BANKING AND ALLIED LAWS

I. NATURE AND CONCEPT OF BANKING LAWS

A. Governing Law- RA 337, as amended by RA 8791 or The General Banking Act of 2000; RA 7653 or the
New Central Bank Act
B. Nature of Business
i. Bank-Section 3.1, GBL
"Banks" shall refer to entities engaged in the lending of funds obtained in the form of deposits.
ii. Quasi-Bank – Section 95, NCBA in relation to Section 4.6, GBL
Section 4.6, GBL states that:

4.6. Enforcing prompt corrective action. (n)

The Bangko Sentral shall also have supervision over the operations of and exercise regulatory powers
over quasi-banks, trust entities and other financial institutions which under special laws are subject to
Bangko Sentral supervision. (2-Ca)
For the purposes of this Act, "quasi-banks" shall refer to entities engaged in the borrowing of funds
through the issuance, endorsement or assignment with recourse or acceptance of deposit substitutes as
defined in Section 95 of Republic Act No. 7653 (hereafter the "New Central Bank Act") for purposes of
relending or purchasing of receivables and other obligations. (2-Da)

Section 95, NCBA states that:

SEC. 95. Definition of Deposit Substitutes. _ The term "deposit substitutes" is defined as an
alternative form of obtaining funds from the public, other than deposits, through the
issuance, endorsement, or acceptance of debt instruments for the borrower's own account,
for the purpose of relending or purchasing of receivables and other obligations. These
instruments may include, but need not be limited to, bankers acceptances, promissory notes,
participations, certificates of assignment and similar instruments with recourse, and
repurchase agreements. The phrase “obtaining funds from the public” shall mean borrowing
from twenty (20) or more lenders at any one time and for this purpose, “lenders” shall refer
to individuals and corporate entities that are not acting as financial intermediaries, subject to
the safeguards and regulations issued by the Monetary Board. The Monetary Board shall
determine what specific instruments shall be considered as deposit substitutes for the
purposes of Section 94 of this Act: Provided, however, That deposit substitutes of
commercial, industrial and other nonfinancial companies issued for the limited purpose of
financing their own needs or the needs of their agents or dealers shall not be covered by the
provisions of Section 94 of this Act.
C. Declaration of Policy- Section 2, GBL
SECTION 2. Declaration of Policy. — The State recognizes the vital role of banks in providing an environment
conducive to the sustained development of the national economy and the fiduciary nature of banking that
requires high standards of integrity and performance. In furtherance thereof, the State shall promote and
maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive
to the demands of a developing economy. (n)
D. Requirements to Operate- Sections 8,14, 19, GBL
SECTION 8. Organization. — The Monetary Board may authorize the organization of a bank or quasi-bank
subject to the following conditions:
8.1. That the entity is a stock corporation (7);
8.2. That its funds are obtained from the public, which shall mean twenty (20) or more persons (2-Da); and
8.3. That the minimum capital requirements prescribed by the Monetary Board for each category of banks are
satisfied. (n)

SECTION 14. Certificate of Authority to Register. — The Securities and Exchange Commission shall not
register the articles of incorporation of any bank, or any amendment thereto, unless accompanied by a certificate
of authority issued by the Monetary Board, under its seal. Such certificate shall not be issued unless the Monetary
Board is satisfied from the evidence submitted to it:
14.1 That all requirements of existing laws and regulations to engage in the business for which the applicant is
proposed to be incorporated have been complied with;
14.2. That the public interest and economic conditions, both general and local, justify the authorization; and
14.3. That the amount of capital, the financing, organization, direction and administration, as well as the integrity
and responsibility of the organizers and administrators reasonably assure the safety of deposits and the public
interest. (9)
SECTION 9. Issuance of Stocks. — The Monetary Board may prescribe rules and regulations on the types of
stock a bank may issue, including the terms thereof and rights appurtenant thereto to determine compliance with
laws and regulations governing capital and equity structure of banks: Provided, That banks shall issue par value
stocks only.
E. Degree Of Care- READ CASES

Q: What is the degree of diligence required of banks in handling deposits?

A: Extraordinary diligence. The appropriate standard of diligence must be very high, if not the highest,
degree of diligence; highest degree of care (PCI Bank vs. CA, 350 SCRA 446, PBCom vs. CA, G.R. No.
121413, 29 Jan. 2001) This applies only to cases where banks are acting in their fiduciary capacity, that
is, as depository of the deposits of their depositors. (Reyes v. CA, G.R. No. 118492, Aug. 15, 2001)

ARMANDO V. ALANO - versus-PLANTERS DEVELOPMENT BANK, as Successor-in-Interest

of MAUNLADSAVINGS and LOAN ASSOCIATION, INC.,⃰ ⃰ ⃰ G.R. No. 171628 June 13, 2011
“The general rule that a mortgagee need not look beyond the title does not apply to banks and other financial
institutions as greater care and due diligence is required of them.[48] Imbued with public interest, they are
expected to be more cautious than ordinary individuals.[49] Thus, before approving a loan, the standard practice
for banks and other financial institutions is to conduct an ocular inspection of the property offered to be
mortgaged and verify the genuineness of the title to determine the real owner or owners thereof.[50] Failure to
do so makes them mortgagees in bad faith.”

CHINA BANKING CORPORATION, versus MARIA G. LAGON, represented by Armando G.

Lagon and/or Jose Lagon, Jr., G.R. No. 160843 “Moreover, petitioner could not be considered a
mortgagee in good faith. It had knowledge that respondent was in the United States at the time the
SPAs were allegedly executed, yet, it did not question their due execution. Though petitioner is not
expected to conduct an exhaustive investigation on the history of the mortgagors title, it cannot be
excused from the duty of exercising the due diligence required of a banking institution.[14] Banks are
expected to exercise more care and prudence than private individuals in their dealings, even those
that involve registered lands, for their business is affected with public interest.
SPOUSES EMILIANO L. JALBAY, SR. AND MAMERTA C. JALBAY, Petitioners, v. PHILIPPINE
NATIONAL BANK, Respondent. G.R. No. 177803, August 03, 2015 “True, banks, in handling real
estate transactions, are required to exert a higher degree of diligence, care, and prudence than
individuals. Unlike private individuals, it is expected to exercise greater care and prudence in its
dealings, including those involving registered lands. A banking institution is expected to exercise due
diligence before entering into a mortgage contract. 5 Indeed, there is a situation where, despite the
fact that the mortgagor is not the owner of the mortgaged property, his title being fraudulent, the
mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public
policy. This is the doctrine of "the mortgagee in good faith," wherein buyers or mortgagees dealing
with property covered by a Torrens Certificate of Title are no longer required to go beyond what
appears on the face of the title.6 However, the rule that persons dealing with registered lands can rely
solely on the certificate of title is not applicable to banks. Thus, before approving a loan application, it
is a standard operating practice for these institutions to conduct an ocular inspection of the property
offered for mortgage and to verify the veracity of the title to determine its real owners. An ocular
inspection is necessary to protect the true owner of the property as well as innocent third parties with
a right, interest or claim thereon from a usurper who may have acquired a fraudulent certificate of
title.7redarclaw”

Citibank, N.A - versus -Spouses Luis and Carmelita Cabamongan and their sons
Luis Cabamongan, Jr. And Lito Cabamongan, G.R. No. 146918 May 2, 2006 “The Court has
repeatedly emphasized that, since the banking business is impressed with public interest, of
paramount importance thereto is the trust and confidence of the public in general. Consequently, the
highest degree of diligence[40] is expected,[41] and high standards of integrity and performance are
even required, of it.[42] By the nature of its functions, a bank is under obligation to treat the accounts
of its depositors with meticulous care,[43] always having in mind the fiduciary nature of their
relationship.”

BPI FAMILY SAVINGS BANK, INC., petitioner, vs. FIRST METRO INVESTMENT
CORPORATION, respondent. [G.R. No. 132390. May 21, 2004] “A bank is under obligation to
treat the accounts of its depositors with meticulous care, whether such account consists only of a few
hundred pesos or of millions of pesos.[10] Here, petitioner cannot claim it exercised such a degree of
care required of it and must, therefore, bear the consequence.”
 VICENTE GO, - versus - METROPOLITAN BANK AND TRUST CO., G.R. No. 168842, August
11, 2010 “As a business affected with public interest and because of the nature of its functions, the
banks are under obligation to treat the accounts of its depositors with meticulous care, always having
in mind the fiduciary nature of the relationship. [26] The fact that this arrangement had been practiced
for three years without Mr. Go/Hope Pharmacy raising any objection does not detract from the duty of
the bank to exercise extraordinary diligence. Thus, the Decision of the RTC, as affirmed by the CA,
holding respondent bank liable for moral damages is sufficient to remind it of its responsibility to
exercise extraordinary diligence in the course of its business which is imbued with public interest.”

PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR BANK OF ASIA AND

AMERICA),vs. COURT OF APPEALS and FORD PHILIPPINES, INC. and CITIBANK, N.A., .
G.R. No. 121413 January 29, 2001 “It is a well-settled rule that the relationship between the
payee or holder of commercial paper and the bank to which it is sent for collection is, in the absence
of an argreement to the contrary, that of principal and agent.22 A bank which receives such paper for
collection is the agent of the payee or holder.

Time and again, we have stressed that banking business is so impressed with public interest where
the trust and confidence of the public in general is of paramount umportance such that the
appropriate standard of diligence must be very high, if not the highest, degree of diligence.34 A bank's
liability as obligor is not merely vicarious but primary, wherein the defense of exercise of due diligence
in the selection and supervision of its employees is of no moment.35

Banks handle daily transactions involving millions of pesos.36 By the very nature of their work the
degree of responsibility, care and trustworthiness expected of their employees and officials is far
greater than those of ordinary clerks and employees.37 Banks are expected to exercise the highest
degree of diligence in the selection and supervision of their employees.38

FIRESTONE TIRE & RUBBER COMPANY OF THE PHILIPPINES, petitioner, vs., COURT OF
APPEALS and LUZON DEVELOPMENT BANK, respondents. G.R. No. 113236. March 5, 2001
“A bank is under obligation to treat the accounts of its depositors with meticulous care, whether such
account consists only of a few hundred pesos or of millions of pesos. [13] The fact that the other
withdrawal slips were honored and paid by respondent bank was no license for Citibank to presume
that subsequent slips would be honored and paid immediately. By doing so, it failed in its fiduciary
duty to treat the accounts of its clients with the highest degree of care.”

BANK OF THE PHILIPPINE ISLANDS, Petitioner, v. TARCILA FERNANDEZ, Respondent.;

DALMIRO SIAN, THIRD PARTY G.R. No. 173134, September 02, 2015 “BPI is sternly
reminded that the business of banks is impressed with public interest. The fiduciary nature of their
relationship with their depositors requires it to treat the accounts of its clients with the highest degree
of integrity, care and respect. In the present case, the manner by which BPI treated Tarcila also
transgresses the general banking law47 and Article 19 of the Civil Code, which directs every person, in
the exercise of his rights, "to give everyone his due, and observe honesty and good faith.

F. Strikes and Lockouts- Section 22, GBL

SECTION 22. Strikes and Lockouts. — The banking industry is hereby declared as indispensable to
the national interest and, not withstanding the provisions of any law to the contrary, any strike or lockout
involving banks, if unsettled after seven (7) calendar days shall be reported by the Bangko Sentral to the
Secretary of Labor who may assume jurisdiction over the dispute or decide it or certify the same to the
National Labor Relations Commission for compulsory arbitration. However, the President of the
Philippines may at any time intervene and assume jurisdiction over such labor dispute in order to settle or
terminate the same. (6-E)

II. CLASSIFICATION OF BANKS

A. Types of Bank- Section 3.2, GBL

3.2. Banks shall be classified into:

(a) Universal banks; (b) Commercial banks; (c) Thrift banks, composed of: (i) Savings and mortgage
banks, (ii) Stock savings and loan associations, and (iii) Private development banks, as defined in
Republic Act No. 7906 (hereafter the "Thrift Banks Act"); (d) Rural banks, as defined in Republic Act No.
7353 (hereafter the "Rural Banks Act"); (e) Cooperative banks, as defined in Republic Act No. 6938
(hereafter the "Cooperative Code"); (f) Islamic banks as defined in Republic Act No. 6848, otherwise
known as the "Charter of Al Amanah Islamic Investment Bank of the Philippines"; and (g) Other
classifications of banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas. (6-Aa)
 B. Distinctions (waley po ako mahanap na iba )

1. Universal banks ‐ Primarily governed by the General Banking Law (GBL), can exercise the powers of an
investment house and invest in non‐ allied enterprises and have the highest capitalization requirement.

2. Commercial banks ‐ Ordinary banks governed by the GBL which have a lower capitalization requirement
than universal banks and can neither exercise the powers of an investment house nor invest in non‐ allied
enterprises.

