Bank Secrecy and Public Interest

The author is the senior policy analyst and a member of the Management Collective of Action for Economic Reforms.

By the time the Senate investigation on the Jose Pidal issue
terminates, it is possible that the public will still be unable to make
head or tail of the truth to the claims and counterclaims made by all
parties to this issue. That will be another public interest unserved.
Certainly the public has a legitimate interest in knowing whether or
not the First Gentleman Mr. Jose Miguel Arroyo was involved in money
laundering as alleged by Senator Panfilo Lacson.

Two key factors stand in the way of finding the truth: the Bank Secrecy Law and the nature of a Senate investigation.

The details of the alleged Jose Pidal bank accounts, the existence of
at least one of which appears corroborated by evidence, should contain
facts that can help prove or disprove Senator Lacson’s allegations. But
the secrecy of bank deposits is protected by Republic Act 1405 or the
Law on Secrecy of Bank Deposits (note also Sec. 8 of RA 6426 or the
Foreign Currency Deposit Act). This 1955 enactment meant 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” declares all bank deposits to be “of an absolutely
confidential nature and may not be examined, inquired or looked into by
any person, government official, bureau or office.

Republic Act 1405 and other subsequent laws provide certain exceptions
to the prohibition on disclosure. Bank deposits may be inquired into or
examined:

  1. When there is written permission by the depositor (RA 1405)
  2. In cases of impeachment (RA 1405)
  3. Upon order of a competent court in cases of bribery or dereliction of duty of public officials (RA 1405)
  4. In cases where the money deposited is the subject matter of litigation (RA 1405)
  5. In cases of unexplained wealth under RA 3019 (RA 3019
    or the Anti Graft and Corrupt Practices Act, Sec. 8, as held in the
    case of PNB vs. Gancayco, 122 Phil 503)
  6. Upon an order by the Ombudsman to produce for in camera
    inspection bank accounts, provided there is a pending case before a
    court of competent jurisdiction, the account is clearly identified, the
    inspection limited to the subject matter of the pending case, and the
    bank personnel and account holder are notified to be present during the
    inspection (Sec 15 (8), RA 6770 or the Ombudsman Act, as limited by the
    Supreme Court in Marquez v Desierto, G.R. No 135882, 27 June 2001)
  7. When the Bureau of Internal Revenue Commissioner
    inquires into the bank deposits of a decedent to determine his gross
    estate, or of any taxpayer who has filed an application for compromise
    of his tax liability by reason of financial capacity, in which case
    such taxpayer is required to waive in writing his privilege under RA
    1405 (RA 8424 or the National Internal Revenue Code of 1997, Title I,
    Sec 6 (F))
  8. When banks forward to the Treasurer of the Philippines,
    within the period prescribed, a statement of all credits and deposits
    held by them in favor of persons known to be dead, or who have not made
    further deposits or withdrawals during the preceding ten years or more
    (Act No. 3936 or the Unclaimed Balances Law, as amended by PD 679)
  9. When the Anti-Money Laundering Council inquires into or
    examines any particular bank deposit upon order of any competent court
    in cases of violation of the Anti-Money Laundering Act when it has been
    established that there is probable cause that the deposit is related to
    a money laundering offense (RA 9160 or the Anti-Money Laundering Act,
    Sec 11)

Unlike in the case of the Jose Velarde accounts when the Senate was
acting in the exercise of its power to try and decide the impeachment
case against former President Joseph Estrada, the ongoing Senate
investigation of the Jose Pidal issue is not one of the exceptions to
the law on bank secrecy. The ongoing investigation is an inquiry in aid
of legislation as provided by Art. VI, Sec 21 of the Constitution.

This leaves the fate of whether or not the public interest will be
served up to the two contending parties. Will the accuser be able
discharge the obligation of producing convincing evidence to prove his
allegations? On the part of Mr. Jose Miguel Arroyo, since he has
offered as proof of his innocence the alleged ownership of the Jose
Pidal accounts by his brother Mr. Ignacio Arroyo, will he substantiate
such assertion? After all, the owner of the account/s can waive the
privilege under the bank secrecy law by issuing a written permission
for the disclosure of the account/s.

Failing in any of these, it is reasonable to conclude that the public
interest is farthest from the minds of the parties to this issue. The
claims and counterclaims will have produced enough doubt and
speculation to polarize public opinion in time for the 2004
presidential elections. Such outcome may be all that matters to them.

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