Good Practices: Banking Sector

b. & c. The amount and types of information provided in practice by banks to customers concerning money transfers appears to vary. Banks did not provide copies of the brochures or information sheets that might be available describing the fees, time frames and other conditions of the transfers. Although there is no indication that there are significant misunderstandings on these issues, the lack of a consistent form for provision of the relevant information is likely to make it more difficult for customers to compare competing services.

d. Instruction #162 specifies the information that must be contained in a request for a foreign currency transfer by the sending party. This includes the relevant information about the transfer itself (amount, sender’s information, recipient’s information, and so forth), but does not include information about the costs of the transfer. There is no requirement in the instructions that a copy of the request be provided to the sender or any information on what should be included in any receipt provided to the sender. The Instruction also includes information on when a written record (Form 377) must be made concerning the receipt of a foreign currency transfer. Where such a record is made, the original must be given to the recipient, but Form 377 is mandatory only for transfers above US$10,000 and issued by request of the recipient for lesser amounts.

e. There are no provisions in law or regulations specifying the procedures that need to be observed in cases of fraud, error or other problem, nor any destination outside the bank or transfer point to which a customer can go to have a complaint resolved. A provision in the law “On Banking Activity” does require that in the case of a delay beyond statutory time limits in a transfer into a customer account, the bank must pay interest on the sum in the amount of the NBT refinance rate. Because this provision refers to customer accounts, it would not appear to be applicable to money transfers accomplished without the opening of an account.

f. Electronic payment cards are just coming into use in Tajikistan, and include cards used to access a specific deposit account for cash withdrawals and make debit payments, prepaid cards that do not access a specific account, and credit cards. Credit card accounts are still relatively rare. Card accounts are governed by the terms of the general laws on banking activity and Instruction #190 of the NBT “On the Procedure for the Provision of Services By Means of Bank Payment Cards.” Chapter 2 of the Instruction requires that the contract between the customer and the bank concerning a card account include provisions on (inter alia) the size and type of commissions (bank fees) to be paid. Although the Instruction does not specify fees for foreign transactions specifically, this requirement should, presumably, include the fees and commissions related to the use of the card in foreign locations, if such use of the card is possible. Whether such fees are, in practice, specified in relation to cards that can be used internationally is not clear as no standard bank contracts were obtain for review during the diagnostic. See also section C.5, above, concerning payment cards.

Recommendation	The NBT should issue clear instructions concerning the information that must be made available to customers concerning money transfer operations, the form in which it should be provided, the receipt or other records that are to be provided to the sender and recipient, and the rights and liabilities of the parties and proper procedures in the case of errors, delays, fraud. These provisions could be included in an expansion of Instruction #162. Banks should be required by these instructions to have a procedure in place to address problems and complaints and to provide clear information to consumers concerning how they should contact the bank in such instances.
Good Practice C.8	Debt Recovery A bank, agent of a bank and any third party should be prohibited from employing any abusive debt collection practice against any customer of the bank, including the use of any false statement, any unfair practice or the giving of false credit information to others. The type of debt that can be collected on behalf of a bank, the person who can collect any such debt and the manner in which that debt can be collected should be indicated to the customer of the bank when the credit agreement giving rise to the debt is entered into between the bank and the customer. A debt collector should not contact any third party about a bank customer’s debt without informing that party of the debt collector’s right to do so; and the type of information that the debt collector is seeking. Where sale or transfer of debt without borrower consent is allowed by law, the borrower should be: notified of the sale or transfer within a reasonable number of days; informed that the borrower remains obligated on the debt; and provided with information as to where to make payment, as well as the purchaser’s or transferee’s contact information.