3. Thrift banks – These are a) Savings and mortgage banks; b) Stock savings and loan associations; c)
Private development banks, which are primarily governed by the Thrift Banks Act (R.A. 7906).

4. Rural banks – Mandated to make needed credit available and readily accessible in the rural areas on
reasonable terms and which are primarily governed by the Rural Banks Act of 1992 (RA 7353).

5. Cooperative banks – Those banks organized whose majority shares are owned and controlled by
cooperatives primarily to provide financial and credit services to cooperatives. It shall include cooperative
rural banks. They are governed primarily by the Cooperative Code (RA 6938).

6. Islamic banks – Banks whose business dealings and activities are subject to the basic principles and
rulings of Islamic Shari’ a, such as the Al Amanah Islamic Investment Bank of the Philippines which was
created by RA 6848.

7. Other classification of banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas.

III. DEPOSIT FUNCTION

A. Nature- Article 1980, NCC
Art. 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall be
governed by the provisions concerning simple loan. (n)

Q: What is the nature of a bank deposit?

A: All kinds of bank deposits are loan. The bank can make use as its own the money deposited. Said
amount is not being held in trust for the depositor nor is it being kept for safekeeping. (Tang Tiong Tick
v. American Apothecaries, G.R. No. 43682, Mar. 31, 1938)

B. Relationship Between the Bank and Deposit

PAULINO GULLAS vs.THE PHILIPPINE NATIONAL BANK G.R. No. L-43191

November 13, 1935 “As a general rule, a bank has a right of set off of the deposits in
its hands for the payment of any indebtedness to it on the part of a depositor. In
Louisiana, however, a civil law jurisdiction, the rule is denied, and it is held that a bank
has no right, without an order from or special assent of the depositor to retain out of his
deposit an amount sufficient to meet his indebtedness. The basis of the Louisiana
doctrine is the theory of confidential contracts arising from irregular deposits, e. g., the
deposit of money with a banker. With freedom of selection and after full preference to
the minority rule as more in harmony with modern banking practice.”

MACLARING M. LUCMAN, in his capacity as the Manager of the LAND BANK OF

THE PHILIPPINES, Marawi City, versus - ALIMATAR MALAWI, ABDUL-
KHAYER PANGCOGA, SALIMATARSARIP, LOMALA CADAR, ALIRIBA S.
MACARAMBON and ABDUL USMAN, G.R. No. 159794 December 19, 2006 “ By
virtue of the deposits, there exists between the barangays as depositors and LBP a
creditor-debtor relationship. Fixed, savings, and current deposits of money in banks and
similar institutions are governed by the provisions concerning simple loan.[33] In other
words, the barangays are the lenders while the bank is the borrower.

Bank deposits are in the nature of irregular deposits. They are really loans because they
earn interest. All kinds of bank deposits, whether fixed, savings, or current are to be
treated as loans and are to be covered by the law on loans (Art. 1980, Civil Code; Gullas
v. Phil. National Bank, 62 Phil. 519).

MANUEL M. SERRANO vs.CENTRAL BANK OF THE PHILIPPINES; OVERSEAS

BANK OF MANILA G.R. No. L-30511 February 14, 1980 “Bank deposits are in the
nature of irregular deposits. They are really loans because they earn interest. All kinds of
 bank deposits, whether fixed, savings, or current are to be treated as loans and are to be
covered by the law on loans. 14 Current and savings deposit are loans to a bank because
it can use the same. The petitioner here in making time deposits that earn interests with
respondent Overseas Bank of Manila was in reality a creditor of the respondent Bank and
not a depositor. The respondent Bank was in turn a debtor of petitioner. Failure of he
respondent Bank to honor the time deposit is failure to pay s obligation as a debtor and
not a breach of trust arising from depositary's failure to return the subject matter of the
deposit”

TEOFISTO GUINGONA, JR., vs.THE CITY FISCAL OF MANILA G.R. No. L-60033
April 4, 1984 “In the case of Central Bank of the Philippines vs. Morfe (63 SCRA
114,119 [1975], We said:

It should be noted that fixed, savings, and current deposits of money in banks and similar
institutions are hat true deposits. are considered simple loans and, as such, are not
preferred credits

This Court also declared in the recent case of Serrano vs. Central Bank of the
Philippines (96 SCRA 102 [1980]) that:

Bank deposits are in the nature of irregular deposits. They are really 'loans because they
earn interest. All kinds of bank deposits, whether fixed, savings, or current are to be
treated as loans and are to be covered by the law on loans (Art. 1980 Civil Code Gullas
vs. Phil. National Bank, 62 Phil. 519). Current and saving deposits, are loans to a bank
because it can use the same. The petitioner here in making time deposits that earn
interests will respondent Overseas Bank of Manila was in reality a creditor of the
respondent Bank and not a depositor. The respondent Bank was in turn a debtor of
petitioner. Failure of the respondent Bank to honor the time deposit is failure to pay its
obligation as a debtor and not a breach of trust arising from a depositary's failure to
return the subject matter of the deposit(Emphasis supplied).

Hence, the relationship between the private respondent and the Nation Savings and Loan
Association is that of creditor and debtor; consequently, the ownership of the amount
deposited was transmitted to the Bank upon the perfection of the contract and it can
make use of the amount deposited for its banking operations, such as to pay interests on
deposits and to pay withdrawals. While the Bank has the obligation to return the amount
deposited, it has, however, no obligation to return or deliver the same money that was
deposited. And, the failure of the Bank to return the amount deposited will not constitute
estafa through misappropriation punishable under Article 315, par. l(b) of the Revised
Penal Code, but it will only give rise to civil liability over which the public respondents
have no- jurisdiction.

THE CONSOLIDATED BANK and TRUST CORPORATION, petitioner, vs. COURT

OF APPEALS and L.C. DIAZ and COMPANY, CPAs, respondents. [G.R. No.
138569. September 11, 2003] “The contract between the bank and its depositor is
governed by the provisions of the Civil Code on simple loan.[17] Article 1980 of the Civil
Code expressly provides that x x x savings x x x deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loan. There is a debtor-
creditor relationship between the bank and its depositor. The bank is the debtor and the
depositor is the creditor. The depositor lends the bank money and the bank agrees to pay
the depositor on demand. The savings deposit agreement between the bank and the
depositor is the contract that determines the rights and obligations of the parties.

However, the fiduciary nature of a bank-depositor relationship does not convert the
contract between the bank and its depositors from a simple loan to a trust agreement,
whether express or implied. Failure by the bank to pay the depositor is failure to pay a
simple loan, and not a breach of trust.[24] The law simply imposes on the bank a higher
standard of integrity and performance in complying with its obligations under the contract
of simple loan, beyond those required of non-bank debtors under a similar contract of
simple loan.

C. Rules on Minors –Section 1, PD 734 “AUTHORIZING MINORS TO DEPOSIT WITH AND WITHDRAW
FROM BANKS

Section 1. Minors who are at least seven years of age, are able to read and write, have sufficient
discretion, and are not otherwise disqualified by any other incapacity, are hereby vested with special
 capacity and power, in their own right and in their own names, to make savings or time deposits with and
withdraw the same as well as receive interests thereon from banking institutions, without the assistance
of their parents or guardians, the provisions of existing laws and regulations to the contrary
notwithstanding. Parents may nevertheless deposit for their minor children and guardians for their wards.

D. Kinds of Deposits

Q: What are the kinds of deposits between a bank and its depositors?
A: 1. As debtor‐ creditor:
a. Demand deposits – all those liabilities of banks which are denominated in the Philippine
currency and are subject to payment in legal tender upon demand by representation of checks.

b. Savings deposits – the most common type of deposit and is usually evidenced by a passbook.

Note: The requirement of presentation of passbooks is usually included in the terms and
conditions printed in the passbooks. A bank is negligent if it allows the withdrawal
without requiring the presentation of passbook (BPI v. CA, GR No. 112392, Feb. 29,
2000).

c. Negotiable order of withdrawal account (NOWA) – Interest‐ bearing deposit accounts that
combine he payable on demand feature of checks and investment feature of saving accounts.

d. Time deposit – an account with fixed term; payment of which cannot be legally required within
such a specified number of days.

2. As trustee‐ trustor: Trust account – a savings account, established under a trust agreement
containing funds administered by the bank for the benefit of the trustor or another person or persons.

3. As agent‐ principal:
a. Deposit of checks for collection
b. Deposit for specific purpose
c. Deposit for safekeeping

Q: What are the types of deposit accounts?

A:
1. Individual; or
2. Joint:
a. “And” account – the signature of both co‐ depositors are required for withdrawals.
b. “And/or” account – either one of the co‐ depositors may deposit and withdraw from the
account without the knowledge consent and signature of the other.

E. Survivorship Agreement

ROMARICO G. VITUG vs.THE HONORABLE COURT OF APPEALS and ROWENA FAUSTINO-

CORONA, G.R. No. 82027 March 29, 1990 “The Court ruled that a Survivorship Agreement is
neither a donation mortis causanor a donation inter vivos. It is in the nature of an aleatory contract
whereby one or both of the parties reciprocally bind themselves to give or to do something in
consideration of what the other shall give or do upon the happening of an event which is to occur at
an indeterminate time or is uncertain, such as death. The Court further ruled that a survivorship
agreement is per se not contrary to law and thus is valid unless its operation or effect may be violative
of a law such as in the following instances: (1) it is used as a mere cloak to hide an inofficious
donation; (2) it is used to transfer property in fraud of creditors; or (3) it is used to defeat the legitime
of a compulsory heir. In the instant case, none of the foregoing instances were present. Consequently,
the Court upheld the validity of the survivorship agreement entered into by the spouses Vitug. As
such, Romarico, being the surviving spouse, acquired a vested right over the amountsunder the
savings account, which became his exclusive property upon the death of his wife pursuant to the
survivorship agreement. Thus, the funds of the savings account are not conjugal partnership
properties and not part of the estate of the deceased Dolores.”

F. Secrecy of Bank Deposit

i. Nature –Section 2, RA 1405

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, except 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.

ii. Acts Punishable – Section 3, RA 1405

Section 3. It shall be unlawful for any official or employee of a banking institution to

disclose to any person other than those mentioned in Section two hereof any information
concerning said deposits.

IT ALSO INCLUDE: Deposit may not be examined, inquired or looked into by any
person, government official, bureau or office.

iii. Penalty for Violation – Section 5, RA 1405

Section 5. 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.

G. Exception to Bank Secrecy

1. Section 2, RA 1405 - 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.
2. R A No. 3019 - ANTI-GRAFT AND CORRUPT PRACTICES ACT
3. Section 8 (8), RA 3591 - To make examinations of and to require information and reports from
banks, as provided in this Act
4. RA 3936 or the Unclaimed Balances Act-
5. Section 3(i) in relation to Section 11 of RA 9160, as amended (Sec. 8, RA 9194) –
SECTION 8. Section 11 of the same Act is hereby amended to read as follows:

"Sec. 11. Authority to Inquire into Bank Deposits. -- Notwithstanding the provisions of Republic Act
No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws,
the 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
are related to an unlawful activities as defined in Section 3(I) hereof or a money laundering offense
under Section 4 hereof, except that no court order shall be required in cases involving unlawful
activities defined in Sections 3(I)1, (2) and (12).

"To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may inquire into or
examine any deposit of investment with any banking institution or non-bank financial institution
when the examination is made in the course of a periodic or special examination, in accordance with
the rules of examination of the BSP.

6. RA 9372 or the Human Security Act

7. BSB GROUP, INC., -versus- SALLY GO a.k.a. SALLY GO-BANGAYAN “The Court noted that the
inquiry into bank deposits allowable under R.A. No. 1405 must be premised on the fact that the
money deposited in the account is itself the subject of the action.

