Easing bank secrecy law to stop launderers, evaders

CEBU, Philippines - Easing the country’s bank secrecy law could possibly write off the “dirty money haven” label, an official of the Philippine Institute of Certified Public Accountants-Cebu Chapter said.

PICPA-Cebu President Edgar Detoya said he supports easing the Philippine bank secrecy law, which is considered among the most restrictive in the world.

Doing so, he said, would also help fight against graft and corruption practices as well as prevent money laundering activities, the PICPA official said.

Globally, only the Philippines, Lebanon, and Switzerland still adapt restrictive banking laws making it hard for the government to go after tax evaders and money launderers, according to the National Tax Research Center (NTRC).

Detoya said there should be nothing to fear about lifting bank secrecy law, if the money placed by depositors in their bank accounts come from legitimate sources.

The secrecy law, he said, has allowed a haven for "dirty" money.

Currently, only the Philippines and Lebanon are the countries where tax evasion is not a predicate crime to money laundering.

Restrictive law

In fact, the Philippines is the only country in the Asia-Pacific region with highly restrictive law that explicitly prohibits the Anti-Money Laundering Council from sharing data with the Bureau of Internal Revenue.

The bank secrecy law prohibits an inquiry into any bank records except if there is an expressed permission from the depositor, in cases of impeachment, upon order of a competent court in cases of bribery or dereliction of duty of public officials, or cases where the money deposited is the subject matter of the litigation.

Banks are prohibited by the bank secrecy law to disclose financial records of their clients.

Republic Act 1405 or the Bank Secrecy Law, enacted on September 9, 1955, was create 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."

In its July-August 2016 tax research journal, NTRC said that while bank secrecy is always considered one of the main aspects of private banking, it has also been "pinpointed to be responsible for one of the main instruments of underground economy, tax evasion and money laundering.

"The amendment of our Bank Secrecy Laws should be viewed positively as an opportunity for the Philippines to effectively combat both domestic and global tax evasion, money laundering, and other financial crimes, foster harmonious and supportive international relations, to finally comply with world standards on transparency," NTRC said.

"With the global call to end excessive protection benefiting dubious parties, it is inevitable that banking secrecy is set to end. The FATCA (Foreign Account Tax Compliance Act) has received considerable international support because most foreign governments recognize how effective it has been in detecting and combating tax evasion," NTRC also said.

It can be recalled in early February 2016, hackers attempted to steal $951 million from the Bank of Bangladesh's account through the Federal Reserve, $81 million of which was transferred into the Philippines.

The money made its way into phony accounts at the Rizal Commercial Banking Corp. and were laundered through the country's casinos.

The incident highlighted the weakness of the country's money laundering law after lawmakers decided in 2012 to exclude casinos from the list of entities required to report to AMLC regarding suspicious transactions. (FREEMAN)