Sie sind auf Seite 1von 19

POINTERS & CASES

BANKING & ALLIED LAWS and AMLA


larry p. ignacio ©

Δ ORGANIZATION AND OWNERSHIP OF BANKS

*Foreign banks. Foreign banks are now allowed to own or control up to one hundred
percent (100%) of a local bank. The Monetary Board may authorize foreign banks to
operate in the Philippine banking system through any one of the following” modes of
entry:
(i) by acquiring, purchasing or owning up to one hundred percent (100%) of the
voting stock of an existing bank;
(ii) by investing in up to one hundred percent (100%) 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. (Sec. 2, RA 7721,
Foreign Banks Liberalization Act [FBLA] as amended by RA No. 10641: An Act
Allowing the Full Entry of Foreign Banks in the Philippines, amending for the
purpose RA No. 7721 [effective 07 August 2014])

*Ownership of foreign individuals or non-bank corporations. Foreign individuals and


non-bank corporations may only own or control up to forty percent (40%) of the voting
stock of a domestic bank (Sec. 11 GBL). 100% ownership of the voting stock
of a Philippine Bank is allowed only to foreign banks (Sec. 73, GBL; RA
No. 10641).

*Foreign ownership in thrift banks (Sec. 8, Thrift Banks Act [TBA]). Forty percent
(40%) of the voting stock of a thrift bank shall be owned by Philippine citizens. In case of
a merger or consolidation with a foreign holding, foreign ownership is limited to sixty
percent (60%).

*Foreign ownership in rural banks. In Section 4 of the Rural Banks Act (RBA) the
capital stock of any rural bank shall be fully owned and held directly or indirectly by
citizens of the Philippines or corporations, associations or cooperatives qualified under
Philippine laws to own and hold such capital stock. This is now amended by RA No.
10574, the Foreign Equity Bill, approved on 24 May 2013. Foreigners may own up to
60% of voting stocks in rural banks.

* Prohibition on Public Officials. No appointive or elective public officials, whether full-


time or part-time shall at the same time serve as officer of any private bank (Sec. 19,
GBL).
Exception: a) when the service of the public official is incidental to financial
assistance provided by the government or a government-owned or
-controlled corporation to the bank;
b) when the law provides otherwise (e.g. Rural banks allow public
officials, elective or appointive, to serve in a rural bank in any capacity
(Sec. 5, Rural Banks Act [RBA], RA No. 7353).

Δ SUPERVISION AND EXAMINATION OF BANKS

*The BSP is not required to give banks copies of the Report of Examination (ROE).
There is no provision of law, no section in the procedures of the Bangko Sentral ng
Pilipinas (BSP) that shows that the BSP is required to give banks copies of the Reports
of Examination. Section 28 of Republic Act 7653, or the New Central Bank Act, which
governs examinations of banking institutions, provides that the Report of Examination
(ROE) shall be submitted to the MB – the bank examined is not mentioned as a recipient
of the ROE (BSP-MB v. Antonio-Valenzuela, 602 SCRA 698, 02 Oct. 2009).

1
*The Philippine Deposit Insurance (PDIC) and the investigation of banks (RA No.
3591, as amended by RA No. 9302 & RA No. 9576 [April 29, 2009]). Section 9(b-1) of
the PDIC Charter empowers the PDIC to conduct an investigation of a bank and to
appoint examiners who shall have the power to examine any insured bank. Such
investigators are authorized to conduct investigations on frauds, irregularities and
anomalies committed in banks, based on an examination conducted by the PDIC and
the BSP or on complaints from depositors or from other government agencies (PDIC v.
Phil. Countryside Rural Bank, Inc., 640 SCRA 322 [2011]). The Supreme Court ruled that
the power of the PDIC to conduct examination and investigation, although used
interchangeably, are distinct. It was further ruled that an examination of banks requires
the prior consent of the Monetary Board, whereas an investigation based on an
examination report, does not. (PDIC v. Phil. Countryside Rural Bank, Inc., 640 SCRA
322 [2011])

*The action of the Monetary Board in placing a bank under conservatorship, receivership
or liquidation and/or in closing a bank is final and executory in nature. It is an exercise of
police power and there is no need for prior notice and hearing. (Rural Bank of San Miguel
Inc. v. MB, 516 SCRA 154 [2007; Miranda v. PDIC, 501 SCRA 288 [2006; BSP-MB v.
Antonio-Valenzuela, 602 SCRA 698, 02 Oct. 2009).

*Judicial action on conservatorship, receivership, liquidation and bank closure.


The “close now, hear later” rule. While the closure and liquidation of a bank is an
exercise of police power, the validity of such exercise is subject to judicial inquiry
(Central Bank v. CA, 106 SCRA 143 [1981]). The actions of the MB under Secs. 29 and
30 of Republic Act 7653 “may not be restrained or set aside by the court except on
petition for certiorari on the ground that the action taken was in excess of jurisdiction or
with such grave abuse of discretion as to amount to lack or excess of jurisdiction” (BSP-
MB v. Antonio-Valenzuela, 602 SCRA 698, 02 Oct. 2009). A petition for certiorari may
only be filed by the stockholders of record representing the majority of the capital stock
within ten (10) days from receipt by the board of directors of the institution of the order
directing receivership, liquidation or conservatorship (Sec. 30, NCBA). Judicial review
enters the picture only after the MB has taken action – it cannot prevent such action by
the MB. Under the law, the sanction of closure could be imposed upon a bank by the
Bangko Sentral ng Pilipinas (BSP) even without notice and hearing – this “close now,
hear later” scheme is grounded on practical and legal considerations to prevent
unwarranted dissipation of the bank’s assets and as a valid exercise of police power to
protect depositors, creditors, stockholders, and the general public (BSP-MB v. Antonio-
Valenzuela, 602 SCRA 698, 02 Oct. 2009).

Close now, hear later doctrine.


The “close now, hear later” doctrine is justified as a measure for the protection of the
public interest. Swift action is called for on the part of the BSP when it finds that a
bank is in dire straits. Thus, MB may forbid a bank from doing business and place it
under receivership without prior notice and hearing, whenever, upon report of the head
of the supervising or examining department, the MB 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 BSP, 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 (Apex Bancrights Holdings, Inc. v. BSP & PDIC, GR NO.
214866, 02 October 2017).

2
*The bank under receivership cannot continue doing business. It can, however,
foreclose existing mortgages. When a bank is placed under receivership, it would not
be able to do new business, that is, to grant new loans or to accept new deposits but the
receiver is in fact obliged to collect debts owing to the bank, which debts form part of the
assets of the bank (Aguilar v. Manila Banking Corp., 502 SCRA 354 [2006]). Foreclosure
is deemed embraced by the phrase "doing business" as a preparatory measure to
acquiring or holding property. When a bank is prohibited from continuing to do business
by the Central Bank and a receiver is appointed for such bank, that bank would not be
able to do new business, i.e., to grant new loans or to accept new deposits. However,
the receiver of the bank is in fact obliged to collect debts owing to the bank, which debts
form part of the assets of the bank. The receiver must assemble the assets and pay the
obligation of the bank under receivership, and take steps to prevent dissipation of such
assets. Accordingly, the receiver of the bank is obliged to collect pre-existing debts due
to the bank, and in connection therewith, to foreclose mortgages securing such debts
(Provident Savings Bank v. CA, 222 SCRA 125 [1993]).

