What you need to know about the Bank Secrecy Law

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Published — March 20, 2019

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

Also Read: How safe is our banking system?

Republic Act No. 1405, otherwise known as the Bank Secrecy Law was approved on September 9, 1955. It was created to encourage people to deposit their money in banking institutions, and for the same to be utilized by the banks for the economic development of the country (Section 1). The money deposited and invested in the bank can be used by the latter for another purpose that will be beneficial to our economy.

According to Section 2 of the said law, 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 hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office. Further, it shall be unlawful for any official or employee of a banking institution to disclose to any person other than those mentioned in Section two hereof any information concerning said deposits (Section 3).

The general rule is that all bank deposits of whatever nature are absolutely confidential, and cannot be inquired into by any person regardless whether he is a private individual or representative of the government. It guarantees the right of an individual to privacy with regard to his money, which a person can be expected to be treated as a private matter, not readily available to anyone. However, there are exceptions to the general rule which are specifically the following:

1. When there is written permission of the depositor or investor;
2. In cases of impeachment;
3. Upon order of a competent court in cases of bribery or dereliction of duty of public officials;
4. When the money deposit or invested is the subject matter of litigation;
5. Upon inquiry by the Commissioner of Internal Revenue for the purpose of determining the net estate of a deceased depositor for tax purposes;
6. Report of banks to Anti-Money Laundering Council of covered and/or suspicious transactions
7. Upon order of the competent court or tribunal in cases involving unexplained wealth under the Anti-Graft and Corrupt Practices Act or Republic Act No. 3019; and
8. In cases of terrorism under the Human Security Act of 2007 or Republic Act No. 9372.

The case of BSB Group, Inc. v. Sally Go, G.R. No. 168644, dated February 16, 2010, wherein respondent Sally Go was charged with Estafa and/or Qualified Theft due to her misappropriation of company funds provides guidance. Respondent allegedly deposited the checks issued by the customers to her personal bank account in Security Bank. The Supreme Court in ruling that the inquiry into the account of respondent with the said bank constitutes a violation of the provisions of the Bank Secrecy Law and thus cannot be inquired into, stated that:

“What indeed constitutes the subject matter in litigation in relation to Section 2 of R.A. No. 1405 has been pointedly and amply addressed in Union Bank of the Philippines v. Court of Appeals, in which the Court noted that 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. Given this perspective, we deduce that the subject matter of the action in the case at bar is to be determined from the indictment that charges respondent with the offense, and not from the evidence sought by the prosecution to be admitted into the records. In the criminal Information filed with the trial court, respondent, unqualifiedly and in plain language, is charged with qualified theft by abusing petitioners trust and confidence and stealing cash in the amount of P1,534,135.50. The said Information makes no factual allegation that in some material way involves the checks subject of the testimonial and documentary evidence sought to be suppressed. Neither do the allegations in said Information make mention of the supposed bank account in which the funds represented by the checks have allegedly been kept. In other words, it can hardly be inferred from the indictment itself that the Security Bank account is the ostensible subject of the prosecution inquiry.”

            In the said case, it was not proved that the amount deposited in the account of the respondent is indeed the amount which is the subject of the action. In the indictment, it cannot be inferred that the Security Bank account is the subject of the prosecution’s inquiry. It was not certainly and particularly deduced that the money in the Security Bank account is actually the money which is the subject matter of litigation. Every person has the right to privacy including any Information regarding their finances. With the provisions of the Bank Secrecy Law, said right is protected and is subjected to high level of scrutiny should there be any infringement of such right.

With regard to foreign bank deposits under the Foreign Currency Deposits Act or Republic Act No. 6426, the law only provides for one instance wherein a foreign bank account can be looked into and that is: when there is written permission of the depositor (Section 8, Foreign Currency Deposits Act). Although, inquiry into said foreign deposits is also allowed in cases provided for under Section 11 of the Anti-Money Laundering Law, and the Human Security Act of 2007.

For any violation of this law, will subject the offender upon conviction, to an imprisonment of not more than five (5) years or a fine of not more than Twenty Thousand (20,000) Pesos or both, in the discretion of the Court (Section 5).

 Further, bank deposits may be garnished by creditors of the depositor, and it will not be considered as a violation of the Bank Secrecy Law. The reason is that the amount of deposit is actually not disclosed. The intent of the legislature is discussed by the Supreme Court in the case of China Banking Corporation v. Ortega, G.R. No. L-34964 dated January 31, 1973 to wit:

“The prohibition against examination of or inquiry into a bank deposit under R.A. No. 1405 does not preclude it being garnished to insure satisfaction of a judgment. Indeed, there is no real inquiry in such a case, and if existence of the deposit is disclosed the disclosure is purely incidental to the execution process. It is hard to conceive that it was ever within the intention of Congress to enable debtors to evade payment of their just debts, even if ordered by the Court, through the expedient of converting their assets into cash and depositing the same in a bank.”

            In the said case, there is no actual inquiry as to the deposit because the amount of the deposit was not inquired. It was only the existence of the account that was disclosed. If garnishment will not be allowed by using the Bank Secrecy Law as a defense, then, any person may just invoke said law in order for their deposits not to be garnished allowing them to evade payment of debts. Such instance is not what the law intends to happen. Hence, garnishment of bank deposits, except foreign bank deposits, are allowed under our existing laws.

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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