BANKING LAWS

BASED ON THE SYLLABUS OF ATTY. VIVAS

PADAYON, PA ÑERA!

© Divina on Commercial Law | Lectures of Atty. Vivas

 Banking Laws

SYLLABUS FOR BANKING LAWS

I. Introduction

▪ Mercantile Law
▪ Constitutional Provisions
▪ Synthesis of Legal Provisions
Related to Banking Laws

II. Law on Secrecy of Bank Deposits (R.A

1405, as amended)

▪ Purpose
▪ Prohibited acts
▪ Deposits covered
▪ Exceptions
▪ Garnishment of deposits
▪ Foreign currency deposit act
▪ Assigned Cases

III. Anti-Money Laundering Act (R.A 9160,

as amended)

▪ State Policies
▪ Covered institutions
▪ Obligations of covered institutions
▪ Covered transactions
▪ Suspicious transactions
▪ Money laundering
▪ Unlawful activities or predicate
crimes
▪ Anti-Money Laundering Council
▪ Functions
▪ Freezing of monetary instrument
or property
▪ Authority to inquire into bank
deposits
▪ Safe harbor provision
▪ R.A. 9194, R.A.10167, R.A. 10365,
R.A.10927
▪ Assigned Cases

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I. INTRODUCTION

A. Mercantile Law

Mercantile law is a body of law or a legal code that

deals with international commerce, business
transactions and operations like agreements, contracts,
copyrights, franchising, insurance, licensing, patents,
shipping, transport, trademarks, etc. [Black's Law
Dictionary]

Also known as Commercial Law – refers to the body of

laws that govern commercial transactions and business
activities. It encompasses legal principles and rules
applicable to individuals and entities engaged in trade,
commerce, and business.

Scope

Mercantile Law in the Philippines refers to the body of

laws that govern commercial transactions and business
activities. It encompasses various aspects of trade,
including contracts, sales, negotiable instruments,
partnerships, and corporations.

Sources of Mercantile Law

1) Civil Code of the Philippines: Contains provisions

related to contracts and obligations.

2) Corporation Code: Governs the formation,

operation, and dissolution of corporations.

3) Negotiable Instruments Law: Regulates

negotiable instruments like checks, promissory
notes, and bills of exchange.

4) Special Commercial Laws: Various laws cover

specific commercial transactions, such as the
Warehouse Receipts Law, Insurance Code, and
others.

B. Constitutional Provisions

C. Synthesis of Legal Provisions Related to

Banking Laws

(Refer to the table on the following pages)

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Philippine Banking Laws at a Glance: Synthesis of Key Legal Aspects

Banking Laws Key Provisions

General Banking Law (R.A. 1) Aims to establish a stable and efficient banking system in the Philippines.
No. 8791)
2) State Policy (Sections 1 and 2)
• Diligence Required of Banks:
The state policy emphasizes the diligence required of banks, setting the
tone for prudent and responsible banking practices. Banks are expected to
operate with care, ensuring the stability and integrity of the financial system.

3) Banks and Quasi-Banks (Sections 3, 4, and 71)

• Financial Intermediaries:
Defines the roles and functions of banks and quasi-banks as financial
intermediaries. Banks mobilize funds from savers and channel them to
productive uses, contributing to economic growth.

4) Authority of Bangko Sentral over Banks (Sections 4-7)

• Other Financial Institutions:
Specifies the regulatory authority of the Bangko Sentral ng Pilipinas (BSP)
over banks and other financial institutions. This regulatory oversight ensures
the stability and efficiency of the financial sector.

5) Organization, Management, and Administration of Banks and Quasi-Banks

(Section 8-22)
• Deposit Substitutes (Section 95, R.A. No. 7653):
Governs the issuance and regulation of deposit substitutes, ensuring that
financial instruments with deposit-like characteristics are subject to
appropriate regulatory oversight.

6) Powers of Universal Banks (Sections 23-28):

• Outlines the extensive powers and functions of universal banks. These banks
have a broad scope of financial services, enabling them to engage in various
activities under regulatory guidelines.

7) Powers of Commercial Bank (Sections 29-32):

• Enumerates the powers and limitations of commercial banks, specifying the
range of financial activities they are authorized to engage in.

8) Deposit Function (Section 33)

• Different Kinds of Account:
Defines and regulates various types of deposit accounts to provide
flexibility and cater to different financial needs of depositors.
• Demand Deposits (Section 58-60, R.A. 7653):
Establishes rules governing demand deposits, including withdrawal
procedures and related matters.
• Stipulations on Interest:
Provides a framework for stipulating interest rates on deposits, ensuring
transparency and fairness in banking transactions.
• Usury Law:
Prescribes rules related to usury, regulating the maximum interest rates that
banks can charge on loans to prevent excessive interest charges.

9) Loan Function (Sections 34-52)

• Risk-Based Capital:

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Imposes the requirement for banks to maintain adequate risk-based capital

to ensure their financial stability and resilience.
• Single Borrower's Limit:
Sets limits on the amount that a single borrower can obtain from a bank to
manage concentration risk and promote prudent lending practices.
• DOSRI Loans (Section 26, R.A. 7653)
Governs loans granted to directors, officers, stockholders, and related
interests (DOSRI), subjecting them to specific regulations to prevent
conflicts of interest.
• Foreclosure of Real Estate Mortgage:
Defines the procedures and safeguards for foreclosure of real estate
mortgages, ensuring fair treatment of borrowers.
• Credit Cards:
Regulates the issuance and use of credit cards, outlining the rights and
responsibilities of both cardholders and issuers.

10) Other Banking Services (Section 53)

• Authorizes banks to offer a wide range of financial services beyond
traditional banking activities.

11) Prohibitions (Sections 54-66)

• Enumerates prohibited acts and practices to maintain the integrity of the
banking sector and protect the interests of depositors and the general
public.

12) Cessation of Banking Business (Sections 68-70)

• Provides guidelines for the cessation of banking business, outlining the
procedures to be followed by banks intending to terminate their operations.

13) Foreign Banks (Sections 72-78)

• Regulates the entry and operations of foreign banks in the Philippines,
ensuring that their activities are consistent with the laws and regulations of
the country.

14) Trust Operations (Sections 79-93)

Governs the trust operations of banks, specifying the legal framework for
managing trusts, investments, and related fiduciary activities.
New Central Bank Act (R.A. 1) Constitutional Provisions
No. 7653)
The New Central Bank Act establishes the Bangko Sentral ng Pilipinas (BSP) as
the central monetary authority, deriving its existence and powers from
constitutional provisions.

2) State Policy (Section 1; Section 5, R.A. No. 8791)

• Price Stability:
The State declares its policy to maintain price stability conducive to
balanced and sustainable economic growth. This reflects the government's
commitment to controlling inflation and fostering a stable economic
environment.

3) Creation, Responsibilities, and Corporate Powers (Sections 2-5)

• Central Bank of the Philippines (Sections 132, 136):
The BSP is established as the central monetary authority with the power to
issue currency and administer the monetary system. It outlines the essential

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functions and corporate powers of the BSP in maintaining monetary

stability.

4) Monetary Board (Sections 6-16)

• The Monetary Board, as the highest policy-making body of the BSP, is
detailed in terms of its composition, powers, and responsibilities in shaping
and implementing monetary policies.

5) Duties of the Governor (Sections 17-21)

• The duties and responsibilities of the Governor of the BSP are specified,
emphasizing the pivotal role in executing monetary policies and ensuring
the stability of the financial system.

6) Prohibitions on BSP Personnel (Section 27)

• Prohibitions are imposed on BSP personnel to prevent conflicts of interest
and maintain the integrity of the institution, ensuring that individuals
involved in BSP operations adhere to ethical standards.

7) Supervision over Banks and Other Financial Institutions (Sections 25, 28;
Sections 4, 6, R.A. No. 8791)
• The BSP is granted supervisory powers over banks and other financial
institutions, highlighting its role in ensuring the stability and soundness of
the financial system.

8) Banks in Distress
• Conservatorship (Section 29; Section 67, R.A. No. 8791)
The BSP has the authority to appoint a conservator for distressed banks to
facilitate rehabilitation.
• Receivership and Liquidation (Sections 30-33; Section 69, R.A. No. 8791):
The procedures for the receivership and liquidation of banks that cannot be
rehabilitated are outlined.
• R.A. No. 10846:
• Specific provisions address the rehabilitation and liquidation of the Rural
Bank of Maigo, Inc.

9) Administrative and Penal Sanctions (Sections 34-37

• Administrative and penal sanctions are detailed for offenses or violations
committed under the New Central Bank Act, promoting accountability.

10) Means of Payment (Sections 48-57)

• Legal Tender Power:
The BSP has the power to issue legal tender, determining the acceptable
currency for transactions.
• Exclusive Issue Power:
The exclusive authority to issue currency is granted to the BSP.
• Digital and Virtual Currencies:
Regulations and guidelines are established regarding digital and virtual
currencies, reflecting the evolving nature of financial transactions.
• BSP Circular No. 537, Series of 2006:
Specific guidelines are provided for the classification and licensing of
electronic money issuers.

11) Guiding Principles on Monetary Administration

• Domestic Monetary Stabilization (Section 61):

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Principles for domestic monetary stabilization are introduced, addressing

challenges related to inflation and deflation.
• International Monetary Stabilization (Sections 64-67):
Guidelines are provided for international monetary stabilization,
recognizing the interconnectedness of global financial systems.

12) Instruments to Achieve Price Stability

• Moral Suasion (Section 68):
Moral suasion is employed as a tool for influencing economic behavior.
• Foreign Exchange Operations (Sections 70, 72-75):
The BSP engages in foreign exchange operations to achieve monetary
goals.
• Regulation of Foreign Exchange Operations of Banks (Section 76):
Regulations are imposed on foreign exchange operations of banks.
• Credit Policy (Section 81):
Credit policy is guided, encompassing lender of last resort and emergency
credit operations.
• Open Market Operations (Sections 90-92):
Open market operations are utilized to influence monetary conditions.
• Bank Reserves (Sections 94-97):
Regulations on bank reserves are established to control money supply.

13) Banker of the Government (Sections 110-113)

• The BSP acts as the banker and financial agent of the government,
managing financial transactions on behalf of government entities.

14) Financial Advisor of the Government (Sections 123-124)

• The BSP serves as the financial advisor to the government, providing
expertise and guidance on financial matters.
Law on Secrecy of Bank 1) Purpose
Deposits (R.A. No. 1405, as • The primary purpose of the Law on Secrecy of Bank Deposits is to ensure
amended) the confidentiality of bank deposits, serving as a cornerstone for promoting
trust in the banking system, encouraging individuals to deposit their funds,
and safeguarding the privacy of account holders.

2) Prohibited Acts
• Unauthorized Disclosure:
The law strictly prohibits any official or employee of a banking institution
from disclosing any information regarding the deposits of its clients
without their written consent.

• Penalties for Violation:

To underscore the significance of maintaining confidentiality, the law
imposes penalties for unauthorized disclosure, emphasizing the gravity of
violating the provisions aimed at protecting depositors' privacy.

3) Deposits Covered
• All Deposits:
The law categorically declares that all deposits, regardless of their nature,
held with banks or banking institutions shall be considered as absolutely
confidential. This blanket coverage ensures comprehensive protection of
depositors' financial information.

4) Exceptions
• Exceptions (R.A. No. 6426):

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Recognizing that there may be circumstances requiring disclosure, the law

includes exceptions to confidentiality in cases of impeachment, upon court
order for cases of bribery or dereliction of duty by public officials, and with the
written permission of the depositor.
• Expanded Exceptions (R.A. No. 8791):
Amendments further expand exceptions to confidentiality, allowing
disclosure in situations of imminent danger of death or serious physical
harm to the depositor, among other circumstances.
• Automatic Exchange of Information (R.A. No. 10167):
The law aligns with international standards by introducing amendments
related to the automatic exchange of information, reinforcing efforts to
combat tax evasion.
• Amendments to the Anti-Money Laundering Act (R.A. No. 11521):
Ensuring cooperation between laws, the amendments align the Law on
Secrecy of Bank Deposits with changes to the Anti-Money Laundering Act,
particularly in the pursuit of combatting money laundering and related
offenses.

5) Garnishment of Deposits
• Prohibition on Garnishment:
To protect the rights of depositors, the law prohibits the garnishment or
attachment of deposits, except in specific cases and under particular
conditions. This provision safeguards depositors from undue interference
with their deposited funds.

6) Foreign Currency Deposit Act

• Confidentiality of Foreign Currency Deposits:
The principles of confidentiality are extended to foreign currency deposits
through the Foreign Currency Deposit Act, ensuring that the same level of
privacy applies to both local and foreign currency accounts.
• Exception for Foreign Currency Deposits (R.A. No. 6426)
Acknowledging the unique nature of foreign currency deposits, the law
provides a limited exception allowing disclosure in cases of impeachment,
court order for cases of bribery or dereliction of duty by public officials, and
with the written permission of the depositor.
Anti-Money Laundering Act 1) AMLA aims to prevent money laundering, detect financial crimes, and protect
(R.A. No. 9160, as amended) the integrity of the financial system through robust regulations, international
cooperation, and asset forfeiture measures.

