LAW ON SECRECY OF BANK Section 3.

  It shall be unlawful for any

DEPOSITS official or employee of a banking
institution to disclose to any person other
Republic Act No. 1405. An act
than those mentioned in Section two
prohibiting disclosure of or inquiry into,
hereof any information concerning said
deposits with any banking institution and
deposits.
providing penalty therefor.

Section 4.  All Acts or parts of Acts,

Section 1.  It is hereby declared to be
Special Charters, Executive Orders, Rules
the policy of the Government to give
and Regulations which are inconsistent
encouragement to the people to deposit
with the provisions of this Act are hereby
their money in banking institutions and to
repealed.
discourage private hoarding so that the
same may be properly utilized by banks in Section 5. Any violation of this law will
authorized loans to assist in the economic subject offender upon conviction, to an
development of the country. imprisonment of not more than five years
or a fine of not more than twenty thousand
Section 2.  All deposits of whatever
pesos or both, in the discretion of the
nature with banks or banking institutions
court.
in the Philippines including investments in
bonds issued by the Government of the Section 6.  This Act shall take effect
Philippines, its political subdivisions and upon its approval.
its instrumentalities, are hereby considered
as of an absolutely confidential nature and Republic act no. 1405 - passed on
may not be examined, inquired or looked September 09, 1955.
into by any person, government official,
Amended by Presidential Decree No. 1792
bureau or office, except upon written
on January 16, 1981.
permission of the depositor, or in cases of
impeachment, or upon order of a Philippines is one of the three countries in

competent court in cases of bribery or the world with a bank secrecy law. The

dereliction of duty of public officials, or in other two are Lebanon and Switzerland.

cases where the money deposited or A. PURPOSE

invested is the subject matter of the
(1) To give encouragement to the people
litigation.
by depositing their money in banking
institutions and to discourage private (3) Bank Secrecy may be a big help for the
hoarding reduction of corruption against the
government officials.
Deposits - money or funds placed
in a bank as savings, current and time (4) Paves way to economic development.
deposits that are withdrawable under the Private business owners, government
depositor’s consent or command. establishments, authorities, investors and
other institutions borrow money from
(2) In order for the money to be properly
banks to sustain their financial transactions
utilized the law prefers that money shall be
and return the money to the bank after.
deposited in banks to assist in the
economic development of the country. B. CRIMES AND PROHIBITED ACTS

The absolute confidentiality rule in Republic Act No. 1405, or the bank
Republic Act No. 1405 aims to protect secrecy law, prohibits the disclosure of, or
depositors from groundless inquiry or inquiry into, all deposits in banks and
investigation merely to determine the banking institutions in the Philippines.
existence, nature and as well as the amount
Prohibited Acts and Persons Liable
of deposit in any given bank account.
The following are liable under this law:
Bank Secrecy is a law that establishes
rules of banking such as depositing and (1) Any person or government official

claiming. It is also certain that the law who, or any government bureau or office

covers privacy of customers and declares that, examines, inquires or looks into a

penalty for the customers to go against the bank deposit or government bond

law. Under the law are the following investment in any of the instances not

importance: allowed in Section 2;

(1) In the absence of the law, no one has (2) Any official or employee of a banking

the knowledge and authority to perform institution who makes a disclosure

and execute the necessary transactions. In concerning bank deposits to another in any

order for the bank customer to be instance not allowed by law (Sec. 3, Rep.

systematic and well directed, bank secrecy Act No. 1405); and

law is established. (3) Any person who commits a violation of

(2) Bank secrecy ensures the privacy of any of the provisions of the law (Sec. 5,

depositors’ bank information and data’s. Rep. Act No. 1405).

Any bank official, director, employee or extends to trust accounts. (Ejercito v.
agent who discloses information relative to Sandiganbayan (Special Division), 2006)
funds or properties in the custody of the
Not covered by the bank secrecy law are
bank may also be held liable under the
investments that are not bank deposits or
applicable provisions of the General
government securities such as corporate
Banking Law, Thrift Banks Act and Rural
bonds, purchases of shares of stocks,
Banks Act.
purchases of receivables of business and
C. DEPOSITS COVERED purchase of foreign exchange.

Banks or financial institutions in the D. EXCEPTIONS

Philippines are hereby considered absolute
Section 2 of Republic Act No. 1405
confidential and cannot be examined
provides that bank deposits and
without authority.
government bond investments may be
Deposits includes investments in bonds examined, inquired and looked into in the
issued by the Philippine Government, its following instances:
political subdivisions and its
(a) Upon written permission or consent in
instrumentalities, regardless of the
writing by the depositor.
currency denomination.
An official binding agreement either
The Foreign Currency Deposit Act
signed on paper or digitally by parties
governs the confidentiality of foreign
involved recognized legally. For consent to
currency deposits.
be valid, it should knowingly, voluntarily
The term deposits as used in RA 1405 is to and with sufficient awareness of the
be understood broadly and not limited only relevant circumstances and likely
to accounts that give rise to a creditor- consequences.
debtor relationship between the depositor
and the bank.
(b) Order of competent Authority
Considering the use of the phrase “of
In the case of a special or general
whatever nature” Republic Act No. 1405
examination of a bank and is specifically
applies not only to money which is
authorized by the Monetary Board after
deposited also to those which are invested.
being satisfied that there is reasonable
Thus, the protection afforded by RA 1405
ground to believe that a bank fraud or
serious irregularity has been or is being
committed, that it is necessary to look into In the case of foreign deposits, as general
the deposit to establish such fraud or rule, foreign currency deposits shall be
irregularity. Alternatively, when an exempt from attachment, garnishment, or
independent auditor hired by the bank to any other order or process of any court,
conduct its regular audit provided makes legislative body, government agency or
the examination, the examination is for any administrative body whatsoever. (Sec
audit purposes only and the results thereof 8. R.A. 6426) with the exemption that the
shall be for the exclusive use of the bank. application of Section 8 of R.A. 6426
In cases of impeachment, or upon order of depends on the extent of its justice. The
a competent court in cases of bribery or garnishment of a foreign currency deposit
when public officials fails to fulfill their should be allowed to prevent injustice and
obligations, or in cases where the money for equitable grounds
deposited or invested is the subject matter
Example: A foreigner’s bank account can
of the litigation.
be garnished in order to settle its legal
E. GARNISHMENT OF DEPOSITS liability in a foreign land for equitable and
INCLUDING FOREIGN DEPOSITS just grounds.

Garnishment- a legal procedure by which a

creditor can collect what a debtor owes by
reaching the debtor’s property when it is in
the hands of someone other than the
debtor.

Bank Accounts can be garnished in order

to recover money from people with
outstanding debts. The procedure of
garnishment of a debtor’s account
commences when a court order has been
made, ordering the bank to freeze the
debtor’s account in order for the creditor to
withdraw enough funds to satisfy the legal
judgement. If the account does not contain
enough funds, the debtor must pay for the
remaining balance.