Cross Border Banking : Reconceptualizing Bank Secrecy

Cross Border banking has become the prevailing reality. This fact is reflected twice over: Many banks operate outside their homeland by opening branches and subsidiaries in foreign countries. At the same time, they provide services in their home countries, not only to local citizens but also to foreign customers.One of the predominant characteristics of the banking activity, including the cross-border activity, is bank secrecy. However, banking secrecy is not an absolute value: Different legal systems acknowledge exceptions to the doctrine of bank secrecy, exceptions that require the bank to disclose information regarding its customers.In recent years, banks that are engaged in cross-border activities, find themselves subject to an ever growing number of disclosure obligations of foreign countries, due to the provision of services – in the home country of the bank – to citizens of foreign countries. In other words, the banking secrecy rules of foreign countries have extra-territorial status, hence their broad applicability even on banks outside their country of origin. As a result, an ever progressive process of erosion of the status of bank secrecy can be noticed, specifically vis-à-vis governments. Whereas customer information remains relatively confidential in relation to private third parties, the situation is different when the information is sought by governments and official authorities. The article analyzes the process of the erosion of bank secrecy in cross border activities due to extra-territorial disclosure requirements, and the transformation of the banks into gatekeepers of foreign governments