Washington University Global Studies Law Review

Volume 14
Issue 4 Global Perspectives on Colorism (Symposium Edition)

2015

Lifting Bank Secrecy: A Comparative Look at the Philippines,

Switzerland, and Global Transparency
Ray Flores
Washington University in St. Louis, School of Law

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International Law Commons

Recommended Citation
Ray Flores, Lifting Bank Secrecy: A Comparative Look at the Philippines, Switzerland, and Global
Transparency, 14 WASH. U. GLOBAL STUD. L. REV. 779 (2015),
https://openscholarship.wustl.edu/law_globalstudies/vol14/iss4/16

This Note is brought to you for free and open access by the Law School at Washington University Open
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 LIFTING BANK SECRECY: A COMPARATIVE
LOOK AT THE PHILIPPINES, SWITZERLAND,
AND GLOBAL TRANSPARENCY
INTRODUCTION

A global trend towards greater financial transparency has created

pressure upon several countries with strict and long-standing bank secrecy
laws, including Switzerland and the Philippines, two countries of focus in
this note.1 Countries with such laws in place are increasingly becoming the
targets of international groups and global powers2 seeking financial
accountability to combat international crime and corruption, as well as to
curb tax evasion through offshore storage of wealth.3 That this pressure
has led to reform of the financial institutions of countries like Switzerland,
perhaps the most notorious pioneering country of bank account
confidentiality, reflects a broader international movement towards freer
global access and sharing of banking information.
Bank secrecy laws have notably been criticized in the Philippines, one
country with an established code of strict confidentiality with respect to
bank accounts and deposits, for hampering effective investigation and
prosecution of white-collar criminals.4
Part I of this Note will look into the Philippines’ statutes of present
controversy: the Foreign Currency Deposit Act,5 in place since 1974, and

1. The U.S. Department of State has stated that “excessive bank secrecy laws make financial
systems vulnerable to abuse from criminal activities, ranging from terrorism to tax evasion.” Int’l
Monetary Fund, Financial System Abuse, Financial Crime and Money Laundering—Background
Paper 4 n.3 (Feb. 12, 2001), available at http://www.imf.org/external/np/ml/2001/eng/021201.pdf.
2. Watchdog calls on G20 to fight bank secrecy, GLOBAL POST (Apr. 18, 2013), http://www.
globalpost.com/dispatch/news/afp/130418/watchdog-calls-g20-fight-bank-secrecy; See also OECD,
The Era of Bank Secrecy is Over (Oct. 26, 2011), available at http://www.oecd.org/ctp/exchange-of-
tax-information/48996146.pdf.
3. See Transparency Int’l, Scandals Show Urgent Need for Bank Reform (Aug. 6, 2012),
http://www.transparency.org/news/feature/scandals_show_urgent_need_for_bank_reform.
4. The country’s general rule is to keep bank deposits “absolutely confidential in nature.” Fred
Pamaos, Amend the Foreign Currency Deposits Act? (Feb. 14, 2012), http://attyatwork.com/amend-
the-foreign-currency-deposits-act. Within the relevant statutes there is a distinction between peso
deposits (the domestic currency of the Philippines) and dollar-denominated and other foreign currency
deposits. Id. While the latter are accorded full confidentiality, account details in relation to peso
deposits have the following exceptions allowing for a release of information: “(1) upon written
permission of the depositor; (2) in cases of impeachment; (3) upon order of a competent court in cases
of bribery or dereliction of duty of public officials; and (4) in cases where the money deposited or
invested is the subject matter of the litigation.” Id.
5. An Act Instituting a Foreign Currency Deposit System in the Philippines, and For Other
Purposes, Rep. Act No. 6426 (Apr. 4, 1974) (Phil.).

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the Bank Secrecy Law,6 in place since 1955.7 It will then proceed to
evaluate recent reform measures to the banking system of the Philippines
and consider potential alternative measures in addressing the problems
arising from bank secrecy. The Note will also analyze recent court rulings
on interpretation and enforcement of the existing bank secrecy laws and
the legislative responses coming from the debate over banking reform in
the Philippines.
Part II will discuss the history of banking in Switzerland. The
foundations of modern private banking come from the landmark Swiss
Banking Act of 1934.8 Swiss adherence to protecting bank information has
received much international criticism and pressure9 for its tendency to
perpetuate black market activity and offshore tax evasion by non-domestic
parties.10 However, in response to pressure from the United States and
increasing international outcry against the use of Swiss banks as tax
evasion vehicles, Switzerland has in the past decade begun to chip away at
the country’s legacy of bank secrecy. Facing threat of punishment, its
largest private banks have been forced to reveal the fraudulent practices of
individuals and companies holding Swiss bank accounts, and its
government has moved towards compliance with global standards of
transparency.
Although the Philippines and Switzerland differ in their respective
roles and impacts in the global marketplace, their common legacies of
bank secrecy offer a pathway for comparative analysis. Part III will
juxtapose the driving legal, economic, and political forces of each country

6. An Act Prohibiting Disclosure of or Inquiry Into, Deposits with Any Banking Institution and
Providing Penalty Therefor, Rep. Act No. 1405 (Sept. 9, 1955) (Phil.).
7. Lucy Swinnen & Michael Lim Ubac, Philippines bank secrecy laws strictest in the world,
ASIA ONE (Feb. 18, 2012), http://news.asiaone.com/News/AsiaOne+News/Asia/Story/A1Story2012
0218-328709.html.
8. See Lee Ann Orbringer, How Swiss Bank Accounts Work, HOWSTUFFWORKS,
http://money.howstuffworks.com/personal-finance/banking/swiss-bank-account2.htm (last visited Oct.
20, 2013). Prior to the 1934 law, Switzerland already had an established reputation as a foreign fund
safe haven. Id. The Great Council of Geneva (1713) disallowed bankers from sharing client
information unless urged by the City Council. Id. Under civil law, clients could bring a suit for
damages against any bank for breaching confidentiality. Id.
9. See Alana Petroff, Chipping away at Swiss bank secrecy, CNN MONEY (July 5, 2013),
http://money.cnn.com/2013/07/05/news/companies/swiss-secrecy-banks/index.html. See also Raphael
Minder, Pressure Mounts on Vaunted Secrecy of Switzerland’s Banks, N.Y.TIMES (May 23, 2013),
http://www.nytimes.com/2013/05/24/business/global/swiss-banking-secrecy-under-pressure-from-europe.
html?pagewanted=all&_r=0.
10. See Swiss Banking Secrecy: Don’t Ask, Won’t Tell, ECONOMIST (Feb. 11, 2012),
http://www.economist.com/node/21547229; See also Fin. Secrecy Index, Narrative Report on
Switzerland, TAX JUSTICE NETWORK (2013), http://www.financialsecrecyindex.com/PDF/ Switzerland.
pdf.

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that kept bank secrecy laws in place, as well as the forces that now
challenge those laws.
Finally, Part IV will frame these analyses against the backdrop of an
international trend towards financial transparency and a freer market place
in response to global economic crisis and recession. In assessing the legal,
economic, and political effects of foreign bank secrecy laws and the
potential exploitation of financial institutions for unlawful activities,11 this
note will utilize a comparative law lens to discuss issues pertinent to
current events in global finance.

