Banking Secrecy Law: Fundamentals

Purposes of Special Banking Laws

1. To encourage people to deposit in banking institutions; and

2. To discourage private hoarding of money so banks can utilize funds for authorized loans to assist in the economic development of the country.

Coverage of the Banking Secrecy Law

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 instrumentalities.

Nature of Covered Deposits

Deposits are considered of an absolutely confidential nature and may not be examined, inquired, or looked into by any person, government official, bureau, or office.

Exception requiring depositor's consent

When there is written permission of the depositor or investor.

Exceptions related to public officials' accountability

In cases of impeachment; and upon order of a competent court in cases of bribery or dereliction of duty of public officials.

Exception related to the subject matter of litigation

Upon order of a competent court in cases where the money deposited or invested is the subject matter of the litigation.

Exception related to unexplained wealth

Upon order of the competent court or tribunal in cases involving unexplained wealth under Sec. 8 of the Anti-Graft and Corrupt Practices Act (R.A. No. 3019).

Tax exception for deceased depositors

Upon inquiry by the Commissioner of Internal Revenue for the purpose of determining the net estate of a deceased depositor.

Tax exception for compromise settlement

Upon inquiry by the Commissioner of Internal Revenue for the purpose of determining the financial incapacity of a taxpayer applying for compromise settlement under Sec. 204 (A) (2) of the Tax Code.

Exception related to Unclaimed Balances

Disclosure of the Treasurer of the Philippines for dormant deposits for at least 10 years under the Unclaimed Balances Act (R.A. No. 3936).

AMLC exception for transaction reports

Report of banks to the AMLC of covered and/or suspicious transactions under Sec. 9 of R.A. No. 9160.

AMLC inquiry requiring court order (Money Laundering)

When there is probable cause of money laundering (upon order of a competent court, or in proper cases by the AMLC).

AMLC inquiry without court order (Specific Crimes)

In instances related to kidnapping, violation of the Dangerous Drugs Act, hijacking, destructive arson and murder, including those perpetrated by terrorists.

AMLC inquiry without court order (Terrorism Financing R.A. 10168/11479)

In case of designation of a terrorist individual, group, or organization, the AMLC may inquire into property or funds related to financing of terrorism (R.A. No. 10168) and acts punished under the Anti-Terrorism Act (R.A. No. 11479).

FCD General Exception

When there is written consent of the depositor under Section 8 of the Foreign Currency Deposits Act (R.A. No. 6426).

FCD Exception (Money Laundering)

Upon the order of a competent court, the AMLC may inquire into or examine the deposit if there is probable cause that the deposits are related to a money laundering offense.

FCD Exception (Terrorism Financing)

The AMLC may, without a need of a court order, inquire into the property or funds related to the financing of terrorism (R.A. No. 10168) or the Anti-Terrorism Act (R.A. No. 11479), upon issuance of a court's preliminary order of proscription OR designation of a terrorist individual/group.

Definition of Unclaimed Balances (Status of Person)

Credits or deposits in favor of any person known to be dead.

Definition of Unclaimed Balances (Activity Status)

Credits or deposits in favor of any person who has not made further deposits or withdrawals during the preceding ten (10) years or more.

Recipient of Unclaimed Balances

The funds, together with their increase and proceeds, shall be deposited with the Treasurer of the Philippines to the credit of the Government of the Republic of the Philippines.

Types of Financial Instruments Covered

Credits or deposits of money, bullion, security or other evidence of indebtedness of any kind, and interest thereon with banks, loan associations, and trust corporations.

Deadline for filing sworn statement to the Treasurer of the Philippines

Within the month of January of every odd year.

Information required in the sworn statement

Names and last known place of residence; the amount and date of the outstanding unclaimed balance; date of death (if known) or date of last deposit or withdrawal; and the interest due.

Mandatory action before filing the sworn statement

The financial institution must communicate with the person in whose favor the unclaimed balance stands at his last known place of residence or post office address.

Posting requirement for the sworn statement

A copy must be posted in a conspicuous place in the premises for at least sixty (60) days from the date of filing.

Role of the Solicitor General (Escheat)

To initiate the proper escheat proceedings in court after being informed by the Treasurer of the Philippines.

Rule governing Escheat proceedings

Rule 91 of the Rules of Court.

Where the Petition of Escheat is filed

In the Regional Trial Court (RTC) of the province where the deceased last resided or where he had estate.

Publication requirement for the Order of Hearing

Publication of the order once a week for six (6) consecutive weeks in a newspaper of general circulation published in the province.

Adjudication of Escheat

If no sufficient cause is shown to the contrary, the court shall adjudge that the estate of the deceased in the Philippines, after the payment of just debts and charges, escheat.

Time limit for heirs to claim the estate after judgment of escheat

Within 5 years from the date of such judgment.