violation of bank secrecy
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DESCRIPTIONViolation of Bank Secrecy
IN THE PHILIPPINESREPUBLIC ACT No. 6426AN ACT INSTITUTING A FOREIGN CURRENCY DEPOSIT SYSTEM IN THE PHILIPPINES, AND FOR OTHER PURPOSES.Section 1.Title. This act shall be known as the Foreign Currency Deposit Act of the Philippines.Section 2.Authority to deposit foreign currencies. Any person, natural or juridical, may, in accordance with the provisions of this Act, deposit with such Philippine banks in good standing, as may, upon application, be designated by the Central Bank for the purpose, foreign currencies which are acceptable as part of the international reserve, except those which are required by the Central Bank to be surrendered in accordance with the provisions of Republic Act Numbered two hundred sixty-five (NowRep. Act No. 7653).Section 3.Authority of banks to accept foreign currency deposits. The banks designated by the Central Bank under Section two hereof shall have the authority:(1) To accept deposits and to accept foreign currencies in trustProvided, That numbered accounts for recording and servicing of said deposits shall be allowed;(2) To issue certificates to evidence such deposits;(3) To discount said certificates;(4) To accept said deposits as collateral for loans subject to such rules and regulations as may be promulgated by the Central Bank from time to time; and(5) To pay interest in foreign currency on such deposits.Section 4.Foreign currency cover requirements. Except as the Monetary Board may otherwise prescribe or allow, the depository banks shall maintain at all times a one hundred percent foreign currency cover for their liabilities, of which cover at least fifteen percent shall be in the form of foreign currency deposit with the Central Bank, and the balance in the form of foreign currency loans or securities, which loans or securities shall be of short term maturities and readily marketable. Such foreign currency loans may include loans to domestic enterprises which are export-oriented or registered with the Board of Investments, subject to the limitations to be prescribed by the Monetary Board on such loans. Except as the Monetary Board may otherwise prescribe or allow, the foreign currency cover shall be in the same currency as that of the corresponding foreign currency deposit liability. The Central Bank may pay interest on the foreign currency deposit, and if requested shall exchange the foreign currency notes and coins into foreign currency instruments drawn on its depository banks. (As amended by PD No. 1453, June 11, 1978.)Depository banks which, on account of networth, resources, past performance, or other pertinent criteria, have been qualified by the Monetary Board to function under an expanded foreign currency deposit system, shall be exempt from the requirements in the preceding paragraph of maintaining fifteen percent (15%) of the cover in the form of foreign currency deposit with the Central Bank. Subject to prior Central Bank approval when required by Central Bankregulations, said depository banks may extend foreign currency loans to any domestic enterprise, without the limitations prescribed in the preceding paragraph regarding maturity and marketability, and such loans shall be eligible for purposes of the 100% foreign currency cover prescribed in the preceding paragraph. (As added byPD No. 1035.)Section 5.Withdrawability and transferability of deposits. There shall be no restriction on the withdrawal by the depositor of his deposit or on the transferability of the same abroad except those arising from the contract between the depositor and the bank.Section 6.Tax exemption. All foreign currency deposits made under this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized underPD No. 1034, including interest and all other income or earnings of such deposits, are hereby exempted from any and all taxes whatsoever irrespective of whether or not these deposits are made by residents or nonresidents so long as the deposits are eligible or allowed under aforementioned laws and, in the case of nonresidents, irrespective of whether or not they are engaged in trade or business in the Philippines. (As amended byPD No. 1246, from. Nov. 21, 1977.)Section 7.Rules and regulations. The Monetary Board of the Central Bank shall promulgate such rules and regulations as may be necessary to carry out the provisions of this Act which shall take effect after the publications in theOfficial Gazetteand in a newspaper of national circulation for at least once a week for three consecutive weeks. In case the Central Bank promulgates new rules and regulations decreasing the rights of depositors, rules and regulations at the time the deposit was made shall govern.Section 8.Secrecy of foreign currency deposits. All foreign currency deposits authorized under this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative, or any other entity whether public or private;Provided, however,That said 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. (As amended by PD No. 1035, and further amended by PD No. 1246, prom. Nov. 21, 1977.)Section 9.Deposit insurance coverage. The deposits under this Act shall be insured under the provisions of Republic Act No. 3591, as amended (Philippine Deposit Insurance Corporation), as well as its implementing rules and regulations:Provided, That insurance payment shall be in the same currency in which the insured deposits are denominated.Section 10.Penal provisions. Any willful violation of this Act or any regulation duly promulgated by the Monetary Board pursuant hereto shall subject the offender upon conviction to an imprisonment of not less than one year nor more than five years or a fine of not less than five thousand pesos nor more than twenty-five thousand pesos, or both such fine and imprisonment at the discretion of the court.Section 11.Separability clause. The provisions of this Act are hereby declared to be separable and in the event one or more of such provisions are held unconstitutional, the validity of other provisions shall not be affected thereby.Section 12.Repealing clause. All acts, executive orders, rules and regulations, or parts thereof, which are inconsistent with any provisions of this Act are hereby repealed, amended or modified accordingly, without prejudice, however, to deposits made thereunder.Section 12-A.Amendatory enactments and regulations. In the event a new enactment or regulation is issued decreasing the rights hereunder granted, such new enactment or regulation shall not apply to foreign currency deposits already made or existing at the time of issuance of such new enactment or regulation, but such new enactment or regulation shall apply only to foreign currency deposits made after its issuance. (As added by PD No. 1246, prom. Nov. 21, 1977.)Section 13.Effectivity. This Act shall take effect upon its approval.Approved, April 4, 1974
BANK SECRECY LAW - G.R. NO. 189206 G.R. NO. 189206
"x x x.GSIS invokes Republic Act No. 1405 to justify the issuance of the subpoena while the banks cite Republic Act No. 6426 to oppose it. The core issue is which of the two laws should apply in the instant case.Republic Act No. 1405 was enacted in 1955. Section 2 thereof was first amended by Presidential Decree No. 1792 in 1981 and further amended by Republic Act No. 7653 in 1993. It now reads:Section 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation.Section 8 of Republic Act No. 6426, which was enacted in 1974, and amended by Presidential Decree No. 1035 and later by Presidential Decree No. 1246, provides:Section 8. Secrecy of Foreign Currency Deposits. All foreign currency deposits authorized under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative or any other entity whether public or private; Provided, however, That said 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. (As amended by PD No. 1035, and further amended by PD No. 1246, prom. Nov. 21, 1977.)On the one hand, Republic Act No. 1405 provides for four (4) exceptions when records of deposits may be disclosed. These are under any of the following instances: a) upon written permission of the depositor, (b) in cases of impeachment, (c) upon order of a competent court in the case of bribery or dereliction of duty of public officials or, (d) when the money deposited or invested is the subject matter of the litigation, and e) in cases of violation of the Anti-Money Laundering Act (AMLA), the Anti-Money Laundering Council (AMLC) may inquire into a bank account upon order of any competent court.[footnoteRef:1] On the other hand, the lone exception to the non-disclosure of foreign currency deposits, under Republic Act No. 6426, is disclosure upon the written permission of the depositor. [1: ]
These two laws both support the confidentiality of bank deposits. There is no conflict between them. Republic Act No. 1405 was enacted for the purpose of giving encouragement to the people to deposit their money in banking institutions and to discourage private hoarding so that the same may be properly utilized by banks in authorized loans to assist in the economic development of the country.[footnoteRef:2] It covers all bank deposits in the Philippines and no distinction was made between domestic and foreign deposits. Thus, Republic Act No. 1405 is considered a law of general application. On the other hand, Republic Act No. 6426 was intended to encourage deposits from foreign lenders and investors.[footnoteRef:3] It is a special law designed especially for foreign currency deposits in the Philippines. A general law does not nullify a specific or special law. Generalia specialibus non derogant.[footnoteRef:4] Therefore, it is beyond cavil that Republic Act No. 6426 applies in this case. [2: ] [3: ] [4: ]
Intengan v. Court of Appeals affirmed the above-cited principle and categorically declared that for foreign currency deposits, such as U.S. dollar deposits, the applicable law is Republic Act No. 6426. In said case, Citibank filed an action against its officers for persuading their clients to transfer their dollar deposits to competitor banks. Bank records, including dollar deposits of petitioners, purporting to establish the deception practiced by the officers, were annexed to the complaint. Petitioners now complained that Citibank violated Republic Act No. 1405. This Court ruled that since the accounts in question are U.S. dollar deposits, the applicable law therefore is not Republic Act No. 1405 but Republic Act No. 6426. The above pronouncement was reiterated in China Banking Corporation v. Court of Appeals,[footnoteRef:5] where respondent accused his daughter of stealing his dollar deposits with Citibank. The latter allegedly received the checks from Citibank and deposited them to her account in China Bank. The subject checks were presented in evidence. A subpoena was issued to employees of China Bank to testify on these checks. China Bank argued that the Citibank dollar checks with both respondent and/or her daughter as payees, deposited with China Bank, may not be looked into under the law on secrecy of foreign currency deposits. This Court highlighted the exception to the non-disclosure of foreign currency deposits, i.e., in the case of a written permission of the depositor, and ruled that respondent, as owner of the funds unlawfully taken and which are undisputably now deposited with China Bank, he has the right to inquire into the said deposits. [5: ]
