When Bank Leumi Discloses Confidential Banking Information, About Bank Abuse of the Elderly and on Ongoing Power of Attorney

When Bank Leumi Discloses Confidential Banking Information, About Bank Abuse of the Elderly and on Ongoing Power of Attorney

Doron Afik, Esq.
September 5, 2020

There is no denying that banking secrecy is one of the cornerstones of the banking system. After all, who would agree to deposit money with a bank, when there is a risk that the bank will reveal to others how much money the customer has? But does banking secrecy apply when the bank receives a foreclosure order on the customer's name (but not on any customer's account held by it)? The Tel Aviv District Court so believes, and in a holding dated September, 03 2020, it even clarified that Bank Leumi was not allowed to provide a customer's ex-wife with private data on the contents of the account of his elderly parents and did not accept Bank Leumi's position that once a foreclosure order is issued, the banking secrecy collapses, even towards an elderly couple of 83 and 86 years old, which have nothing to do with the foreclosure order. ()

The Supreme Court of Israel held already in 1993 that banking secrecy is intended to prevent a situation in which information about the customer's financial operations and financial situation would become public domain and emphasized that the entire banking system is based on a relationship of trust and a duty of confidentiality. There are cases where a bank may be required to disclose information relevant to the customer's Court proceedings, but this will be in exceptional cases and only in very rare cases can information belonging to a non-party to a legal proceeding, in which the information is requested, be disclosed. But what happens when a bank receives a foreclosure order that is not clear to it? Can the bank is such case simply disclose any data? This was the position of Bank Leumi, but the Tel Aviv District Court did not agree with it, to say the least.

In a divorce dispute, the divorcee of a Bank Leumi client (son of the elderly couple) initiated an enforcement proceeding and even succeeded in convincing the Office of Execution (of Court verdicts) to issue foreclosure order even before her divorcee knew that an enforcement case had been opened against him. The District Court later accepted the appeal of the judgment which was the basis for the execution case and the divorcee was even required to repay funds, however this detail is less material to our case. The son was registered for decades as an additional owner in the account of his elderly parents, in case of emergency, from the time when a similar result could not be reached through a lasting power of attorney, and one day he discovered (from documents his ex-wife filed in Court) that not only did the bank foreclosed the bank account of his parents, but Bank Leumi even sent his ex-wife data about the contents of the account. Bank Leumi initially sent a letter in which it apologized for the mistake but clarified that it was not responsible because within two months it removed the foreclosure and therefore no damage was caused. The bank later argued, as part of the District Court proceeding, that banking secrecy did not apply at all from the moment there was a proceeding involving a customer. The District Court not only held that Bank Leumi was not allowed to provide confidential information about the account, but that in case a foreclosure order is unclear the bank is required to request clarifications or alternatively contact the account holder for clarification or prior notice. Thus, Bank Leumi acted unreasonably and had to compensate its customers.

Surprisingly, the Court held against Bank Leumi a very low amount of ILS 25,000 compensation and reimbursement of legal expenses - an amount that does not reach the legal costs of case management and thus created an incentive for other banks to act as Bank Leumi and not only ignore banking secrecy but also abuse 83 and 86-year-old customers who managed an account with it for many decades. However, in the age of the Internet, the clear statements of the Court against the conduct of Bank Leumi are of great importance, to remind Bank Leumi in particular, but also other banks, of the importance of banking secrecy.

And what lessons should the general public learn from this affair beyond the question that everyone should ask themselves, whether to keep an account with such a bank? Bank Leumi disclosed information on the private account of two elderly people because a foreclosure was imposed on the name of their son, who was registered as another owner of the account, in case of emergency. As of 2016, Israeli law allows for the creation of a lasting power of attorney, which eliminates the need to register as an additional owner and it is important to approach a lawyer with many years of experience in the commercial field and trained in the field to assist in drafting this important document.(+)

() Civil Appeal 35516-04-20 Afik & Co. v. Bank Leumi LeIsrael Ltd., 03.09.2020 - https://he.afiklaw.com/caselaw/11186 (Hebrew)
(+) Read more at: “Lasting Power of Attorney–A Legal Guiding Light for a Foggy Day”, (Afik News 279, 27.03.2019), https://www.afiklaw.com/newsletter/n279