EXCEPTIONS TO THE BANK

SECRECYRULE

Ejercitov.Sandiganbayan
o TheSupremeCourtruled
on the issue of unlawful
access of bank accounts
of former President
Joseph Estrada on the
chargeofplunder.
o Injustifyingtheaccessof
bank information for
plunder,theCourtlikened
cases of plunder and
unexplained wealth to
bribery or dereliction of
duty, in order to fit the
case squarely into the
exceptions under Section
2 of the Bank Secrecy
Law,asfollows:
Cases

of
unexplained
wealtharesimilar
to cases of
bribery

or
derelictionofduty
and no reason is
seen why these
two classes of
cases cannot be
exceptedfromthe
rule making bank
deposits
confidential. The
policy as to one
cannot

be
different from the
policy as to the
other ... Thus,
cases for plunder
involve
unexplained
wealth.

RA 1405 declares all deposits

absolutely confidential, withthe
exceptionsof:
o written consent of the
depositor;
o incasesofimpeachment;
o upon order of a
competent court in cases
of bribery or dereliction
ofdutyofpublicofficials;
or
o incaseswherethemoney
deposited or invested is
the subject matter of the
litigation.
The Foreign Account Tax
ComplianceAct(FATCA)
o requires all financial
institutions outside the
US,designatedbythelaw
as foreign financial
institutions (FFIs), to
report information on
financialaccountsheldby
US persons to the US
InternalRevenueService
(IRS).
o FATCAcoversindividual
accounts with at least
$50,000 and corporate
accounts with at least
$250,000 in USsourced
income.
o Noncompliancewiththe
FATCA reportorial
requirements exposes
erring FFIs to a 30%
withholding tax on US
sourcedincomeincluding
dividend, interest, fees,
sales,andinvestments.
TheDepartmentofFinanceand
the Bureau of Internal Revenue
(BIR) entered into a reciprocal

Intergovernmental Agreement
(IGA) with the US on July 13,
2015 to implement the FATCA
under Model 1. FATCA is
among the priority programs of
theBIRthisyear.
The IGA helps facilitate the
compliance of local banks and
financial institutions. With the
IGA, all financial institutions
will effectively be considered
FATCA compliant and will not
be subject to the 30%
withholding tax on USsourced
income, provided they register
with FATCA and submit to its
terms.
The Philippines and the US
already have an existing double
taxationtreatywhichcontainsan
exchange of information
provisionwhereinformationmay
besharedbetweentherespective
competentauthoritiestocarryout
the treaty provisions or for the
prevention of fraud in the
administration of the statutory
provisions on taxes. The
exchangeofinformationmaybe
inresponsetoaspecificrequest
ordoneonaroutinebasis.
Toenhancethistreatyprovision,
Model1oftheIGArequiresFFIs
toregularlyreportinformationof
financial accounts of American
citizens in their records to the
BIR; the BIR, in turn, annually
transmits the information to the
IRS.

Covered FFIs must identify,

collect and report the following
bySept.30,2015:
(1)accountholdersname;
(2) account holders US tax
identificationnumber(TIN);
(3)accountholdersaddress;
(4)accountnumber;
(5)accountbalanceorvaluewith
respectto2014activitiesand/or
transactions;and
(6) aggregate number and
balance or values for accounts
held by recalcitrant/non
cooperatingholders.
Considering that FATCA
compliance involves disclosure
ofaccountinformation,itaffects
the Philippines bank secrecy
laws.However,itisstillpossible
for FFIs to observe FATCA
requirementsbysecuringwritten
permissionfromaffectedclients
to allow banks to disclose their
accountinformation,whichisan
exception to the bank secrecy
law.
AsidefromAmericanexpatriates
livinginthePhilippines,FATCA
also significantly impacts
Filipinos with dual citizenship
(those whose country of
citizenship is the US); Filipinos
whoarepermanentUSresidents
(i.e., green card holders); or
Filipinos with substantial
presence in the US (i.e., those
whove resided in the US for
more than 183 days, but not
working as a diplomat, teacher,
studentoranathlete).