Course Code: Banking Laws

Module #3

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Lesson title: Secrecy of Bank Deposits Materials:

Lesson Objectives: Student Activity Sheet
At the end of this module, I should be able to: References:
1. Appreciate the purpose of the law, the prohibited acts, the UST Golden Notes: Mercantile
types of deposits covered and its exceptions thereto Law
2. Associate Unclaimed Balances Law as an exemption to the Republic Act No. 1405: Secrecy of
Secrecy Rule Bank Deposits
3. Understand how garnishment is made on foreign deposits Presidential Decree No. 679:
Unclaimed Balances Law
Republic Act No. 6426: Foreign
Currency Deposit Act of the
Philippines

Productivity Tip: Create flashcards for key terms and concepts you learned today. Quiz yourself using
these flashcards every few days!

A. LESSON PREVIEW/REVIEW
1) Introduction
Imagine if anyone can look into your bank account! Would you feel safe? secure? In this module,
we will learn to appreciate the purpose of the bank secrecy rule and its exemptions.

One of the imperative laws covered in the Regulatory Framework for Business Transactions (RFBT)
is the Secrecy of Bank Deposits.

General Rule: Bank deposits 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.

2) Activity 1: What I Know Chart, part 1 (3 mins)

Do you know anything about bank deposits? Try answering the questions below by writing your
ideas under the first column What I Know. It’s okay if you write keywords or phrases that you think
are related to the questions.

This document is the property of PHINMA EDUCATION

 Course Code: Banking Laws
Module #3

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

What I Know Questions: What I Learned

What is a bank?

What is R.A. 1405?

How is garnishment made on

foreign deposits?

B.MAIN LESSON
1) Activity 2: Content Notes

R.A. 1405 (Secrecy of Bank Deposits) is an act prohibiting disclosure of or inquiry into
deposits with any banking institution and providing penalty therefore.

The purposes are:

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.

The following are the prohibited acts in R.A. 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 (Sec. 2).
2. Disclosure by any official or employee of any banking institution to any unauthorized person of
any information (Sec. 3).

In the case of BSP Group, Inc. v. Go, G.R. No. 168644, 2010, the absolute confidentiality rule in R.A.
1405 actually aims at protection from unwarranted inquiry or investigation if the purpose of such
inquiry or investigation is merely to determine the existence and nature, as well as the amount of
the deposit in any given bank account.

This document is the property of PHINMA EDUCATION

 Course Code: Banking Laws
Module #3

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Note: Non-bank official or employee is not covered by the prohibition. Neither is disclosure by a
bank official or employee of information about bank deposit in favor of a co-employee in the
course of the performance of his duties covered by the prohibition.

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

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 (Php 20,000)or both, at the discretion
of the court.

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

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 (R.A. 1405)

Upon order of the Commissioner of Internal Revenue in respect of the bank deposits of a
decedent for the purpose of determining such decedent’s gross estate (NIRC)

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 (NIRC)

The Commissioner of Internal Revenue is authorized to inquire into bank deposits of 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 (NIRC)

In case of dormant accounts/deposits for at least 10 years under the Unclaimed Balances Act
(Act No. 3936)*

The prohibition against examination of bank deposit does not preclude its garnishment to satisfy

This document is the property of PHINMA EDUCATION

 Course Code: Banking Laws
Module #3

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

a judgment against the depositor (Oñate v. Abrogar, G.R. No. 107303, February 21, 1994)

Presidential Commission on Good Government (PCGG) may require the production of bank
records material to its investigation (Opinion of the Secretary of Justice, February 27, 1987)

The Anti-Money Laundering Council (AMLC) may inquire into any deposit with any bank in case
of violation of the R.A. 9160 or the AMLA if there is probable cause that it is related to an
unlawful activity (R.A. 9160, as amended)

The PDIC and the BSP may examine deposit accounts and all information related to them in case
of a finding of unsafe or unsound banking practices (R.A. 3591, as amended)

With court order:

a. In cases of unexplained wealth under Sec. 8 of the Anti-Graft and Corrupt Practices Act (PNB v.
Gancayco, L-18343, September 30, 1965)
b. In cases filed by the Ombudsman and upon the latter’s authority to examine and have access
to bank accounts and records (Marquez v. Desierto, GR 138569, September 11, 2003)

Without court order:

a. If the AMLC determines that a particular deposit or investment with any banking institution is
related to the following (HK-MADS):
1. Hijacking,
2. Kidnapping,
3. Murder,
4. Destructive Arson, and
5. Violation of the Dangerous Drugs Act
6. Acts of Terrorism or in violation of Human Security Act

In case the law is repealed, superseded or modified by any law to the contrary.

