Bank-Secrecy-Law - Bank secrecy law PDF

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Bank Secrecy LawRA 1405 [1955], RA 6426 Only two countries have a bank secrecy act, Philippines and Lebanon.Q: Why is there a bank secrecy law in the first place? A: The law was enacted to encourage people to deposit their money in banking institutions and to discourage private hoarding so that the...

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Bank Secrecy Law RA 1405 [1955], RA 6426  Only two countries have a bank secrecy act, Philippines and Lebanon. Q: Why is there a bank secrecy law in the first place? A: The law was enacted to encourage 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. Coverage  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. Prohibited Act  It shall be unlawful for any official or employee of a banking institution to disclose to any person any information concerning bank deposits.  The prohibition is not absolute. The rule allows several exceptions, carved out by special laws and jurisprudence: Exceptions (PIO-GUAPO-CA-A) 1. Written Permission of the depositor 2. Impeachment 3. Upon Order of a competent court a. In cases of bribery or dereliction of duty of public officials b. The money deposited or invested is the subject matter of litigation Example 1: UCPB erroneously deposited P1,000,000 to the savings account of Mr. Bean instead of only P1,000. To recover the P999,000 UCPB filed a case to the court as Mr. Bean denies the erroneous deposit. The court could then order disclosure of information as the subject matter of litigation is about UCPB’s erroneous deposit. Example 2: A buys 100 flower pots from B and deposited P100,000 to B’s bank account as payment for the pots. However, B did not deliver the pots so A then filed for litigation. To prove that A paid P100,000, A wants to check the B’s bank account. The court could NOT order disclosure of information as the subject matter of litigation is B’s performance not the deposited money. 4. Incidental disclosure in Garnishment or execution of bank deposits.  Garnishment is when a third-party sues you for payment on an obligation and the court orders to charge it against your bank account. It is incidental as the purpose is not to know your account balance but to know if your balance is enough to cover the damages of the one suing you.

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Incidental disclosure under Unclaimed Balances Law.  If one’s bank account is has no movement for 10 years, it could be claimed by the government. 6. Prosecution for unexplained wealth under the Anti-Graft and Corrupt Practices Act. 7. PDIC/BSP may inquire into bank deposits if there is a finding of unsound or unsafe banking practice (Sec. 8 [8], PDIC Charter) 8. Power of the Ombudsman to examine and have access to bank accounts and records under Sec. 15(8) of The Ombudsman Law (RA 6770)  There should be a pending case before a competent court. 9. Authority of the Commissioner of Internal Revenue to inquire into the bank deposits of a decedent for estate tax purposes or in case of a tax compromise under Sec.6(f) of the NIRC or upon request for tax information by a foreign tax authority under an international convention or agreement (RA 10021 [2009]) 10. Authority of the AMLC to inquire into any particular deposit or investment with any banking institution upon order of CA based on an ex parte application upon probable cause that such deposit/investment is related to an unlawful activity or to money laundering pursuant to Sec 11 of the Anti-Money Laundering Act of 2001 (RA 9160, as amended by RA 9194 and RA 10167). a. Reporting of covered or suspicious transactions pursuant to 59(c) of the AMLA. b. The BSP may, in the course of a periodic or special examination, check the compliance of a covered institution with the requirements of the AMLA and its implementing rules and regulations (S11 AMLA) 11. Authority of AMLC, either upon its own initiative or at the request of ATC, to inquire into bank deposits upon the issuance by the court of a preliminary order of proscription or in case of designation: a. Any property or funds that are in any way related to financing of terrorism as defined and penalized under RA 10168 b. Violation of Sec 4, 6, 7, 10, 11, or 12 of the Anti-Terrorism Law c. Property or funds of any person or persons in relation to whom there is probable cause to believe that such person or persons are committing or attempting or conspiring to commit, or participating in or facilitating the financing or terrorism Confidentiality of Foreign Currency Deposits (RA 6426)  All foreign currency deposits are of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall foreign currency deposits be examined, inquired, or looked into by any person, government official, bureau or office whether juridical or administrative or legislative, or any other entity whether public or private. Exceptions to Confidentiality of FCD (WAP-AC) 1. Written permission of depositor 2. Authority of the AMLC to inquire into any particular deposit or investment with any banking institution upon order of CA based on an ex parte application upon probable cause that such

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deposit/investment is related to an unlawful activity or to money laundering pursuant to Sec 11 of the Anti-Money Laundering Act of 2001 (RA 9160, as amended by RA 9194 and RA 10167). a. Reporting of covered or suspicious transactions pursuant to 59(c) of the AMLA. b. The BSP may, in the course of a periodic or special examination, check the compliance of a covered institution with the requirements of the AMLA and its implementing rules and regulations (S11 AMLA) PDIC/BSP may inquire into bank deposits if there is a finding of unsound or unsafe banking practice (Sec. 8 [8], PDIC Charter) Authority of AMLC to inquire into or examine bank deposits & investments pursuant to the AntiTerror Law. Authority of the Commissioner of Internal Revenue to inquire into the bank deposits of a decedent for estate tax purposes or in case of a tax compromise

Exemption from Process of Foreign Currency Deposits  Foreign currency deposits (FCD) 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 FCDA). The process-exemption should be distinguished from the confidentiality clause. Exemption from confidentiality does not necessarily translate to exemption from process.  In other words, FCD are exempt from court order or administrative process. This is to encourage foreign currency deposits to increase international reserves. Example: You lent P500,000 to Win, a Thai national residing and working in the Philippines. When the loan fell due, Win didn’t pay. You found out that Win has a peso account deposit with Chinaoil Bank and a foreign currency deposit with NorthSouth Bank. Despite demands, Win refuses to pay because he said that the remaining money he has is already allocated for his vacation in Bali with his boyfriend, Bright. You now went to court, filed a case against Win for collection of sum of money and won. In order to satisfy your claim against Win, you applied for a writ of garnishment with the court for the bank deposits of Win. Q: Will the court issue the writ? A: Yes, for the peso deposit account but no for foreign currency deposits because they are exempt from garnishment. Exceptions to the Exemption  Pro hac vice (for that instance only) case The Supreme Court allowed garnishment of FCD of a foreign national who raped a minor and escaped (Salvacion vs Central Bank)  Civil Forfeiture Suit brought by the AMLC through the OSG pursuant to Sec 7(4) & 12 of AMLA and Sec 18 of TFPSA  Freeze order pursuant to AMLA and Anti-Terror Law Source: Banking Laws with Atty. Mae Diane Azores, CPA (In partnership with NFJPIA) - YouTube 1:08:45-1:35:02...