Banks closed by the MB shall no longer be rehabilitated

 Banks closed by the MB shall no longer be rehabilitated (Sec. 12a, PDIC Charter as
amended)
 Whenever a bank has been put under receivership by the MB, the PDIC shall be
designated as receiver and it shall proceed with the liquidation of the closed bank
(Sec. 30, NCBA as amended by RA 11211 [14 Feb.2019]).
In no case shall a bank be re-opened and permitted to resume banking
business after being placed under rehabilitation (Sec. 12a,PDIC Charter).

Liquidation of banks; Monetary Board.


It is settled that the power and authority of the MB to close banks and liquidate them
thereafter when public interest so requires is an exercise of the police power of the
State. Police power, however, is subject to judicial inquiry. x x x There is no legal
provision ordering the MB to make a separate and distinct factual determination before it
can order the liquidation of a bank or quasi-bank. There being none, it can safely be
concluded that the MB is not so required when the PDIC has already made such
determination. It must be stressed that the BSP (the umbrella agency of the MB), in its
capacity as government regulator of banks, and the PDIC, as statutory receiver of banks
under RA 7653, are the principal agencies mandated by law to determine the financial
viability of banks and quasi-banks, and facilitate the receivership and liquidation of
closed financial institutions, upon a factual determination of the latter’s insolvency (Apex
Bancrights Holdings, Inc. v. BSP & PDIC, GR NO. 214866, 02 October 2017).

Δ BANK DEPOSITS AND THE RESPONSIBILITY OF BANKS TO DEPOSITORS

*Ownership of bank deposits. Banks, where monies are deposited, are considered the owners
thereof (People v. Puig, 563 SCRA 564 [2008]). Fixed, savings, and current deposits of
money in banks and similar institutions shall be governed by the provisions concerning
loan (Article 1980, Civil Code).
A person who receives a loan of money or any fungible thing acquires ownership
thereof, and is bound to pay to the creditor an equal amount of the same kind and quality
(Article 1953, Civil Code).

*The relationship created between the bank and depositor. There is a creditor and
debtor relationship established with the bank as debtor and the depositor as creditor
(Serrano v. CA, 96 SCRA 96).

*The nature of the relationship that is created. The relationship is fiduciary in nature
(PBCOM v. CA, 269 SCRA 695 [1997]; BPI v. IAC, 206 SCRA 408). The fiduciary
relationship means that the bank’s obligation to observe “high standards of integrity and
performance” is deemed written into every deposit agreement between a bank and its
depositor. The fiduciary nature of banking requires banks to assume a degree of
diligence higher than that of a good father of a family. Article 1172 of the Civil Code
states that the degree of diligence required of an obligor is that prescribed by law or
contract, and absent such stipulation then the diligence of a good father of a family.
3
Section 2 of RA 8791 prescribes the statutory diligence required of from banks—that
banks must observe “high standards of integrity and performance” in servicing their
depositors (Consolidated Bank v. CA, 410 SCRA 562, 11 Sept. 2003; BPI v. Lifetime
Marketing Corp., GR No. 176434, 25 June 2008; Associated Bank v. Tan, 446 SCRA
282 [2004; People v. Go, 732 SCRA 216, 06 August 2014).

*The business of banking is analogous to a common carrier. Like a common carrier


whose business is imbued with public interest, a bank should exercise extraordinary
diligence to negate its liability to the depositors (Gonzales v. PCIB, 643 SCRA 180 [23
February 2011]). Banking institutions have the duty to exercise the highest degree of
diligence when transacting with the public (Solidbank Corporation, et al. v. Sps. Tan,
G.R. No. 167346, April 2, 2007 [520 SCRA 123]).

*There is no need to sufficiently prove malice and bad faith to make a bank liable
for moral damages due to the error or negligence of a bank employee. Malice or
bad faith need not be proved sufficiently. As long as the bank has committed a serious
mistake and the bank’s negligence was a result of lack of due care and caution required
of managers and employees of a firm engaged in so sensitive and demanding business
as banking, it is liable for moral damages (Prudential Bank v. CA, 328 SCRA 264).

*The bank’s liability is not merely vicarious but direct and primary. The defense of
diligence in the selection and supervision of employees is not a valid defense to
escape, or at least mitigate, a bank’s liability. (PCIBank v. CA, 350 SCRA 446
[2001]).

Δ SECRECY OF BANK DEPOSITS

*The persons banned in the SBD from looking into bank deposits. Any person,
government official, bureau or office (Sec. 2, SBD; Relate to: AMLA (RA No. 9160 as
amended by RA No. 9194), RA No. 9372 (Human Security Act [HSA]), RA No. 10168
and PDIC Law [RA 33591 as amended by RA No. 9576]).

*The Ombudsman is not covered among the persons banned in the SBD from
looking into bank deposits. Under Sec. 15 (8) of RA No. 6770 (The Ombudsman Act
of 1989), the Ombudsman may examine and have access to bank accounts and
records. This does not, however, mean that the Ombudsman is given the mandate to
look or inquire into all bank deposits at anytime. In Marquez v. Desierto, GR No. 135882,
27 June 2001, the Supreme Court, regulated the powers of the Ombudsman as follows:
a. Only in-camera inspection is allowed;
b. There must be a pending case before a court of competent jurisdiction;
c. The account must be clearly identified;
d. The inspection is limited to the account subject of the court case;
e. The bank personnel and account holder must be notified to be present during
the inspection.

The other persons, government official, bureau or office NOT included in the SBD who
are banned from looking into deposits are:

1) The BSP (Bangko Sentral ng Pilipinas) in line with its mandate to supervise and
examine banks;
2) The PDIC and/or the BSP may inquire into or examine deposit accounts and all
information related thereto in case there is a finding of unsafe or unsound
banking practice (Sec. 8, RA No. 3591 [PDIC Law], as amended by RA No.
9576, June 1, 2009);
3) The AMLC (Anti-money Laundering Council), in cases falling under the Terrorism
Financing Prevention and Suppression Act of 2012 (RA 10168) and the AMLA
(Anti-money Laundering Act (RA 9160 as amended);
4) The ATC (Anti-terror Council) in cases falling under the Human Security Act (Sec.
27, RA No. 9372); and
5) The BIR in case of inquiry of banks accounts of a decedent for estate tax
purposes or in case of a tax compromise (Sec. 6[F], NIRC of 1997 [RA No.
3696]) (RA No. 10021).
4
Note that the above persons/entities are still covered by the confidentiality of
bank deposits and can only examine, look or inquire into bank deposits in line
with the mandate or functions of their office. Similarly, the data or information
obtained in the course of their examination or inquiry can be disclosed only in
accordance with such mandate or function. Otherwise, this may result in the
circumvention of the bank secrecy law.

