REPUBLIC ACT No.

1405: SECRECY OF BANK DEPOSITS ACT

AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS WITH ANY

BANKING INSTITUTION AND PROVIDING PENALTY THEREFOR.

Section 1. It is hereby declared to be the policy of the Government to give

encouragement to the people to deposit their money in banking institutions 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.

Section 2. 1 All deposits of whatever nature with banks or banking institutions in the
Philippines including investments in bonds issued by the Government of the Philippines,
its political subdivisions and its instrumentalities, 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 written permission of the
depositor, or in cases of impeachment, or upon order of a competent court in cases of
bribery or dereliction of duty of public officials, or in cases where the money deposited
or invested is the subject matter of the litigation.

Section 3. It shall be unlawful for any official or employee of a banking institution to
disclose to any person other than those mentioned in Section two hereof any
information concerning said deposits.

Section 4. All Acts or parts of Acts, Special Charters, Executive Orders, Rules and
Regulations which are inconsistent with the provisions of this Act are hereby repealed.

Section 5. Any violation of this law will subject offender upon conviction, to an
imprisonment of not more than five years or a fine of not more than twenty thousand
pesos or both, in the discretion of the court.

Section 6. This Act shall take effect upon its approval.

Approved: September 9, 1955

SECRECY OF BANK DEPOSITS SIMPLIFIED
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On 09 September 1955, Republic Act No. 1405, otherwise known as An Act Prohibiting
Disclosure of or Inquiry into, Deposits with any Banking Institution (“Bank Secrecy
Law”), was approved. This law was enacted to encourage individuals to deposit their
money in banks instead of hoarding them.

You may ask, why is there a need to protect the secrecy of bank deposits? Technically
speaking, the law prefers that money be deposited in banks so they may be properly
utilized to assist in the economic development of the country. However, it is more
relevant on a practical matter. Let’s use you dear reader as an example. Suppose that
you only have P1,000 in your bank account. Surely, you do not want any person (such
as your friend, employer or any stranger) to find that out. Either you do not want others
to know that you do not have sufficient money or you simply do not feel comfortable in
people prying in your financial affairs. On the other hand, if you have P100,000,000.00
in your bank account, you also do not want others to find that out for fear that you might
be kidnapped, or relatives might borrow from you, or simply, it’s your personal affair. In
all these cases, one’s financial status is a private matter. Transactions happening in
your bank account are not just empty figures. There are stories affixed to such
transactions. Thus, these financial transactions are akin to your personal activities
which should not be easily accessible to anyone.
The Bank Secrecy Law protects all deposits of whatever nature in banks or banking
institutions in the Philippines as well as investments in government bond. This law
prohibits any person, subject to the exceptions below, from disclosing to any person any
information, relative to the funds or properties belonging to the depositors in the custody
of the bank. Simply put, no one can just go to your bank and ask for your bank balance.
However, the rule is not absolute. The following are the exceptions to the bank secrecy
law:
1. Written permission or consent in writing by the depositor;

2. In cases of impeachment;

3. Upon order of the court in cases of bribery or dereliction of duty of public officials;

4. Upon order of the court in cases where the money deposited or invested is the
subject matter of the litigation;
5. Upon a subpoena issued by the Ombudsman concerning an investigation it is
conducting, provided that there must already be a case pending in court, the account be
clearly identified, the inspection be limited to the subject matter of the pending case;
and the bank personnel and the depositor must be notified to be present during the
inspection;

6. The BIR can inquire into bank deposits in an application for compromise of tax
liability or determination of a decedent’s gross estate;

7. The Anti-Money Laundering Council (“AMLC”) can examine bank accounts pursuant
to a court order, where there is probable cause that the deposits are related to an
unlawful activity or money laundering offense;

8. The AMLC can examine bank accounts, WITHOUT a court order, where there is
probable cause that the deposits are related to certain crimes such as kidnapping for
ransom, violation of the Dangerous Drugs Act, hijacking, destructive arson, murder and
violations of RA 6235 (acts inimical to civil aviation);

9. The Bangko Sentral can examine bank accounts in the course of its periodic or
special examination regarding compliance with Anti-Money Laundering Law.

As you can see, although there are many exceptions, securing such exceptions is not
an easy task. The easiest way to waive the secrecy of bank deposits is through a
written waiver. Although there is no prescribed form for a waiver, it is necessary that
the waiver be made voluntarily, knowingly and with sufficient awareness of relevant
circumstances and consequences. Thus, as a matter of practice, banks will require the
depositor to state in his waiver the specific bank account, bank branch, name of
depositor, period covered by the transactions and the name of the person authorized to
access the bank account.

