GROUP 2

PRESENTS

SECRECY
OF BANK
DEPOSITS
REPUBLIC ACT 1405
OF THE PHILIPPINES
 GROUP 2

Aslanie Candotan Stela Mariz Prejoles Lawrence Acaylar Marynol Llena

TABLE OF CONTENT
Introduction to RA 1405
Prohibited Acts
Types of bank deposits covered
Exceptions
Garnishment of deposits
(including Foreign deposits)
 1. INTRODUCTION
TO RA 1405

As society becomes more advanced and

complex, our personal privacy has also become
more important. People have developed into
more conscious individuals relative to their
personal activities and what they would want and
not want be known to, and by, others. One of
these pertains to a person’s financial activities.
Thus, we shall tackle the question:

What is RA 1405, known as the Bank

Secrecy Law?
Generally, the financial activities
and status of a person are shown
through the numbers that he or she
puts in a bank. These numbers do
not just show how wealthy, or
financially troubled, a person is,
they show much more important
information a normal person would
glance over. Since the numbers tell
so much about a person it is
understandable to protect such
information from others.
It does not matter if the money put inside was
big or small, it also does not matter if a
person has one or more accounts, we all have
an interest to keep this information a secret.
To give an example, a man with low bank
deposits would not want everyone to know
he has barely enough funds to keep himself
afloat.
This may be seen as a source of
embarrassment for others. On the
other hand, the wealthier/richer
individuals would want also want to
keep their status a secret for their own
protection. Whatever the motivation or
reason is, the law makes sure that our
financial status, partially our bank
deposits, remain protected through
bank secrecy.
Moreover, bank secrecy
encourages people to invest
their money in the banks instead
of merely hoarding their cash
underneath a secret stash
somewhere inside their house.
With this set-up, the banks can
loan and use the money to help
increase economic activity which
ultimately helps national
development.
 2. 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 (R.A. 1405, Sec. 2).
PROHIBITED ACTS
2. Disclosure by any official or
employee of any banking institution
to any unauthorized person of any
information concerning said deposit
(R.A. 1405, Sec. 3).
Non-bank official or employee is not covered
by the prohibition.
Neither is disclosure by a bank official or
employee
in of information about bank deposit
favor of a co-employee in the course of the
performance of his duties covered by the
prohibition
EXAMPLE:
Both employees are working for BPI,
there will be inquiries to each other as
to certain accounts as the two of you
might have handled it, “are you
prohibited to disclose information”?
EXAMPLE:
Both employees are working for BPI,
there will be inquiries to each other as to
certain accounts as the two of you might
have handled it, “are you prohibited to
disclose information”?

ANSWER:
No, because it would hamper your work
and responsibilities as bank employees.
But, voluntarily disclosing information
to a co-employee who do not have rights or
access to the information, you
have violated the prohibition.
3. TYPES OF
DEPOSITS COVERED
Section 2. All deposits of whatever nature with
banks or banking institutions in the Philippines
including investments in bonds issued by the
Government of the Philippines, its political
subdivisions and its instrumentalities, 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, except 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.
THE GENERAL
RULE

All bank deposits of whatever

nature are absolutely confidential
and cannot be inquired into by any
person regardless of whether he is
a private individual or
representative of the government.
 I .THE GENERAL RULE
✓ All deposits whatever nature
with banks or banking institutions
found in the Philippines;
Savings Bank Account
Current Deposit Account
Fixed Deposit Account
Recurring Deposit Account
✓ INVESTMENT IN BONDS
ISSUED BY THE PHILIPPINE
GOVERNMENT, ITS
BRANCHES, AND
INSTITUTIONS.
DISCLAIMER: Not all investment in
bonds
If issued by the corporation, then
it is not covered by law.
II. TRUST FUNDS
✓The money deposited under trust "Whatever nature"
government is intended merely not to remain
- prescribes any restrictive
in the bank but to be invested by it
interpretation of deposits
elsewhere.
- RA 1405 is no longer limited to
deposits governed by the law
on loans giving rise to a creditor-
debtor relationship but it also
covers fund of whatever
nature as long as the bank may
use and utilized it in authorized
loans.
The law applies not only to
money which is deposited but
also to those invested such as
trust funds

- cannot be inquired or looked

into without permission,
without competent order of
the court or in case of
impeachment or subject
matter of litigation.
 To hold 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
Profitability
ventures, contrary to policy behind the law
(Ejercito vs. Sandiganbayan)

One of the primary purpose of RA. 1405 is

to discourage hoarding so this Trust fund is
covered under RA. 1405
Innovation
The inclusion of Trust Funds in the
definition of deposits under RA 1405 is
limited only under this law. Outside the
said law
III. FOREIGN
CURRENCY DEPOSIT

