(R.A.

1405)

A. PURPOSE
1. To encourage deposit in banking institutions; and
2. To discourage private hoarding so that banks may lend

such funds and assist in the economic development of

the country.

PROHIBITED ACTS
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 (Sec. 2)
2. Disclosure by any official or employee of any
banking institution to any authorized person of any
information concerning said deposit (Sec. 3)

DEPOSITS COVERED
1. All deposits of whatever nature with banks or
banking institutions found in the Philippines; or
2. Investments in bonds issued by the Philippine
government, its branches, and institutions. (Sec. 2,
R.A. 1405)

Definitions:
DEPOSITS
refer to money or funds placed with a bank that can be

withdrawn on the depositors order or demand, such as

deposit accounts in the form of savings, current and time
deposits.

Investments in Government Bonds

refer to investments in bonds issued by the Government
of the Philippines, its political subdivisions and its
instrumentalities.
Government bonds are debt securities which are
unconditional obligations of the State, and backed by its
full taxing power.
Government bonds include treasury bills, treasury notes,
retail treasury bonds, dollar linked peso notes, and other
risk-free bonds.

Are trust funds covered by the

term deposit?

YES.
The money deposited under the trust agreement is
intended not merely to remain with the bank but to be
invested by it elsewhere. To hold that this type of account is
not protected by R.A. 1405 would encourage private
hoarding of funds that could otherwise be invested by
banks in other ventures, contrary to the policy behind the
law. (Ejercito v. Sandiganbayan, G.R. No. 15729495, Nov.
30, 2006)

(Despite such pronouncement that trust funds are

considered deposits, trust funds remain not covered by
PDIC.)

Are foreign currency

deposits covered by the
Secrecy in Bank Deposits
(R.A. 1405)?

NO.
Foreign currency deposits are covered by R.A. 6426
otherwise known as the Foreign Currency Act.
Under the same law, all authorized foreign currency
deposits are considered of an absolutely confidential nature
and, except upon the written permission of the depositors,
in no instance shall be examined, inquired or looked into by
any person, government official, bureau or office whether
judicial or administrative private.

EXCEPTIONS
(Instances where examination or disclosure
of information about deposits can be
allowed)

EXCEPTIONS UNDER RA 1405

1. Upon written consent of the depositor. (Sec. 2)
2. In cases of impeachment. (Sec. 2)
3. Upon order of competent court in cases of bribery or

dereliction of duty of public officials. (Sec. 2)

4. In cases where the money deposited or invested is the

subject matter of the litigation. (Sec. 2)

EXCEPTIONS UNDER OTHER LAWS

5.

Upon order of the Commissioner of Internal Revenue

in respect of the bank deposits of a decedent for the
purpose of determining such decedents gross
estate. (Sec. 6[F][1], NIRC)

6.

Upon the order of the Commissioner of Internal

Revenue in respect of bank deposits of a taxpayer
who has filed an application for compromise of his
tax liability by reason of financial incapacity to pay
his tax liability. (Sec. 6[f][1],NIRC)

7.

In case of dormant accounts/deposits for at least

10 years under the Unclaimed Balances Act. (Sec.
2, Act No. 3936).

8.

When the examination is made by the BSP to

insure compliance with the AML Law in the
course of a periodic or special examination

9.
a)

With court order:

In cases of unexplained wealth under Sec. 8 of
the AntiGraft and Corrupt Practices Act (PNB v.
Gancayco, L18343, Sept. 30, 1965)

a)

In cases filed by the Ombudsman and upon the

latters authority to examine and have access to
bank accounts and records (Marquez v. Desierto,
GR 138569, Sept. 11, 2003)

10.

Without court order:

If the AMLC determines that a particular deposit
or investment with any banking institution is
related to the following:
a. Hijacking,
b. Kidnapping,
c. Murder,
d. Destructive Arson, and
e. Violation of the Dangerous Drugs Act.

What are the requisites

before the Ombudsman may
examine deposits?

What are the requisites before the Ombudsman

may examine deposits?
1. There is a pending case before court of competent
jurisdiction
2. The account must be clearly identified

3. There is notice upon the account holder and bank

personnel of their presence during inspection.
The inspection must cover only the account identified in the
pending case. (Marquez v. Desierto, G.R. No. 138569, Sept. 11,
2003)

Can a bank be compelled to

disclose the records of the
accounts of a depositor under
the investigation for
unexplained wealth?

