“LAW ON SECRECY BANK DEPOSITS”

What is Bank Secrecy Law?

According to Wikipedia.com, a Secrecy Bank Deposit, alternately known as

financial privacy, banking discretion, or bank safety, is a conditional agreement between
a bank and its client that all foregoing activities remain secure, confidential and private.

It’s Importance:
 Without banking law, no one knows what has to be done. In order for the bank-customer
to be organized and well-directed, bank secrecy law is established.
 Bank want to protect depositors. Bank secrecy law aims to give a perfect privacy and
security to depositors from fraud.
 Bank Secrecy Law paves the way for economic development.

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Regulations which are inconsistent with the provisions of this Act are hereby repealed.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
Purposes:
 To encourage people to deposit their money in banks.
 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 deposit 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. Any person or
ii. Any government official or
iii. Any bureau or this are the persons liable under this law
iv. Any office (sec. 2)

( Note: the number 1 prohibited acts, kindly refer to section 2)

2. The DISCLOSURE by

i. Any OFFICIAL of any banking institution or persons liable under this

ii. Any EMPLOYEE of any banking institution law (sec. 3)

To ANY UNAUTHORIZED PERSON of any information concerning the said deposit.

( Note: the number 1 prohibited acts, kindly refer to section 3)

Penalties for Violation:

EXCEPTIONS
a. Upon written permission or consent in writing by the depositor. For consent to be valid, it
should be made knowingly, voluntarily and with sufficient awareness of the relevant
circumstances and likely consequences.
b. In cases of impeachment of the President, Vice President, members of the Supreme Court,
members of the Constitutional Commission (Commission on elections, civil service,
commission and commission on audit) and the Ombudsman for culpable violation of the
Constitution, treason, bribery, graft and corruption, other high crimes or betrayal of public
trust.
c. In cases where the money deposited or invested is the subject matter of the litigation. The
money deposited should be the very thing in dispute.
Absolute Confidentiality:
SECTION 2 of the Law on Secrecy of Bank Deposits, as amended, declares bank
deposit to be absolutely confidential except:

1. During a special or general examination of a bank, as authorized by the

Monetary Board, to investigate bank fraud or a serious irregularity
2. During a regular audit of a bank by an independent auditor
3. Upon the written permission of the depositor
4. In cases of impeachment,
5. Upon the order of a competent court in cases of bribery or dereliction of duty
of public officials
6. In cases where the money deposited is the subject of the litigation.

SAMPLE CASES:

1. 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.

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.
2. 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?

ANSWER:
Only the savings and checking account are covered. The money market
placement and the trust fund are not covered.
 “UNCLAIMED BALANCES”
PRESIDENTIAL DECREE No. 679 April 2, 1975

AMENDING ACT NUMBERED THIRTY NINE HUNDRED AND THIRTY SIX, AN

ACT REQUIRING BANKS, TRUST CORPORATIONS, AND BUILDING AND LOAN
ASSOCIATIONS, TO TRANSFER UNCLAIMED BALANCES HELD BY THEM TO THE
TREASURER OF THE PHILIPPINES AND FOR OTHER PURPOSES.

Section 1. Sections 1, 2, 3, 4, and 5 of Act No. 3936 are hereby amended to read as follows:

"Sec. 1. "Unclaimed balances", within the meaning of this Act, shall include credits or
deposits of money, bullion, security or other evidence of indebtedness of any kind, and interest
thereon with banks, buildings and loan associations, and trust corporations, as hereinafter defined,
in favor of any person known to be dead or who has not made further deposits or withdrawals during
the preceding ten years or more. Such unclaimed balances, together with the increase and proceeds
thereof, shall be deposited with the Treasurer of the Philippines to the credit of the Government of
the Republic of the Philippines to be used as the National Assembly may direct.

"Banks", "building and loan associations" and "trust corporations", within the meaning of this
Act, shall refer to institutions defined under Section two, thirty-nine and fifty-six, respectively, of
Republic Act Numbered Three Hundred Thirty Seven, otherwise known as the General Banking Act,
as amended, whether organized under special charters or not.