✓ Foreign currency deposits are covered by a different

law which is the Foreign Currency Deposit Acts (RA
6426).
provides absolute confidentiality of the said foreign
currency deposits made by the depositor are
exempted from attachment as well as garnishment
of the said deposit in favor of the other party,
however there are exemptions to this rule: In case
there are violations of certain right under the civil
code.
This does not fit in the general rule but rather, an
exception.
 EXAMPLE:
✓ 10-year-old minor was raped, and the perpetrator
has already absconded. He was able to flew away
and cannot be caught anymore. There is juris
prudence in this case.
his deposits to settle the civil liability aspect of the
criminal case that is foreign currency are not
exempted to settle the civil liability according to
the Supreme Court.
upon determination of the court that he has
foreign currency deposits and has liability to settle
the civil obligation/liability, such deposit can be
used to pay for his damages.
✓ Confidentiality grated by the
RA. 1405 does not extend to
letters and trust receipts, other
documents and records like bank
drafts and promissory notes.

- this is not a Supreme Court

Ruling but rather an opinion
issued by the Secretary of
Justice No. 126 series of 1989.
 3. EXCEPTIONS:
The following are the exceptions to the bank
secrecy law:

1. Under R.A. 1405

Section 2 of Republic Act No. 1405 provides
that bank deposits and government bond
investments may be examined, inquired and
looked into in the following instances:
A. BEFORE AMENDMENT
- When the examination is made in
the course of a special or general
examination of a bank (which is
specifically authorized by the
Monetary Board) regarding bank
fraud or irregularity

- When the examination is made by

an independent auditor hired by the
bank to conduct its regular audit .
- Upon written permission of the
depositor
- In cases of impeachment
- Upon competent order of the court
- When it is the subject matter of the
litigation
B. AFTER AMENDMENT
- Upon written permission or
consent in writing by the
depositor.
• For consent to be valid, it
should be made knowingly,
voluntarily and with sufficient
awareness of the relevant
circumstances and likely
consequences.
B. AFTER AMENDMENT
- In cases of impeachment
• President
• Vice President
• Members of the Supreme Court
• Members of the Constitutional
Commission
• Ombudsman
for culpable violation of the
Constitution, treason, bribery graft and
corruption, other high crimes or betrayal
of public trust. (Art. XI, Sec. 2, 1987
Philippine Constitution)
B. AFTER AMENDMENT
- Upon order of a
competent court in
cases of
• Bribery
• Dereliction of
duty of public
officials
 B. AFTER AMENDMENT
- In cases where the money deposited
or invested is the subject matter of
the litigation. The money deposited
should be the very thing in dispute.
(Mellon Bank, N.A. v. Magsino, 190
S.C.R.A. 633 [1990])
2. UNDER OTHER
LAWS:

Bank deposits and investments

may be examined, inquired or
looked into as provided for
under other laws in the
following circumstances:
a. The Ombudsman has the power to issue
subpoena and subpoena duces tecum, take
testimony in any investigation or inquiry, as well as
examine and access bank accounts and records. The
power of the Ombudsman to subpoena deposit
information of a government official may be
exercised when the following conditions concur:

- there must be a case pending before a court of

competent jurisdiction;
- the account must be clearly identified;
-the inspection must be limited to the subject
matter of the pending case; and
- the bank personnel and the account holder must
be notified to be present during the Inspection.
(Marquez v. Desierto, 359 S.C.R.A. 772 [2001)
2. UNDER OTHER LAWS b. Bank deposits of a public official, his
spouse and unmarried children may be
taken into consideration in the enforcement
of Section 8 of The Anti-Graft and Corrupt
Practices Act (Rep. Act No. 3019).

c. Directors, officers, stockholders and

related interests who contract a loan or any
form of financial accommodation with their
bank or related bank are required to
execute a written waiver of secrecy of
deposits pursuant to The New Central Bank
Act. (Sec. 26, Rep. Act No. 7653)
d. The Commissioner of Internal Revenue is
authorized to inquire into bank deposit accounts
in relation to:
an application for compromise of tax liability or
a determination of a decedents gross estate
under The National Internal Revenue Code (Rep.
Act No. 8424, as amended by Rep. Act No.
10021); and
a request for tax information of specific
taxpayers made by a foreign tax authority
pursuant to a tax treaty under The Exchange of
Information on Tax Matters Act of 2009 (Rep. Act
No. 8424, as amended by Rep. Act No. 10021).
e. The Anti-Money Laundering Council may be authorized
to examine and inquire into bank deposits or investments
with banks or nonbank ,financial institutions.

