REGULATORY FRAMEWORK AND

LEGAL ISSUES IN BUSINESS

First Trimester, Schoolyear 2023 – 2024
September 9, 2023

Atty. Manuel R. del Rosario

BANK SECRECY LAW
Republic Act. No. 1405 (1955)
 WHAT IS THE STATE POLICY ON
SECRECY OF BANK DEPOSITS?

The state encourages people to deposit their money in

banking institutions and discourages private hoarding so
money can be properly utilized by banks to issue loans
needed to assist the economic development of the
Philippines.
 WHAT IS PROHIBITED?

All deposits of whatever nature (savings, checking, time,

Peso, Dollar) with banks or banking institutions 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.

WHAT ARE THE PENALTIES?

Imprisonment of not more than 5 years or a fine of not
more than P20,000 or both fine and imprisonment at
the discretion of the court
 WHAT BANK DEPOSITS
ARE COVERED?

Covered deposits include deposits of whatever nature and

kind. They include funds deposited or funds invested in the
bank like trust accounts, even if these funds are meant to
be invested and not just kept in trust by the bank. (Ejercito
vs. Sandiganbayan, 2006)

The contents of a safety deposit box cannot be disclosed

under the General Banking Act (RA 337) not under RA 1405

The law DOES NOT cover bank drafts, trust receipts, letters
of credit and promissory notes. (Opinion of the Secretary of
Justice, 1989)
 WHAT BANK DEPOSITS
ARE COVERED?

Foreign currency deposits are protected under RA 6426 (Foreign Currency

Deposit Act of the Philippines).

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.)
 WHAT ARE THE EXCEPTIONS TO
THE SECRECY OF BANK DEPOSITS?

1. When the depositor grant permission by issuing a waiver;

2. In cases of impeachment;
3. Upon order of a competent court in cases of bribery or dereliction of
duty of public officials;
4. in any case where the money deposited or invested is the subject matter
of litigation, to include AMLA violations;
5. In any case the BIR needs to inquire into the bank deposits of a
decedent in order to compute the proper estate taxes;
6. In any case involving unexplained wealth by the Ombudsman (Marquez
vs. Desierto, 2003)
7. In any case the BSP or PDIC is investigating unsafe or unsound banking
practices.
8. In cases of unclaimed balances for filing of Escheat Proceedings, under
PD 679.
 RECENT MOVES TO AMEND
THE SECRECY OF BANK DEPOSITS?
There have been various attempts to amend the law on
Secrecy of Bank Deposits. The law is more than 70 years old.

The law hinders investigations into Money Laundering

activities. The hands of investigators are tied since all bank
deposits have to be confidential.

A criminal will hide ill-gotten wealth or funds from illegal

enterprises in the banking system (earning interest even!)
and away from the prying eyes of investigators.
UNCLAIMED BANK BALANCES
Presidential Decree No. 679 (1975)
 WHAT ARE UNCLAIMED BANK BALANCES?

Unclaimed balances shall include credits or deposits of money,

tuition, security or other evidence of indebtedness of any kind
and interest thereon with banks, buildings and loan
associations and trust corporations in favor of any person:

a. Known to be dead;
b. No financial activity related to the account (deposits,
withdrawals, transfers of funds, etc.) for 10 years or more

DORMANT ACCOUNTS do not earn interest

 PROCEDURE FOR
UNCLAIMED BANK BALANCES
1. The covered institution should communicate with the depositor at his or her last known
address.

2. Within the month of January of every odd year (2021, 2023, etc.) covered institutions
shall forward to the National Treasurer a statement under oath of all deposits held by
persons known to be dead or who have not made any deposits or withdrawals during the
preceding 10 years or more.

3. A copy of the sworn statement shall be posted in a conspicuous place in the premises of
the covered institution.

4. The Solicitor General shall commence an action to forfeit the deposits in favor of the
government.

5. The proper court forfeits the money in favor of the national government.
 THREE STEP PROCESS FOR
ALL UNCLAIMED BANK BALANCES
“DORMANT ACCOUNTS”

Bank must send 3 written notices to the depositor:

a. That the account is about to be declared dormant (60 days before)

b. That the account is already dormant and it will be subject to a dormancy fee if
no activity within 5 years and falls below Minimum Average Daily Balance
(MADB) – (60 days before)
c. That the account will be forfeited by way of ESCHEAT PROCEEDINGS in
favor of the government through the National Treasurer

New Bangko Sentral Rule (2016): a depositor may be notified through postal mail,
courier delivery, email, telephone or other means at least 60 days before the
deposit becomes dormant and at least 60 days before the charging of any
dormancy fees
 WHAT ARE ESCHEAT
PROCEEDINGS?

