US not happy with strict Ph bank secrecy laws

Following the landmark decision coming from the Senate court trying the impeachment of Chief Justice Renato Corona to uphold a Supreme Court restraining order on the opening of Corona’s dollar accounts, much attention has now been directed to the Philippines’ “archaic” bank secrecy laws. According to also secret United States embassy cables revealed by Wikileaks, US officials have long been “concerned” about the impenetrable legal wall of secrecy that protects foreign currency accounts in the Philippines.

“The bank secrecy laws in the Philippines are among the strictest in the world,” said [Former US ambassador to Manila Francis ] Ricciardone in a January 2005 cable (code: 05MANILA84, http://cables.mrkva.eu/cable.php?id=25003), in which he related the transparency problems besetting the country.

The United States is apparently particularly concerned about the Foreign Currency Deposit Act of the Philippines (FCDA), otherwise known as Republic Act No. 6426. The FCDA is a legacy of the martial-law era, having been signed into law by the late dictator Ferdinand Marcos in 1974.

The “Group of 20” (G20) countries who supposedly are the “leading economies” of the world issued a “joint communiqué” in a 2009 summit in London declaring that “the era of banking secrecy is over”. The United States for its part had successfully forced the Union Bank of Switzerland into coughing up information on accounts held by more than 4,000 Americans there who were suspected of “tax evasion”.

“Offshore tax evasion” is considered by some “experts” to be a “global problem” and the biggest form of “theft” amongst members of the international community (ref). In the Philippines however, where graft, corruption, and public thievery is pretty much a normal thing, Philippine Bank Secrecy it seems at least keeps stolen money within the domestic financial system. Imagine then a scenario where Filipino thieves can no longer rely on the local banking system to protect their assets. That would be a double whammy to the average Filipino schmoe who already suffer from a long Filipino tradition of having their money stolen by their leaders. Now they are facing the prospect of seeing these stolen funds shipped out to banks in other countries.

So though there may be a “noble” case when framed from the perspective of the G20 (from which funds are siphoned out by suspected crooks), seeing the issue from the perspective of the Philippines — and from the point of view of its national interests — the motivation to “reform” bank secrecy laws takes on a different flavour.

Yes sirree… Strip out the morality plays in the quaint sloganeering of some self-righteous folk and we lay bare the reality that nothing is really quite as straightforward as moronic dogma dictates.

In a country suffering from a chronic crisis of confidence and a renowned epic fail score when it comes to social trust, the Philippines’ final ace to ensure that whatever precious financial capital left within its borders does not take flight are these legal relics of what’s been made to look like a dark chapter in its history.

Section 8 of Republic Act 6426 (RA 6426, “Foreign Currency Deposit Act of the Philippines”) states that foreign currency accounts are “absolutely confidential”…

Section 8. Secrecy of foreign currency deposits. – All foreign currency deposits authorized under this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, are hereby declared as and considered of an absolutely confidential nature and, 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; Provided, however, That said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. (As amended by PD No. 1035, and further amended by PD No. 1246, prom. Nov. 21, 1977.)

This thing about the so-called “righteousness” of dismantling Philippine bank secrecy laws really looks more like a case of one man’s dull piece of coal being another man’s glittering diamond. Think about it. For lack of any other reason to stay within the country (other than an immense population of brand-beholden startstruck ignoramuses with wads of OFW cash to spend) the only thing tethering an immense balloon of vital capital to Philippine soil is RA 6426.

It might be prudent to re-think moves to “reform” Philippine bank secrecy laws. Is it really the best thing to do now, specially when one considers the current global economic climate? Perhaps the timing of the motivation of the United States and, for that matter, much of Western Europe to issue unsolicited advise on how a sovereign nation should protect its financial capital becomes suspect. Perhaps they should first show us a roadmap of where the Euro is headed over the next several years before they make any further “declarations”.

benign0

benign0 is the Webmaster of GetRealPhilippines.com.