Central Bank prods Congress on loosening bank secrecy law

THE Bangko Sentral ng Pilipinas (BSP) is calling for urgent reforms in the bank secrecy law, noting that the Philippines is now the only country with such a measure in place.

BSP Governor Benjamin Diokno said the Philippines needs to change its current framework of bank secrecy in order to keep up with international standards on transparency and to help combat both domestic and global tax evasion, money laundering, and other financial crimes.

Diokno said based on studies by the International Monetary Fund (IMF) and World Bank, only the Philippines and Lebanon have bank secrecy laws that hamper implementation of prudential and anti-money laundering frameworks.

In May 2020, however, Lebanon removed its bank secrecy rules in an effort to tackle corruption in the country.

is leaves the Philippines the only country in the world to have strict bank secrecy laws. Diokno said it “does not look good” for the Philippines to be the only country that has no provisions to open up bank accounts under the guise of prudential and anti-money laundering frameworks.

As such, Diokno said they are recommending amendments to Republic Act 1405, also known as “e Secrecy

of Bank Deposits Law,” to be limited within the confines of BSP’S banking supervision and its investigation of closed banks.

House Bill 8991, the BSP’S version of the law amendment, is currently on second reading in plenary.

In this proposal supported by the BSP, the coverage of allowed inquiries is not too broad as to include just any depositor; it is limited only to deposits of specified persons and anchored on their commission of fraud, serious irregularity, or unlawful activity.

“e proposed reforms will place the country’s deposit secrecy law on a par with international standards. is is seen to strengthen the Filipino public’s and the global community’s trust in our banking

system,” Diokno said.

e governor added that they expect President Duterte to certify this as an urgent measure.

Among the key provisions of the Bspsupported version:

First, the inquiry is limited to the deposit account of the stockholder, owner, director, trustee, officer or employee of an entity that is subject to the supervision or regulatory power of the BSP, the representative or agent, the related party, or any of the conspirators of the person involved in the commission of fraud, serious irregularity or unlawful activity.

Second, the grounds for inquiry or examination of bank deposits are limited only to deposits of specified persons and anchored on the commission of fraud,

serious irregularity or unlawful activity. As such, it will be done only in the exercise of BSP’S supervisory powers or in the course of investigations of closed banks.

ird, the definition of “deposits” will use the one provided under the charter of the Philippine Deposit Insurance Corp. (PDIC), but carves out inapplicable portions like those on insurability.

“We’d like to emphasize that the proposed law protects the interest of depositors. is is clear in the provisions of the bill that limits inquiries to specified persons only; sets the parameters for sharing of information; and protects against political persecution, harassment or attempts to hamper competition in trade and commerce,” Diokno said.