SECRECY OF BANK

DEPOSITS ACT

1. Policy under Rep. Act 1405

( The Act is the statutory enforcement of Government's policy to discourage

hoarding and to encourage people to deposit their money in banks, so that the
same may properly be utilized by banking institutions in authorized loans to
assist in the economic development of the country.

BSB Group, Inc. v. Go

612 SCRA 596 (2010)
/ W h i l e the fundamental law has not bothered with the
triviality of specifically addressing the privacy rights relative to
banking accounts, there,, nevertheless, exists in our jurisdiction a
legitimate expectation of privacy governing such accounts - the
source of this right of expectation is statutory, and it is found in
the Bank Secrecy Act of 1955. In any given jurisdiction where
the right of privacy extends its scope to include an individual's
financial privacy rights and personal financial matters, there is an
intermediate or heightened scrutiny given by courts and legislators
to laws infringing such rights.

BSB Group, Inc. v. Go

612 SCRA 596 (2010)
f R.A. 1405 has two.allied purposes: (aj'to discourage private
hoarding and (b) at the same time encourage the people to deposit
their money in banking institutions so that it may be utilized by way
of authorized loans and thereby assist in economic development.
Owing to this piece of legislation, the confidentiality of bank
deposits remains to be a basic state policy in the Philippines.
Sec. 2 of the law institutionalized this policy by characterizing as
absolutely confidential in general all deposits of whatever nature
with banks and other financial institutions in the country.

Subsequent statutory enactments have expanded the list of

exceptions to this policy, yet the secrecy of bank deposits still lies

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as the general rule, falling as it does within the legally recognized

zones of privacy. There is, in fact, much disfavor to construing
these primary and supplemental exceptions in a manner that would
authorize unbridled discretion, whether governmental orotherwise,
in utilizing these exceptions as authority for unwarranted inquiry
into bank accounts. It is then perceivable that the present legal
order is obliged to conserve the absolutely confidential nature of
bank deposits.

2. O p e r a t i v e P r o v i s i o n s

•-''a. SECRECY OF BANK DEPOSITS - Under the Act, all deposits of whatever
nature with banks or banking institutions, including investments in
bonds issued by the Government, and its political subdivisions and
instrumentalities, are absolutely confidential in nature and may not be
examined, inquired or looked into by any person, government official,
bureau or office.

EXCEPT: ( 1 ) Upon the debtor's written permission; ' -

(2) In cases of impeachment;

(3) Upon a competent court's order in cases of bribery of, or

dereliction of duty by, public officials; or

(4) In cases where money deposited or invested is the

subject matter of litigation.

b. PROHIBITION ON DISCLOSURE - Other than above-enumerated cases,

the Act declares it unlawful for any official or employee of a banking
institution to disclose to any person any information concerning bank
deposit accounts.

Onate v. Abrogar
230 SCRA 181 (1994)
In a collection suit by an insurance company to determine
how the defendant has applied the proceeds of a check paid
to it, the grant by the trial court of examination of the pertinent
records of the bank was allowed without need of notice to the
 SECRECY OF BANK DEPOSITS ACT 1081

depositor himself, pursuant to Sec. 10, Rule 57 of the Rules of

Court covering examination of party whose property is attached
and persons indebted to him or controlling his property; delivery
of property to officer. The same is authorized under Sec. 2 of Rep.
Act No. 1405, "in cases where the money deposited or invested is
the subject matter of litigation."

3. Other Laws Promoting Secrecy of Bank Deposits Policy

a. Under the Foreign Currency Deposit Act (Rep. Act 6426, a m e n d e d

by Pres. Decrees 1 0 3 4 , 1 0 3 5 a n d 1246)

(l)^Except upon written permission by the depositor, F C D U de-

posits are hereby declared as and considered of an absolutely
confidential nature, and in no instance shall foreign currency de-
posits be examined, inquired or looked into by any person, govern-
ment official, bureau or office, whether judicial or administrative, or
any other entity whether public or private.

(2j F C D U accounts are "exempt from attachment, garnishment, or any

other order or process of any courtTegistatrv&lsotly, government
agency or any administrative body whatsoever."

