WikiLeaks cables: Philippine bank secrecy laws under fire | ABS-CBN News

WikiLeaks cables: Philippine bank secrecy laws under fire | ABS-CBN News

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MANILA, Philippines - The US government had criticized Philippine laws and local court rulings that block investigation and prosecution of suspected corrupt government officials, according to several US embassy cables published by anti-secrecy group WikiLeaks.

Unclassified cable 08MANILA622, dated March 12, 2008 and sent by then Ambassador Kristey Kenney to the US Secretary of State, said anti-corruption efforts in the Philippines were being hampered by local institutions themselves.

"Investigations are hindered by Philippine banking secrecy laws that limit access to certain crucial financial information, and by poor protection for would-be whistleblowers," said the cable, which was the US Embassy's 2008 report on the Philippines regarding the International Anticorruption And Good Governance Act.

Republic Act 1405 or the Bank Secrecy Act states that all deposits with Philippine banks are "absolutely confidential" and may not be examined by any person or government official.

However, it cited exemptions such as "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."

However, another law, Republic Act 6426 or the Foreign Currency Deposits Act, prohibits all kinds of inquiry into bank accounts involving foreign currencies "except upon the written permission of the depositor."

"In no instance shall foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative, or any other entity whether public or private," Section 8 of Republic Act 6426 states.

The Supreme Court on Thursday issued an indefinite temporary restraining order on the subpoena issued by the impeachment court on the alleged dollar accounts of Chief Justice Renato Corona in Philippine Savings Bank.

The Supreme Court based its decision on the Foreign Currency Deposit Act, which has not been amended by Congress since it came into law on April 4, 1974, just a year-and-a-half into the Marcos dictatorship.

Money laundering

The US State Department, in a 2012 report on the Philippines, said Congress enacted an anti-money laundering law in September 2001 and followed through with amendments in March 2003 to address legal concerns posed by the Organization for Economic Cooperation and Development (OECD) Financial Action Task Force (FATF).

It said that the FATF Asia Pacific Group conducted a comprehensive peer review of the Philippines in September 2008 and raised several important concerns, including court rulings that inhibit and complicate investigations of fraud and corruption by prohibiting ex-parte inquiries regarding suspicious accounts.

"Legislation to address these deficiencies is pending in the Philippine Congress, and has been designated 'urgent' by the Aquino administration, which will accelerate its movement through the Congress," the US State Department said.

The FATF's concerns regarding local laws and court rulings on bank accounts were earlier echoed in a US embassy cable 10MANILA149 dated January 25, 2010.

The cable, titled "2010 Investment Climate Statement - Philippines," said that some problems remain unresolved after the General Banking Law of 2000 paved the way for the Philippine banking system to phase in internationally accepted, risk-based capital adequacy standards.

"Some impediments remain to more effective bank supervision, including stringent bank deposit secrecy laws, obstacles preventing regulators from examining banks at will, and inadequate liability protection for Central Bank officials and bank examiners," it said.

"There are a number of laws and mechanisms directed at combating corruption and related anti-competitive business practices, although the enforcement of anti-corruption law has been weak and inconsistent," it added.

The Carlos Garcia case

Cable 05MANILA84, a US embassy report on anti-corruption efforts in the Philippines, mentioned how the Foreign Currency Deposit Act prevented the Landbank from enforcing the Sandiganbayan's freeze order on the dollar accounts of former Armed Forces comptroller Major General Carlos Garcia, who allegedly amassed wealth while he served in the military.

Garcia was charged with plunder and corruption before the Sandiganbayan. A military tribunal also found him guilty of violating the Articles of War.

The military tribunal said Garcia did not truthfully declare his properties in his statement of assets, liabilities and net worth, and had a US green card despite being a top Philippine military official.

"The Landbank froze Garcia's two peso-denominated accounts, worth nearly USD 120,000. Landbank Vice-President Rosemarie Osoteo, defending her company's decision, publicly stated that the Sandiganbayan's freeze order did not apply to the dollar accounts, which, she said, were 'confidential' and could only be opened in cases of violation of the Anti-Money Laundering Act," Cable 05MANILA84 said.

Cable 05MANILA5927, meanwhile, asked if local financial institutions comply fully with provisions of the Anti-Money Laundering Act (AMLA) of 2001.

The cable, dated December 22, 2005, said the Central Bank "does not have a mechanism in place to ensure that the financial community is adhering to the reporting requirements."

"While bank secrecy provisions to the BSP's supervisory functions were lifted in Section 11 of the AMLA, implementation appears to be incomplete. Due to Philippine 'privacy issues,' examiners of the BSP are not allowed to review documents held by covered institutions in order to determine if the covered institutions are complying with the reporting requirement," it said.

Prior notification

A 2008 cable, 05MANILA5927, cited the Supreme Court's strict interpretation of bank secrecy laws.

"The Philippine Supreme Court has ruled that a bank account holder must be given prior notification before inquiry can be made into their bank records during investigation of money laundering or corruption cases," it said.

The case, G.R. No. 174629, involved the Anti-Money Laundering Council's efforts to look into 8 bank accounts that were allegedly used in corrupt activities involving the Ninoy Aquino International Airport (NAIA) Terminal 3.

"Both Philippine and US criminal law enforcement efforts may be negatively affected by this decision," the embassy cable said.

The Supreme Court decision rejected the opening of the bank accounts and said that except in cases of terrorism, kidnapping, and drug violations, the bank account holder must be given prior notification before inquiry can be made into their bank records during investigation of money laundering or corruption cases.

"In financial fraud and corruption investigations this will require the AMLC to disclose the fact of its investigation and the evidence uncovered to the subject of the investigation long before the government is in a position to file criminal charges," the US embassy had warned.

"It will also allow the account holder to prevent effective investigation by tying the proceedings up with litigation. Giving subjects of investigations notice of the investigations at an early stage allows opportunity for the destruction of evidence, the concealment of other assets, and the obstruction of justice," it added.

"United States criminal law enforcement efforts will also be negatively affected by this decision. Through our Mutual Legal Assistance Treaty with the Philippines, the United States enjoys an excellent means to seek financial records to support investigations of a wide variety of violations of U.S. law including wire fraud, money laundering, counterfeit products, smuggling, and computer fraud," the cable said.

"In most cases the U.S. investigations are not at stages where disclosure of the investigation can be made without severely compromising the investigation," it explained. "Our ability to obtain necessary evidence from the Philippines in such cases will be significantly reduced."

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