About secrets and suspicion

Dr. Dimitrios Karathanassis 

In: ContraLegem 2018/2, S. 76ff. 

• Mandate content in legal advice and the claim of  a bank to  be informed about the legal concerns of its customers.  
•   Under the pretext of  due diligence,  banks are increasingly demanding information  concerning  the  legal interests of their customers.   The following applies: legal professional privilege and the right to privacy must be respected. 

Trust and secrets as basic elements of a liberal order 

«There is nothing makes a man suspect much, more than to know little» schreibt Francis Bacon und gibt gleich selber den Rat, wie dieser Argwohn zu beheben sei: «and therefore, men should remedy suspicion by procuring to know more» («Suspicion», in: The Works of Francis Bacon, Vol. 1, Philadelphia 1844). 

It has  not been  created and, to the  author’s knowledge,   has never been the subject of  a research project as to whether Francis Bacon’s works  belong to  the  reading canon of the compliance departments of banks.   However, it  seems that  the banks, consciously following Francis Bacon  or  unconsciously confirming him,  try to follow his advice strictly.  

 A few days ago, as always at this time of year,  invoices were sent to   clients  in my office. As with many other law firms, billing is  done quarterly.  Bound by the lawyer’s code of conduct, every service from a mandate is recorded. The client has the choice whether he   wants these  services  described in  detail and  listed as an attachment at the end of the invoice, or the invoice from  the list of the individual  services  wants to receive separately. 

Mr. X, a client, received the invoice without details because he  wanted  it that way  .  After a few days had passed,  Mr. X called somewhat perplexed. He  had  ordered the payment  from his  bank in Zurich  , but his account manager had  contacted him immediately that  the payment could  only be triggered if the payment had been   made. would receive  the corresponding lawyer’s invoice. The compliance department had asked for it. 

Even before  it could be explained to Mr X  that he  was  neither contractually nor legally obliged to do so, he stated that  he  had already sent the  invoice to the bank, but that the  compliance The department  would still not be  prepared to  approve  the initiation of the payment because it first had to “know” the content of   the   invoiced services. 

It  doesn’t happen often, but with this answer,  the phone receiver almost fell off. In order   to be absolutely sure, the   client was  asked in writing whether he  had really been correctly understood, that the  bank   would have to know the content of the  mandate  before  it fulfils its contractual obligation to  trigger payment. The client confirmed this and was surprised himself. Shortly thereafter, a telephone conversation took place with  the bank’s account manager, in which the latter  confirmed that  the bank  needed this information,  actually meaning that  the  bank  had it  wanted. 

Later,  when I got home,  I dug out my old edition of Bacon  . And lo and behold, in the Meditationes Sacrae (1597) 77  the Latin saying “ipsa scientia  potestas est” appears, which his secretary at the time,  Thomas Hobbes, later described in Leviathan as ”   scientia potentia  est”   (albeit with less conviction). It  is  this quote by Bacon that has been quoted again and   again since then and is a popular subject of PowerPoint presentations and hobby state philosophers sometimes  more, sometimes less taken out of context.  . 

So, according to  Bacon,   knowledge is power.       Consequently,  power   can  be  protected by protecting  the knowledge   that constitutes  power.  This  elementary  task falls  to  the mystery.  From  the biblical  beginning,   in which God deliberately  does not  reveal to Adam and Eve the knowledge of the world, to the priestly castes  of ancient  Babylon  and Egypt, to    the medieval  monasteries    ,  about the emergence of state secrets  parallel  to   the emergence    of nation states  and   continuing to  this day,     secrecy has   a  power-establishing  task. In the   context of the     rule of law,   however, this power-establishing task   changes to   a  power-limiting  function: secrets  apply  not  only to the powerful, but    above all      to  the   powerful. state  power. The individual is  protected by   the state power by providing   him with   secrets  materially (e.g.: personal rights, informational  self-determination, banking secrecy), but  also  formally  (e.g.     Prohibition of torture)     and   granted  as  part of his rights. The  concession of the state   to  its citizens to   have    secrets is the consensual  foundation  of the rulers  with    the governed  in a    constitutional state. . The omniscient and thus  omnipotent  state is   rejected, because without omniknowledge     and without the   right  to omniknowledge  there     is  no  omnipotence    . The possibility  of secrets  then  allows  a distinction to be   made  between  public  and private  life.  While  in  the former  everyone   can see  and participate,   the latter forms  a  protection of the  individual   from  his  fellow human beings. Between  these  two  pillars, protection    from the state   and protection from fellow human beings,    lies  the breeding ground for  individual  freedom  in a  liberal  constitutional state.        Crucially,  this   area  protected  by  secrets  must  not  arouse  suspicion. If he does do so for  reasons  of curiosity  or   the desire for power, which   is all too  human and should not    be   preventable,  the law intervenes  and protects  over  the      Mystery  through  the individual. The individual is  thus   shielded against  the suspicion  of the state  and his fellow human beings.            

Back to the bank and its compliance department. One could  now go on  for pages about the impudence of a Swiss  bank to  want to see the bill of a  Swiss law firm, about the lack     of a contractual  or legal       The fact   that  if the  bank’s request had  gone directly to  the lawyers,  it  would have been an incitement to violate attorney-client privilege   The   fact that this  generates costs for the customer,  the  fact  that it is not the bank’s  task to prevent  the execution of payment orders  from the receipt of payment orders   other information that does  not affect the customer-bank relationship dependent on 78.   However,  there is enough literature available on all this, the position of legal professional privilege in a constitutional state has been dealt with  in detail and the mania of the banks, with   which  they carry out  their supposed duties of care is now also well known. 

