BANK SECRECY LAW

REPUBLIC ACT No. 1405

AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS
WITH ANY BANKING INSTITUTION AND PROVIDING PENALTY
THEREFOR.
 Policy and Objective

It is hereby declared to be the policy of the Government to give

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.
 Confidentiality of all deposits
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,
 Exceptions
1. upon written permission of the depositor;
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 cases where the money deposited or invested is the subject matter of the
litigation;
5. Upon a subpoena issued by the Ombudsman concerning an investigation it is
conducting, provided that there must already be a case pending in court, the
account be clearly identified, the inspection be limited to the subject matter of
the pending case; and the bank personnel and the depositor must be notified
to be present during the inspection;
 Exceptions
6. The BIR can inquire into bank deposits in an application for compromise of tax
liability or determination of a decedent’s gross estate;

7. The Anti-Money Laundering Council (“AMLC”) can examine bank accounts

pursuant to a court order, where there is probable cause that the deposits are
related to an unlawful activity or money laundering offense;

8. The AMLC can examine bank accounts, WITHOUT a court order, where there is
probable cause that the deposits are related to certain crimes such as kidnapping
for ransom, violation of the Dangerous Drugs Act, hijacking, destructive arson,
murder and violations of RA 6235 (acts inimical to civil aviation);
 Exceptions
9. In cases of terrorism under the Human Security Act of 2007 or Republic Act No. 9372
(Court Order)

10. The Bangko Sentral can examine bank accounts in the course of its periodic or special
examination regarding compliance with Anti-Money Laundering Law, and to investigate
unsafe and unsound banking practices.

11. Prosecution for violation of the anti-graft and corrupt practices act.

12. Under the Unclaimed Balances law, the bank may disclose to the National Treasurer
information concerning dormant deposits for the purpose of initiating escheat
proceedings.
 Prohibition
It shall be unlawful for any official or employee of a banking
institution to disclose to any person other than those mentioned in
Section two hereof any information concerning said deposits.
 Penalty
Any violation of this law will subject 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.
How about foreign currency deposits?
For foreign currency deposits, Republic Act No. 6426 (The Foreign Currency Deposit
Act) similarly declares that these deposits are of an absolutely confidential nature
and cannot 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.

There is only one instance for disclosure under said law and, that is, upon the
written permission of the depositor. RA 6426 also exempts foreign currency
deposits from attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body whatsoever.
 TRUTH IN LENDING ACT
REPUBLIC ACT No. 3765
AN ACT TO REQUIRE THE DISCLOSURE OF FINANCE CHARGES IN
CONNECTION WITH EXTENSIONS OF CREDIT
 Declaration of Policy

It is hereby declared to be 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.
 Categories of Transactions Included:

a. Any loan, mortgage, deed of trust, advance and discount;

b. 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;

c. Any rental-purchase contract;

 Categories of Transactions Included:

d. Any contract or arrangement for the hire, bailment, or leasing of property;

e. Any option, demand, lien, pledge, or other claim against, or for delivery of,
property or money;

f. Any purchase, or other acquisition of, or any credit upon security of any
obligation or claim arising out of any of the foregoing; and

g. Any transaction or series of transactions having a similar purpose or effect.

Categories of credit transactions
EXLUDED:

(1) Credit transactions which do not involve the payment of any finance
charge by the debtor; and

(2) Credit transactions in which the debtor is the one specifying a

definite and fixed set of credit terms such as bank deposits, insurance
contracts, sale of bonds, etc.
 Definition of terms
Person means any individual, partnership, corporation, 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 any of its political subdivisions, or any agency of the
foregoing.

Cash price or delivered price, in case of trade transactions, is the amount of

money which would constitute full payment upon delivery of property (except
money) or service purchased at the bank’s place of business. In the case of
financial transactions, cash price represents the amount of money received by the
debtor upon consummation of the credit transaction, net of finance charges
collected at the time the credit is extended (if any).
 Definition of terms
Down Payment represents the amount paid by the debtor at the time of the
transaction in partial payment for the property or service purchased.

Trade-in represents the value of an asset agreed upon by the bank and debtor, given
at the time of the transaction in partial payment for the property or service
purchased.

Non-finance charges correspond to the amounts advanced by the bank for items

normally associated with the ownership of the property or of the availment of the
service purchased which are not incident to the extension of credit. For example, in
the case of the purchase of an automobile on credit, the creditor may advance the
insurance premium as well as the registration fee for the account of the debtor.
 Definition of terms
Amounts to be financed consist of the cash price plus non-finance
charges less the amount of the down payment and value of the trade-in.

Finance charge includes interest, fees, service charges, discounts, and

such other charges incident to the extension of credit.

Simple annual rate is the uniform percentage which represents the ratio
between the finance charge and the amount to be financed under the
assumption that the loan is payable in one (1) year with single payment
upon maturity and there are no upfront deductions to principal.
 Information to be disclosed prior to the
consummation of the transaction
As a general rule, loan terms shall be disclosed to all types of borrower

(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);
 Information to be disclosed prior to the
consummation of the transaction
(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.
 Right to demand 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.

*** Posters. Banks shall post in conspicuous places in their principal place of

business and branches, the information as contained in the revised format of
disclosure statement. The posters shall include an explicit notification that the
disclosure statement is a required attachment to the loan contract and the
customer has a right to demand a copy of such disclosure. (Manual of
Regulation for Banks)
Inspection of contracts covering credit
transactions
Banks shall keep in their offices or places of business copies of
contracts which involve the extension of credit by the bank and the
payment of finance charges therefor. Such copies shall be available for
inspection or examination by the appropriate supervising department
of the Bangko Sentral.
 Penalty
Any person who willfully violates any provision of this Act or any
regulation issued thereunder shall be fined by not less than P1,000 or
more than P5,000 or imprisonment for not less than 6 months, nor
more than one year or both.

****No punishment or penalty provided by this Act shall apply to the

Philippine Government or any agency or any political subdivision
thereof.
Conviction shall be Prima Facie Evidence
in the succeeding cases

A final judgment hereafter rendered in any criminal proceeding under

this Act to the effect that a defendant has willfully violated this Act
shall be prima facie evidence against such defendant in an action or
proceeding brought by any other party against such defendant under
this Act as to all matters respecting which said judgment would be an
estoppel as between the parties thereto.