PHL's bank secrecy law among the toughest in the world

The last time Republic Act No. 1405 or the Bank Secrecy Law has been repeatedly invoked in a Senate inquiry was during the impeachment trial of ousted Chief Justice Renato Corona.

During the trial, his lawyers repeatedly cited the law to challenge the prosecution's presentation of his supposed bank records to prove he illegally amassed wealth while in government service.

Corona was eventually convicted on May 29, 2012 by the Senate impeachment court for failing to declare around P200 million in peso and dollar accounts that he acquired while in public office.

Now, the public has found a renewed interest on the law thanks to the Senate inquiry on a scheme to launder $81 million stolen by hackers from the account of the Bangladesh central bank at the Federal Reserve Bank of New York and wired to the Rizal Commercial Banking Corp. (RCBC) in the Philippines

During the Senate hearings, RCBC executives repeatedly refused to answer the senators why they allowed millions of dollars to be withdrawn from the the bank's branch on Jupiter Street in Makati City even after the Federal Reserve Bank of New York already sent a stop-payment request in early February. They repeatedly cited the law as reason why they're prevented from answering such questions.

The Bank Secrecy Law, enacted September 9, 1955, was created to encourage 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."

The law 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.

Deposits refer to money or funds placed with bank that can be withdrawn on the depositor’s order or demand, such as deposit accounts in the form of savings, current and time deposits. Investments in government bonds, meanwhile, refer to investments in bonds issued by the government and its instrumentalities.

According to University of Santo Tomas Faculty of Civil Law Dean Nilo Divina, under the law, information about Philippine currency bank deposits and government-issued securities is "privileged and confidential."

Divina, however, clarified that the prohibition set by the law is not absolute. These, he said, are the cases where inquiry or disclosure is permissible without violating the law:

1. Written permission from the depositor;
2. In case of impeachment and
3. In case of court order in the following cases:

• Bribery, dereliction of duties;
• Where the subject matter of litigation is the money deposited;
• In case of violation of the anti graft and corrupt practice act;
• Violation of the unexplained wealth law ( plunder is akin to unexplained wealth;
• Violation of the Anti-Money Laundering Law, and
• Garnishment

Violators of the law will be imprisoned for not more than five years or penalized with a fine not more than P20,000, in the discretion of the court.

Despite the Bank Secrecy Law, the Anti-Money Laundering Council (AMLC) may inquire into bank deposits, funds or investments if there is a prima facie violation of the anti-money laundering law, said Divina, adding that a bank inquiry order, however, is needed to do so.

Also, a court order is no longer required if the proceeds of the unlawful activity originated from hijacking, kidnapping, terrorism, murder, arson and dangerous drugs law violation, he added.

Strictest 

Kim Henares, commissioner of the Bureau of Internal Revenue, was earlier quoted saying that among those not covered by the Bank Secrecy Law are investments which are not bank deposits or government securities such as corporate bonds, purchases of shares of stocks, purchases of receivables of business, and purchases of foreign exchange.

Former US ambassadors to the Philippine Francis Ricciardone and Kristie Kenney, in separate cables made public though Wikileaks, reportedly described the Philippines’ Bank Secrecy Law as “among the strictest in the world” and “hampers” transparent governance and anti-corruption mechanisms.

In 2009, countries like Liechtenstein, Andorra, Austria, Luxembourg and Switzerland announced they were loosening their strict bank secrecy laws.

In 2014, 47 countries including Switzerland and Singapore, two of the most massive offshore financial centers in the world, entered into a treaty that would allow them to share data and tax information among each other.

Last year, the European Union and Switzerland signed an agreement that would prevent EU residents from hiding undeclared income in Swiss banks starting 2018. Through the deal, the EU and Switzerland would start exchanging information on the bank accounts which their respective citizens hold.

While some have embraced openness in sharing bank information with each other, others like Lebanon remained firm in not abandoning its bank secrecy law. Lebanon, however, in March 2015 vowed to continue cooperating with the US and other nations in the exchange of tax information and the fight against money laundering.

Changes

In the Philippines, UST's Divina said that to further strengthen measures to thwart laundering, amendments should already be made on Republic Act of 9160 or the Anti-Money Laundering Act of 2001 "to shorten the period for the bank to disclose covered and suspicious transactions to the AMLC, say 48 hours."

Divina said the AMLC should within 48 hours from receipt of a report on suspicious transaction apply for a freeze order.

If no complaint is filed, however, within seven days from issuance of the freeze order, it should be automatically lifted, he added.

Divina said that under present rules and regulations, "before the AMLC obtains a freeze order, the proceeds of the unlawful activities may have already been withdrawn." — APG, GMA News