Escheat proceedings refer to the judicial process in which

the state or national government, by virtue of its
sovereignty, steps in and claims abandoned, left vacant or
unclaimed property, without there being an interested
person having a legal claim thereto.

In the case of dormant accounts, the state inquires into

the status, custody and ownership of the unclaimed
balance to determine whether the inactivity was brought
about by the fact of death or absence of or abandonment
by the depositor.
 WHAT ARE ESCHEAT
PROCEEDINGS?

If after the proceedings the property remains without a

lawful owner interested to claim it, the property shall be
reverted to the state to forestall an open invitation to self-
service by the first comers.

If, however, interested parties have come forward and lay

claim to the property, the courts shall determine whether
the credit or deposit should pass to the claimants or be
forfeited in favor of the state.
 PROCEDURE FOR REACTIVATION OF UNCLAIMED
BALANCES ALREADY REPORTED TO THE
TREASURER OF THE PHILIPPINES
BUT BEFORE ESCHEAT?
1. Depositor writes the bank asking for reactivation
2. The bank shall verify and confirm all information
3. The bank will write the Bureau of Treasury requesting
authority to reactivate the account
4. The Bank shall execute a Deed of Undertaking holding the
Bureau of Treasury free and harmless from any liability
5. The Bureau of Treasury will issue a Letter of Authority to
Reactivate
“All unclaimed balances, which include credits or deposits of money,
bullion, securities or other evidences of indebtedness of any kind, and
interest thereon already reported to the Treasurer of the Philippines in
accordance with the Unclaimed Balances Act (Act No. 3936, as
amended) shall be transferred/reclassified from the deposit
liability/other credit accounts to the liability account, “Due to the
Treasurer of the Philippines,” until they are deposited with or turned
over to the Treasurer of the Philippines upon order of the court that the
same have been escheated in favor of the Government of the Republic
of the Philippines and as such, such, the unclaimed deposit liabilities
shall no longer be covered by reserves required of deposit liabilities.”
TRUTH IN LENDING

Republic Act No. 3765 (1963)

 TRUTH IN LENDING POLICY?

It is the policy of the State to protect its citizens from a lack of

awareness of the true cost of credit to the user by assuring a
full disclosure of such cost with a view of preventing the
uninformed use of credit to the detriment of the national
economy.

Inform the borrower of the true and effective cost of the

transaction and make this an integral part of the
documentation.
 DEFINITIONS

(1) "Board" means the Monetary Board of the Central Bank of the
Philippines.

(2) "Credit" means any loan, mortgage, deed of trust, advance, or

discount; any conditional sales contract; any contract to sell, or sale or
contract of sale of property or services, either for present or future
delivery, under which part or all of the price is payable subsequent to
the making of such sale or contract; any rental-purchase contract; any
contract or arrangement for the hire, bailment, or leasing of property;
any option, demand, lien, pledge, or other claim against, or for the
delivery of, property or money; any purchase, or other acquisition of, or
any credit upon the security of, any obligation of claim arising out of
any of the foregoing; and any transaction or series of transactions
having a similar purpose or effect.
 DEFINITIONS

(3) "Finance charge" includes interest, fees, service charges, discounts,

and such other charges incident to the extension of credit as the Board
may be regulation prescribe.

(4) "Creditor" means any person engaged in the business of extending

credit (including any person who as a regular business practice make
loans or sells or rents property or services on a time, credit, or
installment basis, either as principal or as agent) who requires as an
incident to the extension of credit, the payment of a finance charge.

(5) "Person" means any individual, corporation, partnership, association,

or other organized group of persons, or the legal successor or
representative of the foregoing, and includes the Philippine Government
or any agency thereof, or any other government, or of any of its political
subdivisions, or any agency of the foregoing.
 WHAT IS REQUIRED?

Any creditor shall furnish to each person to whom credit is extended, prior to
the consummation of the transaction, a clear statement in writing setting
forth, to the extent applicable and in accordance with rules and regulations
prescribed by the Board, the following information:

(1) the cash price or delivered price of the property or service to be acquired;
(2) the amounts, if any, to be credited as down payment and/or trade-in;
(3) the difference between the amounts set forth under clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to be paid by such
person in connection with the transaction, but which are not incident to
the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of Pesos and Centavos; and
(7) the percentage that the finance bears to the total amount to be financed
expressed as a simple annual rate on the outstanding unpaid balance of
the obligation
 TRUTH IN LENDING
DISCLOSURE STATEMENT

The disclosure statement in writing is a required attachment to

the credit transaction contract. The borrower has a right to
demand a copy of the disclosure statement.
THANK YOU!