LAW ON SECRECY OF BANK DEPOSITS

R.A. 1405, AS AMENDED

I.PURPOSE:

1. Encourage deposit in banking institutions and

2. Discourage private hoarding

II.PROHIBITED ACTS

1. Examination/inquiry /looking into all deposits of whatever nature with banks or banking
institutions in the Philippines( including investment in bonds issued by the government ) by any person,
government official or office (RA 1405, Sec. 2)

2. Disclosure by any official or employee of any banking institution to any unauthorized person of
any information concerning said deposit (RA 1405, Sec.3)

III.DEPOSITS COVERED

1. All deposits of whatever nature with banks or banking institutions found in the Philippines; or
2. Investments in bonds issued by the Philippine government, its branches, and institutions. (RA
1405, Sec. 2)
3. Trust accounts are included in the scope of the law

IV.EXCEPTIONS

1. Upon written consent of the depositor (RA 1405, Sec. 2)

2. In cases of impeachment (ibid)
3. Upon order of competent court in cases of bribery or dereliction of duty of public officials (ibid)
4. In cases where the money deposited or invested is the subject matter of the litigation (ibid)
5. Upon order of the Commissioner of Internal Revenue in respect of bank deposits of a decedent
for the purpose of determining such decedent’s gross estate (NIRC, Sec. 6[F][1])
6. In case of dormant accounts/ deposits for at least 10 years under the Unclaimed Balances Act
(Act No. 3936, Sec. 2)
7. The prohibition against examination of bank deposit does not preclude its garnishment to satisfy
judgment against the depositor (Onate v. Abrogar, G.R. No. 107303, February 21,1994)
 8. The Anti-Money Laundering Council (AMLC) may inquire into any deposit with any bank in case
of violation of the RA 9160 or the AMLA if there is probable cause that it is related to an
unlawful activity (RA 9160, as amended Sec. 11)
9. The PDIC and the BSP may examine deposit accounts and all information related to them in case
of finding of unsafe or unsound banking practices (RA 3591, as amended, Sec. 8)
10. With court order :
a. In cases of unexplained wealth under Sec. 8 of the Anti -Graft and Corrupt Practices Act
(PNB v. Gangayco, G.r. No. L-18343, Sept. 30 1965)
b. In cases filed by the Ombudsman and upon the latter’s authority to examine and have
access to bank accounts and records. (Marquez v. Desierto, GR No. 138569, September 11,
2003)
11. Without court order : If the AMLC determines that a particular deposit or investment with any
banking deposit or investment with any banking institution is related to the following:
a. Hijacking
b. Kidnapping
c. Murder
d. Destructive Arson, and
e. Violation of the Dangerous Drugs Act
f. Acts of Terrorism or in Violation of Human Security Act.

V.GARNISHMENT OF DEPOSIT , INCLUDING FOREIGN DEPOSITS

Garnishment of a bank deposit does not violate the law

The prohibition against examination or inquiry does not preclude its being garnished for satisfaction of
judgment. The disclosure is purely incidental to the execution process and it was not the intention of the
legislature to place bank deposits beyond the reach of judgment creditor. (PCIB v. CA , GR No. 84526,
January 28, 1991)

Garnishment of foreign currency deposits

GR: Foreign currency deposits shall be exempt from attachment, garnishment, or any other order or
process of any court, legislative body whatsoever (R.A. 6426, Sec.8)

XPN: The application of Section 8 of RA6426 depends on the extent of justice. The garnishment of a
foreign currency deposit should be allowed to prevent injustice and for equitable grounds, otherwise, it
would negate Article 10 of the New Civil Code which provides that “in case of doubt the interpretation
or application of laws , it is presumed that the law making body intended right and justice to prevail
(Salvacion v. Central Bank of the Phil., GR No. 94723, August 21, 1997)
The foreign currency deposit of a transient foreigner who illegally detained and raped a minor Filipina
can be garnished to satisfy the award for damagesto the victim.

VI.PENALTIES for violation of RA 1405:

1. Imprisonment of not more than five (5)years

2. Fine of not more than P20,000.00
3. Both, in the discretion of the court (RA 1405, Sec.5).

JURISPRUDENCE

EJERCITO vs SANDIGANBAYAN
GR No. 157294-95, November 30,2006

FACTS:

Joseph Victor G. Ejercito is the owner of Trust Account No. 858 which was originally opened at Urban
Bank but which is now maintained at Export and Industry Bank, which is the purchaser and owner now
of former Urban Bank and Urban Corp investment, Inc. He is also the owner of Savings Account No.
0116-17345-9 which was originally opened at Urban Bank.

