The Bangko Sentral ng Pilipinas (BSP) reiterated on Wednesday the importance of lifting the bank secrecy law amid the ongoing Wirecard AG scandal, saying it would protect the country’s banking system and depositors better.
During the Pre-State of the Nation Address (SONA) forum, BSP Governor Benjamin Diokno said lifting that law was a key reform the central bank had been pushing for years.
“The BSP will continue to communicate to Congress the importance of the reform to align our laws with international best practices, as well as to better protect our banking system and our people from potential fraudsters,” Diokno said.
The central bank, he added, is also working closely with the Department of Finance for the immediate passage of this “critical piece of legislature that would finally break the doors of bank secrecy, especially in fraud cases.”
“Only the Philippines and Lebanon [are] still implementing stringent bank secrecy laws.”
Republic Act 1405, or the “Law on Secrecy of Bank Deposits,” was put in place in 1955 to ensure the confidentiality of all types of bank deposits, except when the depositor allows disclosure, in case of impeachment proceedings, upon the order of a court in cases of bribery or dereliction of duty of a public official, or where the deposit is the subject of litigation.
The law sought to encourage people to place their money in banks and discourage private hoarding, so that the funds can be used for lending.
In 1981, the law was amended to allow the examination of bank records when authorized by monetary authorities or when an independent auditor hired by the bank itself will do that.
Diokno assured that the central bank’s reform agenda for the financial sector continues and would ensure the effective implementation of existing regulations.
Included in the BSP’s significant reforms to protect the integrity and promote the sustained safety and soundness of the Philippine financial system are raising the bar for corporate and risk governance and internal controls, strengthening antimoney laundering laws and regulations, and establishing robust financial surveillance.
Open to collaborate
Meanwhile, Diokno said the Bangko Sentral and the Anti-Money Laundering Council were open to collaborate with international agencies and German regulators dealing with the Wirecard scandal to hold the fraudsters accountable and to give justice to those harmed by their actions.
The scandal involved Wirecard’s missing $2.1-billion fund and the use of the names of two of the country’s biggest banks, BDO Unibank Inc. and Bank of the Philippines Islands, in order to cover the perpetrators’ tracks. No part of the missing amount entered the Philippine financial system.
“Apart from conducting investigations, we have reminded banks to strengthen their know-your-customers protocols and be very strict in knowing their clients. Moreover, banks are also reminded of their obligation to know [their] employees,” Diokno said.
He also said banks’ respective compliance offices and internal audit functions should be able to process their employees’ behavior and financial transactions in the same way they assess and monitor their customers.