The said Information makes no factual allegation that in some material way involves the checks
subject of the testimonial and documentary evidence sought to be suppressed. Neither do the
allegations in said Information make mention of the supposed bank account in which the funds
represented by the checks have allegedly been kept.
It comes clear that the admission of testimonial and documentary evidence relative to respondent’s
Security Bank account serves no other purpose than to establish the existence of such account, its
nature and the amount kept in it. It constitutes an attempt by the prosecution at an impermissible
inquiry into a bank deposit account the privacy and confidentiality of which is protected by law. On
this score alone, the objection posed by respondent in her motion to suppress should have indeed
put an end to the controversy at the very first instance it was raised before the trial court.
In sum, we hold that the testimony of Marasigan on the particulars of respondent’s supposed bank
account with Security Bank and the documentary evidence represented by the checks adduced in
support thereof, are not only incompetent for being excluded by operation of R.A. No. 1405. They
are likewise irrelevant to the case, inasmuch as they do not appear to have any logical and
reasonable connection to the prosecution of respondent for qualified theft. We find full merit in and
 affirm respondent’s objection to the evidence of the prosecution. The Court of Appeals was,
therefore, correct in reversing the assailed orders of the trial court.
8. JOSEPH VICTOR G. EJERCITO vs. SANDIGANBAYAN G.R. Nos. 157294-95 November 30,
2006
“TRUST ACCOUNT”
The policy behind the law is laid down in Section 1:
SECTION 1. It is hereby declared to be the policy of the Government to give encouragement to the
people to deposit their money in banking institutions and to 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. (Underscoring supplied)
If the money deposited under an account may be used by banks for authorized loans to third
persons, then such account, regardless of whether it creates a creditor-debtor relationship between
the depositor and the bank, falls under the category of accounts which the law precisely seeks to
protect for the purpose of boosting the economic development of the country.
Trust Account No. 858 is, without doubt, one such account. The Trust Agreement between petitioner
and Urban Bank provides that the trust account covers "deposit, placement or investment of
funds" by Urban Bank for and in behalf of petitioner.6 The money deposited under Trust Account No.
858, was, therefore, intended not merely to remain with the bank but to be invested by it elsewhere.
To hold that this type of account is not protected by R.A. 1405 would encourage private hoarding of
funds that could otherwise be invested by banks in other ventures, contrary to the policy behind the
law.
The phrase "of whatever nature" proscribes any restrictive interpretation of "deposits." Moreover, it is
clear from the immediately quoted provision that, generally, the law applies not only to money which
is deposited but also to those which are invested. This further shows that the law was not intended
to apply only to "deposits" in the strict sense of the word. Otherwise, there would have been no
need to add the phrase "or invested."
Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account No. 858.
“PLUNDER”
Cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no reason
is seen why these two classes of cases cannot be excepted from the rule making bank deposits
confidential. The policy as to one cannot be different from the policy as to the other. This policy
expresses the notion that a public office is a public trust and any person who enters upon its
discharge does so with the full knowledge that his life, so far as relevant to his duty, is open to public
scrutiny.
Undoubtedly, cases for plunder involve unexplained wealth. Section 2 of R.A. No. 7080 states so.
9. LOURDES T. MARQUEZ, in her capacity as Branch Manager, UNION BANK OF THE
PHILIPPINES, vs.HONORABLE ANIANO A. DESIERTO G.R. No. 135882 June 27, 2001 The
order of the Ombudsman to produce for in camera inspection the subject accounts with the Union
Bank of the Philippines, Julia Vargas Branch, is based on a pending investigation at the Office of the
Ombudsman against Amado Lagdameo, et. al. for violation of R.A. No. 3019, Sec. 3 (e) and (g)
relative to the Joint Venture Agreement between the Public Estates Authority and AMARI.
We rule that before an in camera inspection may be allowed, there must be a pending case before
a court of competent jurisdiction. Further, the account must be clearly identified, the inspection
limited to the subject matter of the pending case before the court of competent jurisdiction. The
bank personnel and the account holder must be notified to be present during the inspection, and
such inspection may cover only the account identified in the pending case.
In the case at bar, there is yet no pending litigation before any court of competent authority. What is
existing is an investigation by the Office of the Ombudsman. In short, what the office of the
ombudsman would wish to do is to fish for additional evidence to formally charge Amado Lagdameo,
et. al., with the Sandiganbayan. Clearly, there was no pending case in court which would warrant the
opening of the bank account for inspection.
10. UNION BANK OF THE PHILIPPINES, vs. COURT OF APPEALS and ALLIED BANK
CORPORATION G.R. No. 134699 December 23, 1999 In short, petitioner is fishing for
information so it can determine the culpability of private respondent and the amount of damages it
can recover from the latter. It does not seek recovery of the very money contained in the deposit.
The subject matter of the dispute may be the amount of P999,000.00 that petitioner seeks from
private respondent as a result of the latter's alleged failure to inform the former of the discrepancy;
but it is not the P999,000.00 deposited in the drawer's account. By the terms of R.A. No. 1405, the
"money deposited" itself should be the subject matter of the litigation.

That petitioner feels a need for such information in order to establish its case against private
respondent does not, by itself, warrant the examination of the bank deposits. The necessity of the
 inquiry, or the lack thereof, is immaterial since the case does not come under any of the exceptions
allowed by the Bank Deposits Secrecy Act.
11. REPUBLIC OF THE PHILIPPINES, vs. HON. ANTONIO M. EUGENIO, JR. G.R. No. 174629
February 14, 2008 “Of course, Section 11 also allows the AMLC to inquire into bank accounts
without having to obtain a judicial order in cases where there is probable cause that the deposits or
investments are related to kidnapping for ransom,71certain violations of the Comprehensive
Dangerous Drugs Act of 2002,72 hijacking and other violations under R.A. No. 6235, destructive
arson and murder. Since such special circumstances do not apply in this case, there is no need for us
to pass comment on this proviso. Suffice it to say, the proviso contemplates a situation distinct from
that which presently confronts us, and for purposes of the succeeding discussion, our reference to
Section 11 of the AMLA excludes said proviso.
In the instances where a court order is required for the issuance of the bank inquiry order, nothing in
Section 11 specifically authorizes that such court order may be issued ex parte. It might be argued
that this silence does not preclude the ex parte issuance of the bank inquiry order since the same is
not prohibited under Section 11. Yet this argument falls when the immediately preceding provision,
Section 10, is examined.
Although oriented towards different purposes, the freeze order under Section 10 and the bank
inquiry order under Section 11 are similar in that they are extraordinary provisional reliefs which the
AMLC may avail of to effectively combat and prosecute money laundering offenses. Crucially, Section
10 uses specific language to authorize an ex parte application for the provisional relief therein, a
circumstance absent in Section 11. If indeed the legislature had intended to authorize ex
parte proceedings for the issuance of the bank inquiry order, then it could have easily expressed such
intent in the law, as it did with the freeze order under Section 10.”
EXC under Sec. 2 of the Law on Secrecy of Section 11 also allows the AMLC
Bank Deposits
(1) In an examination made in the course of a in cases where there is probable cause that the
special or general examination of a bank that is deposits or investments are related to kidnapping
specifically authorized by the Monetary Board for ransom,71certain violations of the
after being satisfied that there is reasonable Comprehensive Dangerous Drugs Act of
ground to believe that a bank fraud or serious 2002,72 hijacking and other violations under R.A.
irregularity has been or is being committed and No. 6235, destructive arson and murder.
that it is necessary to look into the deposit to
establish such fraud or irregularity,
(2) In an examination 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 the exclusive use of the bank,
(3) Upon written permission of the depositor,
(4) In cases of impeachment,
(5) Upon order of a competent court in cases of
bribery or dereliction of duty of public officials,
or
(6) In cases where the money deposited or
invested is the subject matter of the litigation.

H. Foreign Currency Deposit- RA 6426 or the Foreign Currency Deposit Act

1. CARMEN LL. INTENGANvs. COURT OF APPEALS, G.R. No. 128996 February 15, 2002 “The
accounts in question are U.S. dollar deposits; consequently, the applicable law is not Republic Act No.
1405 but Republic Act (RA) No. 6426, known as the "Foreign Currency Deposit Act of the Philippines,"
Thus, under R.A. No. 6426 there is only a single exception to the secrecy of foreign currency deposits,
that is, disclosure is allowed only upon the written permission of the depositor. Incidentally, the acts of
private respondents complained of happened before the enactment on September 29, 2001 of R.A.
No. 9160 otherwise known as the Anti-Money Laundering Act of 2001.
2. KAREN E. SALVACION, vs.CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING
CORPORATION and GREG BARTELLI y NORTHCOTT. G.R. No. 94723 August 21, 1997
“Thus, one of the principal purposes of the protection accorded to foreign currency deposits is "to
assure the development and speedy growth of the Foreign Currency Deposit system and the Offshore
Banking in the Philippines"
It is evident from the above [Whereas clauses] that the Offshore Banking System and the Foreign
Currency Deposit System were designed to draw deposits from foreign lenders and investors (Vide
second Whereas of PD No. 1034; third Whereas of PD No. 1035). It is these deposits that are induced
by the two laws and given protection and incentives by them.
Obviously, the foreign currency deposit made by a transient or a tourist is not the kind of deposit
encouraged by PD Nos. 1034 and 1035 and given incentives and protection by said laws because such
depositor stays only for a few days in the country and, therefore, will maintain his deposit in the bank
only for a short time.
 Respondent Greg Bartelli, as stated, is just a tourist or a transient. He deposited his dollars with
respondent China Banking Corporation only for safekeeping during his temporary stay in the
Philippines.
For the reasons stated above, the Solicitor General thus submits that the dollar deposit of respondent
Greg Bartelli is not entitled to the protection of Section 113 of Central Bank Circular No. 960 and PD
No. 1246 against attachment, garnishment or other court processes.
3. CHINA BANKING CORPORATION,vs.THE HONORABLE COURT OF APPEALS and JOSE
"JOSEPH" GOTIANUY. G.R. No. 140687 December 18, 2006 “the law provides that all foreign
currency deposits authorized under Republic Act No. 6426, as amended by Sec. 8, Presidential Decree
No. 1246, Presidential Decree No. 1035, as well as foreign currency deposits authorized under
Presidential Decree No. 1034 are considered absolutely confidential in nature and may not be inquired
into. There is only one exception to the secrecy of foreign currency deposits, that is, disclosure is
allowed upon the written permission of the depositor.
The Court of Appeals, in allowing the inquiry, considered Jose Gotianuy, a co-depositor of Mary
Margaret Dee. It reasoned that since Jose Gotianuy is the named co-payee of the latter in the subject
checks, which checks were deposited in China Bank, then, Jose Gotianuy is likewise a depositor
thereof. On that basis, no written consent from Mary Margaret Dee is necessitated.”

IV. PDIC- DEPOSIT INSURANCE

A. Governing Laws – Act 3591, as amended by RA 10846
B. Insurance Requirement
i. Rule on Deposit in a Domestic Bank Operating Within the Philippines-all deposit
regardless of the classification of the bank be subject to insurance under to
PDIC(MANDATORY)
The deposit liabilities of a bank or banking institution, which is engaged in the business
of receiving deposits, shall be insured with PDIC. The coverage is compulsory.

ii. Rule on Deposit in a Domestic Bank Operating Within Abroad – they are not covered
by the PDIC unless it was elected by the board or the bank opt to be covered by PDIC

NOTE: Foreign Bank operating within the Philippines is subject to insurance under PDIC
C. Nature of Insurance Policy- Section 10(a), RA 3591 states that, The provisions of other laws, general
or special, to the contrary notwithstanding, whenever it shall be personnel, deputies and agents of the
Corporation. (BASE PO KAY SIR YAN) PERO FEELING KO DAPAT SECTION 1 hahaha
Section 1. There is hereby created a Philippine Deposit Insurance Corporation hereinafter
referred to as the “Corporation” which shall insure, as herein provided, the deposits of all
banks which are entitled to the benefits of insurance under this Act, and which shall have the
powers hereinafter granted.

The Corporation shall, as a basic policy, promote and safeguard the interests of depositing
public by way of providing permanent and continuing insurance coverage on all insured
deposits.

