Medela seeks to lift the banking secrecy law

Philippine Central Bank Governor Philip Medala has urged the Financial Executives Institute of the Philippines (Finex) to support lifting the bank secrecy law.

Speaking at a meeting of Finex members, Medala said the central bank is asking for more powers so that it can check suspicious bank accounts, especially those potentially linked to illegal activities.

“Bill Settlement Payment Administrators (BSP) are not allowed to view bank accounts. [Sometimes] Bank owners, usually small banks, steal from their banks. [We ask that] At least no banking supervisor should be covered in secrecy.”

“I need your support there. [If] Bank secrecy is so important to the political system, at least not to make it cripple and disrupt bank supervisors,” he told Finex members.

Republic Act 1405, or the Bank Deposit Secrecy Act, was enacted in 1955 to ensure the confidentiality of all types of bank deposits, except those authorized by the depositor, during impeachment proceedings pursuant to a court order in cases of bribery or official misconduct, or in cases where the Where the deposit is the subject of a legal dispute. The aim 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.

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According to the International Monetary Fund (IMF), there is compelling reason to modify the extraordinarily strict bank secrecy regulations in the Philippines so that law enforcement and financial regulators have full and direct access to depositors’ information.

He stressed that prompt reimbursement to depositors, effectiveness of the Anti-Money Laundering and Terrorist Financing (AML/CFT) framework, prudential supervision and settlement activities are all factors impeded by the Bank Secrecy Law.

“In addition, these laws have broader negative financial stability, development, financial soundness, and reputational implications,” the IMF said.

It also said the Philippines would be able to remove itself from the FATF’s “grey list” by reviewing laws governing bank secrecy and implementing anti-money laundering and terrorist financing activities.

The Financial Action Task Force (FATF) is a global organization that sets policies and encourages the effective application of measures to combat money laundering and terrorist financing. The Philippines returned to the gray list in June of last year.

Despite current solutions, the IMF said obstacles caused by bank secrecy regulations hamper effective prudential oversight. He stressed that “the amendment of banking secrecy laws would improve transparency and control for financial stability purposes, enhance the effectiveness of the anti-money laundering and terrorist financing system and reduce exposure to corruption.”

In a related development, Senator Francis “Chez” Escudero introduced Senate Bill 56, which would require all government employees, except those serving in an honorary capacity, to provide written consents allowing the ombudsman’s office to access and inspect all deposits, including currency deposits. foreign, both at home and abroad.

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