SECRECY OF BANK DEPOSITS

GOVERNING LAW
For local currency deposits – RA 1405, the Secrecy of Bank Deposits (SBD)
For foreign currency deposits – RA 6426, the Foreign Currency Deposits Act (FCDA)

PURPOSE OF RA 1405
R.A. No. 1405 has two allied purposes. It hopes to discourage private hoarding and at
the same time encourage the people to deposit their money in banking institutions, so
that it may be utilized by way of authorized loans and thereby assist in economic
development. Owing to this piece of legislation, the confidentiality of bank deposits
remains to be a basic state policy in the Philippines. Section 2 of the law
institutionalized this policy by characterizing as absolutely confidential in general all
deposits of whatever nature with banks and other financial institutions in the country.
(BSB Group Inc. v. Sally Go, G.R. No. 168644, 16 February 2010)

DEPOSITS COVERED BY RA 1405

All deposits of whatever nature including investments in government bonds (Sec. 2,
SBD). Section 2 of RA 1405 is broad enough to cover trust accounts. The phrase "of
whatever nature" proscribes any restrictive interpretation of "deposits." Moreover, it is
clear from the Sec. 2 of RA 1405 that, generally, the law applies not only to money
which is deposited but also to those which are invested. This further shows that the law
was not intended to apply only to "deposits" in the strict sense of the word. Otherwise,
there would have been no need to add the phrase "or invested."
The term "deposits" as used in RA 1405 is to be understood broadly and not limited
only to accounts which give rise to a creditor-debtor relationship between the depositor
and the bank. The Supreme Court ruled that:

The contention that trust accounts are not covered by the term
"deposits," as used in R.A. 1405, by the mere fact that they do not entail
a creditor-debtor relationship between the trustor and the bank, does not
lie. An examination of the law shows that the term "deposits" used
therein is to be understood broadly and not limited only to accounts which
give rise to a creditor-debtor relationship between the depositor and the
bank.

The policy behind the law is laid down in Section 1:

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

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 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. (Underscoring supplied)

If the money deposited under an account may be used by banks for authorized loans to
third persons, then such account, regardless of whether it creates a creditor-debtor
relationship between the depositor and the bank, falls under the category of accounts
which the law precisely seeks to protect for the purpose of boosting the economic
development of the country. (Ejercito v. Sandiganbayan, G.R. No. 157294-95)

1997 BAR QUESTION

An employee of a large manufacturing firm earns a salary which is just a bit

more than what he need for a comfortable living. He is thus able to still
maintain a P10,000 savings account, a P20,000 checking account, a P30,000
money market placement and a P40,000 trust fund in a medium-size
commercial bank. State which of the above accounts are covered by the Law
on Secrecy of Bank Deposits.

SUGGESTED ANSWER:

The P10,000 savings account, P20,000 checking account and the P40,000 trust fund are
covered by the Law on Secrecy of Bank Deposits as they fall under the term “all
deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds.” (Sec. 2, SBD). Only the money market placement
is NOT covered by the Secrecy of Bank Deposits law as it is not a deposit and not an
investment in government bonds.

SAFETY DEPOSIT BOXES ARE NOT COVERED.

A safety deposit box is not strictly a deposit; it is a special kind of deposit. The safety
deposit box is for hire and for mutual benefit of the parties concerned.
HOWEVER, any information regarding the existence of the safety deposit box is still
considered secret and confidential in view of Sec. 55.1(b) of the GBL. Thus, any
information relative to funds or properties in the custody of the bank belonging to
private individuals, corporations or any other entity is considered confidential.

RECALL: “Without order of a court of competent jurisdiction, disclose to any

unauthorized person any information relative to the funds or properties in the custody
of the bank belonging to private individuals, corporations, or any other entity: Provided,

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That with respect to bank deposits, the provisions of existing laws shall prevail (Sec.
55.1(b) of the GBL)”.

PERSONS BANNED IN THE SBD FROM LOOKING INTO BANK DEPOSITS

Any person, government official, bureau or office (Sec. 2, SBD).
HOWEVER, the Ombudsman is not covered among the persons banned in the SBD
from looking into bank deposits
Under Section 15(8) of RA 6770 (The Ombudsman Act of 1989), the Ombudsman may
examine and have access to bank accounts and records. This does not, however, mean
that the Ombudsman is given the mandate to look or inquire into all bank deposits at
anytime.
In Marquez v. Desierto, GR No. 135882, 27 June 2001, the Supreme Court regulated
the powers of the Ombudsman as follows:
a. Only in-camera inspection is allowed;
b. There must be a pending case before a court of competent jurisdiction;
c. The account must be clearly identified;
d. The inspection is limited to the account subject of the court case;
e. The bank personnel and account holder must be notified to be present during
the inspection.

