BANK SECRECY LAW (RA 1405, AS AMENDED)

Purpose of the law

• 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
Prohibited Act
• It shall be unlawful for any official or employee of a bank to disclose to any person or for an independent
auditor hired by a bank to conduct its regular audit to disclose to any person other than a bank director,
official or employee authorized by the bank, any information concerning deposits
Deposits covered:
1. Peso deposits
• All deposits of whatever nature with banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the Philippines, its political subdivisions and its
instrumentalities, are considered absolutely confidential and may not be examined, inquired or looked
into by any person, government official, bureau or office unless:
a. When there is a written permission of the depositor or investor
b. Impeachment cases
c. Upon the order of a competent court in cases of bribery or dereliction of duty of public
officials
d. Upon the order of a competent court in cases where the money deposited or invested is the
subject of litigation
e. Upon order of the competent court or tribunal in cases involving unexplained wealth under
RA 3019, or the Anti-Graft and Corrupt Practices, Act.
f. Upon inquiry by the Commissioner of BIR for the purpose of determining the net estate of
deceased depositor
g. Upon the order of a competent court or in proper cases by the AMLC where there is probable
cause of money laundering and in some instances even without court order
h. Disclosure to the Treasurer of the Philippines for dormant deposits for at least 10 years under
the Unclaimed Balances Act (RA 3936)
i. Report of banks to AMLC of covered and/or suspicious transactions
j. Upon order of the CA, examination by law enforcement officers in terrorism cases under the
Human Security Act of 2007 (RA 9372)
k. Examination is made in the course of a special or general examination of 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 is necessary to look into the deposit to establish such fraud or irregularity
L. 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

2. Foreign currency deposits (FOREIGN CURRENCY DEPOSIT ACT)

• foreign currency deposits in banks are likewise absolutely confidential and cannot be disclosed, except:
 a. When there is written consent of depositor under Section 8 of the Foreign Currency
Deposits Act (RA 6426)
b. Under Section 11 of the Anti-Money Laundering Act (probable cause established that it is
related to an unlawful activity as defined or money laundering)
c. 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)

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. Deposits exempt
from garnishment:
1. Foreign currency deposits, Section 8 of RA 6426
2. Those exempt under Rules of Court

- Penalties for violation: imprisonment of not more than 5 years or a fine not more than
P20,000.00 or both
- Trust Accounts: are likewise covered by the bank secrecy law. (Ejercito vs. Sandiganbayan)

UNCLAIMED BALANCES LAW (ACT 3936, AS AMENDED BY PD 679)

Unclaimed Balances
• include credits or deposits of money, bullion, security, or other evidence of indebtedness of any kind, and
interest thereon with banks, buildings and loan associations, and trust corporations, in favor of any person
known to be dead or who has not made further deposits or withdrawals during the preceding 10 years or
more
It is obligatory of every bank to report, in 9 sworn statement, to the Treasurer of the Philippines (who
will, in turn, inform the Solicitor General) of deposits that have not been touched (no deposit or withdrawal
made) for a period of 10 years or held in favor of persons Known to be dead.

Information required in the Sworn Statement:

1. The names and last known place of residence or post office addresses of the persons in whose favor such
unclaimed balances stand;
2. The amount and the date of the outstanding unclaimed balance and whether the same is in money or in
security, and if the latter, the nature of the same;
3. The date when the person in whose favor the unclaimed balance stands died, if known, or the date when
he made his last deposit or withdrawal; and
4. The interest due on such unclaimed balance, if any, and the amount thereof.
Posting Requirement: the above-mentioned sworn statement shall be posted in a conspicuous place in the
premises of the bank, building and loan association, or trust corporation concerned for at least sixty (60)
days from the date of filing thereof.
Procedure:
1. A notice to the depositor will be given at his last known place of residence or post office address.
2. The bank will then report, through a sworn statement to the Treasurer of the Philippines the existence of
such deposits.
3. The Solicitor General will then initiate the proper escheat proceedings in court
4. A copy of the complaint and summons shall be served upon the president, cashier or managing officer of
each defendant bank, building and loan association or trust corporation and a publication of such summons a
newspaper of general circulation.
5. After trial, and it is determined that such balances are unclaimed, the court shall render judgment
declaring such balances escheated in favor of the Government.
6. Such unclaimed balances, together with the increase and proceeds thereof, shall be deposited with the
Treasurer of the Philippines to the credit of the Government of the Republic of the Philippines to be used as
Congress may direct.