Applying Section 8 of Republic Act No. 6426, absent the written permission from Domsat, Westmont Bank cannot be legally compelled to disclose the bank deposits of Domsat, otherwise, it might expose itself to criminal liability under the same act.[footnoteRef:6] [6: ]
The basis for the application of subpoena is to prove that the loan intended for Domsat by the Banks and guaranteed by GSIS, was diverted to a purpose other than that stated in the surety bond. The Banks, however, argue that GSIS is in fact liable to them for the proper applications of the loan proceeds and not vice-versa. We are however not prepared to rule on the merits of this case lest we pre-empt the findings of the lower courts on the matter. The third issue raised by GSIS was properly addressed by the appellate court. The appellate court maintained that the judge may, in the exercise of his sound discretion, grant the second motion for reconsideration despite its being pro forma. The appellate court correctly relied on precedents where this Court set aside technicality in favor of substantive justice. Furthermore, the appellate court accurately pointed out that petitioner did not assail the defect of lack of notice in its opposition to the second motion of reconsideration, thus it can be considered a waiver of the defect.x x x."DOES THE BANK SECRECY LAW REALLY PROTECT ALL OF CORONAS DOLLARS?Everyone assumes that all the US dollars that Chief Justice Renato Corona stashed in banks are covered by the bank secrecy law.Let me offer the theory that they might not be ALL covered and the Senate impeachment court can legally look into them.Yes, I know I am a mere reporter with no formal training in law. But Ive had the experience of watching senators up close while they crafted our nations laws. And as a business reporter, Ive covered retail banking. Anyway, this week I ran these ideas past two high-level bank officials. None of them wanted to be identified (I wonder why?), so lets just call them Banker A and Banker B.However, what they told me are all verifiable.Now to go back to the Bank Secrecy LawThe mother law is Republic Act No. 6426 or An Act instituting a foreign currency deposit system in the Philippines, and for other purposes.RA 6426 has no section defining what constitutes foreign currency.However, it has three sections that suggest the definition by stating how banks are supposed to treat foreign currency.First, Section 4 states that banks taking in such deposits shall maintain at all times a one hundred percent foreign currency cover for their liabilitiesSection 4 recognizes that the act of depositing by a client establishes a kind of relationship and obligation between the bank and the customer. As Banker B explained to me -Once you give money to the bank, the bank is indebted to you as a depositor. This is the relationship the bank is borrowing from you in the form of a deposit. For that debt they will now pay you a certain amount of interest.The next section in RA 6426 that further suggests a definition of foreign currency is Section 6:Section 6.Tax exemption. All foreign currency deposits made under this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized underPD No. 1034,including interest and all other income or earnings of such deposits, are hereby exempted from any and all taxes whatsoever irrespective of whether or not these deposits are made by residents or nonresidents so long as the deposits are eligible or allowed under aforementioned lawsIn other words, Section 6 gives all foreign currency deposits a 100 percent tax break.The third section that suggests a definition of foreign currency is Section 9 which states:Section 9.Deposit insurance coverage. The deposits under this Act shall be insured under the provisions of Republic Act No. 3591, as amended (Philippine Deposit Insurance Corporation), as well as its implementing rules and regulations:Provided, That insurance payment shall be in the same currency in which the insured deposits are denominated.In other words, foreign currency deposits are insured by PDIC.Now let me go to my theory that not all foreign currency deposits are guaranteed confidentiality by RA 6246 or the bank secrecy law. Section 8 of this law states in particular:Section 8.Secrecy of foreign currency deposits. All foreign currency deposits authorized under this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, are hereby declared as and considered of an absolutely confidential naturePlease note the phrase here all foreign currency deposits authorized under this Act.It is part of my theory that bank secrecy only covers those foreign currency deposits defined by RA 6426. In other words, only those foreign currency deposits that contain the following elements enumerated by RA 6426: Those for which banks have to maintain a 100% foreign currency cover Those with interest earnings that are not taxed by the government And those that are insured by PDIC.
WHY DO I BRING UP THESE FINE DISTINCTIONS?Because since RA 6426 came into law in 1974, banks have dramatically expanded the array of foreign currency products they offer their clients.These are aside from the traditional savings, current and time deposits that were envisioned to be covered by RA 6426.Today, clients can park their dollars in sovereign bonds, in commercial papers, unit investment trust funds (UITFs), mutual funds all denominated in dollars and which are not tax-free and are not insured by the PDIC.Why would a depositor want to move away from plain vanilla dollar accounts? One reason would be: Because the interest rate on dollar savings and time deposits are terrible.According to Banker A, a US dollar time deposit now earns 0.25% per year. A US Treasury Bond earns 2% per annum. While a US dollar-denominated ROP (Republic of the Philippines) five-year bond can earn from 2% to 2.5%. In such transactions, we merely act as a broker, Banker B told me.From this, we can see that if the client wanted to put his or her dollars to work earning something more than the miserable interest on time and savings deposit accounts, then investing in these products would make sense.In fact, as Banker B explained to me, with a UITF or mutual fund, there is no such promise by the bank that it will pay a certain amount. It is not a bank obligation. This is a separate vehicle from the bank. In that sense, UITFs are not considered as bank deposits.Banker B also explained that while even mutual funds can now be bought through banks, these money market instruments are actually regulated by the Securities and Exchange Commission. In this case, the banks merely serve as brokers for these products.In the case of such products, the bank has no customer liability, Banker B said. The bank doesnt pay interest to the customer. Rather, it is the customer that pays the bank a transaction fee for arranging the buy and doing the paperwork.In such arrangements, the bank usually asks the customer to designate a particular bank account (either savings or current) as the settlement account. When the customer wants to liquidate the UITF or when a commercial paper or bond reaches maturity, proceeds including the interest earned from such products are deposited in this settlement account.In addition, Banker A also explained to me further why a dollar bond or a UITF denominated in dollars, for instance, is not considered a foreign currency deposit as defined by RA 6426:Iba nga talaga. Kasi hindi siya deposit. Hindi siya covered ng PDIC. Pag bumili ka ng bond, wala naman sa amin ang bond. You house it at a third party. We only facilitated. We act as a broker.Halimbawa kung ikaw kliente, magpabili ka ng stocks, I give you confirmation of sale that you bought 10,000 shares. I deliver the receipt. Babayaran mo ko. Kukunin ko commission ko. That money goes to the central depository (PCD).Pag nagpabenta ka. Ibibigay mo ang instruction, pupunta (yung instruction) sa broker. Kukuhanin namin shares sa PCD, ito ang pang-settle. Parang nagkaliwaan lang kayo.From covering retail banking, Ive also noted that while banks like PSB do not offer certain investment products, as its president Pascual Garcia III testified today, they do routinely refer their customers to the head office of the mother bank, in this case Metrobank. Such referrals are coursed through the retail bank like PSB which then transacts with the head office or mother bank and charges a transaction fee for this service.Because of this, it may be necessary for the Senate impeachment court to ask Metrobank and Bank of the Philippine Islands head offices whether CJ Corona has foreign currency investments with them. And not just dollars because some banks now have expanded their foreign currency-related transactions to euros and even yen.Senator-judge Serge Osmea seems to be on the same line of thinkingAn hour ago, Osmea asked PSB president and CEO Garcia whether dollar bonds could be classified as deposits under RA 6426.And so I would like to ask the following questions of the Supreme Court and the senator-judges:Is my theory valid or plain hogwash?If valid, can the Senate impeachment court now ask the banks to disclose any and all dollar transactions of CJ Corona revolving around such products? I believe that the moment an amount of foreign currency deposit from CJ Corona left the safe haven of savings and/or time deposit it loses the umbrella of confidentiality during that period. And these become legitimate subjects of inquiry by the Senate impeachment court.For this piece, I had tried to interview a well-known lawyer who teaches banking law. But he declined to speak to me. Likewise, I tried to obtain an interview with officials of the Bangko Sentral ng Pilipinas but no one would talk to me.Because of this, I have decided to throw my questions to the public and see that maybe, just maybe, some lawyers and banking experts will respond and share what they know.
