BANGKO Sentral ng Pilipinas (BSP) Governor Felipe Medalla wants the Financial Executives Institute of the Philippines (Finex) to support the lifting of the bank secrecy law.
Speaking at a Finex special membership meeting, Medalla said the central bank was requesting more authority so it could examine suspect bank accounts, particularly those possibly linked to illegal activities.
“BSP supervisors are not allowed to look at bank accounts. [Sometimes] the owners of a bank, usually small banks, are stealing from their own banks. [We ask that] at least a banking supervisor should not be covered by secrecy,” Medalla said.
“I need your support there. [If] bank secrecy is too important to the political system, at least don’t make it paralyze and disable your banking supervisors,” he told Finex members.
Republic Act 1405, or the “Law on Secrecy of Bank Deposits,” was put in place in 1955 to ensure the confidentiality of all types of bank deposits, with the exception of those where the depositor authorizes disclosure, during impeachment proceedings as per a court’s order in cases of bribery or official misconduct, or in cases where the deposit is the subject of a legal dispute. The goal of the law was to prevent private hoarding and encourage people to deposit their money in banks so that it could be used for lending.
According to the International Monetary Fund (IMF), there is a compelling rationale for amending the Philippines’ unusually strict bank secrecy regulations so that law enforcement and financial regulators have complete and direct access to depositor information.
Prompt reimbursement of depositors, the effectiveness of the anti-money laundering and combating the financing of terrorism (AML/CFT) framework, and prudential supervision and resolution activities are all hindered by the bank secrecy law, it was emphasized.
“In addition, these laws have wider negative financial stability, developmental, financial integrity and reputational implications,” the IMF said.
It also said that the Philippines would be able to remove itself from the Financial Action Task Force’s (FATF) “grey list” by revising laws governing bank secrecy and implementing AML/CFT activities.
The FATF is a global organization that develops policies and encourages the effective application of measures to combat money laundering and terrorism financing. The Philippines reentered the grey list in June last year.
Despite existing workarounds, the IMF said obstacles caused by bank secrecy regulations hinder effective prudential oversight. “Amending the bank secrecy laws would improve transparency and supervision for financial stability purposes, strengthen the effectiveness of the AML/CFT regime and reduce vulnerabilities to corruption,” it underscored.
In related development, Sen. Francis “Chiz” Escudero has filed Senate Bill 56, which will require all government employees, aside from those who serve in an honorary capacity, to submit written consents allowing the Office of the Ombudsman to access and examine all their deposits, including foreign currency deposits, both here and abroad.