SEC backs lifting of bank secrecy law

To combat corruption, boost probe power

MANILA, Philippines —  The Securities and Exchange Commission has expressed support for proposals to amend the bank secrecy law to address corruption in government as well as enhance the SEC’s investigative power.

“As a corporate and capital market regulator, the SEC welcomes the proposed easing of our bank secrecy law as a necessary measure to uphold trust and confidence in the Philippine capital market and overall economy,” SEC chairperson Francis Lim said.

Lim cited corruption as a major concern for both local and foreign investors.

“It does not only create crippling uncertainties; it translates to real, unnecessary, additional costs of doing business in the country,” he said.

The SEC noted that several bills are pending before the House of Representatives for the lifting of the bank secrecy law, primarily to promote transparency and tackle corruption.

The amendments seek to empower the Bangko Sentral ng Pilipinas to inquire into and examine deposits when there is reasonable ground to believe that fraud, serious irregularity or unlawful activity has been committed by stockholders, owners, directors, trustees, officers or employees of supervised institutions.

Lim said that having the ability to access critical financial information, particularly in cases of insider trading, market manipulation and investment fraud, would significantly enhance the enforcement capabilities of the SEC.

“More importantly, it sends a clear message that our capital markets are governed by transparency and accountability,” he said.

According to the SEC, the Secrecy of Bank Deposits Act, Republic Act (RA) 1405, has often been used as a shield for owners of bank accounts in cases of violations of the Securities Regulation Code and the Revised Corporation Code of the Philippines, limiting the commission’s enforcement capacities.

The SEC said that it has also prevented the commission from validating information on the declared financial position of companies where there are grounds to believe that there is an effort to conceal misconduct, corporate fraud or non-compliance with certain requirements.

The commission said that amendments to RA 1405 could potentially enhance its investigative power, enabling it to easily gather evidence from bank records and trace funds flowing into or out of entities or individuals suspected of securities fraud, misrepresentation or unregistered securities offering.

Further, the initiative could speed up the resolution of investigations and cases as it reduces the need for separate court proceedings just to access bank information.

“We are optimistic that further easing of bank secrecy – especially relating to securities law violations – can significantly aid enforcement efforts. A clear example is the BSP’s use of the Anti-Financial Account Scamming Act to investigate financial accounts linked to the flood control corruption fiasco,” Lim said.

The SEC also expects the reforms to serve as testament to the country’s commitment to international standards and best practices against money laundering, terrorist financing and other financial crimes.

In line with global efforts to tackle money laundering, terrorist financing, tax evasion, corruption and other financial crimes, multilateral organizations such as the International Monetary Fund, the Organization for Economic Cooperation and Development and the Financial Action Task Force have long recommended reforms in the Philippines’ bank secrecy laws.

“The lifting of the bank secrecy law will sustain our efforts toward strengthening transparency and accountability. The measure will eliminate a significant barrier that has long hindered the investigation and prosecution of financial crimes,” Lim said.