PHILIPPINE BANK SECRECY AND THE FRUIT OF THE POISONOUS TREE
The ongoing impeachment trial of Chief Justice Renato Corona brought back into the limelight issues of bank secrecy and confidentiality, which had not been so publicly heard of since the impeachment trial of President Joseph Ejercito Estrada in 2000. Accessory to the issue of bank secrecy is the doctrine of the fruit of the poisonous tree, which has likewise gained a foothold in the Philippine media and popular pulse of late.
The rule of thumb has always been that when evidence has been acquired unlawfully, contrary to a number of constitutional protections under the Bill of Rights, such evidence is deemed inadmissible in court or any proceeding. This rule has traditionally been known as the doctrine of the "fruit of the poisonous tree." The doctrine states that if the tree (the source of the evidence) is tainted, then the fruit (any evidence gained from the tree) is tainted as well and thus inadmissible in any court or other proceeding.
Patterned after the US Constitution, the 1987 Philippine Constitution provides a fundamental right of the people against unlawful searches and seizures in Article III, Section 2 of the Bill of Rights, as follows:The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable, and no search warrant or warrant of arrest shall issue except upon probable cause to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the persons or things to be seized.Throughout the years, the Philippine Supreme Court has had the occasion to rule on issues relating to the doctrine of the fruit of the poisonous tree. From as early as US v. Hachaw in 1912 and US v. Santos holdings of the courts at a time when the Philippines was still a non-state US territory pursuant to the Treaty of Paris of 1898 to People v. Aminnudin in 1988 among many other cases, the Supreme Court has remained steadfast on the ruling thatIf a person is searched without a warrant, or under circumstances other than those justifying an arrest without warrant in accordance with law, merely on suspicion that he is engaged in some felonious enterprise, and in order to discover if he has indeed committed a crime, it is not only the arrest which is illegal but also, the search on the occasion thereof as being "the fruit of the poisonous tree."To reinforce inadmissibility, the Court ruled in 1987 in Nolasco v. Pao and People v. Burgos in 1986, again turning to US precedent, that any evidence taken, even if it confirms the suspicion of commission of a crime, is inadmissible "for any purpose in any proceeding."
Now on the topic of secrecy of bank accounts, the Philippine bank secrecy law has been considered as among the strictest in the world on the issue of confidentiality and non-disclosure. The primary law is the 1955 Republic Act No. 1405, also known as the Bank Secrecy Law, which provided as a general rule, strict confidentiality on deposits with banks or banking institutions, as followsSection 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation.While Section 2 provided for the confidentiality of bank accounts, it also provided for exceptions, thereby allowing lawful access to bank information. These exceptions can be summed up into four instances: first, upon written permission of the depositor; second, in cases of impeachment; third, upon order of a competent court in bribery or dereliction of duty cases of public officials; and fourth, in cases where the money is the subject matter of litigation. Arguably, the second, third and fourth exceptions may be applicable to Corona's impeachment trial, thus, banks which are subject to a subpoena by the Senate sitting as the Impeachment Court, would have to disclose Corona's accounts. It has to be noted too that subsequent laws provided for other exceptions to the guarantee of privacy under Republic Act No. 1405.
Curiously, the Bank Secrecy Law did not provide for a clause aimed to render inadmissible unlawfully accessed bank information. The only plausibly relevant provisions, read together, which may lend support to an application of the fruit of the poisonous tree doctrine state that the unlawful act of any official or employee of a banking institution to disclose any information on bank deposits (Section 3) is deemed a violation of the law subjecting the offender to imprisonment and fine (Section 5).
In the landmark 2006 case of Ejercito v. Sandiganbayan, the Philippine Supreme Court ruled on the issue of unlawful access of bank accounts of former President Joseph Estrada on the charge of plunder. In justifying the access of bank information for plunder, the Court likened cases of plunder and unexplained wealth to bribery or dereliction of duty, in order to fit the case squarely into the exceptions under Section 2 of the Bank Secrecy Law, as followsCases of unexplained wealth are similar to cases of bribery or dereliction of duty and no reason is seen why these two classes of cases cannot be excepted from the rule making bank deposits confidential. The policy as to one cannot be different from the policy as to the other ... Thus, cases for plunder involve unexplained wealth.
On the issue of the doctrine of the fruit of the poisonous tree, the Supreme Court also held in EstradaHowever, R.A. 1405, it bears noting, nowhere provides that an unlawful examination of bank accounts shall render the evidence obtained therefrom inadmissible in evidence. Section 5 of R.A. 1405 only states that "any violation of this law will subject the offender upon conviction, to an imprisonment of not more than five years or a fine of not more than twenty thousand pesos or both, in the discretion of the court.The fruit of the poisonous tree doctrine presupposes a violation of law. If there was no violation of RA 1405 in the instant case, then there would be no "poisonous tree" to begin with, and, thus, no reason to apply the doctrine.
As such, it has become clear that, as it currently stands, the Bank Secrecy Law provides for confidentiality of bank accounts and information, the exceptions thereto, and the penalties for violations of its provisions. However, the Estrada ruling brings to light a ratio that may provide for instances where bank information may be accessed unlawfully yet may be admissible against the account holder in any court or proceeding. This, in our opinion, can be a silent constitutional space which the prosecution and defense alike may capitalize upon.
BANK SECRECY, AND WHY IT MAY NOT MATTER AFTER ALL Thursday, 09 February 2012 07:51 Written by Jego Ragragio As of this writing, PSBank's petition for the issuance of a TRO against the Impeachment Court subpoena of Chief Justice Renato Corona's dollar account has yet to be taken up by the Supreme Court en banc. Both sides argue their position from the laws. Those who see the subpoenas as proper, and even the Senate itself, rely on Republic Act 1405, or the Bank Secrecy Law. Those who oppose it, on the other hand, cite a special law, RA 6426, known as the Foreign Currency Deposit Act of the Philippines. In a nutshell, Act 1405 allows bank records to be revealed in cases of impeachment, while R.A. 6426 does not provide for such an exception.This issue is not without precedent. In the case of Intengan v. Court of Appeals, Citibank N.A. officers suspected of illegal activities were investigated. In the course of the investigation, the dollar bank records involved with the activities were obtained by law enforcement and used as basis to file criminal charges against the officers. The owners of the accounts, who were not accused of any crimes but where indirectly involved with the scheme, invoked Act 1405 (mistakenly, as the Court would later point out), claiming that the disclosure of their accounts did not fall under any of the exceptions listed.The Supreme Court through Justice De Leon, Jr. ruled that foreign accounts are covered exclusively by R.A. 6426, while peso accounts are covered by Act 1405. And since R.A. 6426 provides for only one exception to bank records disclosures (namely, written permission from the account holder), no other grounds can be invoked. And in this case involving dollar accounts, the Court ruled in favor of the account-holders.Tracing the history of R.A. 6426 reveals that foreign currency accounts were, at one point, subject to the exact same secrecy provisions of Act 1405, but such exceptions were later removed by amendment via two presidential decrees. The unmistakable intent of the amendments was to remove foreign currency accounts from the expanded list of exceptions to the bank secrecy laws and subject it to a much more restricted list of exceptions, to encourage foreign depositors to utilize our banking system for their purposes. In hindsight and in light of the current situation, this may seem like a harsh restriction against government agents pursuing justice, but as the maxim goes: Dura lex, sed lex. The law is harsh, but it is law..The inescapable conclusion, therefore, is that impeachment cannot be a ground to force PSBank to divulge the contents of CJ Corona's dollar accounts. Whether we like it or not, the defense is clearly correct in its objection.But at this point, is it even necessary to discuss the issues of bank secrecy?In the defense's petition to the Supreme Court, the petition makes an argument out of a lack of a waiver from CJ Corona granting the prosecution authority to examine the account. Yet this argument can only be held valid if CJ Corona had a dollar account to begin with. Without this account, the subpoena is void from the beginning, and there would be no need to argue its illegality.In fact, PSBank President Pascual Garcia III practically confirmed that CJ Corona indeed has dollar accounts with their bank, by stating in the Impeachment Court that he refused to bring the pertinent records for fear of exposure to criminal liability. Again, such a defense could only make sense if CJ Corona indeed had such accounts; otherwise, why risk the ire of the Senate over accounts that don't exist?As it stands, a year-on-year comparison of CJ Corona's SALN and available bank records show large discrepancies between the numbers, and the SALN values are the ones that are lower. What's more, from the SALN records, no items indicate any cash in foreign currency bank accounts, as required by the SALN form itself.For all intents and purposes, the mere establishment of the continued existence of these dollar accounts, from the testimony of the PSBank chief and even from the defense' own petition to the Supreme Court, is itself another piece of evidence against Corona as far as Art. II goes. For all the hue and cry on bank secrecy laws and its supposed violation, it may not even matter after all.