I. BANK SECRECY IN THE PHILPPINES

A. Background and Characteristics of Philippine Banking

The Philippines is a developing country that has grown as a global

economic player at an increased pace in the last decade.12 Renewable
energy13 and infrastructure investment14 are two pursuits that may aid its
economic stability and growth. The prevalent domestic issues facing the
Philippine government15 include corruption,16 poverty,17 and the effects of

11. The IMF identified the negative macroeconomic consequences of financial system abuse as
follows:
[I]t could compromise bank soundness with potentially large fiscal liabilities, lessen the
ability to attract foreign investment, and increase the volatility of international capital flows
and exchange rates. In the era of very high capital mobility, abuse of the global financial
system makes national tax collection and law enforcement more difficult. Financial system
abuse, financial crime, and money laundering may also distort the allocation of resources and
the distribution of wealth and can be costly to detect and eradicate.
Int’l Monetary Fund, supra note 1, at 9 n.17.
12. Since 2002, the country has averaged approximately 5% in growth thanks to its “sound
economic fundamentals and highly-skilled workforce.” Philippines Overview, THE WORLD BANK,
http://www.worldbank.org/en/country/philippines/overview (last visited Oct. 28, 2013). As Eugene
Leow, a Singapore-based economist, points out, “‘[t]he domestic economy is the engine behind these
high levels of growth, insulating the Philippines from weak external demand’” and “[t]he government
has some room to respond in case the economy sputters.” Cecilia Yap & Karl Lester M. Yap,
Philippines Defies Asia Slowdown as Growth Holds Above 7%, BLOOMBERG BUSINESS (Aug. 28,
2013, 10:40 PM), http://www.bloomberg.com/ news/2013-08-29/philippine-gdp-growth-holds-above-
7-as-aquino-boosts-spending.html.
13. New hydro and wind power projects bring the country closer to its goal of running
completely on renewable energy within a decade. Medilyn Manibo, Hydro, wind power booms in
Philippines in 2014, ECO-BUSINESS (Jan. 13, 2014), http://www.eco-business.com/news/hydro-wind-
power-booms-philippines-2014.
14. See Yap, supra note 12.
15. The Philippines is a constitutional republic with a presidential form of government.
Philippine Government, THE OFFICIAL GAZETTE (Jan. 7, 2013), http://www.gov.ph/about/gov. The
islands’ path to independence was preceded by a period under Spanish colonization beginning in the
16th century. Philippines, THE WORLD FACTBOOK (Sept. 25, 2013), https://www.cia.gov/library/

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recurring natural disasters.18 Recent catastrophes such as Typhoon Haiyan

have highlighted how the country’s “combination of geography and
poverty leaves those in the Philippines at almost unequaled risk of
calamity.”19 But despite such obstacles to stabilization, the country appears
to be making substantive progress as a growing economy.20
The country’s long-standing stringent bank secrecy laws frequently
have been referenced in international reports spotlighting offshore tax
evasion, money laundering, and corruption.21 Despite an apparent causal

publications/the-world-factbook/geos/rp.html. In 1898, the U.S. claimed sovereignty from Spain, and

the Philippines would continue as a U.S. territory until independence on July 4th, 1946. Id.
16. See James Hookway, Philippine Economy Withstands Latest Corruption Scandal: President
Aquino Renews Battle Graft, Bolstering Investor Confidence, WALL ST. J. (Sept. 17, 2013, 10:20PM),
http://online.wsj.com/news/articles/SB10001424127887323342404579080871650566730. In 2007, the
Philippines lost roughly 13% of its annual budget to corruption. Carlos H. Conde, Philippines most
corrupt, survey says (Mar. 13, 2007), N.Y. TIMES (Mar. 13, 2007), http://www.nytimes.com/2007/03/
13/business/worldbusiness/13iht-peso.4891792.html.
17. Nearly 30% of the country’s population lives in poverty. Hookway, supra note 16.
18. Notably, in November 2013, Typhoon Yolanda (internationally, “Typhoon Haiyan”) struck
the country, killing over 6,000 and forcing hundreds of thousands to evacuate their homes. ‘Yolanda’
death toll rises to 6,201, ABS-CBN NEWS (Jan. 14, 2014) http://www.abs-cbnnews.com/nation/
regions/01/14/14/yolanda-death-toll-rises-6201; See also Jethro Mullen, Super Typhoon Haiyan, one of
strongest storms ever, hits central Philippines, CNN (Nov. 8, 2013, 3:44 AM), http://www.cnn.com/
2013/11/07/world/asia/philippines-typhoon-haiyan/index.html. The storm was classified as matching a
Category 5 hurricane and labeled a “super typhoon,” one with surface winds sustain[ing] speeds of
more than 240 [kilometers per hour] for at least a minute.” Jethro Mullen, Super Typhoon Haiyan, one
of strongest storms ever, hits central Philippines, CNN (Nov. 8, 2013, 3:44 AM), http://www.cnn.com/
2013/11/07/world/asia/philippines-typhoon-haiyan/index.html. Floods and landslides continue to
affect the country annually. Landslides, floods kill at least 19 in northern Philippines, CNN (Sept. 24,
2013, 10:39 AM), http://www.cnn.com/2013/09/24/world/asia/philippines-landslides. For more
information on the prevalence of natural disasters and their effects see Chico Harlan, In the
Philippines, natural disasters are common; ways to reduce their impact aren’t, WASH. POST (Nov. 16,
2013), http://www.washingtonpost.com/world/asia_pacific/in-the-philippines-natural-disasters-are-
common-ways-to-reduce-impact-arent/2013/11/16/c0d77e24-4ecd-11e3-97f6-ed8e3053083b_story.html.
19. Id.
20. In 2012, the Philippines was reported to be the 44th largest economy in the world and
projected to have the potential to reach 16th largest by the year 2050. Floyd Whaley, A Youthful
Populace Helps Make the Philippines an Economic Bright Spot in Asia, N.Y. TIMES (Aug. 27, 2012),
http://www.nytimes.com/2012/08/28/business/global/philippine-economy-set-to-become-asias-newest-
bright-spot.html. The country’s working population (ages 15 to 64) is growing, unlike the aging
populations of many other Asian countries. Id. But frequent natural disasters and the government’s
failure to properly utilize the country’s natural resources have been unmistakable obstacles to growth.
Id. Additionally, due to waves of political instability, the Philippines has been less favored by foreign
companies as a site for export-driven manufacturing, relative to neighbors such as China, Japan,
Thailand, and Vietnam. Id. Much of the recent economic growth is centered on the cities and young
urbanites, and does not reach poverty in large rural areas. See id.; See also Int’l Fund for Agric. Dev.,
Enabling poor rural people to overcome poverty in the Philippines (Oct. 2009), available at
http://www.ifad.org/operations/projects/regions/pi/factsheets/ph.pdf.
21. In 2009, the Organisation for Economic Co-operation and Development (“OECD”) placed
the Philippines on its tax haven blacklist. Roel Landingin, Philippines to revise bank secrecy laws,
FIN. TIMES (Apr. 20, 2009, 5:13 AM), http://www.ft.com/intl/cms/s/0/764f3b14-25a9-11de-be57-
00144feabdc0.html. Although an anti-money laundering law was passed in 2003, tax evasion was one

