Escal, Queen Mhaiel M.

Law on Secrecy of Bank Deposits and Unclaimed Balances Law

Answer the following questions.

1. What is the purpose R.A. No. 1405?

-The first is to discourage hoarding in private. Next is to encourage individuals to deposit their
money in banking institutions since this will allow banks to appropriately use the funds in
approved loans to support the nation's economic development.

2. Can deposits of whatever nature with banks or banking institutions in the Philippines including
investment in Government Bonds be examined? Explain.
- Any deposits made with banks or other financial institutions in the Philippines,
including investments in bonds issued by the Philippine government, its political subdivisions,
and its instrumentalities, are hereby declared to be of the utmost confidential nature and are not
subject to inspection, investigation, or review by any individual, government official, bureau, or
office, unless the depositor gives written consent, or in cases of impeachment, or upon an order
from a competent court in cases of public officials' bribery or dereliction of duty, or in situations
where the money deposited or invested is at issue in a lawsuit.

3. Deposits and investment in Government Bonds is of what nature?

- Deposits are characterized as being in the nature of a simple loan, while on the other hand
Investment in Government Bonds This refers to investment in bonds issued by the government
of the Philippines, its political subdivisions and its instrumentalities. Government bonds are
debt securities which are an unconditional obligation of the State and backed by its full taxing
power. It includes treasury bills, treasury notes, and other risk-free bonds.

4. Define attachment or garnishment of bank account?

- A creditor may legally access money kept in a debtor's bank account by means of bank
garnishment, which is intended to pay off debt. This usually happens following a court
judgment that a creditor has secured against the debtor for nonpayment of a debt. The creditor
may ask the court to issue a garnishment order once the judgment is secured, instructing the
debtor's bank to freeze the cash in their account up to the amount owing. To settle the debt,
these monies are then given to the creditor.

5. What are the exceptions to the prohibited acts mentioned in R.A. 1405?
- Exceptions under RA 1405 (Section 2): 1. When there is written permission or consent in
writing by the depositor or investor; 2. In cases of impeachment cases; 3. Upon order of the
court in cases of bribery or dereliction of duty of public officials; and 4. Upon order of the court
in cases where the money deposited or invested is the subject matter of the litigation. a. The
inquiry into the bank deposit must be premised on the fact that the money deposited in the
account itself is the subject matter of the action.
 - Other exceptions: 1. Upon order of a competent court in cases of unexplained wealth under
Anti-Graft and Corrupt Practices Act (RA 3019); 2. The Commissioner of Internal Revenue can
inquire into bank deposits of the following:
a. determination of a decedent’s gross estate; and
b. an application for compromise of tax liability.

6. Under what circumstances can the Commissioner of Internal Revenue inquire into bank
deposits?
- The Commissioner of Internal Revenue can inquire into bank deposits of the following:
a. determination of a decedent’s gross estate; and
b. an application for compromise of tax liability.

7. What cases under the Anti-Money Laundering Act of 2001 (RA 9160) are considered as an
exception to the prohibited acts under RA 1405?
- In the following cases under the Anti-Money Laundering Act of 2001 (RA 9160)
a. where there is probable cause that the deposits are related to an unlawful activity or money
laundering offense;
b. where there is probable cause that the deposits are related to certain crimes such as
kidnapping for ransom, violation of the Dangerous Drugs Act, hijacking, destructive arson,
murder and violations of RA 6235 (acts inimical to civil aviation)
c. The Bangko Sentral can examine bank accounts in the course of its periodic or special
examination regarding compliance with Anti-Money Laundering Law; and
d. Upon order of the Court of Appeals, examination by law enforcement officers in terrorism
cases under the Human Security Act of 2007.

8. What are the penalties for violating RA 1405?

- Any violation of this law will subject offender upon conviction, to an imprisonment of not more
than five (5) years or a fine of not more than twenty thousand pesos(P20,000) or both, in the
discretion of the court (Section 5).

9. Can any private or public entity examine, inquire, or look into foreign currency deposits?
Explain.
-General rule: All foreign currency deposits are absolutely confidential in nature and cannot be
examined, inquired, or looked into by any person, government official, bureau, or office,
whether judicial or administrative or legislative, or any other private or public entity (Section 8,
RA 6426)

10. When may Foreign Currency Deposits be examined?

- Foreign currency deposits may be examined, inquired, or looked into when there is a written
permission of the depositor (Section 8, RA 6426)

11. When may Foreign Currency Deposits be garnished?

- 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 (Section 8, RA 6424)
 12. What are the penalties for violating RA 6424 better known as Foreign Currency Deposit Act of
the Philippines?
-Any willful violation of this Act or any regulation duly promulgated by the Monetary Board pursuant
hereto shall subject the offender upon conviction to an imprisonment of not less than one year nor more
than five years or a fine of not less than five thousand pesos nor more than twenty-five thousand pesos,
or both such fine and imprisonment at the discretion of the court.

13. What are unclaimed balances?

- "Unclaimed balances", within the meaning of this Act, 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 dead or who has not made further deposits or withdrawals
during the preceding ten years or more. 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.

14. For how many years shall deposits remain dormant before it may be handed over to the
government?
- Deposits that have become dormant for a period of 10 years may be escheated in favor of the
government.

