BANKING LAW (R.A.

8791) equity structure of banks; Provided, That

banks shall issue par value stocks only.
General Banking Law: 2. Bank must be an open corporation
Reason: Vital to industry
Sec. 3 of the General Banking Law provides that: 3. The word bank cannot be used if such
"Banks" shall refer to entities engaged in the person or entity is not engaged in banking
lending of funds obtained in the form of deposits. business.
4. It is subject to heavy and close supervision
Sec. 8 of the General Banking Law provides that:
and/or regulation by the Bangko Sentral ng
The Monetary Board may authorize the Pilipinas.
organization of a bank or quasi-bank subject to the 5. Banks must observe highest degree of
following conditions: diligence.
8.1 That the entity is a stock corporation; 6. Sec. 22 of the General Banking Law
8.2 That its funds are obtained from the public, states that: The banking industry is hereby
which shall mean twenty (20) or more persons; and declared as indispensable to the national
interest and, notwithstanding the
8.3 That the minimum capital requirements
provisions of any law to the contrary, any
prescribed by the Monetary Board for each strike or lockout involving banks, if
category of banks are satisfied. unsettled after seven (7) calendar days shall
No new commercial bank shall be established be reported by the Bangko Sentral to the
within three (3) years from the effectivity of this Secretary of Labor who may assume
Act. In the exercise of the authority granted jurisdiction over the dispute or decide it or
herein, the Monetary Board shall take into certify the same to the National Labor
consideration their capability in terms of their Relations Commission for compulsory
financial resources and technical expertise and arbitration. However, the President of the
integrity. The bank licensing process shall Philippines may at any time intervene and
incorporate an assessment of the banks ownership assume jurisdiction over such labor dispute
structure, directors and senior management, its in order to settle or terminate the same.
operating plan and internal controls as well as its
projected financial condition and capital base. *In DBP v CA, the SC held that while an
innocent mortgagee is not expected to conduct
*To be registered as bank, it must be a stock an exhaustive investigation on the history of
corporation. the mortgagors title, in case of a banking
institution, it must exercise due diligence
*Banks must obtain funds from the public. before entering into said contract, and cannot
Minimum number of depositor is 20 persons. rely upon on what is or is not annotated on the
title.
Nature of Business: Cases: China Banking v Lagon; Citibank v
Cabangongan
Sec. 2 of the General Banking Law states that:
The State recognizes the vital role of banks Authority to incorporate and operate:
providing an environment conducive to the
sustained development of the national economy Sec. 14 of the General Banking Law states that:
and the fiduciary nature of banking that requires The Securities and Exchange Commission shall
high standards of integrity and performance. In
not register the articles of incorporation of any
furtherance thereof, the State shall promote and
maintain a stable and efficient banking and bank, or any amendment thereto, unless
financial system that is globally competitive, accompanied by a certificate of authority issued by
dynamic and responsive to the demands of a the Monetary Board, under its seal. Such
developing economy. certificate shall not be issued unless the Monetary
Consequences: Board is satisfied from the evidence submitted to
1. Sec. 9 of the General Banking Law it:
provides that: The Monetary Board may
14.1. That all requirements of existing laws and
prescribe rules and regulations on the types
of stock a bank may issue, including the regulations to engage in the business for which the
terms thereof and rights appurtenant applicant is proposed to be incorporated have been
thereto to determine compliance with laws complied with;
and regulations governing capital and

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14.2. That the public interest and economic Persons or entities found to be performing banking
conditions, both general and local, justify the or quasi-banking functions without authority from
authorization; and the Bangko Sentral shall be subject to appropriate
sanctions under the New Central Bank Act and
14.3. That the amount of capital, the financing,
other applicable laws.
organization, direction and administration, as well
as the integrity and responsibility of the organizers Classification of banks:
and administrators reasonably assure the safety of
deposits and the public interest. Sec. 3.2 of the General Banking Law provides
The Securities and Exchange Commission shall not that: Banks shall be classified into:
register the by-laws of any bank, or any (a) Universal banks;
amendment thereto, unless accompanied by a (b) Commercial banks;
certificate of authority from the Bangko Sentral. (c) Thrift banks, composed of:
*The articles of incorporation must be (i) Savings and mortgage banks;
accompanied by the favorable recommendation of (ii) Stock savings and loan associations;
the BSP.
and
Sec. 6 of the General Banking Law provides that:
(iii) Private development banks, as defined
No person or entity shall engage in banking
in the Republic Act No. 7906 (hereafter the
operations or quasi-banking functions without
Thrift Banks Act);
authority from the Bangko Sentral: Provided,
(d) Rural banks, as defined in Republic Act
however, That an entity authorized by the Bangko
No. 73S3 (hereafter the "Rural Banks Act");
Sentral to perform universal or commercial
(e) Cooperative banks, as defined in Republic
banking functions shall likewise have the authority
Act No 6938 (hereafter the "Cooperative Code");
to engage in quasi-banking functions.