THE RULE OF LAW AND BANK SECRECYFROM A DISTANCE By Carmen N. Pedrosa | Updated February 12, 2012 - 12:00amI dont know if many read the article purportedly from Wikileaks that the US government had criticized Philippine laws and local court rulings that block investigation and prosecution of suspected corrupt government officials.It was said to be an unclassified cable 08MANILA622, dated March 12, 2008 and sent by then Ambassador Kristie Kenney to the US Secretary of State who said anti-corruption efforts in the Philippines were being hampered by local institutions themselves.Isnt it an artful coincidence that this leak should be published at the same time that the SC stops the subpoena on dollar accounts of CJ Renato Corona at PS Bank?* * *But how is bank secrecy dealt with in America? Let us hear from Robert Goulders article :US Bank Secrecy is Alive & KickinAmerican taxpayers are basically on the honor system when it comes to declaring income from hidden Swiss bank accounts. US politicians pitch a fit when Americans take advantage of foreign bank secrecy rules to conceal income from the IRS and rightfully so yet we do the same thing to other countries?Opinion ( Article MRec ), pagematch: 1, sectionmatch: 1Apparently the US governments indignation over bank secrecy is, shall we say, selective.We object to bank secrecy when another country (i.e., Switzerland) erodes our tax base and prevents us from taxing our own citizens, yet we do precisely the same thing to every other country (other than Canada).Why does Congress tolerate US bank secrecy?Simple: our banks need the money.My purpose here is not to defend Switzerland or UBS account holders who knowingly violate US law. Its merely to point out a glaring double standard when I see it. Hmm. This is food for thought.There were other aspects that the framers of the bank secrecy law must have considered. Like the US bank secrecy whether rightly or wrongly is practiced in the US as well because the banks need the money. If US banks need the money it would be hypocritical to say that the Philippine banks do not need the money. But there you are, the ugly head of double standard again rearing its head.It is a matter of concern that an impeachment hearing that was called for by 188 congressmen without reading the reasons for impeachment for dubious reasons like huge pork barrels and other bribes should now take the moral high ground and earn their pay at the expense of the countrys banking system.I think the business community should take heed on what is happening. The Philippine banking system is being made a casualty in burning the Philippine house to impeach CJ Renato Corona.
We are all praises for Philippine Savings Bank president Pascual Garcia III who unlike the prosecution congressmen knows and understands what his duty is under the law. The rule of law is paramount.Garcia referred time and again to the Foreign Currency Deposit Act (Republic Act No. 6426). Section 8 states: All foreign currency deposits authorized under this Act are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositors, in no instance shall be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or private. If the prosecutor congressmen or the senator-judges want Garcia to accede to their demands, then they will have to change the law first.* * *The issue yet again as it has been from the very beginning of the impeachment trial is whether we should protect the rule of law. It supersedes any other consideration if we are to preserve democracy in the Philippines.Therefore we should vigorously oppose and denounce the prosecution for acting as a quasi judicial body to compel banks to reveal deposit documents, both peso and foreign currency, without the express and written consent of the depositor.Thankfully the Supreme Court issued an indefinite temporary restraining order on the subpoena issued by the impeachment court on the alleged dollar accounts of Chief Justice Renato Corona in Philippine Savings Bank. The TRO that SC issued was on PSBanks separate petition that sought to prevent violation of the law and protect its 600,000 depositors, sources said.By doing so the Supreme Court exercised its mandate in the Constitution to interpret the law and protect it from the vagaries of politics.At press time I was told that the chief prosecutor, Congressman Niel Tupas also banks with the same branch. It may be that there was no need for the little woman to come along to bring the envelope.* * *The Supreme Courts TRO against the Senate tribunal was defended by Fr. Joaquin Bernas. It has less to do with whether or not CJ Corona has deposits in a bank or any bank for that matter. The issue is about the mandate of the Supreme Court under the Constitution.He said that the SC has the power to enjoin actions and rulings of the Senate sitting as impeachment court if found to be against the Constitution. It may review interlocutory orders of the impeachment trial and enjoin those it found to be issued with grave abuse of discretion.The SC can come in when needed to determine the meaning of the law. This does not mean superiority of the SC over the other departments. All it means is that the Constitution has placed in the SC the power to determine with finality the meaning of the law, Bernas told the Philippine Constitutional Assembly.* * *While politicians burn the Philippine house, ordinary Filipinos are moving heaven and earth to help the victims of the earthquake in Negros Oriental. Louie Sarmiento, head of the Philippine Mine Safety and Environment Association (PMSEA) texted this column:Ten minutes ago, PMSEAs Pusong Minero team from Apex Mines recovered one body in Barangay Solongon, La Libertad. PMSEA Director Roger Casido, PR Officer Bojo Sta. Maria and I were accompanied by La Libertad Mayor Lawrence Limkaichong to Solongon. Our geologists from the Mines and Geosciences Bureau (MGB) Region 7 and University of the Philippines National Institute of Geological Sciences (UPNIGS) are doing geohazard assessment.PHILIPPINE BANK SECRECY, MONEY LAUNDERING, AND SOLUTIONSSummaryThe Philippines have very specific legal provisions on both Philippine Bank Secrecy and Money Laundering. For the most part, there should be no contradictions between the two as per the provisions of both laws. However, when it comes to the provisions regarding the privacy of foreign currency accounts, it becomes complicated. This became a major issue in the ongoing impeachment trial of Chief Justice Renato Corona, wherein tension among all the three branches was heightened. To avoid repeating the same compromising situation, some members of the Senate are proposing amending the bank secrecy laws in a ways that would make litigation of government individuals easier.Provisions of the LawIn summary, the Bank Secrecy Law assures that the bank records of individuals are absolutely confidential nature and and may not be examined, inquired or looked into by any person, government official, bureau or office. However, there is a limitation to this rule as per the peso accounts particularly: upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation.On the other hand, the Foreign Currency Deposits Act(Republic Act No. 6426, as amended) is stricter with regards to the confidentiality of the accounts. The only exception is when the owner of the said account gives written consent to open the bank accounts in question. This provision, according some government officials, is a loophole that can be used by money launderers and corrupt officials. Simply put, they can just save ill-gotten funds into Foreign Currency Accounts and be immune from having the said accounts be used as evidence against them.The Anti Money Laundering Act of 2001 (AMLA), which is to be implemented by the Anti Money Laundering Council (AMLC), defines money laundering as a crime whereby the proceeds of an unlawful activity as [defined in the law] are transacted, thereby making them appear to have originated from legitimate sources. The AMLC is tasked to investigate cases of money laundering order Bank Inquiry Order and Freeze Order if there are apparent violations. However, the law cannot do anything to foreign currency deposits as per the provisions of Foreign Currency Deposits Act.On the Corona TrialThe three laws factored heavily in the ongoing Corona Trial earlier. The alleged Peso bank accounts of CJ Corona were exposed as per the provisions of the Bank Secrecy Law and the Anti Money Laundering Act of 2001. However, the dollar accounts of the Chief Justice are yet to be opened as per the Foreign Currency Deposits Act. The Supreme Court ordered a TRO regarding the opening of the said accounts as per the mandate of the law even if the Impeachment Court pushed for it earlier.Proposed LegislationSeveral proposals to amend the current AMLA by the BSP and other politicians have been made in light of the predicament that they have faced in the Corona Impeachment Trial. Among the proposals was one that aims to exempt all functioning government officials from the coverage of the Bank Secrecy Act and the Foreign Currency Deposits Act. Other strengthening measures proposed in turn by the BSP include stricter monitoring and having a reward system for would-be whistle blowers. These provisions are targeted to strengthen the push of the AMCLC to apprehend more money launderers and for the government to tighten its anti-corruption campaign.Assessment The proposals to amend the standing AMLA is a reactionary measure to the several money laundering problems the government has faced before, and also the current impeachment trial. Some would view the measures as a late response to an un-anticipated problem raised by the Corona dollar accounts. However, the proposals have positive repercussions if and when passed. It strengthens the Anti Money Laundering campaign by the government to near global standards. More importantly, it limits the options of corrupt officials in terms of where they would hide ill-gotten wealth undetected. Furthermore it prevents the same clash between the branches of government who are looking into Foreign Currency and even Peso accounts as part of litigation.
