Banking Stealth: Lifting of Reserve and Confidentiality for the collection of Evidence on Arbitrations
Sigilo Bancario: Levantamiento de la Reserva y Confidencialidad para la obtención de Evidencias en Arbitrajes
NATALIA A. DALENZ LORIETO
With the extraordinary development of anti-money laundering regulations, the confidentiality of financial information has displaced banking secrecy from many Latin American jurisdictions. Such is the case of Bolivia, where confidentiality is the guiding principle on which the current financial system is based and built on.
Confidentiality is the tool that allows for the integral protection of a legal asset, object of constitutional protection, such as the individual freedom, and in this case, it translates into the custody of privacy of the financial information.
As a general principle, the regime of exceptions to this rule must be regulated by the principle of specificity, which is established by national Law and must be interpreted restrictively.
This article will analyze the applicability of the exception’s regime to the confidentiality of financial data for evidence gathering in ADR processes.
Key Words: money laundering/ confidentiality/ bank secrecy/ Bolivia/ financial system/ constitutional protection/ individual freedom/ financial information/ exceptions/evidence/ ADR processes.
Con el notable desarrollo de la regulación en materia de lavado de activos, la reserva y la confidencialidad de la información en materia financiera han desplazado al secreto bancario en muchas jurisdicciones de América Latina. Tal es el caso de Bolivia, donde la reserva y la confidencialidad se constituyen en los principios rectores sobre los cuáles se apoya y construye el sistema financiero actual.
La reserva y la confidencialidad son herramientas que permiten la protección integral de un bien jurídico objeto de tutela constitucional como es la libertad individual, y, que, en este caso, se traduce en la custodia de la intimidad y la privacidad de la información financiera.
Como principio general, el régimen de excepciones sobre esta regla debe estar regulado por el principio de máxima taxatividad, hallarse fijado por la Ley nacional y ser interpretado de forma restrictiva.
Este artículo busca analizar la aplicabilidad de la excepción a la reserva y la confidencialidad de la información financiera para la obtención de evidencias en procesos de resolución alternativa de conflictos.
Palabras Clave: lavado de activos/ reserva y confidencialidad/ secreto bancario/ Bolivia/ sistema financiero/ tutela constitucional/ libertad individual/ información financiera/ régimen de excepciones/ evidencias/ resolución alternativa de conflictos.
Com o extraordinário desenvolvimento da regulamentação contra o branqueamento de capitais, a confidencialidade da informação financeira deslocou o sigilo bancário de muitas jurisdições latino-americanas. É o caso da Bolívia, onde a confidencialidade é o princípio orientador sobre o qual o actual sistema financeiro se baseia.
A confidencialidade é o instrumento que permite a protecção integral de um bem jurídico, objecto de protecção constitucional, como a liberdade individual, e neste caso, traduz-se na custódia da privacidade da informação financeira.
Como princípio geral, o regime de excepções a esta regra deve ser regulado pelo princípio da especificidade, que é estabelecido pelo direito nacional e deve ser interpretado de forma restritiva.
Este artigo irá analisar a aplicabilidade do regime de excepções à confidencialidade dos dados financeiros para a recolha de provas em processos de ADR.
Palavras-chave: branqueamento de capitais / confidencialidade / sigilo bancário / Bolívia / sistema financeiro / protecção constitucional / liberdade individual / informação financeira / excepções / processos de ADR.
ADR. -Alternative Dispute Resolution
ASFI. – Financial System Supervisory Authority
FSI. – Financial Secrecy Index
SIN.- Bolivian Tax Authority
UIF. – Financial Investigations Unit
In recent years, banking secrecy has undergone successive transformations, within Bolivia and the rest of the world. Therefore, it is extremely interesting to analyze the evolution of this institute over the time.
A commonly raised legal impediment on the production of evidence in ADR, particularly in disputes involving banks, is the banking secrecy regime. Financial services and general banking legislation around the globe may provide that financial institutions cannot disclose information and documents about accounts held by their clients. Failure to comply with these provisions, may put the financial institution at a genuine risk of sanctions.
Breach of a banking secrecy or a confidentiality regime may, in some jurisdictions, even trigger a criminal prosecution and a later conviction.
For instance, under Bolivian Criminal Code, unauthorized receiving, disclosure, or usage of information, including data covered by confidentiality, made without the permission of its owner, by a person to whom it was entrusted or who has obtained the information during business, constitutes a crime, and shall be punished with fine or by deprivation of liberty.
