DOJ Opinion No. 126, s. 1989

DOJ OPINION NO. 126 , s. 1989 June 22, 1989 Governor Jose B. Fernandez, Jr. Central Bank of the Philippines Manila Sir : This has reference to your request for opinion on the extent of the authority of the Monetary Board "to use or disclose information obtained from examination of bank deposit accounts" under the pertinent provisions of R.A. 1405, as amended (Law on Secrecy of Bank Deposits) and R.A. 265, as amended (Central Bank Charter). prLL It appears that the National Bureau of Investigation (NBI) has uncovered the existence of a syndicate which has defrauded the Bureau of Customs and/or the National Steel Corporation in the amount of P177 M by using certain bank deposit accounts as conduits in the diversion of funds; that on the basis of said investigation report, the Monetary Board authorized the examination of certain bank deposit accounts to establish such defraudation; and that the NBI is requesting for the disclosure of the information obtained from such examination. The issue presented to us is whether or not the Monetary Board can disclose to the NBI information obtained from the aforesaid examination of bank deposit accounts without violating the aforecited statutes if the serious irregularity discovered neither involves fraud upon, or injury or damage to, a bank nor any violation of banking laws, rules and regulations, but establishes, for instance, that certain deposit accounts are being used as part of the scheme to defraud the government or its agencies. The doubt arises from your belief that the special and general examinations of the banks and banking institutions are conducted solely to assure observance of the Central Bank Act and of other pertinent banking laws. The pertinent provisions of the law read: R . A . 1405, as amended "Sec. 2. 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 and may not be examined, inquired or looked into by any person, government official, bureau or office except when the examination is made in the course of a special or general examination of a bank and is specifically authorized by the Monetary Board after being satisfied that there is reasonable ground to believe that a bank fraud or serious irregularity, has been or is being committed and that it is necessary to look into the deposit to establish such fraud or irregularity , or when the examination is made by an independent auditor hired by the bank to conduct its regular audit provided that the examination is for audit purpose only and the results thereof shall be for the exclusively use of the bank, or 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." (As amended by P.D. No. 1792 dated January 16, 1981) "Sec. 3. It shall be unlawful for any official or employee of a bank to disclose to any person other than those mentioned in Section Two hereof, or for an independent auditor hired by a bank to conduct its regular audit to disclose to any person other than a bank director, official or employee authorized by the bank, any information concerning said deposits." (As amended by P.D. No. 1792 dated Jan. 16, 1981). R . A . 256, as amended "Sec. 25-A. The department heads and the examiners of the supervising and examining/departments, in the conduct of the periodic or special examination of banking institutions may be specifically authorized by the Monetary Board to examine, inquire or look into all deposits of whatever nature with banking institutions in the Philippines including investments in debt instruments issued by the Government of the Philippines, its political subdivisions and its instrumentalities, after being satisfied that there is reasonable ground to believe that a bank fraud or serious irregularity has been or is being committed and that it is necessary to look into the deposit to establish such fraud or irregularity ." (As amended by P.D. No. 1771 dated January 14, 1981) (Emphasis ours) It is believed that the abovesaid issue should be resolved in the affirmative. The general authority of the Central Bank to conduct periodic and special examinations of banking institutions in the Philippines is based on Section 25 of R.A. 265, whereas the specific authority of the Monetary Board to authorize an inquiry into bank deposits is founded upon other sections of law, i.e., Section 25-A of said Act and Section 2 of R.A. 1405. The purpose behind Section 25, namely, to assure observance of the Central Bank Act and other banking laws, is not necessarily the objectives behind Section 25-A of R.A. 265, and Section 2, of R.A. 1405. The authority of the Central Bank, thru its supervising and examining departments, to conduct periodic examinations of banking establishments is mandated by law, whereas its power to conduct examinations of bank deposit accounts depends upon a specific authorization by the Monetary Board. This is so because where in the course of the regular examination of a banking firm, the Central Bank comes across a bank fraud or serious irregulatory being or having been committed, the legislature has intended to take out the deposit-investigating authority of the Bank from the narrow confines of the objective behind its general examination authority of banking institutions, which is to assume observance of banking laws. prcd It stands to reason that where a particular deposit account is the product of a "serious irregulatory", even if the bank concerned is not guilty of such irregularity, the said deposit account may be examined to establish such anomaly. It has been said that an irregulatory is anything that does not conform to, or constitutes a deviation from, what is established law (Mielcarek vs. Riske, 21 NW 2d 218) Furthermore, R.A. 1405, in granting bank deposit immunity from examination could not have intended to allow the use of banking institutions as instruments to facilitate or conceal any criminal wrongdoing. It is inconceivable that Congress could have legislated a statute whose operative effect is to frustrate the ends of justice. Pertinent is the rule that in case of doubt in the construction of a statute, it is presumed that the legislature intended right and justice to prevail (Art. 10, Civil Code). This Department has had the occasion to rule that the immunity granted under Section 2 of R.A. No. 1405 is limited to two matters, namely: bank deposits and investments in government bonds; it does not extend to papers and documents pertaining to commercial transactions conducted through banking Institutions such as the issuance of letters of credit or trust receipts which do not involve the deposit of money, as instrument of indebtedness, such as bank drafts or promissory notes. Not all records and documents pertaining to banking transactions are covered by the immunity (Sec. of Justice Op. No. 5, s. 1982). It has likewise been ruled that the said law prohibiting examination of bank accounts does not prohibit seizure thereof to satisfy just and lawful debts, as it is inconceivable that Congress intended to convert banks into sanctuaries or places of refuge for debtor's money, placing this beyond the reach of creditors (Sec. of Justice Op. No. 54, s. 1956). The apprehension that the foregoing conclusion might make the Monetary Board an instrument for the circumvention of the law on the confidentiality of bank deposits should be dispelled. The legislative purpose behind such law is "to keep bank accounts from prying eyes or, in the words of its sponsor, from fishing expeditions by those who for one reason or another, especially for tax assessment, would find out whether a given person has money in a bank and if so, where, when or how he got it" (see Sec. of Justice, Opn. No. 54, s. 1956). Under the law, the Monetary Board may authorize an inquiry and disclosure of bank deposits only if there is reasonable ground to believe that a bank fraud or serious irregularity has been or is being committed. Hence, such an inquiry cannot be deemed exploratory in character since such inquiry is allowed only where there exists evidence of such fraud or irregularity. LexLib Finally, it is noted that in PNB v. Gancayco (15 SCRA 91), the Supreme Court observed that while R.A. 1405 declares bank deposit absolutely confidential, it nonetheless allows disclosure in the following instances: (1) upon written permission of the depositors; (2) in cases of impeachment; (3) upon order of the competent court in cases of bribery and dereliction of duty of public officials; (4) in cases where the money is subject of the litigation; and (5) in cases of unexplained wealth. Subsequently, P.D. No. 1792 was issued which added two more instances constituting exceptions to the absolute confidentiality rule in R.A. 1405, namely, (a) in cases of examination of a banking institution upon specific authority of the Monetary Board where a bank fraud or serious irregularity appears to have been or is being committed and (b) in cases of examination by an independent auditor hired by a bank to conduct its regular audit. It should follow, on the basis of the Gancayco ruling, that in these two instances, the disclosure of the bank deposit involved is likewise allowed by law. Please be advised accordingly. Very truly yours, (SGD.) SEDFREY A. ORDOEZ Secretary of Justice