BACKGROUND

On September 9, 1955 Republic Act No. 1405, an act prohibiting disclosure of or

inquiry into, deposits with any banking institution, was approved. The said act was
promulgated to encourage the public to deposit their money in the bank and to
discourage private hoarding so that the funds may be utilized by the banks to authorize
loans to assist in the economic development.
The said act declares bank deposits and government issued investment in
bonds as confidential in nature and may not be examined, inquired or looked into by any
person, government official, bureau or office. The act also specifies the exceptions as to
how the confidentiality of the said documents is lifted:
1.
Through written confirmation from the depositor in cases of impeachment
2.
Upon order of a competent court in cases of:
a. bribery or dereliction of duty of public officials
b. where the money deposited or invested is the subject matter of the litigation
Likewise, bank officials and employees are prohibited from disclosing any
information concerning the said deposit except for the instances cited above. An
imprisonment of no more than 5 years and/or a fine of not more than P20,000 will be the
penalty for those who will violate this act.
In January 16, 1981, former President Ferdinand Marcos issued an amendment to
R.A. 1405 through Presidential Decree (P.D.) No. 1792. The said P.D. inserted another
exception to the absolute confidentiality of bank deposits, when the examination is
made in the course of a special or general examination of a bank and is specifically
authorized by the Monetary Board after being satisfied that there is reasonable ground to
believe that a bank fraud or serious irregularity has been or is being committed and that
it is necessary to look into the deposit to establish such fraud or irregularity, or when the
examination is made by an independent auditor hired by the bank to conduct its regular
audit provided that the examination is for audit purposes only and the results thereof
shall be for the exclusive use of the bank. The said provision empowers the Central
Bank to effectively supervise the bank and promote the safety of deposits.
On March 11, 2011, Sen. Panfilo Lacson, through Senate Bill 2767 proposed an
amendment to R.A. 1405. In the explanatory note of the said amendment, he noted that
the R.A. 1405 have been used to hamper stall investigation of government officials and
employees suspected of enriching himself while in office. He explained that since public
office connotes public trust, its officials and employees should be transparent in
disclosing their wealth so as to prove that those are not ill-gotten.
The proposed amendment included government officials and employees among
the exceptional cases wherein the bank deposits and government issued bonds may be
examined even without written confirmation or order of a competent court. Currently,
Senate Bill 2767 is still pending in the committee. The last committee meeting was held

last March 22, 2011.

THE HISTORY BEHIND THE LAW
R.A. 1405 was passed in September 1955, exactly 10 years after the end of the
Second World War. During this time, the banking industry is still at its infancy and
massive poverty is rampant. Many people preferred to smuggle their money out of the
country or keep it at home than to deposit it in banks. Needless to say, with this trend,
the banks did not have sufficient funds to expand the capital market and help the
economy recover. The legislative body, in seeking to induce the people to invest,
passed the Bank Secrecy Act.
In 1981, Marcos foresaw the delimiting provisions in the Act which prevents the
Central Bank in performing its duties of effectively supervising the banks. He then
inserted another exception to authorize the Central Bank to examine all records of banks
in the discharge of its responsibilities under the Central Bank Charter.
More than half a century after the initial implementation of the Secrecy Act, when
the economy is more stable and people are investing left and right, certain government
officials were able to use this act to their advantage. The most controversial of these
was the case of former Chief Justice Renato Corona who was impeached in 2012 due to
his hidden wealth. On this note, Sen. Lacson, even before the impeachment of Corona,
proposed an amendment to include government officials and employees among the
exceptions in the confidentiality of bank deposit accounts.
RELATED LAW
The issue on secrecy of bank deposits became a hot topic during the
impeachment case against Corona. As a matter of fact, some analysts agreed that his
interpretation on the absolute confidentiality of foreign deposits has eventually put a nail
on his coffin. R.A. 6426 is an act instituting a foreign currency deposit system in the
Philippines. Section 8 states that, foreign currency deposits shall be exempt from
attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever. R.A. 6465, unlike R.A.
1405, provides for absolute confidentiality of foreign bank deposits.
Some members of the legislature clamored for the amendment of R.A. 6465 to
include exceptions as included in R.A. 1405. The said exceptions may inhibit certain
government officials to use the absolute confidentiality clause as their defense against
transparency.
CASES RELATED TO THE BANK DEPOSIT SECRECY ACT
A. G.R. No. 189206 GSIS v. CA June 8, 2011
The controversy originated from a surety agreement by which Domsat obtained
a surety bond from GSIS to secure the payment of the loan from the Banks. In the
surety bond, it was stated that LBP, Westmont Bank, among others guarantee the
repayment of the principal and interest of the loan granted to Domsat for the financing of

the lease of a Russian satellite. When Domsat failed to pay the loan, GSIS, the
administrator of the general insurance fund, refused to comply with its obligation
reasoning that Domsat did not use the loan proceeds for the payment of rental for the
satellite. GSIS alleged that Domsat, with Westmont Bank as the conduit, transferred the
U.S. $11 Million loan proceeds from the Industrial Bank of Korea to Citibank New York
account of Westmont Bank and from there to the Binondo Branch of Westmont Bank.
The Banks filed a complaint before the RTC of Makati against Domsat and GSIS.
In the course of the hearing, GSIS requested for the issuance of a subpoena
duces tecum to the custodian of records of Westmont Bank to produce the following
documents:
1. Ledger covering the account of DOMSAT Holdings, Inc. with Westmont Bank
(now United Overseas Bank
2. All applications for cashiers/ managers checks and bank transfers funded by
the account of DOMSAT Holdings, Inc. with or through the Westmont Bank (now
United Overseas Bank) for the period January 1997 to December 2002
3. Ledger covering the account of Philippine Agila Satellite, Inc. with Westmont
Bank (now United Overseas Bank
4. All applications for cashiers/managers checks funded by the account of
Philippine Agila Satellite, Inc. with or through the Westmont Bank (now United
Overseas Bank) for the period January 1997 to December 2002.
https://www.scribd.com/doc/101024019/Bank-Secrecy#download
Are we ready to lift the veil of secrecy of local banking laws?
IT IS said that the Philippines set of bank secrecy laws is one of the strictest bank
secrecy laws in the world. Not a few have opined that
these banking laws are already antiquated because the
era of bank secrecy is long over. Recently, many quarters have called for
the lifting of this veil of secrecy.
The proposal to lift our bank secrecy laws continues to receive support, if not a push,
from some key government personalities, including the Internal Revenue Commissioner,
the Chairman of the Senate Committee on Banks, and the Governor of the Central Bank
of the Philippines. There are even pending bills in both houses of Congress aimed to
limit
or
remove
bank
secrecy
provisions
in
our
jurisdiction.
Nonetheless, there are also camps that have expressed reservations on the proposal.
Many are of the opinion that the lifting of our bank secrecy laws would only create a
chilling
effect
on
the
banking
industry.

