Publication date: 15.07.2024
Banking secrecy: concept and legal protection in Ukraine
Introduction.
Banking secrecy is an important element of banking activity that ensures the protection of confidential information about bank customers and their financial transactions. Maintaining banking secrecy is one of the main responsibilities of banks, which contributes to customer confidence and stability of the financial system. In this article, we will examine the concept of banking secrecy, the legal basis for its protection, the rights and obligations of banks and clients, and the mechanisms for protecting banking secrecy in Ukraine.
The concept of banking secrecy
Definition
Banking secrecy covers information about bank customers and their financial transactions that becomes known to the bank in the course of providing banking services. Banking secrecy includes:
- Information about the bank's clients (individuals and legal entities), including their personal data.
- Information on customer accounts, account balances, account transactions.
- Information on loan and deposit agreements, terms and conditions of granting and repayment of loans, accrual and payment of interest.
- Other information that becomes known to the bank in the course of customer service and financial transactions.
Legal basis for banking secrecy
The Constitution of Ukraine
The Constitution of Ukraine guarantees the right to privacy, protection of personal data and confidential information. This provides the legal basis for the protection of banking secrecy.
Civil Code of Ukraine
The Civil Code of Ukraine (the "CCU") regulates the protection of information constituting a banking secret and defines the rights and obligations of the parties to maintain confidentiality.
Law of Ukraine "On Banks and Banking Activities"
This law is the main legal act regulating banking secrecy. The law defines the concept of banking secrecy, the obligations of banks to maintain it, as well as the conditions and procedure for disclosing information that constitutes banking secrecy.
Law of Ukraine "On Personal Data Protection"
This law establishes the legal framework for the protection of personal data that is part of banking secrecy, defines the rights of personal data subjects and the obligations of banks as personal data owners.
Rights and obligations of banks and clients
Rights of banks
- Processing and storage of information: banks have the right to process and store information that constitutes banking secrecy in order to provide banking services and fulfil contractual obligations.
- Demand forinformation: banks have the right to demand that customers provide information necessary for opening accounts, granting loans and performing other financial transactions.
Banks' obligations
- Keepingbanking secrecy: banks are obliged to ensure confidentiality of information that constitutes banking secrecy and take measures to protect it from unauthorised access, loss, disclosure or distortion.
- Restriction of access to information: banks are obliged to restrict access to information constituting banking secrecy only to employees who need it to perform their duties.
- Disclosure ofinformation only on legal grounds: banks may disclose information that constitutes banking secrecy only if there are legal grounds specified by law (e.g., court decision, request of law enforcement agencies, etc.).
Customer rights
- Protection ofconfidential information: customers have the right to protect their confidential information that constitutes banking secrecy.
- Obtaining information: customers have the right to receive information from the bank about their accounts, account transactions and other information that constitutes banking secrecy, subject to compliance with the law and the terms of the agreement.
- Appealing against violations: customers have the right to appeal against the bank's actions that violate their rights to protect banking secrecy in court or to regulatory authorities.
Client obligations
- Provision of accurate information: customers are obliged to provide the bank with accurate information necessary for opening accounts, granting loans and performing other financial transactions.
- Compliance with theterms of the agreement: customers are obliged to comply with the terms of the agreement concluded with the bank, including requirements for confidentiality of information.
Mechanisms for protecting bank secrecy
Internal bank procedures
Banks must implement internal procedures to protect banking secrecy, including
- Confidentiality policies and procedures: development and implementation of policies and procedures governing access to information, processing and storage of confidential data.
- Employee training: conducting regular training for bank employees on confidentiality requirements and banking secrecy.
- Access control: ensuring control of access to information constituting banking secrecy through technical and organisational measures.
Regulatory supervision
The National Bank of Ukraine supervises banks' compliance with banking secrecy requirements, including
- Inspectionsand audits: conducting inspections and audits of banks for compliance with the requirements of the banking secrecy legislation.
- Enforcementactions: in the event of violations, the NBU has the right to impose enforcement actions on banks, including fines, restrictions on activities or revocation of licences.
Judicial protection
Customers have the right to apply to the courts to protect their rights in cases of breach of bank secrecy requirements. The court may decide to compensate losses, impose fines or take other measures against the bank.
Protection of personal data
The Law of Ukraine "On Protection of Personal Data" sets out requirements for the processing and storage of personal data that is part of banking secrecy. Banks are required to comply with the requirements of this law, including:
- Obtainingconsent to data processing: obtaining consent from customers to process their personal data in cases provided for by law.
- Ensuring data security: taking measures to protect personal data from unauthorised access, loss, disclosure or distortion.
- Providinginformation about data processing: providing clients with information about the processing of their personal data, the purpose of processing, data retention periods, etc.
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