent, bankers are cautioned from disclose any information of

customer on relying or assuming the implied consent of the customer. The decision of the

Court of Appeal in Turner vs. Royal Bank of Scotland Plc.,94 provides a clear caution to

banks that, since many customers are ignorant of the bank’s practice therefore bankers they

should not undertake that customers have consented to disclosure of confidential information,

particularly where disclosure of such information may be potentially unfavourable to the

customer’s interests. In this regard any disclosure done by the banker which is unfavourable to

the customer’s interests constitute a breach of the principle of confidentiality.95

Always the banker is required to seek the express consent of costumer at the first instance

because if the customer file a suit for breach of the duty of secrecy the court will deny to

imply consent from the ‘inactivity of the customer’ in circumstances where the bank had not

sought express consent to its practice of giving references.

3.3. Significances/Roles of the Duty of Secrecy in Promoting Banker-Customer Relationship

The bank’s duty of confidentiality plays an important role in safeguarding financial privacy.

Provisions of BAFIA, BOT Act together with rules under the Code of Conduct for Bankers

both regards secrecy or confidentiality as a fundamental principle in banking business and

hence provides for the prohibition of disclosure of customer information in any circumstance

except as provided by the law or under customary banking practice and usage.
93
(1938) 5 LDAB 163
94
[1999] 2 All ER (Comm.) 664
95
Ibid, at 672.

32
The aim of this prohibition in promoting banker-customer relationship is to create and

maintain confidence between banks and their customer. Normally the duty of confidentiality

linked to the maintenance of customer confidence in the banking system which is a major

source of finance for businesses in a sense that a bank's profitability depends on its ability to

maintain its reputation and inspire its customers with confidence, 96 as observed by Bankes LJ

that the credit of the customer depends very largely upon the strictly observance of

confidence." 97

It is a general principle that an agent is bound by a duty of confidentiality to its principal in

regard to information obtained during the agency relationship. The banker as an agent of

customer is obliged to observe that confidence measures. In such regard Prof. Peter Ellinger

has stated and emphasized that; ‘[T]he agent’s duty of confidentiality is a facet of the

principal’s protection against unwarranted attempts by outsiders to inquire into his or her

affairs.98 Therefore good relationship between banker and customer depend more on ability of

the banker to maintain and aspire its customers with confidence.

Another role of the banker duty of secrecy in promoting banker-customer relationship is that of

maintaining trust between parties. Trust is one of the key factors which is associated with

successful banking because always customers want to feel that their confidential information

are in good hands. 99 Such trust will develop when the participants to that transaction feel secure

and assured that only authorised users have access to information and that the quality of the

information being accessed is complete, uncorrupted and easily accessible. 100 Bankers as agents

owe duties of confidentiality to their customers because of the trust placed by customers in the

96
Samahir Abdulah, "The Bank's Duty of Confidentiality, Disclosure versus Credit Reference Agencies; Further
Steps for Consumer Protection: 'Approval Model'', Web Journal of Current Legal Issues, Vol. 19, No. 4, 2013.
Visit http://webjcli.org/article/view/296/405
97
Tournier case, 474
98
Ellinger E. P., Lomnicka Eva, and Hooley Richard, Ellinger's Modern Banking Law, 3rd Edition, Oxford
University Press, 2002. Pg. 166
99
Naledi Thabang Masete, 'The Challenges in Safeguarding Financial Privacy in South Africa', Journal of
International Commercial Law and Technology, Vol. 7, Issue 3, IAITL, 2012. pg. 253
100
ibid

33
professional status of bankers.101 Bank confidentiality is a practical necessity as bankers often

have access to a good deal of information about their customer’s business, which each

customer would have reason to conceal from their commercial competitors, 102 thus any

disclosure by banks of details of a customer’s financial affairs to 'the wrong person or at the

wrong time', can harm the existed banker-customer relationship.103

On other side the duty acts as a shield to secure customer economic values. That the bank

confidentiality has an economic value to a customer which should not be disturbed unless

justified by law. In relation to this idea the banks shall not be permitted to disclose any related

information of the customer for marketing and other commercial purposes without obtaining

the customer’s prior consent. This prevents some financial institutions which would abuse their

customers’ information by providing third parties with it without their customers’ consent. Also

employees of financial institutions are obliged to exercise reasonable care when dealing with

customers’ information and upholding their duty of confidentiality. Therefore without

protecting financial privacy there would be a rise in fraudulent and criminal activities occurring

at financial institutions.