Indeed, on one hand, the proposal may provide better tax administration by eliminating
fraud, misdeclaration and concealment of income and may assist in the graft
investigation of public officials. On the other hand, such proposals could also result in
capital flight and loss of confidence in our banking system, and, to the extreme -- the
violation of our right against unlawful search with impunity. It is thus crucial to ensure that
if we are to lift our bank secrecy laws, the benefits of such a move would outweigh its
costs.
In deciding which camp to support, it is important to understand the current set of laws.
Republic Act No. 1405 (better known as the Bank Secrecy Law) which was enacted in
1955, provides that as a general rule, all deposits of whatever nature with banks or
banking institutions in the Philippines are strictly confidential. The rule on strict
confidentiality means that such deposits may not be examined, inquired or looked into by
any person, government official, bureau or office. The rule on strict confidentiality on
bank deposits is subject only to limited exceptions, which are as follows: first, upon
written permission of the depositor; second, in cases of impeachment; third, upon order
of a competent court in cases involving bribery or dereliction of duty of public officials;
and fourth, in cases where the deposited money is the subject matter of litigation. In the
landmark case of Ejercito v. Sandiganbayan, the Supreme Court confirmed that cases
involving the charge of Plunder and unexplained wealth are included in the exceptions to
the rule on strict confidentiality because they are akin to bribery, which is the third
exception under the law (G.R. Nos. 157294-95, Nov. 30, 2006).
In 1974, almost two decades after the passage of the Bank Secrecy Law, another law
was passed to govern foreign currency deposits in the Philippines -- the Foreign
Currency Deposit Act. Thus, Philippine peso deposits are governed by the Bank Secrecy
Law, while the Foreign Currency Deposit Act applies to foreign currency deposits.
The Foreign Currency Deposit Act established a stricter rule on confidentiality of foreign
deposits because it only provides for a single exception. Under the law, foreign deposits
may only be examined, inquired or looked into with the written permission of the
depositor. The other exceptions found in the Bank Secrecy Law are not applicable to
foreign currency deposits. Moreover, the Foreign Currency Deposit Act provides that
foreign currency deposits are exempt from attachment, garnishment, or any other order
or process of any court, legislative body, government agency or any administrative body.
The exemption from garnishment and other court processes is also not applicable to
peso deposits.

The declared policy behind the Bank Secrecy Law is to encourage the people to deposit
their money in banking institutions and to discourage private hoarding of cash so that the
money may be properly utilized by banks in authorized loans to assist in the economic
development of the country. The Foreign Currency Deposit Act has the same rationale,
with focus on its effort to attract foreign investors. It bears emphasis, however, that in a
1997 Supreme Court case of Salvacion, et. al v. Central Bank of the Philippines, et. al.,
the Supreme Court refused to apply the protective mantle of the Foreign Currency
Deposit Act to the foreign deposits of a pedophile and allowed his 12-year-old victim to
look into and garnish his deposits in the Philippines. The Supreme Court in that case
reasoned that the law was enacted to attract foreign investors and should not be applied
in cases where its application would result in injustice especially to a citizen aggrieved by
a foreign guest. The Supreme Court, in fine, said that the application of the law depends
on the extent of its justice. (G.R. No. 94723. Aug. 21, 1997).
Both the Bank Secrecy Law and Foreign Currency Deposit Act provide for penalties
against those who violate them. Moreover, while not expressly provided for in these
laws, it is a settled principle that any information obtained in violation of these bank
secrecy laws is inadmissible as evidence under the doctrine of the fruit of the poisonous
tree.
Given the protective cloak being enjoyed by citizens, and even foreigners, by our bank
secrecy laws, perhaps only time can tell whether we are already prepared to give up this
perceived security and incentive for foreign investors for better governance.
(The author is an Associate of Angara Abello Concepcion Regala & Cruz Law Offices
[ACCRALAW]. He can be contacted at 830-8000 or fljavier@accralaw.com. The views
and opinions expressed in this article are those of the author. This article is for general
informational and educational purposes and not offered as and does not constitute legal
advice or legal opinion.)
http://www.bworldonline.com/content.php?section=Opinion&title=Are-we-ready-to-lift-theveil-of-secrecy-of-local-banking-laws?&id=85836
MANILA, Philippines Senators cautioned the Bureau of Internal Revenue (BIR) on
Monday over its proposal to lift the bank secrecy law, one saying it has a chilling effect
on the banking industry.
Although I understand where Commissioner Kim (Henares) is coming from as far as
taxation is concerned, but her proposal has a chilling effect on the banking industry since
there are more disadvantages than advantages, Senator Nancy Binay said in a text
message.
It was Henares, who reportedly proposed the need to lift the bank secrecy law to fight tax
fraud and enhance transparency.