*The exceptions to the SBD. The following are the exceptions to the SBD:

a. Written permission of the depositor (Sec. 2, SBD);


b. In cases of impeachment (Sec. 2, SBD).
c. Upon order of a competent court in cases of bribery or dereliction of duty of
public officials (Sec. 2, SBD)
- Cases of unexplained wealth are similar to cases of bribery or
dereliction of duty (PNB v. Gancayco, 122 Phil 503 [1965]; BF v.
Purisima, 161 SCRA 576; RA No. 3019).
- Plunder is analogous to bribery (Ejercito v. Sandiganbayan, GR Nos.
157294-95, 30 Nov. 2006; RA No. 7080).
*In anti-graft cases, inquiry extends to property not legitimately acquired,
even if concealed, held or recorded in the name of third persons,
relatives, or other persons.

d. In cases where the money deposited or invested is the subject matter of


litigation (Sec. 2, SBD; Mellon Bank v. Magsino, 190 SCRA 633; UCPB v. CA,
321 SCRA 563 [1999]).
*The subject matter of litigation cannot be limited to the bank accounts
under the name of the accused alone, but must include those accounts to
which the money purportedly acquired illegally or a portion thereof was
alleged to have been transferred (Ejercito v. Sandiganbayan, supra.)

e. In case of inquiry of the BIR of banks accounts of a decedent for estate tax
purposes or in case of a tax compromise (Sec. 6[F], NIRC of 1997 [RA No.
3696]). (RA No. 10021)

f. Incidental disclosures of unclaimed balances under the Unclaimed Balances


Law [Act. No. 3696].

Ω Unclaimed balances – They include credits or deposits of money,


bullion, security or other evidence of indebtedness of any kind, and
interest thereon with banks, buildings and loan associations, and trust
corporations, in favor of any person known to be dead or who has not
made any further deposits or withdrawals during the preceding ten [10]
years or more [Sec. 1, RA No. 3696]. Also known as dormant accounts.

g. In cases falling under the Anti-Money Laundering Act (AMLA) [RA No. 9160 as
amended by RA No. 9194, RA 10167 & RA 10365].

1) Inquiry of bank deposits WITH court order

- Bank inquiry order maybe availed of ex parte premised on the existence


of probable cause for violation of an unlawful activity under Sec. 3 (i) or
money laundering offense under Sec. 4 of the AMLA.
- inquiry includes related accounts which shall refer to accounts, the
funds and sources of which originated from and/or are materially linked to
the monetary instruments(s) or property(ies) subject of the freeze
order(s).
- The Court of Appeals shall act on the application to inquire into or
examine any deposit or investment with any banking institution or non-
bank financial institution within twenty-four (24) hours from filing of the
application. (RA 10167)

5
- The authority to inquire into or examine the main account and the
related accounts shall comply with the requirements of Article III, Sections
2 and 3 of the 1987 Constitution (RA 10167). Likewise, the constitutional
injunction against ex post facto laws and bills of attainder shall be
respected in the implementation of the AMLA (RA 10365).

2) inquiry of bank deposits WITHOUT a court-order

Bank inquiry without need of a court order in the following instances:

(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, 12, 13, 14, 15, and 16 of RA No.
9165, otherwise known as the Comprehensive Dangerous Drugs Act of
2002;
(3) Hijacking and other violations under RA No. 6235; destructive
arson and murder, as defined under the Revised Penal Code, as
amended; and
(4) Terrorism and conspiracy to commit terrorism as defined and
penalized in RA 9372 (Human Security Act).

The basis of bank inquiry.


- When it has been established that there is probable cause that the
deposits or investments, including related accounts involved, are related
to an unlawful activity as defined in Section 3(i) or a money laundering
offense under Section 4. (RA 10167)
- Bank inquiry maybe made in the event of violation of the AMLA and
does not presuppose the pre-existence of a money laundering offense
case already filed in court. The phrase in Section 11, RA 9160, “upon
order of any competent court in cases of violation of this Act,” should be
interpreted to mean “in the event there are violations” of the AMLA, and
not that there are already cases pending in court for such violations.
(Republic v. Eugenio, Jr. (545 SCRA 384 [2008])

The requirement of covered persons in cases of occurrence of


covered and suspicious transactions.
- Covered persons shall report to the AMLC all covered transactions and
suspicious transactions within five (5) working days from occurrence
thereof, unless the AMLC prescribes a different period not exceeding
fifteen (15) working days. Lawyers and accountants acting as
independent legal professionals are not required to report covered and
suspicious transactions if the relevant information was obtained in
circumstances where they are subject to professional secrecy or legal
professional privilege. (RA 10365)

There is no violation of the secrecy of bank deposits law and similar


laws when reporting covered or suspicious transactions.
- When reporting covered or suspicious transactions to the AMLC,
covered institutions and their officers and employees, shall not be
deemed to have violated the secrecy of bank deposits law and similar
laws (Rule 9.3.c., RIRR).
- In fact, no administrative, criminal or civil proceedings shall lie against
any person for having made a covered or suspicious 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 (Rule 9.3.e). This is known as the SAFE HARBOR
PROVISION.
- When reporting covered or suspicious transactions to the AMLC,
covered persons and their officers and employees are prohibited from
communicating, directly or indirectly, in any manner or by any means, to
any person or entity, the media, the fact that a covered or suspicious
transaction has been reported or is about to be reported, the contents of
6
the report, 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 and employee of the covered person and
media shall be held criminally liable (RA 10365).

h. The examination of a bank account based on Sec. 10, Rule 57 of the Rules of
Court (the examination of a party whose property is attached and persons
indebted to a defendant or controlling his property) (Oñate v. Abrogar, 230 SCRA
181 [1994]).

i. In cases falling under the Human Security Act (Sec. 27, RA No. 9372).

- The justices of the Court of Appeals (CA) specially designated as special


court to handle anti-terrorism cases may authorize in writing any police or
law enforcement officer and the members of his/her team duly authorized
in writing by the anti-terrorism council (ATC) to:

(a) Examine or cause the examination of, the deposits, placements, trust
accounts, assets and records in a bank or financial institution; and

(b) Gather or cause the gathering of any relevant information about such
deposits, placements, trust accounts, assets, and records from the bank
or financial institution.

The bank or financial institution concerned shall not refuse to allow such
examination or to provide the desired information, when so ordered by
and served with the written order of the CA (Sec. 27, HSA).

j. The PDIC and/or the BSP may inquire into or examine deposit accounts and all
information related thereto in case there is a finding of unsafe or unsound
banking practice (Sec. 8, RA No. 3591 [PDIC Law], as amended by RA No.
9576, June 1, 2009).

k. The AMLC (Anti-money Laundering Council), in cases falling under the


Terrorism Financing Prevention and Suppression Act of 2012 (RA 10168), is
authorized to inquire into or examine deposits and investments with any banking
institution or non-bank financial institution and their subsidiaries and affiliates
without a court order.

