SECRECY IN BANK DEPOSITS (R.A.

1405)

REPUBLIC ACT No. 1405

AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS WITH ANY BANKING

INSTITUTION AND PROVIDING PENALTY THEREFOR.

Section 1. 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.

Section 2. 1 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, except upon written permission of the depositor, or in cases of impeachment,
or upon order of a competent court in cases of bribery or dereliction of duty of public officials,
or in cases where the money deposited or invested is the subject matter of the litigation.

Section 3. 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.

Section 4. All Acts or parts of Acts, Special Charters, Executive Orders, Rules and Regulations
which are inconsistent with the provisions of this Act are hereby repealed.

Section 5. 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.

Section 6. This Act shall take effect upon its approval.

Approved: September 9, 1955

Footnote
1
This Section and Section 3 were both amended by PD No. 1792 issued January 16,
1981, PD 1792 was expressly repealed by Sec 135 of R.A. No. 7653, approved June 14,
1993. The original sections 2 and 3 of R.A. No.1405 are hereby reproduced for
 reference, as follows; "Sec 2 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, except upon written
per-mission of the depositor, or in cases of impeachment, or upon order of a competent
court in cases of bribery or dereliction of duty of public officials. or in cases where the
money deposited or invested is the subject matter of the litigation," "Sec. 3. 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."

A.PURPOSE

Q: What is the purpose?

A:
1. To encourage deposit in banking institutions; and
2. To discourage private hoarding so that banks may lend such funds and assist in the
economic development of the country.

B. PROHIBITED ACTS

Q: What are the prohibited acts under the law?

A:
1. Examination/inquiry/looking into all deposits of whatever nature with banks or banking
institutions in the Philippines (including investment in bonds issued by the government) by any
person, government official or office (Sec. 2)
2. Disclosure by any official or employee of any banking institution to any authorized person of
any information concerning said deposit (Sec. 3)

C. DEPOSITS COVERED

Q: What are the kinds of deposits covered?

A:
1. All deposits of whatever nature with banks or banking institutions found in the Philippines; or
2. Investments in bonds issued by the Philippine government, its branches, and institutions.
(Sec. 2, R.A. 1405)

Q: Are trust funds covered by the term “deposit?”

A: Yes, the money deposited under the trust agreement is intended not merely to remain with
the bank but to be invested by it elsewhere. To hold that this type of account is not protected
by R.A. 1405 would encourage private hoarding of funds that could otherwise be invested by
banks in other ventures, contrary to the policy behind the law. (Ejercito v. Sandiganbayan, G.R.
No. 157294‐95, Nov. 30, 2006)

Note: Despite such pronouncement that trust funds are considered deposits, trust funds
remain not covered by PDIC.

Q: Are foreign currency deposits covered by the Secrecy in Bank Deposits (R.A. 1405)?
A: No. Foreign currency deposits are covered by R.A. 6426 otherwise known as the Foreign
Currency Act. Under the same law, all authorized foreign currency deposits are considered of an
absolutely confidential nature and, except upon the written permission of the depositors, in
no instance shall be examined, inquired or looked into by any person, government official,
bureau or office whether judicial or administrative private.

D. EXCEPTIONS

Q: What are the instances where examination or disclosure of information about deposits can
be allowed?
A:
1. Upon written consent of the depositor. (Sec. 2)
2. In cases of impeachment. (Sec. 2)
3. Upon order of competent court in cases of bribery or dereliction of duty of public officials.
(Sec. 2)
4. In cases where the money deposited or invested is the subject matter of the litigation.
(Sec. 2)
5. Upon order of the Commissioner of Internal Revenue in respect of the bank deposits of a
decedent for the purpose of determining such decedent’s gross estate. (Sec. 6*F+*1+, NIRC)
6. Upon the order of the Commissioner of Internal Revenue in respect of bank deposits of a
taxpayer who has filed an application for compromise of his tax liability by reason of financial
incapacity to pay his tax liability. (Sec. 6[f][1],NIRC)
7. In case of dormant accounts/deposits for at least 10 years under the Unclaimed Balances
Act. (Sec. 2, Act No. 3936).
8. When the examination is made by the BSP to insure compliance with the AML Law in the
course of a periodic or special examination
9. With court order:
a. In cases of unexplained wealth under Sec. 8 of the Anti‐Graft and Corrupt Practices Act
(PNB v. Gancayco, L‐18343, Sept. 30, 1965)
b. In cases filed by the Ombudsman and upon the latter’s authority to examine and have
access to bank accounts and records (Marquez v. Desierto, GR 138569, Sept. 11, 2003)
10. Without court order: If the AMLC determines that a particular deposit or investment with
any banking institution is related to the following: HK‐MAD
a. Hijacking,
b. Kidnapping,
c. Murder,
d. Destructive Arson, and
 e. Violation of the Dangerous Drugs Act. (2004, 2006 Bar Question)

Q: What are the requisites before the Ombudsman may examine deposits?
A:
1. There is a pending case before court of competent jurisdiction
2. The account must be clearly identified
3. There is notice upon the account holder and bank personnel of their presence during
inspection.

