Bank's Duty of Confidentiality

Mondaq Business Briefing › Austria Law Articles in English (2005)

Author position: Binder Grösswang Rechtsanwälte OEG

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Bank's Duty of Confidentiality

Article by Michael Kutschera, Thomas Schirmer and Alexander Kramer

Introduction

Austrian law expressly recognises and protects a bank's duty of confidentiality (sometimes referred to as 'bank secrecy') with respect to information received by or relating to its customers. This duty is primarily governed by s 38(1) to (4) (scope and exceptions) and s 101 (criminal liability) of the Banking Act (BWG) and supplemented by several provisions of a procedural nature such as the Revenues Penal Code and the Criminal Procedure Code.

Section 38(5) of the BWG, a provision of constitutional law, affords special protection to the provisions of s 38(1) to (4) of the BWG by stipulating that an amendment of these provisions requires - similar to an amendment of a provision of constitutional law - a quorum of at least 50% and a majority of two-thirds of the deputies to the National Counsel (Nationalrat, the more powerful of Austria's two Houses of Parliament).1

Since 1 January 1994, the provisions on bank secrecy were partly amended, in particular with regard to money laundering, as Austrian law and banking practice initially permitted the opening of anonymous accounts in certain cases. In order to avoid the abuse of the Austrian banking system for the purpose of money laundering, Austrian banks in 1989 agreed on the wording of a uniform declaration, according to which each bank voluntarily undertook a number of duties to prevent such abuse.2 These duties were expanded by another declaration on additional duties of diligence in 1992, the compliance with which still was voluntary.

Due to increasing national and international political pressure, as well as the fact that Austria became a full member of the EEA in 1994 and of the EU in 1995, most of the duties contained in the above-mentioned two declarations were implemented into s 39ff of the BWG.3 Furthermore, money laundering was rendered a criminal offence. By amendment of s 40 of the BWG, with effect from 1 Novemb...

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