Binay, a member of the opposition said there are still more pressing issues that need to
be addressed like the problem on peace and order.
Can BIR guarantee that the information will be for purposes and will not be used to
commit crime or for political harassment? May exceptions na naman ang bank secrecy
law (The bank secrecy law already has exceptions), she pointed out.
Senator Grace Poe, an administration ally, also expressed apprehension, saying the
proposal should be studied first and the banking industry should also be consulted.
The public might lose faith in the banks if their accounts are made open to scrutiny by
the BIR, Poe said in a separate text message.
If this happens the economy may suffer. Anyway, the BIR meantime has the ways and
means to run after tax cheats pending any amendment, she added.
Senator Juan Edgardo Angara, chairman of the Senate committee on ways and means,
said the proposal has its costs and benefits and the government must determine if the
benefits would outweigh the costs.
The benefits are better tax administration by eliminating fraud, misdeclaration and
concealment of income while collection, while the costs may include capital flight and
loss of confidence in the banking system, he said.
But I think the Commissioner is correct that the trend is towards an easing of
restrictions, Angara said.
Senator Vicente Tito Sotto III, another opposition member, said he was neither against,
nor in favor of the proposal but he suggested that the issue be formally brought to
Congress so the lawmakers could debate on it.
I suggest the BIR draft and file a bill in Congress so we can debate on the issue.
Besides, thats the only way to do it, Sotto said.
Read more: http://newsinfo.inquirer.net/588530/weigh-pros-and-cons-of-bank-secrecylaw-lifting-bir-urged#ixzz3wAuK9igC
Solons cite chilling effect of Bank Secrecy Law lifting
Manila, Philippines Lifting the Bank Secrecy Law, as proposed by Bureau of Internal
Revenue Commissioner Kim Henares to effectively track tax fraud, sends a chilling effect
in the banking industry, senators warned yesterday.
Senator Nancy Binay said that while Henares suggestion is understandable, she
believes such proposal can erode the private sectors trust in the government.
Although, I understand where Commissioner Kim is coming from as far as taxation is
concerned, her proposal has a chilling effect on the banking industry since there are
more disadvantages than advantages (to her pitch), the neophyte senator said.
According to Binay, the government has yet to plug the loopholes in the peace and order
situation in the country and lifting the Bank Secrecy Law may be used for political
purposes.

Can the BIR guarantee that the information will be for purposes and will not be used to
commit crime or for political harassment? There are already exceptions under the Bank
Secrecy Law, she said.
Senator Grace Poe Llamanzares said the matter should be thoroughly studied and the
banking industry should be consulted.
The public might lose faith in the banks if their accounts are made open to scrutiny by
the BIR. If this happens the economy may suffer, Llamanzares warned.
Llamanzares echoed Binays observation, saying there are provisions under the present
laws that allow the BIR to go after delinquent taxpayers and prosecute them.
Anyway, the BIR meantime has the ways and means to run after tax cheats pending
any amendment, Poe said.
Senator Juan Edgardo Sonny Angara, chairman of the Senate Ways and Means
Committee, said there is a need for lawmakers to balance the costs and benefits of
such measure.
There are costs and benefits to that and we must determine if the benefits outweigh the
costs, Angara said.
The benefits are better tax administration by eliminating fraud, misdeclaration, and
concealment of income while the costs may include capital flight and loss of confidence
in the banking system, Angara said.
But I think the commissioner is correct that (international) trend is toward an easing of
restrictions, he said.
Im not against nor in favor. I suggest the BIR draft a bill in Congress so we can debate
on the issue. Besides, that is the only way to do it, Sen. Vicente Sotto III said.
Senator Francis Escudero, Senate Finance Committee chief, said he finds Henares
suggestion is excessive.
Escudero said he is finding it difficult to pass a bill he filed requiring all public officials to
sign a waiver of the secrecy of bank deposits law together with the filing of their
Statement of Assets, Liabilities and Network (SALN), let alone pass a bill repealing the
Bank Secrecy Law.
That might be too much. The current exceptions to the Bank Secrecy Law like
corruption investigations and Anti-Money Laundering Council (AMLC) powers over
private individuals, I believe, is sufficient, Escudero said. (With a report from Mario B.
Casayuran)
http://www.mb.com.ph/senators-cite-chilling-effect-of-bank-secrecy-law-lifting/
The bank-secrecy law
THE Insurance Commission is one of three members of the Anti-Money Laundering
Council (AMLC); the other two are the Bangko Sentral ng Pilipinas and the Securities
and Exchange Commission. In a recent meeting with the Department of Finance, they

raised a concern regarding the continuing need for bank-secrecy laws in the country. Let
us, then, take a look at the current state of our bank-secrecy law.
While Section 2 of Republic Act (RA) 1405, also known as the Secrecy of Bank Deposits
Act, declares bank deposits to be absolutely confidential, deposits of whatever nature,
including investments in bonds, are expressly allowed to be examined, inquired or
looked into by the same law, as amended, in these instances: a) during a special or
general examination of a bank, as authorized by the Monetary Board, to investigate bank
fraud or a serious irregularity; b) during a regular audit of a bank by an independent
auditor; c) upon the written permission of the depositor; d) in cases of impeachment; e)
upon the order of a competent court in cases of bribery or dereliction of duty of public
officials; and f) in cases where the money deposited is the subject of the litigation.
Clearly, the confidentiality or secrecy is not absolute. Moreover, the exceptions listed
above is not exclusive, since, in addition to those expressly listed under Section 2 of RA
1405, other laws have either expressly or impliedly provided other exceptions to the
bank-secrecy law. These are: g) upon inquiry by the internal-revenue commissioner in
the determination of the net estate of a deceased depositor; h) under Section 11 of the
Anti-Money Laundering Act of 2011; i) under Section 2 of the Unclaimed Balances Act; j)
under Section 8 of RA 3019, pertaining to unexplained wealth; and k) under Section 27
to 43 of the Human Security Act of 2007, also known as the antiterrorism law.
Some of the laws that have impliedly added exceptions to the bank-secrecy laws have
been confirmed by Supreme Court (SC) decisions. Note that Section 11 of the AntiMoney Laundering Act provided for an expressed exception to the bank-secrecy law,
while Section 8 of RA 3019 and 1379 provided for an implied exception to the same law,
as ruled in Philippine National Bank v Gancayco. All these exceptions bring to mind the
historical observation that the Holy Roman Empire of the Middle Ages was neither holy
and Roman nor an empire.
Perhaps, as the last exception to the bank secrecy law, one may add: l) upon order of a
competent court in cases similar to that of bribery or dereliction of duty of public officials.
For example, unexplained wealth is considered as similar to bribery and plunder under
RA 7080. In Ejercito v Sandiganbayan, it was held that the crime of plunder is analogous
to bribery and, therefore, the exception from the secrecy of bank deposits granted in
cases of bribery should also be granted to cases for plunder under RA 7080, in which
crime is not expressly listed as an exception in RA 1405.
It should also be pointed out that there is no secrecy for the bank deposits of dummies.
In
Banco
Filipino
Savings and Mortgage Bank v Purisima, the SC held that the spouse, dependents and
other persons may not effectively invoke the bank-deposits secrecy law. The High Court
also cited Section 1 of RA 1379 that characterized a property unlawfully acquired by the
respondent to include properties where their ownership is concealed by [their] being

