Published 17 May 2019, The Daily Tribune
Recently, spirited discussions on the pros and cons of relaxing the decades old law on secrecy of Philippine currency bank deposits ( RA 1405 ) resurfaced when the Department of Finance announced a fresh round of tax reform package which includes significant amendment, if not repeal, of RA 1405. Pro repeal advocates espouse that the law is antiquated, abets money laundering and goes against the almost universal trend towards transparency, greater accountability, good corporate governance. Those against maintain that the rationale of the law holds true then and now, that is, to give encouragement to the people to deposit their money in banks and to discourage private hoarding so that the same may be properly utilized by banks in authorized loans to assist in the economic development of the country.
Let us take a refresher then on the basic features of the law. Under RA 1405, Philippine currency bank deposits are privileged and confidential. As such, it shall be unlawful for any official or employee of a bank to disclose or allow the examination or inquiry by any person other than those excepted by law any information concerning Philippine currency bank deposits of whatever nature and kind, as well as investment in bonds issued by the government of the Philippines, its political subdivisions and instrumentalities. Penalties for violation consist of imprisonment of not more than five years or a fine not more than 20,000 or both at the discretion of the court. In one case, the Supreme Court ruled that the term deposit should also include trust funds and any sum of money invested in the bank which the latter may use for loans and similar transaction ( Ejercito vs Sandiganbayan, November 2006 )
The prohibition is not absolute. Information on Philippine currency bank deposits, as well as investment in government securities may be disclosed, examined or looked into without violating the law in the following cases :
- written permission of the depositor
- in case of impeachment
- in case of order of a competent court in any of the following cases :
i. bribery or dereliction of duty of public officials
ii. where the subject matter of litigation is the money deposited
iii. prosecution for unexplained wealth
(the Supreme Court incidentally ruled that plunder is akin to violation of the unexplained wealth law)
iv. prosecution for violation of the anti-graft and corrupt practices act
v. if there is a probable cause of violation of the anti-money laundering law
vi. garnishment of bank deposits
- The BIR may also inquire into bank deposits if there is an offer of compromise of tax liability on account of the depositor’s financial incapacity to verify such representation.
The BIR used to have the authority inquire into bank deposits for the purpose of computing the tax due on the estate of the deceased depositor. However, the TRAIN law removed it since withdrawal of such deposits is automatically subject to 6% withholding tax anyway.
- Under the Unclaimed Balances law, the bank may disclose to the National Treasurer information concerning dormant deposits for the purpose of initiating escheat proceedings.
- The BSP may also conduct examination of bank accounts to ensure compliance with the Anti-Money Laundering law, and to investigate unsafe and unsound banking practices.
- In case the law is repealed, superseded, or modified by any law to the contrary.
The prohibition against unauthorized disclosure, examination and inquiry into Philippine currency bank deposits is only statutory. It is not a right guaranteed by the Constitution. As such, Congress may carve out additional exceptions or repeal the law altogether. We trust the sense of wisdom of our legislators to do the right thing.
For comments and questions, please send an email to cabdo@divinalaw.com.
