RA 1405 Section 3 Additional Materials

RA 1405 Section 3 Additional materials
Section 3 Prohibition on Disclosure
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.
Prohibited Disclosures by Bank Officials or Employees
The law prohibits any official or employee of a bank from disclosing

to any person any information concerning bank deposits, except if the disclosure
is made in the circumstances provided by Section 2.
Moreover, any person who inquires into such bank deposits in violation of
Section 2 shall be liable.
3.1.1 Disclosure to Independent Auditors
A disclosure made to an independent auditor in the conduct of due

diligence and legal audit of the bank is not among the enumerated
exceptions and cannot be allowed. The express repeal of Presidential Decree
No. 1792, which previously allowed disclosure to an independent auditor hired
to conduct regular audit, signifies the legislative intent to limit the circumstances
of allowable disclosures.
3.1.2 Tracing of Bank Deposits
The Bangko Sentral does not have the power to issue a general directive to
banks to produce accounts or records of wards or certain persons. It is
generally prohibited from making inquiries with respect to requests from the
public to trace bank deposits of deceased or incompetent persons pursuant to this
law. As deposits are private contracts between the banks and their depositors,
duly
authorized representatives of deceased or incompetent persons may inquire
directly from their depositary bank on the requirements for tracing of deposits.
3.2 Authorized Disclosures
3.2.1 Disclosure to Treasurer of the Philippines in Cases

Involving Unclaimed Balances
The Unclaimed Balances Act directs all banks, building and loan
associations, and trust corporations to forward to the Treasurer of the
Philippines a statement under oath executed by their respective managing officers
of all credits and deposits held by them in favor of persons known to be dead, or
who have not made further deposits or withdrawals during the preceding 10 years
or more.The sworn statement must be arranged in alphabetical order according
to the names of creditors and depositors.
Banks and other financial institutions are required to post the sworn
statement and to inform depositors of escheat proceedings being undertaken by
the Government. This statutory mandate is intended to provide concerned
depositors whose accounts are subject of escheat proceedings to intervene as
parties-defendants. Thus, the bank officer responsible for the filing and posting
of the statement cannot be held liable under this Section.
The Unclaimed Balances Act and this law may both be implemented
without their respective purposes and policies being defeated.The former was
enacted to authorize and provide the procedure for escheat of unclaimed bank
balances to the Government. It also requires banks to report to the Treasurer of
the Philippines a statement of unclaimed balances held by them. To state that the
submission of the statement constitutes a violation of this law would defeat the
very purpose of The Unclaimed Balances Act because without the information
about the unclaimed account in the statement, there would be no basis for the
Solicitor General to file escheat proceedings.
3.2.2 Distraint and Garnishment in Collection of
Delinquent Taxes
The Commissioner of Internal Revenue, in implementing his remedies

in collecting delinquent taxes, may issue a warrant of distraint of personal
property of whatever character, including debts, credits and bank accounts, and
interests in and rights to personal property. Distraint is the seizure by the
Government of personal property, tangible or intangible, to enforce the payment
of taxes, to be followed by its public sale, if the taxes are not voluntarily paid.
With respect to bank accounts, the Commissioner issues a warrant of

garnishment to seize the bank deposits of a delinquent taxpayer. Bank accounts
are garnished by serving a warrant of garnishment upon the delinquent
taxpayer and upon the president, manager, treasurer, or other responsible officer
of the bank. Upon receipt of the warrant of garnishment, the bank shall turnover
to the Commissioner so much of the bank accounts as may be sufficient to
satisfy the claim of the Government.
3.2.3 Garnishment of Deposits in Satisfaction of

Judgment
Pursuant to the Supreme Court’s authority to promulgate rules concerning

the protection and enforcement of constitutional rights, pleading, practice and
procedure in all courts, it issued the rules on execution of judgments which
allow the garnishment of debts and credits due to the judgment obligor. The
court officer may levy on debts due the judgment obligor and other credits,
including bank deposits. Levy is made by serving notice upon the persons
owing such debts or having in his possession or control such credits to which
the judgment obligor is entitled. The garnishment, however, shall cover only
such amount as will satisfy the judgment and all lawful fees.
Within five (5) days from service of the notice of garnishment, the
garnishee shall make a written report to the court stating therein whether or not
the judgment obligor has sufficient funds or credits
to satisfy the amount in the judgment. If the funds are insufficient, the report
shall state how much funds or credits are held by the garnishee for the
judgment obligor. Within 10 working days from service of notice requiring
delivery on said garnishee, the garnished amount shall be delivered directly to
the judgment obligee, except lawful fees which shall be paid directly to the court.
Thus, in order to satisfy a final judgment in a collection case, the

responsible bank official to whom the writ of garnishment is directed must
disclose information on whether the judgment debtor has a deposit with the
bank. The disclosure of the existence of a deposit is purely incidental to the
execution process. The measure of protection afforded by this law is not intended
to enable debtors to evade payment of their just debts through the expedient of
converting their assets into cash and depositing the same in a bank. It is not
the intention of the law to place bank deposits beyond the reach of execution to
satisfy a final judgment.
3.2.4 Disclosure of Information on Bank Accounts in a

Closed Bank
Employees and officers of a closed bank cannot be prosecuted for violation

of this law when they disclose information concerning a bank account which was
used in the perpetration of anomalies.
HILARIO P. SORIANO v. GUTIERREZ AND MANUZON

C.A. G.R. SP No. 87634,May 30, 2006
A bank officer of a closed bank was exonerated of the charge of violation

of Republic Act No. 1405. Since Rural Bank of San Miguel was already
forbidden to do business, it could no longer perform the functions of a
banking institution. It only exists to wind up its corporate affairs, gather its
assets, and settle its obligations. Thus, the disclosure of a bank account is
not a prohibited act under Republic Act No. 1405 inasmuch as the Rural
Bank of San Miguel is no longer a “banking institution” within the spirit
and letter of the law.
3.2.5 Disclosures to Directors
Inquiry by bank directors of clients’ deposit accounts may be allowed when such is in relation
to the exercise of their official functions.165 Disclosures to them may be justified because they are
primarily responsible for the corporate governance of the bank and the monitoring and overseeing of
management actions.166 Persons or government officials who are enjoined from looking or inquiring into
bank deposits under Section 2 of this law refer to “strangers to the bank,” or those who have no hand in
the conduct and administration of the bank, such as tax collectors, police officers, and other persons who
are merely engaged in “fishing expeditions”.167 Thus, directors cannot be deemed strangers to the bank.168

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RA 1405 Section 3 Additional materials

Section 3 Prohibition on Disclosure

SEC. 3. It shall be unlawful for any official or employee of a banking

Prohibited Disclosures by Bank Officials or Employees

The law prohibits any official or employee of a bank from disclosing

3.1.1 Disclosure to Independent Auditors

A disclosure made to an independent auditor in the conduct of due

3.1.2 Tracing of Bank Deposits

3.2 Authorized Disclosures

3.2.1 Disclosure to Treasurer of the Philippines in Cases

The Commissioner of Internal Revenue, in implementing his remedies

With respect to bank accounts, the Commissioner issues a warrant of

3.2.3 Garnishment of Deposits in Satisfaction of

Pursuant to the Supreme Court’s authority to promulgate rules concerning

Thus, in order to satisfy a final judgment in a collection case, the

3.2.4 Disclosure of Information on Bank Accounts in a

Employees and officers of a closed bank cannot be prosecuted for violation

HILARIO P. SORIANO v. GUTIERREZ AND MANUZON

A bank officer of a closed bank was exonerated of the charge of violation

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