recorded in the name of [or] held by the respondents spouse, ascendants, descendants,
relatives or any other person. Accordingly, concealing unlawfully acquired wealth,
including cash in banks, in the name of other persons does not guarantee a successful
abscondment.
With respect to foreign-currency deposits, note that its confidentiality is more strictly
upheld by lesser exceptions. Hence, the exceptions listed in RA 1405 do not apply to
such deposits. Inquiries into such accounts may be allowed only under Section 8 of the
Foreign Currency Deposits Act, that is, with the depositors written consent and by the
AMLC under Section 11 of RA 9160.
*****
Atty. Dennis B. Funa is the deputy commissioner for legal services of the Insurance
Commission.
Bank secrecy
Bank secrecy (or bank privacy) is a legal principle in some jurisdictions under
which banks are not allowed to provide to authorities personal and account information
about their customers unless certain conditions apply (for example, a criminal
complaint has been filed[1]). In some cases, additional privacy is provided to beneficial
owners through the use of numbered bank accounts or otherwise. Bank secrecy is
prevalent
in
certain
countries
such
as Switzerland, Lebanon, Singapore and Luxembourg, as well as offshore banks and
other tax havens under voluntary or statutory privacy provisions.
https://en.wikipedia.org/wiki/Bank_secrecy
PH bank secrecy laws strictest in the world
The United States has questioned the antiquated bank secrecy laws of the Philippines,
describing them as among the strictest in the world, in the face of the global trend
toward transparency.
The criticisms made by two US envoys are contained in a series of cables from 2005
and 2008, and have been made public by the whistle-blower website, Wikileaks.
Former US ambassadors to Manila Francis Ricciardone and Kristie Kenney, in separate
cable dispatches sent to Washington, said the banking secrecy laws in the country were
hampering transparent governance and anticorruption mechanisms, and went against
the global trend relaxing bank secrecy laws.
Foreshadowing events in the Philippines as early as 2007, Kenney talked of institutional
challengeswhich included bank secrecy laws and poor protection for whistle-blowers
as serious barriers to corruption convictions in the Philippines.
The bank secrecy laws in the Philippines are among the strictest in the world, said
Ricciardone
in
a
January
2005
cable
(code:
05MANILA84,

http://cables.mrkva.eu/cable.php?id=25003), in which he related the transparency

problems besetting the country.
The United States is apparently particularly concerned about the Foreign Currency
Deposit Act of the Philippines (FCDA), otherwise known as Republic Act No. 6426. The
FCDA is a legacy of the martial-law era, having been signed into law by the late dictator
Ferdinand Marcos in 1974.
The FCDA makes the revelation of foreign currency details unlawful, except upon a
written permission of the depositor.
The other law is the Bank Secrecy Law (Republic Act No. 1405) enacted on Sept. 9,
1955.
RA 1405 declares all deposits absolutely confidential, with the exceptions of: written
consent of the depositor; in cases of impeachment; upon order of a competent court in
cases of bribery or dereliction of duty of public officials; or in cases where the money
deposited or invested is the subject matter of the litigation.
Kenney and Ricciardones remarks came on the heels of a global rethink of bank
secrecy laws.
The era of banking secrecy is over, declared members of the Group of 20 leading
economies (G20) at the 2009 summit in London in a joint communiqu.
The global financial crisis was the catalyst for the G20 crackdown on bank secrecy that
began in 2009.
In order to manage the global financial crisis and prevent future crises from reoccurring,
financial institutions need to pursue accountability reforms, said the G20 communiqu.
The FCDA was invoked last week by the Philippine Savings Bank (PSBank) in refusing
to divulge the alleged foreign currency deposits of Chief Justice Renato Corona, which
the Supreme Court acceded to by issuing a temporary restraining order (TRO).
The Senate impeachment court voted on Monday to respect the TRO, effectively barring
the prosecution from opening the alleged foreign currency deposits with PSBank of the
Chief Justice.
AFP corruption scandal
In the January 2005 cable, Ricciardone reported to Washington that the Sandiganbayan
antigraft court had resumed efforts to prosecute the former Armed Forces comptroller,
Maj. Gen. Carlos Garcia, for plunder and corruption in 2005.
However, Ricciardone noted that the strict bank secrecy laws prevented the Land Bank
of the Philippines (LandBank) involved in the litigation from fulfilling the court order to
freeze Garcias dollar accounts.
The LandBank froze Garcias two peso-denominated accounts, worth nearly $120,000.
However, the LandBank, a Filipino financial institution, refused an order of garnishment
issued by the Sandiganbayan on five US dollar-denominated accounts, he said.

Kenney, who is now the US ambassador to Thailand, sent two separate cable
dispatches in which she lamented the barriers to effective prosecution of money
launderers in the Philippines.
These are Wikileaks cables for November 2007 (cable code: 07MANILA3669,
http://cables.mrkva.eu/cable.php?id=130120) and March of 2008 (cable code:
08MANILA622, http://cables.mrkva.eu/cable.php?id=145394).
Investigations are hampered by Philippine banking secrecy laws that limit access to
certain crucial financial information, and by poor protection for would-be whistleblowers, said Kenney.
In one dispatch, Kenney highlighted the severe negative implications of a ruling handed
down by the Supreme Court in the case of People of the Philippines v. Eugenio.
The dispatch (08MANILA626, http://cables.mrkva.eu/cable.php?id=145542) is titled, RP
Supreme Court supports bank secrecy, which contains this summary:
The Philippine Supreme Court has ruled that a bank account holder must be given prior
notification before an inquiry can be made into their bank records during investigation of
money laundering or corruption cases. Both Philippine and US criminal law enforcement
efforts may be negatively affected by this decision. The Philippine Office of the Solicitor
General is likely to file a motion by March 14 asking that the entire Supreme Court
rehear the case.
Ownership dispute
Kenney recounted that upon hearing the news of the high courts decision in the Eugenio
case, she requested the Philippine Anti-Money Laundering Council to explain this
debacle.
The Eugenio case concerns a February 2008 high court ruling in a case involving the
ownership dispute between the Philippine government and the Piatco consortium that
built the Ninoy Aquino International Airport Terminal 3 (Naia 3). The government had
nullified the contract on the ground that it was attended by corruption.
The high court ruled against the Anti-Money Laundering Council probing into the bank
deals surrounding the Naia project. The high court ruled that except in cases of
terrorism, kidnapping and drug violations, bank account holders must be given prior
notification before inquiry can be made into their bank records.
In her report, Kenney said the high court decision jeopardized both Philippine and US
investigations in anticorruption cases.
Giving subjects of investigations notice of the investigations at an early stage allows
opportunity for the destruction of evidence, the concealment of other assets and the
obstruction of justice, Kenney stated.
It will also allow the account holder to prevent effective investigation by tying the
proceedings up with litigation, it said.
Pending bills

