(R.A.

1405)

A. PURPOSE
1. To encourage deposit in banking institutions; and
2. To discourage private hoarding so that banks may lend

such funds and assist in the economic development of the country.

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

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. (Sec. 2, R.A. 1405)

Definitions:
DEPOSITS
refer to money or funds placed with a bank that can be

withdrawn on the depositors order or demand, such as deposit accounts in the form of savings, current and time deposits.

Investments in Government Bonds refer to investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities. Government bonds are debt securities which are unconditional obligations of the State, and backed by its full taxing power. Government bonds include treasury bills, treasury notes, retail treasury bonds, dollar linked peso notes, and other risk-free bonds.

Are trust funds covered by the term deposit?

YES. The money deposited under the trust agreement is 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. 1405 would encourage private hoarding of funds that could otherwise be invested by banks in other ventures, contrary to the policy behind the law. (Ejercito v. Sandiganbayan, G.R. No. 15729495, Nov. 30, 2006)

(Despite such pronouncement that trust funds are considered deposits, trust funds remain not covered by PDIC.)

Are foreign currency deposits covered by the Secrecy in Bank Deposits (R.A. 1405)?

NO. Foreign currency deposits are covered by R.A. 6426 otherwise known as the Foreign Currency Act. Under the same law, all authorized foreign currency deposits are considered of an absolutely confidential nature and, except upon the written permission of the depositors, in no instance shall be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative private.

EXCEPTIONS
(Instances where examination or disclosure of information about deposits can be allowed)

EXCEPTIONS UNDER RA 1405

1. Upon written consent of the depositor. (Sec. 2)
2. In cases of impeachment. (Sec. 2) 3. Upon order of competent court in cases of bribery or

dereliction of duty of public officials. (Sec. 2)

4. In cases where the money deposited or invested is the

subject matter of the litigation. (Sec. 2)

EXCEPTIONS UNDER OTHER LAWS

5. 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)
Upon the order of the Commissioner of Internal Revenue in respect of bank deposits of a taxpayer who has filed an application for compromise of his tax liability by reason of financial incapacity to pay his tax liability. (Sec. 6[f][1],NIRC)

6.

7.

In case of dormant accounts/deposits for at least 10 years under the Unclaimed Balances Act. (Sec. 2, Act No. 3936).

8.

When the examination is made by the BSP to insure compliance with the AML Law in the course of a periodic or special examination

9. a)

With court order: In cases of unexplained wealth under Sec. 8 of the AntiGraft and Corrupt Practices Act (PNB v. Gancayco, L18343, Sept. 30, 1965) In cases filed by the Ombudsman and upon the latters authority to examine and have access to bank accounts and records (Marquez v. Desierto, GR 138569, Sept. 11, 2003)

a)

10.

Without court order: If the AMLC determines that a particular 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.

What are the requisites before the Ombudsman may examine deposits?

What are the requisites before the Ombudsman may examine deposits?
1. There is a pending case before court of competent jurisdiction
2. The account must be clearly identified

3. There is notice upon the account holder and bank personnel of their presence during inspection.
The inspection must cover only the account identified in the pending case. (Marquez v. Desierto, G.R. No. 138569, Sept. 11, 2003)

Can a bank be compelled to disclose the records of the accounts of a depositor under the investigation for unexplained wealth?

Can a bank be compelled to disclose the records of the accounts of a depositor under the investigation for unexplained wealth?
YES The cases of unexplained wealth are similar to cases of bribery, dereliction of duty. Thus, no reason is seen why it cannot be excepted from the rule making bank deposits confidential. Inquiry into illegally acquired property in antigraft cases extends to cases where such property is concealed by being held or recorded in the name of other persons. This is also because the AntiGraft and Corrupt Practices Act, bank deposits shall be taken into consideration in determining whether or not a public officer has acquired property manifestly out of proportion with his lawful income. (PNB v.
Gancayco, G.R. No. L18343, Sept. 30, 1965)

In an action filed by the bank to recover the money transmitted by mistake, can the bank be allowed to present the accounts which it believed were responsible for the acquisition of the money?

In an action filed by the bank to recover the money transmitted by mistake, can the bank be allowed to present the accounts which it believed were responsible for the acquisition of the money?

YES. R.A. 1405 allows the disclosure of bank deposits in cases where the money deposited is the subject matter of litigation. In an action filed by the bank to recover the money transmitted by mistake, necessarily, an inquiry into the whereabouts of the amount extends to whatever is concealed by being held or recorded in the name of the persons other than the one responsible for the illegal acquisition. (Mellon Bank, N.A. v. Magsino, G.R. No. 71479, Oct. 18, 1990)

The Law on Secrecy of Bank Deposits provides that all deposits of whatever nature with banks or banking institutions are absolutely confidential in nature and may not be examined, inquired or looked into by any person, governmental official, bureau or office. However, the law provides exceptions in certain instances. Which of the following may NOT be among the exceptions?
1. 2. 3. 4. 5.

in cases of impeachment in cases involving bribery in cases involving BIR inquiry in cases of antigraft and corrupt practices in cases where the money involved is the subject of litigation

 Under Section 6(F) of the National Internal Revenue Code, the Commissioner of Internal Revenue can inquire into the deposits of a decedent for the purpose of determining the gross estate of such decedent. Apart from this case, a BIR inquiry into bank deposits cannot be made. Thus, exception 3

may not always be applicable.

 In exception 4, an inquiry into bank deposits is possible only in prosecutions for unexplained wealth

under the Antigraft and Corrupt Practices Act. However, all other cases of antigraft and corrupt practices will not warrant an inquiry into bank deposits. Thus, exception 4 may not always be applicable. Like any other exception, it must be interpreted strictly.

Exceptions 1, 2, and 5 on the other hand, are provided expressly in the Law on Secrecy of Bank Deposits. They are available to depositors at all times.

GARNISHMENT OF DEPOSITS, INCLUDING FOREIGN DEPOSITS

Does garnishment of a bank deposit violate the law?

Does garnishment of a bank deposit violate the law?

NO. The prohibition against examination 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, G.R. No. 84526, Jan. 28, 1991)

Can Foreign Currency Deposits be subjected to garnishment?

Can Foreign Currency Deposits be subjected to garnishment?

General Rule: 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. (Sec 8. R.A. 6426)

EXCEPTION: The application of Section 8 of R.A. 6426 depends on the extent of its 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 in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail. (Salvacion vs. Central Bank of the Philippines, G.R. 94723, August 21, 1997)

PENALTIES FOR VIOLATION

The penalty of imprisonment of not more than 5 years or a fine of not more than 20,000pesos or both, in the discretion of the court shall be imposed upon any official or employee of a banking institution who, upon conviction, was found to have violated R.A. 1405.