"Sec. 2. Immediately after the taking effect of this Act and within the month of January of
every odd year, all banks, building and loan associations, and trust corporations shall forward to the
Treasurer of the Philippines a statement, under oath, of their respective managing officers, of all
credits and deposits held by them in favor of persons known to be dead, or who have not made
further deposits or withdrawals during the preceding ten years or more, arranged in alphabetical
order according to the names of creditors and depositors, and showing:

"(a) The names and last known place of residence or post office addresses of the persons in
whose favor such unclaimed balances stand;

"(b) The amount and the date of the outstanding unclaimed balance and whether the same is
in money or in security, and if the latter, the nature of the same;

"(c) The date when the person in whose favor the unclaimed balance stands died, if known,
or the date when he made his last deposit or withdrawal; and

"(d) The interest due on such unclaimed balance, if any, and the amount thereof.

"A copy of the above sworn statement shall be posted in a conspicuous place in the premises of the
bank, building and loan association, or trust corporation concerned for at least sixty days from the
date of filing thereof: Provided, That immediately before filing the above sworn statement, the bank,
building and loan association, and trust corporation shall communicate with the person in whose
favor the unclaimed balance stands at his last known place of residence or post office address.
"It shall be the duty of the Treasurer of the Philippines to inform the Solicitor General from time to
time the existence of unclaimed balances held by banks, building and loan associations, and trust
corporations.

"Sec. 3. Whenever the Solicitor General shall be informed of such unclaimed balances, he
shall commence an action or actions in the name of the People of the Republic of the Philippines in
the Court of First Instance of the province or city where the bank, building and loan association or
trust corporation is located, in which shall be joined as parties the bank, building and loan
association or trust corporation and all such creditors or depositors. All or any of such creditors or
depositors or banks, building and loan association or trust corporations may be included in one
action. Service of process in such action or actions shall be made by delivery of a copy of the
complaint and summons to the president, cashier, or managing officer of each defendant bank,
building and loan association or trust corporation and by publication of a copy of such summons in a
newspaper of general circulation, either in English, in Filipino, or in a local dialect, published in the
locality where the bank, building and loan association or trust corporation is situated, if there be any,
and in case there is none, in the City of Manila, at such time as the court may order. Upon the trial,
the court must hear all parties who have appeared therein, and if it be determined that such
unclaimed balances in any defendant bank, building and loan association or trust corporation are
unclaimed as hereinbefore stated, then the court shall render judgment in favor of the Government
of the Republic of the Philippines, declaring that said unclaimed balances have escheated to the
Government of the Republic of the Philippines and commanding said bank, building and loan
association or trust corporation to forthwith deposit the same with the Treasurer of the Philippines to
credit of the Government of the Republic of the Philippines to be used as the National Assembly may
direct.

"At the time of issuing summons in the action above provided for, the clerk of court shall also issue a
notice signed by him, giving the title and number of said action, and referring to the complaint
therein, and directed to all persons, other than those named as defendants therein, claiming any
interest in any unclaimed balance mentioned in said complaint, and requiring them to appear within
sixty days after the publication or first publication, if there are several, of such summons, and show
cause, if they have any, why the unclaimed balances involved in said action should not be deposited
with the Treasurer of the Philippines as in this Act provided and notifying them that if they do not
appear and show cause, the Government of the Republic of the Philippines will apply to the court for
the relief demanded in the complaint. A copy of said notice shall be attached to, and published with
the copy of, said summons required to be published as above, and at the end of the copy of such
notice so published, there shall be a statement of the date of publication, or first publication, if there
are several, of said summons and notice. Any person interested may appear in said action and
become a party thereto. Upon the publication or the completion of the publication, if there are
several, of the summons and notice, and the service of the summons on the defendant banks,
building and loan associations or trust corporations, the court shall have full and complete
jurisdiction in the Republic of the Philippines over the said unclaimed balances and over the persons
having or claiming any interest in the said unclaimed balances, or any of them, and shall have full
and complete jurisdiction to hear and determine the issues herein, and render the appropriate
judgment thereon.