The role of bank secrecy laws in the Corona trial has spurred some members of
Congress to call for a change to the banking laws.
Sen. Ralph Recto filed Senate Resolution 711 last week seeking a review of the FDCA
and RA 1405.
Recto acknowledged the concern in the financial sector that bank practices were being
dragged into the politics of the impeachment trial.
The review is not meant to de-fang [these] laws but to make certain that no one gets
hurt or gets special treatment when the claws of these laws start to pounce on its object
of prey, he said.
Back in 2010, Sen. Francis Escudero filed Senate Bill 107 bill that would require
government employees to provide the Office of the Ombudsman with written permission
to look into their bank accounts if they are accused of crimes.
We want to put in place a mechanism that promotes openness and transparency in the
public sector said Escudero, adding that those who did not provide permission were
free to go to the private sector because working in the government is a privilege and not
a right.
These two Senate bills are pending at the Senate committee on banks.
In the House of Representatives, partylist member Antonio Tinio (Alliance of Concerned
Teachers, or ACT) has filed a counterpart bill that seeks to amend the FDCA by revoking
the absolute confidentiality conferred upon foreign currency deposits, but only in cases
involving bribery and dereliction of duty.
These privileges granted by law to foreign currency deposits effectively place them
beyond the reach of government, Tinio said.
First posted 11:39 pm | Friday, February 17th, 2012
http://newsinfo.inquirer.net/147567/ph-bank-secrecy-laws-strictest-in-the-world
LAW ON SECRECY OF BANK DEPOSITS
Purposes:
1. to encourage people to deposit their money in banks
2. to discourage private hoarding so that the banks may lend out the money and
assist in the economic development of the country
Prohibited Acts:
1. the EXAMINATION AND INQUIRY OR LOOKING into all deposits of whatever
nature with banks or banking institutions in the Philippines (including
investments in bonds issued by the Governments or its political subdivisions and
instrumentalities) by
i.
ii.

any person or
any government official or

iii.
any bureau or
iv.
any office
2. the DISCLOSURE by
i.
any OFFICIAL of any banking institution or
ii.
any EMPLOYEE of any banking institution
to ANY UNAUTHORIZED PERSON of any information concerning the said
deposit.

M, a newspaper columnist, while making a deposit in a bank, overheard a bank

teller informing a co-employee that G, a well-known public official, has just a few
hundred pesos in Gs bank account and that her check will probably bounce. M
wrote about this information in his newspaper column. G filed a complaint
against M for unlawfully disclosing information about her bank account.
The suit will not prosper. The Law on Secrecy of Bank Deposits does not
penalize the mere receipt of information about a bank account. M, having
merely overheard the information on Gs account and not having examined,
inquired or looked into the said account cannot be penalized under Sec. 2 of the
Bank Secrecy Law. Neither could he be penalized under Sec. 3 of the Bank
Secrecy Law since Sec. 3 refers to disclosures made by officials or employees
of banking institutions.

A has P10,000 in his savings account, P20,000 in his checking account,

P30,000 in his money market placement and P40,000 in a trust fund. Which of
the accounts are covered by the Secrecy of Bank Deposits Law?
Only the savings and checking account are covered. The money market
placement and the trust fund are not covered. 1

A bought some goods from a department store and paid with his personal check.
The check was dishonored. On the assumption that the department store did
not know who A was, the store manager inquired from the checks drawee bank
the name of the dishonored check. The drawee bank refused to disclose the
name of the drawer invoking the Secrecy of Bank Deposits Law.
1

This was the answer of the resource persons for the 1997 Bar
Exams (see p. 39). However, Miravite thinks that the trust fund is also
covered. (p. 537) Miravite says a money market placement is not covered
since it is not deposited in the bank.

In this case, the bank is not justified in not divulging the name of the drawer to
the store manager. The store manager is merely inquiring as to the name of the
drawer of the check. To divulge the same would not in anyway amount to
disclosure of any information concerning his deposits. Also, the inquiry is not an
investigation of any balance in favor of the drawer. To include such disclosure
within the ambit of the prohibition would be unduly straining and stretching the
meaning of the Secrecy of Bank Deposits Law.
Instances When Examination or Disclosure of Information about Bank Deposits is
Allowed
1. upon WRITTEN PERMISSION OF THE DEPOSITOR
2. in cases of IMPEACHMENT
3. upon order of a competent court in cases of
i.
BRIBERY of public officials or
ii.
DERELICTION of duty of public officials
4. in cases where the money deposited or invested is the subject matter of the
litigation
Mellon Bank vs. Magsino
Even in cases not involving prosecution under the Anti-Graft and
Corrupt Practices Act, an inquiry into the whereabouts of the amount converted
necessarily to whatever is concealed (by being held or recorded in the name of
persons other than the one responsible for illegal acquisition) inasmuch as the
case is aimed at recovering the amount converted.
5. upon order of the court in cases of UNEXPLAINED WEALTH UNDER SEC. 8
OF THE ANTI GRAFT AND CORRUPT PRACTICES ACT RA 3019 (PNB v.
Gancayco)
Banco Filipino vs. Purisima
The permitted inquiry into illegally acquitted property in anti-graft cases
extends to instances where such property is concealed by being held by or
recorded in the name of other persons.
6. upon order of the Commissioner of Internal Revenue in respect of the bank
deposits of a decedent for the PURPOSE OF DETERMINING SUCH
DECEDENTS GROSS ESTATE (Sec. 6 [F] [1], NIRC)
7. upon the order of the Commissioner of Internal Revenue in respect of the bank
deposits of a taxpayer who has filed an APPLICATION FOR COMPROMISE OF

