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Bank Secrecy is passe′

(Article published in the Feb 22,2012 issue of Manila Standard Today) 

That the Impeachment Court trying the charges against Chief Justice Renato C. Corona was not persuaded to look into the magistrate’s dollar accounts at the Philippine Savings Bank was not due to the ineptness of the prosecution nor to the savvy of the defense.  Instead, it was due to  regime of bank secrecy in the Philippines, now increasingly becoming outmoded elsewhere.

No less than two US ambassadors to the Philippines allegedly cabled back home observations critical of our laws on bank secrecy.  In 2007 and 2008, Ambassador Kristie Kenny reportedly rued that “investigations are hampered by Philippine banking secrecy laws that limit access to certain financial information...”  Earlier in 2005,  Ambassador Francis Ricciardone was said to have observed that  “the bank secrecy laws in the Philippines are among the strictest in the world...”  Both believe that our laws on bank secrecy, most specially the Foreign Currency Deposit Act (R.A. No. 6426), hamper the investigation and punishment of corruption as well as facilitate the concealment, if not the commission, of crime.

Hopefully, the situation will not stay that way for long.  If Congress were to only speed up the disposition of the Corona impeachment accusations, one way or another, and focus on addressing this severe defect in the country’s financial legal infrastructure, we would be more aligned with the rest of the world in opting for transparency as a means of avoiding the more severe implications of global meltdown all are still reeling from.  Now more than ever, it is important to pass into law Senate Bill No. 2484, authored by Senator Sergio R. Osmeña III.


Passing Senate Bill No. 2484 is almost obligatory on our part.  In 1988, at the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (known as the Vienna Convention), the Philippines agreed to, among other commitments, “adopt such measures as may be necessary to enable its competent authorities to identify, trace, and freeze or seize proceeds, property, instrumentalities and any other things” used or intended to be used in money laundering.  More specifically, a party to that convention is obligated to “empower its courts or other competent authorities to order that bank, financial or commercial records be made available or be seized.”   A party cannot refuse to so act “on the ground of bank secrecy.”

Two years after the Vienna Convention, the Philippines also became part of the 2000 United Nations Convention Against Transnational Organised Crime, known as the Palermo Convention.  Again, the Philippines bound itself to “adopt such measures as may be necessary to enable the identification, tracing, freezing, or seizure of any item” connected with terrorist financing.

Since bank inquiry is “an indispensable discovery tool in following the money trail to ensure success in tracing the proceeds of crime and identifying and bringing to justice the perpetrators,” Section 7 of Senator Osmeña’s bill seeks to permit the Anti-Money Laundering Council to apply, ex parte, for authority to examine not only a particular bank account, but also the “related web of accounts” of which it may be a part.

Proposing to amend Section 11 of R.A. No. 9160, or the Anti-Money Laundering Law, as amended, Section 7 of Senate Bill No. 2484 suggests the express modification of (a)  The Secrecy of Bank Deposits Act (R.A. No. 1405), (b) the Foreign Currency Deposit Act (R.A. No. 6426) and (c) the General Banking Act (R.A. No. 8791).  The intended change is as follows:

“Sec. 11. Authority to Inquire Into Bank Deposits.- Notwithstanding the provisions of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the AMLC may inquire into or examine any particular deposit or investment, including related web of accounts, with any banking institution or non-bank financial institution upon order of any competent court based on an ex parte application in cases of violations of this Act when it has been established that there is probable cause that the deposits or investments including related web of accounts involved are related to an unlawful activity as defined in Sections 3(i) hereof or a money laundering offense under Section 4 hereof; except that no court shall be required in cases involving unlawful activities defined in Section 3(i)(1), (2), (12), (13) and (14) hereof.


To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may inquire into or examine any deposit or investment including related web of accounts with any banking institution or non-bank financial institution when the examination is made in the course of a periodic or special examination, in accordance with the rules of examination of the BSP.”

Senate Bill No. 2484’s proposal to amend of Section 11 of the Anti-Money Laundering law is in direct repudiation of the Supreme Court’s interpretation of that section that the high court articulated in the case of Republic v. Eugenio, G.R. No. 174629, promulgated 14 February 2008.   The decision was said to have alarmed US Ambassador Kristie Kenny. 

In Eugenio, the court said that the application for authority to inquire into a bank deposit cannot be heard and decided ex parte, i.e. without notifying the owner of the account concerned.  The Supreme Court reasoned, among other arguments, that, in contrast with a preceding section dealing with a freeze order, where ex party applications are permitted, Section 11 does not expressly permit an ex parte proceeding.  The justification for the difference, claimed the court, is that while a freeze order is intended to prevent the spiriting away of the funds by the suspected owner who is thereby alerted by notice of the proceeding to the possibility of his losing access to his money, the intention of a bank inquiry is only to get information.  It was assumed by the court, erroneously.  I submit, that, since the owner is not threatened by an inquiry with losing use of his fund, he is not likely to spirit his money away upon being giving notice of it.

Senator Osmeña apparently does not buy the argument and with reason.  A guilty perpetrator is not about to wait for the imminent freezing of his account before transferring his funds out of the bank.  On the contrary, the earlier he gets an indication of the possibility of government seizure, the sooner will he move out his account.  Hence, he ought not be given advance notice even of a mere inquiry by the authorities into his bank funds.  To avoid the repetition of the Eugenio debacle, Senate Bill No. 2484 makes it very plain that ex parte inquiry is the legislative intent and the bank depositor is put on permanent notice that the authorities, whenever necessary could look into his bank account, peso or otherwise.