How about dollar deposits? Now, foreign currency deposits are governed by a different
law, namely Republic Act No. 6426 and has fewer exceptions. This will be discussed in
a separate article.
You may be curious if there is any criminal liability for violating the bank secrecy law.
Yes, there is criminal liability. Any person violating this law may be imprisoned for not
more than five (5) years, or meted a fine not exceeding P20,000.00 or both.
C an the bank disclose personal information about their depositor to

any person who inquires?

No. This is prohibited under REPUBLIC ACT No. 1405 or “An Act Prohibiting
Disclosure of or Inquiry Into, Deposits with Any Banking Institution and Providing Penalty
Therefor.”
The law says:
All deposits of whatever nature with banks or banking institutions in the
Philippines including investments in bonds issued by the Government of the
Philippines, its political subdivisions and its instrumentalities, 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 written permission of the depositor, or in cases of
impeachment, or upon order of a competent court in cases of bribery or
dereliction of duty of public officials, or in cases where the money deposited
or invested is the subject matter of the litigation.

Moreover, it shall be unlawful for any official or employee of a banking

institution to disclose to any person other than those mentioned above.

Thus, the following are the prohibited acts in RA 1405:

1. Examination/inquiry/looking into all deposits of whatever nature with banks or
banking institutions in the Philippines (including investment in bonds issued by
the government) by any person, government official or office.
2. Disclosure by any official or employee of any banking institution to any
unauthorized person of any information concerning said deposit.
However, bank deposit may be examined or disclosed by an official or
employee of any banking institution if:

1. there is written permission of the depositor;

2.  in cases of impeachment;
3. upon order of a competent court in cases of bribery or dereliction of duty of
public officials; or
4.  in cases where the money deposited or invested is the subject matter of the
litigation.

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C an foreign currency deposit be inquired or looked into?

Generally, foreign currency deposit is absolutely confidential nature.

Republic Act No. 6426 or Foreign Currency Deposit Act of the Philippines provides that:
All foreign currency deposits authorized the Foreign Currency Deposit Act, as
amended by PD No. 1035  (Expanding the Authority of Certain Depository Banks under R.A.
No. 6426 and for other Purposes), as well as foreign currency deposits authorized
under PD No. 1034(Expanding the Authority of Certain Depository Banks
under R.A. No. 6426 and for other Purposes), are 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; provided, however, that said foreign
currency deposits shall be exempt from attachment, garnishment, or any
other order or process of any court, legislative body, government agency or
any administrative body whatsoever. (As amended by PD No. 1035, and
further amended by PD No. 1246, promulgated on Nov. 21, 1977)
Thus, Foreign currency deposits cannot be inquired or looked into. All foreign
currency deposits are confidential.

However, Republic Act No. 10021 or Exchange of Information on Tax Matters Act of

2009 allowed Commissioner of Internal Revenue to inquire into bank deposits
of the following:
1. A decedent to determine his estate;
2. Any taxpayer who has filed for an application for compromise of his tax liability;
and
3. A specific taxpayer upon request for tax information from a foreign tax authority
pursuant to an international convention or agreement on tax matters to which the
Philippines is a party.
 All foreign currency deposits are declared as and considered of an absolutely
confidential nature.
 Foreign currency deposits shall be exempt from attachment, garnishment, or
any other order or process of any court.
 Commissioner of Internal Revenue is allowed to inquire into foreign bank
deposits.
Dollar vs. Peso Account

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In my previous column, I cited the rule against unauthorized disclosure, examination

or inquiry into Philippine currency bank deposits under Republic Act 1405. I also
explained that the prohibition is not absolute. It admits of various exceptions, carved out
by statute and jurisprudence. Another law governs secrecy of foreign currency deposits.
The rule ordaining their confidentiality is even more stringent, with fewer
exceptions compared to RA 1405.

The most significant distinction is that while Philippine currency bank deposits may be
examined or disclosed if there is a relevant court order, foreign currency deposits are
exempt from court order and administrative process. In fact, they are exempt from
execution, attachment and garnishment. Injunction will not lie to enjoin bank withdrawals
of such deposits. Creditors cannot satisfy their claim then from the foreign currency
bank deposits of their debtor. In simple words, the unpaid creditors, no matter how
meritorious the claim may be, cannot seize the monies of their debtor if they are in
foreign currency bank deposits. The purpose of RA 6426 is to encourage foreign
currency deposits in order to beef up the country’s international reserves. The intent
may be laudable but the stringent rule favoring these kind of deposits may be abused.
Debtors who are anticipating adverse court decision can simply convert their deposits
into foreign currency and instantaneously render them beyond the reach of judgment
creditors.

