Foreign Currency Deposit Act

Dela Cruz | Laguna | Manabat | Mercado | Romero | Ucat | Vinuya

Based on Republic Act 6426 (as amended)

PURPOSE
Encourage foreign lenders
and investors in the PH

Who may deposit?

RA 6426
PROVISIONS
(Sec. 2)

Any person (natural or juridical)

may deposit with Philippine banks
in good standing
What to deposit?
Foreign currencies which are
acceptable as part of international
reserve

RA 6426

PROVISIONS
(Sec. 3)
Banks which are designated by
the Central Bank can accept
foreign currency deposits

(1) To accept deposits and to accept

foreign currencies in trust Provided, That
numbered accounts for recording and
servicing of said deposits shall be allowed;
(2) To issue certificates to evidence such
deposits;
(3) To discount said certificates;
(4) To accept said deposits as collateral for
loans subject to such rules and regulations
as may be promulgated by the Central
Bank from time to time; and
(5) To pay interest in foreign currency on
such deposits

RA 6426

PROVISIONS
(Sec. 4)
Foreign currency cover
requirements

100%

Cover for their Foreign Deposit Liabilities to be maintained at all times

15%

Foreign currency deposits

with the Central Bank

85%

Foreign currency
loans/securities which are
short-term and readily
marketable

Foreign currency cover shall be in the same currency as that

of the corresponding foreign currency deposit liability

EFCDS

Banks under Expanded Foreign Currency Deposit System

shall be exempt from the 15% cover rule. They may extend
foreign currency loans to any domestic enterprise without
the maturity and marketability limitations. Such loans are
eligible for the 100% foreign currency cover.

RA 6426
PROVISIONS
(Sec. 5)

RIGHTS OF THE
DEPOSITOR
Ability to withdraw and transfer
deposits without restrictions
except deposits arising from the
contract between depositor and
bank.

RA 6426
PROVISIONS
(Sec. 6)

TAX EXEMPTIONS
All foreign currency deposits,
including interest and other
income, are exempt from all
taxes, whether resident or nonresident, and whether engaged in
trade/business or not.

SECRECY OF FCD

RA 6426
PROVISIONS
(Sec. 8)

All foreign currency deposits

under this Act are considered of
an absolutely confidential nature,
except upon the written
permission of the depositor

SECRECY OF FCD
Contrasted to the Law on
Secrecy of Bank Deposits

RA 6426
PROVISIONS
(Sec. 8)

1. 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
4. In cases where the money deposited
or invested is the subject matter of
the litigation

SECRECY OF FCD
Other Law that affects the
secrecy of FCD

RA 6426
PROVISIONS
(Sec. 8)

Anti-Money Laundering Act of 2001

The Anti-Money Laundering Council may
look into any type of deposit, including a
foreign currency deposit, upon order of
any competent court when it has been
established that there is probable cause
that the deposit involved is related to a
money laundering offense.

DEPOSIT INSURANCE

RA 6426
PROVISIONS
(Sec. 9)

The deposits under this Act shall

be insured under RA 3591 (PDIC)
and its IRR

Payment is denominated
based on the currency of
the foreign deposit

PENAL PROVISIONS

RA 6426
PROVISIONS
(Sec. 10)

Willful violation of the Act or a

regulation can result to:

1-5AND/OR

years, imprisonment

5,000-25,000

fine

GR No. 140687
China Banking Corporation vs Court of Appeals and Jose Gotianuy as
substituted by Elizabeth Gotianuy Lo
Complaint for recovery of sums of money was filed by Jose "Joseph" Gotianuy
against his son-in-law, George Dee, and his daughter, Mary Margaret Dee

GR No. 140687
P35,000,000.00 and US$864,000.00

GR No. 140687
Trial court issued a subpoena to Cristota Labios and Isabel Yap, employees of
China Bank, to testify on the case.

GR No. 140687
China Bank moved for a reconsideration. Resolving the motion, the trial court
issued an Order dated 16 April 1999 and held: the disclosure only as to the
name or in whose name the said fund is deposited is not violative of the law.