*Evidentiary value of information obtained in violation of the SBD. There is nowhere


in RA 1405 that provides that an unlawful examination of bank accounts shall render the
evidence obtained therefrom inadmissible in evidence. Section 5 of RA 1405 only states
that “[a]ny violation of this law will subject the 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” (Ejercito v. Sandiganbayan, supra).

In RA No. 10167 (an Act amending the Anti-Money Laundering Act [AMLA]), it is
provided that inquiry or examination of bank accounts shall comply with the
requirements of Article III, Sections 2 and 3 of the 1987 Constitution which are
incorporated by reference. Art. III, Sec. 3(2) reads: “Any evidence obtained in violation of
this or the preceding section shall be inadmissible for any purpose in any proceeding.”
The authority to inquire into or examine the main account and the related accounts shall
comply with the requirements of Article III, Sections 2 and 3 of the 1987 Constitution (RA
10167). Likewise, the constitutional injunction against ex post facto laws and bills of
attainder shall be respected in the implementation of the AMLA (RA 10365).
Waiver of bank secrecy

BPI and TIDCORP entered into a joint compromise agreement that includes a waiver of
confidentiality of bank deposits of Doña Adela Export International, Inc. which is not a
party and signatory to the compromise. Is Doña Adela bound by the waiver?

7
NO. The provision on the waiver of the confidentiality of petitioner’s bank
deposits was merely inserted in the agreement. It is clear therefore that Doña Adela
Export International, Inc. (Doña Adela) is not bound by the said provision since it was
without the express consent of Doña Adela who was not party and signatory to the said
agreement.
Neither can petitioner be deemed to have given its permission by failure to
interpose its objection during the proceedings. It is an elementary rule that the existence
of a waiver must be positively demonstrated since a waiver by implication is not normally
countenanced. The norm is that a waiver must not only be voluntary, but must have been
made knowingly, intelligently, and with sufficient awareness of the relevant
circumstances and likely consequences. There must be persuasive evidence to show an
actual intention to relinquish the right. Mere silence on the part of the holder of the right
should not be construed as a surrender thereof; the courts must indulge every
reasonable presumption against the existence and validity of such waiver (Doña Adela
Export International, Inc. v. Trade and Investment Development Corporation [TIDCORP],
750 SCRA 429, 11 February 2015).

Δ FOREIGN CURRENCY DEPOSITS AND BANK SECRECY

*Foreign currency deposits are absolutely confidential and shall in no instance be


inquired or examined. In NO INSTANCE shall foreign currency deposits be examined,
inquired or looked into by any person, government official, bureau or office whether
judicial or administrative or legislative, or any other entity whether public or private (Sec.
8, Foreign Currency Deposit Act [FCDA] [RA No. 6426]). Hence, even if the foreign
currency deposit is the subject matter of litigation, the same may not be inquired,
examined or looked into.

Only the owner of the foreign currency deposit is entitled to the confidentiality provisions
of Sec. 8 of RA No. 6426 (FCDA) (Van Twest v. CA, 230 SCRA 42, 10 February 1994).

*Foreign currencies that are covered. ALL kinds of foreign currency deposits are
covered. In the case of Benedicto v. CA, 364 SCRA 334 (2001), the Supreme Court
ruled that Sec. 2 of the FCDA speaks of “deposit with such Philippine banks in good
standing, as may . . . be designated by the Central Bank for the purpose” and does not
cover foreign currency accounts maintained in foreign banks.

*The instance when foreign currency deposits maybe inquired or looked into. The
lone exception to the disclosure of foreign currency deposits, under Republic Act No.
6426, is a disclosure upon the written permission of the depositor (GSIS v. CA, 651
SCRA 661, 08 June 2011; Intengan v. CA, 15 February 2002, 377 SCRA 63).

However, with the enactment of subsequent laws, there are FOUR (4) additional
exceptions now: 1) Sec. 11 of the AMLA as amended by RA No. 10167; 2) the Human
Security Act [RA 9372]; 3) Sec. 5, RA No. 3591 [PDIC Law] as amended by RA No.
9576; AND 4) RA No. 10168 [Terrorism Financing Prevention & Suppression Act of
2012]).

*The garnishment of bank deposits is not a violation of the SBD (RA 1405). A bank
may not validly refuse to comply with an order of garnishment by invoking the
provisions of RA 1405. The garnishment of bank deposit of a defendant does not
involve examination or inquiry into the deposit, but is merely to inform the court whether
defendant has a deposit in the bank, which may be garnished. It does not violate RA
1405 (ChinaBank v. Ortega, 49 SCRA 355 [1973]). There is no real inquiry in case of
garnishment, and if the existence of the deposit is disclosed, the disclosure is purely
incidental to the execution process (ibid.).
*Joint accounts maybe garnished. It is in the nature of joint accounts that anyone of
the depositors has access to the entire funds therein and therefore subject to
garnishment on account of the liability of one of them—if, afterwards, there should be
squabbling amongst the supposed joint depositors as to the share of each, they can sort
it out amongst themselves (Fernandez v. Aniñon, GR No. 138967, 24 April 2007).

8
*A foreign currency deposit cannot be garnished. The foreign currency deposit shall
be exempt from attachment, garnishment or any other order or process of any court,
legislative body, government agency or any administrative body whatsoever (Sec. 8,
FCDA). EXCEPT when it falls under Sec. 11 of the AMLA (When it has been established
that there is probable cause that the deposits involved are in any way related to money
laundering offense).

*The foreign currency deposit of a foreign transient/tourist maybe garnished.


Foreign currency deposits are exempt from attachment, garnishment, or any other order
or process of any court, legislative body, government agency or any administrative body.
The provision of RA No. 6426 (FCDA) which prohibits garnishment of foreign currency
deposits is INAPPLICABLE to a foreign transient. The FCDA applies to accounts of
lenders and investors (Salvacion et al., v. CB, 278 SCRA 27)

Δ LOAN ACCOUNTS, ETC.

*A bank may allow a DOSRI to: a) borrow from the bank; b) become a guarantor,
indorser or surety for loans from such bank to others; c) be an obligor; or d) incur
any contractual liability. 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
(Sec. 36, GBL).

However, the written approval shall NOT be required for loans, other credit
accommodations and advances granted to officers under a fringe benefit plan approved
by the BSP (Sec. 36, GBL).

The transaction with a DOSRI is further subject to the following conditions: a) The
dealings of a bank with any of its DOSRI shall be upon such terms not less favorable to
the bank than those offered to others (Sec. 36, GBL); b) The DOSRI borrower is required
to waive the secrecy of his/her deposits of whatever nature in all banks in the Philippines
(Sec. 26, NCBA); c) The ceiling/limitation in Sec. 36, GBL is followed.
Loans, credit accommodations or guarantees extended by a bank to DOSRI are also
termed as “insider lending,” “self-dealing transaction” or “related
party lending.”

