Bank Secrecy Law Notes

Bank Secrecy Law (Republic Act 1405, As Amended)
PURPOSE OF THE LAW

 To discourage private hoarding
 Encourage people to deposit their money in banking institutions
• So that money may be utilized by way of authorized loans thereby assisting economic
development
PROHIBITED ACTS
It shall be unlawful:
1. Bank (any official or employee or independent auditor of a bank)
• To disclose to any person any information concerning deposits
EXC: information maybe disclosed to bank director, official or authorized employee
2. Any person (including the government)
• To inquire, examine or look in to bank deposits or bonds issued by the government
In camera inspection of the bank deposit records is also not allowed and is also in the nature of examination.
DEPOSITS COVERED
1. All deposits of whatever nature with banks or banking institutions in the Philippines, including Trust
Accounts.
Deposits
 Money or funds placed with a bank that can be withdrawn on the depositor’s order or demand
• Savings deposit
• Current deposit
• Time deposit
 Characterized as being in the nature of a simple loan
 Placing of deposits in a bank creates a creditor – debtor relationship between the depositor and the bank
• As such, the bank, being the debtor, has the obligation to pay a certain sum of money to the
depositor, being the creditor.
2. Investments in bonds issued by the government of the Philippines, its political subdivisions and its
instrumentalities.
 Investment in government bonds are debt securities and includes the following:
• Treasury bills, treasury notes, retail treasury bonds, dollar linked peso notes and other risk free
bonds
 Unconditional obligations of the State and backed by its full taxing power.
EXCEPTIONS:
PESO DEPOSITS
1. When there is a written permission of the depositor or investor.
Mere silence is not sufficient and failure to object during the proceedings where a bank deposit is involved
does not amount to waiver. In the case of an insolvent where a receiver is appointed, the conformity of the
receiver is necessary for the written waiver to be valid.
DOSRI accounts: Directors, officers, stockholders and related interests

 Who contract a loan or any form of financial accommodation with their bank or related bank
• required to execute a written waiver of secrecy of deposits pursuant to The New Central Bank
Act
Taxpayer’s application for compromise
1
For the exclusive use of University of the Visayas LAW 222 students of AS1-AS2 A.Y. 2022 – 2023. Unauthorized reproduction and/or distribution is prohibited.
 Taxpayer who is applying for a compromise on the ground of clear inability to pay or financial
incapacity
• required to execute a waiver prior to the processing of his request
2. Impeachment cases for culpable violation of the Constitution, treason, graft and corruption and other high
crimes or betrayal of public trust.
 President
 Vice President
 Members of the Supreme Court
 Members of the Constitutional Commission
• Commission on Elections
• Civil Service Commission
• Commission on Audit
 Ombudsman
3. Upon the order of a competent court in cases of

a. bribery or dereliction of duty of public officials (including plunder)
b. where the money deposited or invested is the subject of litigation
The inquiry into bank deposits allowable under R.A No. 1405 must be premised on the fact that the money
deposited in the account is itself the subject of the action.
Example: The criminal information filed with the trial court charged the accused with qualified theft by abusing
his employer’s trust and confidence stealing cash in the amount of P1,534,135.50. On the premise that the
accused had deposited the stolen amounts to her personal banking account, the prosecution moved for the
issuance of subpoena duces tecum ad testificandum against the respective managers or records custodians of
the bank. The trial court granted the motion and issued the corresponding subpoena. The Supreme Court ruled
that there is violation of the law on secrecy of bank deposits. The High Court explained that the admission of
testimonial and documentary evidence relative to respondent’s Security Bank account serves no other purpose
than to establish the existence of such account, its nature and the amount kept in it. It constitutes an attempt by
the prosecution at an impermissible inquiry into a bank deposit account the privacy and confidentiality of which
is protected by law.
c. when it involves unexplained wealth under the Anti-Graft and Corrupt Practices Act
4. Upon inquiry by the Commissioner of the Bureau of Internal Revenue (BIR)

