BankTrack report finds banks hide links to human rights abuses behind "client confidentiality"
In a recent report published by BankTrack, the banking industry is revealed as citing self-imposed client confidentiality to avoid discussing potential links to human rights abuses.
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Press: release: World's biggest banks routinely hide links to human rights and environmental abuses behind client confidentiality
"World's biggest banks routinely hide links to human rights and environmental abuses behind client confidentiality – study", 26 March 2019
Some of the world's biggest banks are routinely hiding behind client confidentiality to conceal investments in companies and projects that infringe human and environmental rights... BankTrack, which campaigns to hold commercial banks accountable, [published] analysis of five years of correspondence with 31 major international banks regarding problematic projects they finance. It finds that in nearly half of all responses (70 of 150), banks said they could not comment on whether they had a relationship with a particular customer or project. Half of those responses cited client confidentiality as the reason. The study also finds no legal obstacles to banks disclosing information about their clients... provided they obtain client consent. In almost all major banking centres, client confidentiality is written into bank contracts but is not a statutory requirement... "When big banks hide links to companies that use child labour, trash rainforests or displace indigenous people, they make accountability for those abuses impossible. Banks routinely claim that they are prevented from disclosing their finance for these companies, but we've found that this is a choice banks make..." said Johan Frijns, Director at BankTrack...
HSBC was the bank found most often to cite client confidentiality as an obstacle to disclosing its clients... The research finds that banks based in the UK, Canada and Asia are the least likely to disclose their clients, with those in mainland Europe the most transparent. Transparency varies significantly across banks in both the USA and Australia... Christian Donaldson, IFI Economic Justice Policy Advisor at Oxfam, said: "...For vulnerable and marginalized communities, the need for transparency and disclosure of such transactions including project-related information is real and urgent. But bank confidentiality practices represent the first major challenge to this approach for development finance..."
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Report: “We are unable to comment on specific customers...” Challenging banks on client confidentiality
The paper includes an analysis of five years of correspondence with big international banks about problematic projects they finance, and finds that in nearly half of all responses, banks said they could not comment on whether they had a relationship with the customer or project in question. Meanwhile other banks are routinely more transparent. The paper explores some of the problems with this, and digs into the legal frameworks around client confidentiality in major banking centres. While this is not an exhaustive legal review, we found that the differences between bank behaviour cannot be explained by national legislation. Further we found no obstacles to banks disclosing information about their clients provided they secure their consent - and no obstacles to banks writing the right to disclose into loan agreements (as a few banks already do).
As we argue in the paper, we consider that greater transparency of bank lending is essential for greater accountability, the effective functioning of grievance mechanisms, and for banks to show how they meet their responsibility to respect human rights. The paper aims to call time on the myth that banks are ‘unable’ to comment on specific customers, and calls on banks to make new corporate lending and project finance contingent on clients consenting to disclosure, and then move towards publishing details of their lending, beginning with high risk sectors. Regulation may be needed to embed this, where voluntary action is not forthcoming ...
The paper and its recommendations are also endorsed by a civil society coalition including Oxfam, Fair Finance Guide International, Accountability Counsel, ACCR, BIC Europe, Bankwatch, Conectas, SOMO, Facing Finance, Les Amis de la Terre France, PAX, Public Eye, RAN and Share Action.