2) State Policies
• Declaration of Policy (R.A. No. 9160):
The Anti-Money Laundering Act declares the policy of the State to protect
and preserve the integrity and confidentiality of bank accounts. It aims to
ensure that the Philippines is not used as a money laundering site.

3) Covered Institutions
• Covered Persons (R.A. No. 9160, as amended):
Covered persons include individuals, partnerships, corporations, and other
juridical entities that are involved in covered transactions. These entities are
subject to the obligations and requirements of the AMLA.

4) Obligations of Covered Institutions

• Customer Identification and Record-Keeping (R.A. No. 9160):

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Covered institutions have the obligation to establish and record the true
identity of their clients based on reliable documents. This includes
maintaining records of customer identification and transactions.

5) Covered Transactions
• Definition (R.A. No. 9160):
The law defines covered transactions, encompassing various financial
activities, especially those involving cash or other equivalent monetary
instruments.

6) Suspicious Transactions
• Reporting of Suspicious Transactions (R.A. No. 9160):
Covered institutions are required to report to the Anti-Money Laundering
Council (AMLC) any covered or suspicious transactions. This is a crucial
mechanism for detecting and preventing money laundering activities.

7) Money Laundering
• Definition (R.A. No. 9160):
Money laundering is defined as the act of engaging in transactions
involving the proceeds of any unlawful activity. The law aims to target and
penalize individuals involved in the process of legitimizing illegally
obtained funds.

8) Unlawful Activities or Predicate Crimes:

• List of Predicate Crimes (R.A. No. 9160, as amended):
The law provides a list of unlawful activities or predicate crimes. These are
offenses whose proceeds may become the subject of money laundering
investigations.

9) Anti-Money Laundering Council

• Creation and Composition (R.A. No. 9160):
The Anti-Money Laundering Council (AMLC) is established as the primary
government agency responsible for implementing the provisions of the law.
It plays a key role in investigating and combating money laundering.
• Functions of the AMLC (R.A. No. 9160):
The AMLC is tasked with various functions, including receiving and
investigating covered transaction reports and suspicious transaction
reports. It acts as a central authority for addressing money laundering
concerns.

10) Freezing of Monetary Instrument or Property

• Authority to Freeze (R.A. No. 9160):
The AMLC is given the authority to issue a freeze order on monetary
instruments or property suspected to be proceeds of any unlawful activity.
This helps prevent the further movement of potentially illicit funds.

11) Authority to Inquire into Bank Deposits

• Inquiry into Bank Deposits (R.A. No. 9160):
The AMLC has the authority to inquire into or examine any particular
deposit with any banking institution upon the order of any competent
court. This power is crucial for investigating money laundering activities.

12) Safe Harbor Provision

• Immunity from Suit (R.A. No. 9160):

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The law provides immunity from suit for individuals who, in good faith,
make a report to the AMLC or provide testimony in any administrative or
judicial proceeding related to money laundering. This encourages reporting
and cooperation in anti-money laundering efforts.
Philippine Deposit Insurance 1) Purpose
Corporation Law (R.A. No. • Establish the Philippine Deposit Insurance Corporation (PDIC) to provide
3591, as amended) deposit insurance and ensure the stability of the banking system.
2) Deposit Insurance Coverage
• Provides insurance coverage for bank deposits, protecting depositors from
losses in the event of bank closures or financial distress.

3) Insured Deposits
• Specifies the types of deposits covered by insurance, including savings
accounts, time deposits, and other similar instruments.

4) Insurance Limit
• Sets the maximum amount of insurance coverage per depositor, ensuring
equitable protection for depositors with varying account sizes.

5) Premium Payments:
• Establishes mechanisms for the payment of premiums by insured banks to
the PDIC, contributing to the sustainability of the deposit insurance fund.

6) Management of Closed Banks

• Grants PDIC the authority to take over the management and control of
closed banks, implementing rehabilitation or liquidation measures as
needed.

7) Reimbursement of Insured Deposits

• Outlines the procedures for the reimbursement of insured deposits to
depositors affected by a bank closure.

8) Resolution of Problem Banks

• Authorizes PDIC to intervene in the operations of problem banks,
implementing corrective measures to address financial issues and protect
depositors.

9) Conservatorship and Liquidation

• Provides for the appointment of conservators and the liquidation of
insolvent banks when necessary, safeguarding the interests of depositors
and maintaining financial stability.

10) Emergency Measures

• Grants PDIC the authority to take emergency measures to protect the
deposit insurance fund and prevent systemic risks in the banking industry.

11) Amendments and Updates

• Recognizes amendments to the law through subsequent legislative acts,
ensuring that the PDIC Law remains responsive to changing economic
conditions and banking industry dynamics.

12) Enhanced Powers

• May include enhanced powers granted to the PDIC, such as the authority
to assist in the rehabilitation of distressed banks.

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Unclaimed Balances Law (Act 1) Purpose

No. 3936) • Address the treatment of unclaimed balances in banks to ensure proper
handling and reporting.

2) Definition of Unclaimed Balances

• Defines unclaimed balances as funds in a bank that have been inactive or
dormant for a specified period and for which the rightful owners cannot be
identified or located.
3) Duty of Banks
• Imposes a duty on banks to identify and report unclaimed balances to the
Treasurer of the Philippines.

4) Period of Inactivity
• Specifies the period of inactivity after which a balance is considered
unclaimed, triggering the obligation for banks to take appropriate actions.

5) Reporting Procedures
• Outlines the procedures that banks must follow when reporting and
remitting unclaimed balances to the Treasurer, ensuring transparency and
accountability.

6) Treasurer's Custodianship
• Places unclaimed balances under the custodianship of the Treasurer of the
Philippines, who is responsible for their safekeeping.

7) Public Notice
• Requires banks to publish public notices informing account holders about
the impending transfer of unclaimed balances to the Treasurer.

8) Claiming Process
• Establishes a process for the rightful owners or heirs to claim unclaimed
balances from the Treasurer, ensuring a fair and accessible mechanism for
recovery.

9) Record Keeping
• Mandates banks to maintain proper records of unclaimed balances,
facilitating accurate reporting and tracking of dormant accounts.

10) Amendments and Updates

• May recognize any amendments to the law or subsequent legislative acts
that modify the procedures or timeframes related to unclaimed balances.

11) Protection of Depositors' Rights

• Balances the need to address unclaimed funds with the protection of
depositors' rights, ensuring a fair and just process for the treatment of
dormant accounts
Truth in Lending Act (R.A. 1) Purpose
No. 3795) • Ensure transparency in credit transactions and protect consumers by
providing accurate and meaningful information about the cost of credit.

2) Full Disclosure
• Requires creditors to provide full and clear disclosure of the true cost of
credit transactions, ensuring that borrowers are informed about the terms
and conditions of their loans.

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3) Interest Rates and Charges

• Mandates the disclosure of the annual percentage rate (APR) and other
relevant charges associated with the credit transaction, allowing borrowers
to understand the total cost of borrowing.

4) Loan Terms and Conditions

• Specifies the disclosure of loan terms and conditions, including the
repayment schedule, grace periods, and any penalties or fees that may
apply.
5) Uniform Terminology
• Encourages the use of uniform terminology in disclosing credit terms,
facilitating better understanding and comparison of different credit
offerings.

6) Pre-Loan Disclosures
• Requires creditors to provide pre-loan disclosures, enabling borrowers to
make informed decisions before entering into a credit agreement.

7) Format and Presentation

• Provides guidelines on the format and presentation of the required
disclosures to enhance clarity and comprehension for consumers.

8) Advertising Disclosures
• Extends disclosure requirements to advertisements related to credit
transactions, preventing misleading advertising practices.

9) Right of Recission
• Grants borrowers the right of rescission, allowing them to cancel certain
credit transactions within a specified period without penalty.

10) Penalties for Non-Compliance

• Imposes penalties on creditors for non-compliance with the disclosure
requirements, ensuring accountability and adherence to the law.

11) Consumer Education

Promotes consumer education regarding credit transactions, empowering
borrowers to make informed choices and protect their financial interests.

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C. Deposits Covered
II. LAW ON SECRECY OF BANK DEPOSITS
(R.A. NO. 1405, AS AMENDED) The following are the deposits covered:

A. Purpose All DIT (Always Look, Learn, and Deposit In Trust)

The purposes of R.A. No. 1405 are: 1) All Deposits of whatever nature with banks or
banking institutions found in the Philippines.
EPHED (Every Penny Helps Economic Development)
2) Investments in bonds issued by the
1) To give Encouragement to the People to Government, its political subdivisions and its
deposit their money in banking institutions; and instrumentalities [Sec. 2, R.A. No. 1405].

2) To discourage private Hoarding so that the 3) Trust Accounts

same may be properly utilized by banks in
authorized loans to assist in the Economic Meaning of the Phrase "of whatever nature and
Development of the country [Sec. 1, R.A. No. kind"
1405].
Ejercito v. Sandiganbayan, November 20, 2006
BSP Group, Inc. v. Go, February 16, 2010
This refers to money whether deposited or invested. If
R.A. No. 1405 has two allied purposes. It hopes to the money deposited under an account may be used by
discourage private hoarding and at the same time banks for authorized loans to third persons, then such
encourage the people to deposit their money in account, regardless of whether it creates a creditor-
banking institutions, so that it may be utilized by way of debtor relationship between the depositor and the
authorized loans and thereby assist in economic bank, it falls under the category of accounts which the
development. Owing to this piece of legislation, the law precisely seeks to protect for the purpose of
confidentiality of bank deposits remains to be a basic boosting the economic development of the country.
state policy in the Philippines [BSP Group, Inc. v. Go, G.R.
No. 168644, February 16, 2010]. Trust Funds Covered by the Term “Deposit”

In simple terms, the purpose of Section 1 of Republic Act No. 1405 is Ejercito v. Sandiganbayan, November 30, 2006
to encourage people to put their money in banks and discourage
them from keeping their money at home. The idea is that by
depositing money in banks, individuals contribute to the country's
X, a government official, has a number of bank accounts
economic development. Banks can then use these deposits to provide in T Bank containing millions of pesos. He also opened
loans and support various economic activities. The law aims to several trust accounts in the same bank which
promote a more organized and productive use of money through the specifically covered the placement and/or investment of
banking system.
funds. X was later charged with graft and corruption
before the Sandiganbayan (SB) by the Ombudsman. The
B. Prohibited Acts
Special Prosecutor filed a motion praying for a court
The following are the prohibited acts in R.A. No. 1405: order authorizing it to look into the savings and trust
accounts of X in T Bank. X opposed the motion arguing
1) Examination/inquiry/looking into all deposits of that the trust accounts are not "deposits" under the Law
whatever nature with banks or banking on Secrecy of Bank Deposits (R.A. No. 1405). Is the
institutions in the Philippines (including contention of X correct? Explain. (2016 BAR)
investment in bonds issued by the Government
of the Philippines, its political subdivisions and NO. The contention of X is not correct. Deposits in the
its instrumentalities) by any person, context of the Secrecy of Bank Deposits Law include
government official, bureau, or office [Sec. 2, deposits of whatever nature and kind. They include
R.A. No. 1405]. funds deposited in the bank giving rise to creditor-
debtor relationship, as well as funds invested in the bank
2) Disclosure by any official or employee of any like trust accounts.
banking institution to any unauthorized person
The money deposited under the trust agreement (“Trust
of any information concerning said deposit.
account”) is intended not merely remain with the bank
[Sec. 3, R.A. No. 1405]. to

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but to be invested by it elsewhere. To hold that this type No, the agreement executed by the parties on the
of account is not protected by R.A. 1405 would waiver of confidentiality of the petitioner’s deposits
encourage private hoarding of funds that could does not bind the latter, who was neither a party nor a
otherwise be invested by banks in other ventures, signatory to the said agreement. There was no written
contrary to the policy behind the law. consent given by the petitioner or its representative,
indicating that the petitioner is waiving the
D. Exceptions from Coverage confidentiality of its bank deposits. Emphasizing the
necessity of express consent for such waivers, the Court
Instances where examination or disclosure of clarified that contractual agreements are binding only
information about deposits can be allowed: on involved parties and not on non-parties.