PH BANK SECRECY LAWS STRICTEST IN THE WORLDBy Lucy Swinnen, Michael Lim UbacPhilippine Daily Inquirer 12:51 am | Saturday, February 18th, 2012 The United States has questioned the antiquated bank secrecy laws of the Philippines, describing them as among the strictest in the world, in the face of the global trend toward transparency. The criticisms made by two US envoys are contained in a series of cables from 2005 and 2008, and have been made public by the whistle-blower website, Wikileaks. Former US ambassadors to Manila Francis Ricciardone and Kristie Kenney, in separate cable dispatches sent to Washington, said the banking secrecy laws in the country were hampering transparent governance and anticorruption mechanisms, and went against the global trend relaxing bank secrecy laws. Foreshadowing events in the Philippines as early as 2007, Kenney talked of institutional challengeswhich included bank secrecy laws and poor protection for whistle-blowersas serious barriers to corruption convictions in the Philippines. The bank secrecy laws in the Philippines are among the strictest in the world, said Ricciardone in a January 2005 cable (code: 05MANILA84, http://cables.mrkva.eu/cable.php?id=25003), in which he related the transparency problems besetting the country. The United States is apparently particularly concerned about the Foreign Currency Deposit Act of the Philippines (FCDA), otherwise known as Republic Act No. 6426. The FCDA is a legacy of the martial-law era, having been signed into law by the late dictator Ferdinand Marcos in 1974. The FCDA makes the revelation of foreign currency details unlawful, except upon a written permission of the depositor. The other law is the Bank Secrecy Law (Republic Act No. 1405) enacted on Sept. 9, 1955. RA 1405 declares all deposits absolutely confidential, with the exceptions of: written consent of the depositor; in cases of impeachment; upon order of a competent court in cases of bribery or dereliction of duty of public officials; or in cases where the money deposited or invested is the subject matter of the litigation. Kenney and Ricciardones remarks came on the heels of a global rethink of bank secrecy laws. The era of banking secrecy is over, declared members of the Group of 20 leading economies (G20) at the 2009 summit in London in a joint communiqu. The global financial crisis was the catalyst for the G20 crackdown on bank secrecy that began in 2009. In order to manage the global financial crisis and prevent future crises from reoccurring, financial institutions need to pursue accountability reforms, said the G20 communiqu. The FCDA was invoked last week by the Philippine Savings Bank (PSBank) in refusing to divulge the alleged foreign currency deposits of Chief Justice Renato Corona, which the Supreme Court acceded to by issuing a temporary restraining order (TRO). The Senate impeachment court voted on Monday to respect the TRO, effectively barring the prosecution from opening the alleged foreign currency deposits with PSBank of the Chief Justice. AFP corruption scandal In the January 2005 cable, Ricciardone reported to Washington that the Sandiganbayan antigraft court had resumed efforts to prosecute the former Armed Forces comptroller, Maj. Gen. Carlos Garcia, for plunder and corruption in 2005. However, Ricciardone noted that the strict bank secrecy laws prevented the Land Bank of the Philippines (LandBank) involved in the litigation from fulfilling the court order to freeze Garcias dollar accounts. The LandBank froze Garcias two peso-denominated accounts, worth nearly $120,000. However, the LandBank, a Filipino financial institution, refused an order of garnishment issued by the Sandiganbayan on five US dollar-denominated accounts, he said. Kenney, who is now the US ambassador to Thailand, sent two separate cable dispatches in which she lamented the barriers to effective prosecution of money launderers in the Philippines. Investigations are hampered by Philippine banking secrecy laws that limit access to certain crucial financial information, and by poor protection for would-be whistle-blowers, said Kenney. In one dispatch, Kenney highlighted the severe negative implications of a ruling handed down by the Supreme Court in the case of People of the Philippines v. Eugenio. The dispatch (08MANILA626, http://cables.mrkva.eu/cable.php?id=145542) is titled, RP Supreme Court supports bank secrecy, which contains this summary: The Philippine Supreme Court has ruled that a bank account holder must be given prior notification before an inquiry can be made into their bank records during investigation of money laundering or corruption cases. Both Philippine and US criminal law enforcement efforts may be negatively affected by this decision. The Philippine Office of the Solicitor General is likely to file a motion by March 14 asking that the entire Supreme Court rehear the case. Ownership dispute Kenney recounted that upon hearing the news of the high courts decision in the Eugenio case, she requested the Philippine Anti-Money Laundering Council to explain this debacle. The Eugenio case concerns a February 2008 high court ruling in a case involving the ownership dispute between the Philippine government and the Piatco consortium that built the Ninoy Aquino International Airport Terminal 3 (Naia 3). The government had nullified the contract on the ground that it was attended by corruption. The high court ruled against the Anti-Money Laundering Council probing into the bank deals surrounding the Naia project. The high court ruled that except in cases of terrorism, kidnapping and drug violations, bank account holders must be given prior notification before inquiry can be made into their bank records. In her report, Kenney said the high court decision jeopardized both Philippine and US investigations in anticorruption cases. Giving subjects of investigations notice of the investigations at an early stage allows opportunity for the destruction of evidence, the concealment of other assets and the obstruction of justice, Kenney stated. It will also allow the account holder to prevent effective investigation by tying the proceedings up with litigation, it said. Pending bills The role of bank secrecy laws in the Corona trial has spurred some members of Congress to call for a change to the banking laws. Sen. Ralph Recto filed Senate Resolution 711 last week seeking a review of the FDCA and RA 1405. Recto acknowledged the concern in the financial sector that bank practices were being dragged into the politics of the impeachment trial. The review is not meant to de-fang [these] laws but to make certain that no one gets hurt or gets special treatment when the claws of these laws start to pounce on its object of prey, he said. Back in 2010, Sen. Francis Escudero filed Senate Bill 107 bill that would require government employees to provide the Office of the Ombudsman with written permission to look into their bank accounts if they are accused of crimes. We want to put in place a mechanism that promotes openness and transparency in the public sector said Escudero, adding that those who did not provide permission were free to go to the private sector because working in the government is a privilege and not a right. These two Senate bills are pending at the Senate committee on banks. In the House of Representatives, partylist member Antonio Tinio (Alliance of Concerned Teachers, or ACT) has filed a counterpart bill that seeks to amend the FDCA by revoking the absolute confidentiality conferred upon foreign currency deposits, but only in cases involving bribery and dereliction of duty. These privileges granted by law to foreign currency deposits effectively place them beyond the reach of government, Tinio said.
END THE PHILIPPINE BANK SECRECY LAW!Ever since the former dictator Ferdinand Marcos signed into law the Foreign Currency Deposit Act(FCDA), also known as Republic Act No. 6426 on April 4, 1974, Philippine banks have been forbidden from disclosing any information about a customers bank account if that account is denominated in a foreign currency. Only with the written consent of the account holder will banks release any information about the account. And since 1974, Philippine banks have become a haven for plundered and ill-gotten wealth.No less than two US Ambassadors to the PhilippinesFrancis Ricciardone and Kristie Kenneyin separate cable dispatches published by Wikileaks had voiced concern about the FCDA. Ricciardones 2005 dispatch characterized PHL banking laws as among the strictest in the world. Kenny likewise laments in a 2007 cable about corruption that Investigations are hampered by Philippine banking secrecy laws that limit access to certain crucial financial information. As the Group of 20 leading economies (G20) categorically stated in their 2009 London communiqu The era of banking secrecy is over. It is thus high time that Congress repeal or revise this anachronistic Marcos-era piece of bad legislation. The ongoing Corona impeachment trial has placed the spotlight on the FCDA and its detrimental effect on transparency and accountability in government.Philippine legislators from both Houses of Congress are now working on various bills to either repeal or revise the FCDA. This is therefore the perfect time for PHILNEWS.COM readers to step in and lend them a helping hand. Heres what we need to do:Sign the Petition to US President ObamaClick the button on the left to directly petition the Obama Administration to make the transfer of Coast Guard Cutter Dallas contingent on the repeal or revision of the FCDA. Our goal is to get at least 25,000 signatures within 30 days. So please be sure to get all your friends and relatives to sign the petition as well.Remember, the more signatures we can gather, the better our chances of making a significant impact on this issue. If enough of us do it, Washington will surely be forced to take notice and lean on the Philippine Government to finally put an end to this odious law that Marcos foisted on the Filipino people nearly four decades ago. Filipinos living abroad often feel frustrated and disenfranchised with regards to Philippine politics. They see things that need changing but feel helpless to doing anything about them. Well, heres one opportunity for Filipino-Americans to get rid of a Marcos-era law that should never have been promulgated to begin with. With a much needed naval vessel hanging in the balance, the executive and legislative branches of the Philippine government would be more inclined to repeal Republic Act No. 6426a law that even the United States would want to see repealed. More importantly, you would have made a big difference in helping bring more transparency and accountability to Philippine governance. Fatca: The end of banking secrecy? Published on Wednesday, 10 April 2013 20:49 Written by Edzyl Josef G. Magante / Contributor ConclusionGOVERNMENT POWER TO CONCLUDE BILATERAL AGREEMENTSSINCE the US pursues the implementation of the Foreign Account Tax Compliance Act (Fatca) by concluding bilateral agreements with national governments, another question that ensues is whether the Philippine government may legally contract away individual rights that may be prejudiced by Fatca, such as the right to privacy.Again, in Republic v. Eugenio, the Supreme Court ruled that there is a right to privacy governing bank accounts in the Philippines. By this pronouncement, the Court may be implying that the rule on secrecy of bank deposits has constitutional underpinnings. The Court even went as far as to say that the framers of the 1987 Constitution, likewise, recognized that bank accounts are not covered by either the right to information under Section 7, Article III or under the requirement of full public disclosure under Section 28, Article II. As reflected earlier, the Supreme Court has, likewise, consistently held that bank deposits are statutorily protected and fall within recognized zones of privacy. In BSB Group Inc. v. Go, the Court further stated that in any given jurisdiction where the right to privacy extends its scope to include an individuals financial privacy rights and personal financial matters, there is an intermediate or heightened scrutiny given by courts and legislators to laws infringing such rights.If the right to privacy that inheres in the secrecy of bank deposits is indeed constitutionally founded, then the intergovernmental approach of the US may not be enough to sidestep Fatcas possible infringement of banking secrecy in the Philippines. Again, does the Philippine government have the power to conclude a bilateral agreement that implements a foreign law that may violate a possibly constitutionally protected right to privacy?Now more than ever, when even first-world economies are falling like dominoes, tax collection becomes a priority of national governments the world over. But to what extent may cash-strapped states resort to radical legal measures to increase tax collection? Fatca certainly tests the limits of a nations power to tax.Still a work in progress, Fatca has a long way to go in terms of making its design and strategy legally viable in foreign jurisdictions. On this score, the intergovernmental approach of the US falls short: a quid pro quo does not cut it.Bilateral agreements, where national governments commit to implement Fatca on the basis of mutual concessions, do not automatically make Fatca implementation entirely legal, even in those acceding jurisdictions. Legal shortcuts at best, these agreements, in large part, only serve to shift the blame to the consenting national governments for any illegality resulting from Fatca enforcement.It is doubtful whether a bilateral agreement to implement Fatca will survive a constitutional challenge in the Philippine Supreme Court. It is far too established to require citation of authority that an international agreement cannot override the Philippine Constitution.