DOSRI loans are not prohibited; they are merely restricted or regulated, i.e. certain
ceilings/limits have to be observed and certain procedural and reportorial requirements
have to be complied with.

*Rationale of DOSRI restrictions. Banks were not created for the benefit of their
directors and officers; they cannot use the assets of the bank for their own benefit,
except as may be permitted by law. Congress has thus deemed it essential to impose
restrictions on borrowings by bank directors and officers in order to protect the public,
especially the depositors (Go v. BSP, 604 SCRA 322, 29 October 2009).

Δ THE TRUTH IN LENDING ACT [TLA] (RA No. 3765)

*The nature and purpose of RA 3765. The law is an act to require the disclosure of
finance charges in connection with extensions of credit. It is known as the “Truth in
Lending Act” (TLA). The purpose of the TLA is the full disclosure to the borrower of the
true cost of credit as well as other finance charges (Sec. 2, TLA).
The Truth in Lending Act, or Republic Act No. 3765, was enacted “to protect citizens
from a lack of awareness of the true cost of credit to the user by using a full disclosure of
such cost with a view of preventing the uninformed use of credit to the detriment of the
national economy (Silos v. PNB, 728 SCRA 617, 02 July 2014).

The rationale of this provision is to protect users of credit from a lack of awareness of the
true cost thereof, proceeding from the experience that banks are able to conceal such
9
true cost by hidden charges, uncertainty of interest rates, deduction of interests from the
loaned amount, and the like. The law thereby seeks to protect debtors by permitting
them to fully appreciate the true cost of their loan, to enable them to give full consent to
the contract, and to properly evaluate their options in arriving at business decisions
(UCPB vs. Sps. Beluso, G.R. No. 159912, August 17, 2007).

*The creditor under the TLA. Creditor means any person engaged in the business of
extending credit (including any person who as a regular business practice makes loans
or sells or rents property or services on a time, credit, or installment basis, either as
principal or as agent) who requires as an incident to the extension of credit the payment
of a finance charge (Sec. 3, par. 4, TLA).

*The finance charge under the TLA. Finance charge includes interest fees, service
charges, discounts, and such other charges incident to the extension of credit as the
Board may by regulation prescribed (Sec. 3, par. 3, TLA).

*The effect of failure to comply with the provisions of the TLA. The creditor shall
pay a fine of P100.00 or double the amount of the finance charge but in no case shall it
exceed P2,000.00 (Sec. 6a, TLA). In case of willful violation, the fine shall not be less
than P1,000.00 nor more than P5,000.00 or imprisonment for not less than 6 months,
nor more than one year or both (Sec. 6b, TLA).

*The violation or non-compliance with the provisions of the TLA will not affect the
validity or enforceability of the contract. Nothing contained in the provisions of the
TLA or any regulation thereunder shall affect the validity or enforceability of any contract
or transaction (Sec. 6b, TLA).

*Banks cannot collect handling charges if not disclosed pursuant to the Truth in
Lending Act or in the event the borrower is not duly informed of the data required
by law. (Consolidated Bank v. CA, 246 SCRA 193 [1995]; DBP v. Arcilla, Jr., 462 SCRA
599 [30 June 2005]).

Δ THE UNCLAIMED BALANCES LAW (Act No. 3936, as amended)

*Definition of unclaimed balance. They shall include credits, deposits of money,


bullion, security or other evidence of indebtedness of any kind, and interest thereon with
banks, buildings and loan associations, and trust corporations, in favor of any person
known to be dead or who has not made further deposits or withdrawals during the
preceding ten (10) years or more (Sec. 1, Unclaimed Balances Law [UBL]).

*What will happen to the unclaimed balance? The unclaimed balance, together with
the increase and proceeds thereof, shall be deposited with the Treasurer of the
Philippines to the credit of the Government of the Republic of the Philippines to be used
as the National Assembly may direct (Sec. 1, UBL). The process of depositing to the
Treasurer unclaimed balances is known as “escheat proceedings.”

Escheat proceeding refer to the judicial process in which the state, by virtue of its
sovereignty, steps in and claims abandoned left vacant, or unclaimed property, without
there being an interested person having a legal claim thereto. Escheat is not a
proceeding to penalize depositors for failing to deposit to or withdraw from their
accounts. In case the bank complies with the provisions of the law and the unclaimed
balances are eventually escheated to the Republic, the bank shall not thereafter be
liable to any person for the same and any action which may be brought by any person
against any bank for unclaimed balances so deposited shall be defended by the Solicitor
General without cost to such bank (RCBC v. Hi-Tri Dev’t. Corp., 672 SCRA 514, 13 June
2012).

*The publication of the list of unclaimed balance is essential before the deposit to
the Treasurer of the Republic of the Philippines. The publication of the list of
unclaimed balances is intended to safeguard the right of the depositors, their heirs and
successors to due process. The fact that the government is in a tight financial situation is

10
not a justification to dispense the elementary rule of due process (Republic v. CA, 345
SCRA 63 [2000]).

Δ THE PHILIPPINE DEPOSIT INSURANCE CORPORATION [PDIC] (RA No. 3591, as


amended)

*The purpose of the PDIC. The purpose of the PDIC (the Corporation) is to insure
deposit of all banks which are entitled to the benefits of insurance. It shall, as a basic
policy, promote and safeguard the interests of the depositing public by way of providing
permanent and continuing insurance coverage on all insured deposits (Sec. 1, RA No.
3591, as amended). The purpose of the PDIC is to protect the depositing public in the
event of a bank closure (PDIC v. Citibank, N.A., 669 SCRA 191, 11 April 2012). The
primary purpose of the PDIC is to act as insurer, as a co-regulator of banks, and as
receiver and liquidator of closed banks (PDIC v. Phil. Countryside Rural Bank, Inc. 640
SCRA 322, 24 January 2011).

The PDIC may likewise conduct an investigation of banks. It was decided in a case that
the Monetary Board approval is not required for the PDIC to conduct an investigation on
the Banks (PDIC v. Phil. Countryside Rural Bank, Inc., 640 SCRA 322 [2011]).

*The risk insured against. The risk insured against is bank closure.

*Types of deposits that are insured. Savings account, current account, time deposits.
Deposits in acceptable foreign currencies are also insured pursuant to the FCDA (RA
6426). However, the PDIC will only pay those deposits that are made in the usual course
of business (PDIC v. CA, 402 SCRA 194 [2003]). Trust funds were deleted from the
coverage of insured deposits (PD No. 1974).

*The term “deposit” under the PDIC. 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.

Note that the term deposit does not cover any obligation of a bank which is payable at
the office of the bank located outside of the Philippines. However, subject to the approval
of the Board of the PDIC, any insured bank which maintains a branch outside the
Philippines may elect to include for insurance its deposit obligations payable only at such
branch (Sec. 4f, RA 3591 as amended).

