German Law on Accessing Bank Details Can Go Ahead

[FaGal]

German Law on Accessing Bank Details Can Go Ahead
www.bloomberg.com - March 23, 2005


Germany's highest court ruled that a law that gives more authorities access to people's bank-account details can take effect as planned in April.

A German bank, an unidentified lawyer, a notary, a recipient of welfare payments and a woman receiving housing subsidies had argued that the law shouldn't take effect as it would breach citizens' personal rights. The Federal Constitutional Court today rejected their calls.

Under legislation designed to detect money laundering, financial regulator BaFin can access information such as a customer's name and birth date and when an account is opened. The law taking effect April 1 will extend that access to tax offices, social service departments and labor agencies. It doesn't require evidence of wrongdoing or giving the client prior notification.

To reject the law would ``take away from authorities an instrument that will help levies and social welfare payments be collected fairly,'' the court said in a statement on its Web site. ``Striking a balance between the collection of taxes and social welfare payments and preventing people from misusing these payments is important for public welfare.''

Guidelines

A finance ministry directive of March 10 specified how the law should be applied and said that it would be invoked when the authorities suspected that an offense has been committed, the Karlsruhe, Germany-based court said.

The directive also states that bank details can only be disclosed for specific purposes and for clearly identified people. The authorities can't carry out such investigations before trying other means such as asking the person concerned directly. Citizens must always be informed of data checks after they have been carried out and at the very latest before any legal action is taken.

The rules prevent ``out of the blue'' investigations and ``spot checks of bank accounts without any reason,'' the court said. The advantages of this law will outweigh the disadvantages as long as the authorities comply with the finance ministry's directive, it said.

Today's ruling was an expedited ruling. The court didn't say when it would issue a final decision on the constitutional complaint.

No Amendments

The government welcomed the court's decision and said it doesn't plan to make any changes to the new law.

``The ruling confirms that all remaining concerns about privacy can be ignored,'' German Finance Minister Hans Eichel's spokesman Stefan Giffeler said today in a regular government press briefing. ``It also shows how right it is to check bank accounts, especially after the tax amnesty.''

Eichel introduced a tax amnesty at the start of 2004 for a 15-month period in an attempt to crack down on tax evaders inside and outside Germany. Income declared by the end of last year was taxed at 25 percent, while payments in the first three months of this year fall into a 35 percent tax bracket. The government had received total revenue of ``slightly more than 1 billion euros'' ($1.3 billion) by the end of February, Giffeler said.

The new law doesn't provide blanket access to bank data, and tax offices can only find out at which bank a taxpayer has an account, not the balance or any movements, the finance ministry said on Feb. 15. The rules foster tax honesty and guarantee justice among tax payers.

Personal Rights

Lawmakers, banking groups and the BDST taxpayers' association have criticized the law, saying that it interferes with personal rights and has nothing to do with tax honesty.

The law goes ``too far to breach personal rights because of a suspicion somebody might not be honest about his taxes or even simply because somebody is curious about the accounts of a person,'' Karl Heinz Daeke, president of the BDST Taxpayers' Association said in an interview on Feb. 15.

German cooperative banks association BVR at its annual press conference on March 8 said the law goes against people's basic rights. It would also add ``considerable'' costs for banks and would damage the trust between a bank and its clients, BVR said.

The costs for banks are low when compared with the benefits, the court said. The banks don't breach the trust of their customers because the authorities look for the information without the banks' knowledge, it said.

``The chances aren't too bad that the judges will still object to essential parts of the law'' once they give a final ruling, Manfred Weber, the managing director and chief executive officer of the German BDB banking association, said today in an e- mailed statement.

The case number is 1 BvR 2357/04 and 1 BvQ 2/05.


To contact the reporters on this story:
Claudia Rach in Berlin at crach@bloomberg.net.

To contact the editors responsible for this story:
Catherine Hickley at chickley@bloomberg.net.