NEED TO CRAFT NEW BANK SECRECYLAWPosted by butalidnl on 21 February 2012There is a lot of interest these days on the issue of Bank Secrecy specifically about looking at officials bank accounts to determine if they have some undeclared wealth. Some people have proposed that the Bank Secrecy Law be changed. I agree. But it is important to note that any new law will only apply to subsequent cases, and not to the current impeachment trial.There are actually two Bank Secrecy Laws: the Foreign Currency Deposit Act (FCDA), otherwise known as Republic Act No. 6426, enacted in 1974; and the Bank Secrecy Law (Republic Act No. 1405) enacted in 1955. Bothneed to be amended, or rather replaced by a new law. The new law is needed in order to fight corruption, tax evasion, money laundering etc, while protecting the privacy of bank accounts.
The law should be changed, and it should properly be renamed as a Bank Privacy Law. The basic principle of this law would be that a persons bank account is private i.e. known only by him and his bank. But that the government should have the capacity to access what it needs from such accounts to determine if any laws have been violated. Privacy should not provide a safe haven for those doing illegal acts. At the same time, privacy should be respected even when a persons bank account records are accessed.People want to have privacy in their bank accounts for all kinds of reasons. Bank accounts reflect what one does in life, and these things do not need to be known by the public. They may have special reasons why they do not want to divulge their bank account data. Things like: donations to ones church and other charitable causes, tuition fee payments, even the cost of a house may not be good to divulge. And there are things that are legal, but may be awkward: payment for a drug rehab treatment, a VD clinic, or even informal support payments for an undeclared child.Public officials should be subject to more monitoring than the rest of the public. This is to check against cases of corruption. They are required to file SALNs (Statement of Assets, Liabilities and Net worth), which naturally include their bank account balance. In order to ensure that SALNs are accurate, anti-corruption bodies should be able to verify that their declared bank account balances are accurate.The question that policymakers should consider is: how to craft a law that protects peoples bank privacy, while ensuring that tax evaders, criminals and corrupt officials dont use the banking system to hide their deeds?PROVISIONS.Some provisions of the proposed law would be:Protection of Account Privacy. Bank accounts, whether they are in peso or in foreign currency are private. Anybody violating this without legal justification will be severely punished. When an investigation makes it necessary for a Court to access some account data, the data should be limited to what is strictly needed, and the full account record should never come out in a court record.End of Year Balance. At the end of every year, banks will provide depositors a statement of their balance as of 31 December, as well as the amount of tax withheld. This will be used as a basis for SALNs etc.Withheld Tax. All Earnings through the banks will have tax withheld automatically. This tax will be turned over to the tax authorities. Tax on interest for foreign currency accounts will also be collected; the rate of tax will depend on the declared citizenship of the depositor. If an account holders country does not collect tax on interest earned, tax will be withheld based on Philippine law and collected by Philippine tax authorities.Tax authorities can request from banks an end of year statement for persons they are investigating, which specify: total deposits, total withdrawals, total tax withheld.Ombudsman and Sandiganbayan (anti-corruption court) have the right to request End of the Year balance, total deposits, total withdrawal and tax withheld for any official that they are investigating. If, upon investigation of these documents, the Sandiganbayan deems it necessary, it can also ask to look at that officials monthly bank statements.Anti-money laundering. The NBI should be able to get access to an account in terms of the money transfers into or going outside the country, as well as large deposits and withdrawals (perhaps amounts of P1 million or more). The bank will provide these to them in a special form, without revealing the account holders other bank transactions.Prosecution of Criminals. Courts should be able to access bank records of people being tried for financial crimes (including tax evasion and money laundering). But these records remain private meaning that only the judge (and some select court officials) would have (temporary) access to the full records. On the basis of their examination of the actual records, they would sign an extract from the records which would omit all transactions not relevant to the case as correctly reflecting the actual record. It will only be these extracts which will appear in the court record. The original records will be returned to the bank.Bank Officials. Since bank officials have a key role in keeping bank accounts private, they have a big responsibility in their hands. Any violation of the rules by bank officials (e.g. leaking the contents of an account) should be severely punished. Before they are entrusted with these responsibilities, bank officials should be cleared by both the NBI and the BSP. The BSP will hold a regular audit of cases where bank balance data are shared with courts, to ensure that bank officials and courts correctly follow the procedures.Exodus?Some people are concerned that there would be an exodus of funds from Foreign Currency Deposits if the Bank Secrecy Laws are amended. I think that the economic effect of such new laws will be limited. It may even be beneficial, since it may result in a devaluation of the peso, which would benefit exporters and OFW families.The main effect of new Bank Secrecy Laws will be that it would be increasingly difficult to hide ill-gotten wealth in the banking system. And this may, or it may not, lessen corruption of officials. If, in the process of doing so, we also rid the country of its reputation as a haven for tax cheats and money-launderers, then that should be all right.
http://en.wikipedia.org/wiki/Bank_Secrecy_ActBANK SECRECY ACTThe Bank Secrecy Act of 1970 (or BSA, or otherwise known as the Currency and Foreign Transactions Reporting Act) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, and file reports of cash purchases of these negotiable instruments of more than $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. Many banks will no longer sell negotiable instruments when they are purchased with cash, requiring the purchase to be withdrawn from an account at that institution.The BSA was originally passed by the Congress of the United States in 1970, and amended several times since then, including provisions in title III of the USA PATRIOT Act. (See 31 USC 53115330 and 31 CFR Chapter X.) The BSA is sometimes referred to as an "anti-money laundering" law ("AML") or jointly as "BSA/AML".