a. the purpose of determining the gross estate of a deceased depositor
b. pursuant to a request for tax information of specific taxpayers made by a foreign tax authority pursuant to a
tax treaty under The Exchange of Information on Tax Matters Act of 2009 (R.A. 8424, as amended by R.A.
No. 10021)
5. Upon the order of a competent court or in proper cases by the AMLC where there is probable cause of money
laundering in some instances even without court order
6. Reports
a. Disclosure to the Treasurer of the Philippines for unclaimed balances under the Unclaimed Balances Act
(RA 3936)
b. Report of banks to AMLC of covered and/or suspicious transactions
7. The Ombudsman has the power to:

 issue subpoena and subpoena duces tecum
 take testimony in any investigation or inquiry
 examine and access bank accounts and records
The power of the Ombudsman to subpoena deposit information of a government official may be exercised
when the following conditions concur:
1. there must be a case pending before a court of competent jurisdiction
2. the account must be clearly identified
3. the inspection must be limited to the subject matter of the pending case
4. the bank personnel and the account holder must be notified to be present during the inspection
2
8. Upon order of the Court of Appeals, examination by law enforcement officers in terrorism cases under the
Human Security Act of 2007
9. Examination is made:
a. In the course of a special or general examination of bank and is specifically authorized by the Monetary
Board (BSP) after being satisfied that there is a reasonable ground to believe that a bank fraud or serious
irregularity has been or is being committed and that is necessary to look into the deposit to establish such fraud
or irregularity
b. By the Philippine Deposit Insurance Corporation (PDIC) who may inquire into bank deposits when there is
a finding of unsafe or unsound banking practices
c. By the Commission on Audit (COA) who is authorized to examine and audit government deposits pertaining
to the revenue and receipts of, and expenditures or uses of funds and properties, owned or held in trust by, or
pertaining to, the Government or any of its subdivisions, agencies or instrumentalities, including government
owned and controlled corporations with original charters
d. By the Presidential Commission on Good Governance (PCGG) who, in the conduct of its investigations to
recover ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate family,
relatives, subordinates and close associates, may issue subpoenas requiring the attendance and testimony of
witnesses and/or the production of books, papers, contracts, records, statement of accounts and other
documents
10. 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 result thereof shall be for the exclusive use of the bank
FOREIGEN CURRENCY DEPOSITS
Foreign currency deposits in banks are likewise absolutely confidential and cannot be disclosed, except:
1. When there is written consent of depositor under Section 8 of the Foreign Currency Deposits Act
2. Under Section 11 of Anti-Money Laundering Act (probable cause established that is related to an unlawful
activity as defined or money laundering)
3. Under Section 27 and 28 of the Human Security Act (existence of probable cause in anti-terrorism cases
and those involving persons charged with or suspected of the crime of terrorism or conspiracy to commit
terrorism, judicially declared and outlawed terrorist organization, association or group of persons, or member
of such organization, association or group of persons)
4. Examinations by the BSP, PDIC, PCGG and COA.
Garnishment
Bank accounts maybe garnished by the creditors of the depositor. These is no violation of the Law on Secrecy
of Bank Deposits if the accounts are garnished. The amount of deposit is actually not disclosed and the intent
of the legislature does not cover garnishment.
Deposits that are exempt from garnishment

1. Foreign Currency Deposits
2. Those exempt under the Rules of Civil Procedure like provision for the family for four months
3

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Bank Secrecy Law (Republic Act 1405, As Amended)

PURPOSE OF THE LAW

DOSRI accounts: Directors, officers, stockholders and related interests

Taxpayer’s application for compromise

3. Upon the order of a competent court in cases of

4. Upon inquiry by the Commissioner of the Bureau of Internal Revenue (BIR)

7. The Ombudsman has the power to:

FOREIGEN CURRENCY DEPOSITS

Deposits that are exempt from garnishment

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