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link between the secrecy laws and illegal activity, several recent Philippine
Supreme Court decisions have protected bank secrecy as a constitutional
and statutory right.
The Foreign Currency Deposit Act (“FCDA”) and the Bank Secrecy
Law form the legal foundation for bank secrecy in the Philippines. The
more restrictive FCDA prohibits the revelation of foreign currency details
without a depositor’s permission.22 Section 8, titled Secrecy of foreign
currency deposits, states:
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.23
The accompanying Bank Secrecy Law makes all domestic deposits
confidential, with few exceptions.24

crime excluded from its coverage. Id. Roel Landingin drew out other lagging features of Philippine
law with respect to protections against offshore tax evasion:
The country’s tax chief is only allowed access to bank information for estate tax assessments
and to confirm claims of inability to pay tax. The country lacks laws to explicitly allow
sharing of tax information with other countries. [It] has over 30 tax treaties with other
countries but these generally limit information sharing to cases of taxpayers also being
pursued by Manila. . . . Not even the finance secretary can examine tax returns without
explicit authority from the president.
Id. at 1. As a response to these issues, the Bureau of Internal Revenue of the Philippines has declared a
lifting of secrecy with respect to requests from foreign tax authorities. Monicca Egoy, Philippines
changes law, wants off tax-haven blacklist, REUTERS (Mar. 26, 2010), http://in.reuters.com/
article/2010/03/26/philippines-tax-oecd-idINSGE62P0AS20100326.
22. Swinnen & Ubac, supra note 7.
23. Republic Act No. 6426, THE LAWPHIL PROJECT, http://www.lawphil.net/statutes/repacts/
ra1974/ra_6426_1974.html (last visited Oct. 26, 2013) (emphasis added). The FCDA has been around
since the martial-law era in 1974, existing as approved by the dictator Ferdinand Marcos. Swinnen &
Ubac, supra note 7.
24. An Act Instituting a Foreign Currency Deposit System in the Philippines, and For Other
Purposes, Rep. Act No. 6426. (Apr. 4, 1974). Under Republic Act 1405, deposits have absolute
confidentiality except for: “written consent of the depositor; in cases of impeachment; 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.” Swinnen & Ubac, supra note 7.
For the full text of Republic Act 1405 (An Act Prohibiting Disclosure of or Inquiry into, Deposits with
any Banking institution and Providing Penalty Therefor) see Republic Act No. 1405, THE LAWPHIL
PROJECT, available at http://www.lawphil.net/statutes/repacts/ra1955/ra_1405_1955.html (last visited
Oct. 26, 2013).

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Significantly, a 1977 presidential decree established a heightened level

of confidentiality for foreign currency deposits, limiting releases of related
financial accounts only to instances where a depositor had given his or her
written consent.25 These banking restrictions create the incentive for
money launderers and corrupt officials to pool funds into protected foreign
currency-denominated accounts.

B. Recent Controversies over the Bank Secrecy Statutes

Bank secrecy was established as a policy intended to encourage

banking growth, discourage the private hoarding of money, and build trust
in domestic banking services and institutions by the people.26 These laws
have notably been invoked in recent corruption prosecutions, illustrating
the political and legal problems tied to bank secrecy. Such lawsuits have
given rise to international and domestic calls to reform the bank secrecy
statutes.27
In 2005, the Land Bank of the Philippines, citing the bank secrecy laws
in place, refused to carry out an order of garnishment against a former
Armed Forces comptroller in a plunder and corruption suit.28 The court

25. Magtanggol de la Cruz, Secrecy in Foreign Currency Deposits (Feb. 8, 2012, 10:33 PM),
http://www.rappler.com/nation/80-special-coverage/1403-secrecy-in-foreign-bank-accounts. The change
was expressly backed by a rationale of economic growth:
WHEREAS, making absolute the protective cloak of confidentiality over such foreign
currency deposits, exempting such deposits from tax, and guaranteeing the vested rights of
depositors would better encourage the inflow of foreign currency deposits into the banking
institutions authorized to accept such deposits in the Philippines thereby placing such
institutions more in a position to properly channel the same to loans and investments in the
Philippines, thus directly contributing to the economic development of the country.
Id.
26. Pamaos, supra note 4.
The primary benefit [of private banking] is not the interest earned by the depositor because, as
compared to direct investments in business, deposit interest is minimal. The bigger impact of
pooling the deposit accounts and lending/investing the money, which is the business of banks,
is to provide large-scale financing for entrepreneurs, business people and other institutions.
[Banking secrecy] reflects the State’s policy to encourage savings in banks so the money may
be utilized by way of authorized loans and assist in economic development.
Id. These principles would seem especially important for emerging economies like the Philippines.
27. For a domestic perspective championing change to Philippine bank secrecy see Reynaldo
Geronimo, Bank Secrecy is Passe, SUNSTAR (Feb. 23, 2012), http://www.sunstar.com.ph/manila/
opinion/2012/02/23/geronimo-bank-secrecy-passe-207636. Reynaldo Geronimo points out the
country’s already standing international obligations under the 1988 Vienna Convention to implement
any possible measures against money laundering and, he emphasizes, “to empower its courts or other
competent authorities to order that bank, financial or commercial records be made available or be
seized.” Id.
28. Swinnen & Ubac, supra note 7. A military tribunal found that Major General Carlos Garcia
had submitted a fraudulent report of his assets, liabilities, and net worth. See also Jojo Malig,

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ordered a freezing of Major General Garcia’s dollar accounts; however,

the bank, a Filipino financial institution, froze only two of Garcia’s peso-
denominated accounts, while refusing to act on five U.S. dollar-
denominated accounts.29 This case, along with the Supreme Court ruling in
People of the Philippines v. Eugenio,30 was criticized by United States
ambassadors for fortifying barriers to the effective investigation of corrupt
financial actions and the prosecution of money launderers.31 The Eugenio
case held that applications to examine and investigate a particular bank
deposit could not be heard without providing notice to the owner of the
account.32
In the Eugenio case, the Philippine government nullified a contract
with a company involved in constructing an airport terminal based on
suspicions of corruption.33 In February 2008, a high court ruling
disallowed the Philippine Anti-Money Laundering Council from looking
inside the bank deals of the construction project because the situation did
not involve terrorism, kidnapping, or drug violations.34 Objecting to the
cited laws requiring prior notification to account holders before inquiry
into their records, U.S. ambassador Kristie Kenney argued, “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.”35
Similarly, during the 2012 impeachment trial of Renato Corona, the
23rd Chief Justice of the Supreme Court of the Philippines, 36 the

