CONFIDENTIALITY OF BANKING TRANSACTIONS

BY: JACINTO D. JIMENEZ

I.

Law on Secrecy of Bank Deposits (Republic Act No. 1405, as

amended)
A.

Scope
1.

Deposits and Investments in Government Bonds

The following are absolutely confidential and may not be examined,

inquired or looked into by anyone:
a.
b.
c.

Deposits
Investment in bonds issued by the government, its political
subdivisions and instrumentalities (Section 2)
Trust accounts are included in the scope of the law, because
they are also funds which the law seeks to protect to
discourage private hoarding so that they can be invested by
banks and the law includes deposits of whatever nature.
(Ejercito vs. Sandiganbayan, 509 SCRA 590)

It is unlawful for any official or employee of a bank to disclose any

information concerning deposits and investments in government bonds.
(Section 3)
2.

Other Records

The confidentiality granted by the law does not extend to other documents
and records like letters of credit, trust receipts, bank drafts and promissory
notes; (Opinion of the Secretary of Justice No. 5, Series of 1982; Opinion
of the Secretary of Justice No. 126, Series of 1989.)
B. Exceptions
1. The depositor has given his written consent.
a.

For loans secured by holdout or assignments of

certificates of time deposits, the loan documents should include a
waiver by the borrower of his rights under existing laws to the
confidentiality of his deposits. (Section 315, Manual of Regulations
for Banks)

b.

Any director, officer or stockholder who, together

with his related interest, contracts a loan or any form of financial
accommodation from (1) his bank or (2) from a bank (a) which is a
subsidiary of a bank holding company by which both his bank and
the lending bank are subsidiaries or (b) in which a controlling
proportion of the shares is owned by the same interest that owes a
controlling proportion of the shares of the bank, in excess of 5% of
the capital and surplus of the bank, or in the maximum amount
permitted by law, whichever is lover, shall be required by the
lending bank to waive the secrecy of bank deposits in the banks in
the Philippines (Section 26, Republic Act No. 7653).

2. The examination is made in connection with an impeachment case.

3. There is an order from a competent court in cases of bribery or

dereliction of duty of public officials.
4. Bank accounts may be inquired into in a criminal prosecution for
plunder, because all the underlying criminal acts are similar to bribery.
(Ejercito vs. Sandiganbayan, 509 SCRA 190)
5. The money deposited or invested is the subject matter of the litigation:
a.

Proper Cases
i.

In an action by a bank to recover money it

transmitted by mistake, the records of the bank accounts in
which the proceeds of the money were deposited to be
produced, since the money deposited is the subject matter of
the litigation, even if the money was deposited in the names of
persons other than the recipient of the payment by mistake.
(Mellon Bank, N.A. vs. Magsino, 190 SCRA 633)

ii.

Since a criminal case for plunder

against a former public official necessarily involves an inquiry
into the whereabouts of the funds he allegedly acquired illegally,
the bank accounts of his son to which the funds were allegedly
transferred can be inquired into, because they are included in
the subject matter of the litigation. (Ejercito v. Sandiganbayan,
509 SCRA 190)

iii.

In a special proceedings to settle the

estate of deceased depositor, his bank deposits may be inquired
into, since his bank deposits are the subject matter of the case,
because all his assets are supposed to be collated. [Sy vs.
Judge, Regional Trial Court of Iloilo City, 93 O.G. 54072; Reyes
v. Mercado, (Supplement No. 27) 99 O.G. 66]

b.

Improper Case
i.

The examination of the bank account to which

the money paid by an insurance company for treasury bills it
purchased was deposited is improper, even if the insurance
company sued the seller of the treasury bills for failure to deliver
the treasury bills, because the money it paid is not the subject
matter of the litigation. (Onate vs. Abrogar, 241 SCRA 659.)

ii.

A collecting bank which sued the

drawee bank to recover the deficiency for the payment of a
check for failure of the drawee bank to notify the collecting bank
that the collecting bank had erroneously undercoded the
amount of the check it presented for clearing is not entitled to
examine the account of the drawer of the check, because the
money in the account of the drawer is not the subject matter of
the case. (Union Bank of the Philippines, 321 SCRA 563)

iii.

