Junk the bank secrecy law!

PerryScope
By Perry Diaz

BIR Commissioner Kim Henares

BIR Commissioner Kim Henares

Recently, members of the House of Representatives – the people’s representatives – blasted Bureau of Internal Revenue (BIR) Commissioner Kim Henares for suggesting to repeal or amend Republic Act (RA) 1405, also known as the Bank Secrecy Law, in order for the BIR to look into taxpayers’ bank accounts. Henares said that repealing or amending the law is needed to give BIR greater access to bank accounts suspected tax evaders. She said that the law hinders the government’s investigation of suspected money launderers and corrupt officials who’d use banks to hide their ill-gotten wealth. She believes that repealing or amending the law could help detect tax leakages, improve collections, and increase voluntary compliance.

Money-exchangeSection 2 of RA 1405 states: “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.”

Little did Henares know that her move to repeal or amend RA 1405 would meet virulent resistance from lawmakers who are masquerading as protectors of the people’s wealth or is it the unexplained wealth of corrupt officials that they’re really protecting?

Pork barrel scam

Napoles, Enrile, Estrada, and Revilla

Napoles, Enrile, Estrada, and Revilla

The recent scandal involving the Priority Development Assistance Fund (PDAF) — or pork barrel — typified the modus operandi of kleptocrats in Congress who are stealing from pork barrel funds earmarked for projects that would benefit the people. And what is really disgusting is none of them had ever admitted to stealing from their pork barrel allocations nor had they expressed sympathy for the people who had suffered from the gigantic scams perpetrated by these lawmakers who are in cahoots with the biggest scam operator that inhabited this hellhole we love to call Inang Bayan.

But while all these shenanigans are happening, President Benigno “P-Noy” Aquino III touted the government’s “success” in fighting corruption. He even claimed credit for the exposure of the P10-billion pork barrel scam allegedly pulled off by Janet Lim-Napoles who is currently detained for an unrelated crime but has yet to be charged of plunder. Makes one wonder, what’s preventing the government from prosecuting Napoles?

Hiding ill-gotten wealth

Corruption-in-the-Philippines.2In my article, “Institutionalized corruption” (November 21, 2012), I wrote: “In many countries, like the United States, people with ill-gotten wealth deposit their money in banks in Switzerland or the Cayman Islands, where bank secrecy laws protect the identity of depositors. But in the Philippines, a corrupt official, a drug lord or a jueteng operator doesn’t need to go abroad to hide their dirty money. Yep, they can go straight to their local bank and open a foreign currency deposit account and nobody can see it, not even government investigators.

“Known as ‘Foreign Currency Deposit Act of the Philippines,’ Republic Act (RA) 6426’ ‘was signed into law by then President Ferdinand E. Marcos in 1974 during the martial law era. The law states that any information can only be disclosed ‘upon written permission of the depositor.’ Many believe that it was enacted for the purpose of hiding the ill-gotten wealth of Marcos and his cronies.

Speaker Feliciano Belmonte Jr.

Speaker Feliciano Belmonte Jr.

“But RA 6426 survived when the people power revolution toppled the Marcos dictatorship. Oddly, it remains in the books to this day. Perhaps, the lawmakers find it useful.” Yes, indeed.

Is it then surprising that the legislators are against repealing or amending RA 1405 and RA 6426? Speaker Feliciano Belmonte Jr. said that scuttling the bank secrecy law could result in capital flight, as it would affect depositors’ confidence in the banking system. In the Senate, Sen. Sergio Osmeña III was the only one who expressed support for the proposed amendment.

Freedom of information

Another bill that has been tossed around like a ping-pong ball was the Freedom of Information (FOI) bill. FOI has been debated in Congress for the past 10 years. When P-Noy ran for President in 2010, he promised to sign an FOI bill into law if he won the election. But after he was sworn in as President, he showed reluctance in supporting it. However, he recently said that he wanted the FOI bill passed after the Senate passed it. The question is: will it pass in the House? Some congressmen were saying that without P-Noy’s active support for FOI, it will fail to pass. Many believe that P-Noy was just paying lip service to FOI.

FOI.5If P-Noy really wants to fight corruption, he needs more than just slogans to do it. He should – nay, must — have the ability to track where the dirty or ill-gotten money went. And to do that, he needs tools like FOI and anti-money laundering law to catch the culprits. And only then can he claim that he is really serious about fighting corruption.

The bottom line is that unless P-Noy actively supports and encourages his allies in Congress to repeal or amend RA 1405 and RA 6426, his reform agenda will fail and he might as well kiss it goodbye.

At the end of the day, for as long as the Bank Secrecy Law and the Foreign Currency Deposit Act are in effect, corruption will flourish with impunity.

(PerryDiaz@gmail.com)


8 Responses. Have your say.

  1. Don Azarias says:

    Perry,

    The Bank Secrecy Law in the Philippine jurisprudence is one of those laws enacted by legislative idiots which, in reality, only favors those financial wrongdoers like tax cheaters and money launderers.

    In the United States, the IRS can look into and freeze and seize your bank accounts, with easy to obtain court order, without the interference from the Legislative Branch.

    Those moronic lawmakers in the Philippines still have a lot to learn. Is it any wonder that graft and corruption continue to flourish in the Philippines?

    Don

  2. cito tican says:

    Amend the secrecy law to exempt the business people. Prior to, during and 3 years after leaving public service, a person is required to report local and foreign bank accounts in the SALN and the BIR are authorized to investigate that person’s accounts during the time frame mentioned above. C2

  3. cito tican says:

    Correction: To exempt nonpublic officials which includes business people. This is in response to the claim of scaring investors. c2

  4. Ramon Calalang says:

    This is shameful! Commissioner Henares made a very brilliant and courageous act in proposing the repeal of the Bank Secrecy law. All our congressmen knew that the primary reason in the passage of this law during the time of Marcos was to hide his ill-gotten wealth that he stole from the Filipino taxpayers. Our congressmen, obviously, are not putting themselves in the shoes of Marcos in objecting to the repeal of this law. whoever will object to this is a sign that they have ill-gotten wealth and don’t want this to be exposed.

    • perry says:

      Hi Ramon,

      I wouldn’t be surprised if the senators and congressmen who stole from their pork barrel allocations had deposited their loots in their secret bank accounts.

      Perry

  5. ben oteyza says:

    It appears that even if the law stands “as is,” by COURT ORDER, the bank account may be opened.
    This shall depend on ability of government or anyone with court standing to obtain a court order to open the bank account in question in cases of ill-begotten wealth or similar criminal activities. Correct me if wrong !

    • perry says:

      Hi Ben,

      Under Section 2 of the Bank Secrecy Law (RA 1405), a court order can’t open a secret bank account without a written permission of the depositor.

      Perry

  6. Fernando Habito says:

    In a country labeled as ” Land of Liars and Thieves” repealing the “Bank Secrecy Law ” is one step forward to fight graft and corruptions and money laundering of people’s money. But politicians will strongly resist to amend the law coz they’re the beneficiaries.

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