WikiLeaks cables: Philippine bank secrecy laws under fire, ABC-CBN NEWS (Feb. 9, 2012),
http://www.abs-cbnnews.com/-depth/02/09/12/wikileaks-cables-philippine-bank-secrecy-laws-under-
fire.
29. Swinnen & Ubac, supra note 7.
30. People v. Eugenio, G.R. No. 174629 (S.C., Oct. 20, 2008) (Phil.), available at
http://www.chanrobles.com/scresolutions/2008octoberresolutions.php?id=203.
31. Swinnen & Ubac, supra note 7. “The Philippine Supreme Court has ruled that a bank holder
must be given prior notification before an inquiry can be made into their bank records during
investigation of money laundering or corruption cases.” Id. at 2.
32. The Supreme Court in Eugenio held that the Anti-Money Laundering Act permitted freeze
orders on bank accounts, but not the type of ex parte (without notice) proceeding discussed by Kenney.
Geronimo, supra note 27. Echoing the ambassador’s logic, one legal commentator reasoned:
“A guilty perpetrator is not about to wait for the imminent freezing of his account before
transferring his funds out of the bank. On the contrary, the earlier he gets an indication of the
possibility of government seizure, the sooner will he move out his account. Hence, he ought
not to be given advance notice even of a mere inquiry by the authorities into his bank funds.”
Id. at 2.
33. Swinnen & Ubac, supra note 7.
34. Id.
35. Swinnen & Ubac, supra note 7, at 3.
36. Floyd Whaley, Philippines Chief Justice Denies Corruption Charges, N.Y. TIMES (May 22,
2012), http://www.nytimes.com/2012/05/23/world/asia/renato-corona-philippines-judge-testifies-at-

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Philippine Savings Bank invoked the bank secrecy statutes in denying

access to Corona’s alleged foreign currency deposits.37 The case sparked a
debate over whether the impeachment court should be able to compel
private banks by subpoena to disclose information regarding foreign
currency deposits in such cases.38
While the Senate uncovered information about Corona’s accounts
denominated in pesos, the Philippines’ domestic currency, it was unable to
do the same for his U.S. dollar accounts, as the current statutes contain
fewer exceptions allowing for the lifting of confidentiality with respect to
foreign currency deposits.39 The bank thereby filed for and received a
temporary restraining order (TRO) to block the Senate from reaching the
foreign dollar accounts, which would have opened the bank to criminal
liability.40

C. Potential for Reform

In response to such controversies, some members of the Philippine

Congress, including a prosecuting panel composed of members of the
House of Representatives and Senator-judges,41 have sought banking law

impeachment-trial.html. See generally, Documents on the Corona Impeachment, OFFICIAL GAZETTE

OF THE REPUBLIC OF THE PHIL. (June 15, 2012), http://www.gov.ph/the-corona-impeachment-trial;
Floyd Whaley, Philippine Justice Removed Over Omission in Report on Assets, N.Y. TIMES (May 29,
2012), http://www.nytimes.com/2012/05/30/world/asia/philippines-chief-justice-removed-over-finances.
html; The Chief Justice on Trial Timeline, GMA NEWS ONLINE, http://www.gmanetwork.
com/news/cjtrial (last visited Jan. 14, 2014). For a biography of Corona, see Chief Justice on Trial,
ABS-CBNNEWS.COM, http://www.abs-cbnnews.com/specials/cjontrial/biography-of-corona.html (last
visited Oct. 28, 2013).
37. Swinnen & Ubac, supra note 7. The Supreme Court obliged the bank, issuing a temporary
restraining order. Id. The result of the TRO as upheld by the Senate impeachment court was to inhibit
any uncovering of the Chief Justice’s alleged deposits at issue in the litigation. Id. Nonetheless, in May
2012 the Senate voted to remove Corona, finding him guilty of hiding assets. Shielo Mendoza, Chief
Justice Renato Corona: Guilty as Charged, YAHOO! NEWS PHILIPPINES (May 29, 2012),
http://ph.news.yahoo.com/verdict-is-out.html.
38. See de la Cruz, supra note 25. The overarching legal issue is whether impeachment courts
have the power to force a violation of law, because the law prevents the senate from accessing foreign
currency accounts without the depositor’s express consent. Id. One senator submitted a motion for
reconsideration upon issuance of the subpoena, citing RA 6246’s expressed protection of foreign
currency deposits if a depositor has not given his or her written permission. Id.
39. See Pamaos, supra note 4; see also Philippine Savings Bank vs. Senate Impeachment Court,
G.R. No. 200238 (S.C., Nov. 20, 2012) (Phil.).
40. Shielo Mendoza, Senate Heeds SC TRO on Corona Dollar Accounts, YAHOO! NEWS
PHILIPPINES (Feb. 13, 2012), http://ph.news.yahoo.com/senate-heeds-sc-tro-on-corona-accounts.html.
One senator noted, “Obedience to the TRO preserves governmental stability, while disobedience
precipitates a constitutional crisis. If we have a choice between stability and crisis, the wiser choice is
always national stability.” Id. at 1.
41. Pamaos, supra note 4. Such lawmakers have specifically voiced concern for the need to
prevent public officials accused of corruption from hiding behind the Bank Secrecy Law. Id.

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reform. For example, in 2010, Senator Francis Escudero filed a bill to

mandate that government officials provide written permission for account
inquiries when they are accused of crimes.42 This approach would add a
sort of judicially-based exception missing from the banking statutes’
coverage of foreign currency deposit accounts. Pursuing an alternative
solution, Antonio Tinio filed in 2012 a House of Representatives bill to
amend the FCDA to lift confidentiality in cases of bribery and dereliction
of duty.43
In contrast to such attempts at direct statutory reform, other proposals
seek increased empowerment of corruption councils, such as authorizing a
council to examine the full network of accounts related to a particular
suspect in a criminal case.44 Public politics have thus been contemplated as
one vehicle for raising awareness of the detrimental effects of long-
standing bank secrecy, and consequently for fostering legal change.45
The United States is one of several countries that has been critical of
the antiquated bank secrecy laws in the Philippines.46 Calls to reform
continue from international crime watch groups, and from within the
country as well.47 Proponents emphasize the importance of confidentiality

42. Swinnen and Ubac, supra note 7. Arguing for such measures, Escudero stated, “We want to
put in place a mechanism that promotes openness and transparency in the public sector. . . . Working
in the government is a privilege and not a right.” Id. In 2012, Senator Ralph Recto filed a resolution to
review the two central secrecy laws. Id.
43. Swinnen and Ubac, supra note 7. Five other bills also sought stiffer anti-money laundering
legislation and less secrecy through change to the FCDA. See RG Cruz, Corona to help amend bank
secrecy?, ABS-CBN NEWS, June 6, 2012, http://www.abs-cbnnews.com/business/06/05/12/corona-
help-amend-bank-secrecy-laws.
44. Geronimo, supra note 27.
45. The recent Congressional proposals have pushed the House committee on banks to
consolidate the bills and endorse amendments to the FCDA before the House. Jess Diaz, House to
Amend Law on Foreign Currency Deposits, PHILIPPINE STAR, June 6, 2012, http://www.philstar.com/
headlines/814133/house-amend-law-foreign-currency-deposits. Representative Sergio Apostol, chair
of the committee, directly cited the Corona impeachment trial—“specifically the assertion of ousted
chief justice Renato Corona that the [FCDA] affords his dollar deposits absolute secrecy”—as the
impetus for reform. Id.
46. Wikileaks publicized two particular cable dispatches from U.S. envoys to Washington
identifying the Philippines’ secrecy laws as “hampering transparent governance and anticorruption
mechanisms.” Swinnen and Ubac, supra note 7. See also Malig, supra note 28. In concert with poor
mechanisms for whistleblower protection in the country, bank secrecy was noted as a serious problem
for combating corruption and obtaining convictions. Id. One cable attacked the refusal of the state-
owned LandBank to follow an order of an anti-graft court to disclose the information for an officer’s
US dollar accounts. Id. For more on the Supreme Court ruling in Eugenio, see supra note 32.
47. The Paris-based Financial Action Task Force (FATF) is one international monitoring
organization seeking compliance with global standards set against harboring tax evaders from
countries like the Philippines. Zinnia Dela Peña, Bank secrecy hindering anti-corruption drive—BIR,
PHILIPPINE STAR, July 15, 2013, http://www.philstar.com/headlines/2013/07/15/970911/bank-secrecy-
hindering-anti-corruption-drive-bir. Within the country, the commissioner of the Philippine Bureau of
International Revenue (BIR) has spoken out against RA 1405, citing the statute as an obstacle to