TYPES OF REPORTSThe BSA regulations require all financial institutions to submit five types of reports to the government. The following is not an exhaustive list of reports to be filed. The FBAR has an individual filing requirement, as detailed below.1. FinCEN Form 112 (formerly Form 104) Currency Transaction Report (CTR): A CTR must be filed for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through or to a financial institution, which involves a transaction in currency of more than $10,000. Multiple currency transactions must be treated as a single transaction if the financial institution has knowledge that: (a) they are conducted by or on behalf of the same person; and, (b) they result in cash received or disbursed by the financial institution of more than $10,000.2. FinCEN Form 105 Report of International Transportation of Currency or Monetary Instruments (CMIR): Each person (including a bank) who physically transports, mails or ships, or causes to be physically transported, mailed, shipped or received, currency, traveler's checks, and certain other monetary instruments in an aggregate amount exceeding $10,000 into or out of the United States must file a CMIR.3. Department of the Treasury Form 90-22.1 Report of Foreign Bank and Financial Accounts (FBAR): Each person (including a bank) subject to the jurisdiction of the United States having an interest in, signature or other authority over, one or more bank, securities, or other financial accounts in a foreign country must file an FBAR if the aggregate value of such accounts at any point in a calendar year exceeds $10,000. A recent District Court case in the 10th Circuit has significantly expanded the definition of "interest in" and "other Authority".4. Treasury Department Form 90-22.47 and OCC Form 8010-9, 8010-1 Suspicious Activity Report (SAR): Banks must file a SAR for any suspicious transaction relevant to a possible violation of law or regulation.5. FinCEN Form 110 Designation of Exempt Person: Banks must file this form to designate an exempt customer for the purpose of CTR reporting under the BSA. In addition, banks use this form biennially (every two years) to renew exemptions for eligible non-listed business and payroll customers.It also requires any business receiving one or more related cash payments totalling $10,000 or more to file IRS/FinCEN Form 8300.AFFECTED TRANSACTIONSCURRENCY TRANSACTION REPORT (CTR)The CTR must report cash transactions in excess of $10,000 during the same business day. The amount over $10,000 can be either in one transaction or a combination of cash transactions. It is filed with the Internal Revenue Service.MONETARY INSTRUMENT LOG (MIL)The MIL must indicate cash purchases of monetary instruments, such as money orders, cashier's checks and traveler's checks, in value totaling $3,000 to $10,000, inclusive. This form is required to be kept on record at the financial institution, and produced at the request of examiners or audit to verify compliance. A financial institution must maintain a Monetary Instrument Log for five years.SUSPICIOUS ACTIVITY REPORT (SAR)The SAR must report any cash transaction where the customer seems to be trying to avoid BSA reporting requirements by not filing CTR or MIL, for example. A SAR must also be filed if the customer's actions suggest that he is laundering money or otherwise violating federal criminal laws and committing wire transfer fraud, check fraud or mysterious disappearances. The bank should not let the customer know that a SAR is being filed. These reports are filed with the Financial Crimes Enforcement Network ("FinCEN").SANCTIONSThere are heavy penalties for individuals and institutions that fail to file CTRs, MILs, or SARs. There are also penalties for a bank which discloses to its client that it has filed a SAR about the client. Penalties include heavy fines and prison sentences.HOW IT AFFECTS AMERICAN CITIZENSCTRs include the individual's bank account number, name, address, and social security number. SAR reports, required when transactions indicate behavior designed to elude CTRs (or many other types of suspicious activities), include somewhat more detailed information and usually include investigation efforts on the part of the financial institution to assess the validity or nature of the transactions. A single CTR filed for a client's account is usually of no concern to the authorities, while multiple CTRs from varying institutions or a SAR suggest that activity may be suspicious. A financial institution is not allowed to inform a business or consumer that a SAR is being filed, and all the reports mandated by the BSA are exempt from disclosure under the Freedom of Information Act.Businesses that deal primarily in cash, such as bars and restaurants, can be exempted from having their deposits and withdrawals reported on CTRs, although this exemption is rarely granted. Instead, most banks have computer systems which retain information on CTRs and allow duplicate CTRs to be created seamlessly.INDIVIDUAL FILING REQUIREMENTU.S. citizens must file the FBAR if they have a financial interest in, or authority over, foreign bank accounts that have an aggregate value of $10,000 at any point in a year. Additionally, they must report the accounts on Schedule B of the Form 1040 tax form. The FBAR should be filed separately with the U.S. Treasury by June 30 of each year.ADDITIONAL INFORMATIONAn entire industry has developed around providing software to analyze transactions in an attempt to identify transactions or patterns of transactions called structuring, which requires SAR filing. Financial institutions are subject to penalties for failing to properly file CTRs and SARs, such as heavy fines and regulatory restrictions, including charter revocation.These software applications effectively monitor customer transactions on a daily basis, and using a customer's past transactions and account profile, provide a "whole picture" of the customer to the bank management. Transaction monitoring can include cash deposits and withdrawals, wire transfers and ACH activity. In the banking industry, these applications are known as "BSA software" or "anti-money laundering software"
NOTABLE CASESIn 1998, the Supreme Court ruled in United States v. Bajakajian that the government may not confiscate any money from an individual for failure to report it on a CMIR, as such punishment would be "grossly disproportional to the gravity of [the] offense" and thus unconstitutional under the Excessive Fines clause of the Eighth Amendment.In 2011 the Observer reported that Wachovia, at one time a major US bank, was implicated in laundering money for Mexican drug lords, through its lax laundering controls, a violation of the Bank Secrecy Act. It moved money in and out of casas de cambio without proper due diligence.BANK SECRECYBank secrecy (or bank privacy) is a legal principle in some jurisdictions under which banks are not allowed to provide to authorities personal and account information about their customers unless certain conditions apply (for example, a criminal complaint has been filed). In some cases, additional privacy is provided to beneficial owners through the use of numbered bank accounts or otherwise. Bank secrecy is prevalent in certain countries such as Switzerland, Lebanon, Singapore and Luxembourg, as well as offshore banks and other tax havens under voluntary or statutory privacy provisions.
Lebanonhas retained itsbanking secrecylaws whilst adopting new measures to fight money laundering.Created by the Swiss Banking Act of 1934, which led to the famous Swiss bank, the principle of bank secrecy is always considered one of the main aspects of private banking. It has also been accused by NGOs and governments of being one of the main instruments of underground economy and organized crime, in particular following the class action suit against the Vatican Bank in the 1990s, the Clearstream scandal and the terrorist attacks of September 11, 2001. Former bank employees from banks in Switzerland (UBS, Julius Baer) and Liechtenstein (LGT Group) have testified that their former institutions helped clients evade billions of dollars in taxes by routing money through offshore havens in the Caribbean and Switzerland. One of these, Rudolf M. Elmer, wrote, "It is a global problem...Offshore tax evasion is the biggest theft among societies and neighbor states in this world." The Swiss Parliament ratified on June 17, 2010 an agreement between the Swiss and the United States governments allowing UBS to transmit to the US authorities information concerning 4,450 American clients of UBS suspected of tax evasion.Advances in financial cryptography (e.g. public-key cryptography) could make it possible to use anonymous electronic money and anonymous digital bearer certificates for financial privacy and anonymous Internet banking, given enabling institutions (e.g. issuers of such certificates and digital cash) and secure computer systems.SWISS BANKING ACT OF 1934Bank secrecy was codified by the 1934 Swiss Banking Act following a public scandal in France, when MP Fabien Alberty denounced tax evasion by eminent French personalities, including politicians, judges, industrialists, church dignitaries and directors of newspapers, who were hiding their money in Switzerland. He called these men of "a particularly ticklish patriotism", who "probably are unaware that the money they deposit abroad is lent by Switzerland to Germany". The Peugeot brothers and Franois Coty, of the famous perfume family, were on his list. Since then, Swiss banks have acquired worldwide celebrity due to their numbered bank accounts, which critics such as ATTAC NGO alleged only help legalized tax evasion, money laundering and more generally the underground economy. Alternatively, secrecy laws allowed at the same period Jews and others to escape from Nazi Germany without losing everything. Having moved assets to Switzerland, Swiss authorities were not allowed to answer German questions about who had what where. Even employees of German banks in Switzerland were not allowed to answer questions from their employer in Germany. The value of this discretion became even greater as the whole of continental Europe was occupied. Bank secrecy therefore was, and remains a protection of the individual against the power of the state.Under the Swiss principle of bank secrecy, privacy is statutorily enforced, with Swiss law strictly limiting any information shared with third parties, including tax authorities, foreign governments or even Swiss authorities, except when requested by a Swiss judge's subpoena. However banking is not strictly anonymous since under its banking law all Swiss bank accounts, including numbered bank accounts, are linked to an identified individual. This law only permits a bank to share information with others in cases of severe criminal acts, such as identifying a terrorist's bank account or tax fraud, but not simple non-reporting of taxable income (called tax evasion in Switzerland). In April 2013, French Minister Jrme Cahuzac was forced to resign when the Geneva public prosecutor, acting quickly on a French request related to tax fraud, found evidence of undeclared Swiss accounts.Under pressure from the G20 and the OECD, the