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Exceptions to deposit secrecy

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By Atty. Jun de Zuñiga

Today, deposit secrecy is still a highly sensitive issue.  It is asserted as a “zone of privacy” entitled to protection from harassment, fishing expeditions and criminal risks.  On the other hand, it is claimed to have been an instrument to evade and obstruct justice, particularly in relation to tax evasion, money laundering, corruption, terrorism and financial frauds.To what extent then can Philippine authorities have access to deposits?  The Philippines has a strict deposit secrecy law in Republic Act No. 1405 and it allows only four (4) exceptions to confidentiality, namely: (1) upon written permission of the depositor;  (2) in cases of impeachment;  (3) upon order of the court in cases of bribery or dereliction of duty; and (4) where the deposit is the subject matter of litigation.

The above exceptions have been expanded by other legislation and rulings made by the Supreme Court.  The Anti-Money Laundering Act (RA No. 9160, as amended) now allows deposit disclosure in covered transactions reports and in suspicious transactions reports.

This law also allows inquiry in cases of violation thereof, with a court order or even without a court order in certain cases such as kidnapping for ransom or violations of the Comprehensive Dangerous Drugs Act.

Another law, the National Internal Revenue Code, authorizes the inquiry into bank deposits in determining a decedent’s gross estate, or in connection with the request by a foreign tax authority under the Exchange of Information on Tax Matters Act.  Under the Human Security Act (RA No. 9372), examination is also allowed upon a court order in cases related to the financing of acts of terrorism.

The last of such laws as of now would be the amendment to the PDIC Charter (RA No. 3591) which authorizes the Bangko Sentral and the PDIC to look into deposits in cases involving unsafe or unsound banking.

On the matter of jurisprudence, the Supreme Court has ruled in favor of inquiry in cases of unexplained wealth under the Anti-Graft and Corrupt Practices Act and in plunder under RA No. 7080, stating that these offenses are similar to bribery or dereliction of duty (Phil. National Bank vs. Gancayco, 122 Phil. 503;  Ejercito vs. Sandiganbayan and People of the Philippines, 509 SCRA 190).

The Supreme Court also held that the disclosure of deposits to satisfy the writ of garnishment issued by the court is not a violation of deposit secrecy since the disclosure is purely incidental to the execution process (China Banking Corp. vs. Ortega, 49 SCRA 355);  and that on grounds of equity, the deposit of a foreign transient can be proceeded against to prevent an injustice to an aggrieved citizen (Salvacion vs. Central Bank, 278 SCRA 27). Also on grounds of equity, the Supreme Court allowed the owner of funds unlawfully taken to inquire on the deposit of said funds (China Banking Corp. vs. Court of Appeals, 511 SCRA 110).

Amidst the pros and cons, there are appeals for the reassessment of our bank secrecy laws as in fact there are now proposals to relax further deposit secrecy for tax collection and bank examination purposes.

These would be consonant with the position of the Group of 20 Leading Economies (G20) that the era of banking secrecy is now over, there being a shift from secrecy to transparency, and from a domestic approach to global cooperation.

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The above comments are the personal views of the writer. His email address is jzuniga@bsp.gov.ph

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