HIS TAX LIABILITY under Sec. 204 (A) (2) of the NIRC by reason of financial
incapacity to pay his tax liability (Sec. 6 [F] [2], NIRC)
8. upon ORDER OF THE OMBUDSMAN (Sec. 15 [8], RA 6770)
M was able to secure a favorable judgment against P for recovery of a sum of
money and the said judgment became final and executory. M was informed by
someone that P might have a deposit with a bank in which M was a stockholder.
Invoking his right as a stockholder to inspect the corporate records, M
demanded to see the records to see if P really had a savings deposit with the
bank. The bank manager refused invoking the Secrecy of Bank Deposits Law.
In this case, the stockholders right to the inspection of corporate books will have
to bow to the provisions of the Secrecy of Bank Deposits Law. The case of M
does not fall under any of the exceptions. The only remedy of M is to ask the
court for a writ of garnishment to be served on the bank.
The City Fiscal required a bank to produce at a hearing the records of the bank
deposits of A. The bank refused invoking the Secrecy of Bank Deposits Law.
Threatened with prosecution, the bank filed an action for declaratory relief. May
the bank be compelled to disclose the bank deposits of A?
Unless the case comes under one of the exceptions, the court cannot compel
the bank to disclose As deposits.
Garnishment of Bank Deposits
garnishment of bank deposits will not violate the bank secrecy law
China Bank vs. Ortega
The discussion in the conference committee report on the Senate and
House bills which eventually became RA 1405 indicates that it was not the
intention of the legislature to place bank deposits beyond the reach of the
execution to satisfy a final judgment. Furthermore, there is no real inquiry in an
order for garnishment and if the existence of the deposit were disclosed, the
disclosure was purely incidental to the execution process.
RCBC vs. de Castro
The SC said that to expose garnishees to risks for obeying court orders
and processes would only undermine the administration of justice.
PCIB vs. Court of Appeals
Garnishment is considered as a specie of attachment for reaching
credits belonging to the judgment debtor and owing to him from a stranger to the
litigation. The garnishee (the 3 rd person) is obliged to deliver the credits, etc. to
the proper officer issuing the writ and the law exempts from liability the person

having in his possession or under his control any credits or other personal
property belonging to the defendant, of such property be delivered or transferred
to the clerk, sheriff, or other officer of the court in which the action is pending.

Since there is no evidence that the bank divulged the information that its client
had an account with the said bank and it is undisputed that the said account was
properly the object of the notice of garnishment and the writ of execution carried
out by the deputy sheriff, a duly authorized officer of the court, there is no
violation of the Secrecy of Bank Deposits Law.
The branch manager of a bank, in response to a notice of garnishment,
discloses to the sheriff the outstanding deposit balance of the judgment debtor
with the bank as of the date of the receipt of the garnishment notice. The
judgment debtor files a criminal complaint for violation of the Bank Secrecy Law.
In this case the criminal complaint will not prosper. The prohibition against
examination of, or inquiry, into a bank deposit does not preclude its being
garnished to insure satisfaction of a judgment. Indeed, there is no real inquiry in
such a case, and if the existence of the deposit is disclosed, the disclosure is
purely incidental to the execution process.

Application of the Secrecy of Bank Deposits on Safety Deposit Boxes

the prohibition against inquiry or disclosure of bank accounts under the Secrecy
of Bank Deposits Law does NOT to apply to safety deposit boxes 2
Special Note on Foreign Currency Deposits
the Foreign Currency Deposit Act (RA 6426) allows any person to deposit,, and
banks to accept for deposit ANY foreign currency ACCEPTABLE AS PART OF
OUR INTERNATIONAL RESERVE
unlike ordinary bank deposits, foreign currency deposits enjoy the following
unique privileges
1. absolute confidentiality
EXCEPT UPON WRITTEN PERMISSION OF THE
DEPOSITOR, a foreign currency deposit cannot be
examined, inquired, or looked into by any person or office,
2

This was the answer of the resource persons for the 1989 Bar
Exams (see p. 193), and yet, the resource persons were unsure of their
answer. However, Miravite has a contrary opinion (p. 540). In my notes for
Prof. Catindigs class, it says that safety deposit boxes are considered
deposits since the law says all deposits of whatever nature.

whether public or private, or judicial, administrative or

legislative

Bartelli, a foreign transient, deposited his dollars in a foreign

currencyt account with China Bank. Bartelli raped
Salvacion. A criminal case for rape and a civil action for
damages for rape were filed. The SC said that the
exemption from garnishment granted to foreign currency
deposits is inapplicable to a foreign transient. 3

M withdrew without authority funds of the partnership in the

amounts of P500,000 and $50,000. He deposited the
P500,000 in his personal peso current account and the
$50,000 in his foreign currency savings account. The
partnership sued M to return the money.

6. new enactment or regulation

in the event that a new enactment or regulation is issued
decreasing the rights granted under the law, such new
enactment or regulation SHALL NOT APPLY TO FOREIGN
CURRENT DEPOSITS ALREADY MADE or existing at the
time of issuance of such new enactment or legislative

In this case, the bank can be compelled to disclose the peso

deposit of M since sec. 2 of RA 1405 allows the disclosure of
deposits in case where the money deposited is the subject
matter of litigation.

https://www.scribd.com/doc/36563734/Law-on-Secrecy-of-Bank-Deposits

With respect to the foreign currency deposit, Under the

Foreign Currency Law, the exemption to the prohibition
against disclosure of information concerning bank deposits is
the written consent of the depositor
2. numbered accounts
authorized banks may adopt a numbered account system
for recording and servicing the said deposits
3. rate of interest
authorized banks are free to pay any rate of interest
4. taxes
the interest received by an individual residents, domestic
and resident foreign corporations from such deposits are
subjected to a 7.5% final income tax
there is NO final income tax on the interest received by
non-resident individuals and non-resident foreign
corporations
5. court order or process
EXEMPT from attachment, garnishment or any other order
or process of any court, legislative or administrative body,
or government agency whatsoever

SECRECY OF BANK DEPOSITS

As reported by Maria Luz B. Lite
For Banking Laws 2E
I. Historical Background
The Bank Secrecy Law was passed in September 1955, exactly ten years after the end
of Second World War. The war had devastated the economy and recovery was just
beginning. During this time, majority of the Filipinos were engaged in agriculture and
thus the population was concentrated in the rural areas. Because of neglect and
widespread illiteracy, farmer income grew rather slowly.
Massive poverty, in turn, fermented social discontent and unrest. With considerable
peasant support, the Hukbalahap (Huks), the military arm of the
PartidoKomunislangPilipinas threatened to topple the young Philippine Republic. To
finance the campaign against the Huks and to build rural infrastructures, the Magsaysay
government issued bonds.
Incidentally, the issuance of the bonds coincided with the passage of the Bank Secrecy
Law. In fact, House Bill No. 3977, the forerunner of the Bank Secrecy Law, lumped the
bond issuance and the bank secrecy provisions together. During that time, the Philippine
banking system was still at its infancy.
There were only five Filipino-owned banks operating at that time, most of them founded
during the period 1950-55. These banks catered to the needs of the booming Philippine
3

