REVIEWER IN REGULATORY FRAMEWORK AND LEGAL ISSUES IN BUSINESS

CHAPTER 6
BANK SECRECY LAW
(REPUBLIC ACT NO. 1405)
of an absolutely confidential nature and, except upon
o Bank Secrecy Law (Republic Act No. 1405) – it
the written permission of the depositor, in no instance
is an act prohibiting disclosure of or inquiry into,
shall foreign currency deposits be examined, inquired
deposits with any banking institution and
or looked into by any person, government official,
providing penalty therefor.
bureau or office whether judicial or administrative or
» Approved: September 9, 1955. legislative, or any other entity whether public or
private.

SECTION 1. » Provided, however, that said foreign currency

deposits shall be exempt from attachment,
It is hereby declared to be the policy of the garnishment, or any other order or process of any
government, to give encouragement to the people to court, legislative body, government agency or any
deposit their money in banking institutions and to administrative body whatsoever.
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. THE TYPES OF DEPOSITS COVERED

o All deposits of whatever nature with banks or

SECTION 2. banking institutions in the Philippines including
investments in bonds issued by the government
All deposits of whatever nature with banks or banking of the Philippines, its political subdivisions and
institutions in the Philippines including investments its instrumentalities.
in bonds issued by the government of the Philippines,
its political subdivisions and its instrumentalities, are o All foreign currency deposits.
hereby considered as of an absolutely confidential o Trust funds and any sum of money invested in the
nature and may not be examined, inquired or looked bank. (CASES: Ejercito v. Sandiganbayan)
into by any person, government official, bureau or
office ---.
EXCEPTIONS