WICS SIBAYAN V. ALDA (G.R. NO. 233395)

1) Upon Written consent of the depositor; (Digest only but YOU HAVE TO READ THE FULLTEXT)

2) In cases of Impeachment; FACTS:

3) Upon order of Competent court in cases of Elizabeth, through her daughter Ruby, charged Norlina
bribery or dereliction of duty of public officials; of unauthorized deduction of her ABC Savings Account,
and as well as for failure to post certain check deposits to the
said account, with the Office of Special Investigation of
4) In cases where the money deposited or invested the Bangko Sentral ng Pilipinas (OSI-BSP). During the
is the Subject matter of the litigation [Sec. 2, investigation, Norlina filed a Motion for Production of
R.A. No. 1405]. Documents praying that she be allowed to inspect and
copy the Statement of Account of other depositors with
Written consent of the depositor/Waiver of rights two others, claiming that resort to discovery process is
part of her right to due process and Ruby signed a
DONA ADELA EXPORT v. TIDCORP (G.R. NO. document allowing Norlina and ABC access to these
201931) deposit accounts. The OSI-BSP denied the motion ruling
that the action is an administrative proceeding aimed at
(Digest only but YOU HAVE TO READ THE FULLTEXT) determining respondent's liability, if any, for violation of
banking laws and that a deposit account may only be
FACTS: examined or looked into if it is the subject matter of a
pending litigation.
Doña Adela Export Int'l, Inc. (petitioner) filed for
Voluntary Insolvency, leading to the RTC declaring it ISSUE:
insolvent and appointing Atty. Arlene Gonzales as the
receiver. She proposed a Compromise Agreement for Whether or not the petitioner is entitled to the
asset distribution among creditors. On May 26, 2011, production of bank documents pursuant to Sec.1, Rule
petitioner and Technology Resource Center (TRC) 27 of the Rules of Court.
entered into a Dacion En Pago by Compromise
Agreement, transferring a parcel of land to TRC in full RULING:
payment of petitioner's obligation. TIDCORP and BPI
later filed a Joint Motion to Approve Agreement, adding NO. The denial was grounded in the privilege of bank
a clause requiring the petitioner to waive banking accounts, as stated in Section 2 of the Law on Secrecy of
confidentiality rights, without petitioner being a party to Bank Deposit, which deems all deposits with banks as
this agreement. The court approved the joint motion. confidential and may not be examined without specific
legal exceptions such as written permission of the
ISSUE: depositor or upon order of a competent court. The
petitioner, Norlina, argued that she had permission from
Whether petitioner is bound by the provision in the the legal and beneficial owner, Ruby, based on various
agreement that waives its rights to confidentiality of its documents. However, the court was unconvinced, noting
bank deposits. that the actual account holders were Ferdinand Oriente
and Jovelyn Oriente. Perforce, the documents executed
RULING: by Ruby purportedly granting ABC access to the

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 Banking Laws

foregoing accounts do not equate to their permissions Dolores Ventosa requested a $1,000 transfer to Victoria
to allow access to their bank account. Javier in Manila from the First National Bank of
Moundsville through the Prudential Bank, but Mellon
Where the money deposited or invested is the Bank mistakenly sent $1,000,000. The Javiers withdrew
subject matter the entire amount, engaged in complex financial
transactions, and purchased a California property.
BSB GROUP, INC. v. SALLY GO-BANGAYAN (G.R. Mellon Bank filed lawsuits, alleging the erroneous
NO. 168644) transfer and Javiers' misconduct. The Philippine court
ruled in 1982 and 1983 that Mellon Bank's pursuit of the
(Digest only but YOU HAVE TO READ THE FULLTEXT) California property in the U.S. case barred its claim for
the purchase price in the Philippines. Despite Mellon
FACTS: Bank seeking reconsideration, the court upheld its
decision as a final disposition.
BSB Group, Inc. filed a complaint against Sally Go for
allegedly depositing company checks into her personal ISSUE:
account. During the trial, the prosecution sought bank
records through subpoenas, which Go objected to citing Whether allowing the questioned testimonies to remain
irrelevancy and bank account confidentiality. Go waived on record would be in violation of the provisions of
objections for one account but later sought to suppress Republic Act No. 1405 on the secrecy of bank deposits.
evidence, invoking the Law on Secrecy of Bank Deposits
(R.A. No. 1405). The trial court denied her motions, RULING
leading Go to file a petition for certiorari. The Court of
Appeals ruled in her favor, deeming the evidence NO, the Court countered the argument by stating that
inadmissible due to irrelevance and violation of bank Section 2 of the said law allows the disclosure of bank
deposit confidentiality. deposits in cases where the money deposited is the
subject matter of the litigation. The Court explained that
ISSUE: because the aim of Civil Case No. 26899 is to recover the
amount converted by the Javiers for their own benefit,
Whether or not the money deposited in the account is the inquiry into the whereabouts of the illegally acquired
the actual subject matter of litigation under R.A. No. amount extends to whatever is concealed by being held
1405? or recorded in the name of persons other than the one
responsible for the illegal acquisition.
RULING:
UNION BANK OF THE PHILIPPINES v. COURT OF
In determining the subject matter in litigation under
APPEALS (G.R. NO. 134699)
Section 2 of the relevant law, the court emphasized that
the inquiry into bank deposits is integral to the action (Digest only but YOU HAVE TO READ THE FULLTEXT)
itself. It asserted that the subject matter should be
derived from the indictment charging the respondent FACTS:
with qualified theft, which plainly alleges the abuse of
petitioner's trust and confidence and the theft of cash in Allied Bank issued a P1,000,000.00 check to Jose Ch.
the amount of P1,534,135.50. The court clarified that the Alvarez, deposited in Union Bank. However, a clearing
subject matter of the action, as per the criminal discrepancy occurred when Union Bank under-encoded
information, pertains to the money allegedly stolen, not the amount to P1,000.00. Union Bank notified Allied
the money equivalent of the checks sought to be Bank almost a year later, seeking reimbursement of
admitted in evidence. Thus, it is that which the P999,000.00. Allied Bank refused the charge slip, leading
prosecution is bound to prove with its evidence, and Union Bank to file a complaint before the PCHC
nothing else. Arbitration Committee and a petition in the RTC. The
RTC dismissed the petition, a decision affirmed by the
MELLON BANK v. MAGSINO (G.R. NO. 71479) CA, stating the case did not involve the deposited
money as the subject of litigation.
(Digest only but YOU HAVE TO READ THE FULLTEXT)
ISSUE:
FACTS:

Reviewer by S.K.A. Francisco | 15

 Banking Laws

Whether or not the petition falls under the last was for the sale of treasury bills or for money placement.
exception on Sec. 2 of R.A. 1405. This determination meant that the money did not fall
under the "subject matter of litigation" as defined by
RULING: Republic Act No. 1405, which prohibits the disclosure or
inquiry into bank deposits, except in cases where the
NO. The Supreme Court revealed that the true purpose money deposited or invested is the subject matter of
of the examination is to aid the petitioner in proving the litigation.
extent of Allied Bank's liability and is fishing for
information so it can determine the culpability of the Other Exceptions based on the Law and
private respondent and the amount of damages it can Jurisprudence (NOTE: I have only listed those instances
recover from the latter. It emphasized that while the from the assigned laws and cases. Be aware that numerous
subject matter of the dispute may be the amount of other exceptions exist beyond this scope.)
P999,000.00 sought due to an alleged failure to disclose
a discrepancy, it is not the P999,000.00 deposited in the 1) The Anti-Money Laundering Council (AMLC)
drawer's account. By the terms of R.A. No. 1405, the may inquire into any deposit or investment,
"money deposited" itself should be the subject matter including related account, with any bank or
of the litigation. Therefore, the case does not fall under non-bank financial institution upon ex parte
the exceptions allowed by the Law on Secrecy of Bank application in case of violation of the R.A. No.
Deposits. 9160 or the AMLA, when it has been established
that there is probable cause that the deposits or
OÑATE v. ABROGAR (G.R. NO. 107303) investments, including the related accounts, are
related to an unlawful activity or money
(Digest only but YOU HAVE TO READ THE FULLTEXT) laundering offense [R.A. No. 9160, as amended,
Sec. 11].
FACTS:
2) The AMLC, without court order, if it determines
Sun Life Assurance sought a writ of attachment against that a particular deposit or investment with any
petitioners on December 23, 1991, which the court banking institution is related to certain
granted on December 24. Efforts to serve summons and predicate crimes: KD-HATTS
the amended writ in January 1992 were unsuccessful.
Garnishment notices were then served on institutions, 3) When reporting covered or suspicious
and properties were attached over several days. transactions to the AMLC, covered persons and
Summons was eventually served on January 9, 1992. their officers and employees shall not be
Despite petitioners filing a motion to discharge the writ, deemed to have violated R.A. No. 1405, as
and Sun Life seeking to examine Brunner Development amended, Republic Act No. 6426, as amended,
Corporation's books, both were denied by the court. A Republic Act No. 8791 and other similar laws.
motion for reconsideration was also filed and denied. [Sec. 9, R.A. No. 9160, as amended].
Petitions for certiorari, arguing that the judge acted with
grave abuse of discretion and alleging a lack of 4) The AMLC is authorized to investigate: (a) any
jurisdiction during the issuance of the writ and a lack of property or funds that are in any way related to
notice for the examination of bank records, were financing of terrorism or acts of terrorism; (b)
dismissed, leading to motions for reconsideration by property or funds of any person or persons in
petitioners. relation to whom there is probable cause to
believe that such person or persons are
ISSUE: committing or attempting or conspiring to
commit, or participating in or facilitating the
Whether the examination of the petitioners' bank financing of terrorism or acts of terrorism as
accounts was justified. defined herein. In relation thereto, AMLC is
authorized to inquire into or examine deposits
RULING: and investments with any banking institution or
non-bank financial institution and their
No. Sun Life argued that the money paid to Brunner was
subsidiaries and affiliates without a court order
subsequently withdrawn and transferred, justifying the
[Sec. 10, R.A. No. 10168].
examination orders. However, the court emphasized
that the core issue was whether the payment to Brunner

Reviewer by S.K.A. Francisco | 16

 Banking Laws

5) In cases involving plunder (which is considered General Rule: The prohibition against examination of
analogous to bribery). The exception in the law or inquiry into a bank deposit under Republic Act 1405
that is applicable in bribery also applies to does not preclude its being garnished to ensure
plunder. The overt or criminal acts as described satisfaction of a judgment.
in Sec. 1(d) of R.A. No. 7080 would make the
similarity between plunder and bribery even There is no real inquiry in such a case, and if the
more pronounced since bribery is essentially existence of the deposit is disclosed, the disclosure is
included among these criminal acts [Ejercito v. purely incidental to the execution process.
Sandiganbayan, G.R. No. 157294-95, 30 Nov.
2006]. Exceptions:

6) In cases filed by the Ombudsman and upon the 1) Foreign Currency Deposits. The foreign
latter’s authority to examine and have access to currency deposits shall be exempt from
bank accounts and records provided there is a attachment, garnishment, or any other order or
pending case before a court of competent process of any court, legislative body,
jurisdiction, the account is clearly identified, government agency or any administrative body
inspection is limited to subject matter of whatsoever [Sec. 8, RA No. 6426].
existing case, and bank personnel and account
holder must be notified to be present [Sec 2) Those exempt under the Rules of Civil
15(8), R.A. No. 6770 in relation to Marquez v. Procedure like provision for the family for four
Desierto, G.R. No. 138569, 11 Sept. 2003]. months [Rule 39, ROC].

Inspection by the Ombudsman Exceptions to the Exceptions:

Marquez v. Desierto, June 27, 2001 1) Salvacion Case (Equity). Account of non-
resident alien found guilty of raping a minor
In order that the Ombudsman may inspect a bank Filipino was allowed on the basis of equity
deposit: [Salvacion v. Central Bank. G.R. No. 94723,
August 21, 1997].
P-I-L-A-Ho
2) Gotianuy Case (Co-Payee). Being a co-payee
1) There must be a case Pending in court; thereof, then he or his estate can be considered
as a co-depositor of said checks. No written
2) The account must be clearly Identified; consent of the other co-payee is necessitated in
an inquiry of the deposits by the said co-
3) The inspection must be Limited to the subject matter depositor [China Banking Corporation vs. CA,
of the pending case; G.R. No. 140687, December 18, 200].