*Definition of an “insured deposit.” 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 the date of closure, but not to exceed Five
Hundred Thousand Pesos (P500,000.00).

*The determination of the amount due to a depositor. In determining the amount due
to any depositor, there shall be added together all deposits in the bank maintained in the
same right and capacity for his benefit either in his own name or in the name of others
(Sec. 4g, RA 3591, as amended).

*The treatment of joint accounts in determining the amount due. A joint account
regardless of whether the conjunction “and,” “or,” “and/or” is used, shall be insured
separately from any individually-owned deposit account.
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.

11
If the account is held by a juridical person or entity jointly with one or
more natural persons, the maximum insured deposit shall be presumed to
belong entirely to such juridical person or entity.
The aggregate of the interests 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 P500,000.00. (Sec.
4g, RA 3591, as amended).

*The subrogation of the PDIC upon payment of insured deposits. The Corporation,
upon payment of any depositor as provided for in subsection (c) of this Section3, shall
be subrogated to all rights of the depositor against the closed bank to the extent of such
payment. Such subrogation shall include the right on the part of the Corporation to
receive the same dividends and payments from the proceeds of the assets of such
closed bank and recoveries on account of stockholders’ liability as would have been
payable to the depositor on a claim for the insured deposits but, such depositor shall
retain his claim for any uninsured portion of his deposit. All payments by the Corporation
of insured deposits in closed banks partake of the nature of public funds, and as such,
must be considered a preferred credit similar to taxes due to the National Government in
the order of preference under Article 2244 of the New Civil Code (Sec. 15, RA 3591, as
amended)

*Period to claim insured deposits. Unless otherwise waived by the Corporation, if the
depositor in the closed bank shall fail to claim his insured deposits with the Corporation
within two (2) years from actual takeover of the closed bank by the receiver, or does
not enforce his claim filed with the corporation within two (2) years after the two-year
period to file a claim as mentioned hereinabove, all rights of the depositor against the
Corporation with respect to the insured deposit shall be barred; however, all rights of the
depositor against the closed bank and its shareholders or the receivership estate to
which the Corporation may have become subrogated, shall thereupon revert to the
depositor. Thereafter, the Corporation shall be discharged from any liability on the
insured deposit. (Sec. 16e, RA 3591, as amended by R.A. 9302, 12 August 2004)

*Splitting of insured deposits. Splitting of deposits or creation of fictitious loans or


deposit accounts. Splitting of deposits occurs whenever a deposit account with an
outstanding balance of more than the statutory maximum amount of insured deposit
maintained under the name of natural or juridical persons is broken down and
transferred into two (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. (Sec. 21(f)(5), RA 3591, as amended)

*Actions of the PDIC shall not be restrained or enjoined. No court, except the Court
of Appeals, shall issue any temporary restraining order, preliminary injunction or
preliminary mandatory injunction against the Corporation for any action under the PDIC
law.
This prohibition shall apply in all cases, disputes or controversies instituted by a private
party, the insured bank, or any shareholder of the insured bank.
The Supreme Court may issue a restraining order or injunction when the matter is of
extreme urgency involving a constitutional issue, such that unless a temporary
restraining order is issued, grave injustice and irreparable injury will arise.
Any restraining order or injunction issued in violation of the PDIC law is void and of no
force and effect and any judge who has issued the same shall suffer the penalty of
suspension of at least sixty (60) days without pay. (Sec. 22, RA 3591, as amended)

Justice Perlas Bernabe cases

Diligence required of banks.


In the case of banks and other financial institutions, greater care and due diligence are
required since they are imbued with public interest, failing which renders the mortgagees
in bad faith. Thus, before approving a loan application, it is a standard operating practice
12
for these institutions to conduct an ocular inspection of the property offered for mortgage
and to verify the genuineness of the title to determine the real owner(s) thereof
(Philippine Banking Corp. v. Dy, GR No. 183774, 14 November 2012).

Joint bank accounts.

Evangeline opened with EBPCI a joint “OR” account with his brother. The (a) the
account was opened for a specific purpose, i.e., to facilitate the transfer of needed funds
for Evangeline's business projects; and (b) Dominador may withdraw funds therefrom "if“
there is a need to meet Evangeline's financial obligations arising from said projects.
Dominador later withdrew P980,000 from the joint account and deposited it in his sole
account. Evangeline questioned why the bank allowed the withdrawal without his
consent and contrary to the purpose of the account
The bank has no fault and validly allowed the withdrawal. A joint account is one that
is held jointly by two or more natural persons, or by two or more juridical persons or
entities. Under such setup, the depositors are joint owners or co-owners of the said
account, and their share in the deposits shall be presumed equal, unless the contrary is
proved, pursuant to Article 485 of the Civil Code.
The common banking practice is that regardless of who puts the money into the
account, each of the named account holder has an undivided right to the entire
balance, and any of them may deposit and/or withdraw, partially or wholly, the
funds without the need or consent of the other, during their lifetime. Nevertheless,
as between the account holders, their right against each other may depend on what they
have agreed upon, and thepurpose for which the account was opened and how it will be
operated. (Apique v. Fahnenstick, GR No. 205705,05 August 2015).

Rural Banks Act.


In an extrajudicial foreclosure of land acquired under the free patent, the mortgage may
redeem the property within two (2) years from the date of foreclosure if the land is
mortgaged to a rural bank under RA No. 720, as amended, otherwise known as the
Rural Banks Act, or within one (1) year from the registration of the certificate of sale if the
land is mortgaged to parties other than rural banks pursuant to Act No. 3135. x x x In
addition to the principal and interest, the repurchase price should also include all the
expenses of foreclosure, i.e., Judicial Commission, Publication Fee and Sheriff’s Fee, in
accordance with Section 47 of the General Banking Law of 2000 (Guevarra v. The
Commoner Lending Corp., Inc., GR No. 204672, 18 February 2015).

Redemption in case of land covered by public land act


mortgaged to a rural bank or private individual

 If mortgaged to RURAL BANK: TWO (2) years from the date of foreclosure
or from the registration of the sheriff’s certificate of sale
If the mortgagor fails to exercise such right, he or his heirs may still repurchase the
property within five (5) years from the expiration of the two (2)-year redemption period
(Hilaga v. Rural Bank of Isulan [Cotabato, Inc.], 617 SCRA 531, 07 April 2010)
 If the land is mortgaged to parties other than rural banks, the mortgagor
may redeem the property within ONE (1) year from the registration
of the certificate of sale. IF he fails to do so, he or his heirs may
repurchase the property within five (5) years from the
expiration of the redemption period pursuant to Section 11 of the
Public Land Act (C.A. No. 141) (ibid.).
THE ANTI-MONEY LAUNDERING ACT [AMLA]
(RA No. 9160, as amended by RA No. 9194, RA 10167, RA 10365 & RA 10927, the
Revised Implementing Rules and Regulations [RIRR]), and the Casino Implementing
Rules and Regulations (CIRR) of RA 10927

Who are the “covered persons” under the AMLA?

