By Katherine K. Chan, Reporter
ALLOWING authorities to scrutinize foreign currency deposits when investigating illegal financial transactions is a “welcome move” and could help the Philippines attract more investments if implemented properly, analysts said.
“Overall, this is a constructive step if implemented carefully,” SM Investments Corp. economist Robert Dan J. Roces told BusinessWorld in a Viber message. “Limited, court-supervised access to foreign currency deposits linked to clearly defined offenses strengthens the fight against corruption and aligns the country with global anti-money laundering standards.”
Republic Act No. 6426 or the Foreign Currency Deposit Act of the Philippines requires all foreign currency deposits to be treated with absolute confidentiality, except if the depositor provides a written permission to access their account or records.
It also exempts said funds from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body.
Such tight regulations were part of the government’s efforts to spur the economy by boosting lending and investment activity using foreign currency deposits in the country.
However, lawmakers last month filed House Bill No. 6902 seeking to allow authorities to probe foreign currency deposit accounts linked to cases of impeachment, bribery or dereliction of duty of government officials, or where the funds are the subject of court proceedings.
This came after the House of Representatives approved on third and final reading another measure pushing to ease the decades-old bank secrecy law and allow the central bank to access the bank accounts of bank officers and employees suspected to be involved in financial crimes.
Analysts noted that the bill’s clear line of exemptions allows it to be an effective measure against illicit financial activities.
“Allowing scrutiny of foreign currency deposits only in clearly defined cases like impeachment, bribery, or court proceedings helps close a major loophole used to hide illicit funds, strengthens investigations, and aligns (the Philippines) more closely with global AML/CFT (anti-money laundering and countering the financing of terrorism) standards,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, told BusinessWorld via Viber.
“Access must be risk-based, court-authorized, and case-specific, not blanket,” he added.
Renielle Matt M. Erece, an economist at Okonomia Advisory and Research, Inc., said the measure should only authorize access to foreign currency deposits upon formal and legally obtained court orders.
“If it does, then it can improve efficiency and growth,” he said.
Meanwhile, Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said the government must ensure its implementation will be anchored in transparency for accountability to avoid tainting investors’ confidence.
“The key is balance: transparency for accountability, but not a free-for-all that could erode trust,” he said in a Viber message.
FDI IMPACTAnalysts also said that exempting suspicious foreign currency deposits from confidentiality could boost investors’ confidence in the financial system in the long run.
“The impact on FDI (foreign direct investments) should be modest, as serious investors value predictability and rule of law more than absolute secrecy,” Mr. Roces said. “The key is strong safeguards — clear scope, judicial oversight, and protection from political misuse — so the measure targets illicit activity without undermining confidence in the financial system.”
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort also said that introducing such reforms could improve the Philippine government’s rating, which could be manifested in foreign investments.
“This would help increase the country’s governance rating or ranking that would help attract more international investments into the country,” he said in a Viber message.
Latest central bank data showed that FDI net inflows into the country slumped to its lowest in over five years at $320 million in September, falling by 25.8% from $432 million a year ago.
Still, Bangko Sentral ng Pilipinas Governor Eli M. Remolona, Jr. said that the economy may begin to recover later this year as the local investment climate improves.
“Serious, long-term investors value clean governance and predictable rules more than absolute secrecy,” Mr. Rivera said.
“As long as legitimate deposits remain protected and due process is clear, reform can actually improve the investment climate by lowering corruption and reputational risk rather than deterring capital.”