4) The inspection may cover only the Account identified; Salvacion v. Central Bank, August 21, 1997
and
Far-reaching implications on the right of a national to
5) The bank personnel and the account Holder must be obtain redress for a wrong committed by an alien who
notified to be present during the inspection. takes refuge under a law and regulation promulgated
for a purpose which does not contemplate the
E. Garnishment of Deposits application thereof envisaged by the alien. If we rule
that the questioned Sec. 113 of Central Bank Circular
Garnishment is a way for creditors to collect what
No. 960 which exempts from attachment, garnishment,
they're owed by getting permission from the court to
or any other order or process of any court, legislative
take money directly from your bank account.
body, government agency or any administrative body
whatsoever, is applicable to a foreign transient, injustice
Garnishment of a Bank Deposit DOES NOT VIOLATE
would result especially to a citizen aggrieved by a
the R.A. No. 1405
foreign guest like accused Greg Bartelli. This would
negate Arti. 10 of the New Civil Code which provides
China Banking Corporation v. Ortega, January 31,
that "in case of doubt in the interpretation or
1973
application of laws, it is presumed that the lawmaking

Reviewer by S.K.A. Francisco | 17

 Banking Laws

body intended right and justice to prevail. It would be 1405 which covers all bank deposits in the Philippines is
unthinkable, that the questioned Sec. 113 of Central the general law which does not nullify the special law on
Bank No. 960 would be used as a device by accused foreign currency deposits.
Greg Bartelli for wrongdoing, and in so doing,
acquitting the guilty at the expense of the innocent. This Exceptions:
situation calls for fairness against legal tyranny.
(NOTE: I have only listed those instances from the assigned
China Banking Corporation vs. CA, December 18, laws and cases. Be aware that numerous other exceptions exist
beyond this scope.)
2006

1) The depositor has given his written permission

The monies subject of said checks originally came from
[Sec. 8, R.A. 6426].
the Gotianuy, the owner of the account. Citibank checks
evidenced that the Gotianuy is one of the payees of said
2) The exemption from court process of foreign
checks. Being a co-payee thereof, then he or his estate
currency deposits under R.A. No. 6426 cannot
can be considered as a co-depositor of said checks.
be invoked by a foreign transient who raped a
Since Gotianuy is a co-depositor of the CBC account,
minor, escaped and was held liable for damages
then his request for the assailed subpoena is
to the victim. The garnishment of his foreign
tantamount to an express permission of a depositor for
currency deposit should be allowed to prevent
the disclosure of the name of the account holder. It must
an injustice and for equitable grounds. The law
also be remembered that in the complaint of Jose
was enacted to encourage foreign currency
Gotianuy, he alleged that his US dollar deposits with
deposit and not to benefit a wrongdoer;
Citibank were illegally taken from him. China Bank
[Salvacion v. Central Bank of the Philippines,
employee Cristuta Labios testified that Mary Margaret
G.R. No. 94723, 21 Aug. 1997].
Dee came to China Bank and deposited the money of
Gotianuy in Citibank US dollar checks to the dollar
3) The Anti-Money Laundering Council (AMLC)
account of her sister Adrienne Chu. This fortifies our
may inquire into any deposit or investment,
conclusion that an inquiry into the said deposit at China
including related account, with any bank or
Bank is justified. At the very least, Gotianuy as the owner
non-bank financial institution upon ex parte
of these funds is entitled to a hearing on the
application in case of violation of the R.A. No.
whereabouts of these funds. It was not the intent of the
9160 or the AMLA, when it has been established
legislature when it enacted the law on secrecy on
that there is probable cause that the deposits or
foreign currency deposits to perpetuate injustice. This
investments, including the related accounts, are
Court is of the view that the allowance of the inquiry
related to an unlawful activity or money
would be in accord with the rudiments of fair play, the
laundering offense [Sec. 11, R.A. No. 9160, as
upholding of fairness in our judicial system and would
amended].
be an avoidance of delay and time-wasteful and
circuitous way of administering justice.
4) The AMLC, without court order, if it determines
that a particular deposit or investment with any
F. Foreign Currency Deposit Act
banking institution is related to certain
Foreign currency deposits are covered by R.A. 6426 predicate crimes KD-HATTS.
otherwise known as the “Foreign Currency Deposits Act
of the Philippines”. 5) When reporting covered or suspicious
transactions to the AMLC, covered persons and
Secrecy of Foreign Currency Deposits their officers and employees shall not be
deemed to have violated Republic Act No. 1405,
General Rule: All foreign currency deposits are as amended, Republic Act No. 6426, as
absolutely confidential and cannot be examined, amended, Republic Act No. 8791 and other
inquired, or looked into by any person, government similar laws, (Sec. 9, R.A. No. 9160, as amended)
official, bureau or office, whether judicial or
administrative or legislative, or any other private or When are Inquiry into Deposits Allowed by virtue of
public entity [Sec. 8, R.A. No. 6426] Distinctive Circumstances?

R.A. No. 6426 is a special law designed especially for China Banking Corp. v. CA. December 18. 2006
foreign currency deposits in the Philippines. R.A. No.

Reviewer by S.K.A. Francisco | 18

 Banking Laws

A father who sued his daughter for illegally withdrawing destruction, terrorism, and financing of
funds from his foreign currency deposit and transferring terrorism, pursuant to the resolution of
to another bank in the name of her sister, can inquire the United Nations Security Council
into the deposit of the sister, because the money [Sec. 2, R.A. No. 9160, as amended by
deposited belongs to him. R.A. No. 11521].

In simple terms, if a father takes legal action against his daughter for B. Covered Institutions
taking money from his foreign currency bank account and putting it
in her sister's account, the father can investigate or inquire about the
sister's bank deposit. This is allowed because the money in the sister's
NOTE: Covered “Institutions” was changed to Covered
account actually belongs to the father. “Persons” under R.A. No. 10365. (Sec. 3(a), R.A. No. 9160,
as amended)
NOTE: This is a pro hac vice ruling by the Supreme Court
in view of the distinctive circumstances of the case. Covered persons, natural or juridical, refer to:

BIS-D
II. ANTI-MONEY LAUDENRING ACT
(R.A. NO. 9160, AS AMENDED) 1) Supervised or regulated by the Bangko Sentral ng
Pilipinas (BSP):
The section numbers hereinafter generally pertain to RA
9160 or the Anti-Money Laundering Act, as amended by a) banks,
RA 9194 and RA 10365, unless otherwise indicated.
b) non-banks,
Money Laundering is a crime where the proceeds of an
unlawful activity are transacted, thereby making them c) quasi-banks,
appear to have originated from legitimate sources.
d) trust entities,
It is governed by R.A. 9160, as amended by R.A. 9194
(2003), R.A. 10167 (2012), RA 10365 (2013) and R.A. e) foreign exchange dealers,
10927 (2017).
f) pawnshops,
A. State Policies
g) money changers,
Policy of the Law
h) remittance and transfer companies and
It is the policy of the State to: other similar entities and

PEE i) all other persons and their subsidiaries and

affiliates
1) Protect and preserve the integrity and
confidentiality of bank accounts; 2) Supervised or regulated by the Insurance
Commission (IC):
2) Ensure that the Philippines shall not be used as
a money laundering site for the proceeds of a) Insurance companies,
any criminal activity;
b) pre-need companies and
3) Extend cooperation in:
c) all other persons
a) Transnational investigations and
prosecutions of persons involved in 3) Supervised or regulated by the Securities and
money laundering activities wherever Exchange Commission (SEC):
committed; and
a) Securities dealers, brokers, salesmen,
b) Implementation of targeted financial investment houses and other similar persons
sanctions related to the financing of managing securities or rendering services as
the proliferation of weapons of mass investment agent, advisor, or consultant,

Reviewer by S.K.A. Francisco | 19

 Banking Laws

c) Persons, including lawyers, accountant

b) Mutual funds, closed-end investment Persons who provide any of the following
companies, common trust funds, and other services [Sec. 1, Rule 4, 2018 Implementing
similar persons, and Rules and Regulations of R.A. No. 9160, as
amended]:
c) Other entities administering or otherwise
dealing in currency, commodities or i. Managing of client money,
financial derivatives based thereon, valuable securities, or other assets;
objects, cash substitutes and other similar
monetary instruments or property; ii. Management of bank, savings, or
securities account;
4) Designated Non-Financial Businesses and
Professions (DNFBPs). While not regulated by either iii. Organization or contribution for the
BSP, IC, or SEC, these DNFBPs, which are non- creation, operation, or management
financial in nature, are covered persons by reason of of companies; and
their being designated by law as such. These include
the following: iv. Creation, operation or management
of juridical persons or
a) Jewelry dealers arrangements, and buying and
selling business entities. (Sec. 3[a],
i. In precious metals, who, as a R.A. No. 9160, as amended by R.A.
business, trade in precious metals, No. 10365)
for transactions in excess of Php 1
Million; NOTE: Lawyers and accountants are not
considered as covered persons in relation
ii. In precious stones, who, as a to information concerning their clients or
business, trade in precious stones, where the disclosure of information would
for transactions in excess of Php 1 compromise client confidences or the
Miliion; attorney-client relationship. PROVIDED the
following requisites are present:
b) Company service providers which, as a
business, provide any of the following i. They are acting as independent
services to third parties: legal professionals;

i. Acting as a formation agent of ii. Authorized to practice in the

juridical persons; Philippines; and

ii. Acting as (or arranging for another iii. They are subject to the provisions of
person to act as) a director or their respective codes of conduct
corporate secretary of a company, a and/or professional responsibility or
partner of a partnership, or a similar any of its amendments [Sec. 3(a),
position in relation to other juridical R.A. No. 9160, as amended by R.A.
persons; No. 10365].

iii. Providing a registered office, 5) Casinos, including internet and ship-based

business address or casinos, with respect to their casino cash
accommodation, correspondence transactions related to the gaming operations; [Sec.
or administrative address for a 3[a], R.A. No. 9160, as amended by R.A. No. 10927]
company, a partnership or any other
legal person or arrangement; and 6) Real estate developers and brokers [Sec. 3(a), R.A.
No. 9160, as amended by R.A. No. 11521]
iv. Acting as (or arranging for another
person to act as) a nominee 7) Offshore gaming operators, as well as their service
shareholder for another person; and providers, supervised, accredited or regulated by the
Philippine Amusement and Gaming Corporation

Reviewer by S.K.A. Francisco | 20

 Banking Laws

(PAGCOR) or any government agency [Sec. 2 of RA NOTE: With respect to closed accounts, the records
11521 amending Sec. 3(a), RA 9160]. shall be preserved and safely stored for at least five (5)
years from the dates when they were closed.
NOTE: All covered person shall register with the Anti-
Money Laundering Council (AMLC) [Rule 4, Sec. 3, 2018 3) Reporting of Covered and Suspicious
IRR of AMLA]. Transactions.

C. Obligations of Covered Institutions General Rule: Covered persons shall report to the
AMLC all covered transactions and suspicious
CR2 transactions within 5 working days from occurrence
thereof.
1) Customer Identification Exceptions:
2) Record Keeping
3) Reporting of Covered and Suspicious a) The AMLC prescribes a different period not
Transactions exceeding fifteen (15) working days.

1) Customer Identification – Covered persons shall: b) Lawyers and accountants acting as

independent legal professionals are not
a) Establish and record the true identity of its required to report covered and suspicious
clients based on official documents; transactions if the relevant information was
obtained in circumstances where they are
b) Maintain a system of verifying the true subject to professional secrecy or legal
identity of their clients; and professional privilege [Sec.7, R.A. No.
10365].
c) In case of corporate clients, require a system
to verify: NOTE: Should a transaction be determined to be both
a covered transaction and a suspicious transaction, the
i. Legal existence and organizational covered person shall be required to report the same as
structure; and a suspicious transaction [Sec. 9, R.A. No. 9160, as
amended by Sec. 7, R.A. No. 10365].
ii. Authority and identification of all
persons purporting to act on their D. Covered Transactions
behalf.
Covered Transactions of the AMLA:
NOTE: The provisions of existing laws to the contrary
notwithstanding, anonymous accounts, accounts under CCR (Si-CR)
fictitious names, and all other similar accounts shall be
absolutely prohibited. Peso and foreign currency non- 1) Transaction in Cash or other equivalent
checking numbered accounts shall be allowed. The BSP monetary instrument involving a total amount
may conduct annual testing solely limited to the in excess of Php 500,000 within one banking
determination of the existence and true identity of the day [Sec. 3(b)].
owners of such accounts [Sec.9(a), R.A. No. 9160, as
amended]. 2) For Casinos – a single casino transaction
involving an amount in excess of P5 Million or
2) Record Keeping - All records of all transactions of its equivalent in any other currency [Sec. 3(a)(8),
covered persons shall be maintained and safely R.A. No. 9160, as amended by R.A. No. 10927];
stored for 5 years from the date of transactions.
4) For Real estate developers and brokers – a
Exception: If a case has been filed in court involving single cash transaction involving an amount in
the account, records must be retained and safely excess of Seven million five hundred thousand
kept beyond the five (5)-year period, until it is pesos (P7,500,000.00) or its is equivalent in any
officially confirmed by the AMLC Secretariat that the other currency [Sec. 3(b), R.A. No. 9160, as
case has been resolved, decided or terminated with amended by R.A No. 11521].
finality. (Sec. 3, Rule 20, 2018 Implementing Rules
and Regulations of R.A. No. 9160, as amended): E. Suspicious Transactions

Reviewer by S.K.A. Francisco | 21

 Banking Laws

Suspicious transactions are transactions with covered When reporting covered or suspicious transactions,
persons, regardless of the amounts involved, where any covered institution and its officers and employees are
of the following circumstances exist: prohibited from:

No-CASt-DUS CP

1) There is No underlying legal or trade obligation, 1) Communicating, directly or indirectly, in any

purpose or economic justification; manner or by any means, to any person or
entity, the media, the fact that a covered or
2) The Client is not properly identified; suspicious transaction has been reported or is
about to be reported, the contents of the
3) The Amount involved is not commensurate report, or any other information in relation
with the business or financial capacity of the thereto; and
client;
NOTE: If the reporting is done by any person in
4) Taking into account all known circumstances, it the regular performance of his duties in good
may be perceived that the client’s transaction is faith, no administrative, criminal, or civil
Structured in order to avoid being the subject proceedings shall lie against said person,
of reporting requirements under the Act; whether or not such reporting results in any
criminal prosecution under this Act of any other
5) Any circumstance relating to the transaction law (Safe Harbor Provision).
which is observed to Deviate from the profile of
the client and/or the client’s past transactions 2) Publish or air such report by the mass media, e-
with the covered person; mail, or other devices (Sec. 9[c], R.A. No. 9160).

