Bank-Customer Relationship Flashcards
(25 cards)
When does the bank-customer relationship begin?
When a bank account is opened.
What is the legal nature of the bank-customer relationship?
A contract of mandate: the customer is the mandator and the bank is the mandatory.
What are the duties of the bank in this relationship?
To act in good faith and without negligence.
Who can access the Ombudsman for Banking Services?
Individuals and small businesses with turnover under R10 million.
What is the maximum claim limit for the Ombudsman?
R2 million.
What does the Ombudsman consider in resolving disputes?
Code of Banking Practice, legislation, case law, international best practices, equity and fairness.
What is the Code of Banking Practice?
A voluntary code that sets minimum standards for how banks should treat personal and small business customers.
What are banks’ notice requirements for changing terms or discontinuing products?
At least 20 business days’ notice.
How must banks handle customer complaints?
Acknowledge within 3 business days and investigate in a reasonable time.
Can a bank close a customer’s account without notice?
No, reasonable prior notice must be given to the customer’s last known address.
What are customers’ key responsibilities?
- Pay overdrawings, interest, and bank charges
- Exercise reasonable care in drawing payments instructions
- Notify the bank and any known/suspected forgeries
- Reimburse and indemnify bank
Which case established the bank’s duty of confidentiality?
Tournier v National Provincial and Union Bank of England (1924).
What are exceptions to the duty of confidentiality?
- Legal compulsion
- Public duty,
- Bank’s interests, or
- Customer’s consent.
What principle applies when opening accounts under FICA?
Know Your Client (KYC).
What are the consequences of failing to verify a client properly?
The bank may be held liable in delict (e.g., Energy Measurements Pty Ltd v FNB).
What must be verified when opening a bank account?
- Client identity
- Business relationship
- Source of funds.
What determines the level of due diligence under FICA?
The client’s risk profile.
Can a low-risk client open an account without proof of address?
Yes, for financial inclusion purposes.
What happens if a bank can’t conduct ongoing customer due diligence?
The bank must terminate the customer relationship.
What is a Cash Threshold Report (CTR)?
A report required when R25,000+ is deposited in cash, including smaller amounts that add up over a short time.
What is a Suspicious Transaction Report (STR)?
A report required for frequent large transfers into or withdrawals from a minor’s account.
What law governs the bank-customer relationship?
A contract of mandate.
What are the two core duties in this relationship?
Good faith and compliance.
What is the goal of FICA?
To help banks prevent financial crime.