(f) Islamic banks as defined in Republic Act
The determination of whether a person or entity is
No. 6848, otherwise known as the Charter of Al
performing banking or quasi-banking functions
Amanah Islamic Investment Bank of the
without Bangko Sentral authority shall be decided
Philippines; and
by the Monetary Board. To resolve such issue, the
(g) Other classifications of banks as
Monetary Board may; through the appropriate
determined by the Monetary Board of the
supervising and examining department of the
Bangko Sentral ng Pilipinas.
Bangko Sentral, examine, inspect or investigate the
books and records of such person or entity. Upon Distinctions between different kinds of banks:
issuance of this authority, such person or entity
may commence to engage in banking operations or a. As to Capitalization: They have different
quasi-banking function and shall continue to do so minimum capitalization requirements.
unless such authority is sooner surrendered, b. As to Purpose: Some of the banks have
specific purposes and social functions.
revoked, suspended or annulled by the Bangko
c. As to Powers or Functions: There are
Sentral in accordance with this Act or other special functions and powers that are not exercised
laws. by one that are exercised by others. Some
The department head and the examiners of the banks may exercise certain powers only
appropriate supervising and examining department upon prior approval of the Monetary Board.
are hereby authorized to administer oaths to any *Universal banks can engage into non-allied
such person, employee, officer, or director of any enterprises. It can also act as an
such entity and to compel the presentation or investment house, thus, it can enter into
production of such books, documents, papers or underwriting commitments and do
records that are reasonably necessary to ascertain underwriting securities.
the facts relative to the true functions and d. As to who can be directors: Public officers
operations of such person or entity. Failure or can be directors of Rural Banks while such
refusal to comply with the required presentation or officers are prohibited from being directors
production of such books, documents, papers or or officers of other types of banks.
records within a reasonable time shall subject the e. As to Incorporators: General Rule:
persons responsible therefore to the penal Incorporators must be natural persons.
sanctions provided under the New Central Bank Exception: In rural banks, it can be
Act. organized or established by cooperatives

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 and corporations primarily organized to *Joint accounts may be the subject of survivorship
hold equities in rural banks. agreement whereby the co-depositors agree to
f. As to Foreign Equity: A rural bank must permit either of them to withdraw the whole
be wholly owned by Filipinos while other deposit during their lifetime and transferring the
banks require only 40% Filipino ownership balance to the survivor upon the death of one of
of their voting stocks. them.
*In RA 6938, majority of the shares must be Basis: Trust and Confidence
owned by cooperatives. *What is prohibited under the Family Code is
g. As to necessity of public offering: Public donation inter vivos and not donation mortis
offering of shares is necessary for domestic causa.
banks seeking authority to act as universal
bank while there is no such requirement for Secrecy of Bank Deposits:
other banks.
Peso deposits:
General Rule: Sec. 2 of Republic Act No. 1405
Functions of the bank: provides that: All deposits of whatever nature with
banks or banking institutions in the Philippines
1. Deposit Functions including investments in bonds issued by the
2. Loan Functions Government of the Philippines, its political
subdivisions and its instrumentalities, are hereby
Deposit Function: considered as of an absolutely confidential nature
and may not be examined, inquired or looked into
*The relationship created is one of creditor-debtor by any person, governmental official, bureau or
relation. office.