6) The transaction is in any way related to an NOTE: In case of violation of these prohibitions, the
Unlawful activity or offense under the Act that concerned officer and employee of the covered person
is about to be, is being or has been committed; and media shall be held criminally liable. (Sec. 7, R.A. No.
or 10365)

7) Any transaction that is Similar or analogous to F. Money Laundering

any of the foregoing [Sec. 3(b.l), R.A. No. 9160,
as amended by R.A. No. 11521]. Money Laundering; How committed?

Distinctions between a “covered transaction report” Money laundering is committed by any person who,
and a “suspicious transaction report” knowing that any monetary instrument or property
represents, involves, or relates to the proceeds of any
Covered Transaction Suspicious Transaction unlawful activity:
Repost Report
Involves transaction/s in Involves transactions T-C3AP
cash or other equivalent with cover institutions
1) Transacts said monetary instrument or
monetary instrument regardless of the
property;
involving generally a amounts involved made
total amount in excess of under any the suspicious
2) Converts, transfers, disposes of, moves,
P500,000.00 within 1 circumstances
acquires, possesses, or uses said monetary
banking day. enumerated by law.
instrument or property
[Bar 2015; Divina, Divina on Commercial Law a
3) Conceals or disguises the true nature, source,
Comprehensive Guide Vol. II, 2023, p. 174].
location, disposition, movement, or ownership
Prohibited Acts During Reporting of Covered or of or rights with respect to said monetary
Suspicious Transactions instrument or property;

Reviewer by S.K.A. Francisco | 22

 Banking Laws

4) Attempts or Conspires to commit money

laundering offenses referred to in paragraphs 3) Sec. 3(B), (C), (E), (G), (H), and (I) of R.A. No. 3019,
(a), (b) or (c) as amended, otherwise known as the Anti-
Graft and Corrupt Practices Act;
5) Aids, abets, assists in or counsels the
commission of the money laundering offenses 4) Plunder under R.A. No. 7080, as amended;
referred to in paragraphs (a), (b) or (c) above;
and 5) Robbery and extortion under Arts. 294, 295,
296, 299, 300, 301, and 302 of the RPC, as
6) Performs or fails to perform any act as a result amended;
of which he facilitates the offense of money
laundering referred to in paragraphs (a), (b) or 6) Jueteng and Masiao punished as illegal
(c) above. gambling under P.D. No. 1602;

Money laundering is also committed by any covered 7) Piracy on the high seas under the RPC, as
person who, knowing that a covered or suspicious amended and P.D. No. 532;
transaction is required under the AMLA to be reported
to the AMLC, fails to do so (Sec. 4, R.A. No. 9160, as 8) Qualified Theft under Art. 310 of the RPC, as
amended by Sec. 4, R.A. No. 10365]. amended;

Three Basic Steps in Money Laundering 9) Swindling under Art. 315 and Other Forms of
Swindling under Art. 316 of the RPC, as
The following are: amended;

PLI
10) Smuggling under R.A. Nos. 455 and 1937;

1) Placement – At this stage, the launderer inserts

11) Violations of R.A. No. 8792, otherwise known as
the dirty money into a legitimate financial
the Electronic Commerce Act of 2000;
institution usually in the form of cash bank
deposits.
12) Hijacking and other violations under R.A. No.
6235; Destructive Arson and Murder, as
2) Layering – Involves sending money through
defined under the RPC, as amended;
various financial transactions to change its form
and make it more difficult to follow. It may
13) Terrorism and Conspiracy to Commit
consist of bank-to-bank transfers, changing
Terrorism as defined and penalized under Secs.
currency, or purchasing high value items.
3 and 4 of R.A. No. 9372; (as amended by Sec.
2, R.A. No. 10365)
3) Integration – The money re-enters mainstream
economy in legitimate-looking form, appearing
14) Financing of Terrorism under Sec. 4 and
to have come from some legitimate transaction.
offenses punishable under Secs. 5, 6, 7, and 8 of
R.A. No. 10168, otherwise known as the
G. Unlawful Activities or Predicate Crimes
Terrorism Financing Prevention and
Suppression Act of 2012; (Ibid.)
Unlawful activity refers to any act or omission or series
or combination thereof involving or having relation to
15) Bribery under Arts. 210, 211, and 211-A of
the following:
the RPC, as amended, and Corruption of Public
1) Kidnapping for ransom under Art. 267 of Act Officers under Art. 212 of the RPC, as amended;
No. 3815, otherwise known as the Revised Penal (Ibid.)
Code, as amended;
16) Frauds and Illegal Exactions and
2) Secs. 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15, and 16 Transactions under Arts. 213, 214, 215, and 216
of R.A. No. 9165, otherwise known as the of the RPC, as amended; (Ibid.)
Comprehensive Dangerous Drugs Act of
2002;

Reviewer by S.K.A. Francisco | 23

 Banking Laws

17) Malversation of Public Funds and Property 29) Violation of R.A. No. 8293, otherwise known as
under Arts. 217 and 222 of the RPC, as the Intellectual Property Code of the
amended; (Ibid.) Philippines; (Ibid.)

18) Forgeries and Counterfeiting under Arts. 163, 30) Violation of Sec. 4 of R.A. No. 9995, otherwise
166, 167, 168, 169, and 176 of the RPC, as known as the Anti-Photo and Video
amended; (Ibid.) Voyeurism Act of 2009; (Ibid.)

19) Violations of Secs. 4 to 6 of R.A. No. 9208, 31) Violation of Sec. 4 of R.A. No. 9775, otherwise
otherwise known as the Anti-Trafficking in known as the Anti-Child Pornography Act of
Persons Act of 2003; (Ibid.) 2009; (Ibid.)

20) Violations of Secs. 78 to 79 of Chapter IV, of P.D. 32) Violations of Secs. 5, 7, 8, 9, 10(c), (d), and (e),
No. 705, otherwise known as the Revised 11, 12, and 14 of R.A. No. 7610, otherwise
Forestry Code of the Philippines, as amended; known as the Special Protection of Children
(Ibid.) Against Abuse, Exploitation and
Discrimination; (Ibid.)
21) Violations of Secs. 86 to 106 of Chapter VI, of
R.A. No. 8550, otherwise known as the 33) Fraudulent practices and other violations under
Philippine Fisheries Code of 1998; (Ibid.) R.A. No. 8799, otherwise known as the
Securities Regulation Code of 2000; (as
22) Violations of Secs. 101 to 107, and 110 of R.A. amended by Sec. 2, R.A. No. 11521)
No. 7942, otherwise known as the Philippine
Mining Act of 1995; (Ibid.) 34) Violation of Sec. 19(a)(3) of R.A. No. 10697,
otherwise known as the ‘Strategic Trade
23) Violations of Sec. 27(c), (e), (f), (g), and (i), of R.A. Management Act’, in relation to the
No. 9147, otherwise known as the Wildlife proliferation of weapons of mass destruction
Resources Conservation and Protection Act; and its financing pursuant to United Nations
(Ibid.) Security Council Resolution Nos. 1718 of 2006
and 2231 of 2015; (Ibid.)
24) Violation of Sec. 7(b) of R.A. No. 9072, otherwise
known as the National Caves and Cave 35) Violations of Sec. 254 of Chapter II, Title X of the
Resources Management Protection Act; National Internal Revenue Code of 1997, as
(Ibid.) amended, where the deficiency basic tax due in
the final assessment is in excess of Twenty-five
25) Violation of R.A. No. 6539, otherwise known as million pesos (P25,000,000.00) per taxable year,
the Anti-Carnapping Act of 2002, as for each tax type covered and there has been
amended; (Ibid.) finding of probable cause by the competent
authority: Provided, further, that there must be
26) Violations of Secs. 1, 3 and 5 of P.D. No. 1866, a finding of fraud, willful misrepresentation or
as amended, otherwise known as the decree malicious intent on the part of the taxpayer:
Codifying the Laws on Illegal/Unlawful Provided, finally, that in no case shall the AMLC
Possession, Manufacture, Dealing In, institute forfeiture proceedings to recover
Acquisition or Disposition of Firearms, monetary instruments, property or proceeds
Ammunition or Explosives; (Ibid.) representing, involving or relating to a tax
crime, if the same has already been recovered
27) Violation of P.D. No. 1612, otherwise known as or collected by the Bureau of Internal Revenue
the Anti-Fencing Law; (Ibid.) (BIR) in a separate proceeding; and (Ibid.)

28) Violation of Sec. 6 of R.A. No. 8042, otherwise 36) Felonies or offenses of a similar nature that
known as the Migrant Workers and Overseas are punishable under the penal laws of other
Filipinos Act of 1995, as amended by countries. (Ibid.)
Republic Act No. 10022; (Ibid.)
NOTE: Money laundering is also committed by any
covered person who, knowing that a covered or

Reviewer by S.K.A. Francisco | 24

 Banking Laws

suspicious transaction is required under this Act to be property alleged to be laundered, proceeds
reported to the AMLC, fails to do so [Sec. 4, R.A. No. from, or instrumentalities used in or intended
9160, as amended]. for use in any unlawful activity as defined in Sec.
3(i) hereof;
H. Anti-Money Laundering Council (AMLC)
7) To implement such measures as may be
AMLC is the principal government agency tasked to necessary and justified under the Act to
implement the anti-money laundering laws. It is counteract money laundering;
composed of the:
8) To receive and take action in respect of, any
1) Governor of the Bangko Sentral ng Pilipinas as request from foreign states for assistance in
Chairman; their own anti-money laundering operations
provided in the Act;
2) Commissioner of the Insurance Commission;
and 9) To develop educational programs on the
pernicious effects of money laundering, the
3) Chairman of the Securities and Exchange methods and techniques used in money
Commission, as members [Sec. 7, R.A. No. 9160, laundering, the viable means of preventing
as amended]. money laundering and the effective ways of
prosecuting and punishing offenders;
I. Functions of AMLC
10) To enlist the assistance of any branch,
The AMLC shall act unanimously in the discharge of its
department, bureau, office, agency or
functions as defined hereunder:
instrumentality of the government, including
government-owned-and-controlled
1) To require and receive covered transaction
corporations, in undertaking any and all anti-
reports from covered institutions;
money laundering operations, which may
include the use of its personnel, facilities and
2) To issue orders addressed to the appropriate
resources for the more resolute prevention,
Supervising Authority or the covered institution
detection and investigation of money
to determine the true identity of the owner of
laundering offenses and prosecution of
any monetary instrument or property subject of
offenders;
a covered transaction report or request for
assistance from a foreign State, or believed by
11) To impose administrative sanctions for the
the Council, on the basis of substantial
violation of laws, rules and regulations and
evidence, to be, in whole or in part, wherever
orders and resolutions issued pursuant thereto;
located, representing, involving, or related to,
directly or indirectly, in any manner or by any
12) To require the Land Registration Authority and
means, the proceeds of an unlawful activity;
all its Registries of Deeds to submit to the
AMLC, reports on all real estate transactions
3) To institute civil forfeiture proceedings and all
involving an amount in excess of five hundred
other remedial proceedings through the Office
thousand pesos (P500,000.00) within 15 days
of the Solicitor General:
from the date of registration of the transaction,
in a form to be prescribed by the AMLC. The
4) To cause the filing of complaints with the
AMLC may also require the Land Registration
Department of Justice or the Ombudsman for
Authority and all its Registries of Deeds to
the prosecution of money laundering offenses;
submit copies of relevant documents of all real
estate transactions;
5) To investigate suspicious transactions and
covered transactions deemed suspicious after
13) In the conduct of its investigation, the AMLC
determination by AMLC, money laundering
shall apply for the issuance of a search and
activities, and other violations of this Act;
seizure order with any competent court;

6) To apply before the Court of Appeals, ex parte,

14) In the conduct of its investigation, the AMLC
for the freezing of any monetary instrument or
shall apply for the issuance of subpoena ad

