FINALS COVERAGE:

20 MCQs on GBL and NCBA (Basics)

20 MCQs on Secrecy of Bank Deposits, AMLA and PDIC
60 Essay Qs on Secrecy of Bank Deposits, AMLA and PDIC
Secrecy of Bank Deposits Law: RA 1405
Purpose
Sec. 1, RA 1405
Encouragement- to the people to deposit their money; and
Discourage- private hoarding so that the same may be properly
utilized by banks in authorized loans to assist in the economic
development of the country.
Prohibited Acts
Section 2. All deposits of whatever nature with banks or banking
institutions in the Philippines including investments in bonds issued by
the Government of the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an absolutely
confidential nature and may not be examined, inquired or
looked into by any person, government official, bureau or
office
Section 3. It shall be unlawful for any official or employee of a
banking institution to disclose to any person other than those
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Deposits Covered
Sec. 2, RA 1405. All deposits of whatever nature with banks or
banking institutions in the Philippines including investments in bonds
issued by the Government of the Philippines, its political subdivisions
and its instrumentalities,
Ejercito vs. Sandiganbayan
Sec. 6, RA 8367 : An Act Providing for the Regulation of the
Organization and Operation of Non-Stock Savings and Loan
Associations. All deposits of whatever nature with an Association
(Savings and Loan) in the Philippines are hereby considered as of an
absolutely confidential nature
Sec. 8, RA 6426: Foreign Currency Deposit Act of the Philippines.
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, 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; Provided,

however, That said foreign currency deposits shall be exempt from
attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body
whatsoever. (As amended by PD No. 1035, and further amended).
Exceptions
Bank Secrecy Law:
Upon written permission of the depositor, or
In cases of impeachment, or
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.
Mellon Bank, NA vs. Magsino
Anti-Graft Law
Philippine National Bank vs. Gancayco
Banco Filipino Savings and Mortgage Bank vs. Purisima
Anti-Money Laundering Act : RA 9160
Section 4. Money Laundering Offense. Money laundering is a
crime whereby the proceeds of an unlawful activity are
transacted, thereby making them appear to have originated from
legitimate sources.
Upon order of any competent court in cases of violation, the
AMLC may inquire into or examine any particular deposit or
investment when it is established that:
There is probable cause that the deposits or investments
are related to an unlawful activity; or
A money laundering offense.
However, no court order is required in the following unlawful
activities:
Kidnapping for ransom (RPC)
Violations of the Comprehensive Dangerous Drugs Act of
2002 (RA 9165)
Hijacking and other violations under RA 6235 : An Act
Prohibiting Certain Acts Inimical to Civil Aviation, and for
Other Purposes
Destructive arson and murder including those perpetrated
by terrorists against non-combatant persons and similar
targets.
Periodic or Special Examination
Conducted by the Monetary Board in the following instances:
After being satisfied that there is reasonable ground to
believe that a bank fraud or serious irregularity has
been or is being committed and it is necessary to

look into the deposit to establish such irregularity or

fraud.
Examinations made by an independent auditor hired by
the bank to conduct its regular audit provided that the
examination is for audit purposes only and the results
thereof shall be for exclusive use of the bank.
In Camera Inspection by the Ombudsman
Sec. 15 (8), RA 6770: Ombudsman Act
Administer oaths, issue subpoena and subpoena duces
tecum, and take testimony in any investigation or inquiry,
including the power to examine and have access to bank
accounts and records.
Marquez vs. Desierto
Disclosure of Dormant Accounts: RA 3936
All banks shall forward to the Insular Treasurer a statement,
under oath of all credits and deposits held by them in favor of
persons known to be dead, or who have not made further
deposits or withdrawals during the preceding ten (10) years or
more.
Authority of the Commissioner of Internal Revenue to Inquire into
Deposits: Sec. 6, NIRC
Authority of the Commissioner to inquire into Bank Deposit
Accounts. - Notwithstanding any contrary provision of Republic
Act No. 1405 and other general or special laws, the
Commissioner is hereby authorized to inquire into the bank
deposits of:
1. a decedent to determine his gross estate; and
2. any taxpayer who has filed an application for
compromise of his tax liability under Sec. 204 (A) (2)
of this Code by reason of financial incapacity to pay
his tax liability.
Waiver by DOSRI: Sec. 26, RA 7653: THE NCBA
Bank Deposits and Investments. - in excess of five percent (5%)
of the capital and surplus of the bank, or in the maximum
amount permitted by law, whichever is lower, shall be required
by the lending bank to waive the secrecy of his deposits of
whatever nature in all banks in the Philippines.