D. Meaning of Insured Deposit- Sec.4(g), RA 3591 as amended by RA 9576

i. Rule on Joint-Account - Sec.4(g), RA 3591 as amended by RA 9576
Section. 3. Section 4(g) of the same Act is hereby amended to read as follows:
"(g) The term "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 date of closure, but
not to exceed Five hundred thousand pesos (P500,000.00). Such net amount shall be determined
according to such regulations as the Board of Directors may prescribe, In determining such amount due
to any depositor, there shall be added together all deposits in the bank maintained in the same right and
capacity for his benefits either in his own name or in the name of others. A joint account regardless of
whether the conjunction 'and,' 'or,' 'and/or' is used, shall be insured separately from any individually-
owned deposit account: Provided, That (1) If the account is held jointly by two or more natural persons,
or by two or more juridical persons or entities, the maximum insured deposit shall be divided into as
many equal shares as there are individuals, juridical persons or entities, unless a different sharing is
stipulated in the document of deposit, and (2) If the account is held by a juridical person or entity jointly
with one or more natural persons, the maximum insured deposits shall be presumed to belong entirely to
such juridical person or entity: Provided, further, That the aggregate of the interest of each co-owner
over several joint accounts, whether owned by the same or different combinations of individuals, juridical
persons or entities, shall likewise be subject to the maximum insured deposit of Five hundred thousand
 pesos (P500,000.00): Provided, Furthermore, The the provisions of any law to the contrary
notwithstanding, no owner/holder of any negotiable certificate of deposit shall be recognized as a
depositor entitled to the rights provided in this Act unless his name is registered as owner/holder thereof
in the books of the issuing bank: Provided, Finally, That, in case of a condition that threatens the
monetary and financial stability of the banking system that may have systemic consequences, as defined
in section 17 hereof, as determined by the monetary board, the maximum deposit insurance cover may
be adjusted in such amount, for such a period, and/or for such deposit products, as may be determined
by a unanimous vote of the Board of Directors in a meeting called for the purpose and chaired by the
Secretary of Finance, subject to the approval of the President of the Philippines."
E. Exclusions from Insurance Coverage - Sec.4(f), RA 3591 as amended by RA 9576
Section 2. Section 4 (f) of Republic Act No. 3591, as amended, is hereby amended by adding
an additional paragraph, to read as follows:
"(f) The term "deposit" means the unpaid balance of money or its equivalent received by a bank
in the usual course of business and for which it has given or is obliged to give credit to a commercial,
checking, savings, time or thrift account, or issued in accordance with Bangko Sentral rules and
regulations and other applicable laws, together with such other obligations of a bank, which, consistent
with banking usage and practices, the Board of Directors shall determine and prescribe by regulations to
be deposit liabilities of the bank: Provided, That any obligation of a bank which is payable at the office of
the bank located outside of the Philippines shall not be a deposit for any of the purposes of this Act or
included as part of the total deposits or of insured deposits: Provided, further, That, subject to the
approval of the Board of Directors, any insured bank which is incorporated under the laws of the
Philippines which maintains a branch outside the Philippines may elect to include for insurance its deposit
obligations payable only at such branch.
The corporation shall not pay deposit insurance for the following accounts or transactions,
whether denominated, documented, recorded or booked as deposit by the bank:
"(1) Investment products such as bonds and securities, trust accounts, and other similar
instruments;
"(2) Deposit accounts or transactions which are unfunded, or that are fictitious or fraudulent;
"(3) Deposits accounts or transactions constituting, and/or emanating from, unsage and unsound
banking practice/s, as determined by the Corporation, in consultation with the BSP, after due
notice and hearing, and publication of a cease and desist order issued by the Corporation against
such deposit accounts or transactions; and
"(4) Deposits that are determined to be the proceeds of an unlawful activity as defined under
republic act 9160, as amended.
"The actions of the Corporation taken under this section shall be final and executory, and may not be
restrained or set aside by the court, except on appropriate petition for certiorari on the ground that the
action was taken in excess of jurisdiction or with such grave abuse of discretion as to amount to a lack or
excess of jurisdiction. The petition for certiorari may only be filed within thirty (30) days from notice of
denial of claim for deposit insurance."

PANG 5th ACCORDING SA DISCUSSION NI SIR

Section 11. Section 21, paragraph (f)(5) is hereby amended to read as follows.
"5) splitting of deposits or creation of fictitious loans or deposits accounts.
"Splitting of deposits occurs whenever a deposit account with an outstanding balance of more that the
statutory maximum amount of insured deposit maintained under the name of natural or juridical persons
is broken down and transferred into two (2) 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 one
hundred twenty (120) days immediately preceding or during a bank-declared bank holiday, or
immediately preceding a closure order issued by the Monetary Board of the Bangko Sentral ng Pilipinas
for the purpose of availing of the maximum deposit insurance coverage."

F. Payment of Insured Deposit- Sec. 10(c), RA 3591 (Sec. 14 R.A. 3591, as amended)
Modes of Payment
1. By cash;
2. By making available to each depositor a transferred deposit in another insured bank in an amount
equal to insured deposit of such depositor.

Note: Provided: PDIC , in its discretion, may require proof of claims to be filed before
paying the insured deposits, and that in any case where PDIC is not satisfied as to the
viability of a claim for an insured deposit, it may require final determination of a court of
competent jurisdiction before paying such claim. (Sec. 14 R.A. 3591, as amended)

V. LOAN FUNCTION
A. Authority to Lend Money- Sec. 1, BSP Circular No. 622, Series of 2008
“Before granting loans or other credit accommodations, a bank/QB/NBFI must ascertain that the
borrower, co-maker, endorser, surety and/or guarantor, if applicable, is/are financially capable of fulfilling
his/their commitments to the bank/QB/NBFI. For this purpose, a bank/QB/NBFI shall obtain adequate
information on his/their credit standing and financial capacities.
“In addition to the usual information sheet about the borrower, a bank/QB/NBFI shall require from the
credit applicant the following:
1. A copy of the latest Income Tax Return (ITR) of the borrower and his co-maker, if applicable, duly
stamped as received by the Bureau of Internal Revenue (BIR);
2. Except as otherwise provided by law and in other regulations, if the borrower is engaged in business, a
copy of the borrower's latest financial statements as submitted for taxation purposes to the BIR; and
3. A waiver of confidentiality of client information and/or an authority of the bank/QB/NBFI to conduct
random verification with the BIR in order to establish authenticity of the ITR and accompanying financial
statements submitted by the client.

B. Single Borrower’s Limit “SBL”- Section 35.1, 35.2, GBL

SECTION 35. Limit on Loans, Credit Accommodations and Guarantees. —
35.1. Except as the Monetary Board may otherwise prescribe for reasons of national interest, the total
amount of loans, credit accommodations and guarantees as may be defined by the Monetary Board that
may be extended by a bank to any person, partnership, association, corporation or other entity shall at
no time exceed twenty percent (20%) of the net worth of such bank. The basis for determining
compliance with single-borrower limit is the total credit commitment of the bank to the borrower.
35.2. Unless the Monetary Board prescribes otherwise, the total amount of loans, credit accommodations
and guarantees prescribed in the preceding paragraph may be increased by an additional ten percent
(10%) of the net worth of such bank provided the additional liabilities of any borrower are adequately
secured by trust receipts, shipping documents, warehouse receipts or other similar documents
transferring or securing title covering readily marketable, non-perishable goods which must be fully
covered by insurance.

C. Inclusions to SBL- Sec. X303(c) of the Manual of Regulations for Banks “MORB”

SECTION 35.3, RA 8791

35.3. The above prescribed ceilings shall include:

(a) the direct liability of the maker or acceptor of paper discounted with or sold to such bank and the
liability of a general indorser, drawer or guarantor who obtains a loan or other credit accommodation
from or discounts paper with or sells papers to such bank;

(b) in the case of an individual who owns or controls a majority interest in a corporation, partnership,
association or any other entity, the liabilities of said entities to such bank;

(c) in the case of a corporation, all liabilities to such bank of all subsidiaries in which such corporation
owns or controls a majority interest; and

(d) in the case of a partnership, association or other entity, the liabilities of the members thereof to such
bank.

D. Exclusions from SBL - Sec. X303(e) of the Manual of Regulations for Banks “MORB”

e. For purposes of this Section, loans, other credit accommodations and guarantees shall exclude:

(1) loans and other credit accommodations secured by obligations of the BSP or of the
Philippine Government;

(2) loans and other credit accommodations fully guaranteed by the government as to the
payment of principal and interest;

(3) loans and other credit accommodations secured by U.S. Treasury Notes and other securities
issued by central governments and central banks of foreign countries with the highest credit
quality given by any two (2) internationally accepted rating agencies;

(4) loans and other credit accommodations to the extent covered by the hold-out on or
assignment of, deposits maintained in the lending bank and held in the Philippines;
 (5) loans, credit accommodations and acceptances under letters of credit to the extent covered
by margin deposits; and

(6) other loans or credit accommodations which the Monetary Board may from time to time
specify as non-risk items.

E. DOSRI Accounts- Section 36, GBL

SECTION 36. Restriction on Bank Exposure to Directors, Officers, Stockholders and Their Related
Interests. — No director or officer of any bank shall, directly or indirectly, for himself or as the
representative or agent of others, borrow from such bank nor shall he become a guarantor, indorser or
surety for loans from such bank to others, or in any manner be an obligor or incur any contractual liability
to the bank except with the written approval of the majority of all the directors of the bank, excluding the
director concerned: Provided, That such written approval shall not be required for loans, other credit
accommodations and advances granted to officers under a fringe benefit plan approved by the Bangko
Sentral. The required approval shall be entered upon the records of the bank and a copy of such entry
shall be transmitted forthwith to the appropriate supervising and examining department of the Bangko
Sentral.

Dealings of a bank with any of its directors, officers or stockholders and their related interests
shall be upon terms not less favorable to the bank than those offered to others.

After due notice to the board of directors of the bank, the office of any bank director or officer
who violates the provisions of this Section may be declared vacant and the director or officer shall be
subject to the penal provisions of the New Central Bank Act.

The Monetary Board may regulate the amount of loans, credit accommodations and guarantees
that may be extended, directly or indirectly, by a bank to its directors, officers, stockholders and their
related interests, as well as investments of such bank in enterprises owned or controlled by said
directors, officers, stockholders and their related interests. However, the outstanding loans, credit
accommodations and guarantees which a bank may extend to each of its stockholders, directors, or
officers and their related interests, shall be limited to an amount equivalent to their respective
unencumbered deposits and book value of their paid-in capital contribution in the bank: Provided,
however, That loans, credit accommodations and guarantees secured by assets considered as non-risk by
the Monetary Board shall be excluded from such limit: Provided, further, That loans, credit
accommodations and advances to officers in the form of fringe benefits granted in accordance with rules
as may be prescribed by the Monetary Board shall not be subject to the individual limit.

The Monetary Board shall define the term "related interests."

The limit on loans, credit accommodations and guarantees prescribed herein shall not apply to
loans, credit accommodations and guarantees extended by a cooperative bank to its cooperative
shareholders. (83a)

i. Requisites – BSP Circular 170, in relation to Article 26, NCBA

"SECTION 26. Bank Deposits and Investments. — Any director, officer or stockholder who,
together with his related interest, contracts a loan or any form of financial accommodation from:
(1) his bank; or (2) from a bank (a) which is subsidiary of a bank holding company of which both
his bank and lending bank are subsidiaries or (b) in which a controlling proportion of the shares is
owned by the same interest that owns a controlling proportion of the shares of his bank, 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. Any information obtained from
an examination of his deposits shall be held strictly confidential and may be used by the
examiners only in connection with their supervisory and examination responsibility or by the
Bangko Sentral in an appropriate legal action it has initiated involving the deposit account."

2. The following elements must concur for abovequoted Section 26, Republic Act No. 7653 to
apply:
a. The borrower is a director, officer or any stockholder of a bank;
b. He contracts a loan or any form of financial accommodation;
c.The loan or financial accommodation is from (1) his bank or (2) a bank that is a
subsidiary of a bank holding company of which both his bank and the lending bank are
 subsidiaries, or (3) a bank in which a controlling proportion of the shares is owned by the
same interest that owns a controlling proportion of the shares of his bank; and
d.The loan or financial accommodation of the director, officer or stockholder, singly or
with that of his related interest, is in excess of 5% of the capital and surplus of the
lending bank or in the maximum amount permitted by law, whichever is lower.

3. In paragraph 2(a) above, the director, officer or any stockholder should himself be the
borrower or recipient of the loan or financial accommodation. Thus, if the borrower is the related
interest but not the director, officer or stockholder himself, the director, officer or stockholder is
not required to waive the secrecy of his bank deposits. The function of the phrase "who, together
with his related interest" in abovequoted Section 26 is to determine whether the loan(s) or
financial accommodation(s) exceeds the aggregate ceiling prescribed therein.
Moreover, the term "stockholder" means one as defined in Section 83 of Republic Act No. 337, as
amended, and its implementing rules in Part III of the Manual of Regulations for Banks and Other
Financial Intermediaries, owning two percent (2%) of more of the subscribed capital stock of the
bank.

4. For purposes of Section 26 of Republic Act No. 7653, the term "related interest" shall include
the following:
1.Spouse or relative within the first degree of consanguinity or affinity, or relative by
legal adoption, of a director, officer or stockholder of the bank;
2.Partnership of which a director, officer, or stockholder or his spouse or relative within
the first degree of consanguinity or affinity, or relative by legal adoption, is a general
partner;
3. Co-owner with the director, officer, stockholder or his spouse or relative within the first
degree of consanguinity or affinity, or relative by legal adoption, of the property or
interest or right mortgaged, pledged or assigned to secure the loans or credit
accommodations, except when the mortgage, pledge or assignment covers only said co-
owner's undivided interest;
4. Corporation, association, or firm of which a director or officer of the bank, or his
spouse is also director or officer of such corporation, association or firm, except (a) where
the securities of such corporation, association of firm are listed and traded in the big
board or commercial and industrial board of domestic stock exchanges and less than fifty
percent (50%) of the voting stock thereof is owned by any one person or by persons
related to each other within the third degree of consanguinity or affinity; or (b) where the
director, officer or stockholder of the lending bank sits as a representative of the bank in
the board of directors of such corporation: Provided, That the bank representative shall
not have any equity interest in the borrower corporation except for the minimum shares
required by law, rules and regulations, or by the by-laws of the corporation: Provided,
further, That the borrowing corporation under (a) or (b) is not among those mentioned in
items (5) and (6) hereof.
5. Corporation, association or firm of which any or a group of directors, officers,
stockholders of the lending bank and/or their spouses or relatives within the first degree
of consanguinity or affinity, or relative by legal adoption, hold/own more than twenty
percent (20%) of the subscribed capital of such corporation, or of the equity of such
association or firm;
6. Corporation, association or firm wholly or majority-owned or controlled by any related
entity or a group of related entities mentioned in items (2), (4) and (5) hereof.