Intengan v. Court of Appeals

377 SCRA 63 (2002)
Since the accounts |n question are U.S. dollar deposits,
the applicable law is hot the Secrecy of Bank Deposit Act,
but the Foreign Currency Deposit Act, which contains only a
single exception to the secrecy of foreign currency deposits,
i.e., disclosure is allowed only upon the written permission of
the depositor. The violation of the secrecy of foreign deposit is
punishable as an act malum prohibitum. Violation of the FCDU
Act prescribes in eight (8) years, and the filing of the complaint
or information for alleged violation of the Secretary of Bank
Deposit Act does notMoll the running of the prescriptive period.
[CJ.V: Despite the language of Sec. 8 of P.D. 1034 that
"provisions of R.A. 1405 (Secrecy of Bank Deposits Law) shall
apply to deposits in offshore banking units," Intengan would
not extend the secrecy exceptions under R.A. 1405 to FCDU
accounts under R.A. 6 4 2 6 ]

b. Under the General Banking Law of 2000 - in line with the Secrecy
- " o f Bank Deposit Act, no bank shall employ casual or non-regular
1082 COMMERCIAL LAW REVIEW

personnel or too lengthy probationary personnel in the conduct of its

business involving bank deposits. 1

4. Other Exceptions to the Secrecy of Bank Deposits

a. Anti-Graft and Corrupt Practices Act

PNB v. Gancayco
15 SCRA 91 (1965)
Although the Secrecy of Bank Deposits Act does K o f include
cases covered by the Anti-Graft and Corrupt Practices Act (R.A.
3019), cases of unexplained wealth should be included considering
the mandatory terms of Sec. 8 providing that bank deposits 'shall
be taken into consideration in the enforcement of this section,
notwithstanding any provision of law to the contrary."

Banco Filipino v. Purlslma

161 SCRA 576 (1988)
The provisions of the Anti-Graft Law are quite categorical in
their terms as to warrant examination of bank records! ne* only in
the name of the respondent's spouse, ascendant, descendants,
relatives, but also other persons.

Marquez v. Desierto
359 SCRA 772 (2001)
Outside of Sec. 8 of R.A. 3019 on unexplained wealth, before an
in^camera inspection may be allowed of bank deposits, there must
be a pending case before a court of competent jurisdiction. Further,
the account must be clearly identified, the inspection limited to the
subject matter of the pending case before the court of competent
jurisdiction. The bank personnel and the account holder must be
notified to be present during the inspection, and such inspection
may cover only the account identified in the pending case. An
investigation [not specifically under Sec. 8 of the Anti-Graft and
Corrupt Practices Law on unexplained wealth] by the Office of the
Ombudsman is riot a pending litigation to allow examination of the
respondent's bank'account.

^ c . 55.4. R A. 8791
 SECRECY OF BANK DEPOSITS ACT 1083

BSB Group, Inc. v. Go

612 SCRA 596 (2010)
y Facts: The company cashier has been depositing to her
personal account the company checks collected. A complaint was
filed against the cashier for "estafa and/or qualified theft... alleging
that several checks. ... issued by the company's customers in
payment of their obligations were, instead of being turned over to
the company's coffers, indorsed by respondent who deposited the
same to her personal banking account." The information that was
filed against the cashier in court however read "the said accused
did then and there willfully, unlawfully and feloniously with intent [to]
gain, and without the knowledge and consent of the owner thereof,
take, steal and carry away cash money" belong to the company.
Was the testimony of the bank cashier were the company checks
were deposited admissible or even relevant, considering the
provisions of the Secrecy of Bank Deposit Act?

yHeld: Since the charge filed against the company cashier was
for theft of company money, the testimony of the depositary bank
where the company checks were deposit by her in her personal
account cannot be allowed. The inquiry into bank deposits
allowable under R.A. 1405 must be premised on the fact that the
money deposited in the account is itself the subject of the action.
The evidence regarding the diversion of company checks would
> 1 i a v e been relevant, and would have constituted a clear exception
to the secrecy of bank deposit accounts, if the crime charged was
that of estafa.

b ^ M o n e t a r y Board Authority - In 1 9 8 1 , Pres. Decree 1792 added

the following grounds when the bank can be compelled to reveal the
amount of deposit of a depositor:

(a) Monetary Board orders revelation when there is danger

of bank fraud; and

(bj W h e n independent auditors audit banks.