Rules of Court on Garnishment

A legal proceeding whereby money or property due a debtor but
in the possession of another is applied to the payment of the
debt owed to the plaintiff.
China Banking Corporation vs. Ortega

Secrecy and Exemption from Attachment and Garnishment of

Foreign Currency Deposits
Salvacion vs. Central Bank of the Philipines
Estrada vs. Desierto

Penalties
Section 5, RA 1405. Any violation of this law will subject offender
upon conviction, to an imprisonment of not more than five years
or a fine of not more than twenty thousand pesos or both, in
the discretion of the court.
Anti-Money Laundering Act: RA 9194
Sec. 2. Declaration of Policy. It is hereby declared the policy of
the State 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.
Consistent with its foreign policy, the State shall extend cooperation in
transnational investigations and prosecutions of persons involved in
money laundering activities wherever committed.
Covered Institutions: Sec.3
Banks, offshore banking units, quasi-banks, trust entities, non-stock
savings and loan associations, pawnshops, and all other institutions,
including their subsidiaries and affiliates supervised and/or regulated
by the Bangko Sentral ng Pilipinas (BSP)
Insurance companies, holding companies and all other institutions
supervised or regulated by the Insurance Commission (IC)
Securities dealers, brokers, pre-need companies, foreign exchange
corporations, investment houses, trading advisers, as well as other
entities supervised or regulated by the Securities and Exchange
Commission (SEC)
Obligations of Covered Institutions
(a) Customer Identification. - Covered institutions shall establish and
record the true identity of its clients based on official documents. They
shall maintain a system of verifying the true identity of their clients
and, in case of corporate clients, require a system of verifying their
legal existence and organizational structure, as well as the authority
and identification of all persons purporting to act on their behalf.
(b) Record Keeping. - All records of all transactions of covered
institutions shall be maintained and safely stored for five (5) years
from the dates of transactions. With respect to closed accounts, the
records on customer identification, account files and business
correspondence, shall be preserved and safely stored for at least five
(5) years from the dates when they were closed.

 (c) Reporting of Covered Transactions. - Covered institutions shall

report to the AMLC all covered transactions within five (5) working days
from occurrence thereof, unless the Supervising Authority concerned
prescribes a longer period not exceeding ten (10) working days.
Covered Transactions: Sec. 3
A single, series, or combination of transactions involving a total
amount in excess of 500,000 pesos or an equivalent amount in foreign
currency based on the prevailing exchange rate within 5 consecutive
banking days EXCEPT those between a covered institution and a
person who, at the time of the transaction, was a properly identified
client and the amount is commensurate with the business or financial
capacity of the client; or those with an underlying legal or trade
obligation, purpose, origin or economic justification.
A single, series or combination or pattern of unusually large and
complex transactions in excess of 500,000 pesos especially cash
deposits and investments having no credible purpose or origin,
underlying trade obligation or contract.
Suspicious Transactions
Transactions, regardless of the amount involved, where the following
circumstances exist:
there is no underlying legal or trade obligation, purpose or
economic justification;
the client is not properly identified;
the amount involved is not commensurate with the business or
financial capacity of the client;
taking into account all known circumstances, it may be perceived
that the clients transaction is structured in order to avoid being
the subject of reporting requirements under the Act;
any circumstance relating to the transaction which is observed to
deviate from the profile of the client and/or the clients past
transactions with the covered institution;
the transaction is in any way related to an unlawful activity or
offense under this Act that is about to be, is being or has been
committed; or
any transaction that is similar or analogous to the foregoing.
When 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:
(a) 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.

(b) Any person knowing that any monetary instrument or

property involves the proceeds of any unlawful activity, performs
or fails to perform any act as a result of which he facilitates the
offense of money laundering referred to in paragraph (a) above.
(c) Any person knowing that any monetary instrument or
property is required under this Act to be disclosed and filed with
the Anti-Money Laundering Council (AMLC), fails to do so.