F. Loan Threshold

i. Real Estate – Section 37, GBL

SECTION 37. Loans and Other Credit Accommodations Against Real Estate. — Except as the
Monetary Board may otherwise prescribe, loans and other credit accommodations against real
estate shall not exceed seventy-five percent (75%) of the appraised value of the respective real
estate security, plus sixty percent (60%) of the appraised value of the insured improvements,
and such loans may be made to the owner of the real estate or to his assignees.

ii. Chattel- Section 38, GBL

SECTION 38. Loans and Other Credit Accommodations on Security of Chattels and Intangible
Properties. — Except as the Monetary Board may otherwise prescribe, loans and other credit
 accommodations on security of chattels and intangible properties, such as, but not limited to,
patents, trademarks, trade names, and copyrights shall not exceed seventy-five percent (75%) of
the appraised value of the security, and such loans and other credit accommodations may be
made to the title-holder of the chattels and intangible properties or his assignees.

G. Redemption of Collaterals in case of Foreclosure

i. Natural Person- Section 6, Act 3135 in relation to Section 47, GBL
SECTION 47. Foreclosure of Real Estate Mortgage. — In the event of foreclosure, whether
judicially or extrajudicially, of any mortgage on real estate which is security for any loan or other
credit accommodation granted, the mortgagor or debtor whose real property has been sold for
the full or partial payment of his obligation shall have the right within one year after the sale of
the real estate, to redeem the property by paying the amount due under the mortgage deed,
with interest thereon at the rate specified in the mortgage, and all the costs and expenses
incurred by the bank or institution from the sale and custody of said property less the income
derived therefrom. However, the purchaser at the auction sale concerned whether in a judicial or
extrajudicial foreclosure shall have the right to enter upon and take possession of such property
immediately after the date of the confirmation of the auction sale and administer the same in
accordance with law. Any petition in court to enjoin or restrain the conduct of foreclosure
proceedings instituted pursuant to this provision shall be given due course only upon the filing by
the petitioner of a bond in an amount fixed by the court conditioned that he will pay all the
damages which the bank may suffer by the enjoining or the restraint of the foreclosure
proceeding.
ii. Juridical person - Section 47, GBL
Notwithstanding Act 3135, juridical persons whose property is being sold pursuant to an
extrajudicial foreclosure, shall have the right to redeem the property in accordance with this
provision until, but not after, the registration of the certificate of foreclosure sale with the
applicable Register of Deeds which in no case shall be more than three (3) months after
foreclosure, whichever is earlier. Owners of property that has been sold in a foreclosure sale prior
to the effectivity of this Act shall retain their redemption rights until their expiration.

H. Prohibited Acts of Borrowers- Section 55.2, GBL

55.2. No borrower of a bank shall —
(a) Fraudulently overvalue property offered as security for a loan or other credit accommodation from the
bank;
(b) Furnish false or make misrepresentation or suppression of material facts for the purpose of obtaining,
renewing, or increasing a loan or other credit accommodation or extending the period thereof;
(c) Attempt to defraud the said bank in the event of a court action to recover a loan or other credit
accommodation; or
(d) Offer any director, officer, employee or agent of a bank any gift, fee, commission, or any other form
of compensation in order to influence such persons into approving a loan or other credit accommodation
application.

VI. OWNERSHIP OF BANKS

A. Foreign Equity in Domestic Bank- Section 11, GBL

SECTION 11. Foreign Stockholdings. — Foreign individuals and non-bank corporations may own or
control up to forty percent (40%) of the voting stock of a domestic bank. This rule shall apply to
Filipinos and domestic non-bank corporations. (12a; 12-Aa)
The percentage of foreign-owned voting stocks in a bank shall be determined by the citizenship
of the individual stockholders in that bank. The citizenship of the corporation which is a stockholder in a
bank shall follow the citizenship of the controlling stockholders of the corporation, irrespective of the
place of incorporation.
B. Foreign Banks Operating in the Phils.
i. Modes of Entry – Section 2, RA7721, as amended by RA 10641

Sec. 2. Modes of Entry. — The Monetary Board may authorize foreign banks to operate in the
Philippine banking system through any of the following modes of entry:

(i) by acquiring, purchasing or owning up to sixty percent (60%) of the voting stock of an
existing bank;
(ii) by investing in up to sixty percent (60%) of the voting stock of a new banking subsidiary
incorporated under the laws of the Philippines; or
 (iii) by establishing branches with full banking authority: Provided, That a foreign bank may
avail itself of only one (1) mode of entry: Provided, further, That a foreign bank or a Philippine
corporation may own up to a sixty percent (60%) of the voting stock of only one (1) domestic
bank or new banking subsidiary.
ii. Criteria/Considerations of Entry- Section 3, Ra 7721 as amended by RA 10641

Sec. 3. Guidelines for Approval. — In approving entry applications of foreign banks, the
Monetary Board shall: (i) ensure geographic representation and complementation; (ii) consider
strategic trade and investment relationships between the Philippines and the country of
incorporation of the foreign bank; (iii) study the demonstrated capacity, global reputation for
financial innovations and stability in a competitive environment of the applicant; (iv) see to it
that reciprocity rights are enjoyed by Philippine banks in the applicant's country; and (v)
consider willingness to fully share their technology.

iii. Right of a Foreign Bank to Bid in a Foreclosure Sale- Sec. 9, RA 7721 as amended by RA
10641

Section 9 provides for the authority of the foreign banks who were authorized to do banking
business in the Philippines to do the following acts:

a. Bid and take part in the foreclosure sales of real property mortgaged to them;
b. Avail of enforcement and other proceedings in relation to the same; and
c. Take possession of the mortgaged property for a period not exceeding five (5) years
from actual possession.

Note, however, that although the foreign banks may take part in such foreclosure proceedings
and then, take possession of the real property, the provision provided for certain limitations.
First, the title cannot be transferred to said foreign bank; and second, the foreign bank is
required to transfer its rights to a qualified Philippine national during the five-year period
provided, without prejudice to a borrower’s rights under the applicable laws. In order to enforce
this limitation, RA 10641 provided for penalties in case of failure to transfer the property, i.e.,
the bank will be penalized one half (1/2) of one percent (1%) per annum of the price at which
the property is foreclosed until it is able to transfer the property to a qualified Philippine
national.

VI. BANK DIRECTORS AND OFFICERS

A. Composition – Section 15, 17, & 19, GBL

SECTION 15. Board of Directors. — The provisions of the Corporation Code to the contrary
notwithstanding, there shall be at least five (5), and a maximum of fifteen (15) members of the board of
directors of bank, two (2) of whom shall be independent directors. An "independent director" shall mean
a person other than an officer or employee of the bank, its subsidiaries or affiliates or related interests.
(n) Non-Filipino citizens may become members of the board of directors of a bank to the extent of the
foreign participation in the equity of said bank. (Sec. 7, RA 7721) The meetings of the board of directors
may be conducted through modern technologies such as, but not limited to, teleconferencing and video-
conferencing. (n)

SECTION 17. Directors of Merged or Consolidated Banks. — In the case of a bank merger or
consolidation, the number of directors shall not exceed twenty-one (21). (13a)

SECTION 19. Prohibition on Public Officials. — Except as otherwise provided in the Rural Banks Act, no
appointive or elective public official, whether full-time or part-time shall at the same time serve as officer
of any private bank, save in cases where such service is incident to financial assistance provided by the
government or a government-owned or controlled corporation to the bank or unless otherwise provided
under existing laws. (13)

i. Rural Bank- Section 5, RA 7353

Sec. 5. All members of the Board of Directors of the rural bank shall be citizens of the Philippines
at the time of their assumption to office: Provided, however, That nothing in this Act shall be
construed as prohibiting any appointive or elective public official from serving as director, officer,
consultant or in any capacity in the bank.
No Director or officer of any rural bank shall, either directly or indirectly, for himself or as the
representative or agent of another borrow any of the deposits or funds of such banks, nor shall
he become a guarantor, indorser, or surety for loans from such bank to others, or in any manner
be an obligor for money borrowed from the bank or loaned by it except with the written approval
 of the majority of the directors of the bank, excluding the director concerned. Any such approval
shall be entered upon the records of the corporation and a copy of such entry shall be
transmitted forthwith to the appropriate supervising department. The director/officer of the bank
who violates the provisions of this section shall be immediately dismissed from his office and shall
be penalized in accordance with Section 26 of this Act.
The Monetary Board may regulate the amount of credit accommodations that may be extended
directly to the directors, officers or stockholders of rural banks of banking institutions. However,
the outstanding credit accommodations which a rural bank may extend to each of its stockholders
owning two percent (2%) or more of the subscribed capital stock, its directors, or officers shall be
limited to an amount equivalent to the respective outstanding deposits and book value of the
paid-in capital contributions in the bank.
B. Fit and Proper Rule- Section 16, GBL
SECTION 16. Fit and Proper Rule. — To maintain the quality of bank management and afford better
protection to depositors and the public in general, the Monetary Board shall prescribe, pass upon and
review the qualifications and disqualifications of individuals elected or appointed bank directors or officers
and disqualify those found unfit.
After due notice to the board of directors of the bank, the Monetary Board may disqualify,
suspend or remove any bank director or officer who commits or omits an act which render him unfit for
the position.
In determining whether an individual is fit and proper to hold the position of a director or officer of a
bank, regard shall be given to his integrity, experience, education, training, and competence. (9-Aa)
C. Bank in Distress
i. Emergency Loan- Section 84,NCBA
SEC. 84. Emergency Loans and Advances. _ In periods of national and/or local emergency or of
imminent financial panic which directly threaten monetary and banking stability, the Monetary
Board may, by a vote of at least five (5) of its members, authorize the Bangko Sentral to grant
extraordinary loans or advances to banking institutions secured by assets as defined hereunder:
Provided, That while such loans or advances are outstanding, the debtor institution shall not,
except upon prior authorization by the Monetary Board, expand the total volume of its loans or
investments.
The Monetary Board may, at its discretion, likewise authorize the Bangko Sentral to grant
emergency loans or advances to banking institutions, even during normal periods, for the
purpose of assisting a bank in a precarious financial condition or under serious financial pressures
brought by unforeseen events, or events which, though foreseeable, could not be prevented by
the bank concerned: Provided, however, That the Monetary Board has ascertained that the bank
is not insolvent and has the assets defined hereunder to secure the advances: Provided, further,
That a concurrent vote of at least five (5) members of the Monetary Board is obtained.

ii. Conservationship- Section 29, NCBA

SEC. 29. Appointment of Conservator. _ Whenever, on the basis of a report submitted by the
appropriate supervising or examining department, the Monetary Board finds that a bank or a
quasi-bank is in a state of continuing inability or unwillingness to maintain a condition of liquidity
deemed adequate to protect the interest of depositors and creditors, the Monetary Board may
appoint a conservator with such powers as the Monetary Board shall deem necessary to take
charge of the assets, liabilities, and the management thereof, reorganize the management,
collect all monies and debts due said institution, and exercise all powers necessary to restore its
viability.
The conservator shall report and be responsible to the Monetary Board and shall have the power
to overrule or revoke the actions of the previous management and board of directors of the bank
or quasi-bank. The conservator should be competent and knowledgeable in bank operations and
management. The conservatorship shall not exceed one (1) year.

iii. Receivership- Section 30, NCBA

SEC. 30. Proceedings in Receivership and Liquidation. _ Whenever, upon report of the head of
the supervising or examining department, the Monetary Board finds that a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary course of business:
Provided, That this shall not include inability to pay caused by extraordinary demands
induced by financial panic in the banking community;
(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its
liabilities; or
(c) cannot continue in business without involving probable losses to its depositors or
creditors; or
 (d) has willfully violated a cease and desist order under Section 37 that has become
final, involving acts or transactions which amount to fraud or a dissipation of the assets
of the institution; in which cases, the Monetary Board may summarily and without need
for prior hearing forbid the institution from doing business in the Philippines and
designate the Philippine Deposit Insurance Corporation as receiver of the banking
institution.
For a quasi-bank, any person of recognized competence in banking or finance may be designated
as receiver.

