Threat to financial privacy

From monetary regulator to bank watchdog to powerful financial authority.

If the Bangko Sentral ng Pilipinas (BSP) can have its way, that’s the role it wants to play in our government. And judging from the bills filed in Congress, some lawmakers appear supportive of the idea.

These measures provide, among others, for a fourfold increase in the BSP’s capitalization and its exemption from all kinds of taxes.

In addition to banks, financial institutions and other entities engaged in quasibanking activities, its supervisory and regulatory authority is envisioned to cover credit card companies, money changers, e-money issuers, remittance agents, settlement system operators and other entities performing similar functions.

Corollary to this responsibility, it shall have the power to get information on transactions between banks and their parent or affiliate companies, including bank deposits and investment accounts, and to look into bank deposits to ensure compliance with antimoney laundering laws.

Wrapping up the wish list is the BSP’s desire to make its personnel immune from any suit that may be filed against them in the performance of their work.

The BSP claims the proposed amendments in its charter are necessary to enable it to efficiently perform its duties and responsibilities.

Confidentiality

There is scant disagreement over the need to increase BSP’s authorized capitalization from P50 billion to P200 billion. It needs sufficient financial muscle to maintain the country’s monetary stability when the situation calls for its intervention in the market.

It’s just a question of how and when the government should make those funds available. There are other equally important activities in the country that require budgetary allocation.

In the same vein, it is reasonable to exempt the BSP from taxes for any income it may receive from its operations. Since it is engaged in sovereign, as against commercial, activities, it’s entitled to relief from any tax obligation.

A similar treatment, however, cannot be accorded its proposal to be allowed to break the confidentiality of bank transactions to monitor the activities of banks with ties to conglomerates, or to ensure compliance with antimoney laundering laws.

Unless the BSP has credible proof or reasonable basis to believe that a bank is engaged in an illegal, unauthorized or unacceptable activity, it has no business prying into its bank accounts, investments and other similar transactions.

Snooping into the bank and financial accounts of depositors on the pretext of staving off possible threats to the monetary system violates the right of citizens to be secure from unreasonable searches and seizures.

A Filipino’s right to privacy covers his personal records and his communications to third persons, including banks and financial institutions.

Security threat

Setting aside the constitutional issue, allowing the BSP to look into bank accounts and financial transactions poses a serious threat to the life and safety of people who do business with the affected banks.

A kidnap-for-ransom syndicate would gladly pay millions of pesos to have a glimpse of the names and addresses of people who have fat bank accounts.

What assurance do we have that information about bank deposits that the BSP staff may gather from their examination of bank accounts will not fall into the wrong hands?

Excuse me, but the BSP has its own share of scoundrels who will, with the right amount of persuasion, look the other way to overlook lapses in compliance with banking rules that eventually lead to bank closure or bankruptcy.

In this age of modern technology, once access to a bank’s database is made available to a party, say, BSP personnel, to get inside information, the security of the bank’s computer system, even with firewalls and other protective devices, is invariably compromised.

To use street language, the BSP’s move to get blanket authority to examine bank accounts is a case of “overacting.”

Considering the voluminous reports it requires banks to submit monthly, quarterly, annually and on certain milestones (assuming they read them), it should be able to detect red flags in the banking system that would enable it to take preemptive measures without having to dig deep into the bank clienteles’ guts.

Money laundering

It is ridiculous for the BSP to claim it should be exempted from the confidentiality of bank deposits rule to enable it to effectively enforce compliance by banks with antimoney laundering laws.

Giving credence to this line of reasoning would make the Anti-Money Laundering Council (AMLC) look inutile. Is the BSP saying, in effect, that the AMLC has not been doing its job all these years and therefore the BSP should directly take over its task?

Although considered an independent entity and has a budget of its own, the AMLC is practically a “subsidiary” of the BSP. It has its offices within the BSP Complex, its staff train with BSP personnel and the foreign trips of its officers subsidized by the BSP.

For now, the BSP has its hands full supervising and regulating banks and quasibanking institutions, including pawnshops. Its plate would be fuller if Congress puts credit card companies, money changers, remittance agents and other entities performing similar functions under its wings.

It has more important things to do than enforce compliance with antimoney laundering laws. That job is better left with the AMLC.

On the issue of immunity from suit of BSP personnel, let’s not forget that all government offices that perform regulatory functions routinely find themselves sued by people who are adversely affected by their actions.

That problem is part and parcel of government service. Why should the BSP be treated any different from its counterpart in other offices?

Besides, if BSP officers and employees find themselves in trouble, they have an internal multimillion peso legal defense fund that can pay for the best lawyers money can buy. And money is not a problem at the BSP.

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