An obsolete law, or is it?

During the impeachment trial of Vice President Sara Duterte, the defense insisted that the impeachment court cannot look into her and husband Mans Carpio’s bank records because they are confidential.

But Republic Act 1405, or the Secrecy of Bank Deposits Law, expressly provides that this is not the case.

While Section 2 of the law states that all deposits of whatever nature with banks or banking institutions in the Philippines are of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, it gave four exceptions to this general law.

These are: first, when there is written permission of the depositor; second, in cases of impeachment; third, upon order of a competent court in cases of bribery or dereliction of duty of public officials and fourth, where the money deposited or invested is the subject matter of the litigation.

As explained by the Bangko Sentral Ng Pilipinas (BSP) in its primer, the law was enacted in 1955 primarily to encourage the public to invest their money in government securities and deposit them in banks, discourage private hoarding and enhance the protection of privacy rights. This was because during those times, the country needed enough capital and credit facilities to boost the economy after World War II.

But the financial sector landscape has evolved. Financial innovations and ease of transactions have enabled, necessitated and encouraged the public to place their money in banks. Such confidentiality of bank records may no longer be necessary.

Meanwhile, Republic Act 6426 or the Foreign Currency Deposit Act (FCDA) of the Philippines, enacted in 1972, also provides for the same absolute secrecy of bank deposits save for one exception under the said law, when there is written permission of the depositor.

The law was enacted to encourage Filipinos working overseas especially to deposit their foreign currency-denominated earnings in banks at a time when the country was suffering from a dollar deficit.

However, various laws and jurisprudence have provided other exceptions allowing examination and inquiry into such bank deposits and government bond investments.

While the third exception under the Secrecy of Bank Deposits law is limited only to cases of bribery or dereliction of duty of public officials upon order of competent court, the Supreme Court has ruled that cases of unexplained wealth of public officials, plunder and violations of the anti-graft and corrupt practices act are similar to cases of bribery or dereliction of duty. And this covers bank deposits of a public official’s spouse and unmarried children.

The BSP has also listed other exceptions to the absolute secrecy:

• Investigations by the Office of the Ombudsman when there is a pending case;

• Applications for compromise of tax liability, determination of decedent’s gross estate under the National Internal Revenue Code or a foreign tax authority’s request for tax information of specific taxpayers in the Philippines pursuant to an international convention or agreement on tax matters to which the Philippines is a signatory or party;

• Garnishment of deposits in satisfaction of a final judgment in a collection case;

• Deposits or investments related to unlawful activities or money laundering;

• Annual testing of numbered accounts by the BSP under the Anti-Money Laundering Act;

• Cases of unsafe or unsound banking under the PDIC Charter;

• Examination pursuant to the Anti-Terrorism Act by the Anti Money Laundering Council and under the Terrorism Financing Prevention and Suppression Act;

• Audit of government deposits;

• Investigation to recover ill-gotten wealth by the PCGG;

• Review of records by a rehabilitation receiver under FRIA;

• Escheat proceedings under the Unclaimed Balances Law;

• BSP authority to investigate financial accounts under the Anti-Financial Scamming Act;

• Disclosure by bank employees of records of closed banks;

• Borrowings of directors, officers, stockholders and their related interests;

• Reports by covered persons which include banks of covered and suspicious transactions under AMLA.

Unfortunately, Duterte’s counsel’s argument about confidentiality of the Vice President’s bank records may hold true in case of her foreign currency deposits in the country.

This is because the FCDA only provides for one exception when this kind of deposits may be examined, inquired and looked into, and that is when there is written permission of the depositor. Impeachment cases are not among the exceptions provided by the

This is because the FCDA only provides one exception for examining these kinds of deposits: written permission from the depositor. Impeachment cases are not among the exceptions provided by the FCDA.

However, additional exceptions to the absolute confidentiality of foreign currency deposits exist, similar to those for peso-denominated bank accounts, as established by other laws and jurisprudence.

These include DOSRI borrowings; in cases of application for compromise of tax liability,  determination of a decedent’s gross estate and exchange of tax information; reports by covered persons under AMLA; inquiry by AMLC into deposits or investments related to unlawful activities or money laundering offenses; investigations by the AMLC of deposits related to terrorism or terrorism financing; BSP examination of deposits in the course of periodic or special examinations pursuant to AMLA; inquiry by the BSP and PDIC in cases of unsafe or unsound banking and failure or prompt corrective action by banks; audit of government deposits by COA; ill-gotten wealth investigations and BSP inquiries under AFASA.

There are a number of pending bills that seek to amend if not totally replace the bank secrecy law.

And while there has been a global trend to shift from secrecy toward transparency, it has been noted that the language of existing laws on bank secrecy makes the Philippines the only country to still have such a restrictive bank secrecy policy.

Will Congress make that extreme move to do away with this law and make the bank records of public officials easily open to scrutiny? Your guess is as good as mine.

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