PDIC ACT (RA 3591, AS AMENDED PHILIPPINE DEPOSIT

INSURANCE CORPORATION (PDIC)
• Primary Functions: to act as:
1. Deposit Insurer – the PDIC shall promote and safeguard the interests of the depositing public by way of
providing permanent and continuing insurance coverage on all insured deposits.
2. Co-regulator of banks – as a bank regulator, the PDIC is empowered to examine and investigate banks.
3. Receiver and liquidator of closed banks – the PDIC as receiver shall control, manage and administer the
affairs of the bank.
INSURED DEPOSITS: Amount due to any bona fide depositor for legitimate deposits in an insured bank
net of any obligation of the depositor to the insured bank as of the date of closure, but not to exceed
P500,000.
Examples of types of deposits covered:
1. Savings Deposit
2. Negotiable Order of Withdrawal (NOW)
3. Special Savings
4. Demand/Checking Account
5. Certificate of Time Deposits
6. Foreign currency Deposit
Adjustment of maximum deposit insurance: the amount of coverage may be adjusted in such amount, for
such a period, and/or for such deposit products, provided:
1. The Monetary Board has determined that there is a condition that threatens the monetary and financial
stability of the banking system that may have systematic consequences as defined under RA No. 3591;
2. Approval by a unanimous vote of the Board of Directors of the PDIC in a meeting called for the purpose
and chaired by the DOF Secretary;
3. Approval of the President of the Philippines.

Under Section 22 of the PDIC Charter, a systemic risk refers to the possibility of failure of one bank to
settle net transactions with other banks will trigger a chain reaction, depriving other banks of funds leading
to a general shutdown of normal clearing and settlement activity. It also means the likelihood of a sudden,
unexpected collapse of confidence in a significant portion of the banking or financial system with potentially
large real economic effects.
Coverage: The deposit liabilities of any bank or banking institution, which is engaged in the business of
receiving deposits as herein defined on the effective date of the PDIC Act, or which thereafter may engage in
the business of receiving deposits, shall be insured with the PDIC.

Deposit accounts not entitled to payment:

1. Investment products such as bonds and securities, trust accounts and other similar instruments
2. Deposit accounts or transactions which are unfunded and that are fictitious or fraudulent
3. Deposit accounts or transactions constituting and/or emanating from, unsafe and unsound banking
practice/s, as determined by PDIC, in consultation with BSP, after due notice and hearing, and publication of
a cease and desist order issued by PDIC against such deposit accounts or transactions
4. Deposits that are determined to be the proceeds of an unlawful activity as defined under RA9160 or the
Anti-Money Laundering Act, as amended
5. Deposits payable in a place outside the Philippines (like those in foreign branches)
6. Money placements by the head office of a foreign bank in its branch in the Philippines because there is
only one entity.
7. Deposit products that resulted from splitting of deposit.