- ‘Covered persons’, natural or juridical, refer to:

1) Persons supervised or regulated by BSP


2) Persons supervised or regulated by IC
13
3) Persons supervised or regulated by SEC
4) Designated Non-Financial Businesses and Professions (DNFBPs)
(Rule 3 E. 2016, RIRR; Sec. 3a, RA 10365)
5) Casinos, including internet and ship-based casinos, with respect to their
casino cash transactions related to the gaming operations (Sec. 1, RA 10927).
Included are other entities as may be determined by the AGA (Appropriate
Government Agency) (Section 5, Rule II, CIRR).
Are lawyers and accountants included in the term "covered persons?"

- 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. (Sec. 3a, RA 10365)

HOWEVER, persons, including lawyers and accountants, who provide


any of the following services are covered:

i. Managing of client money, securities or other assets;


ii. Management of bank, savings, securities or other assets;
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.
(Rule III, 2016 RIRR)

What is a “covered transaction?”

• It is a transaction in cash or other equivalent monetary instrument involving a total


amount in excess of Five Hundred Thousand Pesos (P500,000.00) within one (1)
banking day (Sec. 3b, AMLA).
• Covered transaction in casinos refers to a single casino cash transaction involving
an amount in excess of Five Million Pesos (P5,000,000.00) or its equivalent in
any other currency (Sec. 6M, Rule III, CIRR).

• jewelry dealers in precious metals or precious stones, who, as a business, trade


in precious metals/stones, for transactions in excess of One million pesos
(P1,000,000.00)

What court has jurisdiction over money laundering cases?

The Regional Trial Courts shall have jurisdiction to try all cases on money laundering.
Those committed by public officers and private persons who are in conspiracy with such
pubic officers shall be under the jurisdiction of the Sandiganbayan (Sec. 5, AMLA; Rule 5.1.,
RIRR).

SAFE HARBOR PROVISION


No administrative, criminal or civil proceedings shall lie against any person for having
made a covered or suspicious 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 (Rule 9.3.e, AMLA IRR).

The AMLC may inquire, look into, & examine bank deposits

Notwithstanding the provisions of RA No. 1405 (Secrecy of Bank Deposits), RA No.


6426 (Foreign Currency Deposits Acts), RA No. 8791 (General Banking Law) and other
laws, the AMLC may inquire or examine any particular deposit or investment, including
related accounts, with any banking institution or non-bank financial institutions (Sec. 11,
AMLA, as amended by RA 10167).

 Bank inquiry may be with or without a court order.


14
AMLC bank inquiry WITHOUT a court order

 inquiry of bank deposits WITHOUT a court-order

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. Hijacking and other violations under Republic Act No.


6235; destructive arson and murder, as defined under the
Revised Penal Code, as amended;

4. Felonies or offenses of a nature similar to those


mentioned in Section 3(i) (1), (2) and (12) of the AMLA
which are punishable under the penal laws of other
countries;

(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.
(12) Hijacking and other violations under Republic Act No. 6235;
destructive arson and murder, as defined under the
Revised Penal Code, as amended.

5. Terrorism and conspiracy to commit terrorism as defined


and penalized under Republic Act No. 9372; and

6. 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.
(Rule 11B, 2016, RIRR).

Bank inquiry order is EX-PARTE

Bank inquiry order maybe availed of ex parte premised on the existence of probable
cause for violation of an unlawful activity under Sec. 3 (i) or money laundering offense
under Sec. 4 of the AMLA.

- inquiry includes related accounts which shall refer to accounts, the funds and sources
of which originated from and/or are materially linked to the monetary instruments(s) or
property(ies) subject of the freeze order(s).

-The Court of Appeals shall act on the application to inquire into or examine any
deposit or investment with any banking institution or non-bank financial institution within
twenty-four (24) hours from filing of the application. (RA 10167)

Republic v. Bolante, GR No. 190357, 17 April 2017 (Sereno, CJ)

Acting on a suspicious transaction report from the PNB and based on a Senate Committee
Report, the AMLC conducted an investigation on several NGOs—LIVECOR, Molugan and AGS—
of which former Agriculture Usec. Jocelyn Bolante was a former officer, came out with a
Resolution finding probable cause to believe that the accounts of the NGOs were related to what
became known as the "fertilizer fund scam."

15
The AMLC then filed an ex-parte petition for bank inquiry of the account of the NGOs and for the
issuance of a freeze order.
The RTC found no probable cause to believe that the deposits and investments of respondents
were related to an unlawful activity. It pointed out that the Republic, in support of the latter's
application, relied merely on two pieces of evidence: Senate Committee Report and the court
testimony of witness Thelma Espina of the AMLC Secretariat.

A) Is the application ex parte for a bank inquiry order pursuant to Section 11


of RA 9160 Constitutional?
B) Is it a violation of right to privacy or right to due process?

It is Constitutional and does not violate substantive due process.


- There is no physical seizure of the targeted corporeal property.
- The AMLC ex parte inquiry into bank accounts, is merely in pursuance of
its investigative functions akin to those of the NBI. The AMLC does
not exercise quasi-judicial functions.
- The account holder can then question the finding of probable cause for
the issuance of the bank inquiry order.

NO violation of the right to privacy.


- The source of the right to privacy governing bank deposits is statutory, not
constitutional. The legislature may validly carve out exceptions to the rule
on the secrecy of bank deposits, and one such legislation is Section 11 of
R.A. 9160.

What is the basis of bank inquiry?

• When it has been established that there is probable cause that the deposits or
investments, including related accounts involved, are related to an unlawful activity
as defined in Section 3(i) or a money laundering offense under Section 4. (RA 10167)
• Bank inquiry maybe made in the event of violation of the AMLA and does not
presuppose the pre-existence of a money laundering offense case already filed in
court. (Republic v. Eugenio, Jr. (545 SCRA 384 [2008])
The AMLC must show specific facts and circumstances that provide a
link between an unlawful activity or a money laundering offense.

For the issuance of a bank inquiry order, it is necessary for the AMLC to be able to show
specific facts and circumstances that provide a link between an unlawful activity or a
money laundering offense, on one hand, and the account or monetary instrument or
property sought to be examined on the other hand. In the absence of any proof to that
effect, the bank inquiry order will not be issued. (Republic v. Bolante, GR No. 190357, 17 April 2017)
The owner of the account has the right to ascertain from the CA the
basis for the issuance of the bank inquiry order ex-parte.

In 2015, a year before the 2016 presidential elections, reports abounded on the
supposed disproportionate wealth of then Vice President Jejomar Binay and the rest of
his family, some of whom were likewise elected public officers. The Office of the
Ombudsman and the Senate conducted investigations and inquiries thereon ostensibly
based on their respective powers delineated in the Constitution.
News reports announced the AMLC inquiry into then VP Binay's bank accounts,
including accounts of members of his family, and the law firm of Subido Pagente Certeza
Mendoza & Binay (SPCMB) where a family member was a partner. The SPCMB then
wrote the CA about the bank inquiry with a request to be furnished with copies of the
petition for bank inquiry. The CA denied the letter request citing the ex-parte nature and
the confidentiality of the proceedings.