Reviewer by S.K.A. Francisco | 25

 Banking Laws

testificandum and/or subpoena duces tecum Objective of a Freeze Order

with any competent court;
Ligot v. Republic, March 6, 2013
15) To implement targeted financial sanctions in
relation to proliferation of weapons of mass The primary objective of a freeze order is to temporarily
destruction and its financing, including ex parte preserve monetary instruments or property that are in
freeze, without delay, against all funds and any way related to an unlawful activity or money
other assets that are owned and controlled, laundering, by preventing the owner from utilizing them
directly or indirectly, including funds and assets during the duration of the freeze order.
derived or generated therefrom, by individuals
or entities designated and listed under United Application for freeze order
Nations Security Council Resolution Nos. 1718
of 2006 and 2231 of 2015 and their successor (Section 10 of Republic Act No. 9160, as amended)
resolutions as well as any binding resolution of
the Security Council; and NOTE: There are 2 bodies that can issue a freeze order:
CA and AMLC. However, their freeze orders are for
16) To preserve, manage or dispose assets pursuant different purposes.
to a freeze order, asset preservation order, or
judgment of forfeiture: Provided, however, that Issuing Court and Period of Effectivity of the Freeze
pending their turnover to the national Order
government, all expenses incurred in relation to
The CA may issue a freeze order which shall be effective
the duties herein mentioned shall be deducted
immediately, for a period of twenty 20 days upon:
from the amount to be turned over to the
national government [Sec. 7, R.A. No. 9160 as
1) A verified ex parte petition by the AMLC; and
amended].
2) After determination that probable cause exists
J. Freezing of Monetary Instrument or Property
that any monetary instrument or property is in
any way related to an unlawful activity
A freeze order is a provisional remedy aimed at
[predicate crime].
blocking or restraining monetary instruments or
properties in any way related to an unlawful activity
Summary Hearing to Determine Modification of
from being transacted, converted, concealed, moved, or
Freeze Order
disposed without affecting the ownership thereof [Rule
2, Sec. 1, 2018 IRR of AMLA]. Within the 20-day period, the CA shall conduct a
summary hearing, with notice to the parties, to
Ligot v. Republic, March 6, 2013 determine whether or not to modify or lift the freeze
order or extend its effectivity.
It is an extraordinary and interim relief to prevent the
dissipation, removal, or disposal of properties that are Total Period of Freeze Order
suspected to be the proceeds of, or related to, unlawful
activities. The relief is pre-emptive in character, meant The total period of the freeze order shall not exceed 6
to prevent the owner from disposing his property and months.
thwarting the State’s effort in building its case and
eventually filing civil forfeiture proceedings and/or Freeze order in relation to Asset preservation order
prosecuting the owner. of the RTC

Purpose of Freeze Order This is without prejudice to an asset preservation order

that the Regional Trial Court having jurisdiction over the
Ligot v. Republic, March 6, 2013 appropriate anti-money laundering case or civil
forfeiture case may issue on the same account
To give the government the necessary time to prepare depending on the circumstances of the case, where the
its case and to file the appropriate charges without Court of Appeals will remand the case and its records.
having to worry about the possible dissipation of the
assets that are in any way related to the suspected illegal Automatic Lifting
activity.

Reviewer by S.K.A. Francisco | 26

 Banking Laws

If there is no case filed against a person whose account What is the remedy of a party against whom the
has been frozen within the period determined by the AMLC has issued a freeze order?
Court of Appeals, not exceeding 6 months, the freeze
order shall be deemed ipso facto lifted. 1) During the effectivity of the freeze order, the
aggrieved party may, within 20 days from
Provided, further, That this new rule shall not apply to issuance, file with the Court of Appeals a
pending cases in the courts. petition to determine the basis of the freeze
order according to the principle of effective
Period within which Petition to Freeze must be acted judicial protection.
upon by the CA
2) The person whose property or funds have been
In any case, the court should act on the petition to frozen may withdraw such sums as the AMLC
freeze within 24 hours from filing of the petition. determines to be reasonably needed for
monthly family needs and sustenance including
If the application is filed a day before a nonworking day, the services of counsel and the family medical
the computation shall exclude the nonworking days. needs of such person.

Scope of Freeze Order? Civil Forfeiture

The freeze order or asset preservation order issued The AMLC, if circumstances warrant, may initiate civil
under this Act shall be limited only to the: forfeiture proceedings to:

1) Amount of cash or monetary instrument or 1) Preserve the assets; and

value of property that court finds there is
probable cause to be considered as proceeds of 2) Protect it from dissipation.
a predicate offense; and
Can a TRO be issued against a freeze order issued by
2) The freeze order or asset preservation order the AMLC?
shall not apply to amounts in the same account
in excess of the amount or value of the Yes, but only by the CA and the SC.
proceeds of the predicate offense.
K. Authority to Inquire into Bank Deposits (Sec.
Motion to Lift the Freeze Order 11, R.A. No. 9160, as amended)

A person whose account has been frozen may file a When can the AMLC inquire into bank deposits?
motion to lift the freeze order and the court must
resolve this motion before the expiration of the freeze The AMLC may inquire into or examine any particular
order. deposit or investment, including related accounts, with
any banking institution or non-bank financial institution
Can a Temporary Restraining Order be issued provided:
against a freeze order issued by the CA?
1) It is upon order of any competent court based
NO. As per the Act, no court shall issue a TRO or a writ on an ex parte application;
of injunction against any freeze order, except the
Supreme Court. NOTE: Competent court under Sec. 11 of R.A.
9160, as amended, refers to the Court of
Can the AMLC issue freeze orders? Appeals (A.M. No. 21-03-05-CA)

YES, but only for the limited purpose of implementing 2) In cases of violations of this Act, when it has
targeted financial sanctions in relation to proliferation been established that there is probable cause
of weapons of mass destruction and its financing, in that the deposits or investments, including
which case the AMLC shall have the power to issue, ex related accounts involved, are related to an
parte, an order to freeze without delay. The freeze order unlawful activity or a money laundering offense.
shall be effective until the basis for its issuance shall
have been lifted. NOTE: The inquiry conducted by the AMLC is
not violative of The Law on Secrecy of Bank

Reviewer by S.K.A. Francisco | 27

 Banking Laws

Deposits or R.A. No. 1405, as amended; Foreign Republic vs. Eugenio, February 14, 2008
Currency Deposit Act or R.A. No. 6426, as
amended; General Banking Law or R.A. No. Bank Inquiry is not a search warrant or warrant of arrest.
8791; and other similar laws [Sec. 2, R.A. No. A bank inquiry order does not necessitate a finding of
10167]. probable cause similar to that in search warrant or
warrant of arrest. The Constitution and the Rules of
3) In case of exception from court order in cases Court prescribe particular requirements attaching to
involving unlawful activities defined in Secs. search warrants that are not imposed by the AMLA with
3(i)(1), (2), and (12) [Subido Pagente Certeza respect to bank inquiry orders. A constitutional warrant
Mendoza and Binay Law Offices vs. CA., G.R. No. requires that the judge personally examine under oath
216914, December 6, 2016]. or affirmation the complainant and the witnesses he
may produce, such examination being in the form of
First Element: Court Order Ex Parte must first be searching questions and answers. Those are impositions
obtained before the AMLC can inquire into these related which the legislative did not specifically prescribe as to
Accounts: Provided, That the procedure for the ex parte the bank inquiry order under the AMLA. Simply put, a
application of the ex parte court order for the principal bank inquiry order is not a search warrant or warrant of
account shall be the same with that of the related arrest as it contemplates a direct object but not the
accounts. seizure of persons or property.

Court of Appeals action on application within 24 Third Element (optional): Without Court Order
Hours
Except that no court order shall be required in cases
The Court of Appeals shall act on the application to involving activities defined below:
inquire into or examine any deposit or investment with
any banking institution or non-bank financial institution KD-HATTS
within 24 hours from filing of the application. (Ibid.)
1) Sec. 3(i)(1) or Kidnapping for ransom under Art.
Authority of BSP to check compliance 267 of Act No. 3815, otherwise known as the
Revised Penal Code, as amended;
Bangko Sentral ng Pilipinas may, in the course of a
periodic or special examination, check the compliance 2) Sec. 3(i)(2) or Sections 3, 4, 5, 7, 8 and 9 of
of a Covered institution with the requirements of the Article 2, R.A. No. 6425, as amended, otherwise
AMLA and its implementing rules and regulations. known as the Dangerous Drugs Act of 1972;

Definition of Related Accounts 3) Sec. 3(i)(12) or Hijacking and other violations

under R.A. No. 6235;
It refers to accounts, the funds, and sources of which
originated from and/or are materially linked to the 4) Destructive Arson and murder, as defined
monetary instrument(s) or property(ies) subject of the under the Revised Penal Code, as amended,
freeze order(s) [Sec. 2, R.A. No. 10167]. including those perpetrated by terrorists
against non-combatant persons and similar
Second Element: Probable Cause.
targets;

Republic v. Bolante, April 17, 2017

5) Financing of Terrorism under Sec. 4 and
offenses punishable under Secs. 5, 6, 7, and 8 of
In the context of bank inquiry, probable cause refers to
R.A. No. 10168, otherwise known as the
such facts and circumstances which would lead a
Terrorism Financing Prevention and
reasonably discreet, prudent, or cautious man to believe
Suppression Act of 2012
that any monetary instrument or property sought to be
inquired into is in any way related to any unlawful
6) Terrorism and conspiracy to commit terrorism
activity and/or money laundering offense. Otherwise
as defined and penalized under R.A. No. 9372.
stated, it is necessary to show specific facts and
circumstances that provide a link between an unlawful
7) Felonies or offenses of a nature Similar to those
activity or a money laundering offense, on the one hand,
mentioned in Section 3(i)(1), (2), and (12), which
and the account or monetary instrument or property
are Punishable under the penal laws of other
sought to be examined on the other hand.

Reviewer by S.K.A. Francisco | 28

 Banking Laws

countries [Sec. 11, R.A. No. 9160 as amended by the following grounds that the Anti-Money Laundering
R.A. No. 10167]. Act is unconstitutional insofar as it allows the
examination of a bank account without any notice to the
Republic vs. Eugenio, February 14, 2008 affected party,

Section 11 allows the AMLC to inquire into bank ISSUE:

accounts without having to obtain a judicial order in
cases where there is probable cause that the deposits or Whether Section 11 of the Anti-Money Laundering Act
investments are related to kidnapping for ransom, is unconstitutional for violating the right to due process
certain violations of the Comprehensive Dangerous and privacy
Drugs Act of 2002, hijacking and other violations under
R.A. No. 6235, destructive arson and murder. Absent any RULING:
of the mentioned predicate crimes, a court order is
necessary to inquire into bank deposits. (1) Right to substantive due process.

Constitutional Requirement NO. Sec. 11 of the AMLA providing for ex-parte

application and inquiry by the AMLC into certain bank
The authority to inquire into or examine the main deposits and investments does not violate substantive
account and the related accounts shall comply with the due process, there being no physical seizure of
requirements of Article III, Sections 2 and 3 of the 1987 property involved at that stage.
Constitution. Likewise, the constitutional injunction
against ex post facto laws and bills of attainder shall be A bank inquiry order under Sec. 11 does not
respected [Sec. 21, as amended by RA 10365]. necessitate any form of physical seizure of property of
the account holder. What the bank inquiry order
Similarities of a Freeze Order under Sec. 10 and a authorizes is the examination of the particular
Bank Inquiry Order under Sec. 11 deposits or investments in banking institutions or
non-bank financial institutions. The monetary
The freeze order under Sec. 10 and the bank inquiry instruments or property deposited with such banks or
order under Sec. 11 are similar in that they are financial institutions are not seized in a physical sense
extraordinary provisional reliefs which the AMLC may but are examined on particular details such as the
avail of to effectively combat and prosecute money account holder's record of deposits and transactions.
laundering offenses [Republic v. Eugenio, G.R. No.
174629, 15 Feb. 2008]. (2) Right to procedural due process.

