SECRECY OF BANK DEPOSITS (R.A.

1405)

1. What is the bank secrecy law in the Philippines?

The bank secrecy law in the Philippines is an act that prohibits the disclosure of or inquiry into, of all
deposits of whatever nature with banks or banking institutions in the Philippines including investments in
government bonds to encourage individuals to deposit their money in banks instead of hoarding them. All bank
deposits are absolutely confidential, and cannot be inquired into by any person, subject to exceptions. It shall be
unlawful for any official or employee of a banking institution to disclose to any person, other than those
exempted, any information concerning said deposits.
AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS WITH ANY BANKING
INSTITUTION AND PROVIDING PENALTY THEREFOR

2. What is the policy of the government under RA 1405?

Under RA 1405, it is the policy of the government
1. to discourage private hoarding
2. to encourage the people to deposit their money in banking institutions and so that the same may
be properly utilized by banks in authorized loans to assist in the economic development of the country.

3. What is the basic state policy regarding bank deposits?

Maintain confidentiality of bank deposits. The law institutionalized this policy by characterizing deposits with banks
and other financial institutions as absolutely confidential in nature
The following are the basic policies of the state regarding bank deposits:
● All deposits of whatever nature with banks or banking institutions are considered as of an absolutely
confidential nature.
● Deposits of whatever nature with banks or banking institutions may not be examined, inquired or
looked into by any person except in the following cases:
○ there is a written permission of the depositor;
○ in cases of impeachment;
○ upon order of a competent court in cases of bribery or dereliction of duty of public officials;
○ in cases where the money deposited or invested is the subject matter of the litigation.

4. Coverage of secrecy of bank deposits (What are covered in the secrecy law?)
The Secrecy of bank deposits covers all deposits of whatever nature with banks or banking institutions in
the Philippines including investments in government bonds. These are all absolutely confidential in nature and
may not be examined, inquired or looked into by any person, government official, bureau or office.
Political subdivisions - a unit of government created by and under the authority of a higher level of government
such as provinces, cities, municipalities, and barangays.

5. What are the exceptions?

The following are exceptions from the bank secrecy law:
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; or
4. In cases where the money deposited or invested is the subject matter of the litigation;
5. Upon a subpoena issued by the Ombudsman concerning an investigation it is conducting, provided that:
a. There is already a case pending in court,
b. The account is clearly identified,
c. The inspection is limited to the subject matter of the pending case; and
d. The bank personnel and the depositor is notified to be present during the inspection;

NEW EXCEPTIONS:
1. Anti-Graft and Corrupt Practices Act - in cases of unexplained wealth shall be taken into consideration in the
enforcement of secrecy of bank deposit law notwithstanding any provision of the law to the contrary
- Warrants examination of bank records not only in the name of respondent’s spouse, ascendants,
descendants, relatives but also other persons
- Need to apply for court order
Requisites:
1. There is already a case pending in court;
2. The inspection is limited to the subject matter of the pending case; and
2. Monetary board - (#6)
 a. When there is danger of bank fraud
b. Independent auditors audits banks
3. NIRC
a. Under international tax treaties to exchange information with the treaty
b. Upon inquiry by the Commissioner of Internal Revenue in an application for compromise of tax liability
(written waiver is required) or determination of a decedent’s gross estate;
4. AMLA
a. Upon examination of the Anti-Money Laundering Council (AMLC) pursuant to a court order, where
there is probable cause that the deposits are related to an unlawful activity or money laundering offense;
b. Upon examination of the AMLC without a court order, where there is probable cause that the deposits
are related to certain crimes such as kidnapping for ransom, violation of the Dangerous Drugs Act,
hijacking, destructive arson, murder and violations of RA 6235 (acts inimical to civil aviation);
c. In connection with terrorism case (similar w/ a?)
5. PDIC Charter (as well as BSP)
a. These agencies may inquire into or examine deposit accounts and all information relating to bank
deposits in cases there is a finding of UNSAFE or UNSOUND BANKING PRACTICES.
6. NEW EXCEPTION (may also fall under NIRC)
a. Information requested by Foreign countries, only in the bases of formal request course through the BIR
and when all the procedural requirements have been complied with, the BIR Commissioners authorized
to look into the bank deposits and other related information of certain taxpayers in banks and financial
institutions
7. BSP
a. Upon examination of the Bangko Sentral in the course of its periodic or special examination regarding
compliance with Anti-Money Laundering Law.”
What is prohibited under the law: DISCLOSURE OF OR INQUIRY INTO, OF DEPOSITS WITH ANY BANKING
INSTITUTION
1. It is unlawful for any official or employee of a banking institution to disclose to any person any information
concerning bank deposits

FOREIGN CURRENCY DEPOSITS (FCDA)

- considered of an absolutely confidential nature and, except upon the written permission of the depositor,
in no instance shall foreign currency deposits be examined, inquired or looked into by any person, government
official, bureau or office whether judicial or administrative or legislative, or any other entity whether public or
private;

6. What are the new exceptions under Rep. Act 1405?

The following are the new exceptions under RA 1405:
1. When the examination is made in the course of a special or general examination of a bank and is specifically
authorized by the Monetary Board after being satisfied that there is reasonable ground to believe that a bank
fraud or serious irregularity has been or is being committed and that it is necessary to look into the deposit to
establish such fraud or irregularity;
2. When the examination is made by an independent auditor hired by the bank to conduct its regular audit
provided that the examination is for audit purposes only and the results thereof shall be for the exclusive use
of the bank;

7. Define bank account garnishment.

Bank account garnishment refers to the legal process whereby a third party seizes or freezes the bank
account of a debtor in order to settle an unpaid debt. It is usually the last resort the creditors turn to when
debtors ignore requests or cannot pay back what they owe. For the debtor’s bank account to be garnished, the
creditor must win a judgment against the debtor and an order or writ of garnishment signed by a court official
must be issued to begin withdrawing funds from the debtor’s account.
When the bank account is garnished, the debtor won’t be able withdraw, deposit money or write checks.
The account will remain frozen until the creditor has recovered the entire debt in some instances.
A process by which the court orders the seizure or attachment of the property of a defendant or judgment
debtor in the possession or control of the account.

