Edis Felić: Are old clients required to provide their salary information to the card issuer?

A group of readers complained to me that Erste Card Club (ECC) is asking them for a confirmation of their employer’s payslip showing their income, for the purpose of updating conducted by this financial institution. The readers believe that ECC has no right to this, while ECC refers to regulations. The response from HNB can also be interpreted as justifying ECC’s move, which, I admit, narrows my space for explanation as I am not sure about their claims. If they are right, then the regulations need to be changed.

In general, the readers have a contract with ECC, which has called them for data updating. They told me that as proof of their income, ECC requires a payslip or a confirmation from the employer regarding their income, or another appropriate confirmation of the source of funds. ECC refers to Article 9, paragraph 2, point 14 of the Law on the Prevention of Money Laundering and Terrorism Financing (ZSPNFT), according to which financial institutions are ‘obliged to implement measures, actions, and procedures prescribed by this law’. This is also emphasized by HNB. Furthermore, ECC claims that the request for the provision of salary or other income data arises from Article 15, paragraph 1, point 4, and Article 37 of the ZSPNFT, according to which they are obliged to ‘implement measures for the continuous monitoring of the business relationship, including the control of transactions that the client performs during the business relationship to ensure that the transactions carried out are in accordance with the knowledge of the obligated entity about the client…’

What exactly does the Law say?

– This also includes, as necessary, data on the source of funds, whereby the documentation and data available to the obligated entity must be updated. A payslip or another appropriate confirmation of the source of funds, depending on the type of employment or other sources of income of ECC clients, is a credible, adequate, and updated document based on which the source of the client’s funds can be confirmed from a reliable and independent source – they state from ECC.

The same is stated by HNB, which means they believe that ECC has the right. A somewhat awkward situation for me, but I will still express my opinion. I have carefully read all the mentioned (and some unmentioned) legal provisions and, from a layman’s perspective, something is unclear to me. Namely, both ECC and HNB refer to the mentioned provisions, but none of them (as ECC claims in the previous quote) states that data on income levels is required for old clients. Article 15 states that the financial institution must continuously monitor the business relationship, including the control of transactions that the client performs during the business relationship and, as necessary, data on the source of funds. However, this concerns the client’s business relationship with ECC, i.e., how much they spend money through ECC, not that ECC needs to know what their salary is. ECC can provide data on money spending to the relevant authority, as well as data on the source of income, which means that the client needs to state what their sources of income are, and possibly, if it is insisted upon, a confirmation of what their sources of income are (for example, permanent employment in company X). Therefore, a confirmation of the net salary level is not required.

The payslip is not mentioned

HNB also emphasizes Article 16, paragraph 1, point 2, which prescribes that ‘the obligated entity is required to apply measures of due diligence when conducting an occasional transaction valued at 105 thousand kuna or more’. In that article, ECC also notes, it states that they are obliged to update data for both new and old clients. But again, it does not state that old clients need to provide a payslip.

I am not an expert and it is possible that I am wrong, but it seems to me that the law here is imprecise and therefore subject to interpretation in a way that suits the supervisory body and those who enforce it. However, if I am wrong, then the Law needs to be changed because the relevant authorities can obtain data about our income without us providing that data to those who do not need it.

POST SCRIPTUM

The biggest culprit for this is the state, which has imposed on banks to conduct investigations and analyze clients, which the bankers did not like. But since it is so, why provide data to those who do not need it? For example, ECC (like banks) is obliged to monitor the business relationship and report transactions over 105 thousand kuna to the Office for the Prevention of Money Laundering, which should, presumably, further analyze the data. And the data on the net salary level can be obtained by the Office from the client’s main bank, as well as from the employer, the Tax Administration, or whoever the client has a business cooperation agreement with, and why is it now necessary for another financial institution, in this case, ECC, to have that data in addition to the client’s bank? This really makes no sense, and I believe that the readers who contacted me have the right to be upset.

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