Secrecy of Bank Deposits

What is the purpose of the Law? Under Republic Act No. 1405, to give encouragement to the people to deposit their money in banking 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. [1] What is the general rule on Secrecy of Bank Deposits under R.A. 1405? 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. [2]

Is R.A. 1405 applicable to foreign currency bank deposits?

No. As held by the Supreme Court in Intengan vs CA [3], "The accounts in question are U.S. dollar deposits; consequently, the applicable law is not Republic Act No. 1405 but Republic Act No. 6426, known as the Foreign Currency Deposit Act of the Philippines."

What are the exceptions to the general rule? 1. Upon written permission of the depositor; [4] 2. In cases of impeachment; [5] 3. Upon order of a competent court in cases of bribery or dereliction of duty of public officials; [6] 4. Upon or order of a competent court in cases where the money deposited or invested is the subject matter of the litigation; [7] Case where the Supreme Court applied the exception: In the case of Mellon Bank vs. Magsino [8] where petitioner Mellon Bank erroneously transferred USD 1,000,000.00 instead of USD 1,000.00 only to the account of Victoria Javier in Prudential Bank Manila. Subsequently, Javier transferred part of the money to other persons’ bank accounts. The Supreme Court sanctioned the examination of these other bank accounts as it ruled that: Section 2 of said law (RA 1405) allows the disclosure of bank deposits in cases where the money deposited is the subject matter of the litigation. Inasmuch as Civil Case No. 26899 is aimed at recovering the amount converted by the Javiers for their own benefit, necessarily, an inquiry into the whereabouts of the illegally acquired amount extends to whatever is concealed by being held or recorded in the name of persons other than the one responsible for the illegal acquisition. Case where the Supreme Court ruled on the non-applicability of the exception: In the case of Union Bank vs. CA and Allied Bank Corp. [9] where an accountholder of Allied Bank issued a check payable to the order of Jose Alvarez for P 1,000,000.00. Jose Alvarez deposited the check to his account with petitioner Union Bank. Petitioner sent the check for clearing through PCHC but petitioner clearing staff committed an error by under-encoding the check of P 1,000,000.00 to P 1,000.00 only. Subsequently, Union Bank filed a case against Allied for the recovery of the sum of P 999,000.00. Here, the Supreme Court did not allow the examination of the bank account of Alvarez as it ruled that: Petitioner is fishing for information so it can determine the culpability of private respondent and the amount of damages it can recover from the latter. It does not seek recovery of the very money contained in the deposit. The subject matter of the dispute may be the amount of P999,000.00 that petitioner seeks from private respondent as a result of the latter’s alleged failure to inform the former of the discrepancy; but it is not the P999,000.00 deposited in the drawer’s account. By the terms of R.A. No. 1405, the "money deposited" itself should be the subject matter of the litigation. 5. Upon order of a competent court in case of plunder as held by the Supreme Court in the case of Ejercito vs. Sandiganbayan [10]:

"Plunder being thus analogous to bribery, the exception to R.A. 1405 applicable in cases of bribery must also apply to cases of plunder."

6. Upon order of a competent court in cases involving unexplained wealth under R.A. No. 3019 as held by the Supreme Court in the case of PNB vs, Gancayco [11]: "The Anti-Graft Law directs in mandatory terms that bank deposits "shall be taken into consideration in the enforcement of this section, notwithstanding any provision of law to the contrary." The only conclusion possible is that section 8 of the Anti-Graft Law is intended to amend section 2 of Republic Act No. 1405 by providing additional exception to the rule against the disclosure of bank deposits." 7. Upon the order of a competent court in cases involving violation of the Anti-Money Laundering law when it has been established that there is probable cause that the deposits or investments involved are in any way related to a money laundering offense; [12] 8. Upon inquiry of the Anti-Monel Laundering Council involving certain activities defined in Section 11 of R.A. 9160 as amended by R.A. 10167. 9. Reporting by the Covered Institutions to the Anti-Money Laundering Council of Covered Transactions and Suspicious transactions; [13] 10. Upon the order of a competent court involving garnishment of bank deposits; As explained by the Court in the case of China Banking Corp. vs. Ortega: [14] It is sufficiently clear from the foregoing discussion of the conference committee report of the two houses of Congress that the prohibition against examination of or inquiry into a bank deposit under Republic Act 1405 does not preclude its being garnished to insure satisfaction of a judgment. Indeed, 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. It is hard to conceive that it was ever within the intention of Congress to enable debtors to evade payment of their just debts, even if ordered by the Court, through the expedient of converting their assets into cash and depositing the same in a bank. 11. Reporting by the banks, building and loan associations, and trust corporations to the Treasurer of the Philippines of all credits and deposits that have been dormant for 10 years under Unclaimed Balances Act. [15] 12. Upon order of the Court of Appeals for examination of bank deposits, placements, trust accounts, assets, and records, pursuant to Human Security Act of 2007. [16] 13. Exercise by Commissioner of the Bureau of Internal Revenue of its authority to Inquire into Bank Deposit Accounts and Other Related information held by Financial Institutions. [17] 14. In an examination made in the course of a special or general examination of a bank that is specifically authorized by the Monetary Board after being satisfied that there is reasonable ground to believe that a bank fraud or serious irregularity has been or is being committed and that it is necessary to look into the deposit to establish such fraud or irregularity. [18] 15. In an examination made by an independent auditor hired by the bank to conduct its regular audit provided that the examination is for audit purposes only and the results thereof shall be for the exclusive use of the bank. [19] [1] Sec. 1, R.A. No. 1405. [2] Sec. 2, R.A. No. 1405.

[3] Intengan vs. CA, G.R. No. 128996, February 15, 2002 [4] Supra note 2. [5] Id. [6] Id. [7] Id. [8] Mellon Bank vs. Magsino G.R. No. 71479 (October 18, 1990) [9] Union Bank vs. CA, G.R. No. 134699 (December 23, 1999) [10] Ejercito vs. Sandiganbayan G.R. Nos. 157294-95 (November 30, 2006) [11] Philippine National Bank vs. Gancayco, G.R. No. L-18343 (September 30, 1965) [12] Sec. 11, R.A. No. 9160, as amended. [13] Sec. 9, R.A. No. 9160, as amended. [14] China Banking Corp. vs. Ortega, G.R. No. L-34964 (January 31, 1973) [15] Sec. 2 of R.A. No. 3936. [16] Secs. 27 and 28, R.A. No. 9372. [17] Sec. 6 (F), National Internal Revenue Code [18] Supra note 9. [19] Id.

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