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Banks may be sitting ducks for Habeas Data petitions

(Article published in the Feb 27, 2008 issue of Manila Standard Today)  

Because banks, by the very nature of their business, are engaged in the gathering, collecting or storing data or information regarding the person, family, home and correspondence of their clients and counterparties, they are at risk of being hailed as respondents in habeas data petitions that may be brought by people who feel aggrieved by what is in their data base.

         Justice Sandoval-Gutierrez, in her dissenting opinion in the case of Ejercito v. Sandiganbayan (Special Division), 509 SCRA 191, explains how one’s financial transactions “can reveal much about a person’s affairs, activities, beliefs, habits and associations.”

“Indeed,” Justice Gutierrez writes, “the totality of bank records provides a virtual current biography.  Checks, for instance, in a sense define a person.  By examining them, the agents get to know his doctors, lawyers, creditors, political allies, social connections, religious affiliations, educational interests, the papers and magazines he reads, and so on ad infinitum. In other words, one’s bank accounts mirror not only his finances, but also his debts, his way of life, his family and civic commitment.”

She further observes that “practically speaking, a customer’s disclosure of his financial affairs is not entirely volitional, since it is impossible to participate in the economic life of contemporary society without maintaining a bank account.”

Amassing all that information about people is not entirely volitional on the part of the banks either.  Section 40 of the General Banking Law (R.A. No. 8791) says that “a bank must ascertain that the debtor is capable of fulfilling its commitments to the bank. Toward this end, a bank may demand from its credit applicants a statement of their assets and liabilities and of their income and expenditure and such information as may be prescribed by law or by rules and regulations of Monetary Board…”  In turn the Manual of Regulations for Banks construes “debtor” to include “borrowers, co-makers, endorsers, sureties and/or guarantors” and requires banks to look into “their credit standing and financial capacities.”










     

    
          Gather information not just about their borrowers, but also about their lenders, i.e., depositors, too.  Section 9 of  the Anti-Money Laundering Law (R.A. 9160 as amended by R.A. 9194) insists that banks, as covered institutions, to “establish and record the true identity of its clients based on official documents. They shall maintain a system of verifying the true identity of their clients and, in case of corporate clients, require a system of verifying their legal existence and organizational structure, as well as the authority and identification of all persons purporting to act on their behalf. 

The information thus assembled necessarily must be extensive.  After all, the same section of the Anti-Money Laundering Law must be “maintained and safely stored for five (5) years from the dates of transactions.  With respect to closed accounts, the records on customer identification, account files and business correspondence, shall be preserved and safely stored for at least five (5) years from the dates when they were closed.”

A bank with a trust license, called a trust entity in the regulations, is expected by the General Banking Law to “administer the funds or property under its custody with the diligence that a prudent man would exercise in the conduct of an enterprise of a like character and with similar aims.”  This standard is not the standard “Prudent Man Rule”, it is really the more stringent Prudent Expert Rule, requiring as it does the prudence of one who knows how to do things “of a like character and with similar aims.” 

No way can a trust entity be said to be a “prudent expert” if it does not know everything material about its trustors, who provide the funds and property, the beneficiaries, for whom the trusts are administered, and various counterparties it deals with in the administration of the trusts and investment of trust funds.  The latest regulations relating to Unit Investment Trust Funds (UITFs), requiring the explicit profiling of the investors, are but recent examples of trust regulations necessitating the assembly of a myriad of personal information about many people.

But data bases, though computer-assisted, are primarily human generated.  Hence, prone to errors and inaccuracies.  There is always thus a probability of a spurned credit card applicant, a dismayed depositor, a disappointed trustor or disillusioned beneficiary feeling aggrieved by a bank’s decision.  When the elements are of the such a mix, a habeas data petition against the bank perceived to be offending, is a case waiting to happen.

Are our banks prepared to manage that risk? Do they know what defenses they can validly raise? Are they aware they can ask that the hearing be not on camera, in the glare of the public eye, but instead in camara, in the quiet of the Judge’s or Justice’s chambers?  Will they know how to comply when court orders the deletion, destruction, or rectification of erroneous data?  Their time is short: Within 5 days, the banks must make a response.  Within 10 days from submission of the case, a decision is expected. In 3 days, the officer asked to comply must report to the court.

To help banks understand the new Rule on Habeas Data, I have organized a Round Table Discussion to be held at the Top of the Citi on the 34th Floor of Citibank Tower on Paseo De Roxas, Makati City from 1:00 to 5:00 in the afternoon of 05 March 2008. 

To lead the discussion is Justice Sixto Marella, Jr. whose experience is a combination of his years in the Legal Department of Far East Bank and Trust Company, when everyone thought the bank was going to be forever, and of his on-going career in the judiciary starting from the regular Regional Trial Court, then a stint as judge of the special commercial court, and presently at the Court of Appeals. And to explore the impact of the rule on banking regulations is Atty. Elmore O. Capule, Deputy General Counsel of the BSP.

They will be followed by imputs from the banking community, led by the durable Atty. Antonio V. Viray, now Special Counsel and formerly SVP-General Counsel of Metrobank who will speak on retail banking;  Atty. Ma. Cristina Barbara Concepcion, Head-Legal and Administrative Unit-Trust Banking of Banco de Oro Universal Bank, on trust and fiduciary business; and, for the ultra confidential field of private banking, Atty. Federico P. Tancongco, VP-Head of Legal and Compliance of Banco de Oro Private Bank.

Although focused on banking, the discussion ought to be of interest to any entity, like credit card companies, remittance agents, investigatory outfits, rating agencies and credit bureaus, ought to find the discussion informative. 

          Lawyers attending are expected to be given Mandatory Continuing Legal Education credits since I have applied for accreditation of the seminar with the MCLE Committee.
 

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