8. Can foreign currency deposits be subject to garnishment?

No. Under the Foreign Currency Deposit Act of the Philippines (RA 6462), foreign currency deposits are
of an absolutely confidential nature and are exempt from attachment, garnishment, or any other
order or process of any court, legislative body, government agency or any administrative body. However,
the application of the rule depends on the extent of its justice. The exemption may be disregarded in order 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)

NOTES:

BANK SECRECY LAW (RA 1405)

What is prohibited:
The examination, inquiry by or disclosure to, any person of deposits of whatever nature with banks or
banking institutions.
However, it may still be subject to attachment, garnishment, or any other order or process of
any court, legislative body, government agency or any administrative body

Penalty for Violating the Bank Secrecy Law:

1. Imprisonment for not more than five (5) years; or
2. A fine not exceeding P20,000.00; or
3. Both.

Garnishment: Bank accounts may be garnished by the creditors of the depositor. In garnishment, there is no
violation of the bank secrecy law since the amount of the deposit is not actually disclosed.

FOREIGN CURRENCY DEPOSIT ACT OF THE PHILIPPINES (RA 6426)

Foreign currency deposits are of an absolutely confidential nature and in no instance can be examined,
inquired or looked into by any person, public or private, except upon the written permission of the depositor.
It is also exempt from attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body
Creditors cannot satisfy their claim from the foreign currency bank deposits of their debtor. In other
words, the unpaid creditors, no matter how meritorious the claim may be, cannot seize the money of their debtor
if they are in foreign currency bank deposits.

Purpose of RA 6426: To encourage foreign currency deposits in order to beef up the country’s international
reserves.

Disadvantage of the Law:

The stringent rule favoring these kinds of deposits may be abused. Debtors who are anticipating adverse court
decision can simply convert their deposits into foreign currency and instantaneously render them beyond the
reach of judgment creditors.

Exceptions to confidentiality of FCD:

1. Written permission of depositor
2. Upon examination of the Anti-Money Laundering Council (AMLC) pursuant to a court order, where there
is probable cause that the deposits are related to an unlawful activity or money laundering offense;
3. PDIC/BSP may inquire into bank deposiits when there is finding of unsafe/unsound banking practices
4. Upon authority of AMLC to inquire into or examine bank deposits investments pursuant to Anti Terrorism
Law
5. Upon inquiry by the Commissioner of Internal Revenue in an application for compromise of tax liability or
determination of a decedent’s gross estate;

Process exemption should be distinguished from confidentiality clause. Exemption from confidentiality does necessarily
translate to exemption from processes.

Penalty for Violating the Bank Secrecy Law:

1. Imprisonment of not less than one year nor more than five years; or
2. Fine of not less than five thousand pesos nor more than twenty-five thousand pesos; or
3. Both.
—------
1. Upon subpoena issued by the Ombudsman concerning investigation it is conducting provided there is a case
pending in court
2. By the BIR in an application for compromise of tax liability or determination of decedent’s gross estate
3. By the Anti Money Laundering Council pursuant to a court order where there is probable cause that the deposits
are related to an unlawful activity or money laundering offense
 4. By the AMLC, without court order, when deposits are related to kidnapping for ransom, violation of dangerous
drugs law, hijacking, destructive arson, murder
5. By the Bangko Sentral ng Pilipinas in the course of its periodic or special examination regarding compliance with
AMLA
6. In case of DOSRI loans under the General Banking Act where the borrower is required to waive the secrecy of
his bank deposits
7. Under the Human Security Act, upon court order, by law enforcement officials in cases of financing of acts of
terrorism
8. Under RA 3591 or the PDIC Charter where the BSP and the Philippine Deposit Insurance Corp. are authorized
to look into deposits in cases involving unsound or unsafe banking
9. Disclosure by banks to the Treasurer of the Philippines for dormant deposits for at least 10 years under the
Unclaimed Balances Act; and
10. Report of banks to the AMLC for covered and/or suspicious transactions under AMLA
11. The Supreme Court, in the cases of PNB vs Gancayco and Ejercito vs Sandiganbayan, has created another
exception, that is in case of unexplained wealth under the Anti-Graft Law and in plunder under RA 7080 since
these offenses, it said, are similar to bribery and dereliction of duty.
12. Information is requested by Foreign countries

FDC:
The SC, in the case of Salvacion vs Central Bank, provided for another exception, on grounds of equity, when deposits
of a foreign transient can be proceeded against to prevent injustice.

Destructive Arson
The acts committed under Art. 320 of The Revised Penal Code constituting Destructive Arson are characterized as
heinous crimes "for being grievous, odious and hateful offenses and which, by reason of their inherent or
manifest wickedness, viciousness, atrocity and perversity are repugnant and outrageous to the common
standards and norms of decency and morality in a just, civilized and ordered society." On the other hand, acts
committed under PD 1613 constituting Simple Arson are crimes with a lesser degree of perversity and viciousness that
the law punishes with a lesser penalty. In other words, Simple Arson contemplates crimes with less significant social,
economic, political and national security implications than Destructive Arson.