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BANK COMMITMENT. George Ty (left) of Metrobank assures no customer has been affected in this
incident. Photo by Alecs Ongcal/Rappler
MANILA, Philippines – Metropolitan Bank & Trust Company (Metrobank), lender owned
by business tycoon George Ty, lost P14.63 billion in market value in a day, as the
Bangko Sentral ng Pilipinas (BSP) launched its investigation into the alleged P900-
million fraud case involving a senior bank official.
Shares in Metrobank plunged by 5.03% to P86.90 each on Friday, July 21, from P91.50
each on Thursday. This happened the same day the National Bureau of Investigation
(NBI) presented Maria Victoria Lopez, vice president of the Corporate Service Unit at
Metrobank’s Makati head office, as the primary suspect in the case.
"The stock of Metrobank was the biggest underperformer as they were hard hit by the
news, as the BSP is to probe the bank on how a single officer circumvented internal
controls, which led to the alleged loss of at least P900 million in loans," Marita
Limlingan, president of Regina Capital Development Corporation, said in a report.
NBI spokesperson Ferdinand Lavin said on Friday that the Metrobank senior official was
arrested while trying to move the stolen money to an unspecified personal account. The
money was taken from the credit facility of one of the Metrobank's biggest corporate
clients.
Lavin said the 54-year-old Lopez, who was trusted by big corporate clients, had served
the bank for over 3 decades and received a monthly salary of at least P250,000.
This is the latest controversy to hit the Philippine banking industry in the past few
months. In 2016, Rizal Commercial Banking Corporation (RCBC) was slapped a record
P1-billion fine for involvement in $81-million Bangladesh Bank heist.
Weeks after the BPI glitch, Banco de Oro (BDO) became the target of multiple ATM-
skimming attacks, while Union Bank probes a suspected P17-million fraud incident
involving one of its employees.
Resilient
Despite these mishaps, BSP Governor Nestor Espenilla Jr and the Bankers Association
of the Philippines said on Friday they are confident in the banking sector's resilience.
(READ: Banking sector backs Metrobank to pull through P900 M fraud case)
"We're looking into it. We have to look into the circumstances and the facts around it.
That's really all that the BSP can say for now," Espenilla said.
In a separate disclosure to the local bourse, Metrobank said the bank will continue with
its daily operations.
"The bank is reinforcing its commitment to the highest standards of integrity and
upholds the protection of its customers as its main priority. No customer has been
affected in this incident," Metrobank said in a statement.
Metrobank is the country's second largest bank in terms of total assets with P1.9 trillion
as of first quarter of 2017. It booked a net income of P18.09 billion last year as well as
profit of P6.21 billion for the start of this year.
The bank's parent firm GT Capital also saw it stock fall by 2.85% to P1,195 each. –
Rappler.com
2.
The suspect, Maria Victoria Lopez, was arrested on July 18 after she allegedly attempted to shift
P2.25 million in interest from unauthorized loans, officials said.
Lopez was presented to reporters wearing an orange detainee's shirt and with her face wrapped
with a shawl.
The interest payment was for one of 2 borrowings from a P25-billion pool. The bank's client,
which was authorized to borrow from the fund, denied executing the 2 loans worth P900 million
and P850 million, officials said.
The NBI did not name Metrobank, the country's largest lender, which on Friday confirmed
the arrest of an individual for alleged fraud. The bank's admission came after the Philippine
Daily Inquirer reported the case.
"The biggest loss on this is the integrity of the banking system and the internal control system of
the bank," said NBI spokesman Ferdinand Lavin, adding authorities were "doing everything" to
safeguard the industry.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi Fonacier meanwhile assured that
the incident is an "isolated case" and that the banking system is "well-capitalized."
"Metrobank is a big bank. It can handle the situation," Fonacier told reporters.
Lopez had worked for the bank for 3 decades and was earning around P250,000 per month as
head of corporate services. She could be tried for qualified theft, falsification of documents and
violation of banking laws, officials said.
"She's not cooperating. She's not talking," Lavin said, adding an investigation was underway to
determine if other people were involved.
Lopez allegedly directed the issuance of a manager's check to an individual, a "red flag" because
such checks are issued only to corporate clients, said Norman Aguirre, the NBI agent on case.
