House approves bill amending bank secrecy law on second reading

THE HOUSE of Representatives on Monday approved on second reading a bill amending the Philippines’ decades-old bank secrecy law, allowing the Bangko Sentral ng Pilipinas (BSP) to look into the accounts of bank officers and employees involved in illegal financial activities.

In a voice vote, congressmen approved House Bill No. 6707 that would “lift the barriers in the effective investigation and prosecution of corrupt or illegal financial actions of stockholders, owners, directors, trustees, officers or employees of entities supervised and regulated by the BSP.”

The bill also seeks to curb tax evasion, money laundering, and other financial crimes, and address the unintended consequences of bank secrecy. It also aims to align Philippine laws with international standards on transparency in financial transactions.

Under the bill, the BSP is allowed to look into bank deposits of the stockholder, owner, director, trustee, officer or employee of a BSP-regulated entity, as well as any of the conspirators of the person involved but only if the Monetary Board determines there is “reasonable ground” that fraud, serious irregularity or unlawful activity is being committed.

“The authority of the BSP to inquire and examine deposits shall also apply in the course of its investigation of closed banks,” the bill stated.

Under the measure, the BSP is also allowed to examine the foreign currency deposits in banks operating in the Philippines, including offshore branches of domestic banks, but not in nonstock savings and loan associations that serve only their members.

The bill defines deposits as money received by a bank for a commercial, checking, savings, time or thrift account as evidenced by a passbook, certificate of deposit or other evidence of deposits.

“The results of the inquiry or examinations conducted by the BSP shall be for its exclusive use and shall not be made available to any person or entity, whether public or private, except to the Securities and Exchange Commission, Philippine Deposit Insurance Corp., Anti-Money Laundering Council, Department of Justice and the Courts,” the bill said.

The measure includes a safe harbor clause that exempts banks or financial institutions and their directors, officers or employees from any action, claim, demand or liability for acts done in compliance with a BSP order on the inquiry and examination of bank deposits.

It also forbids the use of the bank secrecy law for persecution, harassment, or hindering business competition.

Violators of the proposed law may face imprisonment of two to 10 years, and fines ranging from P50,000 to P2 million, or both, depending on the court’s decision.

“Bank secrecy is also the remaining obstacle to implementing a general tax amnesty,” Albay Rep. Adrian E. Salceda, vice-chairman of the House Banks Committee, told BusinessWorld in a Viber message in Filipino.

“The Department of Finance and other agencies fear that if a general tax amnesty is granted while absolute bank secrecy remains, those who avail of it will find it easy to hide their assets,” he added.

The measure is among President Ferdinand R. Marcos, Jr.’s legislative wishlist for the 20^th Congress. A similar bill cleared the House in the previous Congress but failed to advance in the Senate.

In a report for its Article IV Consultation with the Philippines released earlier this week, the International Monetary Fund (IMF) said the Philippines should continue to prioritize advancing efforts to combat money laundering and terrorist financing.

“Amendments to the Bank Deposits Secrecy Laws in line with international good practices should be pursued to enhance the BSP’s supervisory powers and strengthen AML/CFT (anti-money laundering and combating the financing of terrorism) supervisory effectiveness,” the IMF said.

“Strengthening the AML/CFT frameworks is also important to support broader anti-corruption efforts and effectively combat the laundering of proceeds of corruption,” it added.

In February, the Philippines exited the Financial Action Task Force’s (FATF) “gray list” or the list of jurisdictions under increased monitoring for money laundering.

The FATF is set to reassess the country in 2027, where it will verify whether the country’s anti-money laundering measures are being sustained and still in place. — Kenneth Christiane L. Basilio