The SPCMB assailed the CA denial and questioned the Constitutionality of Section 11 of
the AMLA on the ex-parte bank inquiry.

Although the bank inquiry order ex-parte passes constitutional muster, there is nothing in
Section 11 nor the implementing rules and regulations of the AMLA which prohibits the
owner of the bank account, to ascertain from the CA, post issuance of the bank inquiry
16
order ex-parte, if his account is indeed the subject of an examination. There is nothing in
Section 11 which precludes the owner of the account from challenging the basis for the
issuance thereof. (Subido Pagente Certeza Mendoza and Binay Law Offices v. CA, G.R. No. 216914, 06
December 2016)

What action may the AMLC interpose against proceeds of any


unlawful activity?

The AMLC shall apply via a verified ex parte petition before the Court of Appeals (CA) for
a FREEZE ORDER of any monetary instrument or property alleged to be proceeds of
any unlawful activity (Rule 7.2. par. 6, RIRR; Section 4, RA 10967).

The AMLC may also apply for an asset preservation order before the Regional Trial
Court having jurisdiction over the appropriate anti-money laundering case or civil
forfeiture case regarding the same account (Section 4, RA 10967).

What is the basis in obtaining a freeze order?

Upon a determination that probable cause exist that any monetary instrument or
property is in any way related to an unlawful activity in Sec. 3(i). (RA 10365; Sec. 4, RA 10967)
What is the effective period of the freeze order?

- The freeze order shall be effective immediately, for a period of twenty (20)
days. Within the twenty (20)-day period, the CA shall conduct a summary hearing, with
notice to the parties, to determine whether or not to modify or lift the freeze order, or
extend its effectivity. The total period of the freeze order issued by the CA under this
provision shall not exceed six (6) months.

 If there is no case filed against a person whose account has been frozen within
the period determined by the CA, not exceeding six (6) months, the freeze order
shall be seemed ipso facto lifted (Section 4, RA 10967).

On motion of the AMLC filed before the expiration of the original period
of the freeze order, the court may, for good cause shown, extend its
effectivity. Upon the timely filing of such motion and pending resolution
by the Court of Appeals, the freeze order shall remain effective (Rule 10A3,
2016, RIRR).

Within what period will the CA act on the application for a freeze
order?

CA shall act on the application within 24-hours from filing of the petition. If the application
is filed a day before a nonworking day, the computation of the 24-hour period shall
exclude the nonworking days (Section 4, RA 10967).
What is the remedy of a person whose account was frozen?
A person whose account has been frozen may file a motion to lift the freeze order and
the court must resolve this motion before the expiration of the freeze order.

May a court issue a TRO/injunction against a freeze order?

No court shall issue a temporary restraining order or a writ of injunction against any
freeze order except the Supreme Court (SC) (Sec. 10, RA 10365).
*********

Important definitions

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
17
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. (Sec. 16, GBL)

Quasi-banks
They are entities engaged in the borrowing of funds through the issuance, endorsement
or assignment with recourse or acceptance of deposit substitutes for purposes of
relending or purchasing of receivables and other obligations (Sec. 4 last par., GBL).

Conservatorship of banks
It is an attempt to save the bank from bankruptcy and ultimate liquidation. It is a step
short of liquidation; it is helping a bank by effective management reforms and/or infusion
of additional capital.
Basis. Whenever on the basis of the report of the MB, the bank or quasi-bank is in a
state of inability or unwillingness to maintain a condition of liquidity deemed adequate to
protect the interest of depositors and creditors (Sec. 29, NCBA).
The bank continues to operate as a banking institution during conservatorship. The
conservator merely takes the place of the bank’s management and board of directors.
The conservatorship shall not exceed one (1) year (Sec. 29, NCBA).

Bank Holiday
A situation where a bank or a quasi-bank suspends the payment of its deposit
liabilities continuously for more than thirty [30] days).
Equality in equity or pari passu principle
All creditors, whether secured or unsecured, should stand on equal footing. In legal
parlance, pari passu is used especially of creditors who, in marshaling assets, are
entitled to receive out of the same fund without any precedence over each other
(Express Investments v. BAYANTEL, 687 SCRA 50 [ 05 December 2012]).

SBL or single borrower’s limit


It is the limit of the amount of loan, credit accommodation or guarantees that maybe
extended by a bank to any person, partnership, association, corporation or other entity,
which shall at no time exceed twenty percent (20%) [Increased to 25% as per BSP
Circular No. 425] of the networth of such bank (Sec. 35.1, GBL).
The increase of the SBL. The SBL may be increased by an additional ten percent (10%)
of the networth 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 (Sec. 35.2, GBL).

Networth
The total and unimpaired paid-in capital including paid-in surplus, retained earnings and
undivided profit, net valuation of reserves and other adjustments as may be required by
the BSP (Sec. 24, GBL).
Net worth shall mean the total of the unimpaired paid-in capital including paid-in surplus,
retained earnings and undivided profit, net of valuation reserves and other adjustments
as may be required by the Bangko Sentral (Sec. X326.1, 2015 MORB).

Bank Reserves
That portion of the bank’s earnings or assets especially kept either in the form of cash or
near cash assets or a combination of both for the purpose of being able to meet all
circumstances relative to banking practices. Bank reserves are created under two (2)
categories: as a bank policy and as required by law (Zacarias Ronquillo, Money, Credit
and Banking in the Philippine Financial System [1999 Revised ed.,] p. 106).

a. Primary reserves – All cash in vault, checks and other instruments due
from the BSP and from other banks. They include cash held by tellers known
as TILL MONEY. (ibid.)
18
b. Secondary reserves – Composed of assets which can be easily
liquidated, such as government securities, marketable securities – stocks and
bonds, commercial papers, banker’s acceptance and callable loans. (ibid.)

Prudent man rule


A trust entity shall administer the funds or property under its custody with the diligence
that a prudent man would exercise in the conduct of an enterprise of like character and
with similar aims (Sec. 80, GBL).

The “Self-Dealing” in trust operations


It means that no trust entity shall, for the account of the trustor or the beneficiary of the
trust, purchase or acquire property from, or sell, transfer, assign or lend money or
property to, or purchase debt instruments of, any of the departments, directors, officers,
stockholders, or employees of the trust entity, relatives within the first degree of
consanguinity or affinity, or the related interests, of such directors, officers and
stockholders, unless the transaction is specifically authorized by the trustor and the
relationship of the trustee and the other party involved in the transaction is fully
disclosed to the trustor or beneficiary of the trust prior to the transaction (Sec. 80, 2nd
par, GBL).

****** © LP Ignacio ******

19