a. Effects-
a.1 Fidelity Savings and Mortgage Bank vs. Cenzon, GR No. L-46208 “It is
settled jurisprudence that a banking institution which has been declared insolvent and
subsequently ordered closed by the Central Bank of the Philippines cannot be held liable
to pay interest on bank deposits which accrued during the period when the bank is
actually closed and non-operational.”

a.2 Larrobis vs PVB, GR No. 135706 “When a bank is declared insolvent and placed
under receivership, the Central Bank, through the Monetary Board, determines whether
to proceed with the liquidation or reorganization of the financially distressed bank. A
receiver, who concurrently represents the bank, then takes control and possession of its
assets for the benefit of the banks creditors. A liquidator meanwhile assumes the role of
the receiver upon the determination by the Monetary Board that the bank can no longer
resume business. His task is to dispose of all the assets of the bank and effect partial
payments of the banks obligations in accordance with legal priority. In both receivership
and liquidation proceedings, the bank retains its juridical personality notwithstanding
the closure of its business and may even be sued as its corporate existence is assumed
by the receiver or liquidator. The receiver or liquidator meanwhile acts not only for the
benefit of the bank, but for its creditors as well.”

a.3 Effects : a) operations are suspended; b) asset deemed in custodial egis and shall
be exempt from garnishment, levy, execution, attachment; c) not liable to pay interest
on deposit; d) bank retains legal personality; and e) no preference even if claimant
depositor obtained writ of preliminary attachment.

iv. Liquidation- Section 30, NCBA

If the receiver determines that the institution cannot be rehabilitated or permitted to resume business
in accordance with the next preceding paragraph, the Monetary Board shall notify in writing the board
of directors of its findings and direct the receiver to proceed with the liquidation of the institution. The
receiver shall:

(1) file ex parte with the proper regional trial court, and without requirement of prior notice or any
other action, a petition for assistance in the liquidation of the institution pursuant to a liquidation plan
adopted by the Philippine Deposit Insurance Corporation for general application to all closed banks. In
case of quasi-banks, the liquidation plan shall be adopted by the Monetary Board. Upon acquiring
jurisdiction, the court shall, upon motion by the receiver after due notice, adjudicate disputed claims
against the institution, assist the enforcement of individual liabilities of the stockholders, directors and
officers, and decide on other issues as may be material to implement the liquidation plan adopted. The
receiver shall pay the cost of the proceedings from the assets of the institution.

(2) convert the assets of the institution to money, dispose of the same to creditors and other parties,
for the purpose of paying the debts of such institution in accordance with the rules on concurrence
and preference of credit under the Civil Code of the Philippines and he may, in the name of the
institution, and with the assistance of counsel as he may retain, institute such actions as may be
necessary to collect and recover accounts and assets of, or defend any action against, the institution.
The assets of an institution under receivership or liquidation shall be deemed in custodia legis in the
hands of the receiver and shall, from the moment the institution was placed under such receivership
or liquidation, be exempt from any order of garnishment, levy, attachment, or execution.

D. Effect of Actions of the BSP in Conservatorship and Receivership- Section 30, NCBA
 BSP Monetary Board vs Antonio-Valenzuela, GR No. 184778 “It is well-settled that the
closure of a bank may be considered as an exercise of police power. The action of the MB on this
matter is final and executory. Such exercise may nonetheless be subject to judicial inquiry and can
be set aside if found to be in excess of jurisdiction or with such grave abuse of discretion as to
amount to lack or excess of jurisdiction.

Courts are hereby reminded to take greater care in issuing injunctive relief to litigants, that it would
not violate any law. The grant of a preliminary injunction in a case rests on the sound discretion of
the court with the caveat that it should be made with great caution. Thus, the issuance of the writ of
preliminary injunction must have basis in and be in accordance with law. All told, while the grant or
denial of an injunction generally rests on the sound discretion of the lower court, this Court may and
should intervene in a clear case of abuse.”

VII. THE BANKO SENTRAL NG PILIPINAS

A. Creation- Section 2, NCGBA
SEC. 2. Creation of the Bangko Sentral. _ There is hereby established an independent central
monetary authority, which shall be a body corporate known as the Bangko Sentral ng Pilipinas, hereafter
referred to as the Bangko Sentral. The capital of the Bangko Sentral shall be Fifty billion pesos
(P50,000,000,000), to be fully subscribed by the Government of the Republic, hereafter referred to as the
Government, Ten billion pesos (P10,000,000,000) of which shall be fully paid for by the Government
upon the effectivity of this Act and the balance to be paid for within a period of two (2) years from the
effectivity of this Act in such manner and form as the Government, through the Secretary of Finance and
the Secretary of Budget and Management, may thereafter determine.
B. Responsibility and Objective- Section 3, NCBA

SEC. 3. Responsibility and Primary Objective. _ The Bangko Sentral shall provide policy directions in the
areas of money, banking, and credit. It shall have supervision over the operations of banks and exercise
such regulatory powers as provided in this Act and other pertinent laws over the operations of finance
companies and non-bank financial institutions performing quasi-banking functions, hereafter referred to
as quasibanks, and institutions performing similar functions.

The primary objective of the Bangko Sentral is to maintain price stability conducive to a balanced
and sustainable growth of the economy. It shall also promote and maintain monetary stability and the
convertibility of the peso.

C. Composition of the Monetary Board- Section 6, NCBA

SEC. 6. Composition of the Monetary Board. _ The powers and functions of the Bangko Sentral shall be
exercised by the Bangko Sentral Monetary Board, hereafter referred to as the Monetary Board, composed
of seven (7) members appointed by the President of the Philippines for a term of six (6) years.
The seven (7) members are:
(a) the Governor of the Bangko Sentral, who shall be the Chairman of the Monetary Board. The
Governor of the Bangko Sentral shall be head of a department and his appointment shall be subject to
confirmation by the Commission on Appointments. Whenever the Governor is unable to attend a
meeting of the Board, he shall designate a Deputy Governor to act as his alternate: Provided, That in
such event, the Monetary Board shall designate one of its members as acting Chairman;
(b) a member of the Cabinet to be designated by the President of the Philippines. Whenever the
designated Cabinet Member is unable to attend a meeting of the Board, he shall designate an
Undersecretary in his Department to attend as his alternate; and
(c) five (5) members who shall come from the private sector, all of whom shall serve full-time:
Provided, however, That of the members first appointed under the provisions of this subsection, three
(3) shall have a term of six (6) years, and the other two (2), three (3) years.
No member of the Monetary Board may be reappointed more than once.
D. Vacancies- Section 7, NCBA

SEC. 7. Vacancies. _ Any vacancy in the Monetary Board created by the death, resignation, or removal
of any member shall be filled by the appointment of a new member to complete the unexpired period of
the term of the member concerned.

E. Qualifications- Section 8, NCBA

SEC. 8. Qualifications. _ The members of the Monetary Board must be natural-born citizens of the
Philippines, at least thirty-five (35) years of age, with the exception of the Governor who should at least
be forty (40) years of age, of good moral character, of unquestionable integrity, of known probity and
patriotism, and with recognized competence in social and economic disciplines.
 F. Disqualifications- Section 9, NCBA

SEC. 9. Disqualifications. _ In addition to the disqualifications imposed by Republic Act No. 6713, a
member of the Monetary Board is disqualified from being a director, officer, employee, consultant,
lawyer, agent or stockholder of any bank, quasi-bank or any other institution which is subject to
supervision or examination by the Bangko Sentral, in which case such member shall resign from, and
divest himself of any and all interests in such institution before assumption of office as member of the
Monetary Board.

The members of the Monetary Board coming from the private sector shall not hold any other
public office or public employment during their tenure.

No person shall be a member of the Monetary Board if he has been connected directly with any
multilateral banking or financial institution or has a substantial interest in any private bank in the
Philippines, within one (1) year prior to his appointment; likewise, no member of the Monetary Board
shall be employed in any such institution within two (2) years after the expiration of his term except
when he serves as an official representative of the Philippine Government to such institution.

G. Removal- Section 10, NCBA

SEC. 10. Removal. _ The President may remove any member of the Monetary Board for any of the
following reasons:
(a) If the member is subsequently disqualified under the provisions of Section 8 of this Act; or
(b) If he is physically or mentally incapacitated that he cannot properly discharge his duties and
responsibilities and such incapacity has lasted for more than six (6) months; or
(c) If the member is guilty of acts or operations which are of fraudulent or illegal character or
which are manifestly opposed to the aims and interests of the Bangko Sentral; or
(d) If the member no longer possesses the qualifications specified in Section 8 of this Act.
H. Supervisory Powers- Section 4, GBL
SECTION 4. Supervisory Powers. — The operations and activities of banks shall be subject to supervision
of the Bangko Sentral. "Supervision" shall include the following:
4.1. The issuance of rules of conduct or the establishment of standards of operation for uniform
application to all institutions or functions covered, taking into consideration the distinctive character
of the operations of institutions and the substantive similarities of specific functions to which such
rules, modes or standards are to be applied;
4.2. The conduct of examination to determine compliance with laws and regulations if the
circumstances so warrant as determined by the Monetary Board;
4.3. Overseeing to ascertain that laws and regulations are complied with;
4.4. Regular investigation which shall not be oftener than once a year from the last date of
examination to determine whether an institution is conducting its business on a safe or sound
basis: Provided, That the deficiencies/irregularities found by or discovered by an audit shall be
immediately addressed;
4.5. Inquiring into the solvency and liquidity of the institution (2-D); or
4.6. Enforcing prompt corrective action. (n)
The Bangko Sentral shall also have supervision over the operations of and exercise regulatory powers
over quasi-banks, trust entities and other financial institutions which under special laws are subject to
Bangko Sentral supervision.
I. Money Function of the BSP- Section 50, NCBA
SEC. 50. Exclusive Issue Power. _ The Bangko Sentral shall have the sole power and authority to issue
currency, within the territory of the Philippines. No other person or entity, public or private, may put into
circulation notes, coins or any other object or document which, in the opinion of the Monetary Board,
might circulate as currency, nor reproduce or imitate the facsimiles of Bangko Sentral notes without prior
authority from the Bangko Sentral.
The Monetary Board may issue such regulations as it may deem advisable in order to prevent the
circulation of foreign currency or of currency substitutes as well as to prevent the reproduction of
facsimiles of Bangko Sentral notes.

TRUTH IN LENDING

I.Duty to Disclose- Section 4, RA 3765 “Truth in Lending Act”

Section 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of
the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules
and regulations prescribed by the Board, the following information:
 (1) the cash price or delivered price of the property or service to be acquired;

(2) the amounts, if any, to be credited as down payment and/or trade-in;

(3) the difference between the amounts set forth under clauses (1) and (2);

(4) the charges, individually itemized, which are paid or to be paid by such person in connection with the
transaction but which are not incident to the extension of credit;

(5) the total amount to be financed;

(6) the finance charge expressed in terms of pesos and centavos; and

(7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate
on the outstanding unpaid balance of the obligation.

II. Effect of Non-compliance-

a. New Sampaguita Builders Construction, Inc. Vs PNB GR No. 148753 “Courts have the authority
to strike down or to modify provisions in promissory notes that grant the lenders unrestrained power to increase
interest rates, penalties and other charges at the latters sole discretion and without giving prior notice
to and securing the consent of the borrowers. This unilateral authority is anathema to the mutuality of contracts
and enable lenders to take undue advantage of borrowers. Although the Usury Law has been effectively
repealed, courts may still reduce iniquitous or unconscionable rates charged for the use of
money. Furthermore, excessive interests, penalties and other charges not revealed in disclosure statements
issued by banks, even if stipulated in the promissory notes, cannot be given effect under the Truth in Lending
Act.”
b. DBP vs Arcilla, GR No. 161426 “Under Circular No. 158 of the Central Bank, the information required by
R.A. No. 3765 shall be included in the contract covering the credit transaction or any other document to be
acknowledged and signed by the debtor, thus:

The contract covering the credit transaction, or any other document to be acknowledged and signed by
the debtor, shall indicate the above seven items of information. In addition, the contract or document shall
specify additional charges, if any, which will be collected in case certain stipulations in the contract are not met
by the debtor.

Furthermore, the contract or document shall specify additional charges, if any, which will be collected in
case certain stipulations in the contract are not met by the debtor.

If the borrower is not duly informed of the data required by the law prior to the consummation of the
availment or drawdown, the lender will have no right to collect such charge or increases thereof, even if
stipulated in the promissory note. However, such failure shall not affect the validity or enforceability of any
contract or transaction.

the present case, DBP failed to disclose the requisite information in the disclosure statement form
authorized by the Central Bank, but did so in the loan transaction documents between it and Arcilla. There is no
evidence on record that DBP sought to collect or collected any interest, penalty or other charges, from Arcilla
other than those disclosed in the said deeds/documents.

