20th December, 2023
Financial institutions collect, process, and handle many personal details about their clients, including identification information, bank account numbers, biometric data, transaction history, and more.
Understanding client confidentiality and protecting privacy is imperative, as it helps build trust and assists with necessary legal compliance.
Client confidentiality refers to the ethical and legal obligation to keep clients’ information private and secure from unauthorised access.
Examples of personal information financial professionals might collect from clients include:
Because of the sensitive nature of such information, client confidentiality is a cornerstone of the financial industry, as it helps build and maintain trust between clients and service providers.
Financial professionals should follow specific best practices to protect client confidentiality and personal information.
Implementing these best practices helps your business comply with essential laws that regulate the collection, use, and sharing of personal information in the finance industry.
Your data collection practices must comply with applicable laws depending on where your financial services are located, like the Australian Privacy Act 1988 or the New Zealand Privacy Act 2020.
Consequently, under such laws, you must ensure the information you collect is accurate, restrict who you disclose it to and who has access to it, and implement adequate safety measures to keep it secure from unauthorised breaches.
While collecting specific client data is necessary for financial institutions, it’s important to focus on data minimisation and only track what’s essential.
Not only is this required by privacy laws, but it also helps reduce the risk of a data breach, something financial institutions often fall victim to.
When financial institutions proactively seek client consent and provide clear notifications about how they use personal information, it enhances client trust.
Appropriate client consent is also necessary to comply with Australian and New Zealand privacy laws.
For example, obtaining cookie consent may be necessary, as internet cookies often collect information that legally qualifies as personal information.
One key aspect of protecting client privacy is limiting who has access to their personal information only to those who are properly trained, authorised, and necessary.
Additionally, you should apply access limitations to digital information and any physical files or documents you may have.
Retaining client data only for as long as necessary helps financial institutions prevent identity theft, fraud, and other cybersecurity risks.
Also, if data privacy laws apply, you may be legally obligated to dispose of client information as soon as it’s no longer needed.
Firstly, it’s essential to review and update your legal policies and practices regularly. Consequently, this helps ensure the information you present to clients remains accurate, up-to-date, and legally compliant.
Additionally, have protocols for updating documents, and don’t forget to review items like your disclaimers and terms and conditions agreement.
Firstly, you must implement reasonable security measures to protect personal data collected from clients.
As a result, some possible security measures you might implement include:
Many laws and rules impact how financial service organisations protect the integrity and confidentiality of client data.
Consequently, understanding how these laws affect your business is essential for legal compliance.
When handling customer data, financial services are impacted by several specific Australian laws and regulations, including the following:
Banks in Australia are also subject to common law and contractual duties. For instance, this includes keeping customer information confidential, including consent, compulsion of law, and duty to the public.
For New Zealand financial institutions, the following laws impact how you should handle client privacy and confidentiality:
Maintaining client confidentiality is an essential component, both for legal purposes and to foster integrity and trust.
Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.