Business groups back bill seeking to amend bank secrecy law

Several business groups are supporting the passage of a bill which seeks to relax the existing laws on bank secrecy.

In a joint statement, the business organizations expressed “full support” for the enactment of the Bank Deposits Secrecy Bill, which seeks to amend Republic Act No. 1405, or the Secrecy of Bank Deposits Law.

The signatories in the joint statement are the following:

• American Chamber of Commerce of the Philippines
• Australia-New Zealand Chamber of Commerce Philippines
• Bankers Association of the Philippines
• Cebu Business Club
• Cebu Leads Foundation
• CIBI Foundation Inc.
• European Chamber of Commerce of the Philippines
• Financial Executives Institute of the Philippines
• Fintech Alliance PH
• Foundation for Economic Freedom
• French Chamber of Commerce and Industry in the Philippines
• Fund Managers Association of the Philippines
• Guild of Real Estate Entrepreneurs and Professionals Inc
• Institute of Corporate Directors
• Intellectual Property Association of the Philippines
• Japanese Chamber of Commerce and Industry of the Philippines
• Licensing Executives Society Philippines
• Makati Business Club
• Management Association of the Philippines
• Philippine Center for Entrepreneurship
• Philippine Council of Association and Association Executives
• Philippine Life Insurance Association
• Shareholders’ Association of the Philippines
• Tax Management Association of the Philippines
• Women’s Business Council Philippines

“The global trend is to relax bank deposit secrecy laws across jurisdictions to effectively combat both domestic and global tax evasion, money laundering and other financial crimes and comply with international standards on transparency,” the business groups said.

“The Philippines has lagged behind this worldwide trend. Strict deposit secrecy in the country continues to make the Philippines a haven for tax evasion, a protected channel for international money laundering flows, and other illegal financial transactions,” the groups added.

The groups said that strict bank secrecy also allows politicians and other government officials to hide unexplained wealth, constraining citizens’ ability to exercise their public duty to elect honest officials.

“It does not promote good governance principles of transparency, fairness and accountability,” the groups said.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno earlier said he will ask President Rodrigo Duterte to certify as urgent a bill seeking to amend existing bank secrecy laws and strengthen the central bank's supervisory powers.

At its current version, the bank secrecy law is regarded as one of the toughest in the world, as it prohibits the disclosure, inquiry, and examination into Philippine currency deposits of whatever nature and kind, as well as investment in securities issued or guaranteed by the government.

“Existing bank secrecy laws weaken the Bangko Sentral ng Pilipinas’ exercise of its mandate of maintaining a sound and stable banking system by constraining BSPs supervisory activities and assessment, especially in cases involving unsafe and unsound banking practices,” the groups said.

“Such practices include those that may be committed by the stockholders, owners, directors, trustees, officers or employees of entities that are subject to the supervision or regulatory power of BSP,” they said.

The groups noted that recently, Lebanon passed two laws easing bank secrecy laws, leaving the Philippines as the only remaining country with bank deposit secrecy laws so stringent that they impede prudential supervision.

To recall, President Rodrigo Duterte in his first State of the Nation Address (SONA) in 2016 vowed to lower personal and corporate income tax rates, and relax the Bank Secrecy Law.

Both taxes have been lowered but the amendments to the Bank Secrecy Law have yet to be passed, making the Philippines currently the only country to have such a law after Lebanon lifted its version in May 2020.

“We consider the urgent passage of the Bank Deposits Secrecy Bill of paramount importance to address the unintended consequences of bank secrecy laws in the country,” the groups said.

Once enacted, the Bank Deposits Secrecy Bill will allow BSP to look into the bank deposit accounts of specified persons only under certain conditions: (i) in the exercise of BSP’s supervisory powers, upon determination by the Monetary Board that there is reasonable ground to believe that a fraud, serious irregularity or unlawful activity has been or is being committed by the specified persons, and it is necessary to look into the deposit to establish such fraud, irregularity or unlawful activity; and (ii) in the course of BSP’s investigation of closed banks.

“This will simply restore the authority to have access to bank deposit accounts that the Bangko Sentral had prior to the passage of R.A. 7653 in 1993,” they said.

At present, the central bank's proposals under House Bill 8991 are on second reading at the plenary.

House Bills 1498 and 3554, which exempt government officials, are being deliberated at the House Committee on Banks and Financial Intermediaries.

Meanwhile, Senate Bills 663, 634, 539, 374, 26, and 1802 are being discussed at the Senate Committee on Banks, Financial Institutions, and Currencies.

“Indeed, the proposed Bank Deposits Secrecy Bill has wide-reaching implications. The bill will not only strengthen prudential supervision and allow BSP to effectively fulfill its mandate of maintaining stability of the banking system but also ensure compliance with the international standards on transparency and good governance which will preserve and fortify the public and the global community’s trust in Philippine the banking system,” the groups said. -MDM, GMA News