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Vote for candidates who are against secrecy of bank deposits
(Article published in the March 26, 2001 issue of TODAY, Business Section)

With the election campaign season fully underway, voters who want to make their choice of senators and congressmen on the basis of issues would do well to demand that the candidates formally state their stand on the very significant issue of money laundering.

They should, for instance, ask, "If elected, will you or will you not vote in favor of a bill that will restore to the Bangko Sentral ng Pilipinas the power to examine a bank deposit with a balance in excess of Php 50 million [or its equivalent if the deposit is in a foreign currency], on reasonable grounds that the account is involved in a bank fraud or serious irregularity?"

Yes? or No? The response should be definite, unconditional, and, in writing. Those who have no stand need not ask for your vote.

The candidates’ response is crucial to the country’s welfare. Unless enough number of Congressmen in favor of legislation that empowers the Bangko Sentral to detect and combat money laundering is elected, the Philippines will be effectively excluded from the world economy.


Our businessmen, starting the middle of next year, would have a most difficult time receiving as well as remitting money abroad. All their foreign exchange transactions would be treated with suspicion by their counterparts and subjected to tedious scrutiny by foreign banks. Their cost of doing business, resulting from requirements which would not be imposed on businessmen of countries with anti-money laundering laws, will rise astronomically, making the prices of their goods and services uncompetitive with the rest of the world.

The culprit is our law on the confidentiality of bank accounts. Section 2 of Republic Act No. 1405, known as the law on secrecy of bank deposits, declares deposits with banks, as well as investments in bonds issued by the Government of the Philippines, to be "as of an absolutely confidential in nature and may not be looked into" except in four instances which includes impeachment. Primarily conceived as a bar to the nasty taxman, the law was written so broadly that it can be abused to hide proceeds of crime.

Similarly, Section 8 of the Foreign Currency Deposit Act (Republic Act No. 6426) likewise declares foreign currency deposits as "of an absolutely confidential nature and, except upon the written permission of the depositor" may not be looked into by any person. This law is stricter than R.A. No. 1405, and opens our system to the entry of foreign drug money.

Finally, Section 55.1 of the new General Banking Law punishes a bank director, officer, employee or agent who discloses, without order of a competent court, "any information relative to the funds or properties in the custody of the bank belonging to private individuals, corporations or any other entity". This covers trusts, investment management accounts, and other fiduciary accounts.

As a consequence of this law on confidentiality, the Financial Action Task Force -- a body formed by twenty-nine countries representing the major financial centers in North America (e.g. the United States), Asia (e.g. Singapore and Hongkong) and Europe (would you believe, Switzerland?) for the purpose of developing and promoting policies at the national and international levels, to combat money laundering--cited the Philippines in its 22 June 2000 report as one of fifteen (15) countries as a non-cooperative country or jurisdiction. Others in the list are mostly the so-called "offshore" jurisdictions, such as the Bahamas, the Cayman Islands, and Liechtenstein, but also included are Russia, Panama, Lebanon, and Israel.

Because of the serious consequences of remaining in the list, many of the fifteen (15) have put in place an acceptable anti-money laundering legislation by this year. Soon the list of fifteen would be therefore reduced to only four, namely, Russia, Lebanon, Nauru (Nauru expressed willingness to cooperate, provided it got paid US$10 million) and, if our new Congress will continue to fail to pass the proper legislation, the Philippines.

The Financial Action Task Force is not an international body, like the U.N. and its recommendations do not have the binding force of law (even in the international law sense) and are merely suggestions to the individual member countries. However, since the members are serious in their common objective of fighting money laundering, counter-measures can be expected to be launched (as the committee has already "hinted") against those refusing to cooperate, such as the holding off of crucial loans or higher intermediation costs from multinational organizations and foreign governments.

For example, in July last year, the US Department of Treasury issued an advisory to US domestic financial institutions of "laundering risks that they face in the identified jurisdictions". Since money laundering is a crime in the U.S., this is more than just a "beware", it sounds more like a "better-for-you-to-avoid".

For its part, the Hong Kong Monetary Authority, issued on 28 February of this year, a letter to all authorized banking institutions in Hong Kong, asking them to comply with the Financial Action Task Force’s recommendation No. 21 and "give special attention to business relations and transactions with persons, including companies and financial institutions, from" the fifteen countries in the list.

Recommendation No. 21 suggests that "whenever these transactions have no apparent economic or visible lawful purpose, their background and purpose should, as far as possible, be examined, the findings established in writing, and be available to help supervisors, auditors and law enforcement agencies". That is diplomatic gobbledygook for subjecting to the fine tooth comb all money transactions from the uncooperative countries.

Obviously, it would not be in the interest of our country to be at the receiving end of the Financial Action Task Force’s counter-measures, particularly at this time when the country is still reeling from the Estrada phenomenon and continues to be vulnerable to the consequences of a global economic slow down.

The candidates for the Senate and the House of Representative that we should support are those who will commit that, if and when elected, they would vote in favor of legislation needed to take our country off the list of uncooperative jurisdictions.