Can a bank be compelled to disclose the records of the

accounts of a depositor under the investigation for
unexplained wealth?
YES
The cases of unexplained wealth are similar to cases of
bribery, dereliction of duty. Thus, no reason is seen why it
cannot be excepted from the rule making bank deposits
confidential.
Inquiry into illegally acquired property in antigraft cases
extends to cases where such property is concealed by being
held or recorded in the name of other persons. This is also
because the AntiGraft and Corrupt Practices Act, bank
deposits shall be taken into consideration in determining
whether or not a public officer has acquired property
manifestly out of proportion with his lawful income. (PNB v.
Gancayco, G.R. No. L18343, Sept. 30, 1965)

In an action filed by the bank to

recover the money transmitted by
mistake, can the bank be allowed to
present the accounts which it believed
were responsible for the acquisition of
the money?

In an action filed by the bank to recover the money transmitted by

mistake, can the bank be allowed to present the accounts which it
believed were responsible for the acquisition of the money?

YES.
R.A. 1405 allows the disclosure of bank deposits in cases
where the money deposited is the subject matter of
litigation.
In an action filed by the bank to recover the money
transmitted by mistake, necessarily, an inquiry into the
whereabouts of the amount extends to whatever is
concealed by being held or recorded in the name of the
persons other than the one responsible for the illegal
acquisition. (Mellon Bank, N.A. v. Magsino, G.R. No.
71479, Oct. 18, 1990)

The Law on Secrecy of Bank Deposits provides that all

deposits of whatever nature with banks or banking
institutions are absolutely confidential in nature and may
not be examined, inquired or looked into by any person,
governmental official, bureau or office. However, the law
provides exceptions in certain instances. Which of the
following may NOT be among the exceptions?
1.
2.
3.
4.
5.

in cases of impeachment
in cases involving bribery
in cases involving BIR inquiry
in cases of antigraft and corrupt practices
in cases where the money involved is the subject of
litigation

 Under Section 6(F) of the National Internal Revenue

Code, the Commissioner of Internal Revenue can
inquire into the deposits of a decedent for the
purpose of determining the gross estate of such
decedent. Apart from this case, a BIR inquiry into
bank deposits cannot be made. Thus, exception 3

may not always be applicable.

 In exception 4, an inquiry into bank deposits is

possible only in prosecutions for unexplained wealth

under the Antigraft and Corrupt Practices Act.

However, all other cases of antigraft and corrupt
practices will not warrant an inquiry into bank
deposits. Thus, exception 4 may not always be
applicable. Like any other exception, it must be
interpreted strictly.

Exceptions 1, 2, and 5 on the other hand, are provided

expressly in the Law on Secrecy of Bank Deposits. They
are available to depositors at all times.

GARNISHMENT OF DEPOSITS, INCLUDING

FOREIGN DEPOSITS

Does garnishment of a bank

deposit violate the law?

Does garnishment of a bank

deposit violate the law?
NO.
The prohibition against examination does not preclude
its being garnished for satisfaction of judgment. The
disclosure is purely incidental to the execution process
and it was not the intention of the legislature to place
bank deposits beyond the reach of judgment creditor.
(PCIB v. CA, G.R. No. 84526, Jan. 28, 1991)

Can Foreign Currency Deposits

be subjected to garnishment?

Can Foreign Currency Deposits be

subjected to garnishment?
General Rule:
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. (Sec 8. R.A. 6426)

EXCEPTION:
The application of Section 8 of R.A. 6426 depends on
the extent of its justice.
The garnishment of a foreign currency deposit should
be allowed to prevent injustice and for equitable
grounds, otherwise, it would negate Article 10 of the
New Civil Code which provides that in case of doubt in
the interpretation or application of laws, it is presumed
that the lawmaking body intended right and justice to
prevail. (Salvacion vs. Central Bank of the Philippines,
G.R. 94723, August 21, 1997)

PENALTIES FOR VIOLATION

The penalty of imprisonment of not more than 5
years or a fine of not more than 20,000pesos or
both, in the discretion of the court shall be
imposed upon any official or employee of a
banking institution who, upon conviction, was
found to have violated R.A. 1405.