Salvacion vs. Central Bank of the Philippines

The SC said that the exemption from garnishment did not apply in
this case because of the PECULIAR CIRCUMSTANCES. So, one can argue that
the exemption from garnishment will still apply to foreign transients as long
as there are no peculiar circumstances.

industry and were urban in orientation. During the fifties, the government embarked on
the Import Substitution Program. Abetted by the slapping of exorbitant tariffs on
imported goods and by the restriction of imports through quotas, the elite began
investing in industries.
To finance such investments, they borrowed from the banks, and, from then on, the
banking industry gradually prospered. The Philippine capital markets were not fully
developed then. In order to expand the capital markets and ultimately to generate
economic growth, the House and the Senate passed House Bill No. 397718 and Senate
Bill No. 351, respectively. Both bills intended to generate savings.
Banks and other credit institutions have been established by the government to expand
the credit facilities in the country, and to private enterprise to establish banks and other
credit institutions, but all these steps have not solved the problem of providing adequate
capital to propel more speedily our economic development.
In both Houses, the lawmakers cited hoarding and capital flight as reasons for the
passage of the Bank Secrecy Law. Money, silver and gold bullions is being smuggled
abroad, and many people do not deposit their money in banks or invest in bonds for fear
that the tax collection agencies might make inquiries about their bonds and deposits for
purpose of taxation.
Bank accounts, by nature, are private and confidential. Individuals and firms want
secrecy for their accounts. Moreover, protecting the identity of the account holders will
make them less vulnerable to kidnapping and robbery. Finally, the law protects
depositors' accounts from the scrutiny of the Bureau of Internal Revenue because
without a court order, bank accounts cannot be used as evidence against tax evaders.
The penalties imposedby the Bank Secrecy Law also deter outsider intrusion. The
stringent protection of the identity of the account holders has indeed made bank deposits
attract savers. By 1963, a quarter of public funds are deposited in commercial banks.
Such meteoric riseattracted depositors.
Negative effects of the law were noted in its implementation.
Accordingly, the bankers are the greatest gainers of the Bank Secrecy Law. Abetted by
the porous legal system, they can [and many of them did] plunder the depositor's hard
earned money. The law makes prosecution and conviction of errant bankers difficult if
not impossible. Moreover, the legal system tilts in favor of the bankers who can afford to
hire competent but expensive lawyers. Conversely,the depositor's are the greatest
losers. The law offers them no protection from the depredation by the bankers. Neither
does it offer compensation to the legitimate victims of bank plunder. 4
Historical Background is lifted from different researches as published in the Philippine
Law Journal entitled BANK SECRECY LAW: A HISTORICAL AND ECONOMIC
ANALYSIS by Franz David Ong Lim
4

II. Significance of Privacy

The Civil Code provides that every person shall respect the dignity, personality, privacy
and peace of mind of his neighbors and other persons. It punishes as actionable torts
several acts of meddling and prying into the privacy of another. Public officers and
employees or any private individual are also held for damages for any violation of the
rights and liberties of another person
The revised penal code makes a crime of the violation of secrets by an officer, revelation
of trade and industrial secrets, and trespass to dwelling. Invasion of privacy is also an
offense in special laws like Anti-Wiretapping and Intellectual Property Code. It is in line
with this premises that Act 1405 was promulgated
III. Full text of the Act
REPUBLIC ACT No. 1405
AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS WITH ANY
BANKING INSTITUTION AND PROVIDING PENALTY THEREFOR.
Section 1. It is hereby declared to be the policy of the Government to give
encouragement to the people to deposit their money in banking institutions and to
discourage private hoarding so that the same may be properly utilized by banks in
authorized loans to assist in the economic development of the country.
Section 2. 1 All deposits of whatever nature with banks or banking institutions in the
Philippines including investments in bonds issued by the Government of the Philippines,
its political subdivisions and its instrumentalities, are hereby considered as of an
absolutely confidential nature and may not be examined, inquired or looked into by any
person, government official, bureau or office, except upon written permission of the
depositor, or in cases of impeachment, or upon order of a competent court in cases of
bribery or dereliction of duty of public officials, or in cases where the money deposited or
invested is the subject matter of the litigation.
Section 3. It shall be unlawful for any official or employee of a banking institution to
disclose to any person other than those mentioned in Section two hereof any information
concerning said deposits.
Section 4. All Acts or parts of Acts, Special Charters, Executive Orders, Rules and
Regulations which are inconsistent with the provisions of this Act are hereby repealed.
Section 5. Any violation of this law will subject offender upon conviction, to an
imprisonment of not more than five years or a fine of not more than twenty thousand
pesos or both, in the discretion of the court.
Section 6. This Act shall take effect upon its approval.
Approved: September 9, 1955
Footnote

This Section and Section 3 were both amended by PD No. 1792 issued
January 16, 1981, PD 1792 was expressly repealed by Sec 135 of R.A. No.
7653, approved June 14, 1993. The original sections 2 and 3 of R.A. No.1405
are hereby reproduced for reference, as follows; "Sec 2 All deposits of whatever
nature with banks or banking institutions in the Philippines including investments
in bonds issued by the Government of the Philippines, its political subdivisions
and its instrumentalities, are hereby considered as of an absolutely confidential
nature and may not be examined, inquired or looked into by any person,
government official, bureau or office, except upon written per-mission of the
depositor, or in cases of impeachment, or upon order of a competent court in
cases of bribery or dereliction of duty of public officials. or in cases where the
money deposited or invested is the subject matter of the litigation," "Sec. 3. It
shall be unlawful for any official or employee of a banking institution to disclose
to any person other than those mentioned in Section two hereof any information
concerning said deposits."
IV. Purposes
The Secrecy of Bank Deposits Act has the following purposes:
1. To encourage people to deposit their money in banking institutions; and
2. To discourage hoarding of money5
V. Covered Deposits
All deposits of whatever nature with banks or banking institutions in the Philippines
including investment bonds issued by the Government of the Philippines, its political
subdivisions and its instrumentalities, are considered as absolutely confidential in nature
and may not be examined, inquired or looked into by any person, government official,
bureau or office.
Trust accounts are also included. The rationale on the inclusion of trust accounts is
discussed by the Supreme Court in the case of EjercitovsSandiganbayan 6 where it ruled
the money deposited in the trust account was intended not merely to remain with the
bank but to be invested elsewhere. That to hold that this account is not protected by R.A
1405 would encourage private hoarding of funds that could otherwise be invested by
banks in other ventures, which is contrary to the policy behind the law.
VI. Exceptions to Secrecy of Deposits
The same may be properly utilized by banks in authorized loans to assist development
in the country
6
509 SCRA 190, November 30, 2006
5

