In the know: The bank secrecy law

Republic Act No. 1405, or the bank secrecy law, prohibits the disclosure of, or inquiry into, all deposits in banks and banking institutions in the Philippines.

Section 2 of the bank secrecy law provides that all deposits in whatever nature with banks or banking institutions are of an “absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office.”

The only exceptions are either written consent of the depositor, in cases of impeachment, upon order of a competent court in cases of bribery or dereliction of duty or public officials, or in cases where the money deposited or invested is the subject matter of litigation.

The law was approved on Sept. 9, 1955.

Bangko Sentral ng Pilipinas (BSP) Gov. Amado Tetangco Jr., who also chairs the Anti-Money Laundering Council (AMLC), said the country’s “very strict” bank secrecy law hampered the fight against money laundering.

He restated his call to amend the law and allow prying into a wider array of bank deposits “under certain conditions.”

“When a case reaches the AMLC, that is when an investigation begins. So the incident has already happened. We need some kind of preventive measures. The prevention of this particular activity is being hampered by the very strict bank secrecy law,” Tetangco said.

He said he was amenable to easing or lifting the bank secrecy law under certain conditions, but he did not elaborate.

During the Senate blue ribbon committee hearing on the $81 million stolen from the Bangladesh central bank and laundered in the Philippines, AMLC executive director Julia C. Bacay-Abad reiterated that the council favored lifting the secrecy law.

She said the AMLC would propose to Congress to include casinos and the real estate sector in the coverage of Republic Act No. 9160 or the Anti-Money Laundering Act (Amla) of 2001.

Abad also mentioned a proposal to give the AMLC power to issue a cease-and-desist order to immediately freeze a suspicious account before going to the courts would be “helpful,” although it would be up to legislators who had proposed to amend the Amla.

RA No. 9160, as amended by RA No. 9194, established the AMLC which is tasked with investigating and causing the prosecution of money-laundering offenses.

Amla lists banks, offshore banking units, quasi-banks, trust entities, nonstock savings and loan associations, pawnshops, and all other institutions and their subsidiaries and affiliates supervised or regulated by the BSP as “covered institutions” they are allowed “to require and receive covered transaction reports.”

Other “covered institutions” include insurance companies and all other institutions supervised or regulated by the Insurance Commission, securities dealers, brokers, preneed companies, foreign exchange corporations, investment houses, trading advisers, as well as other entities supervised or regulated by the Securities and Exchange Commission.

Section 11 of the Amla states that the AMLC “may inquire into or examine any particular deposit or investment with any banking institution or nonbank financial institution upon order of any competent court in cases of violation of the Amla when it has been established that there is probable cause that the deposits or investments involved are in any way related to a money-laundering offense.”

Sources: PDIC.gov.ph, BSP Briefer on Amla, Inquirer Archives