The finger was therefore placed on suspicion. It  is   this suspicion, together with the now almost hysterical fear, that is most likely to shake the  foundations of the liberal constitutional state.   Should suspicion of  the state and the citizens among themselves (again)  increasingly  be legally permitted and should the suspicious be given further “rights of intervention”  vis-à-vis   the secret bearers, then  The legal seed, always understood as a construct of defensive rights, which create spaces of freedom, should quickly face its end  . The image of man on which our legal system is based is based  on an individual  who is not accountable for his actions,  as long as they take place  within the legally permissible framework.    Neither to  the state nor to its fellow human beings. 

The much-heard formula “I have nothing to hide”, which    understands the call for  state intervention rights, especially  after terrorist attacks, is the gateway for individual   restrictions. .  Apart from the    fact that  everyone has  something  to  hide (and sometimes just shame),  this formula admits to the suspicion of  having a legal justification. The sufficient suspicion in criminal law,  without which no coercive measure may be ordered, is symbolic of the fact that it  takes more than suspicion to uphold the right  to  Keeping secrets. 

However,  while the suspicion of the state has been increasingly reduced since the  beginning of the Enlightenment  (admittedly with major relapses in the  20th century).            Voices are  becoming louder who  loosen these barriers for fear of terror and catastrophes.  want. This conflict is   far from  over and its outcome is likely to be  groundbreaking for  the  continued existence of the liberal constitutional state of Western character.  The fact that things  can be done differently is shown by the  bonus system now implemented in China, which  evaluates every private  and  public action of individuals in relation to state doctrine and  consequently rewards or sanctions them with bonus points. 

In  the shadow  of this conflict,   however,   increasing  requirements  on banks  and financial intermediaries  have  led  to  state  control mechanisms, with  all  their  restrictions,   now being  transferred to  private individuals. . The verification  of incoming and outgoing money   has  become    mandatory  for banks and is  understood  as a  measure  against  terrorism  and money laundering. However,  the fines and the negative  consequences  in the form  of image losses  due to   media  crucifixion, which   threaten in the  event of failed  due diligence obligations, lead  to   banks    becoming more and more cautious  and   so that they  become  more and  more suspicious.   Under  the umbrella  of compliance, they   assume state  control tasks  and become  state  implementing agents.    However, while  the state  can  only   become  active in the event  of a  concrete  suspicion,   banks  also refuse  harmless  and completely  legal  transactions if  they  themselves   would, nota bene at  its own  discretion,   take risks. As     a result, the ” chilling effect”       achieved extends  control  by   the state  and, in fact, by   private individuals in areas protected   by  secrets. Incidentally, private individuals   themselves  have    discovered the possibility of   playing off the suspicion  (especially  of  the banks) against  the law: in another    case,     a   private  law dispute  of  another  client a   London court  a  world wide  freezing order (WFO) against  his assets.   Of course, this instrument cannot  be used  directly  in Switzerland, 79   requires exequatur. However, the other side  threatened   to   send the WFO and  all  documentation  directly to the banks in order     to    bypass           the state courts. enforce. These  account freezes  would  not have   been carried out     by   state  courts  or  public prosecutor’s  orders, but    by the intervention   of the banks  at  their own  discretion. The result , however ,   would be the same  and it shows the   results  to which   the increasing  suspicion  can  lead. Only  the indication that  such  an  approach  would   trigger  criminal  consequences prevented  the other side from   doing so  in this case. How  the banks,   on the other hand,   would  react if  they  were  “only”  informed about  the  ruling by telephone  and without  presenting the WFO remains  to be seen.              

Finally, the “side effect”  should be mentioned that the information, which is  demanded and obtained out of suspicion,  itself has a value per se. This is particularly evident in this  specific case. The  mandate content required by the bank  is unrelated  to the statutory due diligence obligations.  Rather,  the bank  demanded additional information to which it was   not entitled in order  to generate more knowledge about its customer.  But if knowledge   is  indeed power and Bacon   is right, then it  quickly becomes clear how this  knowledge  puts the bank in a privileged, i.e.  more powerful position  . It may freeze the client’s funds and  refuse payments without consultation   and without being requested by the  courts,  for example in the  case  listed here only hypothetically,    that the content of the mandate contains advice in criminal proceedings and  that this fact  alone is uncomfortable for  the bank  . The customer can defend himself against this approach, but this defense is costly  and time-consuming and even a victory in court does not guarantee  the  It is not possible to survive the facts  of the case unscathed. 

 So  it remains the case  : If suspicion is  allowed, it unfolds a power-protecting function, because in order to (supposedly)  counter  it,  the abandonment of secrets is required, which  actually  should have a power-limiting effect. Francis Bacon himself  wanted to combat suspicion with more knowledge.  For historical reasons, however, he has  not been able to  recognize the elementary necessity of secrets for the existence of the constitutional state  . And yet, in the introduction to  his text on suspicion,  he  seems to  have sensed that sooner or later  the suspicion of  the state restricts freedom and leads to  dictatorship. leads: “They [suspicions] dispose kings to tyranny [… ].» 

 Incidentally, the bank  paid after being emphatically informed  that  the content of the  mandate  was legally protected and that it  had  no claim to know it.