Financial privacy refers to the maintaining by financial institutions of confidentiality of customer and transactional information, with such information not being provided to anybody outside the institution, and even then limited to those people inside the organization who have a specific need to know that information. The primary principle is that customers of a financial institution are entitled to a high level of privacy for their personal and transaction information. However, complete anonymity poses other community issues, such as combating criminal activity, tax evasion, money laundering, as well as national security issues in order to stop financing of terrorism. Such community concerns can only override the principle of personal privacy by express law to that effect.
The term is also used to describe the issue of financial institutions selling customer information to third parties for marketing purposes, and especially for telemarketing purposes. This issue however is mixed with the issue of financial institutions sharing information within themselves, which could be considered "sharing information between companies" or "affiliate sharing" since a financial institution is not allowed to be one company for regulatory reasons, but instead must assume a holding company structure.
The use by marketers of customer information has been criticized. In the United States there is widespread community anger against telemarketers which led to the United States National Do Not Call Registry also was focused on what some alleged to be the source of many of the telemarketers leads: financial institutions selling things like balances and transaction information. Financial services companies, those that offer both banking, insurance, and investment products however say that the issue and attempted legislation on the topic was brought on by smaller financial institutions who simply focused on one type of product or business. The reason for this is that combining all those products with one company creates a Walmart style economies of scale and other synergies which are difficult to compete against as a single product line company. By putting forth legislation which forbids financial institutions from sharing information with other companies, single-product-line financial institutions could cripple integrated financial services companies because of the technicality that the banking, investments, and insurance parts of the business had to be operated under separate company affiliates within a holding company. Most financial services companies claim that they never had sold information to non financial services companies. Some critics of financial institutions agreed with this analysis but continued to press for the legislation because they believed that the financial services integrated business model was fundamentally wrong; however the vast majority of critical articles focused on the issue of selling information to outside telemarketers.
- Banking Privacy Survey