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he Impeachment hearings these past couple of days revolved around Chief Justice Renato Corona’s bank accounts and whether the Senate Impeachment Court could even look at them. One of the banks subpoenaed for documents, PS Bank even requested and was subsequently granted a Temporary Restraining Order (TRO) by the Supreme Court stopping the impeachment court from ordering the bank to turn over Corona’s foreign currency denominated bank documents.

All this high courtroom drama raises the question as to why banking secrecy is so stringent in the Philippines in the first place. In fact foreign currency bank accounts are virtually untouchable under almost any circumstance. The law behind the ironclad secrecy of foreign currency accounts is Republic Act No. 6426, also known as the "Foreign Currency Deposit Act of the Philippines." It was signed into law two days after April Fools Day in 1974 by then President Ferdinand Marcos, during that dark period of Philippine history we now call the Martial Law years. Section 6 of the law even made the interest or other income earned by foreign currency accounts tax exempt.

The mere fact that this law was promulgated by Marcos and his minions during the early years of Martial Law should make it immediately suspect. Was the law simply a way for that corrupt government to hide all its ill-gotten wealth?

Even assuming that there was indeed a legitimate argument at the time for its enactment which was to purportedly raise the country’s foreign currency reserves by attracting foreign depositors with confidentiality and the lure of tax-free interest income, that argument has long since lost its validity. With the number of overseas Filipinos remitting foreign funds into the country, the Banko Sentral is now awash in foreign currency and the country no longer needs to resort to questionable incentives to bolster its foreign reserves.

This bank secrecy law seems to have remained in place for one reason and only one reason: to protect the corrupt by shielding their bank accounts from the law. And it must be noted here that Republic Act No. 6426 goes far beyond even the Swiss banking secrecy laws when it states in its Section 8 that any information about the account can only be divulged “upon the written permission of the depositor.” Swiss banks on the other hand can be compelled via a subpoena from a Swiss judge to provide information about even their numbered private accounts.

And Swiss bank secrecy laws continue to be diluted and made less stringent: In 2009 under pressure from the G20 and the OEDC (Organisation for Economic Co-operation and Development) Swiss banks revised their secrecy rules making it more difficult for their depositors to evade their tax liabilities; and in 2010 the Swiss government under pressure from the United States reluctantly gave one of its banks (UBS) the authority to transmit information regarding its American depositors to the US government. There have also been numerous other developments over the years that have chipped away at the Swiss bank secrecy laws making it ever more difficult for money launderers and tax cheats to use Swiss banks to hide their ill-gotten wealth.

Given the level of transparency and accountability that we expect of this government, shouldn’t Filipinos also expect that same level of forthrightness from everyone else? Our guess is the vast majority of Filipino bank depositors would have no problem if Republic Act No. 6426 was repealed. Only those who are hiding questionable funds have anything to worry about. The argument that a repeal of RA 6426 will cause bank runs or in any way undermine the country’s banking industry is pure nonsense. The United States as well as most other developed countries have no such secrecy laws yet their banking institutions remain strong and their banking industry vibrant.

The Foreign Currency Deposit Act of 1974 was created primarily to shield the plunder of Marcos and his cronies from the law. And the law has served them well, as it has all the plunderers and money launderers that have come after them. Honest and law-abiding Filipinos have no need for this law. It has been around for too long and it is high time it is repealed and tossed in the trash bin of history along with all the other illegal rulings of the Marcos Dictatorship. Published 2/10/2012

Join our Poll: Should the Foreign Currency Deposit Act be amended or repealed?

Postscript:
On February 10, 2012 Senator Ralph G. Recto called for a revisit of the laws on foreign currency deposit units (FCDUs) and the confidentiality of bank accounts to hammer out better laws responsive to the “changing times and changing crimes” in the wake of the controversy over the bank accounts of impeached Chief Justice Renato C. Corona (Manila Bulletin).

At the House of Representatives, Alliance of Concerned Teachers (ACT) party-list Rep. Antonio Tinio filed a bill seeking to amend the Foreign Currency Deposit Act of the Philippines or the Republic Act (RA) 6426 by revoking the absolute confidentiality conferred upon foreign currency deposits only on cases involving bribery and dereliction of duty (Manila Bulletin).

Senator Chiz Escudero likewise is pushing for the passage of Senate Bill No. (SBN) 107 which will require all public officials and employees to sign a written waiver submitted to the Office of the Ombudsman consenting to a government audit of all of their financial assets.

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