GR No. 140687
From this Order, China Bank filed a Petition for Certiorari with the Court of
Appeals. In a Decision dated 29 October 1999, the Court of Appeals denied the
petition of China Bank and affirmed the Order of the RTC.

GR No. 140687
Whether or not the law provides absolute confidentiality of foreign currency
deposit.

GR No. 140687
All foreign currency deposits authorized under this Act, as well as foreign
currency deposits authorized under Presidential Decree No. 1034, are hereby
declared as and considered of an absolutely confidential nature and,
except upon the written permission of the depositor.

GR No. 140687
Considered Jose Gotianuy, a co-depositor of Mary Margaret Dee.

GR No. 140687
Jose Gotianuy as the owner of these funds is entitled to a hearing on the
whereabouts of these funds.

GR No. 140687
Petition of CBC is Denied.

GR No. 200238
Philippine Savings Bank vs Senate Impeachment Court

Subject: five foreign currency deposit accounts with PSB all allegedly in the
name of Renato C. Corona
RA 6426 - provides for the absolute confidentiality of foreign currency
deposits
This section provides (1) a clear right to depositors and (2) obligation from
banks to maintain absolute confidentiality of foreign currency deposits

GR No. 200238
Failure of banks to fulfill the obligation subjects it to criminal liability under Sec
10 and its authority to accept new foreign currency deposits may be revoked
or suspended by the BSP (under Sec 87 of the Manual of Regulations on
Foreign Exchange Transactions)
The single exception to this rule is when the depositor provides a written
permission to inquire into and investigate his/her foreign currency deposits
NONE of this written permission has been given by Renato Corona. Hence, the
PSB prays for a Temporary Restraining Order.

GR No. 200238
Concurring opinion:

A TRO must be issued in favor of PSB because of the extreme urgency

attached to the case and because the applicant will suffer grave injustice and
irreparable injury.
At this point, a subpoena has already been issued requiring PSB to testify and
produce before the Senate Impeachment Court documents pertaining to the
foreign currency deposits.
The purpose of the TRO is to preserve the status quo until the hearing of the
application for preliminary injunction.

GR No. 200238
Dissenting opinion:

The application of absolute confidentiality is intended only to benefit foreign

investors under PD 1246, the amendatory law of RA 6246.
WHEREAS, in order to assure the development and speedy growth of the
Foreign Currency Deposit System and the Offshore Banking System in the
Philippines, certain incentives were provided for under the two Systems
such as confidentiality of deposits subject to certain exceptions and tax
exemptions on the interest income of depositors who are nonresidents
and are not engaged in trade or business in the Philippines.

GR No. 200238
However, whereas clauses are not considered integral part of the laws
and cannot enlarge or confer power, nor control the words of the act,
unless they are doubtful or ambiguous.
The language of RA 6246 was clear and plain that all foreign currency
deposits are considered to be absolutely confidential. The law expressly
refers to deposits and not to the identity, nationality, or residence of the
depositors.

GR No. 200238
Dissenting opinion:
Secrecy guaranteed by the law has steadily declined. While the general
rule facially appears to be secrecy, voluminous exceptions have in
substance created a rule of exceptions.

GR No. 200238
However, it is because of the Bank Secrecy Act that the confidentiality of
bank deposits remains a basic state policy in the Philippines. It falls within
the zones of privacy recognized by our laws.
In addition, the framers of the 1987 Constitution recognized that bank
accounts are not covered by the right to information or the requirement
for full public disclosure.

GR No. 200238
In Republic v Eugenio, the court reiterated the importance of financial
privacy. Should there be doubts in upholding the absolutely confidential
nature of bank deposits against affirming the authority to inquire into
such accounts, doubts must be resolved in favor of the confidentiality of
bank deposits.
In the end, the TRO is not a ruling to encourage public officials to use
foreign deposits to legally evade the correct SALN report. Its clear
objective is to maintain the status quo.

GR No. 200238
Final decision: Granting of the TRO in favor of PSB