In addition to that, the banker duty of secrecy is there to protect the reputation (status) of the

customer. In accordance with practice and usage of banking the non-disclosure of information

related to customer’s account protects economic status of the customer. Thus the duty of

secrecy prevents the banker from damaging reputation of their customer for any disclosure

which do not fall in a qualifications given under the laws.104

101
David Chaikin, at pg. 269
102
ibid
103
ibid
104
Tournier case, at 477

34
3.4. Challenges Encountered by Bankers in relation to Duty of Secrecy

Bankers have a difficult task in ensuring protection of customer information, in this respect

they face many challenges when they are performing their obligations including the

responsibilities in relation to duty of secrecy. The following are some of challenges faced by

the banker at the time of ensuring an effective duty of secrecy.

3.4.1. Identification of a customer

That a communication between banker and customer can be conducted through different media

such as telephone and postal address. These methods can be used by customers to instruct the

banks as well as to require some service from the bankers. Using these media sometime bring

in challenge to bankers on issue of identification of a customer as to whether the person

instructing or require a service on a particular account is a right and lawful customer a bank. In

this regard bankers are needed to conduct a due diligence inquiry before responding to

instruction or service required.

3.4.2. Internet Banking.105

Technology has made banking easily accessible but at the same time it has created a gap for

customer privacy to be infringed. Internet banking has changed the way in which the business

of a bank is done as there is less contact between the bank customers and the bank. In the

banking sector, customers can now perform common banking transactions without being inside

the bank, such as paying bills, transferring funds, printing statements, and enquiring about

account balances online.106 The nature of internet banking involves the acquiring and

processing of sensitive information, such as bank card numbers, personal identification

numbers and passwords. This makes vulnerable for information of customer account to be

disclosed without her or his knowledge.

105
A service which allow the customer of a bank to perform banking transaction and services through a media of
internet.
106
Naledi Thabang Masete, 'The Challenges in Safeguarding Financial Privacy in South Africa', at pg. 255

35
3.4.3. Cyber-crimes

That the bank is entitled to keep personal details supplied by the customer and others in

connection with or relating to the relationship between the bank and the customer on electronic

database, manual filing system or in any other way. The development of technology bring in

crimes such as identity theft and hacking which makes vulnerable for information of customer

account to be disclosed.

Identity theft is the theft of identity information such as a name, date of birth, Social Security

number, or a credit card number. 107 While hacking means gaining access to or breaking into a

computer information system to modify certain user behaviours in a way that violates the

integrity of the entire user information system. 108 Identity theft and hacking can using

computerized databases to access customer’s personal information. It is estimated that identity

theft and hacking has become the fastest-growing financial crime in in our society.109

3.5. CONCLUSION

The banker duty of secrecy is a fundamental aspect in promoting banker-customer relationship.

In Tanzania as among many common law legal system states the duty is not only implied duty

but also it has acquired a legal basis compared to other duties vested to the banker, thus a

breach of this duty is not only a breach of a contract but also a breach of law. Though the duty

is not absolute since it is subjected to other laws, in Tanzania the duty is not effective due to the

fact that State and commercial (banker) interests supersede the customer interest in respect that

the need for disclosure of confidential information for the interest of the banks and the public

supersede need for confidentiality for interest of the customer.