"There were irregularities in the documents itself, indicating falsification such as different fonts,
dubious signatures," Aguirre said.
"The bank conducted an internal inquiry, confirmed that the client has a loan with the bank or if
they have draw-downs. Much to their dismay, they discovered such loans were unknown to the
client," he said.
BSP Governor Nestor Espenilla said regulators were investigating the fraud, the latest in a wave
of controversies to hit the banking system since last year.
Espenilla said he expected the lender, controlled by taipan George Ty, to be "resilient."
In February 2016, unidentified hackers shifted $81 million from Bangladesh's foreign reserves to
an RCBC branch in Makati City.
The BSP fined the Yuchengco-owned lender a record P1 billion over the incident, which
exposed the vulnerabilities of the financial system to money laundering.
Legislators also recently investigated local banks over glitches.
Last month, Bank of the Philippine Islands' digital channels were paralyzed for 2 days due to
what it said was an "internal error."
The country's largest lender, BDO Unibank, later admitted that 7 of its ATMs were
"compromised" in a "skimming" attack that allowed unauthorized transactions.
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3.
A senior executive has been arrested and charged for defrauding Metropolitan Bank
and Trust Co. (Metrobank) in a scandal that sent the lender’s shares tumbling on
Friday.
National Bureau of Investigation officials presented Maria Victoria Lopez, a vice
president at the corporate services unit of Metrobank’s head office in Makati City, to
reporters on Friday afternoon, hours after the banks and financial intermediaries
committee of the House of Representatives announced an inquiry into the fraud that
hit the Philippines’ second-largest bank.
NBI officials said Lopez, who appeared at the news conference with her face covered
with a shawl, was suspected of stealing P1.75 billion in loans from Metrobank.
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The Philippine Daily Inquirer was the first to report on the fraud, stating in its Friday
edition that Metrobank, owned and controlled by George Ty, may have lost as much
as P2.5 billion after the suspect allegedly funneled disbursed loans into fictitious
accounts created in the name of one of the bank’s biggest corporate clients, Universal
Robina Corp. (URC).
A trusted employee of the bank for 30 years, earning a monthly salary of P250,000,
Lopez was arrested on Monday while trying to move the stolen money to an
unspecified personal account, NBI spokesperson Ferdinand Lavin said.
‘Biggest loser’
“The biggest loser of this is the integrity of the banking system,” Lavin said.
The NBI filed charges of theft, violation of the banking law and falsification of
documents against Lopez at the Makati City Prosecutor’s Office on Tuesday.
Metrobank did not confirm how much was stolen or detail the timeframe of the fraud,
but stressed that it did not affect its customers.
“In the context of the bank’s P1.9-trillion financial resources, rest assured that we
continue to operate business as usual for the bank and our customers,” the listed
lender said in a statement.
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Metrobank is investigating whether there were other people involved in the fraud,
Lavin said.
URC, a large food processing company, said on Friday the fraudulent loans had been
drawn from its credit facility with Metrobank.
“We thank Metrobank president Fabian Dee for giving us a heads-up advice that URC
will not be financially impacted in any way by this incident,” the company said in a
statement.
Investors sell their shares
The fraud, however, wiped out nearly P15.2 billion off the paper value of Metrobank
on Friday as investors sold down the stock.
Metrobank shares closed 5.03 percent lower on Friday to P86.90.
The lender’s parent company, GT Capital Holdings, fell 2.85 percent to P1,195.
URC shares closed 0.62 percent down to P161 Friday.
But Bangko Sentral ng Pilipinas (BSP) Gov. Nestor Espenilla told reporters he had no
doubt Metrobank would be able to absorb the blow.
“Banks have controls so that these kinds of things can be mitigated and withstood,”
Espenilla said.
But he added: “We have to look into the adequacy of those controls if in fact a
significant crime happened.”
House inquiry
Eastern Samar Rep. Ben Evardone, chair of the House banks and financial
intermediaries committee, said his panel would inquire into the fraud.
“The discovery of the ‘fake accounts’ in Metrobank is very alarming,” Evardone said
in a statement.
“The adverse effects of the existence of ‘fake bank accounts’ is more damaging than
‘fake news’ because this [involves] actual money of depositors,” he said.