SUBIDO V. CA (G.R. NO. 216914) NO. The AMLC functions solely as an investigative
body in the instances mentioned in Rule 5.b.26.
(Digest only but YOU HAVE TO READ THE FULL TEXT) Thereafter, the next step is for the AMLC to file a
Complaint with either the DOJ or the Ombudsman
FACTS: pursuant to Rule 6b. Even in the case of Estrada v.
Office of the Ombudsman, where the conflict arose at
SPCMB was most concerned with the article published the preliminary investigation stage by the
in the Manila Times on 25 February 2015 which read: Ombudsman, we ruled that the Ombudsman's denial
“The Anti-Money Laundering Council asked the Court of of Senator Estrada's Request to be furnished copies of
Appeals to allow the Council to peek into the bank the counter-affidavits of his co-respondents did not
accounts of the Beenays, their corporations, and a law violate Estrada's constitutional right to due process
office where a family member was once a partner. Also where the sole issue is the existence of probable cause
the bank accounts of the law office linked to the family, for the purpose of determining whether an
the SPCMB, where the Vice President's daughter Abigail information should be filed and does not prevent
was a former partner. Estrada from requesting a copy of the counter-
affidavits of his co-respondents during the pre-trial or
By 8 Mar. 2015, the Manila Times published another even during trial.
article reporting that the appellate court had issued a
Resolution granting the ex-parte application of the Plainly, the AMLC's investigation of money laundering
AMLC to examine the bank accounts of SPCMB. SPCMB offenses and its determination of possible money
undertook this petition for certiorari and prohibition on laundering offenses, specifically its inquiry into certain

Reviewer by S.K.A. Francisco | 29

 Banking Laws

bank accounts allowed by court order, does not any criminal prosecution under the AMLA or any other
transform it into an investigative body exercising Philippine law [Sec. 9(c), R.A. No. 9160, as amended;
quasi-judicial powers. Hence, Sec. 11 of the AMLA, Rule 9.3.e, IRR of R.A. No. 9160].
authorizing a bank inquiry court order, cannot be said
to violate SPCMB's constitutional right to due process. When reporting covered or suspicious transactions to
the Anti-Money Laundering Council (AMLC), covered
(3) Right to privacy. persons and their officers and employees shall not be
deemed to have violated:
NO. To ensure adherence to the general state policy
of preserving the absolutely confidential nature of 1) The Law on Secrecy of Bank Deposits or R.A. No.
Philippine bank accounts: 1405, as amended;

a) The AMLC is required to establish probable 2) Foreign Currency Deposit Act of the Philippines
cause as basis for its ex-parte application for or R.A. No. 6426, as amended;
bank inquiry order;
3) General Banking Law of 2000 or R.A. No. 8791;
b) The CA, independent of the AMLC's and
demonstration of probable cause, itself makes
a finding of probable cause that the deposits 4) Other similar laws [Sec. 9(c), R.A. No. 9160, as
or investments are related to an unlawful amended by Sec. 6, R.A. No. 9194].
activity under Sec. 3(i) or a money laundering
offense under Sec. 4 of the AMLA; Prohibited Communications

Under Sec. 7 of R.A. No. 10365, when reporting covered

c) A bank inquiry court order ex-parte for related
or suspicious transactions to the AMLC, covered
accounts is preceded by a bank inquiry court
persons and their employees or officers are prohibited
order ex-parte for the principal account which
from:
court order ex-parte for related accounts is
separately based on probable cause that such
1) Communicating, directly or indirectly, in any
related account is materially linked to the
manner or by any means, to any person or
principal account inquired into; and
entity, the media, the fact that a covered or
suspicious transaction has been reported or is
d) The authority to inquire into or examine the
about to be reported, the contents of the
main or principal account and the related
report, or any other information in relation
accounts shall comply with the requirements
thereto; and
of Secs. 2 and 3, Art. III, of the Constitution.

NOTE: If the reporting is done by any person in

The foregoing demonstrates that the inquiry and
the regular performance of his duties in good
examination into the bank account are not undertaken
faith, no administrative, criminal, or civil
whimsically and solely based on the investigative
proceedings shall lie against said person,
discretion of the AMLC. In particular, the requirement of
whether or not such reporting results in any
demonstration by the AMLC, and determination by the
criminal prosecution under this Act of any other
CA, of probable cause emphasizes the limits of such
law (Safe Harbor Provision).
governmental action.

L. Safe Harbor Provision 2) Publishing or airing in any manner or form by

the mass media, electronic mail, or other similar
The Safe Harbor Provision provides that no devices.
administrative, criminal, or civil proceedings shall lie
against any person for having made a covered NOTE: In case of violation of these prohibitions, the
transaction report (CTR) or a suspicious transaction concerned officer and employee of the covered person
report (STR) in the regular performance of his duties and and media shall be held criminally liable [Sec. 7, R.A. No.
in good faith, whether or not such reporting results in 10365].

Reviewer by S.K.A. Francisco | 30

 Banking Laws

Comprehensive Overview of Amendments to the Anti-Money Laundering Act (AMLA) in the Philippines

NOTE: R.A 9160, also known as the Anti-Money Laundering Act of 2001, serves as the original law establishing the
legal framework for anti-money laundering efforts in the Philippines. It was approved on September 29, 2001.

Republic Act No. Date of Enactment Summary of Changes

R.A. 9194 March 7, 2003 1) Modified the definition of "Covered Transaction" to involve a total
amount exceeding P500,000 in one banking day.

2) Introduced a new paragraph defining "Suspicious Transaction” with

specific circumstances triggering suspicion.

3) Expanded the definition of "Unlawful Activity" to include various

offenses under different laws.

4) Revised the definition of the money laundering offense, specifying

transacting and facilitating offenses.

5) Modified the composition and functions of the Anti-Money

Laundering Council (AMLC).

6) Altered reporting requirements for covered and suspicious

transactions.

7) Modified the provision related to freezing of monetary instruments or

properties.

8) Modified the authority to inquire into bank deposits.

9) Enhanced penalties for malicious reporting and breach of

confidentiality.

10) Deleted Section 15 of Republic Act No. 9160.

R.A. 10167 June 18, 2012 1) Amendment to Section 10 (Freezing of Monetary Instrument or
Property):

a) Court of Appeals may issue a freeze order upon verified ex

parte petition by AMLC, effective for 20 days, extendable.

b) Account holder may file a motion to lift the freeze order, to

be resolved before the expiration of the 20-day period.

c) No court can issue a temporary restraining order or injunction

against any freeze order, except the Supreme Court.

2) Amendment to Section 11 (Authority to Inquire into Bank Deposits):

a) AMLC can inquire into or examine any deposit or investment

with related accounts based on ex parte application, with a
court order required for related accounts.

b) Court of Appeals must act on the application to inquire within

24 hours from filing.

Reviewer by S.K.A. Francisco | 31

 Banking Laws

c) BSP can check compliance of covered institutions during

periodic or special examinations.

d) "Related accounts" defined as those materially linked to

frozen monetary instruments or properties.

e) Constitutional compliance required for the authority to

inquire into or examine accounts.
R.A. 10365 February 15, 2013 1) Covered Persons – Expanded definition, now includes lawyers and
accountants under specific conditions.

2) Unlawful Activity – Definition was broadened to include terrorism,

bribery, corruption, fraud, and offenses in other countries' penal laws.

3) Definitions – Added clear definitions for "precious metals" and

"precious stones."

4) Money Laundering Offense – Clarified actions constituting money

laundering and included failure to report transactions to AMLC as an
offense.

5) AMLC Powers – Strengthened freezing powers; court must act on

freeze order within 24 hours. AMLC can require reports on real estate.

6) Civil Forfeiture – Introduced process for civil forfeiture of related

monetary instruments or properties.

7) Penal Provisions – Revised penalties, introduced administrative

sanctions for covered persons, and prohibited discriminatory
practices.

8) BIR Operations – Clarified non-intervention of AMLC in Bureau of

Internal Revenue (BIR) operations.

9) Constitutional Compliance – Mandated compliance with

constitutional requirements in account inquiries, including protection
against ex post facto laws and bills of attainder.
R.A. 10927 July 21, 2017 1) Covered Persons (Section 3(a)) – Added casinos, including internet and
ship-based casinos, as covered persons.

2) Covered Transaction Threshold (Sec.3(b)) – Reduced the threshold for

casino transactions to a single transaction exceeding P5,000,000.

3) Definitions for Casinos (Section 3(l)) – Introduced definitions for

"casino," "internet-based casinos," "ship-based casino," "casino cash
transaction," and "gaming operations."

4) Freezing of Monetary Instrument (Sec.10) – Modified freeze order

duration to 20 days, with an option to extend up to 6 months. Excluded
excess amounts from the freeze order.

5) Implementing Rules and Regulations (Sec.18) – Required AMLC,

PAGCOR, and regulatory agencies to jointly formulate rules for casinos
within 90 days.

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 Banking Laws

R.A. 11521 January 29, 2021 1) Declaration of Policy (Section 2) – Emphasis on protecting bank
(Most recent?) account integrity and preventing money laundering. - Commitment to
transnational cooperation.

2) Covered Persons and Transactions (Section 3) – Added real estate

developers, brokers, and offshore gaming operators. - Adjusted
thresholds for covered transactions.

3) New Definitions (Section 3) – Introduced definitions for "offshore

gaming operator," "service providers," "real estate developer," and
"real estate broker."

4) Targeted Financial Sanctions and Proliferation Financing (Section 7) –

Empowered AMLC for targeted financial sanctions and immediate
freeze orders.

5) Information Security and Confidentiality (New Section 8-A) –

Established rules for post-separation information protection.

6) Modified Freezing of Monetary Instrument or Property (Section 10) –

Extended freeze order duration to 20 days, potentially up to 6 months.
- Allowed AMLC to issue ex parte freeze orders.

7) Civil Forfeiture (Section 12) – Provided for civil forfeiture initiated by

AMLC. - Restricted courts from issuing TRO against asset preservation
orders.

8) Penal Provisions (Section 14) – Enhanced penalties for breaches of

information security and confidentiality. - Held media liable for
published breaches.

9) Non-intervention in BIR Operations (Section 20) – Clarified AMLC non-

participation in BIR operations, allowing coordination on tax offense
investigations.

10) Implementing Rules and Regulations – Mandated AMLC to issue rules

and regulations within 90 days

HIGHKEY-NOTE: I made this summary table based on my personal efforts and interpretation of the laws. I’m not perfect, mistakes may occur, so it's
crucial to cross-reference information with the official legislative texts for the most up-to-date and precise details regarding the amendments to the
AMLA.

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 Banking Laws

III. GENERAL BANKING LAW PNB V. VILLA (G.R. NO.)

(R.A. NO. 8791)
(Digest only but YOU HAVE TO READ THE FULL TEXT)

A. State Policy (Sections 1-2) FACTS:

Declaration of Policy ANDRES V. PNB (G.R. NO.)

The State recognizes the (Digest only but YOU HAVE TO READ THE FULL TEXT)

1) Vital role of banks in providing an environment FACTS:

conducive to the sustained development of the
national economy; an PNB V. CORPUZ (G.R. NO.)
2) The fiduciary nature of banking that requires
high standards of integrity and performance. (Digest only but YOU HAVE TO READ THE FULL TEXT)

3) In furtherance thereof, the State shall promote FACTS:

and maintain a stable and efficient banking and
financial system that is globally competitive, GUMABON V. PNB (G.R. NO.)
dynamic and responsive to the demands of a
developing economy [Sec. 2, R.A. No. 8791]. (Digest only but YOU HAVE TO READ THE FULL TEXT)

Diligence Required of Banks FACTS:

New Civil Code CARBONELL V. METROBANK (G.R. NO.)

Article 1173. The fault or negligence of the obligor (Digest only but YOU HAVE TO READ THE FULL TEXT)
consists in the omission of that diligence which is
required by the nature of the obligation and FACTS:
corresponds with the circumstances of the persons, of
the time and of the place. When negligence shows bad B. Banks and Quasi-Banks (Sections 3,4 & 71)
faith, the provisions of articles 1171 and 2201,
paragraph 2, shall apply. “Banks” shall refer to entities engaged in the lending of
funds obtained from the public in the form of deposits
If the law or contract does not state the diligence which [Sec. 3(1), R.A. No. 8791)
is to be observed in the performance, that which is
expected of a good father of a family shall be required. Elements for an Entity to be considered Doing
Business as a Bank
REYES V. CA (G.R. NO.)
1) The entity is engaged in the lending of funds;
(Digest only but YOU HAVE TO READ THE FULL TEXT)
2) Funds are obtained from the public, which
FACTS: means, 20 or more lenders; and

COMSAVINGS BANK V. CAPISTRANO (G.R. NO.) 3) Funds are obtained from the public in the form
of deposits.
(Digest only but YOU HAVE TO READ THE FULL TEXT)
NOTE: A transaction involving not a loan but purchase
FACTS: of receivables at a discount well within the purview of
investing, reinvesting, or trading in securities which an
URSAL V. CA (G.R. NO.) investment company is authorized to perform is not
banking.
(Digest only but YOU HAVE TO READ THE FULL TEXT)
Classification of Banks (Section 3)
FACTS:
Banks shall be classified into:

Reviewer by S.K.A. Francisco | 34

 Banking Laws

(UCTRCIO) others [First Planters Pawnship, Inc. v. CIR, G.R. No.