107
ibid
108
Cybenko George, Cognitive Hacking: A battle for the mind, Journal Computer, Vol. 35 Issue 8, August, 2002,
visits http://dl.acm.org/citation.cfm?id=619078&picked=prox&cfid=39306023&cftoken=92565326 accessed
at 22nd February 2015.
109
Op. cit. n. 56

36
 CHAPTER FOUR

CONCLUSION AND RECOMMENDATIONS

4.1. CONCLUSION

The banker duty of secrecy emanates from the fundamental and constitutional right to privacy,

which entails and guarantee the individual autonomy as provided in the Constitution of the

United Republic of Tanzania of 1977 (as amended from time to time). 110 Despite the fact that

the duty of secrecy in Tanzania is mainly governed by the BAFIA and the BOT Act, the

operations of duty is associated with several different matters including legal agreements,

crimes, torts and other legal procedures connected to it, hence the bankers are required to

disclose the customer information when require by the law. Nowadays bankers have to comply

with the duty as well as its exemptions, making it necessary for banks to do a balancing act.

But in this respect the banker confidentiality in Tanzania became less effective due to the fact

that the need of disclosure supersede that of confidentiality.

However, the subsequent destruction of a customer’s privacy cannot be ignored. Since the

customer is the key component in banking law and the banking secrecy is the heart and soul of

the trust the client attributes the banker, furthermore it is an expression of confidence

unparalleled in normal commercial relations as no one would agree to deposit sensitive

personal information, in the hands of another, unless he knew that the securing party is subject

to obligations of trust and confidentiality. Thus general principles introduced in the Tournier

case to safeguard the customer and his confidentiality has to undergo changes in this new era as

well as to have legislations which comply with the development of science and technology in

order to ensure effective duty of secrecy in Tanzania.

110
See Article 16 of the Constitution of the United Republic of Tanzania, 1977

37
4.2. RECOMMENDATIONS

The study has shown that confidentiality is an important aspect in the relationship of the banker

and customer. In this respect there is a need of specific and comprehensive measures to be

taken by both the bankers and the government in ensuring both laws and practices of bankers

protect the interest of the customers. Therefore in the light of these findings and observations

should I recommend as follows:-

4.2.1. To Bankers

i) It has been observed that many customers are not aware with their rights or obligations

in relation to the duty of confidentiality and other rights or obligations owed to them by

bankers due to the fact that most banks in Tanzania do not issue the Terms and

Conditions Form during or after establishment of the banker-customer relationship. In

this respect the TIOB as a regulatory body should take specific measures to ensure that

its members issues the Terms and Conditions Form during or after the establishment of

the banker-customer relationship as soon as possible. In addition to that, the bankers

either in their own capacity or through the TIOB should increase the awareness of their

customers by conducting seminars, providing posters, handouts, magazines etc. which

would provide sufficient details in rights and responsibilities of the customer as well as

bankers.

ii) Banks and other Financial Institution should posting privacy policies on their websites.

A privacy policy statement is perceived as an important tool which provides for how the

customer information dealt with and handled, therefore banks should have a privacy

policy statement in order to indicate their trustworthiness.111

111
Op cit. Naledi Thabang Masete, 'The Challenges in Safeguarding Financial Privacy in South Africa', at pg. 258

38
iii) The banking sector should, provide systems which are sufficiently secure and conform

to the technological standards that are acceptable. Failure to comply with the law,

providing disclaimers excluding any or all liability is not in the best interest of its

customers.112

4.2.2. To the Government

i) Since the banking sector has undergo a lot of changes due to the development of science

and technology which includes the introduction of new methods of providing banking

service, for instance; the internet banking and mobile banking, the government through

the Parliament should take action on enactment of new legislations and /or regulations

which will protect customer from other kind of information disclosure. This means there

is a need of having legislations such as the Electronic Communications and Transactions

Act, the Cybercrimes Act and the Data Protection Act to be enacted to ensure the right

of financial privacy is guaranteed to customer.113

ii) The government needs to enforce strict penalties for non-compliance with the legislation

requirement of duty of secrecy by bankers in order to ensure accountability for any

unauthorized disclosure.

BIBLIOGRAPHY
112
ibid
113
In this year 2015, the Parliament of Tanzania has to pass two Legislations which are the Electronic
Communications and Transactions Act 2015 and the Cybercrimes Act 2015 which is further steps forward but
still there is need of having the Data Protection Act.