Unlawful Activities
Kidnapping for ransom
Drug offenses
Graft and corrupt practices
Plunder
Robbery and extortion
Jueteng and masiao
Piracy on the high seas
Qualified theft
Swindling
Smuggling
Electronic Commerce crimes
Hijacking, destructive arson and murder, including those perpetrated
against non-combatant persons (terrorist acts)
Securities fraud
Felonies or offenses of a similar nature punishable under penal laws of
other countries
AMLC
The AMLC is the Philippines financial intelligence unit, which is tasked
to implement the AMLA. It is composed of the Governor of the Bangko
Sentral ng Pilipinas (BSP) as Chairman & the Commissioner of the
Insurance Commission (IC) and the Chairman of the Securities and
Exchange Commission (SEC) as members. The AMLC is authorized to:
Require and receive covered or suspicious transaction reports from
covered institutions.
Issue orders to determine the true identity of the owner of any
monetary instrument or property that is the subject of a covered or
suspicious transaction report, and to request the assistance of a
foreign country if the Council believes it is necessary.
Institute civil forfeiture and all other remedial proceedings through the
Office of the Solicitor General.
Cause the filing of complaints with the Department of Justice or the
Ombudsman for the prosecution of money laundering offenses.
Investigate suspicious transactions, covered transactions deemed
suspicious, money laundering activities and other violations of the
AMLA.

 Secure the order of the Court of Appeals to freeze any monetary

instrument or property alleged to be the proceeds of unlawful activity.
Implement such measures as may be necessary and justified to
counteract money laundering.
Receive and take action on any request from foreign countries for
assistance in their own anti-money laundering operations.
Develop educational programs to make the public aware of the
pernicious effects of money laundering and how they can participate in
bringing the offenders to the fold of the law.
Enlist the assistance of any branch of government for the prevention,
detection and investigation of money laundering offenses and the
prosecution of offenders. In this connection, the AMLC can require
intelligence agencies of the government to divulge any information
that will facilitate the work of the Council in going after money
launderers.
Impose administrative sanctions on those who violate the law, and the
rules, regulations, orders and resolutions issued in connection with the
enforcement of the law.
Freezing of Monetary Instrument or Property
A. FREEZE ORDER:
Upon determination of probable cause that any deposit or similar
account is in any way related to an unlawful activity, AMLC may
issue a freeze order, which shall be effective immediately, on the
account for a period not exceeding 15 days (extendible upon
order of court, tolled pending decision)
B. NOTICE TO DEPOSITOR:
o Depositor shall be notified simultaneously with the issuance of
freeze order and he has 72 hours upon receipt of notice to
explain why the freeze order should be lifted
C. AMLC has 72 hours to dispose of the depositors explanation
(automatically dissolve the freeze order)
D. TRO or writ of injunction not allowed to issue against any
freeze order, EXCEPT CA or SC
Authority to Inquire into Bank Deposits
Exception to Secrecy of Bank Deposits Act (RA 1405), RA 6426 and RA
8791
and
other
laws.
AMLC may inquire into or examine any particular deposit or investment
with any banking institution or non-bank financial institution upon
order of any competent court in cases of violation of this Act when it
has been established that there is probable cause that the deposits or
investments involved are in any way related to a money laundering
offense.

Exceptions
However, no court order is required in the following unlawful
activities:
Kidnapping for ransom (RPC)
Violations of the Comprehensive Dangerous Drugs Act of 2002
(RA 9165)
Hijacking and other violations under RA 6235 : An Act Prohibiting
Certain Acts Inimical to Civil Aviation, and for Other Purposes
Destructive arson and murder including those perpetrated by
terrorists against non-combatant persons and similar targets.
Philippine
amended

Deposit

Insurance

Corporation

(PDIC)