174134, 30 July 208].
1) Universal banks;
Deposit Substitutes
2) Commercial banks
Q: The Bureau of Treasury releases a memo outlining
3) Thrift banks composed of; the Formula for the Zero-Coupon Bond. It specifies
that the formula is only applicable if the bonds are
i. Savings and mortgage banks not subject to the 20% final withholding tax due to
ii. Stock savings and loan associations; a limit of 19 buyers/lenders. A day before the
and auction, Auction Guidelines are issued, reiterating
iii. Private development banks, as that the Bonds to be auctioned would be exempt
defined in R.A. No. 7960 from the 20% final withholding tax if limited to 19
lenders. RCBC, representing CODE-NGO, won the
4) Rural banks, as defined in R.A. No. 7353 bid for P35 billion worth of bonds at a yield-to-
maturity of 12.75% and entered agreements under
5) Cooperative banks, as defined in R.A. No. 6938; the belief that income derived from the bonds was
tax-exempt. RCBC Capital sold and distributed
6) Islamic banks as defined in R.A. No. 6848; and Government Bonds. Banco de Oro, et al. purchased
the PEACe Bonds on different dates. However, the
7) Other classification of banks as determined by BIR issued a ruling days before maturity, declaring
the MB of the BSP [Sec. 3(1), R.A. No. 8791]. the bonds as deposit substitute subject to 20% final
withholding tax. Petitioners sought a TRO, granted
Distinction of Banks from Quasi- Banks and Trust by the Supreme Court under the condition that the
Entities banks hold the tax in escrow. Subsequent motions
questioned the interpretation of deposit substitutes
Banks Entities engaged in the lending of under Section 22(Y). The Supreme Court, on January
funds obtained in the form of 13, 2015, granted the Petition and Petitions-in-
deposits [Sec. 3]. Intervention, nullifying BIR Rulings Nos. 370-2011
Quasi-Banks Entities engaged in the borrowing and DA 378-2011. The Bureau of Treasury was
of funds through the issuance, reprimanded for withholding tax and ordered to
endorsement or assignment with release withheld amounts to bondholders. In the
recourse or acceptance of deposit post-decision period (March 13, 2015, to October
substitutes as defined in Section 95 29, 2015), respondents filed a Motion for
of Republic Act No. 7653 for Reconsideration, and petitioners filed motions for
purposes of re-lending or clarification and compliance with the TRO.
purchasing of receivables and Respondents argue the 20-lender rule shouldn't
other obligations [Sec. 4]. strictly apply to government debt instruments,
Trust Entities A stock corporation or a person asserting the PEACe Bonds should be treated as
duly authorized by the Monetary deposit substitutes. Is the respondents' argument
Board to engage in Trust business. valid?

Only such a corporation may act as A: NO. The court finds the respondents' proposition
a trustee or administer any trust or untenable, emphasizing the strict adherence to the
hold property in trust or on deposit letter in construing tax laws and that Section 22(Y)
for the use, benefit, or behoof of mandates considering the actual number of lenders in
others [Sec. 79] determining tax treatment.

Financial Intermediaries The ruling defines deposit substitutes as an alternative

form of obtaining funds from the public, other than
Persons or entities whose principal functions include the deposits, through the issuance, endorsement, or
lending, investing, or placement of funds on pieces of acceptance of debt instruments for the borrower's own
evidence of indebtedness or equity deposited with account, intended for relending or purchasing
them, acquired by them or otherwise coursed through receivables and other obligations.
them, either for their own account or for the account of

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 Banking Laws

The phrase “obtaining funds from the public” shall mean principal functions include the lending, investing or
borrowing from twenty (20) or more lenders at any one placement of funds or evidence of indebtedness or
time. equity deposited with them, acquired by them, or
otherwise coursed through them, either for their own
For this purpose, “lenders” shall refer to individuals and account or for the account of others. It need not be
corporate entities that are not acting as financial elaborated that pawnshops are non-banks/not banking
intermediaries, subject to the safeguards. institutions. Moreover, the nature of their business
activities partakes that of a financial intermediary in that
The court noted that the concept of deposit substitutes its principal function is lending.
emerged due to banks and non-bank financial
intermediaries resorting to issuing various debt That pawnshops are to be treated as non-bank financial
instruments, apart from bank deposits, to obtain funds intermediaries is further bolstered by the fact that
from the public. pawnshops are under the regulatory supervision of the
Bangko Sentral ng Pilipinas and covered by its Manual
Under the NIRC, deposit substitutes include not only the of Regulations for Non-Bank Financial Institutions (First
issuances and sales of banks and quasi-banks for Planters Pawnshop, Inc. v. CIR, G.R. No. 17413430 July
relending or purchasing receivables and other similar 2008).
obligations, but also debt instruments issued by
commercial, industrial, and other non-financial C. Authority of Bangko Sentral over Banks
companies to finance their own needs or the needs of (Sections 4-7)
their agents or dealers.
Supervisory Powers
To determine whether the financial assets are deposit
substitutes, the “20 or more individual or corporate The operations and activities of banks shall be subject
lenders” rule must apply. to the supervision of the Bangko Sentral. "Supervision"
includes:
When the Government Securities Eligible Dealer (GSED)
sells the government securities to 20 or more investors, 1) Issuance of rules, conduct, or establishment
the government securities are deemed to be in the standards of operation for:
nature of a deposit substitute [BDO v. Republic, G.R. No.
198756, 2016]. • Uniform application to all
institutions/functions.
The idea behind "deposit substitutes" is to make sure that financial
rules and taxes also apply to things other than regular bank deposits
when organizations borrow money from the public. In the past, banks
• Consideration of distinctive character and
and other financial groups started using different kinds of debt (like substantive similarities.
bonds) to get money from people instead of just taking deposits. So,
"deposit substitutes" is a way for regulators to keep an eye on and 2) Conduct of examinations to determine
regulate these new ways of borrowing money to ensure everything
follows the rules. It helps them stay in control of the financial system
compliance with laws and regulations.
even as new methods of raising funds emerge.
• Determined by the Monetary Board under
Pawnshops are Non-bank Financial Intermediaries warranted circumstances.

Q: First Planters Pawnshop, Inc. (Pawnshop) contests 3) Overseeing to ascertain compliance with
the deficiency value-added and documentary stamp laws and regulations.
taxes imposed upon it by the Bureau of Internal
Revenue (BIR) for the year 2000. The core of 4) Regular investigations, not be oftener than
petitioner’s argument is that it is not a lending once a year from the last date of
investor within the purview of Sec. 108 (A) of the examination, to determine whether an
National Internal Revenue Code (NIRC), as institution is conducting its business on a
amended, and therefore not subject to value-added safe or sound basis:
tax (VAT). Is Pawnshop’s contention, correct?
• Immediate addressing of
A: NO. The tax treatment of pawnshops as non-bank deficiencies/irregularities found by audit.
financial intermediaries is not without basis. Financial
intermediaries are defined as persons or entities whose

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 Banking Laws

5) Inquiry into solvency and liquidity of the Engagement Authorization

institution.
• No person or entity is allowed to engage in
6) Enforcement of prompt corrective action. banking operations or quasi-banking functions
[Sec. 4(1), R.A. No. 8791]. without authority from the BSP [Sec. 6(1), R.A. No.
8791].
Other Entities Covered
NOTE: Entities authorized by the BSP to perform
Aside from banks, BSP's regulatory and supervisory universal or commercial banking functions also
power extends to the following entities: have the authority to engage in quasi-banking
functions.
1) Quasi-banks;
• Persons or entities found performing banking or
2) Trust entities; and quasi-banking functions without authority from
the BSP are subject to appropriate sanctions under
3) Other financial institutions which under special the New Central Bank Act and other applicable laws
laws are subject to BSP supervision [Sec. 4(2), [Sec. 6(4), R.A. No. 8791]
R.A. No. 8791].
• The MB is responsible for determining whether a
Policy Direction; Ratios, Ceilings, and Limitations person or entity is performing banking or quasi-
banking functions without BSP’s authority [Sec.
Policy Direction
6(1), R.A. No. 8791]
• BSP shall provide policy direction in areas of
• To resolve the issue, the Monetary Board, through
money, banking, and credit [Sec. 5(1), R.A. No.
the appropriate supervising and examining
8791].
department of the BSP, may examine, inspect, or
investigate the books and records of the person or
Ratios, Ceilings, and Limitations
entity in question [Sec. 6(2), R.A. No. 8791].
• The Monetary Board (MB) may prescribe ratios,
ceilings, limitations, or other forms of regulation on • Upon issuance of authority by the BSP, the person
different types of accounts and practices of banks or entity may commence engaging in banking
and quasi-banks [Sec. 5(2), R.A. No. 8791]. operations or quasi-banking functions. This
authority remains valid unless surrendered,
• The prescribed regulations shall, to the extent revoked, suspended, or annulled by the BSP in
feasible, conform to internationally accepted accordance with this Act or other special laws [Sec.
standards, including those of the Bank for 6(2), R.A. No. 8791].
International Settlements (BIS) [Sec. 5(2), R.A. No.
Authority Administration
8791].
• The department head and the examiners of the
Exemptions
appropriate supervising and examining
• The MB may exempt particular categories of department are hereby authorized to administer
transactions from such ratios, ceilings, and oaths to any such person, employee, officer, or
limitations. Exemptions may be granted for director of any such entity and to compel the
exceptional cases or to enable a bank or quasi- presentation or production of such books,
bank under rehabilitation or during a merger or documents, papers or records that are reasonably
consolidation to continue in business [Sec. 5(2), necessary to ascertain the facts relative to the true
R.A. No. 8791]. functions and operations of such person or entity.
[Sec. 6(3), R.A. No. 8791].
• Exemptions aim to ensure the safety of creditors,
depositors, and the general public during unique • Failure or refusal to comply with the required
circumstances [Sec. 5(2), R.A. No. 8791]. presentation or production of documents within a
reasonable time shall subject the responsible
Authority to Engage in Banking and Quasi-Banking individuals to penal sanctions under the New
Functions Central Bank Act [Sec. 6(2), R.A. No. 8791].

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 Banking Laws

D. Organization, Management, and Administration General Rule: No bank shall purchase or acquire shares
of Banks and Quasi-Banks (Sections 8-22) of its own capital stock or accept its own shares as a
security for a loan.
Requisites for Organization of Banks and Quasi-
Banks Exception: When authorized by the MB.

The MB may authorize the organization of a bank or PROVIDED that in every case the stock so purchased or
quasi-bank subject to the following conditions: acquired shall, within 6 months from the time of its
purchase or acquisition, be sold or disposed of at a
1) Entity is a stock corporation; public or private sale [Sec. 10, R.A. No. 8791].

2) Funds are obtained from the public, which shall Extent of Foreign Stockholdings
mean twenty (20) or more persons (2-Da); and
Foreign individuals and non-bank corporations may
3) Minimum capital requirements prescribed by own or control up to 40% of the voting stock of a
the MB for each category of banks are satisfied domestic bank. This rule shall apply to Filipinos and
[Sec. 8(1), R.A. No. 8791]. domestic non-bank corporations.

Considerations for Authorization The percentage of foreign-owned voting stocks in a

bank shall be determined by the citizenship of the
• The MB, in exercising its authority, must consider individual stockholders in that bank. The citizenship of
the capability of the entity in terms of financial the corporation which is a stockholder in a bank shall
resources, technical expertise, and integrity [Sec. follow the citizenship of the controlling stockholders of
8(2), R.A. No. 8791]. the corporation, irrespective of the place of
incorporation [Sec. 11, R.A. No. 8791].
Bank Licensing Process
Stockholdings of Family Groups of Related Interests
The bank licensing process shall incorporate an
assessment of: Family Groups or Related Interests – Stockholdings of
individuals related to each other within the fourth
1) Ownership structure; degree of consanguinity or affinity, whether legitimate
or common-law.
2) Directors and senior management;
NOTE: Family groups or related interests must fully
3) Operating plan and internal controls, and disclose their stockholdings in all transactions with the
bank [Sec. 12, R.A. No. 8791].
4) Projected financial condition and capital base
[Sec. 8(2), R.A. No. 8791]. Related Interests – Two or more corporations owned or
controlled by the same family group or group of
Issuance of Stocks persons shall be considered related interests [Sec. 13,
R.A. No. 8791].
The MB may prescribe rules and regulations on:
Corporate Stockholdings
1) Types of stock a bank may issue;
(same as related interest mentioned above)
2) Including the terms thereof; and
Certificate of Authority to Register
3) Rights appurtenant thereto TO DETERMINE
compliance with laws and regulations Articles of Incorporation
governing capital and equity structure of banks;
PROVIDED, that banks shall issue par value The Securities and Exchange Commission (SEC) is
stocks only [Sec. 9, R.A. No. 8791]. prohibited from registering the articles of incorporation
of any bank or its amendments without a certificate of
Treasury Stocks authority issued by the MB, under its seal [Sec. 14(1),
R.A. No. 8791].

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 Banking Laws

The certificate of authority is only issued by the MB

when satisfied that:

1) All requirements of existing laws and

regulations for the proposed business have
been complied with;

2) Public interest and economic conditions

(general and local) justify authorization;

3) The amount of capital, financing, organization,

direction, administration, integrity, and
responsibility of organizers and administrators
assure the safety of deposits and public interest.

By-Laws Registration

• The SEC is also barred from registering the by-laws

of any bank or amendments without a certificate of
authority from the BSP [Sec. 14(2), R.A. No. 8791].

Board of Directors

Membership Requirements

• The board of directors of a bank must consist of a

minimum of 5 members and a maximum of 15
members [Sec. 15, R.A. No. 8791].

• 2 of these directors must be independent directors,

defined as individuals who are not officers or
employees of the bank, its subsidiaries, affiliates, or
related interests [Sec. 15, R.A. No. 8791].

• In the case of a bank merger or consolidation, the

number of directors shall not exceed 21 [Sec. 17,
R.A. No. 8791].

Fit and Proper Rule

Reviewer by S.K.A. Francisco | 39

Banking Laws

Reviewer by S.K.A. Francisco | 40