In one case, a debtor obtained a foreign currency loan from a bank to invest in
the purchase of a satellite. The loan was further secured by a bond issued by a
reputable insurer. The loan was not paid. The lender called on the loan and ran after the
surety which raised as defense that the loan proceeds were not used for the purpose
specified in the surety agreement. Since there was misrepresentation, the surety
contended that it could not be held liable on the bond. In support of its defense, the
surety asked for a court subpoena to be able to inquire into the whereabouts of the loan
proceeds. The Court held that this is not possible given the statute that exempts foreign
currency deposits from any court order. (GSIS vs Court of Appeals, GR 189206, June 8,
2011)

In another case though, 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. ( He raped a 10 year old minor but was able to abscond). In
disregarding the rigid construction of RA 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)
The High Court likewise refused a trustee from invoking RA 6426 after he diverted the
beneficial owner’s deposits to his own account, declaring that only the owner of the
deposits can benefit from the protective mantle of RA 6426 (Van Twest vs Court of
Appeals, 230 SCRA 42)

By law, notwithstanding RA 1405 and 6426, the Anti Money Laundering Council
may also inquire into funds and deposits if there is a probable cause they relate to
unlawful activities under the Anti- Money Laundering law (AMLA). Stated otherwise, the
rule against unauthorized disclosure, examination and garnishment of deposits does
not apply when it comes to AMLA violation.

After comparing the laws covering ₱ and $, I hasten to add that a revisit of RA
1405 cannot be complete without a corresponding review of RA 6426. Regardless of
any possible amendment though, it should be stressed that laws cannot be used or
applied in any manner contrary to their intent, rationale and purpose.
Update on Secrecy of Bank Deposits Law:

BUSINESS

Malacañang certifies bank secrecy law

amendment as urgent
Lawrence Agcaoili - The Philippine Star 
August 19, 2021 | 12:00am
MANILA, Philippines — Malacañang has certified the urgency of proposed
amendments to the bank secrecy law as the Philippines remains the only
country in the world that maintains the secrecy of bank deposits.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the

proposed Bank Deposits Secrecy Law has been included in President
Duterte’s legislative priorities for the 18th Congress.

“We are glad that the President has identified the Bank Deposits Secrecy bill
as a legislative priority. In view of this, the BSP will further step up its efforts to
coordinate with Congress and other stakeholders for the immediate passage
of the measure,” Diokno said.

The bill, which aims to amend Republic Act 1405 or The Secrecy of Bank
Deposits Law of 1955, has been referred to the Legislative-Executive
Development Advisory Council for prioritization and inclusion in the common
legislative agenda of the executive and legislative branches.

The law enacted 66 years ago to encourage people to deposit their money in
banks prohibits the disclosure of or inquiry into deposits with any banking
institution.

The Philippines is the only remaining country in the world with a bank secrecy
law after Lebanon lifted the secrecy on bank deposits late last year.

The actions of the Office of the President were in response to separate

communications sent by the BSP requesting that the bill be included in the list
of priority bills and certified as urgent by the President.

The proposed law would equip the BSP with tools necessary to prove the
commission of fraud, serious irregularity or unlawful activity if reasonable
basis exists.

Particularly, this would allow the BSP to effectively fulfill its mandate and
enable it to have a holistic examination of a banking institution so that certain
risk areas will be considered in assessing a bank’s financial condition, risk
management and corporate governance.

The results of the inquiry or examination by the BSP shall not be arbitrarily
shared or disclosed but proposed to be for the exclusive use of the BSP.
Nevertheless, the BSP may share the results of its examination with the
courts and other regulators if it is necessary to prevent or prosecute an
offense or crime.

“This enhances the BSP’s capacity to fulfill its mandate of promoting the
safety and soundness of the banking system,” Diokno said.

The central bank is also supporting the proposed amendments in line with the
country’s broader efforts to combat both domestic and global tax evasion,
money laundering and other financial crimes; to promote harmonious and
supportive international relations, and to meet international standards on
transparency.

“It also enables compliance with international standards on transparency that

will also bolster the public and the global community’s trust in the domestic
banking system,” the BSP chief said.

Last June 25, Paris-based dirty money watchdog Financial Action Task Force
placed the Philippines on its gray list or jurisdictions under increased
monitoring that have committed to resolve swiftly identified strategic anti-
money laundering/counter financing of terrorism deficiencies.