Evidence is needed during any arbitration procedure, which in some cases, may consist of confidential and secret financial information from the parties in dispute, but which cannot be obtained at any price. Moreover, the possibilities of obtaining information are limited by the rights of citizens and, particularly, by the fundamental rights to privacy and intimacy.
In this context, this article will analyze the regime of exceptions to the confidentiality of financial data for the collection of evidence process on ADR.
The protection that banks and financial institutions must grant to their client’s deposits and any raised funds that they receive from their customers, is known as banking secrecy.
History reveals that banking secrecy was introduced in Switzerland as an indispensable key to the success of today´s Swiss financial industry. It is well known that over the last thirty years, Switzerland has become a leader in cross-border asset management worldwide.
Prior to the Swiss Banking Law of 1934, banking secrecy was mainly based on tradition in this country, there existed laws in some cantons applicable to public banks only, on an unwritten code of confidentiality form and very similar to the professional secrecy, offered by lawyers, doctors and priests according to author Robert Vogler.
There is also a thesis which sustains banking secrecy was created to prevent Nazi spies getting Jewish assets in Switzerland.
Likewise, there is another current claiming that tax evasion made possible by banking secrecy, was clearly the true reason for its introduction on the financial entities.
As shown, there are, undoubtedly, a whole series of hypothesis regarding the origins and significance of banking secrecy in Switzerland.
The truth is, the primary reason for people to transfer their money to Swiss banks was not only banking secrecy, but the tough political, economic, currency and fiscal conditions in other countries. The flow of foreign money into Switzerland was caused by these negative parameters.
With the passing of years, a close association between banking secrecy and crime has been created.
The following case, according to Vogler (2006) is one example, of many others that have occurred, which have damaged the reputation of banking secrecy: In mid-1990s Swiss banks were accused of systematically withholding dormant assets belonging to victims of the Holocaust from their rightful owners; but also, of systematically enriching themselves as result of this system. Banking secrecy had allegedly been used as the pretext that allowed them to get away with Jewish´s wealth.
As it is evident, the financial system can be used as an instrument to legitimize dirty money from illicit activities. In this respect, organized crime seeks manners and best possible strategies to hide enormous profits obtained without arousing the slightest suspicion, devising ingenious ways of concealing what is illegal by giving it the appearance of being legal, giving rise to what is known as money laundering.
Some of the reasons that led to the gradual disappearance of banking secrecy were:
- Evasion of regulatory conditions, e.g., stock market rules, in a specific country;
- Escape from excessive taxes;
- Financial crime and fraud (often combined with money laundering).
Focusing our attention on South America, specifically in Bolivia, it can be evidenced that with the enactment of the Financial Services Law in 2013, banking secrecy was reversed, and the reserve and confidentiality of financial information was recognized. Banks, at present, may enter into confidentiality agreements or undertakings with customers under which express contractual obligations arise.
Before entering more detail, it is important to differentiate between what is meant by reserve and confidentiality of information.
Even if Bolivian regulation does not specifically differentiate between both terms, we can find this differentiation on the Uruguayan Public Information Classification Manual.
Reserved information is that which, for exceptional reasons, is declared as such by a competent authority, to prevent public access to it. To classify information as reserved it is necessary to justify it is imperative and necessary to keep information confidential because it affects a legitimate interest of the State.
On the other hand, confidentiality consists on the protection of an individual´s information. It directly protects right to privacy, a person’s property, information of a business to protect competition, etc. 
IV. Lifting of Reserve and Confidentiality from the Financial Data on Alternative Disputes Resolution
The grounds provided by law for lifting the confidentiality and secrecy of banking information by financial intermediaries are as follows:
- Compulsion by law
The duty to comply with local law overrides the duty of confidentiality. Key legislative provisions require an individual or entity to disclose information under the scenarios described above.
- Prevention of crime
The disclosure of information for the investigation of corruption offences is not treated as a breach of restriction upon the disclosure of information imposed by statute, contract or otherwise under the Law against Corruption, Illicit Enrichment, and Investigation of Fortunes (2010).
Under the law, the UIF, ASFI or any judicial authority may order the production of, or access to, specified documents. A production order may be issued to investigate whether someone has benefited from criminal conduct or to identify the proceeds of any criminal conduct.