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for preserving public trust in the banking system.48

Along with the increasing levels of international pressure and
awareness resulting from publicized political disputes, the spotlight on the
Philippine banks is maintained through the Anti-Money Laundering
Council (“AMLC”), established by the Anti-Money Laundering Act of
200149 and which serves as a “financial intelligence unit” to investigate
suspicious activity and transactions and to “relax” strict bank deposit
secrecy laws.50 Notably, the Anti-Money Laundering Council possesses
the ability to examine any type of deposit, including those involving
foreign currencies, when provided with a court order and probable cause
that the deposit is tied to money laundering.51 This provision under the
Anti-Money Laundering Act of 2001 provides a channel of information
access in situations like the Corona impeachment trial. However, rather
than working through such intermediate reform vehicles like the AMLC,
which has been criticized for its procedural shortcomings,52 direct
statutory reform appears to be a more impactful approach to these issues.53

effective tax evasion investigations. Id. The commissioner stressed that the BIR has sought repeal or
reform of such statutes for quite some time, with the goal of expanding bank account access to state
revenue collectors in cases of criminal suspicion; however, there has been overriding political
opposition to changes. Id.
48. Id.
49. Republic Act No. 9160.
50. See AMLA at a Glance, Official Website of the Philippines, http://www.amlc.gov.ph/
amla.html (last visited Oct. 28, 2013). Money laundering, as defined by the AMLA, is “a crime
whereby the proceeds of an unlawful activity as [defined in the law] are transacted, thereby making
them appear to have originated from legitimate sources.” Agora Business Intelligence, Philippine Bank
Secrecy, Money Laundering, and Solutions (Feb. 17, 2012), http://www.agora.ph/recent.php?id=519.
In February 2012, the AMLA was expanded by RA 10365, now reaching “bribery and corruption,
malversation of public funds and terrorism and swindling, fraud and illegal exactions and transactions,
forgeries and counterfeiting, and trafficking in persons.” Dela Peña, supra note 47.
51. De la Cruz, supra note 25. See also Anti-Money Laundering Council, Money Laundering
Offenses and Penalties, THE PHILIPPINES’ FINANCIAL INTELLIGENCE UNIT, http://www.amlc.gov.ph/
amla.html#offense (last visited Jan. 14, 2014).
52. For example, in the 2008 Eugenio case, the Philippine Supreme Court denied the Anti-
Money Laundering Council the ability to examine accounts suspected to be tied to corruption without
prior notification to the account holder. Eugenio, supra note 30. This entails that the fact of an
investigation be revealed to such suspicious actors before AMLC or US investigators can collect a
requisite level of evidence and fully prepare their criminal charges. Id. The US embassy therefore
noted, “[The decision] will also allow the account holder to prevent effective investigation by tying the
proceedings up with litigation.” Malig, supra note 28.
53. The AMLA and AMLC’s effectiveness remains in question, given their interaction with the
existing secrecy laws. A 2005 US embassy cable criticized the compliance of local banks with the
Anti-Money Laundering Act: “While bank secrecy provisions to the [central bank’s] supervisory
functions were lifted in Section 11 of the AMLA, implementation appears to be incomplete. Due to
Philippine ‘privacy issues,’ examiners of the [bank] are not allowed to review documents held by
coverable institutions in order to determine if the covered institutions are complying with the reporting
requirement.” Id.

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Given its geographical location in the increasingly privacy-friendly

area of Southeast Asia, the Philippines remains attractive to wealthy
Americans and Europeans seeking less government and tax authority
scrutiny of their banking activities. Nearby Singapore and Hong Kong
remain growing hotbeds for storage of offshore wealth, even more so with
the erosion of Swiss banking secrecy.54 Though there have been some
steps towards international tax compliance and a gradual lifting of bank
account secrecy, it remains to be seen whether the Philippines will be able
to fully establish Western levels of transparency in the immediate future.

II. SWITZERLAND: PIONEER OF CLIENT CONFIDENTIALITY

A. Swiss Secrecy Origins and Reform Overview

The landmark Swiss Banking Act of 1934, a federal law criminalizing

bank-client information sharing, was left relatively unchallenged
throughout the twentieth century, and in 1984, Switzerland upheld bank
secrecy by vote.55 As the world’s largest offshore wealth center,56
Switzerland has been at the forefront of bank secrecy, with its institutions
playing an emblematic role in their resistance the international wave of
banking transparency through the start of the twenty-first century.
However, recent movements ceding ground to the international
pressure for transparency suggest Swiss reform toward lifting bank
secrecy and enforcing previously neglected tax compliance.57 Progress
towards these goals appears to be incremental—for example, a recent
Swiss-signed treaty requires its banks to exchange financial information
“on request,” but does not set in place automatic exchange of information,
a shortcoming which may impose a high burden on a requesting country.58

54. See Lynnley Browning, Seeking Bank Secrecy in Asia, N.Y. TIMES, Sept. 22, 2010,
http://www.nytimes.com/2010/09/23/business/global/23swiss.html.
55. Orbringer, supra note 8. The law had initially served as a response from German and French
pressure on Swiss banks for access to depositor information—at one point, the German Gestapo
patrolled the Swiss banks and sought to execute any Germans with Swiss accounts, reinforcing the
Swiss government’s commitment to secrecy. Id. Underpinning privacy in Swiss banking is Article 13
of the Swiss Federal Constitution, protecting a basic right “to receive respect for his/her private and
family life.” Bank-client confidentiality, SWISS BANKERS ASSOCIATION, http://www.swissbanking.org/
en/bankkundengeheimnis.htm (last visited Oct. 28, 2013). Client confidentiality is rooted in Article 47
of the 1934 law. Id.
56. Game Changer: Swiss Banks Ditch Secrecy, RT BUSINESS, Oct. 16, 2013, http://rt.com/
business/game-changer-swiss-banking-secrecy-254.
57. Swiss Banks and Tax Evasion: Arresting Developments, ECONOMIST, Oct. 23, 2013,
http://www.economist.com/blogs/schumpeter/2013/10/swiss-banks-and-tax-evasion.
58. Id.