THE OTHER PERSONS, GOVERNMENT OFFICIAL, BUREAU OR OFFICE NOT

BANNED FROM LOOKING INTO DEPOSITS ARE:
1. The Bangko Sentral ng Pilipinas (BSP) in line with its mandate to supervise and
examine banks;
2. The PDIC and/or the BSP may inquire into or examine deposit accounts and all
information related thereto in case there is a finding of unsafe or unsound banking
practice (Sec. 8, RA 3591[PDIC law, as amended])
3. The Anti-Money Laundering Council (AMLC), in cases falling under the Terrorism
Financing Prevention and Suppression Act of 2012 (RA 10168) and the AMLA (Anti-
Money Laundering Act [RA 9160]);
4. The ATC (Anti-Terrorism Council) in cases falling under the Human Security Act (Sec.
27, RA 9372);
5. The BIR in case of inquiry of bank accounts of a decedent for estate tax purposes or
in case of a tax compromise (Sec. 6[f], NIRC of 1997)
NOTE: The above persons/entities are still covered by the confidentiality of bank
deposits and can only examine, look or inquire into bank deposits in line with
the mandate or functions of their office. Otherwise, this may result in the
circumvention of the bank secrecy law.

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PERSONS BANNED FROM DISCLOSING ANY INFORMATION CONCERNING
BANK DEPOSITS
Any official or employee of a bank, or an independent auditor hired by the bank to
conduct its regular audit (Sec. 3, SBD)

1990 BAR QUESTION

Manosa, a newspaper columnist, while making a deposit in a bank, overheard

a pretty bank teller informing a co-employee that Gigi, a well-known public
official, has just a few hundred pesos in her bank account and that her next
check will in all probability bounce. Manosa wrote this information in his
newspaper column.
Thus, Gigi filed a complaint with the Office of the City Fiscal of Manila for
unlawfully disclosing information about her bank account. Will the said suit
prosper? Explain your answer.

SUGGESTED ANSWER:

NO. The suit will not prosper. Manosa cannot be sued for unlawful disclosure of bank
deposit of Gigi. Section 3 of the Secrecy of Bank Deposits Law prohibits any official or
employee of a bank, or an independent auditor of a bank to disclose to any person any
information concerning bank deposits. Manosa is neither an official nor employee nor an
independent auditor hired by the bank. There is also no inquiry of bank deposit to
speak of. Manosa merely overheard the bank teller.

EXCEPTIONS TO THE SECRECY OF BANK DEPOSITS

1. Written permission of the depositor (Sec. 2, SBD);
2. In cases of impeachment (Sec. 2, SBD);
3. Upon order of a competent court in cases of bribery or dereliction of duty of public
officials (Sec. 2, SBD)
NOTE: cases of unexplained wealth are similar to cases of bribery or dereliction of duty
(PNV v. Gancayco, 122 Phil 503; BF v. Purisima, 161 SCRA 576)
NOTE: plunder is analogous to bribery (Ejercito v. Sandiganbayan, G.R. Nos.
157294-95)
NOTE: In graft cases, inquiry extends to property not legitimately acquired, even if
concealed, held or recorded in the name of third persons, relatives or other
persons.
4. In cases where the money deposited or invested is the subject matter of litigation
(Sec. 2, SBD)

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5. In case of inquiry of the BIR of bank accounts of a decedent for estate tax
purposes or in case of a tax compromise. (Sec. 6[f], NIRC of 1997)
6. Incidental disclosures of unclaimed balances under the Unclaimed Balances
Law(Act 3696)
7. Cases falling under the Anti-Money Laundering Act (AMLA) [RA 9160, as amended]
8. The examination of a bank account based on Sec. 10, Rule 57 of the Rules of
Court (the examination of a party whose property is attached and persons
indebted to a defendant or controlling his property) (Oñate v. Abrogar, 230 SCRA
181[1994])
9. In cases falling under the Human Security Act (Sec. 27, RA 9372).
10. The PDIC and/or BSP may inquire into or examine deposit accounts and all
information related thereto in case there is a finding of unsafe or unsound banking
practice (Sec. 8, RA 3591[PDIC Law], as amended)
11. The AMLC (Anti-Money Laundering Council) in cases falling under the Terrorism
Financing Prevention and Suppression Act of 2012 (RA 10168), is authorized to
inquire into or examine deposits and investments with any banking institution or
non- bank financial institution and their subsidiaries and affiliates without a court
order.
12. Waiver by DOSRI (Sec. 26, NCBA)