Article 473 of the Financial Services Law on the lifting of confidentiality states that the reserve and confidentiality shall not apply when the information is requested by judicial authorities and public authorities investigating crimes, corruption cases, origin of fortunes and illicit gains; tax authorities; the UIF and the ASFI.
Therefore, based on the principle of collaboration with justice and national security, among other reasons, there is a duty to hand over and exchange relevant information for the investigation of money laundering and terrorist financing offences.
There can be extraterritorial aspects to disclosure by compulsion of law. An overseas claimant in proceedings can seek to obtain confidential information from a bank in Bolivia and the reverse situation can occur. The position varies depending upon whether the proceedings are civil or criminal and upon what international treaties or conventions apply.
Information is not only necessary, but also perhaps the most important asset a tax administration has.
The tax Bureau can have very advanced legislation, well-trained officials and even sufficient material resources, nevertheless without good quality information, it- will never be truly effective.
As stated in Article 31.1. of the Spanish Constitution, the duty to communicate tax-relevant data is a necessary instrument not only for a fair contribution to general expenses, but also for an efficient tax management, necessary instrument not only for a fair contribution to general expenses but also for an efficient tax management.
The SIN authority in Bolivia has wide investigatory powers if it suspects non-compliance with statutory provisions regarding tax avoidance through the transfer of assets abroad; it has other powers to obtain information, particularly if it suspects tax fraud. These include powers to oblige third parties, including banks, to disclose documents in relevant circumstances.
Under this understanding, the right to privacy is limited by the duty to contribute. This implies that the constitutional duty citizen’s have to contribute to the State through the payment of taxes implies the non-existence, before the Tax Bureau or other public authorities, of an alleged absolute and unconditional right to reserve of the taxpayer’s economic data with tax transcendence or fiscal relevance, as it would prevent an equitable distribution of the support of public expenditures as a constitutionally protected good.
Certainly, the right to privacy has had to yield to the duty to contribute to public expenses, as it had to yield to other constitutional rights such as the right to receive and communicate truthful information, or to the needs arising from the exercise of employers’ powers of control over their employees.
- Inter-institutional Cooperation
Bolivian legislation provides that private and public Entities must adopt the necessary measures and incorporate in their respective activity areas, the technologies required to promote information exchange with public and private entities.
- Permitted Disclosure with the Costumer´s Consent
If a bank notifies a customer that it proposes or is entitled to disclose specified information and the reason and receives consent (preferably in writing) from the customer, there will be no breach of duty.
If notice is given to a customer by the bank and the customer does not reply, the bank will not necessarily be entitled to assume implied consent.
As a practical matter, consent can be difficult to prove and may easily be withdrawn.
Express provisions consenting to the disclosure of information can be important in documentation for loans where lenders may wish to transfer their interests in the future and in intercreditor deeds where banks with separate relationships may want to share information on customers.
- Lifting of Banking Data for Evidence Production on ADR
During the last years we have witnessed the growing protection of the right to privacy and intimacy due to the speed with which our information can be disseminated thanks to the Information and Communication Technologies.
General prohibitions on processing and transferring personal data will inevitably affect arbitration proceedings in all its stages.
Under Bolivian Law the review of correspondence and documents at the outset of a dispute in preparation thereof, can constitute a breach of the right to intimacy, the purpose of which will have to be compatible with the purpose the data was originally collected for or be covered by consent.
Bank clients may have to be informed that their data may later be processed and transferred in arbitral proceedings in order to avoid the breach of the data owner´s right to confidentiality and reserve of its financial information.
Bolivian regulation does not have a specific data protection law which preserves the proper treatment of personal data, nevertheless financial data is specially protected through an specific regulation issued by ASFI, we refer to the Regulation for the Information Security Management, besides the reserve and confidentiality regulated under the Financial Services Law.
Obligations imposed by the Financial Services Law, regarding confidentiality of financial data, might clash with a document production order by the tribunal, as the documents will contain personal data.
Although at first sight this seems covered by the exemption compliance with a legal requirement, the Financial Services Law specifies that the lifting can only occur for legal orders from an ordinary justice tribunal, not ones created by an arbitral tribunal.
However, there could be an exemption under a «legitimate interest». This will require a careful weighing of interests in the individual case, considering what type of data is being processed (financial data is considered especially sensitive), their volume and possible measures like blackening the relevant documents.