Description	According to information provided by NBT during the diagnostic review, third party debt collection and sale of debt to others are not practiced in Tajikistan. Banks are responsible for collecting their own debts and do so through their internal legal departments. a. NBT Instruction #186 “On the Procedure for the Provision of Credit and the Calculation of Interest in Credit Organizations” contains instructions to credit organizations concerning the treatment of loans that are in difficulty (Chapter 8). The instructions, however, appear designed to assist banks and other organizations in addressing these problems and suggesting steps to be taken rather than to prevent specific kinds of bad behavior by debt collection staff. Provisions of Instruction #186, as most other Instructions of NBT, do not distinguish between bank clients that are larger businesses or other legal entities, bank clients that are individual entrepreneurs, and bank clients that are private individuals using banking services for personal needs. According to Instruction #186, a bank or other credit organization must create a structural subdivision to deal with all late and otherwise problematic credits (point 52). The Instruction requires or advises a variety of steps, including study of the liquidity and value of property serving as security, provision for payment of debt from other sources, and so forth. In addition, the bank is instructed to conduct continuing work with the borrower in the form of notices to the borrower that the credit is overdue for payment, conduct of negotiations, calling the borrower in to the bank office, and provision of information on the client to the credit bureau. All actions of the staff in relation to the client are to be in accordance with the laws and regulations, and “within the bounds of universally recognized ethical norms” (point 63). In relation to credits that have been written off due to the poor likelihood of payment, banks are instructed (Chapter 9) to continue to conduct collection work to seek payment where possible. Measures to be taken by banks may include regular searches of the press and other mass media to locate information on the borrower that would indicate an ability to pay and also the maintenance of regular contact with relatives and friends of a borrower that is an individual if the failure to pay is connected with an inability to locate the debtor (point 74). There are no further provisions regulating the acceptability of specific actions of debt collection staff. Actions such as false statements or other actions that could have the effect of damaging a consumer’s reputation may be punishable under general legal rules concerning libel or slander. There was no indication during the diagnostic review that abusive behavior by debt collectors is a significant problem in Tajikistan at this time, although it should be noted that there were no avenues to obtain information on this issue from bank clients. For their part, banks reported difficulties in executing on property provided as security for a loan by individuals, including in particular real estate. According to the banks, difficulties are encountered even in cases in which all of the specific legal formalities for pledge of the property have been observed, due to both moral (social) concerns about eviction of families that may not have other housing options and more general legal questions based on the constitutional right or human right to adequate housing. While this is a specific issue, it may indicate the presence of broader social norms capable of deterring some of the worst forms of abuse seen in some other systems. b. & c. There are no legal rules governing these practices and disclosures and no disclosure appears to be made by banks. As third party debt collection is not practiced, disclosures and rules would related only to bank staff. d. Sale of debt does not appear to be practiced.
Recommendation	On the basis of the limited information available during the diagnostic review, systematic abuses by third party debt collectors and debt collection staff of banks did not appear to be a pressing problem at this time. Although it would not be inappropriate for NBT to issue more detailed rules preventing inappropriate behavior, the specific behaviors that might need to be addressed and rules that are needed are not clear. NBT, and also consumer protection authorities and organizations, should remain alert to indications that abusive behavior is, or is becoming, a problem and NBT should take immediate steps to address it in instructions and in its bank supervision activities if necessary. To the extent that any abusive behavior is occurring on an informal basis rather than through formal debt collection activity, other authorities (police, public prosecutors, local government bodies) may need to be involved and rules preventing such abuses may need to be embodied in the Code of Administrative Violations and/or the Criminal Code so that they can be enforced.
Good Practice C.9	Foreclosure of mortgaged or charged property In the event that a bank exercises its right to foreclose on a property that serves as collateral for a loan, the bank should inform the consumer in writing in advance of the procedures involved, and the process to be employed by the bank to foreclose on the property it holds as collateral and the consequences thereof to the consumer. At the same time, the bank should inform the consumer of the legal remedies and options available to him or her in respect of the foreclosure process. If applicable, the bank should draw the consumer’s attention to the fact that the bank has a legal right to recover the balance of the debt due in the event the proceeds from the sale of the foreclosed property are not sufficient to fully discharge the outstanding amount. In the event the mortgage contract or charge agreement permits the bank to enforce the contract without court assistance, the bank should ensure that it employs professional and legal means to enforce the contract, including regarding the sale of the property.