2015 BAR QUESTION

Raymond invested his money in securities issued by the Philippine

government, through his bank. Subsequently, the Bureau of Internal
Revenue asked his bank to disclose his investments. His bank refused the
request for disclosure on the ground that the investments are confidential
under the Secrecy of Bank Deposits Law (Republic Act No. 1405, as
amended). Is the bank’s refusal justified? Defend your answer. (2015)

SUGGESTED ANSWER:

YES. It is justified. Under RA 1405, all deposits of whatever nature including

investments in government bonds, similar to the security investment of Raymond, are
absolutely confidential in nature and may not be examined, inquired or looked into by
any person, government official, bureau or office, like the BIR. Furthermore, there is
nothing in the present case which shows that the inquiry of the BIR falls under any of
the recognized exceptions.

2000 BAR QUESTION

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GP is a suspected jueteng lord who is rumored to be enjoying police and
military protection. The envy of many drug lords who had not escaped the
dragnet of the law, GP was summoned to a hearing of the Committee on
Racketeering and Other Syndicated Crimes of the House of Representatives,
which was conducting a congressional investigation “in aid of legislation” on
the involvement of police and military personnel, and possibly even of local
government officials, in the illegal activities of suspected gambling and drug
lords. Subpoenaed to attend the investigation were officers of certain
identified banks with a directive to them to bring the records and documents
of bank deposits of individuals mentioned in the subpoenas, among them GP.
GP and the banks opposed the production of the banks records of deposits on
the ground that no such inquiry is allowed under the Law on Secrecy of Bank
Deposits (RA 1405). Is the opposition of GP and the bank valid? Explain.

SUGGESTED ANSWER:

Yes. The opposition is valid. All deposits of whatever nature are absolutely confidential
in nature and may not be examined, inquired or looked into by any person, government
official, bureau or office. The inquiry of the Committee is not among those exceptions of
RA 1405 and that GP is merely suspected to be a drug lord.

NOTE: The Committee conducting the investigation is not a competent court authorized
under the law to issue a subpoena for the production of the bank record involving such
disclosure.

1994 BAR QUESTION

Miguel, a special customs agent is charged before the Ombudman with

having acquired property out of proportion to his salary, in violation of the
Anti-Graft and Corrupt Practices Act. The Ombudsman issued a subpoena
duces tecum to the Banco de Cinco commanding its representative to furnish
the Ombudsman records of transactions by or in the name of Miguel, his wife
and children. A second subpoena was issued expanding the first by including
the production of records of friends of Miguel in said bank and in all its
branches and extension offices, specifically naming them.

SUGGESTED ANSWER:

NO, Miguel’s contention is not tenable. In Anti-Graft cases, the inquiry into the illegally
acquired property – or property NOT “legitimately acquired” – extends even to cases
where such property is concealed by being held by or recorded in the name of the
spouse, ascendants, descendants and relatives of the person investigated, and those in
the name of other persons. This is one of the exceptions in RA 1405 ( Banco Filipino v.
Purisima, 161 SCRA 576).

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EVIDENTIARY VALUE OF INFORMATION OBTAINED IN VIOLATION OF THE
SBD
There is nowhere in RA 1405 that provides that an unlawful examination of bank
accounts shall render the evidence obtained therefrom inadmissible in evidence. Section
5 of RA 1405 only states that “any violation of this law will subject the 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.” ( Ejercito v.
Sandiganbayan)

THERE IS NO VIOLATION OF THE SBD WHEN A BANK ALLOWS A COURT

SHERIFF TO GARNISH AND THEN RELEASE DEPOSITS OF A JUDGMENT
DEBTOR
The prohibition against examination of or inquiry into a bank deposit under the SBD
does not preclude its being garnished to insure satisfaction of judgment. There is no
real inquiry in such a case, and if the existence of the deposit is disclosed, the
disclosure is purely incidental to the execution process. ( Chinabank v. Ortega, 49 SCRA
355)

1997 BAR QUESTION

Michael withdrew authority funds of the partnership in the amounts of

P500,000 and used US$50,000 for services he claims he rendered for the
benefit of the partnership. He deposited the P500,000 in his personal peso
current account with Prosperity Bank and the US$50,000 in his personal
foreign currency savings account with Eastern Bank.
The partnership instituted an action in court against Michael, Prosperity Bank
and Eastern Bank to compel Michael to return the subject funds to the
partnership and pending litigation to order both banks to disallow any
withdrawal from his accounts.
At the initial hearing of the case the court ordered Prosperity Bank to
produce the records of Michaels’s peso current account, and Eastern Bank to
produce the records of his foreign currency savings account. Can the court
compel Prosperity Bank and Eastern Bank to disclose the bank deposits of
Michael? Discuss fully.