Estrada was subsequently charged with Plunder. The Sandiganbayan filed a Request for
Issuance of Subpoena Duces Tecum for the issuance of a subpoena directing the President of Export and
Industry Bank (EIB, formerly Urban Bank) or his/her authorized representative to produce
various document related to the investigation.

ISSUE: Whether or not a Trust Account is covered by the term “deposit” as used in R.A. 1405

HELD:

YES. The Trust Account no. 858 is covered by the term “deposit”. The Trust Agreement between
petitioner and Urban Bank provides that the trust account covers "deposit”, placement or investment of
funds by Urban Bank for and in behalf of petitioner.

The money deposited under Trust Account No. 858, was, therefore, intended not merely
to remain with the bank but to be invested by it elsewhere.

To hold that this type of account is not protected by R.A. 1405would encourage private hoarding of
funds that could otherwise be invested by banks in other ventures, contrary to the policy behind the
law. Section 2 of the same law in fact even more clearly shows that the term "deposits" as what the
phrase “of whatever nature” proscribes pertain not only to money which is deposited but also to those
which are invested. Clearly, therefore, RA 1405 is broad enough to cover Trust Account no. 858.
SALVACION VS. CENTRAL BANK
G.R NO.9473 August 21, 1997

FACTS:

Greg Bartelli, an American tourist, was arrested for committing four counts of rape and serious illegal
detention against Karen Salvacion. Police recovered from him several dollar checks and a dollar account
in the China Banking Corp. He was, however, able to escape from prison. In a civil case filed against him,
the trial court awarded Salvacion moral, exemplary and attorney’s fees amounting to almost
P1,000,000.00.

Salvacion tried to execute the judgment on the dollar deposit of Bartelli with the China Banking Corp.
but the latter refused arguing that Section 11 of Central Bank Circular No. 960 exempts foreign currency
deposits from attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever. Salvacion therefore filed this action for
declaratory relief in the Supreme Court.

ISSUE:

Should Section 113 of Central Bank Circular No. 960 and Section 8 of Republic Act No. 6426, as amended
by PD 1246, otherwise known as the Foreign Currency Deposit Act be made applicable to a foreign
transient?

HELD:

NO. The provisions of Section 113 of Central Bank Circular No. 960 and PD No. 1246, insofar as it
amends Section 8 of Republic Act No. 6426, are hereby held to be INAPPLICABLE to this case because of
its peculiar circumstances. Respondents are hereby required to comply with the writ of execution issued
in the civil case and to release to petitioners the dollar deposit of Bartelli in such amount as would
satisfy the judgment.
PHILIPPINE NATIONAL BANK vs. EMILIO A. GANCAYCO
G.R. No. L-18343, 30 September 1965

FACTS:

PNB was required to produce the records of the bank deposits of Jimenez who was then under
investigation for unexplained wealth. In declining to reveal its records, the plaintiff bank invoked
Republic Act No. 1405 or the Law on Secrecy of Bank Deposits with the following exceptions:

 Upon written permission of the depositor;

 In cases of impeachment;
 Upon order of a competent court in cases of bribery or dereliction of duty of public
officials;
 In cases where the money deposited is the subject matter of the litigation.

ISSUE:

Whether or not a bank can be compelled to disclose the records of accounts of a depositor who is under
investigation for unexplained wealth.

RULING:

Yes. Cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no reason is
seen why these two classes of cases cannot be excepted from the rule making bank deposits
confidential. The policy as to one cannot be different from the policy as to the other. This policy
expresses the motion that a public office is a public trust 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.
 QUESTIONS AND ANSWERS

Q: 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 check’s 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. Is the bank correct?

ANSWER: 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 any way amount to disclosure of any. Also, the inquiry is not an investigation of
any balance in favor of the drawer.

Q: 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 G’s 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. Will it prosper?

ANSWER: 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 G’s
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.

Q: Shirlene bought P500,00 worth of Pabahay bonds issued by the Home Development Mutual Fund, a
government agency, through ABC bank. Afterwards, she placed the bonds in a safety deposit box she
rented from ABC bank. Ella one of the bank’s safety deposit attendants, saw what shirlene placed inside
her box, noting that they were in her name. During lunch, she told her co-attendants what she saw and
wondered aloud how government employee like shirlene could have money to buy the bonds. Could
Shirlene file a complaint against Ella for violation of RA 1405?

ANSWER: Yes. Shirlene could. The disclosure by Ella to her co-attendants of the existence, and the
deposit in the safety box, of the bonds is a prohibited act under RA 1405. A deposit in a safety deposit
act is also protected by the said law.

