Singapore banking secrecy update

The Singapore High Court decision in of La Dolce Vita Fine Dining Company Ltd v Zhang Lan [2022] SGHC 89 has clarified the scope of documents considered to amount to entries in a banker’s book.

The Court affirmed the Court of Appeal case of Wee Soon Kim Anthony v UBS AG [2003] SGCA 5 (“Anthony Wee”) that information held by a bank considered to be an entry in a banker’s book is limited to “transactional records” concerning a customer. Further, the focus of “transactional records” must remain on transactions and the information that a bank enters into its permanent record concerning a transaction.

In the instant case, the Court held that the identity of the ultimate beneficial owner of a bank account forms part of a bank’s transactional records despite not recording a particular transaction, and the declaration of beneficial owner is an entry in a banker’s book.

Brief Facts

La Dolce Vita Fine Dining Company Ltd (“LDV”) is a judgement creditor of Mdm Zhang under a Hong Kong Judgement dated 20 May 2020 registered in Singapore on 11 November 2020.

Following the Registration Order, LDV commenced a receivership application to receive monies and securities in the bank accounts held with Credit Suisse AG (“CS”) and Deutsche Bank (“DB”) in the name of Success Elegant Trading Ltd (“SETL”) asserting that the assets in the bank accounts are beneficially owned by Mdm Zhang and sought a pre-action discovery against CS and DB for supporting evidence of beneficial ownership.

The basis of the pre-action discovery application was that, pursuant to a freezing order years ago on 2 March 2015 directed against Mdm Zhang, the banks froze the SETL bank accounts which indicates that “CS and DB are in possession of information showing that Mdm Zhang is (or at least was) beneficial owner of the bank accounts.”

SETL contended in response that correspondence and documents identifying the beneficial owner of the bank accounts are protected by banking secrecy under section 47 of the Banking Act 1970 (“BA”), which provides that “Customer information must not, in any way, be disclosed by a bank in Singapore or any of its officers to any other person except as expressly provided in this Act.”

The exceptions to section 47 of the BA listed in the Third Schedule are comprehensive and there is “no room for common law exceptions to banking secrecy to operate” (Susilawati v American Express Bank [2009] SGCA 8).

One exception under paragraph 7 of the Third Schedule is where disclosure is necessary to comply with an order of the Supreme Court or Judge thereof pursuant to the powers under Part IV of the Evidence Act 1893 (“EA”).

LDV’s application for discovery of documents from the banks was made pursuant to section 175(1) of the EA which is under Part IV of the EA: On the application of any party to a legal proceeding, the court or a Judge may order that such party be at liberty to inspect and take copies of any entries in a banker’s book for any of the purposes of such proceedings.

Further, section 170 of the EA defines “banker’s books” to include “includes ledgers, day books, cash books, account books and all other books used in the ordinary business of the bank”.

The central issue before the court was how to interpret “all other books used in the ordinary business of the bank”.

The leading case on what constitutes a “banker’s book” is Anthony Wee. In Anthony Wee, Chao Hick Tin JA held that “any form of permanent record maintained by a bank in relation to the transactions of a customer should be viewed as falling within the scope of that expression”.

After considering the approaches in both the Malaysian (Tey Por Yee & Anor v Protasco Bhd [2021] 1 MLJ 76 (“Protasco”)) and English (Meng v HSBC Bank Plc [2021] EWHC 342 (QB) (“Meng”)) jurisdictions, the Singapore Court in LDV endorsed Anthony Wee and concluded that the banker’s books category is limited to transactional records concerning a customer.

What are “transactional records concerning a customer”?

The focus of “transactional records” must remain on transactions and the information that a bank enters into its permanent record concerning a transaction.

The Court clarified that the “expansion of the range and types of information concerning their customers … that banks gathers and record as a result of regulatory obligations does not of itself mean that such information is entered in the bank’s transactional records”.

Therefore, documents that a bank generates for its own purposes (e.g. checking on the creditworthiness of a customer), for regulatory compliance (e.g. identification documents for an individual customer or incorporation documents of a corporate customer), or account opening forms would not, ipso facto, form part of their transactional records.

The Singapore Court endorsed Fordham J’s remarks in Meng that “whether a transaction has been undertaken – when, by whom for whom, involving what amount and what account, and so on – these transactional facts are readily evidenced by a banker’s record”.

Accordingly, given that the Monetary Authority of Singapore requires banks to also record the identity of the beneficial ownership of the account, the “bank’s record of the beneficial owner of an account is a record of a transactional fact, and therefore forms part of its transactional records despite not recording a particular transaction”. Further, correspondence to a bank that effects a transaction (and is subsequently filed as a part of its permanent record) may form part of the transactional record. The declaration of beneficial ownership, along with any relevant correspondence, would form part of an entry in a banker’s book.

Concluding Remarks

Surprisingly, DB made two submissions which sought to considerably broaden the definition of “banker’s books”, arguing first, that it extended it to any form of permanent record that was integral to the account of a customer, and second, that documents need only relate to transactions in that they affect transactions, whether existing or future, and need not specifically record a particular transaction.

The Court decisively, and correctly in our view, rejected both expansive submissions and emphasised that “the focus must remain on transactions and the information that a bank enters into its permanent record concerning transactions”. To accept such broad definitions of “banker’s books” as proposed by DB would potentially undermine customer privacy and banking secrecy in Singapore.

In view of the foregoing, it appears that a permanent document which evidences or effects a transaction will fall under the “banker’s book” exception to banking secrecy and may be subject to disclosure.