Description__a._–_e.'>Description	Consumer credit in Tajikistan is very limited. There was a report of consumer credit beginning to be available for purchase of durable household goods, but the availability of such credit and whether any security interest was taken in the goods or in other property could not be verified during the diagnostic. Credit to consumers is primarily available for purchase or improvement of housing, with a security interest taken in the house. Credit is also available to individuals for income-earning activities, and these loans also generally require security in real estate. In some cases, a bank will accept a security interest in valuables deposited at the bank, but this appears to be rare. Thus, mortgage of housing is the only commonly used security in property. Chapter 6 of the law “On Banking Activity” contains some general principles on security in property, but these are applicable to all forms of such security and many are not appropriate for security in real estate that serves as the home of the borrower. Examples include requirements that the credit organization have a plan for control over the condition of the property and that the contract specify in detail all of the conditions for the use of the secured property and also the use of income from its use. The law also specifies, however, that relations between the parties are to be fully governed by the laws on mortgage and on security in property.^5 a. Chapter 8 of the law “On Banking Activity” requires the bank to notify the borrower when the credit is overdue for payment and explain the possible consequences and to conduct negotiation with the borrower about the possibilities for repayment. b. & c. Neither the law nor any NBT regulatory instructions specify the content of the notice to be given, nor establish any requirements that bank inform customers concerning their rights during the process of execution against property. d. The general rule, established by the law “On Mortgage,” is that execution against secured immoveable property takes place through a court proceeding. The only exception to this is in instances in which there is an agreement for execution without a court proceeding that is concluded between the parties after the grounds for execution against the security arose. Banks report that in practice foreclosure on mortgaged real estate presents significant problems, due to the long legal processes involved and in some cases to legal questions about conflict with rights to housing or unwillingness of those participating in eviction processes to deprive a family of its housing if there are not clear alternatives. Foreclosure was described as taking a year or more. For this reason, banks make every attempt to avoid foreclosure proceedings. They describe a policy of work with debtors to reschedule and to find alternate means of repayment, and where sale of the property is necessary they attempt to work together with the debtor to arrange a voluntary sale for the highest price. No information was available during the diagnostic on the prevalence of foreclosures as a means of debt repayment (or of voluntary sales in anticipation of foreclosure) or on consumer perceptions of the process. Discussion with banks suggested that although customers must go through a significant number of formalities before being able to establish a security interest in real estate – including obtaining the consent of all parties who have an interest, such as family members and children – customers may still not fully understand the potential consequences of the agreement or the process by which the bank will seek to enforce it if necessary. It may be appropriate for a clear and simple statement to be developed that would be suitable for provision to borrowers at the time that they are considering the contract, and also again at the time that the bank notifies a borrower of the possibility of execution on the property.
Recommendation	NBT should, with input from banks and from representatives of consumers, develop a statement of basic information in plain language that makes clear to a consumer the meaning and risks of a security interest (mortgage) in property, the process for execution on the property if the debt is not paid, and the consumer’s rights during that process. Banks could be required to provide this statement to consumers taking mortgage loans (and also to individuals taking loans for income-earning activity that involve security interests in their homes) and to include a copy of the statement in the notice to the borrower that enforcement against the property is being considered.
Good Practice C.10	Bankruptcy of Individuals A bank should inform its individual customers in a timely manner and in writing on what basis the bank will seek to render a customer bankrupt, the steps it will take in this respect and the consequences of any individual’s bankruptcy. Every individual customer should be given adequate notice and information by his or her bank to enable the customer to avoid bankruptcy. Either directly or through its association of banks, every bank should make counseling services available to customers who are bankrupt or likely to become bankrupt. The law should enable an individual to: declare his or her intention to present a debtor’s petition for a declaration of bankruptcy; propose a debt agreement; propose a personal bankruptcy agreement; or enter into voluntary bankruptcy. Any institution acting as the bankruptcy office or trustee responsible for the administration and regulation of the personal bankruptcy system should provide adequate information to consumers on their options to deal with their own unmanageable debt.
Description	a. – e. Tajik law does not provide for bankruptcy proceedings in relation to private individuals and banks cannot therefore make a creditor’s petition for bankruptcy against an individual consumer who is in debt to the bank. At the present time, individual consumers are only able to obtain credit against a security interest in real estate or (in limited circumstances) deposit of valuables with the bank or guarantee by third parties. In the event of failure to pay, the bank’s recourse is to foreclose on the secured property.
Recommendation	No recommendation for changes in this area. A law on individual bankruptcy would not improve protection of individual debtors at this time, would be unlikely to be understood by consumers, and could be subject to abuses.