The principle of purpose, security and Confidentiality will also require carefully limiting document production to the extent necessary.
Bank secrecy finds its raison d’être as a manifestation of the right to privacy. In turn, the right to privacy is one of the most precious legal assets, one of the fundamental rights, which is supported by constitutional laws, not only in Bolivia but also in the rest of the world.
The measures for processing financial data, to be adopted in Bolivian financial entities must comply with the provisions of ASFI’s Information Security Management Regulations and the financial entity’s Information Security Policy.
These measures may include, but are not limited to:
- That the employees of financial institution accessing client´s data must maintain the confidentiality of the information, even after the employment relationship has ended.
- Since sensitive information is involved, a legal record must be kept in relation to all the activities that have been carried out.
This means that a detailed report must be made so that all data processing is recorded.
Reserve and confidentiality of financial information, is, definitely, one of the pillars that ensure the legal collection of information without violating, the financial entity clients, right to privacy, except for the exceptions provided by law, including the production of evidence during ADR.
The ICSID tribunal in the case, Caratube International Oil Company LLP and Devincci Salah Hourani v. Republic of Kazakhstan (ICSID Case No. ARB / 13/13), has established a principle whereby an arbitral tribunal may admit as evidence data or documents that were obtained illegally, for example by hacking a computer network.
In this case, the Kazakhstan government’s computer network was hacked and, as a result, the claimants gained access and relied on thousands of confidential documents that were published after the hacking.
Financial data, useful for ADR processes, must be treated according to legitimacy and purpose principles, in order to be used as evidence. Otherwise, the evolution of bank secrecy will end in its total extinction and the consequent suppression of individuals right to privacy.
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Godfrey, G., Newcomb, D., Burke, B., Chen, G., Schmidt, N., Stadler, E., Coucouni, D., Johnston, W. y Boss, W. (2016) Bank Confidentiality – A Dying Duty But Not Dead Yet? International Bar Association.
Villanueva, J., Arias, L. (2010) El secreto bancario. Aspectos históricos y problemática actual. Diálogos Revista Electrónica de Historia.
Vogler, R. (2006) Swiss Banking Secrecy: Origins, Significance, Myth. Association for Financial History.
Criminal Code, Bolivia (1972).
Law Against Corruption and Illicit Enrichment and Investigation of Fortunes “Marcelo Quiroga Santa Cruz” (Law No.004) (2010).
Financial Services Law No. 393, Bolivia (2013).
Regulation for the Security Management of the Information from the Authority for the Supervision of the Financial System (2017).
Compliance Instructions for Financial Intermediation Entities from the Financial Investigations Unit (2019).
Manual de Clasificación de la Información Pública – Uruguay (2020).
Caratube International Oil Company LLP and Devincci Salah Hourani v. Republic of Kazakhstan (ICSID Case No. ARB / 13/13).
 Law Degree from Universidad Católica Boliviana «San Pablo» – La Paz (Bolivia). Master’s in International Business Law at Universitá degli Studi di Padova – Padova (Italy). Independent researcher.
 Public Information Classification Manual- Uruguay (2020).
 See Supreme Decree No.1793, Art. 4, paragraph II.
Natalia Dalenz Lorieto
Abogada especialista en protección de datos personales y nuevas tecnologías con maestría en derecho empresarial internacional, ha estudiado en Bolivia, Italia y Uruguay. Actualmente es abogada senior en una firma internacional de gran prestigio, FERRERE Abogados. Forma parte del equipo de arbitraje y consultoría legal internacional integral.
Recientemente ha realizado un curso formativo en la Universidad de Montevideo en materia de protección de datos bancarios y tributarios. Actualmente, se encuentra realizando el curso «Protección de Datos & Accountability» de la Universidad de Los Andes de Colombia.
Lidera y elabora proyectos sociales enfocados a implementar los Objetivos del Desarrollo del Milenio, para la Asociación “Global Shapers” en el Hub de La Paz auspiciados por el World Economic Forum.
Escribe frecuentemente artículos sobre la situación de la protección de datos en la región en distintos periodicos y plataformas digitales como ser: Status Plataforma Digital, Santa Cruz Económico, periódico digital Guardiana, entre otros. Asimismo ha escrito artículo de arbitraje en la Revista de la Universidad Católica Bolivia y el Very Young Arbitration Blog, una plataforma de interacción académica para jovenes con interés por el Arbitraje.