SUGGESTED ANSWER:
Yes, as far as the peso account is concerned. Section 2 of RA No. 1405 allows the
disclosure of bank deposits in case where the money deposited is the subject matter of
the litigation. Since the case filed against Michael is aimed at recovering the amount he
withdrew from the funds of the partnership, which amount he allegedly deposited in his
account, a disclosure of his bank deposits would be proper.

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No, with respect to the foreign currency account. Under the Foreign Currency Law, the
exemption to the prohibition against disclosure of information concerning bank deposits
is the written consent of the depositor. (BAR 1995)

FOREIGN CURRENCY DEPOSITS AND BANK SECRECY

Governing Law – RA 6426

FOREIGN CURRENCY DEPOSITS SHALL IN NO INSTANCE BE INQUIRED OR

EXAMINED.
All foreign currency deposits authorized under this Act, as amended by PD No. 1035, as
well as foreign currency deposits authorized under PD No. 1034, are hereby 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, prom. Nov. 21, 1977.)
Only the owner of the foreign currency deposit is entitled to the confidentiality
provisions of Sec. 8 of RA 6426 (FCDA) (Van Twest v. CA, 230 SCRA 42).

PROBLEM

A and B opened a joint foreign currency savings account to facilitate with ZZZ
Bank to hold funds which “belong entirely and exclusively” to A, to “facilitate
the funding of certain business undertakings” or both of them and which
funds were to be “temporarily held in trust” by B, who “shall turnover the
same to A upon demand.” Withdrawals from the account were always made
through their joint signatures. When their business relationship turned sour,
B unilaterally closed their joint account, withdrew the remaining balance of
$300,000 and placed the money in his own personal account with the same
bank. A thus sought an injunctive writ to prevent B from withdrawing the
money at any time. Is B’s deposit protected by the law on secrecy of bank
deposits?

SUGGESTED ANSWER:

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NO. By depositing those funds in a joint “and/or” account, A did not convey ownership
thereof to B and B could not convert those funds to his personal and exclusive
ownership and use. The privileges extended by the statute are actually enjoyed, and
are invocable only, by A, because A is the owner of the foreign exchange fund subject
of the case.

B is still not entitled to the confidentiality provisions of the law. For, as already noted, B
is not the owner of such foreign currency funds.

COVERED FOREIGN CURRENCIES

ALL kinds of foreign currency deposits are covered. In case of Benedicto v. CA, 364
SCRA 334 (2001), the Supreme Court ruled that Sec. 2 of the FCDA speaks of deposit
with such Philippine banks in good standing, as may be designated by the Central Bank
(now Bangko Sentral ng Pilipinas) for the purpose” and does not cover foreign currency
accounts maintained in foreign banks.

INSTANCES WHEN A FOREIGN CURRENCY DEPOSIT MAY BE INQUIRED OR

LOOKED INTO
The lone exception to the disclosure of foreign currency deposits, under RA 6426, is a
disclosure upon the written permission of the depositor. (GSIS v. CA, 651 SCRA
661, 8 June 2011)
HOWEVER, with the enactment of subsequent laws, there are four (4) additional
exceptions:

1. Sec. 11 of AMLA, as amended

2. Human Security Act (RA 9372)
3. Sec. 5, RA 3591 (PDIC Law), as amended
4. RA 10168 (Terrorism Financing Prevention and Suppression Act of 2012)

2005 BAR QUESTION

Hi Yielding Corporation filed a complaint against five (5) of its officers for
violation of Section 31 of the Corporation Code. The corporation claimed that
the said officers were guilty of advancing their personal interests to the
prejudice of the corporation, and that they were grossly negligent in
handling its affairs. Aside from documents and contracts, the corporation
also submitted in evidence records of the officers’ U.S. Dollar deposits in

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several bank overseas—Boston Bank, Bank of Switzerland, and Bank of New
York.
For their part, the officers filed a criminal complaint against the directors of
Hi Yielding Corporation for violation of RA No. 6426, otherwise known as
Foreign Currency Deposit Act of the Philippines. The officers alleged that
their bank deposits were illegally disclosed for want of a court order, and
that such deposits were not even the subject of the case against them.