39
BOOKS:

ALASTAIR, Hudson (2009), The Law of Finance, 1st Ed., Sweet & Maxwell, London,
United Kingdom.

CHARLES, Proctor (2010), The Law and Practice of International Banking, Oxford
University Press, United States of America.

DUNNING, H. M (1866), The Theory and Practice of Banking, Volume 1, 2nd Ed., John
King & Company Limited Printers, London, United Kingdom.

ELLINGER, E.P., LOMNICKA, Eva et al (2002), Ellinger’s Modern Banking Law, 3rd Ed.,
Oxford University Press, United States of America.

ELLINGER, E. P., LOMNICKA, Eva et al (2006), Ellinger's Modern Banking Law, 4th
Ed., Oxford University Press. United States of America.

GARNER, Bryan (Ed.) (2009), Black’s Law Dictionary, 9th Ed., Thomson Reuters, United
States of America.

HART, H. L. (1931), Law of Banking, Volume I, 4th Edition, Oxford University Press,
United States of America.

PUTNI, Jan (Ed.) (2013), The Banking Regulation Review, 4th Edition, Law Business
Research Ltd, London, United Kingdom.

ROSS, Cranston (2002), Principles of Banking Law, 2nd Ed., Oxford University Press,
United States of America.

SIR PAGET, John (1922), The Law of Banking, 3rd Ed., Butterworth & Co, London, United
Kingdom

JOURNALS AND ARTICLES:

40
ABDULAH, Samahir (2013), "The Bank's Duty of Confidentiality, Disclosure Versus
Credit Reference Agencies; Further Steps for Consumer Protection: 'Approval
Model'', Web Journal of Current Legal Issues, Vol. 19, No. 4, available Online at;
http://www.webjcli.org/article/view/296/405 accessed on 17th February 2015

ALHOSANI, Waleed (2012), Banking confidentiality versus disclosure, Durham Law

Review 1, Paper presented to Bangor University - School of law, available Online
at http://www.durhamlawreview.co.uk/articles/25-banking-confidentiality-versus-
disclosure.html accessed on 17th February, 2015

CHAIKIN, David (2011), Adapting the Qualifications to the Banker’s Common Law
Duty of Confidentiality to Fight Transnational Crime, Sydney Law Review, Vol.
33, No. 265.

GEORGE, Cybenko (2002), Cognitive Hacking: A battle for the mind, Journal Computer,
Vol. 35 Issue 8, Available online at;
http://dl.acm.org/citation.cfm?
id=619078&picked=prox&cfid=39306023&cftoken=92565326 accessed at 22nd
February 2015

MANDOPI, Kevin (2011), Anti-Terrorists’ Financing: Does it Undermine Privacy of the

Customer of a Bank, Law Reformer Journal, Vol. 3, No.1, The Law Reform
Commission of Tanzania.

MASETE, Naledi T (2012) The Challenges in Safeguarding Financial Privacy in South

Africa', Journal of International Commercial Law and Technology, Vol. 7, Issue 3,
International Association of IT Lawyers.

STOKES, Robert (2011), The Genesis of Banking Confidentiality, The Journal of Legal
History, Vol. 32, No. 3, Routledge Publisher.

41
WEBSITES:

http://www.dl.acm.org/citation.cfm?
id=619078&picked=prox&cfid=39306023&cftoken=92565326 - accessed
on February, 2015

http://www.durhamlawreview.co.uk/articles/25-banking-confidentiality-versus-disclosure.
html - accessed on February, 2015

http://www.scribd.com/doc/222294126/Banking-Confidentiality-Versus-Disclosure#scribd -
accessed on February, 2015

http://www.tiob.or.tz/index.php/archives/corporated-member-s-list - accessed on December

2014

http://www.thelawyerschronicle.com/basics-of-banker-customer-relations - accessed
on December, 2014

http://www.webjcli.org/article/view/296/405 accessed on February 2015

42