"Sec. 4. If the president, cashier or managing officer of the bank, building and loan association, or
trust corporation neglects or refuses to make and file the sworn statement required by this action,
such bank, building and loan association, or trust corporation shall pay to the Government the sum
 of five hundred pesos a month for each month or fraction thereof during which such default shall
continue.

"Sec. 5. Any bank, building and loan association or trust corporation which shall make any deposit
with the Treasurer of the Philippines in conformity with the provisions of this Act shall not thereafter
be liable to any person for the same and any action which may be brought by any person against in
any bank, building and loan association, or trust corporation for unclaimed balances so deposited
with the Treasurer of the Philippines shall be defended by the Solicitor General without cost to such
bank, building and loan association or trust corporation."

Section 2. This Decree shall take effect immediately.

SAMPLE CASE: (the explanation is long. It takes awhile, but it’s worth the read.)

I am an OFW, employed as a caregiver for about eight years now. Before I left
for abroad, I opened an account with a certain bank in the Philippines where I
deposited a significant amount of money as my inheritance from my previous
employer. Up to this date, I have not updated my account. What will be the status
of my account since it has been inactive for more than eight years?
-Jen

ANSWER: Deposits of money in an account in a bank may be considered as

unclaimed balances if no deposits or withdrawals for the past 10 years have
been made under that account. These unclaimed balances may be forfeited in
favor of the government pursuant to Republic Act (RA) 3936 as amended by
Presidential Decree 679.

Unclaimed balances as defined under Section 1 of RA 3936 include credits or

deposits of money, bullion, security or other evidence of indebtedness of any
kind and interest thereon with banks, buildings and loan associations and trust
corporations, as hereinafter defined, in favor of any person known to be dead or
who has not made further deposits or withdrawals during the preceding 10 years
or more.

At the outset, the act requires all banks, building and loan associations and trust
corporations to submit a sworn statement of a list of all unclaimed balances
before them to the Treasurer of the Philippines in January of every odd year.
Immediately before filing the above sworn statement, however, the bank, building
and loan association and trust corporation shall communicate with the person in
whose favor the unclaimed balance stands at his last known place of residence
or post office address (Section 2, RA 3936 as amended). The Treasurer of the
Philippines is then under the obligation to inform the Solicitor General from time
to time on the existence of unclaimed balances held by banks, building and loan
associations and trust corporations. (Ibid.)

Thereafter, the Solicitor General shall commence an action in the name of the
People of the Republic of the Philippines, so that a judgment may be rendered in
its favor, declaring that the unclaimed balances be escheated in favor of the
government and commanding the bank, building and loan association or trust
corporation to forthwith deposit the same with the Treasurer of the Philippines to
the credit of the Government of the Republic of the Philippines to be used as
Congress may direct. The action shall join as parties the bank, building and loan
association or Trust Corporation and all such creditors or depositors. (Section 3,
Ibid.)

Consequently, if your account has been inactive for 10 years or more, your
deposit in the bank may be included in the list of unclaimed balances. The
Solicitor General, however, must institute an escheat proceeding before these
unclaimed balances are deposited to the credit of the government. On the other
hand, if your account has not reached the 10-year dormancy and no escheat
proceeding has been instituted, and then your ownership over the deposit
remains under your name.

“Escheat proceedings refer to the judicial process in which the state, by

virtue of its sovereignty, steps in and claims abandoned, left vacant or
unclaimed property, without there being an interested person having a legal
claim thereto. In the case of dormant accounts, the state inquires into the
status, custody and ownership of the unclaimed balance to determine
whether the inactivity was brought about by the fact of death or absence of
or abandonment by the depositor. If after the proceedings the property
remains without a lawful owner interested to claim it, the property shall be
reverted to the state to forestall an open invitation to self-service by the first
comers. If, however, interested parties have come forward and lain claim to
the property, the courts shall determine whether the credit or deposit
should pass to the claimants or be forfeited in favor of the state.