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Special Commercial Laws

Compared with RA 6426 and RA 8791 Foreign Currency Act 6426 Foreign Currency deposit are also confidential, they cannot be subject of examination or inquiry, except in the following cases:

Case of China Banking Corp, entitled Karen Salvacion v Central Bank of the Philippines. SC allowed the garnishment for equitable consideration, rationale of 6426 is to encourage foreign currency deposit and not to condone the wrongdoing. Law cannot be invoked for purpose other than the law is intended for. iv) Co-owner of account has right to know where money went. But note in case GSIS v CA. GSIS wants to know if the loan was really deposited. SC did not allow the court order because it does not fall under the exceptions. 4) Tax Code to compute estate Tax. 5) Offer to compromise Tax liability. 6) Unclaimed Balance Law. Escheat is akin to garnishment. Dollar cannot be escheated by the Government 7) Law pass repealing 6426

1) Written Permission from the depositor, it also applies to foreign currency deposit. 2) Impeachment, in 1405 Philippine currency deposit may be examined. In Foreign Currency Deposit law is silent. It still debatable, an open issue. 3) Court Order, Foreign Currency Deposits are exempt from execution, attachment, any court order. Exceptions, if it has a court order in case of: i) Violation of Anti Money Laundering Law. RA 9160 as amended Anti-Money Laundering Law does not make any distinction between Philippine Currency and Foreign Currency deposit. So deposit regardless of any kind of currency can be examined by Anti Money Laundering Council. ii) Violation of Anti-Terrorism Law. 10167. If account is used to promote Terrorism. iii) Equitable Considerations.

Ma. Angela L. Hernal

Special Commercial Laws

RA 8791 General banking Law 8791 General Banking Law prohibits examination/disclosure of funds other than deposit, as well as properties. Any fund other than deposit, not falling under debtorcreditor relationship. Money for Safekeeping, what law applies, 1405 or 8791? It is RA 8791. Trust fund Ejercito v Sandiganbayan, expanded the term deposit which includes trust fund. SC simply said that trust fund included in term deposit. Safety Deposit Box. RA 8791 NOTE if you are confronted with problem on deposit, ask yourself if it is Philippine or foreign currency deposit? Case of Tengan v CA. Citibank was charge for violation of 1405, SC said account is foreign currency then the correct law is RA 6426. Case dismissed.

Ma. Angela L. Hernal

Special Commercial Laws

ANTI-MONEY LAUNDERING LAW Basic Policy To protect and preserve the integrity and confidentiality of bank accounts and to ensure that the Philippines shall not be used as a money laundering site for the proceeds of any unlawful activity. Covered Institutions 1) Institutions supervised or regulated by BSP 2) Institutions supervised and regulated by the Insurance Commission 3) Entities dealing in currency, commodities or financial derivatives based thereon valuable objects, cash substitutes and other similar monetary instruments or property supervised and regulated by the Securities and Exchange Commission. (Only cash) Obligations of covered institutions 1) Customer Identification 2) Record keeping 3) Report of covered and suspicious transactions Safe Harbor Provision Officers of bank cannot be held liable to 1405 as long as disclosure was done in good faith.

Covered and Suspicious Transactions Covered Transactions amount exceeds 500,000 within one banking day. Suspicious Transactions transactions, regardless of the amount where any of the following circumstances exist: JICSDUN a) there is no underlying legal or trade obligation, purpose or economic Justification b) the client is not properly Identified c) the amount involved is not Commensurate with the business or financial capacity of the client d) the clients transaction is so Structured in order to avoid being the subject of reporting requirements e) any circumstance relating to the transaction which is observed to Deviate from the profile of the client and/or his past transaction with the covered institution f) transaction is in any way related to an Unlawful activity or offense that is about to be, being, or has been committed g) any transaction analogous to the foregoing When is Money Laundering Committed? Money laundering is a crime whereby the proceeds of an unlawful activity are transacted thereby making them appear to have originated from legitimate sources. It is committed by the following:
Ma. Angela L. Hernal

Special Commercial Laws

1) Any person knowing that any monetary instrument or property represents, involves or relates to the proceeds of any unlawful activity, transacts or attempts to transact said monetary instrument or property, or performs or fails to perform an act as a result of which he facilitates the offense of money laundering. 2) Any person knowing that any monetary instrument or property is required under the law to be disclosed and filed with the Anti-Money laundering Council fails to do so. Anti-Money Laundering Council the government body tasked to carry out the implementation of the Anti-Money Laundering law. It is authorized to impose administrative sanctions for the violation of the law, rules and regulations issued pursuant to the anti-money laundering law.