Note: Such unclaimed balances, together with the increase and proceeds thereof, shall be
deposited with the Treasurer of the Philippines to the credit of the Government of the Republic of
the Philippines to be used as the National Assembly may direct.

Unclaimed balances shall include credits or deposits of money, bullion, security or other
evidence of indebtedness of any kind, and interest thereon with banks, buildings and loan
associations, and trust corporations, as hereinafter defined, in favor of any person known to be

This document is the property of PHINMA EDUCATION

 Course Code: Banking Laws
Module #3

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

dead or who has not made further deposits or withdrawals during the preceding ten years or
more.

Foreign currency deposits are covered by R.A. 6426 otherwise known as the “Foreign
Currency Deposits Act”.
General Rule: Foreign currency deposits cannot be inquired or looked into. All foreign currency
deposits are absolutely confidential (RA 6426, Sec. 8).

Exception: The depositor has given his written permission and others as provided by law and
jurisprudence.

In the case of PCIB v. CA, G.R. No. 84526, January 28, 1991, the prohibition against examination or
inquiry 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 the judgment creditor.

2) Activity 3: Skill-building Activities

Let’s practice! After completing each exercise, you may refer to the Key to Corrections for feedback.
Try to complete each exercise before looking at the feedback.

Exercise 1: Check or Cross – In 10 minutes, write a check on the box provided if the following
accounts are covered by R.A. 1405 and X if they fall under the exception and therefore can be
disclosed.

No. Bank Accounts Covered?

1 Savings account opened in Switzerland

2 Investment bond issued by the BSP

3 China Bank Savings Account

4 Philhealth contributions allegedly taken by Ricardo Morales

5 Bank deposits of a decedent

This document is the property of PHINMA EDUCATION

 Course Code: Banking Laws
Module #3

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

6 BPI Checking account of JV Sebastian a convicted drug lord

7 The BIR Commissioner calling RCBC regarding the deposit of a deceased

taxpayer

8 Dollar account with RCBC

9 Time Deposit in Lebanon

10 Treasury bond issued by SMDC

11 Stocks invested by former Chief Justice Sereno

12 The deposit account of terrorist financier Al Khan

13 The savings account of a taxpayer with a Letter of Authority issued by the

revenue officer

14 Bank deposits which have been dormant for 10 years

15 Checking account

3) Activity 4: What I Know Chart, part 2

It’s time to answer the questions in the What I Know chart in Activity 1. Log in your answers in the
table.

4) Activity 5: Check for Understanding (5 mins)

For us to determine whether we have learned something for today I will ask you this question:

1. Are bank officers disclosing bank deposit information liable under R.A. 1405?
______________________________________________________________________________________________________
______________________________________________________________________________________________________

2. Give me at least three (3) exceptions to the bank secrecy rule.

______________________________________________________________________________________________________
______________________________________________________________________________________________________

This document is the property of PHINMA EDUCATION

 Course Code: Banking Laws
Module #3

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

3. Can the Commissioner of Internal Revenue inquire into the deposits?

______________________________________________________________________________________________________
______________________________________________________________________________________________________

C. LESSON WRAP-UP
1) Activity 6: Thinking about Learning
Congratulations for finishing this module! Shade the number of the module that you finished.

Did you have challenges learning the concepts in this module? If none, which parts of the module
helped you learn the concepts?
______________________________________________________________________________________________________
______________________________________________________________________________________________________

Some question/s I want to ask my teacher about this module is/are:

______________________________________________________________________________________________________
______________________________________________________________________________________________________

FAQs

1. What is a bank?

A bank is an institution that is licensed to receive deposits and provide loans to

consumers. They also provide financial services, such as insurance and wealth
management plans, currency exchange and safe deposit boxes, The banking industry is
the entity that handles cash, credit, and other financial exchange. The primary role that
they play for consumers is to provide deposit accounts and grant loans (imoney.ph).

2. What do you mean by the phrase "of whatever nature and kind" in Sec. 2?

R.A.1405 is no longer limited to deposits governed by the law on loans giving rise to

This document is the property of PHINMA EDUCATION

 Course Code: Banking Laws
Module #3

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

creditor-debtor relationship but it covers funds of whatever nature so long as the bank may use
and utilize it in authorized loans.

KEY TO CORRECTIONS

Answers to Skill-Building Exercises

Exercise 1: X - Nos. 1, 4, 6, 10 - 14 only .

This document is the property of PHINMA EDUCATION