Evardone did not say when the inquiry would be held, but said BSP officials would be
invited to the hearings.
Metrobank officials will also be questioned to determine how the fraud happened, he
said.
“We will look into their protocols and procedures [to see] why fake accounts were
allowed to be opened,” he added.
The Inquirer reported on Friday that the money in the fake accounts was siphoned off
electronically into other accounts in other banks and into the pocket of Lopez.
Initial investigation showed that Lopez made two separate loans—P900 and P850
million—from URC’s P25-billion credit line.
Promissory note
Lawyer Norman Anire of the NBI told the news conference that Metrobank
discovered the fraud after noticing that one promissory note intended for the payment
of interests was irregular.
“Based on the presentation of the bank … their employees discovered the falsified
letter directing the bank to issue a manager’s check in favor of an individual payee.
That itself is a red flag,” Anire said.
He explained that since the owner of the credit line was a corporate account, the bank
“cannot issue a manager’s check to an individual payee.”
Anire said bank officials decided to verify the loans with URC and learned that the
company had made no such loans.
The NBI officials could not provide more details, as they did not have full information
from Metrobank.
It seems that because the credit line used to facilitate the theft belonged to a valued
client, bank officials did not question the transactions.
To cover her tracks, Lopez would pay the interest on the loans and she was supposed
to pay P2.250 million in interest, the funds for which she debited from URC’s
account, on the day she was arrested.
‘I was surprised’
Lopez, who is a year short of retirement from the bank, lives in a posh village in
Quezon City.
She owns nine cars, the “cheapest” of which, according to NBI officials, is a Range
Rover.
The officials did not say how many children Lopez has, but some of them, according
to them, are in school in the United States.
Lopez talked to the Inquirer briefly, but kept the shawl that covered her face.
“No,” she said when asked whether the money really went to her personal accounts.
When asked whether she worked alone, Lopez fell silent.
She said she was in her office when NBI agents arrested her in an entrapment
operation on Monday.
“I was surprised,” she said. —WITH REPORTS FROM DJ YAP AND AFP
By
KEITH A. CALAYAG
A SENIOR official of the Metropolitan Bank and Trust Co. (Metrobank) suspected of
orchestrating an elaborate fraud scheme to embezzle millions of pesos from the second
largest bank in the country was arrested by the National Bureau of Investigation (NBI) last
July 17.
In a statement released by Metrobank on Friday, July 21, it said that the authorities have
already arrested last Monday the alleged mastermind of the P900-million internal fraud.
NBI sources identified the suspect as Maria Victoria Lopez, vice president of the corporate
services unit in Metrobank's Makati City head office.
The Metrobank assured the public that none of its clients have been affected by the incident
that may have lost as much as P2.5 billion.
"The bank is reinforcing its commitments to the highest standard of integrity and upholds
the protection of its customers as its main priority," it said.
"No customer has been affected by this incident. In the context of the bank's P1.9 trillion
financial resources rest assured that we continue to operate business as usual for the bank
and our customers," it added.
The management also said it cannot comment further as the case has already been filed
against Lopez.
Lopez, 54, now detained at the NBI headquarters in Manila, was accused of funneling loans
into fake accounts in the name of a legitimate client, Universal Robina Corporation.
The funds allegedly went to other accounts and financial institutions controlled by Lopez.
Banko Sentral ng Pilipinas Governor Nestor Espenilla in a statement said they will look into
the issue, particularly on how a sole official was able to rob such a huge amount from the
bank.
Espenilla also said they will look into the adequacy of the controls being used by banks in
the country to prevent electronic fraud.
"Our banks have their natural internal controls precisely to prevent these things from
happening," he said.
"So we will have to look into the adequacy of those controls if in fact, a significant crime
happened within the bank," he added.
Espenilla said "no system is perfect" but believes that Metrobank is resilient to such
issues. (SunStar Philippines)
Learning Objectives
You should be understand the elements that it takes for a fraud to be committed.
You should be understand and distinguish the different methods for creating fraudulent
financial statements.
