Analysis On The Legal Control And Regulation Over Protection Of Financial Privacy Of Banks’ Customers With Regards To Internet Banking

Nowadays because of the huge need of information, the confidential information of individuals is not only useful but also has economic values. Banks, serving as one of the most important part of our daily financial life, have the opportunities to obtain huge amount of clients’ financial privacy during their provision of services. The fact that bankers have access to a mountain of information involving customers’ financial dealings, which they would like to hide from the gaze of their commercial competitors or, sometimes even their family, makes the bank confidentiality play an essential role in the maintenance of customers’ confidence in the banking system.The internet bank is regarded as the wave of the future. It not only provides the customers with easier, quicker and more convenient methods of money transaction and platform of banking services, but also enables banks to further extend their customer without geographic restriction with lower cost and more efficiency. On the other hand, E-Banking fulfilled the demand of rapid and precise multinational and cross-border banking services due to the globalization and it promotes competition between banks as well as other financial institutions. The adoption of Information Technology into banking services changed the internal operations in banks, the value chain in the entire financial industry and the interaction of banks with their customers. However, the current situation demonstrates that majority of customers still have critical attitudes towards banking services provided by electronic channels, especially when the usage of internet banks threw threats to the protection of their financial privacy because of its inherently high risks and lack of practical legislation and regulation system. In reality traditional banks still occupy the dominant position in the modern banking industry, which, in other words, demonstrates that E-banking failed to obtain as much popularity as expected.The relationship between a banker and his customer is legal, implied and contractual. Because of the special role of a banker in his customer’s financial transactions, this relationship is largely based on trust. And it has already been accepted that bank’s duty of secrecy is one of the essential part in maintaining customers’ faith in banking system.However, more and more banks chose to abuse and share their clients’ financial privacy without the consent of the relative client in order to seek for their own benefit, which led to a deviation from the traditional banker-customer relationship and finally customers have become parties to a business relationship little different from any other. The expanding of the gray area eventually caused the situation where the clients totally lost faith in the entire financial industry. Furthermore, the high efficiency, borderlessness and the hardness of confirmation of the identity of instructions sender and the authenticity of electronic documents put threats to the financial privacy. The criminals and hackers can take advantage of these characteristic of the internet bank to explore new methods of making benefits, which makes the lose and damage more and more huge and, at the same time, it is harder and harder to investigate this kind of crimes.The conflicts between high risks of internet banks and the fully protection of financial privacy attracted attention of the entire global financial industry. Most developed countries, such as the UK and US, have started their reform in legal control and regulation over the internet banking to relieve the intense between banks and their clients. There are already sophisticated legal control over the banks’ duty of privacy in the UK and US. In the leading cases, the courts provided that the scope of financial privacy not only covers the personal information provided by the clients when start the account but also the information the banks obtained from other sources during the contract period. However, the banks’ duty of privacy also has exceptions. Although they chose the different legislation and regulation modes, the established legal systems with regards to the protection of financial privacy contain something in common.Nevertheless, China do not have efficient and effective practice in this area. Although remarkable progress has been made in the transformation and the reform of the Chinese financial system, especially in the banking sector, since 1978, these changes failed in making the business foundation of Chinese banks completely stable. Compared to the current situation in the UK, major Chinese banks are relatively weak and also, the banking system in China is proved to be not functioning efficiently and, thus, is potentially fragile. However,compared to the sophisticated banking industries in other developed countries, the real and biggest barrier on the perfection of the banking system in China, which should be paid urgent attention to, is the insufficient legal supports, especially when those Internet banking services and products, which expose both banks and customers to high risks, are gradually infiltrated into all sections of the Chinese banking system. Therefore, this dissertation will focus on summarizing the good experiences from the UK and US and, then, try to provide useful suggestions on establishing the protection system of financial privacy in China. Three parts constitute this dissertation, that is introduction, main body and conclusion. There are four chapters in the main body:In the first chapter, it introduces the general history of the banks’ duty of confidentiality and the emergence of internet bank. Also, it discusses the legal essence of the right of financial privacy and the mode of protection.In the second chapter, it analyzes the current legal system of the protection of financial privacy in the UK and US. In addition, it describes potential risks identified by FSA and the fourteen regulation principles provided by the Basel Committee. It also critically compares the effectiveness and efficiency of these legal control methods.The third chapter is about the legislation and regulation situation in China now. It tries to figure out the disadvantages and defects of our legal system via analyzing the reality.In the forth chapter, this dissertation analyzes the trend of the future reform in this area and give some suggestion.