HOWEVER: Sec. 135 of New Central Bank Act repealed Pres. Decree
1792.

c. Under the 1997 NIRC - Sec. 6(F) of the 1977 National Internal
Revenue Code (Rep. Act 8424), authorizes the BIR Commissioner to
inquire into bank deposit accounts of:
/
(af A decedent to determine his gross estate; and
(b) Any taxpayer who has filed an application for compromise
of his tax liability by reason of financial incapacity to pay his
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tax liability, which application shall include a written waiver of

his privilege under the Secrecy of Bank Deposit Act or under
other general or special laws.

d. Anti-Money Laundering A c t of 2001 -

(1) Reporting on Account- Under Sec. 9(c) of Anti-Money Laundering

Act (Rep. Act 9160), banking and other covered institutions are
required to report to the AMLC:

(i) Any single, series or combination of transactions

involving a total amount in excess of P 5 0 0 . 0 0 0 dr an
equivalent amount in foreign currency; or

(ii) Any suspicious transaction of any amount;

within 5, working days from occurrence thereof (unless Supervising

Authority concerned prescribes a longer period), "which shall not
•Hereby be a violation of the Secrecy of Bank Deposit Act, F C D U
Law, and the General Banking Law of 2000."

(2) Examination Accounts - Notwithstanding provisions on secrecy

of bank deposit accounts to the contrary, Court of Appeals may
order to inquire into or examine a particular deposit or investment
with a banking or non-bank financial institution.

EXCEPT: NO court order required in cases involving kidnapping for

ransom, drug trafficking, and terrorism.

(3) Power of BSP - Jo ensure compliance with the AMLA, BSP may
inquire into or examine any deposit or investment with any banking
institution on non-bank financial institution when the examination is
made in the course of periodic or special examination.

e. Revised PDIC Charter - Rep. Act 9576, in revising the PDIC Charter,
provided that, notwithstanding the provisions of the Secrecy of Bank
Deposit Act, PDIC and/or BSP "may inquire into or examine deposit
accounts and all information related [to bank deposits] in case there is
a finding of unsafe or unsound banking practice."

f. Exchange of Information on Tax Matters Act - To comply with the

/ Government's commitment under international tax treaties to exchange
information with its treaty partners to help combat international tax
evasion and avoidance (which placed the country from the "gray list"
into the "white list" of jurisdictions complying with internationally agreed
 SECRECY OF BANK DEPOSITS ACT 10B5

standards of transparency and exchange of tax information), Rep. Act

10021 was enacted whereby the tax authority of a country that has
a tax treaty with the Philippines or is a party to an international tax
convention to which Philippines is also member, can ask for information
from the BIR about Philippine-based taxpayers under investigation in
that country, under the following terms: 2

(^Taxpayers Covered: Taxpayer's nationality is immaterial, since

the Law covers any person or entity covered by our tax laws.

(^Protection Measures for Taxpayers: To protect the taxpayer

from whimsical investigations:

(jt) Requesting country shall vouch that the request is in

conformity with its laws and administrative practices;

(il) It should also affirm that it "has exhausted all legal means
available in its own territory to obtain the information, except
those that would give rise to disproportionate difficulttes."

NOTEj^Followina international convention on exchange of

information, these statements have to be taken at
their face value and given full faith and credence.

(iirfln fairness to the subject taxpayer, the BIR Commissioner is

obliged to inform him of that request.

(3) New Exception to the Secrecy of Bank Deposit Act:

(if Information Requested by Foreign Country - Only on the
basis of a formal request coursed through the BIR, and when
all the procedural requirements have been complied with, BIR
Commissioner is authorized to look into the bank deposits and
other related information about that taxpayer in banks and
financial institutions, based on the following procedures and
conditions:

.^•'"'Requested bank or financial institution has .to open its

records under pain of monetary and penal sanctions;
There must be submission of the information sought to the
foreign country as soon as possible.
BIR Commissioner is unable to do so within 90 days from
receipt of the request due to some obstacles encountered or

'Covered by BIR Rev Regs. No. 10-2010.

 COMMERCIAL LAW REVIEW

refusal of the holder of the information to release it, he must

immediately inform the requesting country of the situation
and explain the nature of such obstacles or the reasons for
the refusal.

> f f i e information intended primarily for the use of the requesting

country, is available to the BIR "for tax assessment, verification,
audit and enforcement purposes."

(ii) Settlement of Estates - The Act also lifts the veil of confi-
dentiality over bank deposits for cases involving the settlement
of the estate of deceased persons: to determine the gross
estate (or totality of the monetary assets and personal and real
properties) of a decedent, BIR is authorized to inquire into his
bank deposits and other related information held by banks and
financial institutions.

(iii) Compromise Settlement of Tax Liabilities - BIR empowered

to examine the bank deposits of taxpayers who apply or
compromise settlement of their tax liabilities with the BIR.

It is not enough for the taxpayer to claim lack of funds to meet

tax liabilities, his request or offer of compromise must be
accompanied by a written waiver of the confidentiality over his
bank deposits.