The Court is convinced that Arcillas claim of not having been furnished the data/information required by
R.A. No. 3765 and CB Circular No. 158 was but an afterthought. Despite the notarial rescission of the
conditional sale in 1990, and DBPs subsequent repeated offers to repurchase the property, the latter maintained
his silence. Arcilla filed his complaint only on February 21, 1994, or four years after the said notarial rescission.

ANTI-MONEY LAUNDERING

I. Governing Laws- RA 9160 “ Anti-Money Laundering Act of 2001” as amended by RA 9194; RA 10167 amending
Sections 10 and 11 of RA 9160; RA 10365
II. Declaration of State Policy- Section 2, AMLA

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.

III. Money Laundering- Section 4, RA 10365

Section 4. Section 4 of the same Act is hereby amended to read as follows:

"SEC. 4. Money Laundering Offense. – Money laundering is committed by any person who, knowing that any
monetary instrument or property represents, involves, or relates to the proceeds of any unlawful activity:

"(a) transacts said monetary instrument or property;

"(b) converts, transfers, disposes of, moves, acquires, possesses or uses said monetary instrument or
property;
"(c) conceals or disguises the true nature, source, location, disposition, movement or ownership of or rights
with respect to said monetary instrument or property;
"(d) attempts or conspires to commit money laundering offenses referred to in paragraphs (a), (b) or (c);
"(e) aids, abets, assists in or counsels the commission of the money laundering offenses referred to in
paragraphs (a), (b) or (c) above; and
"(f) performs or fails to perform any act as a result of which he facilitates the offense of money laundering
referred to in paragraphs (a), (b) or (c) above.

“Money laundering is also committed by any covered person who, knowing that a covered or suspicious transaction
is required under this Act to be reported to the Anti-Money Laundering Council (AMLC), fails to do so."

A. Unlawful Activity- Section 3(i) AMLA, as amended (Section 2, RA 10365)

Section 2. Section 3(i) of the same Act is hereby amended to read as follows:
"(i) ‘Unlawful activity’ refers to any act or omission or series or combination thereof involving or
having direct relation to the following:
"(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised
Penal Code, as amended;
"(2) Sections 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of Republic Act No. 9165, otherwise
known as the Comprehensive Dangerous Drugs Act of 2002;
"(3) Section 3 paragraphs B, C, E, G, H and I of Republic Act No. 3019, as amended, otherwise
known as the Anti-Graft and Corrupt Practices Act;
"(4) Plunder under Republic Act No. 7080, as amended;
"(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the Revised
Penal Code, as amended;
"(6) Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602;
"(7) Piracy on the high seas under the Revised Penal Code, as amended and Presidential Decree
No. 532;
"(8) Qualified theft under Article 310 of the Revised Penal Code, as amended;
"(9) Swindling under Article 315 and Other Forms of Swindling under Article 316 of the Revised
Penal Code, as amended;
"(10) Smuggling under Republic Act Nos. 455 and 1937;
"(11) Violations of Republic Act No. 8792, otherwise known as the Electronic Commerce Act of
2000;
"(12) Hijacking and other violations under Republic Act No. 6235; destructive arson and murder, as
defined under the Revised Penal Code, as amended;
"(13) Terrorism and conspiracy to commit terrorism as defined and penalized under Sections 3 and
4 of Republic Act No. 9372;
"(14) Financing of terrorism under Section 4 and offenses punishable under Sections 5, 6, 7 and 8
of Republic Act No. 10168, otherwise known as the Terrorism Financing Prevention and
Suppression Act of 2012:
"(15) Bribery under Articles 210, 211 and 211-A of the Revised Penal Code, as amended, and
Corruption of Public Officers under Article 212 of the Revised Penal Code, as amended;
"(16) Frauds and Illegal Exactions and Transactions under Articles 213, 214, 215 and 216 of the
Revised Penal Code, as amended;
"(17) Malversation of Public Funds and Property under Articles 217 and 222 of the Revised Penal
Code, as amended;
"(18) Forgeries and Counterfeiting under Articles 163, 166, 167, 168, 169 and 176 of the Revised
Penal Code, as amended;
"(19) Violations of Sections 4 to 6 of Republic Act No. 9208, otherwise known as the Anti-
Trafficking in Persons Act of 2003;
"(20) Violations of Sections 78 to 79 of Chapter IV, of Presidential Decree No. 705, otherwise
known as the Revised Forestry Code of the Philippines, as amended;
"(21) Violations of Sections 86 to 106 of Chapter VI, of Republic Act No. 8550, otherwise known as
the Philippine Fisheries Code of 1998;
 "(22) Violations of Sections 101 to 107, and 110 of Republic Act No. 7942, otherwise known as the
Philippine Mining Act of 1995;
"(23) Violations of Section 27(c), (e), (f), (g) and (i), of Republic Act No. 9147, otherwise known as
the Wildlife Resources Conservation and Protection Act;
"(24) Violation of Section 7(b) of Republic Act No. 9072, otherwise known as the National Caves
and Cave Resources Management Protection Act;
"(25) Violation of Republic Act No. 6539, otherwise known as the Anti-Carnapping Act of 2002, as
amended;
"(26) Violations of Sections 1, 3 and 5 of Presidential Decree No. 1866, as amended, otherwise
known as the decree Codifying the Laws on Illegal/Unlawful Possession, Manufacture, Dealing In,
Acquisition or Disposition of Firearms, Ammunition or Explosives;
"(27) Violation of Presidential Decree No. 1612, otherwise known as the Anti-Fencing Law;
"(28) Violation of Section 6 of Republic Act No. 8042, otherwise known as the Migrant Workers and
Overseas Filipinos Act of 1995, as amended by Republic Act No. 10022;
"(29) Violation of Republic Act No. 8293, otherwise known as the Intellectual Property Code of the
Philippines;
"(30) Violation of Section 4 of Republic Act No. 9995, otherwise known as the Anti-Photo and Video
Voyeurism Act of 2009;
"(31) Violation of Section 4 of Republic Act No. 9775, otherwise known as the Anti-Child
Pornography Act of 2009;
"(32) Violations of Sections 5, 7, 8, 9, 10(c), (d) and (e), 11, 12 and 14 of Republic Act No. 7610,
otherwise known as the Special Protection of Children Against Abuse, Exploitation and
Discrimination;
"(33) Fraudulent practices and other violations under Republic Act No. 8799, otherwise known as
the Securities Regulation Code of 2000; and
"(34) Felonies or offenses of a similar nature that are punishable under the penal laws of other
countries."
B. Covered Person- Section 3(a) AMLA, as amended (Section 1, RA 10365)
Section 1. Section 3(a) of Republic Act No. 9160, as amended, is hereby amended to read as
follows:
"(a) ‘Covered persons’, natural or juridical, refer to:
"(1) banks, non-banks, quasi-banks, trust entities, foreign exchange dealers, pawnshops,
money changers, remittance and transfer companies and other similar entities and all
other persons and their subsidiaries and affiliates supervised or regulated by the Bangko
Sentral ng Pilipinas (BSP);
"(2) insurance companies, pre-need companies and all other persons supervised or
regulated by the Insurance Commission (IC);
"(3) (i) securities dealers, brokers, salesmen, investment houses and other similar
persons managing securities or rendering services as investment agent, advisor, or
consultant, (ii) mutual funds, close-end investment companies, common trust funds, and
other similar persons, and (iii) other entities administering or otherwise dealing in
currency, commodities or financial derivatives based thereon, valuable objects, cash
substitutes and other similar monetary instruments or property supervised or regulated
by the Securities and Exchange Commission (SEC);
"(4) jewelry dealers in precious metals, who, as a business, trade in precious metals, for
transactions in excess of One million pesos (P1,000,000.00);
"(5) jewelry dealers in precious stones, who, as a business, trade in precious stones, for
transactions in excess of One million pesos (P1,000,000.00);
"(6) company service providers which, as a business, provide any of the following
services to third parties: (i) acting as a formation agent of juridical persons; (ii) acting as
(or arranging for another person to act as) a director or corporate secretary of a
company, a partner of a partnership, or a similar position in relation to other juridical
persons; (iii) providing a registered office, business address or accommodation,
correspondence or administrative address for a company, a partnership or any other legal
person or arrangement; and (iv) acting as (or arranging for another person to act as) a
nominee shareholder for another person; and
"(7) persons who provide any of the following services:
(i) managing of client money, securities or other assets;
(ii) management of bank, savings or securities accounts;
(iii) organization of contributions for the creation, operation or management of
companies; and
 (iv) creation, operation or management of juridical persons or arrangements, and
buying and selling business entities.
"Notwithstanding the foregoing, the term ‘covered persons’ shall exclude lawyers and accountants
acting as independent legal professionals in relation to information concerning their clients or
where disclosure of information would compromise client confidences or the attorney-client
relationship: Provided, That these lawyers and accountants are authorized to practice in the
Philippines and shall continue to be subject to the provisions of their respective codes of conduct
and/or professional responsibility or any of its amendments."
C. Anti-Money Laundering Counsil “AMLC”- Section 7, RA 9160
SEC. 7. Creation of Anti-Money Laundering Council (AMLC). – The Anti-Money Laundering Council
is hereby created and shall be composed of the Governor of the Bangko Sentral ng Pilipinas as
chairman, the Commissioner of the Insurance Commission and the Chairman of the Securities and
Exchange Commission as members. The AMLC shall act unanimously in the discharge of its
functions as defined hereunder:
(1) to require and receive covered transaction reports from covered institutions;
(2) to issue orders addressed to the appropriate Supervising Authority or the covered
institution to determine the true identity of the owner of any monetary instrument or
property subject of a covered transaction report or request for assistance from a foreign
State, or believed by the Council, on the basis of substantial evidence, to be, in whole or
in part, wherever located, representing, involving, or related to, directly or indirectly, in
any manner or by any means, the proceeds of an unlawful activity;
(3) to institute civil forfeiture proceedings and all other remedial proceedings through the
Office of the Solicitor General;
(4) to cause the filing of complaints with the Department of Justice or the Ombudsman
for the prosecution of money laundering offenses;
(5) to initiate investigations of covered transactions, money laundering activities and
other violations of this Act;
(6) to freeze any monetary instrument or property alleged to be proceeds of any unlawful
activity;
(7) to implement such measures as may be necessary and justified under this Act to
counteract money laundering;
(8) to receive and take action in respect of, any request from foreign states for assistance
in their own anti-money laundering operations provided in this Act;
(9) to develop educational programs on the pernicious effects of money laundering, the
methods and techniques used in money laundering, the viable means of preventing
money laundering and the effective ways of prosecuting and punishing offenders; and
(10) to enlist the assistance of any branch, department, bureau, office, agency or
instrumentality of the government, including government-owned and -controlled
corporations, in undertaking any and all anti-money laundering operations, which may
include the use of its personnel, facilities and resources for the more resolute prevention,
detection and investigation of money laundering offenses and prosecution of offenders.
D. Prevention of Money Laundering
i. Customer Identification- Section 9(a) RA 9160

(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.The provisions of existing laws
to the contrary notwithstanding, anonymous accounts, accounts under fictitious names, and
all other similar accounts shall be absolutely prohibited. Peso and foreign currency non-
checking numbered accounts shall be allowed. The BSP may conduct annual testing solely
limited to the determination of the existence and true identity of the owners of such
accounts.

ii. Record Keeping- Section 9(b) RA 9160

(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.
iii. Reporting of Covered and Suspicion Transaction – Section 9(c) RA 9160
 (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.

E. Covered Transaction- Section 3(b) as amended (Section 1 RA 9194)

SECTION 1. Section 3, paragraph (b) of Republic Act No. 9160 is hereby amended as
follows:

"(b) 'Covered transaction' is a transaction in cash or other equivalent monetary instrument

involving a total amount in excess of Five hundred thousand pesos (PhP 500,000.00) within one (1)
banking day.