Swiss government announced in March 2009 that it will abolish the distinction between tax fraud and tax evasion in dealings with foreign clients. The distinction remains valid for domestic clients. Any bank employee violating a client's privacy could be punished quite severely by law. After signing 12 new double taxation treaties in accordance with the international standard set by the OECD, Switzerland was removed from the grey list of non-compliant tax jurisdictions.UBS was caught red-handed by the United States government offering tax evasion strategies, sending undercover bankers with encrypted computers to the United States. After it was caught, UBS paid a $780 million penalty and handed over hundreds of client files to American authorities. In 2010, the Swiss and the United States governments negotiated an agreement allowing Swiss bank UBS to transmit to the US authorities information concerning 4,450 American clients of UBS suspected of tax evasion.In the aftermath of the UBS and Julius Baer banking cases, some wealthy clients who continue to use offshore accounts are turning to private banks in Singapore and Hong Kong. In addition to the local Singapore or Hong Kong banks, offices have been opened in those localities by a number of Swiss private banks. The move to Singapore and Hong Kong is an alternative to the banking secrecy that Swiss banks have come under attack for. Singapore has bank secrecy provisions comparable to those in Switzerland. Although Hong Kong does not have the same bank privacy laws, it offers flexibility in the creation of opaque companies that can serve as tax conduits.Many offshore banks, located in tax havens such as in the Cayman Islands and Panama, also have strict privacy laws.United States Legislation in Response to Bank SecrecyU.S. Bank Secrecy Act of 1970 The United States' Bank Secrecy Act (or BSA) requires financial institutions to assist government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, file reports of cash transactions exceeding $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities.USA PATRIOT ActMain article: USA PATRIOT Act, Title IIIThe 2001 USA PATRIOT Act created many new rules for American banks in an attempt to defeat bank secrecy. A list of such banks or shell banks are given to the U.S. banks who are not allowed to wire money to them. All new customers to American banks must now be asked if they are U.S. citizens. If not, they must state their occupation and whether they expect to be wired foreign money.The purpose of the USA PATRIOT Act is to deter and punish terrorist acts in the United States and around the world, to enhance law enforcement investigatory tools, and other purposes, some of which include: --To strengthen U.S. measures to prevent, detect and prosecute international money laundering and financing of terrorism; --To subject to special scrutiny foreign jurisdictions, foreign financial institutions, and classes of international transactions or types of accounts that are susceptible to criminal abuse; --To require all appropriate elements of the financial services industry to report potential money laundering; --To strengthen measures to prevent use of the U.S. financial system for personal gain by corrupt foreign officials and facilitate repatriation of stolen assets to the citizens of countries to whom such assets belong.Actions by European countriesEuropean countries had long complained that banking secrecy provisions in countries such as Austria, Liechtenstein, Luxembourg, and Switzerland favored tax evasion by their citizens, particularly the citizens of countries such as Belgium, France, Germany and Italy which border one or more of those countries. In 2009 tensions reached a height and concerned countries (supported to some extent by other countries) raised the issue at the OECD and the G20. As a result, essentially all countries agreed to implement tax treaties that would facilitate the exchange of banking information in case of suspected tax evasion.In 2013, Swiss President Ueli Maurer defended banking secrecy, and declared it is "comparable" to medical confidentiality, and that "the state must absolutely respect the private sphere" and should not know "what there is in your bank account".CriticismsTax evasion and money launderingJurisdiction with what other countries view are excessive protections benefitting dubious parties are sometimes known as secrecy havens, by analogy with tax havens.Numbered bank accounts, used by Swiss banks and other offshore banks located in tax havens, have been accused by NGOs such as ATTAC of being a major instrument of the underground economy, facilitating tax evasion and money laundering. After Al Capone's 1931 condemnation for tax evasion, according to journalist Lucy Komisarmobster Meyer Lansky took money from New Orleans slot machines and shifted it to accounts overseas. The Swiss secrecy law two years later assured him of G-man-proof-banking. Later, he bought a Swiss bank and for years deposited his Havana casino take in Miami accounts, then wired the funds to Switzerland via a network of shell and holding companies and offshore accountsJoseph Stiglitz, 2001 Nobel laureate for economics, told Komisar:You ask why, if there's an important role for a regulated banking system, do you allow a non-regulated banking system to continue? It's in the interest of some of the moneyed interests to allow this to occur. It's not an accident; it could have been shut down at any time. If you said the US, the UK, the major G7 banks will not deal with offshore bank centers that don't comply with G7 banks regulations, these banks could not exist. They only exist because they engage in transactions with standard banks.In 1999, a class action suit against the Vatican Bank criticized the role of Switzerland during World War II.Also in 1999, according to Lucy Komisar, banks "orchestrated a successful e-mail campaign to Congress" to "sink a 'know your customer' regulation proposed by the Federal Deposit Insurance Corporation".In 2001, the United States learned that the Swiss had protected the bank that handled finances for Osama Bin Laden. One of them, the Bahrain International Bank, had funds transiting through non-published accounts of Clearstream, which has been qualified as a "bank of banks" and was involved in one of Luxembourg's major financial scandals.U.S. Terrorist Finance Tracking ProgramMain article: Terrorist Finance Tracking ProgramA series of articles published on June 23, 2006, by The New York Times, The Wall Street Journal and the Los Angeles Times revealed that the United States government, specifically the US Treasury Department and the Central Intelligence Agency, had a program to access the SWIFT transaction database after the September 11th attacks rendering bank privacy severely compromised.Trusts as vehicles for tax evasion and money launderingAccording to a book published in 2010 by an investigative journalist, the successful campaign to limit bank secrecy will likely lead to an increase use of trusts, mostly based in the UK or the USA. Such trusts can be used for tax evasion and money laundering.
BANK SECRECY ACT/ANTI-MONEY LAUNDERING/OFAC
USA PATRIOT ACT COMPLIANCE POLICY
IntroductionAs part of the effort to combat drug trafficking, money laundering and other financial crimes, federal law requires businesses to report and maintain certain records regarding various monetary transactions. Because of the nature of banking, much of the law addresses the requirements of recordkeeping and reporting by financial institutions. The purpose of these laws is to curtail illegal businesses and impede their ability to launder money by monitoring and reporting cash transactions.The original federal law, entitled the Currency and Foreign Transactions Reporting Act of 1970 and all subsequent related regulation, are commonly referred to as the Bank Secrecy Act (BSA) (31 USC 5311). This common name is a misnomer that originated from a concern by Congress that US citizens may have been using the bank secrecy laws of other countries to conceal illegal activities. The actual purpose of the Bank Secrecy Act is to impose recordkeeping and reporting requirements for monetary transactions.The law is implemented by regulation promulgated by the Department of the Treasury in 31 CFR 103. In addition, regulatory agencies require financial institutions to adopt procedures for monitoring Bank Secrecy Act compliance. The Federal Reserve Board (Fed) regulations are addressed in 12 CFR 208.14 of Regulation H. These regulations require financial institutions to have a Bank Secrecy Act compliance program in place which, at a minimum will: Designate an individual responsible for coordinating and monitoring day-to-day compliance Provide a system of internal controls to ensure ongoing compliance Provide a customer identification program Provide training for appropriate personnel Provide for independent testing of compliance conducted by an independent party
BANK SECRECY ACT/ANTI-MONEY LAUNDERING/OFACUSA PATRIOT ACT COMPLIANCE POLICYThe key to a sound Bank Secrecy Act program is a comprehensive BSA policy. Midwest Independent Bancshares, Inc. and its wholly owned subsidiaries (MIB) adopt this policy in recognition of our banks obligations under the Bank Secrecy Act and its accompanying regulation (31 CFR 103) and the requirements of the Federal Reserve Bank as established in 12 CFR 208.14. Violations of the Bank Secrecy Act carry the highest criminal and civil penalties of any other banking law or regulation. Civil penalties for BSA non-compliance range from fines of $500, $1,000, and $10,000 per occurrence. Criminal penalties for BSA non-compliance range from $10,000 and 5 years to $500,000 and 10 years imprisonment per occurrence. Employees must be aware that penalties may be assessed based upon actions described by two important terms, as further described:
Knowledge - An employee who knows or should have known that conducting a transaction will or might promote an unlawful activity.
Willful Blindness - An employee intentionally fails to inquire about a transaction they consider suspicious, or an employee chooses to ignore the circumstances surrounding a suspicious transaction. The Bank Secrecy Act imposes a number of requirements on financial institutions. The following items are identified and addressed within this comprehensive policy: Anti-Money Laundering Policy OFAC Policy Customer Identification Program Customer/Enhanced Due Diligence Suspicious Activity Reports (SARs) Funds Transfer Recordkeeping Record Retention Training Products & Services Risk Assessment OFAC Risk Assessment Currency Transaction Reports (CTRs) Monetary Instrument Recordkeeping Audit Procedures & Independent TestingThe Enterprise Risk Manager is appointed as the BSA/AML Officer. The BSA/AML Officer is responsible for coordinating and monitoring day-to-day compliance with BSA including the training of employees on BSA requirements.ANTI-MONEY LAUNDERING POLICYThis policy is adopted by MIB in recognition of our banks obligations under the Bank Secrecy Act (BSA) and other related money laundering regulations, and the requirements of the Federal Reserve Bank of St. Louis. The BSA/AML Officer is also hereby appointed as the