2 - Secrecy of Bank Deposits

SPECIAL COMMERCIAL
LAWS
SECRECY OF BANK DEPOSITS

(RA 1405, as amended, and RA 6426, as amended)
SECRECY OF BANK DEPOSITS
(RA 1405, AS AMENDED, AND RA 6426, AS AMENDED)
The purpose of the law is to encourage people to deposit their

money in banks and, thereby, discourage private hoarding so
that the banks may lend out the money and assist in the
economic development of the country
WHAT DOES THE LAW PROHIBIT?
(a) The examination and inquiry or looking into all deposits of whatever nature
with banks or banking institutions in the Philippines including investments in
bonds issued by the Government or its political subdivisions and
instrumentalities by any person, government official, bureau or office; and
(b) The disclosure by any official or employee of any banking institution to any
unauthorized person of any information concerning said deposits. (Sec. 2, RA
1405)
• Note that the law is applicable to trust accounts or an account that has
been set up as an inter vivos or testamentary trust as Section 2 has
been held to cover not only money that has been deposited but also to
money which has been invested although no creditor-debtor relationship
is created between the bank and the client.
• The law does not apply to money market placements as they are not
deposits, rather, they are trades in short term negotiable instruments
such as securities or treasury bills.
WHAT DISCLOSURES OR INQUIRIES INTO
DEPOSITS ARE NOT PROHIBITED?
1) Upon written permission of the depositor;

2) In cases of impeachment;
3) Upon order of a competent court in cases of bribery or dereliction of
duty of public officials;
4) In cases where the money deposited or invested is the subject matter of
litigation
5) Upon order of the court or subpoena issued by the Ombudsman in cases of
unexplained wealth; This is subject to the following requisites:
(1) only an in-camera inspection is allowed
(2) there must be a pending case before a court of competent jurisdiction
(3) account is clearly identified
(4) examination is limited to account subject of the court case, and
(5) bank personnel and the account holder must be notified to be present during
the inspection.
Sec. 6, RA 3019; PNB vs Gancayco, 15 SCRA 91, Marquez vs. Disierto, 399 SCRA
772
6) Upon order of the Commissioner of Internal Revenue in respect of the
bank deposit’s of a decedent for the purpose of determining such
decedent’s gross estate;
7) Upon order of the Commissioner of Internal Revenue when a taxpayer

files an application to compromise his tax liability by reason of financial
incapacity Sec. 6, NIRC.
8) Upon examination made in the course of a special or general audit of a
bank as authorized by the Monetary Board after being satisfied that
there is reasonable ground to believe that a bank fraud or irregularity is
being committed and it has become necessary to look into the deposit
to establish the same;
9) Upon examination of a bank’s independent auditor, the result of which

are for the exclusive use of the bank;
10)In case of suspicious transactions under the Anti-Money Laundering
Law;
11) Under the Anti-Money Laundering Law where banks are required to
report to the Anti-Money Laundering Council any transaction in cash or
other equivalent monetary instrument in excess of P500,000 in any one
day Sec. 3 (b-1) , RA 9160.
12) Also under the Money-Laundering Law, the Anti-Money Laundering
Council may inquire into a deposit or investment maintained with any
financial institution upon order of a competent court, in cases of violation of
the Act, when there is probable cause that the deposit or investment is in
any way related to an unlawful activity as defined in the Act or a money
laundering offense under the Act
13)When a director, officer, stockholder, and related interest (DOSRI) obtains a loan
from his bank or its subsidiaries, or with related controlling interests of more
than 5% of the capital or surplus of the bank, it shall constitute a waiver of
secrecy of all his deposits of whatever nature in all banks in the Philippines; and
14)Under the Unclaimed Balances Law.
15)The examination of a bank account under Section 10, Rule 57 in relation to the
examination of a party whose property is attached and persons indebted to a
defendant or controlling his property. RA 3936.
WHO ARE PRIMARILY LIABLE FOR
VIOLATIONS OF THE LAW?
• The persons primarily liable for a violation of the law would be a bank employee
or officer and the person, government officer, agency or office looking into the
deposit when not authorized by any of the exceptions to the law.
• Note also, that since investigations by the Monetary Board and the Bureau of
Internal Revenue are confidential in nature, any disclosure in violation of the
confidentiality will create liability.
WILL THE GARNISHMENT OF A BANK
DEPOSIT VIOLATE THE LAW?
• No, garnishment of a bank deposit will not violate the law. If the
existence of the deposit is disclosed, the same is considered as purely
incidental to the execution process.
• What is to be disclosed only is the existence of the deposit, particularly

whether or not it is sufficient to satisfy the garnishment. Hence, a
disclosure of the balance may constitute a violation of the law. China
Banking Corp. vs Court of Appeals, 193 SCRA 454
IS A DEPOSITOR WITH A SAFETY DEPOSIT
BOX PROTECTED BY THE LAW?
• No, the deposits made by a depositor in a safety deposit box are not the deposits
contemplated by the law as the bank is never in possession or control of the contents of
the safety deposit box in this instance, the depositor is merely leasing the deposit box
from the bank.
• Prevailing jurisprudence is that the ensuing relationship between the bank renting out
the safety deposit box and the client with respect to the contents of the box is that of
bailor-bailee, the bailment being for hire and mutual benefit. The bank would be liable
for loss of the contents of the box if it is guilty of fraud, negligence or delay or
contravention of the tenor of the agreement.

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What does the law prohibit?

What disclosures or inquiries into deposits are not prohibited?

SPECIAL COMMERCIAL

SECRECY OF BANK DEPOSITS

The purpose of the law is to encourage people to deposit their

1) Upon written permission of the depositor;

7) Upon order of the Commissioner of Internal Revenue when a taxpayer

9) Upon examination of a bank’s independent auditor, the result of which

14)Under the Unclaimed Balances Law.

• What is to be disclosed only is the existence of the deposit, particularly

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