Splitting of Deposit – occurs whenever a deposit account with an outstanding balance more than P500,000
under the name of persons is broken down and transferred to two or more accounts in the name of persons or
entities who have no beneficial ownership in the transferred deposits in their names within 120 days
immediately preceding or during a bank-declared bank holiday.
Or immediately preceding a closure order issued by the Monetary Board for the purpose of availing the
maximum deposit insurance coverage.
This is considered a criminal act punishable by imprisonment of not less than 6 years but not more than 12
years or a fine not less than P50,000 but not more than P10,000,000, or both, at the discretion of the court.
Determination of the amount due Per Depositor, Per Capacity Rule:
Per Bank: the entitlement to deposit insurance is on a per bank basis. Such that if X has a deposit with A
Bank and B Bank and both banks closed, X is entitled to P500,000 insurance coverage for each bank.
Per Depositor, Per Capacity Rule: all deposits in the bank maintained in the same right and capacity for
his benefit either in his own name or in the name of others shall be added together in determining the insured
amount, and regardless of the type of account.
Accounts “By”, “In Trust For (ITF)” or “For the Account of (FAO)” another person:
1. In a “By” account (Juan by Pedro) – Juan is the depositor.
2. In an “ITF” account (Juan ITF Pedro)- Pedro is the depositor.
3. In a “FAO” account (Juan FAO Pedro) – Pedro is the depositor

Joint accounts: A joint account regardless of whether the conjunction “and”, “or”, “and/or” is used shall be
insured separately from any individually-owned deposit account, provided that:
1. If the account is held jointly by two or more natural persons, or by two or more juridical persons or
entities, the maximum insured deposit shall be divided into as many equal shares as there are individuals,
juridical persons O entities, unless a different sharing is stipulated in the document of deposit, and
2. If the account s held by a juridical person or entity jointly with one or more natural persons the
maximum insured deposit shall be presumed to belong entirely to such juridical person or entity;

Provided, further, hat the aggregate of the interest of each co-owner over several joint accounts, whether
owned by the same or different combinations of individuals, juridical persons or entities, shall likewise be
subject to the maximum insured deposit of P500,000.00

Certificate of Deposit: No owner/holder of any negotiable certificate of deposit shall be recognized as a

depositor entitled to the rights in PDIC Act unless his name is registered as owner/holder thereof in the
books of the issuing bank.
The P500,000 entitlement to joint deposits is separate from the P500,000 applicable to the individually
owned accounts by the depositor, giving him a maximum of P1,000,000 insurance coverage.
In short, a depositor who maintains both individual and joint accounts may be insured up to a total of
P1,000,000: P500,000 for all his individual accounts P500,000 for all his joint accounts.
Period for the depositor to file and enforce claim:
1. Period to file claim – 2 years from actual takeover of the closed bank
2. Period to enforce claim – 2 years after the 2-year period to file a claim
Proof of claim: The PDIC, in its discretion, may require proof of claims to be filed before paying the
insured deposits, and that in any case where the PDIC is not satisfied as to the validity of a claim, it may
require final determination of a court of competent jurisdiction before paying such claim.
Effects of non-filing or non-enforcement of claim within the periods above:
1. All rights of the depositor against the PDIC with respect to the insured deposit shall be barred,
2. All rights of the depositor against the closed bank and its shareholders or the receivership estate to which
PDIC may have become subrogated, shall thereupon revert to the depositor.
3. PDIC shall be discharged from any liability on the insured deposit

Effect of payment: PDIC shall be subrogated to all rights of the depositor against the closed bank to
the extent of such payment. Such subrogation shall include the right on the part of PDIC to receive the same
dividends and payments from the proceeds of the assets of such closed bank and recoveries on account of
stockholders liability as would have been payable to the depositor on a claim for the insured deposits, but
such depositor shall retain his claim for any uninsured portion of his deposit.

Period for the PDIC to settle claim: 6 months from the date of filing of the claim.
Failure to settle the claim within 6 months from the date of filing of claim for insured deposit, where such
failure was due to grave abuse of discretion, gross negligence, bad faith or malice, shall upon conviction,
subject the directors, officers or employees of PDIC responsible for the delay, to imprisonment from 6
months to one year.

Except: that the period shall not apply if the validity of the claim requires the resolution of issues of
facts and/or law by another office, body or agency