The Challenges in Safeguarding Financial Privacy in South Africa

• Author: Naledi Thabang Masete
• Position: LLB, LLM candidate, University of South Africa, South Africa
• Pages: 248-259

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248

The Challenges in Safeguarding Financial Privacy in South Africa

Naledi Thabang Masete

LLB, LLM candidate

University of South Africa, South Africa

masetnt@unisa.ac.za

Abstract. With the advancement of internet technologies, banks have adopted the use of

technologies to improve the efficiency and effectiven ess of banking services. These tec hnological

advancements have placed legal risks to person’s financial information. The existing legislation

dealing with the protection of co nsumer’s right to privacy do not adequately protect these rights.

Acts such as the National Cre dit Act 34 of 2005

1

makes it difficult to protect financial privacy as it

enables banks to disclose their customers’ information that imp acts on the customers’ right to

financial privacy. Due to insufficient regulation of fin ancial privacy, consumer’s right to privacy

may be compromised. This article will discuss the legal problems encountered in protecting

financial privacy in South Africa and questions of balancing the duty of confidentiality and the

duty to disclose customer’s information.

© 2012 Naledi Thabang Masete . Published by IAIT L. All rights reserved.

1. Introduction

With the fast growth of technology, the speed in which internet banking has b ecome popular and the rise of

fraudulent cases, it has become a priority for many financial service providers to strengthen their means of

protecting their customers’ information. Every customer expects financial privacy from their financial

institutions. In South Africa, section 14 of the Constitution

2

guarantees everyone a right to privacy a nd it is

protected by common law (law of delict) and the Constitution

3

. There is no spec ific legislation that deals only

with the right to financial privacy.

There is a need to protect financial privacy from be ing misused or disclosed to wrongful people. Financial

information runs a risk of being used to commit fraud and money laundering. On 24 November 2008 it was

reported that cr edit card fraud cost South Africa R420-million in 2007 and it has increased by 146 percent

between 2005/2006 and 2007/2008 according to the South African Bankin g Risk Information Centre

(SABRIC).

4

In 2010, credit card fraud losses in South Africa amounted to R22 million, on the natio nal level, the

total banking industry’s fi nancial losses due to credit card fraud decreased by 36 percent from R409.3 million to

R263.8 million.

5

Bank loan fraud is on a rise in South Africa and recently Bloemfontein was affected where

fraudulent salary advices from a non-existent company were used for fraudulent bank loan applications.

6

T he

incidents stated above indicate ho w consumers’ confidential information is at risk and the need to improve the

measures used to safeguard fi nancial privacy. The attack o n financial privacy is not only South Africa’s prob lem

but it is a global problem.

‘Traditionally, banks are required to uphold their duty of confidentialit y to its customers and to protect the

customers’ financial information. However, the duty of confidentiality co nflicts with certain provisions of the

1

The National Credit Act 34 of 2005, (hereinafter referred to as the NCA).

2

The Constitution of the Republic of South Africa 1996 (hereinafter referred to as the Constitution)

3

Ibid.

4

http:www.iol-co.za/news/south-africa/credit-card-fraud-hits-r420m, accessed on 30August 2011.

5

allafrica.com/stories/201012010137.html , accessed on 30 August 2011.

6

http://www.news24.com/SouthAfrica/News/Eight-arrested-for-bank-loan-fraud-20110214 accessed on 30 August 2011.