Secrecy of Bank Deposits Notes - PDIC PDF

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REPUBLIC ACT No. 1405: SECRECY OF BANK DEPOSITS ACTAN 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 ...

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REPUBLIC ACT No. 1405: SECRECY OF BANK DEPOSITS ACT 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Charters, Executive Orders, Rules and Regulations which are inconsistent with the provisions of this Act are hereby repealed.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

SECRECY OF BANK DEPOSITS SIMPLIFIED Source: https://ndvlaw.com/ On 09 September 1955, Republic Act No. 1405, otherwise known as An Act Prohibiting Disclosure of or Inquiry into, Deposits with any Banking Institution (“Bank Secrecy Law”), was approved. This law was enacted to encourage individuals to deposit their money in banks instead of hoarding them.

You may ask, why is there a need to protect the secrecy of bank deposits? Technically speaking, the law prefers that money be deposited in banks so they may be properly utilized to assist in the economic development of the country. However, it is more relevant on a practical matter. Let’s use you dear reader as an example. Suppose that you only have P1,000 in your bank account. Surely, you do not want any person (such as your friend, employer or any stranger) to find that out. Either you do not want others to know that you do not have sufficient money or you simply do not feel comfortable in people prying in your financial affairs. On the other hand, if you have P100,000,000.00 in your bank account, you also do not want others to find that out for fear that you might be kidnapped, or relatives might borrow from you, or simply, it’s your personal affair. In all these cases, one’s financial status is a private matter. Transactions happening in your bank account are not just empty figures. There are stories affixed to such transactions. Thus, these financial transactions are akin to your personal activities which should not be easily accessible to anyone. The Bank Secrecy Law protects all deposits of whatever nature in banks or banking institutions in the Philippines as well as investments in government bond. This law prohibits any person, subject to the exceptions below, from disclosing to any person any information, relative to the funds or properties belonging to the depositors in the custody of the bank. Simply put, no one can just go to your bank and ask for your bank balance. However, the rule is not absolute. The following are the exceptions to the bank secrecy law: 1. Written permission or consent in writing by the depositor;

2. In cases of impeachment;

3. Upon order of the court in cases of bribery or dereliction of duty of public officials;

4. Upon order of the court in cases where the money deposited or invested is the subject matter of the litigation;

5. Upon a subpoena issued by the Ombudsman concerning an investigation it is conducting, provided that there must already be a case pending in court, the account be clearly identified, the inspection be limited to the subject matter of the pending case; and the bank personnel and the depositor must be notified to be present during the inspection;

6. The BIR can inquire into bank deposits in an application for compromise of tax liability or determination of a decedent’s gross estate;

7. The Anti-Money Laundering Council (“AMLC”) can examine bank accounts pursuant to a court order, where there is probable cause that the deposits are related to an unlawful activity or money laundering offense;

8. The AMLC can examine bank accounts, WITHOUT a court order, where there is probable cause that the deposits are related to certain crimes such as kidnapping for ransom, violation of the Dangerous Drugs Act, hijacking, destructive arson, murder and violations of RA 6235 (acts inimical to civil aviation);

9. The Bangko Sentral can examine bank accounts in the course of its periodic or special examination regarding compliance with Anti-Money Laundering Law.

As you can see, although there are many exceptions, securing such exceptions is not an easy task. The easiest way to waive the secrecy of bank deposits is through a written waiver. Although there is no prescribed form for a waiver, it is necessary that the waiver be made voluntarily, knowingly and with sufficient awareness of relevant circumstances and consequences. Thus, as a matter of practice, banks will require the depositor to state in his waiver the specific bank account, bank branch, name of depositor, period covered by the transactions and the name of the person authorized to access the bank account.

How about dollar deposits? Now, foreign currency deposits are governed by a different law, namely Republic Act No. 6426 and has fewer exceptions. This will be discussed in a separate article.

You may be curious if there is any criminal liability for violating the bank secrecy law. Yes, there is criminal liability. Any person violating this law may be imprisoned for not more than five (5) years, or meted a fine not exceeding P20,000.00 or both.

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an the bank disclose personal information about their depositor to any person who inquires? No. This is prohibited under REPUBLIC ACT No. 1405 or “An Act Prohibiting Disclosure of or Inquiry Into, Deposits with Any Banking Institution and Providing Penalty Therefor.” The law says: 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. Moreover, it shall be unlawful for any official or employee of a banking institution to disclose to any person other than those mentioned above. Thus, the following are the prohibited acts in RA 1405: 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. 2. Disclosure by any official or employee of any banking institution to any unauthorized person of any information concerning said deposit. However, bank deposit may be examined or disclosed by an official or employee of any banking institution if: 1. there is written permission of the depositor; 2. in cases of impeachment; 3. upon order of a competent court in cases of bribery or dereliction of duty of public officials; or 4. in cases where the money deposited or invested is the subject matter of the litigation.

Source: https://www.alburolaw.com/

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an foreign currency deposit be inquired or looked into?

