SECRECY OF BANK DEPOSITS Handout
SECRECY OF BANK DEPOSITS Handout
GOVERNING LAW
For local currency deposits – RA 1405, the Secrecy of Bank Deposits (SBD)
For foreign currency deposits – RA 6426, the Foreign Currency Deposits Act (FCDA)
PURPOSE OF RA 1405
R.A. No. 1405 has two allied purposes. It hopes to discourage private hoarding and at
the same time encourage the people to deposit their money in banking institutions, so
that it may be utilized by way of authorized loans and thereby assist in economic
development. Owing to this piece of legislation, the confidentiality of bank deposits
remains to be a basic state policy in the Philippines. Section 2 of the law
institutionalized this policy by characterizing as absolutely confidential in general all
deposits of whatever nature with banks and other financial institutions in the country.
(BSB Group Inc. v. Sally Go, G.R. No. 168644, 16 February 2010)
The contention that trust accounts are not covered by the term
"deposits," as used in R.A. 1405, by the mere fact that they do not entail
a creditor-debtor relationship between the trustor and the bank, does not
lie. An examination of the law shows that the term "deposits" used
therein is to be understood broadly and not limited only to accounts which
give rise to a creditor-debtor relationship between the depositor and the
bank.
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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. (Underscoring supplied)
If the money deposited under an account may be used by banks for authorized loans to
third persons, then such account, regardless of whether it creates a creditor-debtor
relationship between the depositor and the bank, falls under the category of accounts
which the law precisely seeks to protect for the purpose of boosting the economic
development of the country. (Ejercito v. Sandiganbayan, G.R. No. 157294-95)
SUGGESTED ANSWER:
The P10,000 savings account, P20,000 checking account and the P40,000 trust fund are
covered by the Law on Secrecy of Bank Deposits as they fall under the term “all
deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds.” (Sec. 2, SBD). Only the money market placement
is NOT covered by the Secrecy of Bank Deposits law as it is not a deposit and not an
investment in government bonds.
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That with respect to bank deposits, the provisions of existing laws shall prevail (Sec.
55.1(b) of the GBL)”.
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PERSONS BANNED FROM DISCLOSING ANY INFORMATION CONCERNING
BANK DEPOSITS
Any official or employee of a bank, or an independent auditor hired by the bank to
conduct its regular audit (Sec. 3, SBD)
SUGGESTED ANSWER:
NO. The suit will not prosper. Manosa cannot be sued for unlawful disclosure of bank
deposit of Gigi. Section 3 of the Secrecy of Bank Deposits Law prohibits any official or
employee of a bank, or an independent auditor of a bank to disclose to any person any
information concerning bank deposits. Manosa is neither an official nor employee nor an
independent auditor hired by the bank. There is also no inquiry of bank deposit to
speak of. Manosa merely overheard the bank teller.
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5. In case of inquiry of the BIR of bank accounts of a decedent for estate tax
purposes or in case of a tax compromise. (Sec. 6[f], NIRC of 1997)
6. Incidental disclosures of unclaimed balances under the Unclaimed Balances
Law(Act 3696)
7. Cases falling under the Anti-Money Laundering Act (AMLA) [RA 9160, as amended]
8. The examination of a bank account based on Sec. 10, Rule 57 of the Rules of
Court (the examination of a party whose property is attached and persons
indebted to a defendant or controlling his property) (Oñate v. Abrogar, 230 SCRA
181[1994])
9. In cases falling under the Human Security Act (Sec. 27, RA 9372).
10. The PDIC and/or BSP may inquire into or examine deposit accounts and all
information related thereto in case there is a finding of unsafe or unsound banking
practice (Sec. 8, RA 3591[PDIC Law], as amended)
11. The AMLC (Anti-Money Laundering Council) in cases falling under the Terrorism
Financing Prevention and Suppression Act of 2012 (RA 10168), is authorized to
inquire into or examine deposits and investments with any banking institution or
non- bank financial institution and their subsidiaries and affiliates without a court
order.
