Anti-Terror Act troubles banks

BY MA. ELOISA I. CALDERON, BusinessWorld Senior Reporter Local banks are in a dilemma over protecting clients or complying with the just-implemented Anti-Terror Act given the threat of prosecution if they fail to disclose details of suspect accounts. "Banks are now in a quandary. We grew up with [protecting] the client’s confidentiality and secrecy as our paramount duty. We need guidelines," Leonilo G. Coronel, executive director of the Bankers Association of the Philippines (BAP), told BusinessWorld, referring to provisions of the Human Security Act of 2007 or Republic Act 9372. The law, which took effect on July 15 four months after it was signed by President Gloria Macapagal Arroyo in March, was meant to add weight to the government’s bid to counter terrorist threats. The law, however, has widely drawn flak, with critics arguing that it will allow for more human rights violations, among others. Banks are also critical of the law as probers have been given the license to inquire into the bank accounts of persons on mere suspicion of involvement in terrorist activities. Also covered are money market placements, trust accounts, assets and records in financial institutions including finance companies, investment houses and trust corporations. Section 27 of the law allows for judicial authorization to examine suspect bank accounts without prior notification, which Antonio V. Viray, special counsel of Metropolitan Bank & Trust Co., said comprises a "sneak attack" on both the bank and its client. "The first time the bank will become aware that the client’s account is going to be examined is when it is served with the court order," Mr. Viray told a roundtable discussion on Tuesday in Makati City. Under the law, the police, upon approval of the Anti-Terrorism Council, can file an application to examine a bank account with the Court of Appeals without having to notify the bank or client involved. In legal parlance, such move is known as "ex parte". The court order is also considered classified information and cannot be leaked to the media, Mr. Viray said. "In the end, I will say it will be a judgment call [of the bank on whether to protect the client or comply with the law]," Mr. Viray said. He pointed out that bank officials who defy the court order may face a jail term of 10 to 12 years. Juan de Zuñiga, Jr., Bangko Sentral ng Pilipinas (BSP) assistant governor and general counsel, pointed out that while banks could be prosecuted for refusing to comply with the law, the lenders would be spared from administrative sanctions by the central bank. "There will be no sanctions unless [the action] constitutes unsafe and unsound bank practices [as stipulated in the banking law]," Mr. Zuñiga said noting that the banking law refers to rules being implemented by the policymaking Monetary Board. "My view is that the Human Security Act is not a banking law and, thus, its violation is not a violation of a banking law," the BSP official added. The Anti-Terror Act, he said, provides for an additional exception to confidentiality provisions under RA 1405 (Secrecy of Bank Deposits Act), RA 6426 (the FCDU law), and the RA 9160 or the Anti-Money Laundering Act. Monetary authorities are drumming up a possible agreement with law enforcement agencies that will define the central bank’s role in the examination of bank accounts, Mr. Zuñiga told BusinessWorld. "We’re looking at a possible agreement defining the requirements in assisting in the examination of bank deposits. [But] generally we are not directly participating in the enforcement of the Human Security Act," he said. Mr. Zuñiga pointed out that "there’s value in an ex-parte process to prevent the movement or transfer of funds".