o Foreign Currency Deposit Act of the PHILIPPINE CURRENCY BANK DEPOSITS

Philippines (Republic Act No. 6426) – it is an The following are the exceptions to the Bank Secrecy
act instituting a foreign currency deposit system Law under Section 2 of R.A. No. 1405:
in the Philippines, and for other purposes.
1. Upon written permission of the depositor.
» Approved: April 4, 1974.
2. In cases of impeachment.
3. In cases where the money deposited or invested
SECTION 8. SECRECY OF FOREIGN CURRENCY is the subject matter of litigation.
DEPOSITS
4. Upon order of a competent court in cases of
All foreign currency deposits authorized under this bribery or dereliction of duty of public officials.
act, as amended by Presidential Decree No. 1035, as
well as foreign currency deposits authorized under 5. In cases of violation of the Anti-Money
P.D. No. 1034, are hereby declared as and considered Laundering Act (AMLA), the Anti-Money
Laundering Council (AMLC) may inquire into a
 bank account upon order of any competent investment with any banking institution is
court. related to any one of the unlawful activities
under Section 3(I), except those referred to
» The BIR may inquire into bank deposits if there
in Section 3(I)[1],[2] and [12] of R.A. No.
is an offer of compromise of tax liability on
9160 or a money laundering offense under
account of the depositor’s financial incapacity.
Section 4, Sec.11, R.A.9160.
The following circumstances also constitute exceptions
E. Inquiry into or examination of any deposit or
to the secrecy of bank deposits:
investment with any banking institution
1. Upon order of the court in cases of unexplained when the examination is made by the Bangko
wealth under Section 8 of the Anti-Graft and Sentral ng Pilipinas (BSP) to ensure
Corrupt Practices Act. compliance with the Anti-Money
Laundering Law in the course of a periodic
2. Upon order of the commissioner of the Internal or special examination of the BSP Section 11,
Revenue with respect to the bank deposits of a R.A. 9160 and Section 4, R.A. 8791.
decedent for the purpose of determining the
decedent’s gross estate. 6. When the examination is made in the course of a
special or general examination of a bank and is
3. Upon the order of the commissioner of the specially authorized by the Monetary Board
Internal Revenue with respect to the bank after being satisfied that there is reasonable
deposits of a taxpayer who has filed an ground to believe that a bank fraud or serious
application for compromise of his tax liability irregularity has been or is being committed and
under Section 204 (A2) of the National that it is necessary to look into the deposit to
Internal Revenue Code (NIRC) by reason of establish such fraud or irregularity.
financial incapacity to pay his tax liability. 7. When examination is made by an independent
4. In the case of unclaimed balances. auditor hired by the bank to conduct its regular
audit provided that examination is for audit
5. Without need of court order, if the AMLC purposes only and the results thereof shall be for
determines that a particular deposit or
the exclusive use of the bank.
investment with any banking institution is
related to any one of the following unlawful 8. Upon order of the court in cases filed by the
activities: Ombudsman and upon the latter’s authority to
A. Kidnapping for ransom under Article 267 of examine and have access to bank accounts and
Act No. 3815 Revised Penal Code of the records.
Philippines (RPC).
FOREIGN CURRENCY DEPOSITS
B. Violations of Sections 4, 5, 6, 8, 9, 10, 12, 13,
14, 15, and 16 of Comprehensive o Upon written permission of the depositor.
Dangerous Drugs Act of 2002 (R.A. No.
9165).
CASES:
C. Hijacking and other violations under R.A. No.
6235. Destructive arson and murder, as GSIS vs. Court of Appeals, G.R. 189206
defined under the RPC, as amended, June 8, 2011
including those perpetrated by terrorists
against non-combatant persons and similar A surety bond was agreed with DOMSAT Holdings,
targets. Inc. as the principal and the GSIS as administrator and
the obligees are Land Bank of the Philippines, Tong
D. Upon order of the court, if the AMLC Yang Merchant Bank, Industrial Bank of Korea and
determines that a particular deposit or First Merchant Banking Corporation collectively
known as “The Banks” with the loan granted to Van Twest vs. Ca and Gloria Anacleto
DOMSAT of US $11,000,000 to be used for the
Petitioner alleged in his complaint that in 1989, he
financing of the two-year lease of a Russian satellite
and private respondent opened a joint foreign
from INTERSPUTNIK. DOMSAT failed to pay the loan
currency savings account with interbank to hold funds
and GSIS refused to comply with its obligation
which “belonged entirely and exclusively” to
reasoning that DOMSAT did not use the loan proceeds
petitioner, to “facilitate the funding of certain
for the payment of rental for the satellite. GSIS alleged
business undertakings” of both of them and which
that DOMSAT, with Westmont Bank as the conduit,
funds were to be “temporarily or held in trust” by
transferred the US $11 million loan proceeds from
private respondent, who “shall turnover the same to
the Industrial Bank of Korea to Citibank New York
plaintiff upon demand.”
account of Westmont Bank and from there to the
Binondo branch of Westmont Bank. Petitioner further alleged that withdrawals from the
account were always made through their joint
The banks filed a complaint before the RTC of Makati
signatures. That when his business relationship with
against DOMSAT and GSIS. GSIS requested for the
private respondent turned sour, the latter unilaterally
issuance of a subpoena duces tecum to the custodian
closed their joint account, withdrew the remaining
of records of Westmont Bank to produce bank ledger
balance of Deutschmark (DM) 269,777.37 and
covering the account of DOMSAT with the Westmont
placed the money in her own personal account with
Bank (now united overseas bank) and other pertinent
the same bank.
documents. The RTC issued the subpoena but
nonetheless, the RTC then granted the second motion Petitioner, thus sought an injunctive writ to prevent
for reconsideration by “The Banks” to quash the private respondent from withdrawing the money at
subpoena granted to GSIS. GSIS assailed its case to any time and thereby defeat petitioner's main and
the CA and CA partially granted its petition allowing it pending action in Civil Case No. 90-659.
to look into documents but not the bank ledger
RULING
because the US $11,000,000 deposited by DOMSAT
to Westmont Bank is covered by R.A. 6426 or the In other words, although transfers from one foreign
Bank Secrecy Law. currency deposit account to another foreign currency
deposit account in the Philippines are now eligible
ISSUE
deposits under the Central Bank's Foreign Currency
Whether or not the deposited US $11,000,000 by Deposit System, private respondent is still not
DOMSAT Inc. to Westmont Bank is covered by bank entitled to the confidentiality provisions of the
secrecy law. relevant circulars.
RULING For, as noted earlier, private respondent is not the
owner of such foreign currency funds and her
The court held that this is not possible given the
personal deposit account is not, under Section 49 of
statute that exempts foreign currency deposits from
Circular No. 1318, protected by this Circular.
any court order.

Applying Section 8 of R.A. No. 6426, absent the

written permission from DOMSAT, Westmont Bank GARNISHMENT OF DEPOSITS INCLUDING FOREIGN
cannot be legally compelled to disclose the bank DEPOSITS
deposits of DOMSAT, otherwise, it might expose itself
to criminal liability under the same act. Garnishment is considered as a specie of attachment
for reaching credits belonging to the judgment debtor
and owing to him from a stranger to the litigation.
Under the above-cited rule, the garnishee or the third
person is obliged to deliver the credits, etc.
 » To the proper officer issuing the writ and the law
exempts from liability the person having in his
possession or under his control any credits or
other personal property belonging to the
defendant, . . . if such property be delivered or
transferred, . . . to the clerk, sheriff, or other
officer of the court in which the action is pending.

Salvacion vs. Central Bank of the Philippines

On February 4, 1989, Greg Bartelli y Northcott, an

American tourist, coaxed and lured petitioner Karen
Salvacion, then 12 years old to go with him to his
apartment. Therein, Greg Bartelli detained Karen
Salvacion for four days, or up to February 7, 1989
and was able to rape the child once on February 4,
and three times each day on February 5, 6, and 7,
1989.

The supreme court allowed the garnishment of the

foreign currency deposits of a foreign transient to
satisfy a civil liability arising from his criminal offense.

In disregarding the rigid construction of R.A. 6426,

the court pronounced that the law could not be
invoked to condone a wrongdoing or used for any
purpose inconsistent with the salutary intent of the
law. (Salvacion vs. Central Bank of the Philippines 278
SCRA 27)