Secrecy in foreign currency deposits

Magtanggol De La Cruz

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The prosecution has limited options: amend the law or pin down Corona on money-laundering

MANILA, Philippines – The impeachment trial is indeed generating quite a bit of interesting novel legal conundrums.

The latest one that has grabbed my attention has to do with whether or not a Philippine bank can be compelled via a subpoena to disclose information relating to a foreign currency bank deposit of its depositor, in this case, the Chief Justice of the Supreme Court. 

The scuttlebutt, of course, is that Justice Corona has a US$700,000 deposit held by the Philippine Savings Bank (PSBank) and that the prosecutors even know its account number.

After a caucus on the matter, the Senate agreed to issue a subpoena to PSBank.

Right around the time when this decision of the Senate was announced, senator-judge Franklin Drilon went on record to state essentially that there is no one who can tell the impeachment court what it can do and thus, conversely, what it cannot do. Although this statement may have been given in the context of an unrelated issue—I am not sure as I only caught this sound bite in isolation—it does reflect a legal position, which, I am certain, is not his alone: that the impeachment court’s decisions are final and may not be questioned.

On the other hand, senator-judge Miriam Defensor-Santiago submitted a Motion for Reconsideration to the impeachment court asking it to reconsider its decision on the issuance of that subpoena.  

With respect to the alleged foreign currency deposit account of Chief Justice Corona, Senator-judge Santiago pointed out that under Republic Act No.  6246:

“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.”

The concern raised by Senator-judge Santiago then is that Section 8 of RA 6426 is explicit that foreign currency deposits maintained in the foreign currency deposit units of Philippine banks may only be inquired into with the written permission of the depositor.

5-decade law

The relevant historical origins of this provision on the secrecy of foreign currency bank deposits can be traced back to 1955. 

At that time, Congress enacted Republic Act No. 1405 (the Law on Secrecy of Bank Deposits), which provided for a confidentiality rule for all types of bank deposits, regardless of currency. This rule set out in Section 2 of RA 1405, however, was made subject to certain exceptions, including in cases of impeachment:

“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.”

Congress believed then that shrouding bank deposits with confidentiality would encourage the public “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.”

Nineteen years later or in April 1974, Congress passed Republic Act No. 6426 which instituted the foreign currency deposit system in the Philippines. 

Under that law, it was reiterated, perhaps in order to avoid any doubt, that foreign currency deposits would be entitled to the same secrecy benefits provided for under the then existing Law on Secrecy of Bank Deposits.

In November 1977, with the use by then President Ferdinand E. Marcos of his legislative powers, Presidential Decree No. 1035 was issued. This deliberately tightened further the confidentiality of foreign currency deposits to what it is today, so that only a written consent from the depositor can authorize an examination into a foreign currency deposit. 

The reasons for doing so, as enunciated in PD 1246, were stated as follows:

“WHEREAS, making absolute the protective cloak of confidentiality over such foreign currency deposits, exempting such deposits from tax, and guaranteeing the vested rights of depositors would better encourage the inflow of foreign currency deposits into the banking institutions authorized to accept such deposits in the Philippines thereby placing such institutions more in a position to properly channel the same to loans and investments in the Philippines, thus directly contributing to the economic development of the country.”

Prosecution’s options

In sum, under the currently effective version of RA 6426, foreign currency deposits may, in fact, as a matter of law, not 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.” 

Without the written consent of the depositor, Senator-judge Santiago rightly raises a valid point.

The only significant exception I am aware of at this time, is that the Anti-Money Laundering Council may, under the Anti-Money Laundering Act of 2001 (Republic Act No. 9160), look into any type of deposit, including a foreign currency deposit, upon order of any competent court when it has been established that there is probable cause that the deposit involved is related to a money laundering offense.

In the light of the statutory prohibition in RA 6426, we return to the question of whether or not the Senate, sitting as an impeachment court, has the power to compel PSBank to disclose information relating to Chief Justice Corona’s foreign currency deposit in a case where the depositor has not given his written consent (it should be noted in this connection that imprisonment from 1-5 years is imposable for any violation of RA 6426). Stated in another way, can the impeachment court force a person to violate the law?

My own sense is that the impeachment court has as much authority to do so as it has to command a person to kill his neighbor.

It seems to me then that the options of the prosecution are limited to (a) investigating whether there is basis to accuse the Chief Justice of committing acts of money-laundering and that the proceeds in his foreign currency deposit account at PSBank are linked to such offense, and thereafter get the Anti-Money Laundering Council to examine that deposit, or (b) the easier way—amend the law. –

(As a disclaimer, the author notes that his views do not constitute, and should not be relied upon as constituting, legal advice.)

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