Generally, foreign currency deposit is absolutely confidential nature. Republic Act No. 6426 or Foreign Currency Deposit Act of the Philippines provides that: All foreign currency deposits authorized the Foreign Currency Deposit Act, as amended by PD No. 1035 (Expanding the Authority of Certain Depository Banks under R.A. No. 6426 and for other Purposes), as well as foreign currency deposits authorized under PD No. 1034(Expanding the Authority of Certain Depository Banks under R.A. No. 6426 and for other Purposes), are declared as and considered 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 judicial or administrative or legislative, or any other entity whether public or private; provided, however, that said 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. (As amended by PD No. 1035, and further amended by PD No. 1246, promulgated on Nov. 21, 1977) Thus, Foreign currency deposits cannot be inquired or looked into. All foreign currency deposits are confidential. However, Republic Act No. 10021 or Exchange of Information on Tax Matters Act of 2009 allowed Commissioner of Internal Revenue to inquire into bank deposits of the following: 1. A decedent to determine his estate; 2. Any taxpayer who has filed for an application for compromise of his tax liability; and

3. A specific taxpayer upon request for tax information from a

foreign tax authority pursuant to an international convention or agreement on tax matters to which the Philippines is a party.  

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All foreign currency deposits are declared as and considered of an absolutely confidential nature. Foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court. Commissioner of Internal Revenue is allowed to inquire into foreign bank deposits.

Dollar vs. Peso Account Source: https://www.divinalaw.com/ In my previous column, I cited the rule against unauthorized disclosure, examination or inquiry into Philippine currency bank deposits under Republic Act 1405. I also explained that the prohibition is not absolute. It admits of various exceptions, carved out by statute and jurisprudence. Another law governs secrecy of foreign currency deposits. The rule ordaining their confidentiality is even more stringent, with fewer exceptions compared to RA 1405. The most significant distinction is that while Philippine currency bank deposits may be examined or disclosed if there is a relevant court order, foreign currency deposits are exempt from court order and administrative process. In fact, they are exempt from execution, attachment and garnishment. Injunction will not lie to enjoin bank withdrawals of such deposits. Creditors cannot satisfy their claim then from the foreign currency bank deposits of their debtor. In simple words, the unpaid creditors, no matter how meritorious the claim may be, cannot seize the monies of their debtor if they are in foreign currency bank deposits. The purpose of RA 6426 is to encourage foreign currency deposits in order to beef up the country’s international reserves. The intent may be laudable but the stringent rule favoring these kind of deposits may be abused. Debtors who are anticipating adverse court decision can simply convert their deposits into foreign currency and instantaneously render them beyond the reach of judgment creditors. In one case, a debtor obtained a foreign currency loan from a bank to invest in the purchase of a satellite. The loan was further secured by a bond issued by a reputable insurer. The loan was not paid. The lender called on the loan and ran after the surety which raised as defense that the loan proceeds were not used for the purpose specified in the surety agreement. Since there was misrepresentation, the surety contended that it could not be held liable on the bond. In support of its defense, the surety asked for a court subpoena to be able to inquire into the whereabouts of the loan

proceeds. The Court held that this is not possible given the statute that exempts foreign currency deposits from any court order. (GSIS vs Court of Appeals, GR 189206, June 8, 2011) In another case though, the Supreme Court allowed the garnishment of the foreign currency deposits of a foreign transient to satisfy a civil liability arising from his criminal offense. ( He raped a 10 year old minor but was able to abscond). In disregarding the rigid construction of RA 6426, the Court pronounced that the law could not be invoked to condone a wrongdoing or used for any purpose inconsistent with the salutary intent of the law. (Salvacion vs Central Bank of the Philippines 278 SCRA 27) The High Court likewise refused a trustee from invoking RA 6426 after he diverted the beneficial owner’s deposits to his own account, declaring that only the owner of the deposits can benefit from the protective mantle of RA 6426 (Van Twest vs Court of Appeals, 230 SCRA 42) By law, notwithstanding RA 1405 and 6426, the Anti Money Laundering Council may also inquire into funds and deposits if there is a probable cause they relate to unlawful activities under the Anti- Money Laundering law (AMLA). Stated otherwise, the rule against unauthorized disclosure, examination and garnishment of deposits does not apply when it comes to AMLA violation. After comparing the laws covering ₱ and $, I hasten to add that a revisit of RA 1405 cannot be complete without a corresponding review of RA 6426. Regardless of any possible amendment though, it should be stressed that laws cannot be used or applied in any manner contrary to their intent, rationale and purpose.

Update on Secrecy of Bank Deposits Law:

BUSINESS

Malacañang certifies bank secrecy law amendment as urgent Lawrence Agcaoili - The Philippine Star August 19, 2021 | 12:00am

Particularly, this would allow the BSP to effectively fulfill its mandate and enable it to have a holistic examination of a banking institution so that certain risk areas will be considered in assessing a bank’s financial condition, risk management and corporate governance. The results of the inquiry or examination by the BSP shall not be arbitrarily shared or disclosed but proposed to be for the exclusive use of the BSP. Nevertheless, the BSP may share the results of its examination with the courts and other regulators if it is necessary to prevent or prosecute an offense or crime. “This enhances the BSP’s capacity to fulfill its mandate of promoting the safety and soundness of the banking system,” Diokno said. The central bank is also supporting the proposed amendments in line with the country’s broader efforts to combat both domestic and global tax evasion, money laundering and other financial crimes; to promote harmonious and supportive international relations, and to meet international standards on transparency. “It also enables compliance with international standards on transparency that will also bolster the public and the global community’s trust in the domestic banking system,” the BSP chief said. Last June 25, Paris-based dirty money watchdog Financial Action Task Force placed the Philippines on its gray list or jurisdictions under increased monitoring that have committed to resolve swiftly identified strategic antimoney laundering/counter financing of terrorism deficiencies....