A. Will the complaint filed against the directors of Hi Yielding Corporation

prosper? Explain.

B. Was there a violation of the Secrecy of Bank Deposits Law (RA 1405)?
Explain.

SUGGESTED ANSWER:

A. No. Section 2 of RA No. 6426, as amended, speaks of deposit with such Philippine
banks in good standing, as may be designated by the Central Bank for the purpose, and
is inapplicable to the foreign currency account in question.

[A/N: Simply put, the non-disclosure of foreign accounts does not cover
foreign currency accounts maintained in foreign banks.]

B. No. Section 2of RA No. 1405 or the Bank Secrecy Law covers only “deposits of
whatever nature with banks or banking institutions in the Philippines xxx”, hence,
cannot be made to apply to foreign banks.

GARNISHMENT OF BANK DEPOSITS

GARNISHMENT
It refers to a specie of attachment by virtue of which credit owing from a third party
and belonging to the judgment debtor is required to be paid to the judgment creditor
(Tayabas Land Transportation v. Sheriff, 41 Phil 382)

THE GARNISHMENT OF BANK DEPOSITS IS NOT A VIOLATION OF THE SBD

(RA 1405). A BANK MAY NOT VALIDLY REFUSE TO COMPLY WITH AN ORDER
OF GARNISHMENT BY INVOKING THE PROVISIONS OF RA 1405.
The garnishment of bank deposit of a defendant does not involve examination or
inquiry into the deposit, but is merely to inform the court whether defendant has a
deposit in the bank, which may be garnished. It does not violate RA 1405 ( Chinabank v.

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Ortega, 49 SCRA 355[1973]). There is no real inquiry in case of garnishment, and if the
existence of the deposit is disclosed, the disclosure is purely incidental to the execution
process (PCIB v. CA, 193 SCRA 452).
The notice of garnishment does not order any inquiry or examination of the amount
deposited. The garnishment simply orders that the amount deposited be left intact for
the time being until further orders of the court. It was not the intention of the
lawmakers by enacting RA 1405 to place bank deposits beyond the reach of execution
to satisfy a final judgment (Chinabank v. Ortega).

PROBLEM

KLM Bank, thru its manager, disclosed to the court sheriff the outstanding
balance of X’s deposit with the bank upon its receipt of the garnishment
notice. X filed a criminal complaint against KLM bank for violation of RA No.
1405. Will the criminal complaint prosper? Explain briefly.

SUGGESTED ANSWER:

NO, the complaint will not prosper. The Bank Secrecy Law does not preclude a bank
deposit from being lawfully garnished in order to satisfy a judgment. The disclosure is
merely incidental to the execution of a court judgment.

ACCOUNTS THAT MAY NOT BE GARNISHED.

Government funds and properties may not seized under writs of execution or
garnishment to satisfy such judgments (Republic v. Hidalgo, 534 SCRA 619). Assets of
institutions under receivership or liquidation are deemed in custodia legis and are
exempt from any order of garnishment, levy, attachment or execution (Sec. 30, NCBA).

A FOREIGN CURRENCY DEPOSIT CANNOT BE GARNISHED.

The foreign currency deposit 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, FCDA) EXCEPT when it falls under Sec. 11 of
the AMLA (When it has been established that there is probable cause that the deposits
involved are in any way related to money laundering offense).

2015 BAR QUESTION

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First Bank received an order of garnishment over a client’s peso and dollar
deposits in First Bank. Should First Bank comply with that order? Explain.
(2015)

SUGGESTED ANSWER:

YES for the peso deposit but NO for the dollar deposit.
For peso deposits, banks are duty-bound to comply with the notice of garnishment by
disclosing the existence or non-existence of a bank deposit that may be garnished,
particularly whether it is sufficient or not to satisfy such garnishment.
For foreign currency deposits, like the dollar deposit, they shall be exempt from
attachment, garnishment or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever.

Foreign currency
Peso accounts
accounts
RA 6426, the Foreign
RA 1405, the Secrecy of
Governing law Currency Deposits Act
Bank Deposits (SBD)
(FCDA)
1. upon written permission
of the depositor
2. in case of impeachment
3. upon order or a
competent court in the
Exceptions to non-
case of bribery or Disclosure upon written
disclosure under their
dereliction of duty of permission of the depositor
governing law
public officials
4. when the money
deposited or invested is
the subject matter of
litigation
Prohibited unless non-
Anonymous accounts Prohibited
checking account
Can it be attached/
Yes No
garnished?

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