Q: What does the law prohibits?

ANSWER:
• The examination and inquiry or looking into all deposits of whatever nature with the banks
or banking institutions in the Philippines including the investments in bonds issued by the
Government or its political subdivisions and instrumentalities by any person, government
official, bureau; and
• The disclosure by any official or employee of nay banking institution to any unauthorized
person of any information concerning said deposits.
Q: What disclosures or inquiries into deposits are not prohibited?
ANSWER:
a. Upon written permission of the depositor;
b. In cases of impeachment;
c. Upon order of a competent court in cases or bribery or dereliction of duty of public officials;
d. In cases where the money deposited or invested is the subject matter or litigation;
e. Upon the order of the court or subpoena issued by the Ombudsman in cases of unexplained
wealth. This is subject to the following requisites:
• Only an in-camera inspection is allowed;
• There must be a pending case before a court of competent jurisdiction;
• Account is clearly identified;
• Examination is limited to account subject of the court case; and
• Bank personnel and the account holder must be notified to be present during the
inspection.
f. Upon the order of the Commissioner of Internal Revenue in respect of the bank deposits of a
decedent for the purpose of determining such decedent’s gross estate;
g. Upon the order of the Commissioner of Internal Revenue when a taxpayer files an
application to compromise his tax liability by reason of financial incapacity;
h. Upon examination made in the course of a special or general audit of a bank as authorized
by the Monetary Board after being satisfied that there is reasonable ground to believe that a
bank fraud or irregularity is being committed and it has become necessary to look into the
deposit to establish the same;
i. Upon examination of a bank’s independent auditor, the result of which are for the exclusive
use of the bank;
j. In case of suspicious transaction under the Anti-Money Laundering Law;
k. Under the Anti-Money Laundering Law where banks are required to report to Anti-Money
Laundering Council any transaction in cash or other equivalent monetary instrument in excess of
P500,000.00 in any one day;
l. Also under Anti-Money Laundering Law, the Anti-Money Laundering Council may inquire into
a deposit or investment maintained with any financial institution upon order of a competent
court, in cases of violation of the Act, when there is a probable cause that the deposit or
investment is in any way related to an unlawful activity as defined in the Act or a money
laundering offense under the Act;
m. When a director, officer, stockholder and related interest (DOSRI) obtains a loan from his
bank or its subsidiaries, or with related controlling interests of more than 5% of the capital, or
surplus of the bank, it shall constitute a waiver of secrecy nature in all banks in the Philippines;
and
n. Under the Unclaimed Balances Law;
o. The examination of a bank account under Section 10, Rule 57 in relation to the examination
of a party whose property is attached and persons indebted to a defendant or controlling his
property.
Q: Who are the primarily liable for violations of the law?
ANSWER: The persons primarily liable for a violation of the law would be a bank employee or officer and
the person, government officer, agency or office looking into the deposit when not authorized by any of
the exceptions to the law.
Note: Investigations by the Monetary Board and the Bureau of Internal Revenue are confidential in
nature. Thus, any disclosure in violation of the confidentiality will create liability.

Q: Will the garnishment of a bank deposit violate the law?

ANSWER: No, the garnishment of a bank deposit will not violate the law. If the existence of the deposit
is disclosed, the same is considered as purely incidental to the execution process.What is to be disclosed
only is the existence of the deposit, particularly whether or not it is sufficient to satisfy the garnishment.
Hence, a disclosure of the balance may constitute a violation of the law.

Q: In a case where the money deposited or invested is the subject matter of the litigation, could an
inquiry into the whereabouts of the amount extend to the deposits held in the name of persons other
than the one responsible?
ANSWER: Even in cases not involving prosecution under the Anti-Graft and Practices Act, an inquiry into
the whereabouts of the amount converted necessarily extends to whatever in concealed, held or
recorded in the name of persons other than the responsible inasmuch as the case is aimed at recovering
the amount converted.

Q: Are foreign currency deposits covered by the law?

ANSWERS: While the law does not cover foreign currency deposits, they however are absolutely
confidential and cannot be disclosed pursuant to RA 6426, otherwise known as the Foreign Currency
Deposit Act, the only exception to disclosure being upon the written consent of the depositor.
An additional exemption has been provided by the Anti-Money Laundering Law when it has
been established that there is probable cause that the deposits involved are in any way related to the
offense of money laundering.

Q: Will an unlawful examination of a bank account render the information obtained inadmissible?
ANSWER: There is nothing in the law that provides that an unlawful examination shall render the
evidence obtained therefrom to be inadmissible.