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Action has largely been concentrated in Swiss responses to U.S. attacks on

the largest Swiss banks that enabled the exploitation of secrecy laws to
elude international banking and tax regulations.59
The United States has been a primary force in demanding change from
the Swiss.60 The IRS and Justice Department have worked to encourage
insiders and potential whistleblowers to divulge the role of their own
wrongdoing within the greater illegal scheme of bank confidentiality,61
and to share any incriminating documents to which they have access by
virtue of their employee status.62
Swiss banks have also appeared in several tax evasion investigations up
through the past decade. Often these controversies have been uncovered
by former Swiss bank operators willing to blow the whistle and identify
theft in offshore tax evasion.63

B. Caving to Global Pressure: Erosion of Swiss Secrecy

Cultural attitudes favoring privacy and protection from governmental

interference into private affairs played a role in maintaining these laws in
Switzerland for so long.64 But bank secrecy appears to be on its last legs in

59. Id.
60. Game changer, supra note 56. In the summer of 2013, the U.S. heightened pressures by
threatening $10 billion in tax-related claims against Swiss financial institutions. Id. See also ‘American
Dictate': Swiss Parliament Split on Banking Secrecy Law, RT BUSINESS, June 14, 2013,
http://rt.com/business/swiss-banking-secrecy-parliament-690. The U.S. is investigating over a dozen
Swiss banks. Id.
61. Lynnley Browning, Swiss Banker Blows Whistle on Tax Evasion, N.Y. TIMES, Jan. 18, 2010,
http://www.nytimes.com/2010/01/19/business/19whistle.html. One former Swiss whistleblower,
Heinrich Kieber, relayed client data taken from his employer, the Liechtenstein royal bank, to
American and European authorities. Id.
62. In a recent instance of whistleblowing, Rudolf M. Elmer disclosed to the IRS and American
investigators internal bank and client information of the Swiss bank Julius Baer, with data on more
than 100 trusts, 1300 individuals, and several dozen companies and hedge funds, over a five-year span.
Id. Elmer’s documents “detail the undisclosed role of American investment management companies in
funneling American, European and South American clients who wished to avoid taxes to [the Swiss
bank]; the backdating of documents to establish trusts and foundations used to evade taxes; and the
funneling of trades for hedge funds and private equity firms from high-tax jurisdictions through Baer
entities in the Cayman Islands.” Id.
63. Id.
64. In supporting bank secrecy, President of Switzerland Ueli Maurer stated, “The state must
absolutely respect the private sphere” and should not know “what there is in your bank account.”
When asked about issues of offshore tax evasion, Maurer clarified his answer: “In each system there
are ways to slip through the holes of the net. We must correct these flaws.” Pratap Bhanu Mehta, Swiss
president sees no need to change bank secrecy, THE INDIAN EXPRESS, Apr. 14, 2013,
http://www.indianexpress.com/news/swiss-president-sees-no-need-to-change-banking-secrecy/1102358.
“Swiss bankers and regulators have long dodged and blunted outsiders’ efforts to erode banking
secrecy: out of a principled deference for their respectable and prudent customers’ privacy, they insist;
because of the fat fees paid by crooks, tax-dodgers and dictators, say critics.” Swiss Banking Secrecy:

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this pioneering country due to a shift triggered by global awareness of

Swiss bank operations and ensuing pressure for transparency.65
Foreign bank assets managed in Switzerland decreased by $921 billion
between 2008 and 2012, signaling a withdrawal by tax evaders who
previously exploited Swiss bank secrecy.66 In 2009, the country’s biggest
lender bank, UBS, came clean in its role as a tax evasion vehicle for
52,000 American clients.67 From 2008 to 2010, UBS is estimated to have
lost about $200 billion in assets from private banking clients.68 In January
2013 Wegelin, the country’s oldest private bank, announced a permanent
shutdown after pleading guilty to charges that it offered secret accounts
hiding over $1.2 billion from the IRS.69
The Swiss government has slowly relinquished its strict adherence to
confidentiality,70 and the erosion of bank secrecy continues as compliance
moves beyond bilateral agreements with individual partner countries.71 In

Don’t Ask, Won’t Tell, supra note 10. Swiss secrecy supporters also have attempted to point out that
the pressure is coming from hypocritical sources—the U.S. stores Latin American money and offers a
domain for shell company pursuits in states like Delaware and Nevada, while Britain’s Channel
Islands are up for exploit as well. Id.
65. One Goldman Sachs head official in Europe, Francois-Xavier de Mallman, described the
secrecy crackdown: “A combination of government actions from the U.S. and the EU and increased
regulatory pressure is likely to trigger further changes in Swiss private banking because it will make it
more costly to do business. . . . We expect consolidation to continue in private banking and to likely
accelerate as the uncertainty weighing on the sector decreases.” Aaron Kirchfeld and Elena
Logutenkova, Private Banks Leave Switzerland as End of Secrecy Hurts, BLOOMBERG, June 30, 2013,
http://www.bloomberg.com/news/2013-06-30/private-banks-leave-switzerland-as-end-of-secrecy-hurts-
profits.html. Kinner Lakhani, a Citi Research analyst, notes that the Swiss banks have been anticipating
changes to secrecy rules for “well over a decade.” Petroff, supra note 9.
66. Game Changer, supra note 56. Some clients opted to pay taxes on their undeclared accounts.
Kirchfeld and Logutenkova, supra note 65. Analysts had predicted that the move towards bank secrecy
crackdown and increased regulation for compliance would force “a wave of mergers and acquisitions
[through 2013]. Id.
67. ‘American Dictate,’ supra note 60. UBS “narrowly escaped prosecution” by offering over
5,000 client names and a sum of $780 million. Id.
68. Browning, Seeking Bank Secrecy in Asia, supra note 54.
69. Id. For more on the closing of Wegelin & Co., see Nate Raymond and Lynnley Browning,
Swiss Bank Wegelin to Close after Guilty Plea, REUTERS, Jan. 4, 2013, http://www.reuters.com/article/
2013/01/04/us-swissbank-wegelin-idUSBRE9020O020130104.
70. See Michael Birnbaum, Switzerland, threatened by isolation, lifting veil on secret bank
accounts, WASH. POST, Nov. 4, 2012, http://www.washingtonpost.com/world/europe/threatened-by-
isolation-switzerlandlifting-veil-on-secret-bank-accounts/2012/11/04/bf77e574-24e8-11e2-9313-3c7f
59038d93_story.html. See also Swiss banks agree to US tax deal, more expected to follow, REUTERS,
Dec. 10, 2013, http://www.cnbc.com/id/101262066.
71. Most recently, Swiss parliament signed onto a bilateral agreement with the U.S. for the
exchange of client information, in line with the U.S. Foreign Account Tax Compliance Act (FATCA).
Id. Under FATCA, banks unwilling to identify and report American accounts and clients face a 30%
withholding tax on American investments. Swiss Banking Secrecy: Don't Ask, Won't Tell, supra note
10. For full information on FATCA, see the IRS website page, http://www.irs.gov/Businesses/
Corporations/Foreign-Account-Tax-Compliance-Act-(FATCA). See also U.S. Department of the

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October 2013, Switzerland signed onto the Multilateral Convention on

Mutual Administrative Assistance on Tax Matters, agreeing to increase
transparency and exchange financial information with sixty other
countries.72 As a result, the Swiss government now has the power to force
the country’s largest private banks to reveal certain confidential
information to international tax monitoring groups.73