You should be to understand the three necessary components that allow the perpetrator(s)
You should be familiar with the classifications of fraud and the different roles that business
Fraud can encompass various different types of acts but is generally defined
as the intentional misleading of a person or deception of a person in order to
cause someone to lose property, money, or some other right. This therefore
implies that fraud must be intentional. So theoretically someone can commit
an error on the financial statements without it being considered fraud or
rather without trying to deceive anyone for personal financial gain.
To Identify Fraud you must have a number of items that are identified first.
These items are listed below:
6.) There must be evidence that the suspect profited in some way
by the act(s) that were committed.
It is important to note that the indicators and the symptoms of fraud can be
separated and differentiated from any errors that might occur as a result of
account mistakes by the use of fraud indicators. These fraud indicators help
serve as specific clues or "red flags" that could merit further investigation by
an auditor into a specific area of the business or a specific activity that the
business. These fraud indicators can be classified into three main categories,
which are listed below.
The transactions that have taken place don't have the proper transaction numbers or
serial numbers.
There is one person in the business that is in control and there are no separations of
The financial records and the inventory for a business are not reconciled.
Classifications of Fraud:
Generally the term fraud is meant as a generic overview and can encompass
many different types of fraud that are deliberate acts meant to deceive or
mislead someone that can result in personal, physical, or financial harm.
This act of fraud or intentional deception can be separated and differentiated
in a number of different ways depending on the nature of the act and who
committed the act. Take for example when fraud is committed by an
individual in the form of embezzlement or theft, this type of fraud has a
different classification than the type of fraud that is committed by the
management team of a company where the management team falsifies or
knowingly and inaccurately reports incorrect information on the financial
statements of the company. The first example is known as employee fraud
and the second example is known as management fraud. There are multiple
types of fraud that are segmented by the people who commit the fraud, the
type of fraud, and the victims or people who are negatively affected by the
fraud that has been committed.
Types of Fraud:
Interested in learning
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Understanding
Financial Statements?
Fraudulent Schemes That Are Often Used by the Management Team of a Company
Manipulation of the GAAP accounting practices and standards that have been established by
The usage of aggressive accounting techniques through the illegal or illegitimate financial
for the company, or other significant sources from which the financial statements are
derived.
7.) The Improper Use of Reserve Accounts- There are reserve accounts
that hold reserves for things such as the accounts receivables, obsolete
inventory accounts, returned sales accounts, and warranties. These accounts
can be notoriously difficult to discern because a substantial amount of
judgment and knowledge of the business is required in order to determine
the proper balances at the end of the accounting period.
8.) The Misapplication of the GAAP Rules- There are many businesses
that employee clever accountants and members of the management team
that have familiarized themselves with all of the rules and regulations for the
FASB and GAAP. Just like every system there are still loopholes, which can
be exploited for those people who are looking to intentionally commit
financial statement fraud.
Investigative Audit: An investigative audit generally will take place as the result of a business
within a business. Investigative audits tend to be focused on specific functions and aspects
the deal with the scope of work for an individual or department within the business.
Departmental Review: A departmental review is an analysis based in the current time period
of the administrative functions for business. This type of evaluation seeks to measure and
review the adequacy of controls, how efficiently resources are being used, the safety or
safeguarding of assets, and in compliance with any relative regulations, enterprise policies,
or laws that have been set as standards for the business to follow.
based and has the purpose of confirming the accuracy, fairness, and reliability of financial
data that has been reported via business. A certified public accounting firm usually performs
the financial audit. These accounting firms are usually larger accounting firms such as
Business Information Systems Audit: There are three basic types of Information Systems
Audits they can be performed. These three types of audits or for general controls review,
system development review, and applications control review. These types of audits are
designed to guarantee that the controls are in place in the information systems function in
order to protect the operation as well as the security of the information systems, which
Business Operations Audit: An operational audit has a future based scope that is systematic
financial data of the business may be used it is not considered to be one of the primary
sources of evidence. The primary sources used for operational audit are the operational
policies and the achievements that are related to the organizational objectives for business.
In this type of audit internal controls and efficiencies are the most likely to be evaluated and
reviewed.
KEY POINTS REVIEW
The fraud triangle consists of three elements: Opportunity, Rationalization, and Motive
Investigative audits tend to be focused on specific functions and aspects the deal with the
The three categories of fraud indicators are: Personal Mistakes or Shortcomings, Financial
A financial audit is an independent evaluation that is historically based and has the purpose of
confirming the accuracy, fairness, and reliability of financial data that has been reported via
business.
