Secrecy of Bank Deposits Law Amendments

To combat financial crimes such as money laundering and local and international tax evasion, the Philippine Central Bank (BSP) is expected to continue lobbying for amendments to the Law on Secrecy of Bank Deposits during the Marcos Jr. administration. The measure seeks to require local financial institutions to comply with international banking transparency standards by lifting bank secrecy regulations, particularly on examining suspect bank accounts and deposits.

President Ferdinand Marcos Jr. identified the measure as one of his administration’s priority bills during the second Legislative-Executive Development Advisory Council (LEDAC) in July, which aims to have the measure passed by December 2023. The measure is also supported by leading business groups in the Philippines as well as the Department of Finance (DOF) and Bangko Sentral ng Pilipinas (BSP).

Communications Secretary Cheloy Garafil disclosed that the BSP endorsed the measure among the bills eyed to be passed during the 19th Congress. In a statement in October 2022, the BSP identified the bank deposits secrecy bill as its “priority legislative measure in the 19th Congress.” The BSP noted that “Proposed amendments to the Bank Deposits Secrecy law aim to strengthen the banking system’s capacity to effectively combat tax evasion, money laundering, and other financial crimes.” The Joint Foreign Chambers and Philippine Business Groups (JFC-PBG) likewise identified the measure as one of the priority bills that should get passed under the 19th Congress. The American Chamber of Commerce of the Philippines, Inc. (AmCham Philippines) is also anticipating the passing of the bill as it is part of the six crucial economic reform bills that it has endorsed to legislation. More recently, before the 3rd State of the Nation Address held last July 22, 2024, some business chambers in the Philippines have again endorsed this measure as part of the 21 priority bills that aim to be passed before the 19th Congress ends.

The House approved the measure in third and final reading on May 8, 2023 following months of deliberations. Notably, the bill proposes to exempt the BSP’s examination of bank deposits for possible fraud, serious irregularity, or unlawful activity involving bank officials, and to provide the BSP with exclusive use of the results of its inquiry and examination. These results will only be made available to the Securities and Exchange Commission, Philippine Deposit Insurance Corporation, Anti-Money Laundering Council, Department of Justice, and the courts.

The approved measure provides a safe clause to protect banks or financial institutions, their directors, officers, or employees from any action, claim, demand, or liability, for acts done in compliance with an order of inquiry or examination of deposits from the BSP. Persons or entities found guilty of the measure may be imprisoned between two to 10 years, may be ordered to pay a minimum of PHP 50,000 (USD 910), or both. In related updates, lawmakers also filed other measures that seek to require public officials and employees to execute a written permission for the Ombudsman to examine, inquire, or look into all their bank deposits.

At the Senate level, there are at least two versions of the measure. Senator Francis “Chiz” Escudero refiled the measure as Senate Bill 56. The bill proposes to “make it mandatory for all government personnel, except those who serve in an honorary capacity, to submit a written permission in favor of the Office of the Ombudsman to access and examine all their deposits, including foreign currency deposits, here and abroad.” SB 1405, filed by Senator Grace Poe, proposes to include the BSP’s inquiries or examinations as one of the bases to examine, inquire, or look into deposits that may be involved in any irregularities or unlawful activities. Meanwhile, Senator Poe’s version proposes to ban the BSP from looking into any deposits made during the election period “as a safeguard against using the [measure] for political motives.”

The Bank Secrecy Law Amendments is one of the measures that did not get passed into law during the Duterte administration, and it has yet to be seen how the measure will progress in Congress. The Committee on Banks and Financial Intermediaries in the Senate is headed by Senator Mark Villar, while in the Committee on Civil Service is chaired by Bohol Representative Alexie Tutor in the House. PSA notes that there have been difficulties in passing this measure, as it would subject bank accounts of government officials, elected and unelected, to greater scrutiny. Senator Escudero himself has been trying to pass this measure for years, since he first filed his version on the bill in 2010, then in 2013, and 2016.

In the recent review conducted by Financial Action Task Force (FATF), a global dirty money watchdog, last February 23, the Philippines still remains on the “gray list” after failing to address concerns on anti-money laundering and counter-terrorist financing. While the FATF acknowledges the progress made by the Philippine government in addressing its deficiencies, the following still need to be dealt with:

• Demonstrating that effective risk-based supervision of designated non-financial businesses and professions is occurring
• Demonstrating that supervisors are using anti-money laundering and counter-terrorist financing (AML/CFT) controls to mitigate risks associated with casino junkets
• Enhancing and streamlining law enforcement agency access to beneficial ownership information and taking steps to ensure that beneficial ownership information is accurate and up-to-date
• Demonstrating an increase in money laundering investigations and prosecutions in line with risk
• Demonstrating an increase in the prosecution of terrorist financing cases.

The FATF urged the Philippines to address these deficiencies the soonest possible, as all deadlines expired in January 2023. Staying longer in the “gray list” would run the risk of entering the “black list,” where at present, only three countries are in – Iran, Myanmar, and North Korea. Entering the “black list” would also yield significant consequences, such as lack of foreign investments and its adverse effect on the remittances of overseas Filipino workers (OFWs) as this can lead to more stringent requirements.