III. COMPARATIVE LOOK: THE PHILIPPINES & SWITZERLAND

Although the Philippines occupies a substantially lesser role in the

global marketplace than Switzerland,74 both countries’ historical
commitments to bank secrecy facilitate a comparative look as to the
direction each will take with its private banking system and fight against
white collar and black market financial crime in the near future.
Both countries have faced significant pressure from the United States, a
major global economic power, and it is possible that U.S. pressure on
countries such as the Philippines will increase as the focus on Swiss
private banks and their lifting of bank secrecy ‘trickles down’ in global
influence.75 The United States’ enormous role in global commerce ensures

Treasury, Resource Center, http://www.treasury.gov/resource-center/tax-policy/treaties/Pages/ FATCA.

aspx (last visited on Mar. 20, 2015); and Robert Stack, Myth vs. FATCA: The Truth About Treasury’s
Effort to Combat Offshore Tax Evasion (Sept. 20, 2013), http://www.treasury.gov/connect/blog/
Pages/Myth-vs-FATCA.aspx. For information on FATCA and its adoption by the Philippines and
interaction with bank secrecy there, see Brian Mahany, FATCA Showdown in the Philippines? (Apr.
12, 2013), http://www.mahanyertl.com/mahanyertl/2013/fatca-showdown-in-the-philippines.
72. Game changer, supra note 56. Prior to the convention, which was made in concert with the
Organization for Economic Cooperation and Development (OECD), Switzerland had already made
bilateral tax collection agreements with Austria and the United Kingdom. Id.
73. One potential consequence is a loss of business from foreign banks. Id. Swiss bankers are left
to seek alternative business: one recommendation toeing ethical lines is to set sights on the wealthy
people of poor and unstable countries, no longer “secrecy . . . [but] at least stability.” Swiss Banking
Secrecy: Don't Ask, Won't Tell, supra note 10. The trajectory of Swiss banking is to “an ongoing
process of normalization;” the country’s financial institutions now must pitch onshore, transparent
accounts, reach out to emerging markets, and continue to raise appeal to the most wealthy clients
available. Petroff, supra note 9.
74. In February 2012, the Boston Consulting Group estimated that Swiss banks held about 27%
of offshore wealth. Swiss Banking Secrecy: Don't Ask, Won't Tell, supra note 10.
75. The US State Department has evaluated the progress of the Philippines in its responsiveness
to legal concerns regarding illicit funds by the OECD and Financial Action Task Force (FATF). Malig,
supra note 28. Specifically, the FATF had found a recent history of court decisions employing the
policies of bank secrecy and consequently hindering fraud and corruption investigations. Id. The State
Department reported, “Legislation to address these deficiencies [prohibiting ex-parte inquiries into
suspicious accounts] is pending in the Philippine Congress, and has been designated ‘urgent’ by the
[incumbent] Aquino administration, which will accelerate its movement through the Congress.” Id.
One US embassy cable cited several remaining obstacles to effective combat of illicit bank
activity, including the existing secrecy laws, the inability of regulators to examine banks at will, and
insufficient protections from liability for bank officials and examiners. U.S. DEP’T OF STATE, 2010

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that foreign banks like those in the Philippines continue to transact its
business, to be conditioned in turn on compliance with transparency
laws.76 Increased press and political pressure from other domestic
problems of the Philippines, including frequent corruption cases, may
bring reform of the secrecy statutes further into the international spotlight
and monitoring purview of tax compliance organizations and countries, as
seen by the Corona impeachment trial.
Because of the long-standing entrenchment of a policy of
confidentiality in the Philippines, perhaps the best approach to reform is
through gradual statutory amendments designed to chip away at secrecy
protections. A trend in this direction is evident in the reform proposals
submitted by the Philippine Congress following the Corona impeachment
trial.77
It seems unlikely that the Philippines, a smaller country with less
economic power than Switzerland, will respond to pressure for
transparency as swiftly as Swiss institutions have in recent years. There is
less international outcry to reform bank secrecy laws in the Philippines
because the country does not have the reputation for policies that had
girded the now eroding regime of Swiss bank secrecy. Additionally, the
preference among ordinary Philippine citizens is to maintain the familiar
privacy of their financial information. Reform thus will have to toe the line
of maintaining the public trust in the Philippines’ domestic banking
system.

INVESTMENT CLIMATE STATEMENT—THE PHILIPPINES (2010), available at http://www.state.gov/e/

eb/rls/othr/ics/2010/138129.htm. The cable continued, “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.” Id. See also Swinnen and Ubac,
supra note 7.
76. Mahany, supra note 71. “Although no bank likes FATCA, they mostly recognize that it is
better to cooperate than to be effectively locked out of the American marketplace or taxed to death.”
Id. IRS penalties for unreported or false accounts are substantial, and the agency remains powerful
enough to perform investigations into offshore accounts. Id. See also Internal Revenue Service of the
U.S. Government, International Investigations—Criminal Investigation (CI), http://www.irs.gov/uac/
International-Investigations-Criminal-Investigation-(CI) (last visited on Mar. 3, 2015); Stephen J.
Dunn, Tax Reporting of Foreign Financial Assets: A Tale of Two Acts, FORBES, Apr. 12, 2013,
http://www.forbes.com/sites/stephendunn/2013/04/12/foreign-financial-asset-reporting-a-tale-of-two-
acts.
77. See Swinnen & Ubac, supra note 7. Statutory reform proposals may take as their foundation
plain statements of legislative intent; for example, amendments indicating that account examination
may be carried out without the permission of a suspicious account holder. See Geronimo, supra note
27.

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A moderate approach could be to lift bank secrecy with respect to the

account information of individuals holding public office. 78 Another
measured approach might begin by shoring up the secrecy statutes’
loopholes for withholding bank information when dealing with a criminal
investigation or impeachment, specifically with respect to foreign currency
deposits. Instead, the Philippines could treat such situations as absolute
exceptions to confidentiality.
Finally, some commentators have recommended more indirect
improvements and solutions, including an emphasis on reforming tax law
for greater compliance and accountability,79 stricter bank account
monitoring, and a rewards system for corruption and illicit fund
whistleblowing.80 These solutions might strike an appropriate balance in
satisfying the public trust by upholding the general policy of account
privacy while targeting unlawful banking exploitation.

IV. GLOBAL EFFORTS RELATED TO BANK SECRECY

Fortunately, significant efforts to raise global awareness of “dirty

money” storage in offshore tax havens and private banks have been made
in part through international campaigns for financial accountability that
have advocated for reform beyond Swiss private banks, the most notorious
proponents of bank secrecy.81 These activist groups have identified the
presence of rampant corruption, inequality, and security problems in many
developing countries as primary vehicles for the flow of illegal funds.82