15. What are the covered institutions under Unclaimed Balances Law (PD 679)?
- All banking institutions of every kind covered under Act No. 3936, as amended by PD 679,
which is reported to the Treasurer of the Philippines as unclaimed, the account being applied for
reactivation.

Philippine Deposit Insurance Corporation (PDIC) Law

R.A. 3591 as amended by R.A. 10846

Answer the following questions:

1. What are the two public policy objectives of the PDIC Law. .
-1. Depositor Protection PDIC was established to promote and safeguard the interests of the
depositing public by way of providing permanent and continuing insurance coverage on all
insured deposits. 2. Financial stability PDIC aims to strengthen the mandatory deposit insurance
coverage system to generate, preserve, and maintain faith and confidence in the country’s
banking system, and protect it from illegal schemes and machinations.

2. What are the mandates vested on PDIC?

- The mandates vested on PDIC are deposit insurance and receivership of closed banks.

3. What are the functions of PDIC?

- The functions of PDIC are deposit insurer, co-regulator of banks and receiver and liquidator
of closed banks.
 4. Can directors, officers, and stockholders of a closed bank interfere in any way with the assets,
records, and affairs of the bank? Explain.
- No, accordingly, the directors, officers, and stockholders shall be barred from interfering in
any way with the assets, records, and affairs of the bank

5. Enumerate the persons who may constitute the Board of Directors of the PIDC.
- ➢ The Secretary of Finance, who shall be the ex-officio Chairperson of the Board without
compensation;
➢ The Governor of the Bangko Sentral ng Pilipinas (BSP), who shall be ex-officio member of
the Board without compensation;
➢ The President of the Corporation, who shall be appointed by the President of the Philippines
from a shortlist prepared by the Governance Commission for Government-owned or -controlled
Corporations pursuant to Republic Act No. 10149 to serve on a full-time basis for a term of six
(6) years. The President of the Corporation shall also serve as Vice Chairman of the Board; and
➢ Four (4) members from the private sector to be appointed for a term of six (6) years by the
President of the Philippines from a shortlist prepared by the Governance Commission for
Government-Owned or -Controlled Corporations pursuant to Republic Act No. 10149.

6. Which banks licensed by the Bangko Sentral ng Pilipinas (BSP) must secure a membership with
the PDIC for them to be able to operate in the Philippines?
- ➢ Banks incorporated under Philippine laws, such as commercial banks, savings banks,
mortgage banks, stock savings and loan associations, development banks, cooperative banks
and rural banks (Section 7)
➢ Domestic branches of foreign banks

7. What is the difference between deposit and insured deposit?

- Deposit is the unpaid balance of money or its equivalent received by a bank in the usual
course of business and for which it has given or is obliged to give credit to a commercial,
checking, savings, time or thrift account, evidenced by a passbook, certificate of deposit, or
other evidence of deposit issued in accordance with Bangko Sentral ng Pilipinas’ (BSP) rules
and regulations and other applicable laws, while insured deposit’ means the amount due to any
bona fide depositor for legitimate deposits in an insured bank net of any obligation of the
depositor to the insured bank as of date of closure, but not to exceed P500,000.00.
8. Differentiate single accounts from joint accounts.
- Single Accounts are individually-owned accounts or accounts held under one (1) name, either
as natural person or juridical entity, while joint accounts are accounts held under more than one
(1) name.

MULTIPLE CHOICE
Choose the right answer.
1. All banks, building and loan associations, and trust corporations shall forward to the Treasurer
of the Philippines a sworn statement of all credits or deposits that have been dormant for the
preceding 10 years or in favor of persons known to be dead. In case of failure to do so, what
would be the penalty/ies?
a. Pay 400 hundred pesos a month for each month or fraction thereof during which shall
continue
 b. Pay 400 hundred pesos every quarter during which shall continue
c. Pay 500 hundred pesos a month for each month or fraction thereof during which shall
continue
d. Pay 500 hundred pesos every quarter during which shall continue

2. Which of the following are excluded from deposit insurance coverage?

a. investment products such as bonds, securities, and trust accounts
b. bank deposits in a foreign branch of domestic bank operating in the Philippine territory
c. savings deposit
d. deposit account or transactions which are not unfunded, fictitious, and fraudulent
2. In the case of joint accounts such as “or”, “and”, or “and/or” accounts, who should sign the
deposit insurance claim form?
a. agent
b. trustee
c. each depositor
d. bank teller
3. What is the prescribed number of months for payment to be made by PDIC whenever the
Monetary Board closes an insured bank?
a. one year from the date of filing
b. four months from the date of filing
c. one month from the date of filing
d. six months from the date of filing
4. Who is not required to file insurance claims?
a. creditors
b. depositors with valid deposit accounts with balances of ₱ 100,000.00 and below
c. directors of the bank
d. all of the above.

5. All of the following are considered unsafe and/or unsound deposit-related practices, except
one:
a. failure to keep bank records (printed and/or electronic) within the bank premises
b. non compliance with PDIC Regulatory Issuances
c. granting low-interest rates when the bank has negative unimpaired capital
d. performance of any deposit-related practice, activity, or transaction without the requisite
approvals or without adequate controls
Answers:
1. D
2. A, b, D
2. C
3. D
4. b
5. C