SEC backs bank secrecy reform to fight corruption

The Securities and Exchange Commission has expressed support for proposals to amend bank secrecy laws as part of the government’s ongoing anti-corruption campaign.

“As a corporate and capital market regulator, the SEC welcomes the proposed easing of our bank secrecy laws as a necessary measure to uphold trust and confidence in the Philippine capital market and overall economy,” SEC Chairperson Francis Lim said.

“Corruption is a major concern for local and foreign investors alike. It does not only create crippling uncertainties; it translates to real, unnecessary, additional costs of doing business in the country,” he added.

Several bills are pending before the House of Representatives seeking to lift the bank secrecy law to promote transparency and curb corruption in government.

The proposed amendments would authorize the Bangko Sentral ng Pilipinas to examine deposits when there are reasonable grounds to believe fraud, serious irregularity, or unlawful activity has been committed by stockholders, owners, directors, trustees, officers, or employees of supervised institutions.

“The ability to access critical financial information, particularly in cases of insider trading, market manipulation, and investment fraud, will significantly enhance the enforcement capabilities of the SEC. More importantly, it sends a clear message that our capital markets are governed by transparency and accountability,” Lim noted.

The current law has often shielded account holders in cases involving violations of the Securities Regulation Code and the Revised Corporation Code of the Philippines, limiting the SEC’s enforcement capacity.

It has also restricted the commission from validating the declared financial positions of companies where there are grounds to suspect misconduct, corporate fraud, or noncompliance with regulatory requirements.

Proposed reforms could strengthen the SEC’s investigative powers by allowing access to bank records and the tracing of funds linked to securities fraud, misrepresentation, or unregistered securities offerings.

The measure is expected to reduce delays in investigations by eliminating the need for separate court proceedings to secure bank information.

“We are optimistic that further easing of bank secrecy—especially relating to securities law violations—can significantly aid enforcement efforts. A clear example is the BSP’s use of the Anti-Financial Account Scamming Act to investigate financial accounts linked to the flood control corruption fiasco,” Lim said.

The reforms are also aligned with the Philippines’ commitment to international standards on anti-money laundering, counter-terrorism financing, and financial crime prevention.

Global institutions such as the International Monetary Fund, Organisation for Economic Co-operation and Development, and Financial Action Task Force have long urged the Philippines to reform its bank secrecy laws.

In 2019, the FATF warned that bank secrecy rules hindered timely information exchange for anti-money laundering and counter-terrorism financing enforcement, and in 2021 it placed the Philippines on its grey list of jurisdictions under increased monitoring.

Although the Philippines exited the FATF grey list earlier this year, the IMF has stressed that reforming the bank secrecy law will further strengthen the country’s anti-money laundering framework and enhance the supervisory powers of the Bangko Sentral ng Pilipinas.

Meanwhile, the OECD has consistently advocated ending bank secrecy to improve tax transparency and information sharing among tax authorities.

The SEC has advanced its financial crime enforcement measures in recent years, contributing to the Philippines’ removal from the FATF grey list.

In 2019, the SEC required corporations to declare their beneficial owners through annual general information sheets, and in 2021 it banned the issuance and sale of bearer shares and bearer share warrants to promote transparency.

“The lifting of the bank secrecy law will sustain our efforts toward strengthening transparency and accountability. The measure will eliminate a significant barrier that has long hindered the investigation and prosecution of financial crimes,” Lim said.