SECRECY IN BANK DEPOSITS (R.A.

1405)
A.PURPOSE
Q: What is the purpose?
A:
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.
B. PROHIBITED ACTS
Q: What are the prohibited acts under the law?
A:
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)
C. DEPOSITS COVERED
Q: What are the kinds of deposits covered?
A:
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)
Q: Are trust funds covered by the term deposit?
A: 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)
Note: Despite such pronouncement that trust funds are considered deposits,
trust funds remain not covered by PDIC.
Q: Are foreign currency deposits covered by the Secrecy in Bank
Deposits (R.A. 1405)?
A: 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.
D. EXCEPTIONS
Q: What are the instances where examination or disclosure of
information about deposits can be allowed?
A:
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)
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)
6. 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)
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. With court order:
a. In cases of unexplained wealth under Sec. 8 of the AntiGraft and
Corrupt Practices Act (PNB v. Gancayco, L18343, Sept. 30, 1965)
b. 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)
10. Without court order: If the AMLC determines that a particular deposit
or investment with any banking institution is related to the following:
HKMAD
a. Hijacking,
b. Kidnapping,
c. Murder,
d. Destructive Arson, and
e. Violation of the Dangerous Drugs Act. (2004, 2006 Bar Question)
Q: What are the requisites before the Ombudsman may examine
deposits?
A:
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.
Note: The inspection must cover only the account identified in the pending
case. (Marquez v. Desierto, G.R. No. 138569, Sept. 11, 2003)
Q: Can a bank be compelled to disclose the records of the accounts
of a depositor under the investigation for unexplained wealth?
A: Since cases of unexplained wealth are similar to cases of bribery,
dereliction of duty, no reason is seen why it cannot be excepted from the rule
making bank deposits confidential. In this connection, 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)
Q: 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?
A: 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)
Q: 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.
in cases of impeachment
2.
in cases involving bribery
3.
in cases involving BIR inquiry
4.
in cases of antigraft and corrupt practices
5.
in cases where the money involved is the subject of litigation
A: 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. Turning to 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.
(2004 Bar Question)
E. GARNISHMENT OF DEPOSITS, INCLUDING FOREIGN DEPOSITS
Q: Does garnishment of a bank deposit violate the law?
A: 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)
Q: How about foreign currency deposits, can they be subject to
garnishment?
A:
GR: 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)
XPN: 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)
Q: Can the foreign currency deposit of a transient foreigner who
illegally detained and raped a minor Filipina, be garnished to satisfy
the award for damages to the victim?
A: The exemption from garnishment of foreign currency deposits under R.A.
6426 cannot be invoked to escape liability for the damages to the victim. The
garnishment of the transient foreigners foreign currency deposit should be
allowed to prevent injustice and for equitable grounds. The law was enacted
to encourage foreign currency deposit and not to benefit a wrongdoer.
(Salvacion vs. Central Bank of the Philippines, G.R. 94723, August 21, 1997)
F. PENALTIES FOR VIOLATION

Q: What are the penalties for violation of R.A. 1405?

A: 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.