RA

3591,as

PDIC-General Info.
Philippine Deposit Insurance Corporation.
Founded June 22, 1963 under R.A. 3591,as amended by R.A. 9576,
April 29, 2009.
Attached to the Department of Finance.
Insure the deposits of all banks which is entitled to the benefits of
insurance.
Basic Policy: Promote and safeguard the interest of the depositing public by
way of providing permanent and continuing insurance coverage on all
insured deposits.
Insured Deposit means the amount due to any bona fide depositor for
legitimate deposits in an insured bank net of any obligation of the depositor
to the insured bank as of the date of closure, but not to exceed P500,000.00.
Statutory Liability. PDIC is governed primarily by the provisions of the law
creating it. Hence, liability is statutory and rests upon the existence of
deposits with the insured bank, NOT on the negotiability of the certificate
evidencing the deposit.
Case: PDIC vs. CA, December 22, 1997.
Deposit Required to be insured. Deposits of all commercial banks,
savings and mortgage banks, rural banks, private development banks,
cooperative banks, savings and loan associations, as well as branches and
agencies in the Philippines of foreign banks and all other corporations
authorized to perform banking functions.
Deposit: any unpaid balance of money or its equivalent received by
the bank in the usual course of business and for which it has given or its
obliged to give credit to a commercial, checking, savings, time or thrift

account, or which is evidenced by a passbook check and /or certificate of

deposit.
Case: PDIC vs. CA, April 30, 2003
Commencement of Liability. Upon actual takeover of the closed bank.
Notice. To depositors by whatever means the BOD deemed appropriate.
Publication. Notice is published once a week for 3 consecutive weeks in a
newspaper of general circulation or a newspaper circulated where the closed
bank are located if appropriate.
Deposit Accounts not Entitled to Payment. R.A. 9576 provides the ff.
exclusions:
1. Investment products such as bonds, securities and trust
accounts;
2. Deposit Accounts which are unfunded, fictitious or fraudulent;
3. Deposit products constituting or emanating from unsafe and
unsound banking practices; and
4. Deposits that are determined to be proceeds of an unlawful
activity as defined under the Anti-Money Laundering Law.
Extent of Liability. Up to P500,00.00 per depositor.
Determination of Insured Deposits. All deposits in the bank maintained
in the same right and capacity for the benefit of the depositor either in his
own name or in the name of others shall be added together.
Joint Account regardless of whether the conjunction used is and or
and/or, shall be insured separately from any individually-owned deposit
account.
Accounts held jointly by two or more natural persons or two or more
juridical persons or entities, the maximum insured deposit shall be
divided into as many equal shares are there are persons unless a different
sharing is stipulated.
If account is held by a juridical person jointly with one or more
natural person, the maximum insured deposit shall be presumed to belong
entirely to the juridical person.
Payment. Whenever a bank is closed by the MB, PDIC shall pay insured
deposits:
By cash or
By making available to each depositor a transferred deposit in
another insured bank in an amount equal to insured deposit of
such depositor.

Effect of Payment by PDIC. Subrogation of rights of the depositor against

the closed bank to the extent of such payment.
Preferred Credit. Partake the nature of public funds.
Delay. Failure to settle claim within 6 months from date of filing of claim due
to grave abuse of discretion, gross negligence, bad faith or malice. The
responsible director, officers of employees of PDIC shall upon conviction be
imprisoned from 6 months to 1 year.
Exception: Validity of claim requires resolution of issues or facts by another
agency.
Prescription. 2 years from actual takeover of the closed bank by the
receiver or failure to enforce claim within 2 years after the 2 year period to
file a claim unless otherwise waived by PDIC.
Still subject to receive dividends and payments from the proceeds of
the assets of the bank.
Power to Examine Banks and Deposit Accounts.
With prior approval from Monetary Board.
No examination within 12 months from the last examination.
Special Examination: BOD in coordination with the BSP, by
affirmative vote of a majority if there is threatened or impending
closure of the bank.
Splitting of Deposits.
Deposit account with an outstanding balance over the maximum
insured amount is broken down or transferred to other accounts in the
name of other persons who have no beneficial ownership within 120
days immediately preceeding the closure or declaration of bank
holiday for the purpose of availing the maximum deposit insurance
coverage.
TRO and Injunction. No other court except CA may issue against PDIC
SC may issue restraining order or injunction when the matter is of
extreme urgency involving a constitutional issue. Provided, the party
applying shall furnish a bond in an amount fixed by the court in favor
of PDIC if the court should finally decide that the applicant was not
entitled to relief sought.