1. Upon written permission of the depositor or investor*

2. In cases of impeachment;*
3. Upon order of a competent court in cases of bribery of dereliction of duty of
public officials;*
4. Upon order of a competent court in cases where the money deposited or
invested is the subject matter of the litigation;*
5. Upon order of a competent court or tribunal in cases involving unexplained
wealth under the Anti-Graft and Corrupt Practices Act (R.A. No. 3019);
6. Upon inquiry by the Commissioner of Internal Revenue for the purpose of
determining the net estate of a deceased depositor 7
7. Upon order of a competent court or in proper cases where there is probable
cause of money laundering8;
8. Disclosure to the Treasurer of the Philippines for dormant deposits for at least
ten (10) years under the Unclaimed Balances Act 9;
9. Upon order of the Court of Appeals when there is a probable cause under the
Human Security Act;
10. Inquiry or examination by the PDIC and/BSP of deposit accounts and all
information related thereto in case there is a finding of unsafe or unsound
banking practice.10
VII. OTHER LAWS GOVERNING SECRECY OF BANK DEPOSITS
Republic Act No. 8367 (An Act Providing For The Regulation Of the Organization And
Operation Of Non-Stock Savings and Loan Associations)
Republic Act No. 6426 (Foreign Currency Deposit Act of the Philippines) 11 which is
Applicable to Filipino and foreign nationals holding foreign currency accounts; where the
only an exception provided is upon the written permission of the depositors.
Republic Act 6848 (An Act Providing for the 1989 Charter of the Al-Amanah Islamic
Investment Bank of the Philippines) 12. Exceptions provided under this law are; (1)
inspection by the banks auditor; (2) upon written permission by the depositor; (3) in
7

Section 6(f), National Internal Revenue Code

Section 11, Anti-Money Laundering Act of 2001

Section 2, Act No 3936
10
Section 8, par. 8, R.A. No. 3591 as amended by R.A. 9576 effective June 1, 2009
11
Covers foreign currency deposits, except Islamic Banks
12
Covers confidentiality of deposits in Islamic Banks. This law provides a separate set of
exceptions than Act 1405, which are: (1) inspection by the banks auditor, or (2) upon
written permission of the depositor, or (3) in cases where the money deposited or the
transaction concerned is the subject of a court order.
8
9

cases where the money deposited or the transactions concerned is the subject of the
court order
Section 55 of the General Banking Law complements the Law on Secrecy of Bank
deposits. However, it allows disclosure of information upon order of a court of competent
jurisdiction without reference as to the type of cases involved
VII. Examination by the Ombudsman
Among the powers vested upon the Ombudsman is to examine and have access to bank
records in lieu of their power to administer oaths, issue subpoena and subpoena
ducesstecum and take testimony in any investigation or inquiry. 13
The Supreme Court laid down the following restrictions in Marquez vsDesierto 14:
1. There must be a pending case before a court of competent jurisdiction;
2. The account must be clearly identified;
3. The inspection must be limited to the subject matter of the pending case;
4. The bank personnel and account holder must be notified to be present during
the inspection
5. The inspection must be limited to the account identified
VIII. When Deposit is Subject Matter of Litigation
Subject matter of the litigation means the matter or thing with respect to which the
controversy has arisen, or the thing in dispute.
Illustrative Case: where the bank inadvertently caused the transfer of the amount of $1,
000,000.00 instead of only $1,000.00, the court sanctioned the examination of the bank
account because the money is the subject matter of the litigation. 15

and any person who enters upon its discharge does so with the full knowledge that his
life, so far as relevant to his duty is open to public scrutiny. 16
Plunder is where ny public officer who, by himself or in connivance with members of his
family, relatives by affinity or consanguinity, business associates, subordinates or other
persons, amasses, accumulates or acquires ill-gotten wealth through a combination or
series of overt or criminal acts as described in Section 1(d) hereof in the aggregate
amount or total value of at least Fifty million pesos (P50, 000,000.00) 17
The exclusion of unexplained wealth from the rule on secrecy in as much as an inquiry is
concerned extends to cases where such property is concealed by being held or recorded
in the name of other person.18
X. In garnishment
Garnishment is a legal proceeding in which a plaintiff seeks the satisfaction of a debt
obtained through a judgment where the court directs a third party in possession of the
property of the defendant to make it available to satisfy the judgment.
Bank deposits may be garnished by judgment creditors under Rule 39 of the 1997 Rules
of Civil Procedure.
Garnishment of bank deposits does not violate R.A. No. 1405. When an account is
garnished, no real inquiry is made on the account and the disclosure of the deposit made
by the bank is purely incidental.
https://www.scribd.com/doc/294390276/Report-on-Secrecy-of-bank-Deposits-docx

IX. Unexplained Wealth and Plunder

Unexplained wealth as described in Section 8 of Republic Act 3019
xxx a public official who has been found to have acquired during his incumbency,
whether in his name or in the name of other persons , an amount of property and/or
money manifestly out of proportion to his salary and to his other lawful income, the fact
shall be a ground for dismissal or removalxxx
The Supreme Court ruled that cases of unexplained wealth are similar to cases of
bribery or dereliction of duty. It expresses the notion that a public office is a public trust
13

Sourced from Section 15 of R.A. No. 6770 .

PNB vsGancayco, 122 Phil 503

Section 2 [REPUBLIC ACT NO. 7080] AN ACT DEFINING AND PENALIZING THE
CRIME OF PLUNDER
18
Based on R.A No. 3019
16
17

14
15

359 SCRA 772, June 27 2001

Mellon Bank, NA vsMagsino, 190 SCRA 633, 1990