Note: The inspection must cover only the account identified in the pending case. (Marquez v.
Desierto, G.R. No. 138569, Sept. 11, 2003)

Q: Can a bank be compelled to disclose the records of the accounts of a depositor under the
investigation for unexplained wealth?

A: Since cases of unexplained wealth are similar to cases of bribery, dereliction of duty, no
reason is seen why it cannot be excepted from the rule making bank deposits confidential. In
this connection, inquiry into illegally acquired property in anti‐graft cases extends to cases
where such property is concealed by being held or recorded in the name of other persons. This
is also because the Anti‐Graft and Corrupt Practices Act, bank deposits shall be taken into
consideration in determining whether or not a public officer has acquired property manifestly
out of proportion with his lawful income. (PNB v. Gancayco, G.R. No. L‐18343, Sept. 30, 1965)

Q: In an action filed by the bank to recover the money transmitted by mistake, can the bank
be allowed to present the accounts which it believed were responsible for the acquisition of
the money?
A: Yes, R.A. 1405 allows the disclosure of bank deposits in cases where the money deposited is
the subject matter of litigation. In an action filed by the bank to recover the money transmitted
by mistake, necessarily, an inquiry into the whereabouts of the amount extends to whatever is
concealed by being held or recorded in the name of the persons other than the one responsible
for the illegal acquisition. (Mellon Bank, N.A. v. Magsino, G.R. No. 71479, Oct. 18, 1990)

Q: The Law on Secrecy of Bank Deposits provides that all deposits of whatever nature with
banks or banking institutions are absolutely confidential in nature and may not be examined,
inquired or looked into by any person, governmental official, bureau or office. However, the
law provides exceptions in certain instances. Which of the following may not be among the
exceptions?
1. in cases of impeachment
2. in cases involving bribery
3. in cases involving BIR inquiry
4. in cases of anti‐graft and corrupt practices
5. in cases where the money involved is the subject of litigation
A: Under Section 6(F) of the National Internal Revenue Code, the Commissioner of Internal
Revenue can inquire into the deposits of a decedent for the purpose of determining the gross
estate of such decedent. Apart from this case, a BIR inquiry into bank deposits cannot be made.
Thus, exception 3 may not always be applicable. Turning to exception 4, an inquiry into bank
deposits is possible only in prosecutions for unexplained wealth under the Anti‐graft and
Corrupt Practices Act. However, all other cases of anti‐graft and corrupt practices will not
warrant an inquiry into bank deposits. Thus, exception 4 may not always be applicable. Like any
other exception, it must be interpreted strictly.
Exceptions 1, 2, and 5 on the other hand, are provided expressly in the Law on Secrecy of Bank
Deposits. They are available to depositors at all times. (2004 Bar Question)

E. GARNISHMENT OF DEPOSITS, INCLUDING FOREIGN DEPOSITS

Q: Does garnishment of a bank deposit violate the law?

A: No, the prohibition against examination does not preclude its being garnished for
satisfaction of judgment. The disclosure is purely incidental to the execution process and it was
not the intention of the legislature to place bank deposits beyond the reach of judgment
creditor. (PCIB v. CA, G.R. No. 84526, Jan. 28, 1991)

Q: How about foreign currency deposits, can they be subject to garnishment?

A:
GR: Foreign currency deposits shall be exempt from attachment, garnishment, or any other
order or process of any court, legislative body, government agency or any administrative body
whatsoever. (Sec 8. R.A. 6426)
XPN: The application of Section 8 of R.A. 6426 depends on the extent of its justice. The
garnishment of a foreign currency deposit should be allowed to prevent injustice and for
equitable grounds, otherwise, it would negate Article 10 of the New Civil Code which provides
that “in case of doubt in the interpretation or application of laws, it is presumed that the
lawmaking body intended right and justice to prevail. (Salvacion vs. Central Bank of the
Philippines, G.R. 94723, August 21, 1997)

Q: Can the foreign currency deposit of a transient foreigner who illegally detained and raped
a minor Filipina, be garnished to satisfy the award for damages to the victim?
A: The exemption from garnishment of foreign currency deposits under R.A. 6426 cannot be
invoked to escape liability for the damages to the victim. The garnishment of the transient
foreigner’s foreign currency deposit should be allowed to prevent injustice and for equitable
grounds. The law was enacted to encourage foreign currency deposit and not to benefit a
wrongdoer. (Salvacion vs. Central Bank of the Philippines, G.R. 94723, August 21, 1997)

F. PENALTIES FOR VIOLATION

Q: What are the penalties for violation of R.A. 1405?

A: The penalty of imprisonment of not more than 5 years or a fine of not more than
20,000pesos or both, in the discretion of the court shall be imposed upon any official or
employee of a banking institution who, upon conviction, was found to have violated R.A. 1405.