Freezing of account and bank inquiry AMLC shall apply for a freeze order with the Court of Appeals. Such order may be issued ex parte. Bank inquiry order shall apply with any competent court, which can be issued ex parte. (as of June2012)

Ma. Angela L. Hernal

Special Commercial Laws

TRUTH IN LENDING Rationale of the law complement the then Usury law Obligation of the creditor to disclose to the borrower in writing prior to the consummation of the transaction the following information. PADC-TFP 1. Cash Price/ Delivered price 2. Amount of down payment 3. Difference between 1 and 2 4. Charges not incident to extension of credit 5. Total charges 6. Finance charges 7. Paid interest Where should disclosure be made Effects of non-compliance 1. Transaction is not rendered void or unenforceable. Charges not properly disclosed need not paid and if paid, can be recovered. 2. The offender is liable to pay a penalty for an amount equal to twice the finance charge, not to exceed 2,000. 3. In case of willful violation of the law, the offender shall be liable to pay a fine or imprisonment or both at the option of the court.

Example/applicable jurisprudence Creditor under Truth in Lending Law Macalintal v BPI- 3% compounding interest . shocking to the conscience Consolidated Trust Bank Company v CA- Where promissory note signed by the borrowers do not contain any stipulation on the payment of handling charges, the bank cannot collect the same even though the CB Circular authorized banks to collect handling charges on loans over 500,000. UPCB v Beluso A promissory note which grants the creditor the power to unilaterally fix the interest rate means that the promissory note does not contain a clear statement in writing of the finance charge. Such provision is illegal not only because it violates the mutuality of contracts but also it violates Truth in Lending Law. Lesson in life: Live within your means.

Ma. Angela L. Hernal

Special Commercial Laws

PHILIPPINE DEPOSIT INSURANCE CORPORATION Basic Policy Promote and safeguard the interest of the depositing public by way of providing permanent and continuing insurance coverage on all insure deposits. Liability of PDIC Insurer of deposit to 500,000. Requisites of liability 1. Bank received deposits 2. Bank closes business 3. Claim must be filed within 2 years (24months) from actual takeover. Question: Which of the following accounts are not covered by RA 1405? a) Savings b) c) Trustfund d) Time deposit. Question: Which of the following accounts are not covered or insured by PDIC? a) Savings b) c) Trustfund

d) Time deposit. Before the case of Sandiganbayan it is safe to say that accounts not covered by 1405, are not insured with PDIC. But now, as Trust fund is now included in term deposit under 1405.but only for RA 1405 and not within the meaning of deposit as provided under PDIC. Accounts/Transaction not covered by PDIC OIFUL 1. Deposits Outside Philippines 2. Investment such as bonds and securities other similar instruments 3. Fictitious/fraudulent account 4. Unsafe/unsound banking practices 5. Laundered funds Determination of insured deposits 1. Determine total amount of deposit in his own right and capacity. 2. Deduct any loan of the depositor from the deposit with the insured bank to determine net insured deposit. 3. Individually owned deposit account is insured separately from joint accounts regardless of the whether the conjunction and or an/or is issued. In determining such amount due to the depositor, there shall be added together all
Ma. Angela L. Hernal

Special Commercial Laws

deposits in the bank maintained in the same right and capacity for his benefit either in his own name or in the name of others. 4. If the account is held by a juridical person jointly with a natural person, the maximum insured deposit shall be presumed to belong entirely to the juridical person. 5. The aggregate of the interest of each co-owner over several joint accounts, whether owned by the same or different combination of individuals, juridical persons or entities shall likewise be subject to the maximum insured deposit of 500,000. Effect of Payment PDIC, upon the payment of any depositor, shall be subrogated to all the rights of the depositor against the closed bank to the extent of such payment. Subrogation shall include the right on the part of PDIC to receive the same dividends from the proceeds of the assets of such closed bank and recoveries on account of stockholders equity as would have been payable to the depositor on a claim for the insured deposit but such depositor shall retain his claim for any uninsured portion of his deposit.

Other powers of PDIC Examination of banks and deposit accounts PDIC may conduct examination of banks with prior approval of the MB provided that no examination can be conducted within 12 months from the last examination date; provided however that PDIC may, in coordination with BSP conduct a special examination if there is a threatened or impending closure of a bank. Prohibition against splitting of accounts Splitting of deposits occurs whenever a deposit account with an outstanding balance of more than the statutory maximum amount of insured deposit maintained under the name of natural or juridical persons is broken down and transferred into two or more accounts in the name/s of natural or juridical persons or entities who have no beneficial ownership on transferred deposits in their names within 120 days immediately preceding or during a bank declared holiday or immediately preceding a closure order by the BSP for the purpose of availing of the maximum deposit insurance coverage. Prohibition against issuance of TRO No court, except the Court of Appeals, shall issue any temporary restraining order, preliminary injunction against PDIC for any action on its part under the PDIC charter.
Ma. Angela L. Hernal

Special Commercial Laws

WAREHOUSE RECEIPTS LAW

Ma. Angela L. Hernal

Special Commercial Laws

ACT 3135 What is the basis of Extra-judicial foreclosure of real estate mortgage? SPA. Special power of attorney to take possession of property 2 kind

Ma. Angela L. Hernal