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The Journal of Applied Science University
An International Journal


Volumes > Vol. 05 > No. 1


The Impact of US Tax Compliance Law on the Disclosure of Bank Secrecy

PP: 89-110
Mohammed Obaid Al-Shuraida,
“Banking Confidentiality” was - until very recently - a safeguarded citadel which many countries, together with their financial institutions, praised as the aforementioned institutions obligated to safeguard their clients’ classified data and banking transactions confidentiality, pursuant to banking contracts, laws, international agreements and norms. This engagement continued unless a clause in a concerned law or an agreement requires otherwise, since the principle of safeguarding banking confidentiality is of the most important principles of the banking business. Since every rule has an exception, the one here is that the banks and financial institutions are under different comparative legislations’ pressure that caused them not to follow the same pace in keeping their (Obligation of Confidentiality) of their banking clients, since there are some legislations that are strict in such trend in: “strictly prohibiting” any disclosure of clients’ classified data - in many cases - even to governments’ public authorities, where other legislations - on the contrary - may be complacent in keeping such data confidential to the above mentioned authorities. Never the less, Banks and Financial Institutions became recently under the pressure of different laws and legislations, whether: “Internal” for (Fighting Money Laundering) crimes, or “External”, demanding Banks and Financial Institutions to disclose confidential clients’ data and declare their information for the purpose of “Public Interest”, or even enforcing the U.S Internal Revenue Service (IRS) law, usually known abbreviated as: (FATCA). This law became the impregnable rock to the waves of safeguarding banking and financial confidentiality, where it grew obligating the financial institutions pursuant to international agreements that involve extreme sanctions imposed on Banks in the event of non-compliance to its legal requirements. While banking and financial confidentiality is a “relatively - old” common principle, there isn’t any independent legislation that deals with banking and financial confidentiality in the Kingdom of Bahrain, where this matter has been regulated through Articles No. (116-120), Chapter (8) of Law Bill No. (64) for the Year 2006, for issuing Bahrain’s Central Bank and Financial Institutions’ Law. This research concludes to demand the enact an independent law that is concerned with banking confidentiality for the substantiality of this matter together with reviewing the sanctions imposed on the crime of: (Disclosure of Banking Confidentiality) and respecting the U.S. Tax Compliance Act which has officially came into effect and obligating to the financial institutions.

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