Rule 3(b), AMLA IRR

Rule 3.b. "COVERED TRANSACTION" IS A TRANSACTION IN CASH OR OTHER EQUIVALENT

MONETARY INSTRUMENT INVOLVING A TOTAL AMOUNT IN EXCESS OF FIVE HUNDRED
THOUSAND PESOS (PHP500,000.00) WITHIN ONE (1) BANKING DAY

F.Suspicious Transaction-

SECTION 2. Section 3 of the same Act is further amended by inserting between paragraphs
(b) and (c) a new paragraph designated as (b-1) to read as follows:

"(b-1) 'Suspicious transaction' are transactions with covered institutions, regardless of the
amounts involved, where any of the following circumstances exist:

1. there is no underlying legal or trade obligation, purpose or economic justification;

2. the client is not properly identified;
3. the amount involved is not commensurate with the business or financial capacity of the
client;
4. taking into account all known circumstances, it may be perceived that the client's
transaction is structured in order to avoid being the subject of reporting requirements
under the Act;
5. any circumstances relating to the transaction which is observed to deviate from the
profile of the client and/or the client's past transactions with the covered institution;
6. the transactions is in a way related to an unlawful activity or offense under this Act
that is about to be, is being or has been committed; or
7. any transactions that is similar or analogous to any of the foregoing."
Rule 3.b.1. SUSPICIOUS TRANSACTIONS ARE TRANSACTIONS, REGARDLESS OF AMOUNT,
WHERE ANY OF THE FOLLOWING CIRCUMSTANCES EXISTS:
1. THERE IS NO UNDERLYING LEGAL OR TRADE OBLIGATION, PURPOSE OR ECONOMIC
JUSTIFICATION;
2. THE CLIENT IS NOT PROPERLY IDENTIFIED;
3. THE AMOUNT INVOLVED IS NOT COMMENSURATE WITH THE BUSINESS OR
FINANCIAL CAPACITY OF THE CLIENT;
4. TAKING INTO ACCOUNT ALL KNOWN CIRCUMSTANCES, IT MAY BE PERCEIVED THAT
THE CLIENT'S TRANSACTION IS STRUCTURED IN ORDER TO AVOID BEING THE
SUBJECT OF REPORTING REQUIREMENTS UNDER THE ACT;
5. ANY CIRCUMSTANCE RELATING TO THE TRANSACTION WHICH IS OBSERVED TO
DEVIATE FROM THE PROFILE OF THE CLIENT AND/OR THE CLIENT'S PAST
TRANSACTIONS WITH THE COVERED INSTITUTION;
6. THE TRANSACTION IS IN ANY WAY RELATED TO AN UNLAWFUL ACTIVITY OR ANY
MONEY LAUNDERING ACTIVITY OR OFFENSE UNDER THIS ACT THAT IS ABOUT TO BE,
IS BEING OR HAS BEEN COMMITTED; OR
7. ANY TRANSACTION THAT IS SIMILAR, ANALOGOUS OR IDENTICAL TO ANY OF THE
FOREGOING.
G. Safe Harbor- Section 9, 2nd par, RA 9160

When reporting covered transactions to the AMLC, covered institutions and their officers,
employees, representatives, agents, advisors, consultants or associates shall not be deemed to
have violated Republic Act No. 1405, as amended; Republic Act No. 6426, as amended; Republic
Act No. 8791 and other similar laws, but are prohibited from communicating, directly or indirectly,
in any manner or by any means, to any person the fact that a covered transaction report was
 made, the contents thereof, or any other information in relation thereto. In case of violation
thereof, the concerned officer, employee, representative, agent, advisor, consultant or associate of
the covered institution, shall be criminally liable. However, no administrative, criminal or civil
proceedings, shall lie against any person for having made a covered transaction report in the
regular performance of his duties and in good faith, whether or not such reporting results in any
criminal prosecution under this Act or any other Philippine law.

When reporting covered transactions to the AMLC, covered institutions and their officers,
employees, representatives, agents, advisors, consultants or associates are prohibited from
communicating, directly or indirectly, in any manner or by any means, to any person, entity, the
media, the fact that a covered transaction report was made, the contents thereof, or any other
information in relation thereto. Neither may such reporting be published or aired in any manner or
form by the mass media, electronic mail, or other similar devices. In case of violation thereof, the
concerned officer, employee, representative, agent, advisor, consultant or associate of the covered
institution, or media shall be held criminally liable.

H.Authority to Inquire into Bank Deposit-Section11, RA 9160

SEC. 11. Authority to Inquire into Bank Deposits. – Notwithstanding the provisions of
Republic Act No. 1405, as amended; Republic Act No. 6426, as amended; Republic Act No. 8791,
and other laws, the 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: Provided, That this
provision shall not apply to deposits and investments made prior to the effectivity of this Act.

I.Bank Inquiry Without Court Order- Section 3(i) in relation to Section 11, RA 9160 as amended
(Section 8RA 9194)

Section 3(i) in relation to Section 11, RA 9160

(i) "Unlawful activity" refers to any act or omission or series or combination thereof involving or
having relation to the following:

(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised
Penal Code, as amended;
(2) Sections 3, 4, 5, 7, 8 and 9 of Article Two of Republic Act No. 6425, as amended, otherwise
known as the Dangerous Drugs Act of 1972;
(3) Section 3 paragraphs B, C, E, G, H and I of Republic Act No. 3019, as amended; otherwise
known as the Anti-Graft and Corrupt Practices Act;
(4) Plunder under Republic Act No. 7080, as amended;
(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the Revised
Penal Code, as amended;
(6) Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602;
(7) Piracy on the high seas under the Revised Penal Code, as amended and Presidential Decree
No. 532;
(8) Qualified theft under Article 310 of the Revised Penal Code, as amended;
(9) Swindling under Article 315 of the Revised Penal Code, as amended;
(10) Smuggling under Republic Act Nos. 455 and 1937;
(11) Violations under Republic Act No. 8792, otherwise known as the Electronic Commerce Act
of 2000;
(12) Hijacking and other violations under Republic Act No. 6235; destructive arson and murder,
as defined under the Revised Penal Code, as amended, including those perpetrated by terrorists
against non-combatant persons and similar targets;
(13) Fraudulent practices and other violations under Republic Act No. 8799, otherwise known as
the Securities Regulation Code of 2000;
(14) Felonies or offenses of a similar nature that are punishable under the penal laws of other
countries.

SECTION 8. Section 11 of the same Act is hereby amended to read as follows:

(Section 8RA 9194)

"Sec. 11. Authority to Inquire into Bank Deposits. -- Notwithstanding the provisions of Republic
Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and
 other laws, the 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 are related to an unlawful activities as defined in Section 3(I) hereof or
a money laundering offense under Section 4 hereof, except that no court order shall be required
in cases involving unlawful activities defined in Sections 3(I)1, (2) and (12).

"To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may inquire into or
examine any deposit of investment with any banking institution or non-bank financial institution
when the examination is made in the course of a periodic or special examination, in accordance
with the rules of examination of the BSP.

Rule IX(b)AMLA Revised IRR

Rule 9.1.b. Trustee, Nominee and Agent Accounts. - When dealing with customers who
are acting as trustee, nominee, agent or in any capacity for and on behalf of another, covered
institutions shall verify and record the true and full identity of the person(s) on whose behalf a
transaction is being conducted. Covered institutions shall also establish and record the true and
full identity of such trustees, nominees, agents and other persons and the nature of their
capacity and duties. In case a covered institution has doubts as to whether such persons are
being used as dummies in circumvention of existing laws, it shall immediately make the
necessary inquiries to verify the status of the business relationship between the parties

J.Jurisdiction Over Money Laundering- Rule 5, AMLA Revised IRR

Rule 5.1. Jurisdiction of Money Laundering Cases. - The Regional Trial Courts shall have
1he jurisdiction to try all cases on money laundering. Those committed by public officers and
private persons who are in conspiracy with such public officers shall be under the jurisdiction of
the Sandiganbayan.

K.Freeze Order-Section 10,RA 9160 as amended by Section 7, RA 9194

SECTION 7. Section 10 of the same Act is hereby amended to read as follows:

"Sec 10. Freezing of Monetary Instrument or Property. -- The Court of Appeals, upon
application ex parte by the AMLC and after determination that probable cause exists that any
monetary instrument or property is in any way related to an unlawful activity as defined in
Section 3(i) hereof, may issue a freeze order which shall be effective immediately. The freeze
order shall be for a period of twenty (20) days unless extended by the court.

i. Probable Cause- Ligot vs Republic GR No. 176944- As defined in the law, the
probable cause required for the issuance of a freeze order refers to "such facts and circumstances
which would lead a reasonably discreet, prudent or cautious man to believe that an unlawful
activity and/or a money laundering offense is about to be, is being or has been committed and that
the account or any monetary instrument or property subject thereof sought to be frozen is in any
way related to said unlawful activity and/or money laundering offense."

In other words, in resolving the issue of whether probable cause exists, the CA’s statutorily-guided
determination’s focus is not on the probable commission of an unlawful activity (or money
laundering) that the Office of the Ombudsman has already determined to exist, but on whether the
bank accounts, assets, or other monetary instruments sought to be frozen are in any way related
to any of the illegal activities enumerated under RA No. 9160, as amended. Otherwise stated,
probable cause refers to the sufficiency of the relation between an unlawful activity and the
property or monetary instrument which is the focal point of Section 10 of RA No. 9160, as
amended.

ii. Duration- Section 10,RA 9160 as amended by Section 7, RA 9194

SECTION 7. Section 10 of the same Act is hereby amended to read as follows:

“The freeze order shall be for a period of twenty (20) days unless extended by the
court.”

Ligot vs Republic GR No. 176944- The final sentence of Section 10 of the Anti-Money
Laundering Act of 2001 provides, "the freeze order shall be for a period of twenty (20) days
unless extended by the court. In contrast, Section 55 of the Rule in Civil Forfeiture Cases
 qualifies the grant of extension "for a period not exceeding six months" "for good cause" shown.
Notably, the Senate deliberations on RA No. 9160 even suggest the intent on the part of our
legislators to make the freeze order effective until the termination of the case, when
necessary.40

As correctly noted by the petitioners, a freeze order is meant to have a temporary effect; it was
never intended to supplant or replace the actual forfeiture cases where the provisional remedy -
which means, the remedy is an adjunct of or an incident to the main action – of asking for the
issuance of an asset preservation order from the court where the petition is filed is precisely
available. For emphasis, a freeze order is both a preservatory and preemptive remedy.

To stress, the evils caused by the law’s silence on the freeze order’s period of
effectivity46 compelled this Court to issue the Rule in Civil Forfeiture Cases. Specifically, the
Court fixed the maximum allowable extension on the freeze order’s effectivity at six months. In
doing so, the Court sought to balance the State’s interest in going after suspected money
launderers with an individual’s constitutionally-protected right not to be deprived of his property
without due process of law, as well as to be presumed innocent until proven guilty.

To our mind, the six-month extension period is ordinarily sufficient for the government to act
against the suspected money launderer and to file the appropriate forfeiture case against him,
and is a reasonable period as well that recognizes the property owner’s right to due process. In
this case, the period of inaction of six years, under the circumstances, already far exceeded
what is reasonable.

L. Civil Forfeiture – Section 12, RA 9160

SEC. 12. Forfeiture Provisions. –

(a) Civil Forfeiture. - When there is a covered transaction report made, and the court has, in
a petition filed for the purpose ordered seizure of any monetary instrument or property, in
whole or in part, directly or indirectly, related to said report, the Revised Rules of Court on
civil forfeiture shall apply.

M. Prosecution of Money Laundering- Section 6, RA 9160

SEC. 6. Prosecution of Money Laundering. –

(a) Any person may be charged with and convicted of both the offense of money laundering
and the unlawful activity as herein defined.

(b) Any proceeding relating to the unlawful activity shall be given precedence over the
prosecution of any offense or violation under this Act without prejudice to the freezing and
other remedies provided.

Republic vs Glasgow Credit and Collection Services, Inc. GR No. 170281

A criminal conviction for an unlawful activity is not a prerequisite for the institution of a civil
forfeiture proceeding. Stated otherwise, a finding of guilt for an unlawful activity is not an essential
element of civil forfeiture.
Section 6 of RA 9160, as amended, provides:

SEC. 6. Prosecution of Money Laundering.

(a) Any person may be charged with and convicted of both the offense of money
laundering and the unlawful activity as herein defined.

(b) Any proceeding relating to the unlawful activity shall be given precedence
over the prosecution of any offense or violation under this Act without prejudice to
the freezing and other remedies provided. (emphasis supplied)

Rule 6.1 of the Revised Implementing Rules and Regulations of RA 9160, as amended,
states:

Rule 6.1. Prosecution of Money Laundering

(a) Any person may be charged with and convicted of both the offense of money
laundering and the unlawful activity as defined under Rule 3(i) of the AMLA.
(b) Any proceeding relating to the unlawful activity shall be given precedence
over the prosecution of any offense or violation under the AMLA without prejudice to
the application ex-parte by the AMLC to the Court of Appeals for a freeze order with
respect to the monetary instrument or property involved therein and resort to other
remedies provided under the AMLA, the Rules of Court and other pertinent laws
and rules. (emphasis supplied)

Finally, Section 27 of the Rule of Procedure in Cases of Civil Forfeiture provides:

Sec. 27. No prior charge, pendency or conviction necessary. No prior criminal charge,
pendency of or conviction for an unlawful activity or money laundering offense is
necessary for the commencement or the resolution of a petition for civil forfeiture.
(emphasis supplied)

Thus, regardless of the absence, pendency or outcome of a criminal prosecution for the
unlawful activity or for money laundering, an action for civil forfeiture may be separately and
independently prosecuted and resolved.