Accounting rules and regulations exist to ensure that financial statements are useful to their end users in their
financial decision-making. For financial statements to be useful, the information presented therein must be
accurate, faithful to the financial circumstances and be produced in time to help the decision-making process.
Poor ethics in accounting result not only in increased incidences of criminal activities, but also hurt the
business through harming its reputation and rendering their financial statements untrustworthy and thus
useless.
Criminal Activities
Poor ethics amongst a business' accountants means that those persons are more willing to break the rules to
benefit either themselves or their business illegally. For example, an unethical accountant granted too much
control and too little oversight from superiors can embezzle from the business and conceal the evidence. In
contrast and comparison, an unethical accountant working at the behest of the business can manipulate the data
to commit a number of crimes including fraud and tax evasion.
Personal Consequences
Once caught and tried, accountants so unethical as to commit crimes related to their profession are punished.
Depending on the specific circumstances of the case, this can result in prison time, financial costs and other
legal punishments to the accountants found guilty. Not only is this devastating for said accountant, it is also
devastating on both friends and family, particularly the family.
Business Reputation
Poor ethics can also inflict damages on the business' reputation and trustworthiness of its stakeholders, such as
customers and business partners. The absence of trust ensures that the business finds it difficult to conduct
business with others. This damage to a business' reputation is particularly devastating to accounting firms who
rely heavily on that reputation to remain in business. Arthur Andersen LLP effectively perished as a business
because of its poor conduct in the Enron scandal.
Each time that an unethical accountant deliberately breaks the rules and regulations to manipulate the
information presented on the financial statements to illegal advantage, those financial statements become less
and less useful. Since financial statements must remain accurate and truthful to help end users in making their
financial decisions, financial statements tainted deter the decision-making process. Erroneous figures cast all
other figures into doubt and end users simply become unable to trust the information presented.
Accountants play an important role within small businesses by handling the company’s financial records.
Managers, creditors and investors depend on accurate accounting information to make good business
decisions. The level of responsibility given to accounting professionals can lead to accounting abuse. Many
small businesses suffer greatly because of accounting abuse, which often leads to a loss of profits and a
tarnished reputation. A business owner should understand how accounting abuse negatively impacts her
company and how to prevent it.
Embezzlement
A common type of accounting abuse experienced by small businesses is accounting embezzlement. This
occurs when a trusted employee manipulates accounting records to steal funds from the company.
Embezzlement directly affects a company’s bottom line and can cost a company thousands of dollars if it goes
undetected for many years. Some common signs of embezzlement include an unexplained decline in profit,
missing documents, altered check amounts, unexplained vendors and duplicate payments. Embezzlement is a
criminal offense, and an employee may face serious penalties if found guilty.
Fraud
Fraudulent accounting activity typically occurs through the influence of a company’s manager. Most
companies participating in accounting fraud are attempting to hide serious financial problems from the public.
One form of fraudulent activity is manipulating accounting records and financial statements so that the
company appears financially healthy to investors. Companies depend on investors to finance their business
operations, and negative financial reports discourage investors from buying the company’s financial securities.
Accounting fraud can cause irreversible damage by ruining the reputation of a business and forcing the
company to go out of business. Legal charges may be brought against individuals participating in financial
fraud.
Abuse of Power
Some employees and managers abuse their power within companies. The abuse of power occurs with
employees and managers who make decisions on behalf of the company. An example of an abuse of power
includes an accounting employee who offers special discounts of the company’s products to her friend. The
employee manipulates the accounting records to make the discount appear legitimate. An employee who
abuses her power in relation to a vendor not only negatively impacts the employer’s finances but also can
jeopardize positive relationships between the company and its vendors.
You can prevent or reduce the level of accounting abuse in your company by establishing certain internal
controls. A primary method to deter accounting abuse is through the separation of job duties, which prevents
one employee from possessing too much power to manipulate accounting records. Requiring documentation
and authorization for certain accounting transactions is another internal control method. For example, you can
establish rules that require several managers to sign off on payments to vendors over a certain dollar amount.