with court order, when there is probable cause that the

deposits or investments are related to an unlawful activity or
a money laundering offense (Secs. 3[i] and 4 of Rep. Act No.
9160); and
without need of court order, when probable cause exists
that a particular deposit or investment with any banking
institution is related to certain predicate crimes, such as
kidnapping for ransom, violation of the Comprehensive
Dangerous Drugs Act, hijacking and other violations under
Republic Act No. 623510, destructive arson and murder (Sec.
11 of Republic Act No. 916011).
f. The Bangko Sentral
is authorized to -
- inquire into or examine bank deposits or
investments in the course of a periodic or
special examination to ensure compliance
with The Anti-Money Laundering Law, in
accordance with the rule of examination of
the Bangko Sentral (Sec. 11, Rep. Act No.
9160, as amended); and
- conduct annual testing which is limited
to the determination of the existence and
true identity of the owners of numbered
accounts (Sec. 9, Rep. Act No. 9160, as
amended12).
g. The Philippine Deposit Insurance Commission and
the Bangko Sentral may inquire into bank deposits
when there is a finding of unsafe or unsound
banking practices. (Sec. 8, Rep. Act No. 3591, as
amended)

h. The Court of Appeals, designated as a special court,

may issue an order authorizing law enforcement officers to
examine and gather information on the deposits,
placements, trust accounts, assets and records in abank
or financial institution in connection with anti-terrorism
case. (Rep. Act No. 937213)-
i. The Commission on Audit is authorized to examine and
audit government deposits pertaining to the revenue
and receipts of, and expenditures or uses of funds and
properties, owned or held in trust by, or pertaining to,
the Government or any of its subdivisions, agencies or
instrumentalities, including government-owned and
controlled corporations with original charters. (See Art.
IX-D, 1987 Constitution and Pres. Dec. No. 1445)

j. The Presidential Commission on Good Government, in the

conduct of its investigations to recover ill-gotten wealth
accumulated by former President Ferdinand E. Marcos, his
immediate family, relatives, subordinates and close
associates, may issue subpoenas requiring the attendance
and testimony of witnesses and/or the production of books,
papers, contracts, records, statement of accounts and other
documents. (Sec. 3 [e], Exec. Order No. 1 [1986])
5. CONFIDENTIALITY OF
FOREIGN CURRENCY
DEPOSITS ( R.A. 6426)
All foreign currency deposits are 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.
EXEMPTION FROM
PROCESS OF FOREIGN
CURRENCY DEPOSITS
Foreign currency deposits(FCD)
shall be exempt from attachment,
garnishment, or any other order
or process of any court, legislative
body, government agency or any
administrative body whatsoever.
(R.A. 6426, Sec. 8)
Garnishment
It is an order granted to a third party(garnishee) to
hold the property or assets of a debtor for collection
for the benefit of the creditor. In the case of bank
deposits, where the debtor has an account with the
bank, the bank(garnishee) which is a third party to the
litigation and the deposit can be the subject for
litigation.
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 EXAMPLE:
You lent P500,000 to Win, a Thai national residing
and working in the Philippines. When the loan fell
due, Win didn’t pay. You found out that Win has a
peso account deposit with Chinaoil Bank and a
foreign currency deposit with NorthSouth Bank.
Despite demands, Win refuses to pay because he
said that the remaining money he have is already
for his vacation in Bali with his boyfriend, Bright.
You now went to court, filed a case against Win for
collection of sum of money and won. In order to
satisfy your claim against Win, you applied for a
writ of garnishment with the court for the bank
deposits of Win. Will the court issue the writ?
 EXAMPLE:
You lent P500,000 to Win, a Thai national residing
and working in the Philippines. When the loan fell
due, Win didn’t pay. You found out that Win has a
peso account deposit with Chinaoil Bank and a
foreign currency deposit with NorthSouth Bank.
Despite demands, Win refuses to pay because he Answer:
said that the remaining money he have is already
for his vacation in Bali with his boyfriend, Bright. Yes for the peso deposit
You now went to court, filed a case against Win for account but no for the
collection of sum of money and won. In order to
currency deposits
satisfy your claim against Win, you applied for a
writ of garnishment with the court for the bank because they are exempt
deposits of Win. Will the court issue the writ? from garnishment.
EXCEPTION TO THE
EXEMPTION
Pro hac vice(for that instance only)
case
The Supreme Court allowed
the garnishment of FCD of a foreign
national who raped a minor and
escaped(Salvacion vs. Central Bank).