SECTION D	PRIVACY AND DATA PROTECTION
Good Practice D.1	Confidentiality and Security of Customers’ Information The banking transactions of any bank customer should be kept confidential by his or her bank. The law should require a bank to ensure that it protects the confidentiality and security of the personal data of its customers against any anticipated threats or hazards to the security or integrity of such information, as well as against unauthorized access.
Description	a. Legal rules clearly define customer information as a banking secret and restrict the circumstances in which it may be transferred or revealed. Chapter 8 of the law “On Banking Activity” is devoted to confidentiality of customer information and defines (Article 48) as a banking secret information on: -- the fact of existence of bank accounts, their owners, presence of funds in accounts, and transactions in accounts; -- money transfers made without the opening of an account; -- money and other valuables stored at a bank. With respect to bank accounts, the secrecy of the information listed is also provided for in Instruction #171 of the NBT concerning procedures for opening, transfer and closure of bank accounts. Secrecy of banking information remains in force after the termination of the business relationship between the bank and the client and binds bank employees after termination of employment, employees and inspectors of NBT, persons appointed to conduct supervision activity, and anyone else who by virtue of their profession or activity has access to the information (Article 49). In the case of termination of a banking relationship by death of a client, information can be provided to the person indicated in a will or to the court, notarial office, or foreign consular office handling the estate of the deceased client. b. Banks have the right (but are not required) to create a specialized service within the bank to protect security of information and of property located in the bank, and may use special technological means and armed personnel. The law and instructions do not address directly anticipated threats or hazards or require specific actions of the bank in relation to information security. Bank employees or others with access due to an official or work position who reveal or use banking secrets may be subjected to criminal punishment in the form of fines of from 10,000 to 21,880 somoni^6 or a term of imprisonment of up to five years, with deprivation of the right to hold certain kinds of positions for up to five years (Criminal Code, Article 278). But criminal liability is limited to those who use or reveal the information from motives of gain or personal interest, and only if significant damages are caused to a commercial organization or individual entrepreneur. Prosecution requires a private complaint from an injured party. Illegal receipt of banking secrets is also a criminal offense (Article 277), punishable by a fine of from 10,000 to 14,400 somoni^7 or imprisonment of up to two years. The receipt must be by illegal means (the article lists theft of documents, theft of electronic information, and bribery or threat as examples) and for the purpose of the revelation or illegal use of the information. None of those interviewed for this diagnostic review were aware of any instance of the application of the criminal law provisions. This is not especially surprising, as the provisions seem somewhat inconsistent and may be difficult to apply. Illegal receipt of banking secrets related to private individuals would seem to be covered by the criminal provisions, but not the revelation or use of the same information, unless it causes commercial damage. If the initial revelation or the means of receipt was not illegal – for example, a bank employee was simply gossiping about a bank client or if the initial source of information cannot be shown – neither provision would seem to apply. The nature of damages and proof of causation by the revelation of banking information are also likely to be problematic. There do not appear to be less serious, administrative sanctions available against individuals in relation to improper revelation of banking secrets. The law “On the National Bank of Tajikistan” provides for the NBT to undertake yearly inspections of banks to determine (among other things) whether the bank is in compliance with all of the applicable laws and regulations (instructions). A finding that a bank was failing to provide for the protection of bank secrets might qualify as a violation of the provisions of the law “On Banking Activity” on the issue and of those instructions that repeat secrecy requirements. Under these circumstances, the NBT could be authorized to take corrective measures under Article 48 of the law on the NBT. The primary measures available to remedy a problem would seem to be issuance of an order or directive to the bank and/or demand that the bank submit an action plan to eliminate problems.^8 Even this form of enforcement of secrecy requirements may be difficult, however, since the existing law and instructions do not include specific rules for the treatment and storage of customer information and NBT would not necessarily receive an indication of a lax attitude toward secrecy during an inspection of bank premises and records. Although banks interviewed for this diagnostic did not perceive a problem with customer confidentiality, some did note that consumers regularly expressed a desire to keep their banking matters completely confidential and did not, therefore, want the bank to send any written records to home or business. Banking customers and the general public, however, do not appear to believe that secrecy rules are enforced in practice and fear that their financial information will be revealed to tax and other authorities, local officials, or private parties who may have predatory intentions. Concern over this issue was a commonly cited reason for avoidance of use of the banking system. A visible improvement in this area will be necessary before some consumers will be willing to consider the use of banks for most or all of their financial dealings.