Changes to the Bank Secrecy Act to help PHL get off the FATF gray list

PROPOSED CHANGES to the Philippine Bank Secrecy and Financial Account Regulation Act will improve our defenses against money laundering and cybercrime incidents, a central bank official has said, which could help the country emerge more early on the Financial Action Task Force (FATF) gray list.

At an organizational meeting and briefing of the Senate Banking, Financial Institutions and Currency Committee, Bangko Sentral ng Pilipinas (BSP) Senior Deputy Governor Elmore O. Capule presented the legislative agenda proposed by the Regulator for the 19th Congress, which included measures to amend Republic Act No. 1405 or the Bank Deposit Secrecy Act, regulating the use of financial accounts, and mandating the registration of SIM cards and the institutionalization of digital payments.

Capule said there was a need to change the country’s bank secrecy law, as current rules only allow the BSP to review certain data and records.

“To date, we are the only country where the prudential regulator, or the central bank, does not have the power to control bank deposits, considering that it regulates banks. In all other countries they have already changed their bank secrecy laws to allow their prudential regulators to have access to bank deposits,” he said.

“The BSP recommends that amendments to the Bank Deposit Secrecy Law be limited to the limits of the BSP banking supervision and its investigation of closed banks… We only look at the deposit accounts of shareholders, owners, directors, trustees, officers or employees of banks. as well as their agents and relatives… We only open banking secrecy on a very limited scale. We don’t want bankers to abuse their power as bankers,” Mr. Capule added.

The bill could help improve the country’s chances of graduating early from the FATF’s gray list of jurisdictions under increased scrutiny for dirty money risks, he said. The FATF put the Philippines on its gray list in June 2021 and officials hope the country can be removed by January 2023.

“One of FATF’s findings is that there is no effective implementation of the Money Laundering Act as well as other laws due to strict banking secrecy. They said that the one of our constraints is the lack of capacity of competent authorities to access information held by banks,” Mr. Capule said.

The official said most banks are shut down by the Currency Board due to insider abuse, with bankers setting up fictitious accounts to borrow from their own banks.

“We have cases where the bankers themselves borrow from their own bank or commit fraud and try to hide the proceeds of these illicit funds in their own bank, which the BSP cannot even review, and that is very disturbing. because bankers are supposed to protect their depositors’ money, and yet because of this banking secrecy, we allow them to use this law to protect their illegal activities,” the official said.

Mr Capule said the proposal will include safeguards against abuse of power and strict requirements for determining which accounts can be reviewed.

According to him, according to their proposal, only the Monetary Council can order the opening and investigation of an account taking into account three grounds: fraud, serious irregularity and illegal activity committed by the persons concerned.

Use of information found from account opening will be limited to BSP and the criminal prosecution of the parties involved. Sharing of this information will also be limited to the Securities and Exchange Commission, the Philippine Deposit Insurance Corp., the Anti-Money Laundering Council, the Department of Justice and the courts.

Amendments to the bank secrecy law will also go hand in hand with regulating the use of financial accounts, the official added.

“We know there are a lot of financial mules or a lot of criminal activity, social engineering schemes, phishing, where they use bank accounts or e-wallets. Our problem here is that there is not enough legislation to deter this activity. We are also seeking authorization for the BSP to seek cybercrime warrants and investigate this type of criminal activity,” Mr. Capule said.

The official said the BSP would also support the proposed laws on digital payments and the registration of SIM cards, which are among the measures the national government is about to propose to lawmakers. — with a report of KBT