BANK SECRECY LAW

THE Insurance Commission is one of three members of the Anti-Money Laundering

Council (AMLC); the other two are the Bangko Sentral ng Pilipinas and the Securities and
Exchange Commission. In a recent meeting with the Department of Finance, they raised
a concern regarding the continuing need for bank-secrecy laws in the country. Let us,
then, take a look at the current state of our bank-secrecy law.
While Section 2 of Republic Act (RA) 1405, also known as the Secrecy of Bank Deposits
Act, declares bank deposits to be absolutely confidential, deposits of whatever nature,
including investments in bonds, are expressly allowed to be examined, inquired or
looked into by the same law, as amended, in these instances: a) during a special or
general examination of a bank, as authorized by the Monetary Board, to investigate bank
fraud or a serious irregularity; b) during a regular audit of a bank by an independent
auditor; c) upon the written permission of the depositor; d) in cases of impeachment; e)
upon the order of a competent court in cases of bribery or dereliction of duty of public
officials; and f) in cases where the money deposited is the subject of the litigation.
Clearly, the confidentiality or secrecy is not absolute. Moreover, the exceptions listed
above is not exclusive, since, in addition to those expressly listed under Section 2 of RA
1405, other laws have either expressly or impliedly provided other exceptions to the
bank-secrecy law. These are: g) upon inquiry by the internal-revenue commissioner in
the determination of the net estate of a deceased depositor; h) under Section 11 of the
Anti-Money Laundering Act of 2011; i) under Section 2 of the Unclaimed Balances Act; j)
under Section 8 of RA 3019, pertaining to unexplained wealth; and k) under Section 27 to
43 of the Human Security Act of 2007, also known as the antiterrorism law.
Some of the laws that have impliedly added exceptions to the bank-secrecy laws have
been confirmed by Supreme Court (SC) decisions. Note that Section 11 of the Anti-Money
Laundering Act provided for an expressed exception to the bank-secrecy law, while
Section 8 of RA 3019 and 1379 provided for an implied exception to the same law, as
ruled in Philippine National Bank v Gancayco. All these exceptions bring to mind the
historical observation that the Holy Roman Empire of the Middle Ages was neither holy
and Roman nor an empire.
Perhaps, as the last exception to the bank secrecy law, one may add: l) upon order of a
competent court in cases similar to that of bribery or dereliction of duty of public
officials. For example, unexplained wealth is considered as similar to bribery and plunder
under RA 7080. In Ejercito v Sandiganbayan, it was held that the crime of plunder is
analogous to bribery and, therefore, the exception from the secrecy of bank deposits

granted in cases of bribery should also be granted to cases for plunder under RA 7080, in
which crime is not expressly listed as an exception in RA 1405.
It should also be pointed out that there is no secrecy for the bank deposits of dummies.
In

Banco

Filipino

Savings and Mortgage Bank v Purisima, the SC held that the spouse, dependents and
other persons may not effectively invoke the bank-deposits secrecy law. The High Court
also cited Section 1 of RA 1379 that characterized a property unlawfully acquired by the
respondent to include properties where their ownership is concealed by [their] being
recorded in the name of [or] held by the respondents spouse, ascendants, descendants,
relatives or any other person. Accordingly, concealing unlawfully acquired wealth,
including cash in banks, in the name of other persons does not guarantee a successful
abscondment.
With respect to foreign-currency deposits, note that its confidentiality is more strictly
upheld by lesser exceptions. Hence, the exceptions listed in RA 1405 do not apply to
such deposits. Inquiries into such accounts may be allowed only under Section 8 of the
Foreign Currency Deposits Act, that is, with the depositors written consent and by the
AMLC under Section 11 of RA 9160.
ABOLISH BANK SECRECY LAW
An official of the Organisation for Economic Co-operation and Development (OECD) has
called on the Philippines to abolish the bank-secrecy law to improve tax collection and
more effectively fight corruption and money laundering.
I think the key challenge for tax administration globallyin the Philippines or
everywhere, in dealing with money launderers, in dealing with tax evaders, in dealing
with corruptionis information, said Richard Parry, head of the Global Relations Division
of the OECDs Center for Tax Policy and Administration.
Parry said the trend in the international community is toward the abolition of banksecrecy provi-sions, and cited a G-20 observation way back in 2009 that said bank
secrecy is either dead or dying.
Parry added that, aside from the abolition of the bank-secrecy law, the Philippines should
also cooperate with other countries in the mutual exchange of information on matters
involving taxpayers.

Last year the Philippines signed the OECDs Convention on Mutual Administrative
Assistance in Tax Matters to Enhance Tax Compliance to also allow the country to run
after nonresidents who have tax liabilities in the Philippines.
The Internal Revenue Commission then extended the maximum period during which a
taxpayer may be left in the dark as to the existence of a request for financial information
made by a foreign tax authority to the Bureau of Internal Revenue. Parry said that, aside
from these measures, the Philippines should abolish the bank-secrecy law to meet
international standards in cooperating with other countries in tax and financial matters.
So, the Philippines needs to be engaged in that process. You need to have legislation in
place, which meets the level standards, which means the abolition of bank secrecy, he
said.
He added that abolishing the bank-secrecy law would also boost the governments
efforts against corruption, money laundering and tax evasion, leading to higher revenue
collection to fund its social and economic projects.