12. Waiver by DOSRI (Sec. 26, NCBA)
SUGGESTED ANSWER:
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GP is a suspected jueteng lord who is rumored to be enjoying police and
military protection. The envy of many drug lords who had not escaped the
dragnet of the law, GP was summoned to a hearing of the Committee on
Racketeering and Other Syndicated Crimes of the House of Representatives,
which was conducting a congressional investigation “in aid of legislation” on
the involvement of police and military personnel, and possibly even of local
government officials, in the illegal activities of suspected gambling and drug
lords. Subpoenaed to attend the investigation were officers of certain
identified banks with a directive to them to bring the records and documents
of bank deposits of individuals mentioned in the subpoenas, among them GP.
GP and the banks opposed the production of the banks records of deposits on
the ground that no such inquiry is allowed under the Law on Secrecy of Bank
Deposits (RA 1405). Is the opposition of GP and the bank valid? Explain.
SUGGESTED ANSWER:
Yes. The opposition is valid. All deposits of whatever nature are absolutely confidential
in nature and may not be examined, inquired or looked into by any person, government
official, bureau or office. The inquiry of the Committee is not among those exceptions of
RA 1405 and that GP is merely suspected to be a drug lord.
NOTE: The Committee conducting the investigation is not a competent court authorized
under the law to issue a subpoena for the production of the bank record involving such
disclosure.
SUGGESTED ANSWER:
NO, Miguel’s contention is not tenable. In Anti-Graft cases, the inquiry into the illegally
acquired property – or property NOT “legitimately acquired” – extends even to cases
where such property is concealed by being held by or recorded in the name of the
spouse, ascendants, descendants and relatives of the person investigated, and those in
the name of other persons. This is one of the exceptions in RA 1405 ( Banco Filipino v.
Purisima, 161 SCRA 576).
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EVIDENTIARY VALUE OF INFORMATION OBTAINED IN VIOLATION OF THE
SBD
There is nowhere in RA 1405 that provides that an unlawful examination of bank
accounts shall render the evidence obtained therefrom inadmissible in evidence. Section
5 of RA 1405 only states that “any violation of this law will subject the 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.” ( Ejercito v.
Sandiganbayan)
SUGGESTED ANSWER:
Yes, as far as the peso account is concerned. Section 2 of RA No. 1405 allows the
disclosure of bank deposits in case where the money deposited is the subject matter of
the litigation. Since the case filed against Michael is aimed at recovering the amount he
withdrew from the funds of the partnership, which amount he allegedly deposited in his
account, a disclosure of his bank deposits would be proper.
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No, with respect to the foreign currency account. Under the Foreign Currency Law, the
exemption to the prohibition against disclosure of information concerning bank deposits
is the written consent of the depositor. (BAR 1995)
PROBLEM
A and B opened a joint foreign currency savings account to facilitate with ZZZ
Bank to hold funds which “belong entirely and exclusively” to A, to “facilitate
the funding of certain business undertakings” or both of them and which
funds were to be “temporarily held in trust” by B, who “shall turnover the
same to A upon demand.” Withdrawals from the account were always made
through their joint signatures. When their business relationship turned sour,
B unilaterally closed their joint account, withdrew the remaining balance of
$300,000 and placed the money in his own personal account with the same
bank. A thus sought an injunctive writ to prevent B from withdrawing the
money at any time. Is B’s deposit protected by the law on secrecy of bank
deposits?
SUGGESTED ANSWER:
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NO. By depositing those funds in a joint “and/or” account, A did not convey ownership
thereof to B and B could not convert those funds to his personal and exclusive
ownership and use. The privileges extended by the statute are actually enjoyed, and
are invocable only, by A, because A is the owner of the foreign exchange fund subject
of the case.
B is still not entitled to the confidentiality provisions of the law. For, as already noted, B
is not the owner of such foreign currency funds.