In order that the Ombudsman may

inspect a bank deposit, there must be a case pending in court,
the account must be clearly identified, the inspection must be
limited to the subject matter of the pending case, the inspection
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may cover only the account identified, and the bank personnel
and the account holder must be notified to be present during the
inspection. (Marquez vs. Desierto, 359 SCRA 772; Office of the
Ombudsman vs. Ibay, 364 SCRA 281.)
6. The prohibition against the examination of a bank deposit does not
preclude its garnishment to satisfy a judgment against the depositor.
(China Banking Corporation vs. Ortega, 49 SCRA 355; Philippine
Commercial & Industrial Bank vs. Court of Appeals, 193 SCRA 452;
Oate vs. Abrogar, 230 SCRA 181.)
7. The Commissioner of Internal Revenue is authorized to inquire into
bank deposits of the following:
a.

A decedent to determine his estate; and

b.

Any taxpayer who has filed an application for

compromise of his tax liability by reason of financial incapacity to
pay his tax liability. (Section 6(F), National Internal Revenue Code.)

c.

A specific taxpayer subject of a request for the

supply of tax information from a foreign tax authority pursuant to an
international convention or agreement on tax matters to which
Philippines is a party. (Sec. 6 (K). National Internal Revenue Code,
as amended by Republic Act No. 10021)

8. All banks shall forward to the Treasurer of the Philippines a statement

under oath of all deposits in favor of persons who are known to be
dead or who have not made further deposits or withdrawals during the
preceding ten years showing the name and last known place of
residence of address in whose favor such unclaimed balances stand
and the amount of the outstanding unclaimed balances. (Section 2,
Unclaimed Balances Act, as amended by Presidential Decree No.
679.)
9. Because of its power to conduct investigations to accomplish its
purpose, the Presidential Commission on Good Government may
require the production of bank records as may be material to its
investigation. (Opinion of the Secretary of Justice dated February 27,
1987)
10. The Anti-Money Laundering Council may inquire into any deposit with
any bank or financial institution in case of violation of the Anti-Money
Laundering Law if there is probable cause that it is related to an
unlawful activity. (Section 11, Republic Act No. 9160, as amended.)
11. Upon ex-parte application by a law enforcer authorized by the AntiTerrorism Council, the justices of the Court of Appeals designated as a
special court to handle anti-terrorism cases may authorize the
examination of deposits in a financial institution upon finding probable
cause of the commission of terrorism or conspiracy to commit
terrorism. (Sections 27 and 28, Republic Act 9372)
12. The Philippine Deposit Insurance Corporation and the Bangko Sentral
may examine deposit accounts and all information related to them in
case of a finding of unsafe or unsound banking practices. (Section 8,
Republic Act No. 3591, as amended)
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II.

Foreign Currency Deposit Act (Republic Act No. 6426, as amended)

A. Secrecy of Foreign Currency Deposits
1.

All foreign
deposits are absolutely confidential (Section 8).

2.

Foreign
currency
deposits shall be exempt from attachment, garnishment or any
other order or process of any court, legislative body, government
agency or administrative body. (Section 8)

B.

currency

Exception Based on Law

1.

The depositor has given his written permission (Section

8)
a.

For loans secured by holdouts or assignments

of certificates of time deposits, the loan documents should
include a waiver by the borrower of his rights under existing
laws to the confidentiality of his deposits. (Section 315, Manual
of Regulations for Banks)

b.

Any director, officer or stockholder who,

together with his related interest, contracts a loan or any form of
financial accommodation from (1) his bank or (2) from a bank
(a) which is a subsidiary of a bank holding company by which
both his bank and the lending bank are subsidiaries or (b) in
which a controlling proportion of the shares is owned by the
same interest that owes a controlling proportion of the shares is
owned by the same bank, in excess of 5% of the capital and
surplus of the bank, or in the maximum amount permitted by
law, whichever is lower, shall be required by the lending bank to
waive the secrecy of bank deposits in the banks in the
Philippines (Section 26, Republic Act No. 7653).

c.

This is the only exception to the secrecy of

foreign currency bank deposits. (Intengan vs. Court of Appeals,
377 SCRA 63)

d. The heirs of someone who opened a foreign currency bank

deposit can look unto the deposit, because they inherited it and
a request for subpoena made by them constitutes a written
permission. [Reyes v. Maceda, (Supplement No. 27) 99 O.G.
66]
2.

Exceptions Based on Jurisprudence

a.

