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8â Banking Conduct Regime

overrode the duty of banker-customer confidentiality’.152 The third exception,

the interests of the bank, could apply where a bank sues its customer for debt.

Ellinger et al. took the view that ‘this qualification will most obviously cover the

situation where a bank commences proceedings against its customer to recover

an unpaid loan or overdraft facility and the bank has to disclose in the plead-

ings the extent of the customer’s liabilities.153 The final exception is where the

customer authorised the bank to disclose certain information. It has, however,

also been suggested that a further very important restriction on a bank’s duty of

confidentiality arises in relation to reporting allegations of money laundering.

Under the Proceeds of Crime Act 2002 and the Money Laundering Regulations

2007, a banker is required to report any suspicious activity to the bank’s money

laundering reporting officer (MLRO), who will then file a suspicious activity

report with the Serious Organised Crime Agency. Failure to comply with these

reporting obligations could result, if convicted, in a custodial sentence and/or

the imposition of a financial penalty by the FSA. However, it has been argued

that the money laundering reporting provisions of the Proceeds of Crime Act

2002 are ‘vulnerable to attack through the Human Rights Act 1998 and in par-

ticular, through Article 8 of the European Convention on Human Rights’.154

Q3 What is the significance of the decision in Tournier v. National Provincial

Union Bank of England?

458

Banking and finance law

The Banking Conduct Regime consists of three very important parts: the

full application of the FSA’s Principles for Businesses; the conduct of business

requirements of the Payment Services Regulations 2009, SI 2009/209; and the

Banking Conduct of Business Sourcebook.

(a)â Banking Conduct of Business Sourcebook

The Banking Conduct of Business Sourcebook applies to all firms that accept

deposits from banking customers and those who provide current and savings

accounts. The FSA published a consultation paper in 2008 that outlined its

proposed structure as to how banks should treat their customers.157 Richards-

Carpenter et al., stated:

These proposals follow the speech made in July 2007 by John Tiner, the former

chief executive of FSA, at a meeting of the High Level City Group in which he

indicated that, among other things, FSA should bring the conduct of deposit-

taking business solely under its ‘umbrella’. The reasoning being that this would

eliminate the ‘regulatory gaps’ that existed.158

Cartwright noted that the Banking Conduct of Business Sourcebook:

is concerned, therefore, with conduct of business requirements in areas of

retail banking that are not circumscribed by the Directive. The FSA uses the

language of ‘retail banking services’ to encapsulate the activities covered by

[the Banking Conduct of Business Sourcebook] BCOBS. This covers many

of the services which are not dictated by the Regulations, but which involve

retail banking, such as accepting deposits and providing related services such

as foreign exchange. Some areas are currently covered by COBS and would

largely be carried forward. In other areas, BCOBS will introduce new high-

level rules. Many of these issues were previously incorporated into the Banking

Code, and one area of concern has been whether protection would be lost in a

move to BCOBS. BCOBS is intended to apply to UK branches of credit institu-

tions authorised in other European Economic Area states, credit unions and

e-money issuers.159

The Banking Conduct of Business Sourcebook contains rules and guidance

on a wide range of activities including:

•

communications with banking customers and financial promotions;

• distance communications, including the requirements of the Distance

Marketing Directive 2002/65/EC and E-commerce Directive 2000/31/EC;

•

information to be communicated to banking customers, including appropri-

ate information and statements of account;

157

Financial Services Authority Consultation Paper 08/19, Regulating Retail Banking Conduct of

Business (London, 2008) and its response to the views received in 2009, FSA, Policy Statement

regulating retail banking conduct of business, feedback on CP08/19 and final rules.

158

Richards et al., above n. 156.

159

Cartwright, above n. 50, at 302–3.