Confidentiality

Obligations

Describe the private banking confidentiality obligations.

Section 15a of the Banking Ordinance 1941 further provides:

  • a person shall not divulge any information delivered to him or her or present any document submitted to him or her under this Ordinance or under the Banking (Licensing) Law; however, it shall be lawful to divulge information if the governor deems it necessary to do so for the purpose of a criminal indictment, or if the information or document was received from a banking corporation and it consents to its disclosure;
  • for the purposes of the disclosure of documents and information received under this Ordinance or under the Banking (Licensing) Law to a court, the Bank of Israel or the supervisor and his or her employees shall have the status of the state and its employees; and
  • a person who violates this section or section 6(5) shall be liable to one year’s imprisonment or to a fine of 10,000 shekels.

However, the court (Civil Appeal 174/88 Hilda Guzlan v Company de Participation 42(1) PD 963 [1988] (Isr), Permission for Civil Appeal 1917/92 Jacob Scholar v Nitza Jerby 47(5) PD 764 [1993] (Isr)) has interpreted this section such that it does not refer to the relationship between the bank and the client, but rather to the information a bank provides to the Bank of Israel or to the Banking Supervision Department.

Nonetheless, in the past, the Supreme Court (Permission for Civil Appeal 1917/92 Jacob Scholar v Nitza Jerby 47(5) PD 764 [1993] (Isr)) held that a bank was under a confidentiality obligation with respect to the affairs of its client.

Since these judgments, the confidentiality obligation to which banks are subject has been drastically reduced. Under anti-money laundering legislation, banks are now required to report information concerning their clients to other authorities, such as the Israel Money Laundering and Terror Financing Prohibition Authority. Furthermore, banks are required to conduct a thorough due diligence procedure (see questions 15, 23, 24 and 34), and may even refuse a client, unless he or she releases the bank from its confidentiality obligation (see question 13). The recent amendment to the Anti-Money Laundering Law, which provides that certain tax offences are considered as predicate offences (see question 16), has further diminished this obligation.

In addition, CRS and FATCA regulation dramatically affect the confidentiality duties of the banks.

Scope

What information and documents are within the scope of confidentiality?

As mentioned in question 41, the obligation would generally apply to all the documents and information exchanged between the bank and the client.

Expectations and limitations

What are the exceptions and limitations to the duty of confidentiality?

The confidentiality obligation imposed on banks is relative, and therefore may be reduced when it is proper to do so. Such is the case when maintaining the confidentiality obligation may cause damage to the bank, or when it contradicts applicable reporting duties under anti-money laundering legislation.

In addition, there is one specific exception referring to foreign residents, as mentioned in question 13.

Breach

What is the liability for breach of confidentiality?

A claim for damages and compensation under the Contract Law on the ground of breach of contract or the Torts Ordinance on the ground of breach of duty of care and negligence.