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Congress and our bank secrecy laws

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Point of Law

Congress and our bank secrecy laws

/ 12:40 AM May 26, 2016

A specter commonly  experienced by the banking industry in congressional investigations is the compulsion of our congressmen and senators  to disclose information relating to bank accounts.

Without dealing into specifics such as whether the secrecy of bank deposits covers instances where a bank account is alleged to be fictitious (an issue that only our courts of law can decide under our constitutional system of government), the question is whether or not Congress has the power to compel banks and their officers or employees to disclose to them information relating to “deposits” and “properties and properties in the[ir] custody”  in the course of public hearings in aid of legislation.

A perusal of the records of the legislative deliberations indubitably showed Congress was devoid of such power. The following excerpts from the deliberations conducted by the House of Representatives in respect to the enactment of the Bank Secrecy Act (R.A. 1405) were instructive and telling:

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“MR. RAMOS.  Any investigation conducted by any body or office of the Government, including the Internal Revenue, can go as far as to reach the very deposit or investment made in banks only when such deposit or investment is made the subject of a case brought to the jurisdiction of the court.”

“MR. MARCOS. The law prohibits a mere investigation into the existence and amount of the deposit.

  1. RAMOS. Into the very nature of such deposit.

***

  1. RAMOS. Not only that, but also, it protects the public investors or depositors from any harassment or investigation or inquiry into their bank deposits because the primary object of this bill is to encourage deposits in banks instead of hoarding in private safes of individuals.
  2. MARCOS. I should like to inquire into the power of the President on this point. I understand that the President can authorize the NBI and other investigating agencies under existing laws to look into all bank deposits of individuals. May I know if this is prohibited by this law?
  3. RAMOS. That is prohibited, because this includes anybody in the government service. It gives such power only to the court, and under the specified circumstances.” [House of Representatives Deliberations on H. No. 3977, 3rd Cong. 2nd Sess. (1955)]

In fact, records of  congressional deliberations on R.A. 1405 readily indicated there was an attempt to include inquiries conducted by Congress in aid of legislation as an exception to the secrecy of bank deposits. [House of Representatives Deliberations on H. No. 3977, 3rd Cong. 2nd Sess. (1955)]

Fortunately or unfortunately, the proposal was not adopted. On the contrary, Republic Act 1405, as finally passed by Congress,  expressly provided that “all deposits of whatever nature with banks or banking institutions … 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,” except upon the limited instances provided therein.

This state policy was reiterated and made stricter by Congress when it passed the Foreign Currency Deposits Act (R.A. 6426). This law provided that: “All foreign currency deposits … are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative, or any other entity whether public or private … ”

This strict basic policy which, according to one Supreme Court case  remained “unaltered by the legislated exceptions”, was reiterated by Congress when it passed the General Banking Act. This law expressly provided  that “[n]o  director, officer, employee, or agent of any bank shall … [w]ithout order of a court of competent jurisdiction, disclose to any unauthorized person any information relative to the funds or properties in the custody of the bank belonging to private individuals, corporations, or any other entity …” (Section 55.1(b)).

In fact, aside from our courts of law in the limited instances provided by law, only the Anti-Money Laundering Council was expressly authorized to conduct inquiries into bank deposits should prevailing circumstances so warrant and only if certain conditions were satisfied.

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Undoubtedly, neither the Senate nor the House of Representatives (much less the individual senators and representatives) can ask banks and their officers or employees to disclose any information on deposits or money and properties in their custody even in aid of legislation.

That is the current law. Until Congress repeals or amends our bank secrecy laws, let’s all honor and respect it. The majesty of the law demands no less.

(The author, who serves as counsel for Lorenzo Tan in the ongoing Senate investigation on money laundering,  is a law professor in the Ateneo Law School. The views in this column are exclusively his and may not be attributed to any of  the institutions where he is presently connected with. He may be contacted at: francis.ed.lim@gmail.com.)

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