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repealed.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
hoarding
Deposits - money or funds placed
in a bank as savings, current and time
deposits that are withdrawable under the
depositor’s consent or command.
(2) In order for the money to be properly
utilized the law prefers that money shall be
deposited in banks to assist in the
economic development of the country.
The absolute confidentiality rule in
Republic Act No. 1405 aims to protect
depositors from groundless inquiry or
investigation merely to determine the
existence, nature and as well as the amount
of deposit in any given bank account.
Bank Secrecy is a law that establishes
rules of banking such as depositing and
claiming. It is also certain that the law
covers privacy of customers and declares
penalty for the customers to go against the
law. Under the law are the following
importance:
(1) In the absence of the law, no one has
the knowledge and authority to perform
and execute the necessary transactions. In
order for the bank customer to be
systematic and well directed, bank secrecy
law is established.
(2) Bank secrecy ensures the privacy of
depositors’ bank information and data’s.
(3) Bank Secrecy may be a big help for the
reduction of corruption against the
government officials.
(4) Paves way to economic development.
Private business owners, government
establishments, authorities, investors and
other institutions borrow money from
banks to sustain their financial transactions
and return the money to the bank after.
B. CRIMES AND PROHIBITED ACTS
Republic Act No. 1405, or the bank
secrecy law, prohibits the disclosure of, or
inquiry into, all deposits in banks and
banking institutions in the Philippines.
Prohibited Acts and Persons Liable
The following are liable under this law:
(1) Any person or government official
who, or any government bureau or office
that, examines, inquires or looks into a
bank deposit or government bond
investment in any of the instances not
allowed in Section 2;
(2) Any official or employee of a banking
institution who makes a disclosure
concerning bank deposits to another in any
instance not allowed by law (Sec. 3, Rep.
Act No. 1405); and
(3) Any person who commits a violation of
any of the provisions of the law (Sec. 5,
Rep. Act No. 1405).
Any bank official, director, employee or
agent who discloses information relative to
funds or properties in the custody of the
bank may also be held liable under the
applicable provisions of the General
Banking Law, Thrift Banks Act and Rural
Banks Act.
C. DEPOSITS COVERED
Banks or financial institutions in the
Philippines are hereby considered absolute
confidential and cannot be examined
without authority.
Deposits includes investments in bonds
issued by the Philippine Government, its
political subdivisions and
instrumentalities, regardless of
currency denomination.
The Foreign Currency Deposit
governs the confidentiality of foreign
currency deposits.
The term deposits as used in RA 1405 is to
be understood broadly and not limited only
to accounts that give rise to a creditor-
debtor relationship between the depositor
and the bank.
Considering the use of the phrase “of
whatever nature” Republic Act No. 1405
applies not only to money which is
deposited also to those which are invested.
Thus, the protection afforded by RA 1405
extends to trust accounts. (Ejercito v.
Sandiganbayan (Special Division), 2006)
Not covered by the bank secrecy law are
investments that are not bank deposits or
government securities such as corporate
bonds, purchases of shares of stocks,
purchases of receivables of business and
purchase of foreign exchange.
D. EXCEPTIONS
Section 2 of Republic Act No. 1405
provides that bank deposits and
government bond investments may be
examined, inquired and looked into in the
following instances:
its
(a) Upon written permission or consent in
the
writing by the depositor.
An official binding agreement either
Act
signed on paper or digitally by parties
involved recognized legally. For consent to
be valid, it should knowingly, voluntarily
and with sufficient awareness of the
relevant circumstances and likely
consequences.
(b) Order of competent Authority
In the case of a special or general
examination of a bank and is specifically
authorized by the Monetary Board after
being satisfied that there is reasonable
ground to believe that a bank fraud or
serious irregularity has been or is being
committed, that it is necessary to look into
the deposit to establish such fraud or
irregularity. Alternatively, when an
independent auditor hired by the bank to
conduct its regular audit provided makes
the examination, the examination is for
audit purposes only and the results thereof
shall be for the exclusive use of the bank.
In cases of impeachment, or upon order of
a competent court in cases of bribery or
when public officials fails to fulfill their
obligations, or in cases where the money
deposited or invested is the subject matter
of the litigation.
E. GARNISHMENT OF DEPOSITS
INCLUDING FOREIGN DEPOSITS
In the case of foreign deposits, as general
rule, foreign currency deposits shall be
exempt from attachment, garnishment, or
any other order or process of any court,
legislative body, government agency or
any administrative body whatsoever. (Sec
8. R.A. 6426) with the exemption that the
application of Section 8 of R.A. 6426
depends on the extent of its justice. The
garnishment of a foreign currency deposit
should be allowed to prevent injustice and
for equitable grounds
Example: A foreigner’s bank account can
be garnished in order to settle its legal
liability in a foreign land for equitable and
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.