78. A government official exception was one proposal made following the controversies of the
Corona impeachment trial. See Agora Business Intelligence, supra note 50.
79. Dela Peña, supra note 47. The tax commissioner encouraged an amendment or repeal that
“could help detect tax leakages, improve collections on income and value-added taxes, and increase
voluntary compliance.” Id.
80. Agora Business Intelligence, supra note 50.
81. Global Financial Integrity (“GFI”) is one Washington-based group releasing reports on illicit
outflow. Pratap Bhanu Mehta, Dirty Money from Crime, Corruption and Tax Evasion Costs
Developing World $6 Tn, Led by China, India: Report, THE INDIAN EXPRESS, DEC. 18, 2012,
http://www.indianexpress.com/news/dirty-money-from-crime-corruption-and-tax-evasion-costs-develop
ing-world--6-tn-led-by-china-india-report/1046973. From 2011 to 2012, GFI reported that total outflow
of funds tracked from crime, corruption, and tax evasion increased by 11%. Id.
82. Id. At the end of 2012, “for every dollar in foreign direct aid,” it was found, “$10 leaves
developing countries.” Id. Reports from corruption awareness groups like GFI illustrate a trend
showing a growth in illegal finance outflow of 13.3% per year since 2001. Id. Such movement of
corrupt money is a highly harmful, destabilizing force for the developed world. Entities such as the
Global Organization of Parliamentarians Against Corruption (GOPAC) target these international
issues by seeking out representation, benchmarks, and increased public awareness from and within
countries like the Philippines. See GOPAC: Fighting Corruption and Promoting Integrity through an
Anti-Money Laundering Initiative, http://www.mickikaminska.com/GOPAC/Docs/Cullen%20Data
%20Paper_en.pdf (last visited Mar. 20, 2014). See also GOPAC Global Conference, http://gopac

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International awareness groups will certainly need to play a significant

role in pushing for compliance with tax and financial standards, in
conjunction with active monitoring and calls to reform from large global
economic players like the United States.
Pressure for compliance need not be as hard-nosed as the U.S.
approach with Switzerland; German and British “Rubik” deals with Swiss
banks maintain client confidentiality but impose a lump sum and annual
withholding tax in place of those would-be-unpaid taxes.83 The U.S.
demands have nonetheless precipitated a serious and likely substantial
fund-saving change with the Swiss.
The ultimate objective of Swiss secrecy reform is to have automatic
information exchange between the tax authorities of Switzerland and those
of other countries.84 Currently the OECD and Switzerland have agreed to
“information on request[:] A government can ask for data about specific
offenders; but no fishing expeditions are allowed, and the number of
requests permitted each year is capped.”85
One counterargument to globalization and more open-ended banking in
international finance, however, is that the approach has actually made it
easier to transfer illegal monies to Western banks and tax havens.86
Solutions aimed at these international problems may need to strike a
compromise between transparency and globalized, free-range access. That
is, private banks will need to embrace accountability not only in sharing
information over bank activities where there are suspicions or evidence of
criminal activity, but also in restricting access to banking that potential
criminals might have before they are able to place and manage illicit funds
in offshore accounts. A multi-pronged approach, at least partially focused
on reducing secret bank accounts, will be necessary for change.87

network.org/programs/conferences/gopac-conference. GOPAC held its most recent conference in the

capital city of Manila, in 2013. Id.
83. Swiss Banking Secrecy: Don’t Ask, Won’t Tell, supra note 10. These bilateral deals were
criticized by politicians as too accommodating to Switzerland. Id.
84. Id.
85. Id.
86. Mehta, supra note 81. GFI’s lead economist, Dev Kar, associated the trend of growing illicit
outflow with globalization and “the loosening of capital controls.” Id.
87. GFI has identified several solutions for world leaders targeting illicit outflows, including:
“clamping down on secret bank accounts and ownership of shell companies; reforming customs and
trade protocols so that export/import payments cannot be used to hide illegal fund transfers; requiring
multinational companies to report their profits by country to prevent tax avoidance; and strongly
enforcing anti money-laundering laws.” Id. Abuse of shell companies parallels the illegal activities
associated with secret bank accounts and illicit outflow; international companies without employees or
offices remain easy to set up and hide, and thus their exploitation by “money launderers, bribe givers
and takers, sanction busters, tax evaders, and financiers of terrorism” constitutes another serious

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Recent agreements made by other offshore tax havens further illustrate

the global trend toward transparency. In 2013 several British overseas
territories agreed to automatic information sharing with Britain, France,
Germany, Italy, and Spain.88 Austria is another long-standing tax haven
that has moved towards sharing personal account information, largely due
to influence from the European Union.89 Clearly, international
organizations and solidarity have provided effective solutions by creating
spheres of influence able to spur change and reform from individual
countries and their financial policies.90

CONCLUSION

Bank secrecy laws appear to be eroding in the global move towards

financial transparency. Legal prohibitions and conditions on information
sharing by foreign banks have stirred debate over bank secrecy reform,
and reformists are increasingly empowered by pressure from foreign
governments and international organizations supporting a freer exchange
of client and account data between governments and private financial
institutions.
In the face of reform, countries holding on to bank secrecy may fear
losing the business of wealthy clients, specifically to financial centers
promising sustained confidentiality. They may also hold on to the bank

problem in international finance. Launderers Anonymous, ECONOMIST, Feb. 11, 2012, http://www.
economist.com/node/21563286. One study revealed that nearly half of 3,700 incorporation agents
from 182 countries failed to follow international standards governing shell companies, in neglecting to
ask for proper identification from would-be applicants. Id.
88. Vanessa Houlder, Tax havens agree to more transparency, FINANCIAL TIMES, May 2, 2013,
http://www.ft.com/intl/cms/s/0/723b6e9c-b279-11e2-8540-00144feabdc0.html. Among the territories
were Anguilla, Bermuda, the British Virgin Islands, Montserrat and the Turks and Caicos Islands, all
following suit with the Cayman Islands. Id.
89. James Kanter and Andrew Higgins, Austria Gives Ground on Banking Secrecy at Meeting of
European Union Leaders, N.Y. TIMES, May 22, 2013, http://www.nytimes.com/2013/05/23/business/
global/european-union-leaders-meet-on-tax-avoidance.html. Luxembourg is another E.U. member that
has pledged reform, agreeing at a summit meeting to relinquish its hold on private banking data by
2015. Id.
90. On the other hand, there remain “fortress-like” countries, like Singapore, toward which
former Swiss clients may now be looking. Swiss Banking Secrecy: Don’t Ask, Won’t Tell, supra note
10.
The balance of offshore wealth is tipping to Asia. See Georgia McCafferty, Report: Singapore to
eclipse Switzerland as tax haven by 2020, CNN, May 14, 2013, http://edition.cnn.com/2013/05/13/
business/singapore-rich-switzerland-wealth?iid=EL. “Although Switzerland easily retains its offshore
banking crown with $2.8 trillion in assets under management, or 34% of the global private banking
industry, Singapore is now the world’s fastest growing market with $550 billion under management at
the end of 2011, up from just $50 billion in 2000.” Id. See also Browning, Seeking Bank Secrecy in
Asia, supra note 54.

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 2015] LIFTING BANK SECRECY 797

secrecy principles of independence from interference and privacy in

banking. Strengthening adherence to these principles is the fear of an
unending trend of open access to personal account, transaction, and
identification information due to transparency and globalization.
Greater transparency, however, may help to bolster a country’s
reputation as a compliant and well-regulated center. This should be an
important consideration for emerging markets like the Philippines, which
seek to carve out roles in the globalized world. Transparent financial
banking cultivates economic trust from other countries and represents a
commitment to restricting money laundering, corruption, and tax evasion,
issues now vehemently fought against by international groups to which
many powerful countries are parties.
Ray Flores

 J.D. (2015), Washington University School of Law; B.A. in Political Science and Music
(2012), University of Notre Dame. The author dedicates this Note to his mother, Cynthia Flores.

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