Hi Yielding Corporation filed a complaint against five (5) of its officers for
violation of Section 31 of the Corporation Code. The corporation claimed that
the said officers were guilty of advancing their personal interests to the
prejudice of the corporation, and that they were grossly negligent in
handling its affairs. Aside from documents and contracts, the corporation
also submitted in evidence records of the officers’ U.S. Dollar deposits in
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several bank overseas—Boston Bank, Bank of Switzerland, and Bank of New
York.
For their part, the officers filed a criminal complaint against the directors of
Hi Yielding Corporation for violation of RA No. 6426, otherwise known as
Foreign Currency Deposit Act of the Philippines. The officers alleged that
their bank deposits were illegally disclosed for want of a court order, and
that such deposits were not even the subject of the case against them.
B. Was there a violation of the Secrecy of Bank Deposits Law (RA 1405)?
Explain.
SUGGESTED ANSWER:
A. No. Section 2 of RA No. 6426, as amended, speaks of deposit with such Philippine
banks in good standing, as may be designated by the Central Bank for the purpose, and
is inapplicable to the foreign currency account in question.
[A/N: Simply put, the non-disclosure of foreign accounts does not cover
foreign currency accounts maintained in foreign banks.]
B. No. Section 2of RA No. 1405 or the Bank Secrecy Law covers only “deposits of
whatever nature with banks or banking institutions in the Philippines xxx”, hence,
cannot be made to apply to foreign banks.
GARNISHMENT
It refers to a specie of attachment by virtue of which credit owing from a third party
and belonging to the judgment debtor is required to be paid to the judgment creditor
(Tayabas Land Transportation v. Sheriff, 41 Phil 382)
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Ortega, 49 SCRA 355[1973]). There is no real inquiry in case of garnishment, and if the
existence of the deposit is disclosed, the disclosure is purely incidental to the execution
process (PCIB v. CA, 193 SCRA 452).
The notice of garnishment does not order any inquiry or examination of the amount
deposited. The garnishment simply orders that the amount deposited be left intact for
the time being until further orders of the court. It was not the intention of the
lawmakers by enacting RA 1405 to place bank deposits beyond the reach of execution
to satisfy a final judgment (Chinabank v. Ortega).
PROBLEM
KLM Bank, thru its manager, disclosed to the court sheriff the outstanding
balance of X’s deposit with the bank upon its receipt of the garnishment
notice. X filed a criminal complaint against KLM bank for violation of RA No.
1405. Will the criminal complaint prosper? Explain briefly.
SUGGESTED ANSWER:
NO, the complaint will not prosper. The Bank Secrecy Law does not preclude a bank
deposit from being lawfully garnished in order to satisfy a judgment. The disclosure is
merely incidental to the execution of a court judgment.
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First Bank received an order of garnishment over a client’s peso and dollar
deposits in First Bank. Should First Bank comply with that order? Explain.
(2015)
SUGGESTED ANSWER:
YES for the peso deposit but NO for the dollar deposit.
For peso deposits, banks are duty-bound to comply with the notice of garnishment by
disclosing the existence or non-existence of a bank deposit that may be garnished,
particularly whether it is sufficient or not to satisfy such garnishment.
For foreign currency deposits, like the dollar deposit, they shall be exempt from
attachment, garnishment or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever.
Foreign currency
Peso accounts
accounts
RA 6426, the Foreign
RA 1405, the Secrecy of
Governing law Currency Deposits Act
Bank Deposits (SBD)
(FCDA)
1. upon written permission
of the depositor
2. in case of impeachment
3. upon order or a
competent court in the
Exceptions to non-
case of bribery or Disclosure upon written
disclosure under their
dereliction of duty of permission of the depositor
governing law
public officials
4. when the money
deposited or invested is
the subject matter of
litigation
Prohibited unless non-
Anonymous accounts Prohibited
checking account
Can it be attached/
Yes No
garnished?
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