Where the funds deposited in a joint foreign

currency savings account belonged exclusively to one of the
depositors and were held in trust for him by the other depositor
and the other depositor unilaterally closed the joint account and
transferred the funds to her personal account, the depositor who
owned the funds can have her enjoined from making
withdrawals from her personal account. She cannot invoke the
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exemption of her personal account from court processes,

because the funds did not belong to her. (Van Twest vs. Court
of Appeals, 230 SCRA 42)
b.

A father who sued his daughter for illegally

withdrawing funds from his foreign currency deposit and
transferring to another bank in the name of her sister, can
inquire into the deposit of the sister, because the money
deposited belongs to him. (China Banking Corporation vs.
Court of Appeals, 511 SCRA 110)

c.

The director of a foreign corporation who

fraudulently deposited funds belonging to the corporation and
who is a fugitive from justice may be restrained from making
withdrawals, because he might flee with the funds.
(Breckenridge Corporation, Ltd. vs. Court of Appeals, 232 SCRA
XVII.)

d.

Where a foreign tourist who opened a foreign

currency savings account raped a child and escaped but was
sued and held liable for damages to the victim, garnishment of
his account should be allowed to prevent an injustice.
(Salvacion vs. Central Bank of the Philippines, 278 SCRA 27.)

C. Exception under the National Internal Revenue Code.

The Commissioner of Internal Revenue is authorized to inquire into
bank deposits of the following:
a.

A decedent to determine his estate; and

b.

Any taxpayer who has filed an application for

compromise of his tax liability by reason of financial incapacity to
pay his tax liability. (Section 6(F), National Internal Revenue Code.)

c.

A specific taxpayer subject of a request for the

supply of tax information from a foreign tax authority pursuant to an
international convention or agreement on tax matters to which
Philippines is a party. (Sec. 6 (K). National Internal Revenue Code,
as amended by Republic Act No. 10021)

D. Exception under the Anti-Money Laundering Law

The Anti-Money Laundering Council may inquire into any deposit with
any bank or financial institution in case of violation of the Anti-Money
Laundering if there is probable cause that it is related to an unlawful
activity. (Section 11, Republic Act No. 9160, as amended)
E. Exception under the Human Security Act
Upon ex-parte application by a law enforcer authorized by the AntiTerrorism Council, the justices of the Court of Appeals designated as a
special court to handle anti-terrorism cases may authorize the
examination of deposits in a financial institution upon finding probable
cause of the commission of terrorism or conspiracy to commit
terrorism. (Sections 27 and 28, Republic Act 9372)

F.

Exception under the charter of the

Philippine Deposit Insurance Corporation
The Philippine Deposit Insurance Corporation and the Bangko Sentral
may examine deposit accounts and all information related to them in
case of a finding of unsafe or unsound banking practices. (Section 8,
Republic Act No. 3591, as amended)

III.

General Bank Transactions (Republic Act No. 8791)

A.

Secrecy of Bank Transactions

No director, officer, employee, or agent of any bank shall without order of a
court, disclose to any unauthorized person any information relative to the
funds or properties in the custody of the bank belonging to private
individuals, corporation, or any other entity. (Section 55.1 (b))

B.

Scope
1. The disclosure to an authorized person is permitted
2. The prohibition does not apply to the funds or properties of public
officials. (Section 55.1 (b))

C.

Exception under the National Internal Revenue Code

1. The Commissioner of Internal Revenue is authorized to inquire into
bank deposits of the following:
a.

D.

A decedent to determine his estate; and

b.

Any taxpayer who has filed an application for

compromise of his tax liability by reason of financial incapacity to
pay his tax liability. (Section 6(F), National Internal Revenue Code.)

c.

A specific taxpayer subject of a request for the

supply of tax information from a foreign tax authority pursuant to an
international convention or agreement on tax matters to which
Philippines is a party. (Sec. 6 (K). National Internal Revenue Code,
as amended by Republic Act No. 10021)
Exception under the Anti-Money Laundering Law

The Anti-Money Laundering Law Council may inquire into any funds
deposited with any bank or financial institution in case of violation of the
Anti-Money Laundering Law if there is probable cause that it is related to
an unlawful activity. (Section 11, Republic Act No. 9160, as amended.)
The Philippine Deposit Insurance Corporation and the Bangko Sentral
may examine deposit accounts and all information related to them in case
of a finding of unsafe or unsound banking practices. (Section 8, Republic
Act No. 3591, as amended)