Antimoney laundering and bank secrecy: The nuances

ariel nepomuceno_1The heated discussions during the Senate Blue Ribbon Committee hearing regarding the $81 million that was allegedly stolen from the Bangladesh Bank and the movements of such amounts into our financial system raised a lot of questions about the integrity and stability of our banking institutions and all the network of relationships that go with it.

Not only were the inadequacies of the Anti-Money Laundering Act (AMLC) raised but other tough issues, such as the inflow of monetary proceeds of crime, the black market for foreign-exchange transactions, unregulated activities of money changers, and the lack of tight controls and compliance audits in our banks.

While the central bank, banking executives, the business community and even legislators lament the seeming lack of strong prosecution powers of the AMLC and the non-inclusion of certain business or market activities that are favorite targets of criminal rings involved in terrorism, drugs, prostitution and the like within the law’s ambit, there is now a growing demand for a comprehensive review of the bank-secrecy law, or Republic Act (RA) 1405. The latter is considered to be a huge obstacle for the exercise of prosecutorial and enforcement functions of the AMLC and other legal/regulatory bodies that have jurisdiction over money crimes and related undertakings.

Mandate of the law

Basically, RA 1405 stipulates that all deposits of whatever nature in banks or similar institutions in the Philippines and investments in government bonds are absolutely confidential in nature. In fact, any person or government official, bureau or office that examines, inquires or looks into a bank deposit or government bond, and any bank official or employee who makes an illegal disclosure concerning bank deposits are liable under aforementioned law.

However, other special laws and a plethora of jurisprudence enumerate some interesting exceptions. Worth mentioning are the following: Upon written permission or consent in writing by the depositor; in cases of impeachment of high government officials for culpable violation of the Constitution, treason, bribery, graft and corruption, other high crimes or betrayal of public trust; when the money deposited or invested is the subject matter of the litigation; enforcement of particular sections of the Anti-Graft and Corrupt Practices Act; a special or general examination of a bank in relation to a bank fraud or commission of a serious irregularity; in examinations made by an independent auditor hired by the bank to conduct its regular audit; and violation of the AMLC, among others. Unfortunately, there are many legal conditions and processes involved for one to avail himself or herself of these exceptions.

Collateral intention of the law

Relevant law also provides that the main purpose of bank-deposit secrecy is to encourage 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. The Supreme Court even went to the extent of declaring that the confidentiality of bank deposits remains to be a basic state policy in the Philippines, and a right which belongs to the legally recognized zones of privacy.

Further improve compliance

Critics of this law opine that RA 1405 is one of the strictest in the world, and that it is about time to overhaul the same if only to pave the way for the prosecution and eventual punishment of criminal elements, grafters, corrupt government officials and other similar individuals or groups who have chosen to hide behind the skirt of this confidentiality regime to hide the fruits of their crimes and misdeeds. The debates are becoming healthy and rigorous in the midst of a growing concern about the reputation of our financial system in the international community.

However, the challenge is how to strike that reasonably good balance between protection of the ordinary depositor and curtailment of the evil oftentimes produced by that same mantle of protection if not regulated, monitored or managed carefully.

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