*There is passing of ownership to the bank. Exceptions:
*The bank can appropriate the deposits without 1. When there is written permission of the
the consent of the depositor. depositor or investor;
*Legal compensation can take place because they 2. Impeachment cases;
are mutually creditor-debtor of each other. 3. Upon the order of a competent court in
*Prior to incorporation, the deposits can be named cases of bribery or dereliction of duty of
to corporate treasurer. He will held it in trust for public officials;
the corporation. 4. Upon the order of a competent court in
Depositors: cases where the money deposited or
1. Minors: invested is the subject of litigation;
- They can open bank accounts in their own 5. Upon order of the competent court or
right provided that they are at least 7 years tribunal in cases involving unexplained
of age; they are able to read and write and wealth under Sec. 8 of the Anti-Graft and
have sufficient discretion; they are not Corrupt Practices Act (R.A. 3019);
otherwise disqualified by any other 6. Upon inquiry by the Commissioner of
incapacity; and it should only be savings or Internal Revenue for the purpose of
time deposits. determining the net estate of a deceased
* They cannot open checking account nor depositor;
demand deposits. *In case the taxpayer compromised his tax
2. Married Women: liability by reason of financial incapacity.
- They are allowed to open bank accounts 7. General Rule: Upon the order of a
without the assistance of their competent court or in proper cases by the
husbands. Anti-Money Laundering Council where
Reason: equality in capacity there is probable cause of money
*Bank account may be opened by one individual or laundering.
two or more persons. Whenever two or more Exception: In some instances even without
persons open an account, the same may be an court order.
and/or account or an and account. 8. Disclosure of the Treasurer of the
General Rule: Fictitious accounts or anonymous Philippines for dormant deposits for at least
accounts are prohibited. 10 years under the Unclaimed Balances Act
Exception: Foreign currency deposits which may (R.A. 3936)
be a numbered account. *Escheat proceedings
*The law requires that necessary measures are
undertaken by the bank to record and establish Foreign Currency deposits:
the true identity of the depositor.
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*Subsequent to secrecy law. *A joint account shall be insured separately from
Under the Foreign Currency Deposit Act, there is any individual-owned account.
only one exception and that is: When there is a *A joint account held by a juridical person or entity
written consent of depositor.
jointly with natural person/s shall be presumed to
Secrecy of Deposits under the Anti-Money belong to the juridical person.
Laundering Law: *The aggregate share in all joint accounts is
subject to P250,000 threshold.
General Rule: The Anti-Money Laundering Council
may inquire into deposits upon order of the court Loan Function of the Banks:
when there is probable cause that the deposits are
related to the crime of unlawful activities defined in *A bank shall grant loans and other credit
Sec. 3(1) and Sec. 4 of R.A. 9160 as amended by accommodations only in amounts and for the
R.A. 9194. periods of time essential for the effective
Exception: A court order is not even necessary
completion of the operations to be financed.
when the offense or unlawful activity involved is
any of the following: 1. Kidnapping for ransom
Single Borrowers Limit:
under Article 267 of the Revised Penal Code; 2.
Sections 4, 5, 7, 8, 9, 10, 12, 13, 14, 15, and 16 of
Sec. 35.1 of the General Banking Law provides
the Comprehensive Dangerous Drugs Act of 2002;
that: Except as the Monetary Board may
and Hi-jacking and other violations under R.A.
otherwise prescribe for reasons of national
6235; destructive arson and murder, as defined
interest, the total amount of loans, credit
under the Revised Penal Code, as amended,
accommodations and guarantees as may be
including those perpetrated by terrorists against
defined by the Monetary Board that may be
non-combatant persons and similar targets.
extended by a bank to any person,
Garnishment:
partnership, association, corporation or other
General Rule: Bank accounts may be garnished by
entity shall at no time exceed twenty-five percent
the creditors of the depositor.
(25%) of the net worth of such bank. The
Reason: Not deposits for investment, thus, law on
basis for determining compliance with single
secrecy is not applicable.
borrower limit is the total credit commitment of
Exceptions:
the bank to the borrower.
1. Foreign Currency Deposits
Sec. 35.2 of the General Banking Law states
*In Salvacion v Central Bank of the
that: Unless the Monetary Board prescribes
Philippines, the SC held that foreign
otherwise, the total amount of loans, credit
currency deposits of an American tourist
accommodations and guarantees prescribed in the
who was found guilty of repeatedly raping a
preceding paragraph may be increased by an
twelve years old child is subject to
additional ten percent (10%) of the net worth of
garnishment.
such bank provided the additional liabilities of
2. Those exempt under the Rules of Civil
any borrower are adequately secured by trust
Procedure like provision for the family for
receipts, shipping documents, warehouse receipts
four months
or other similar documents transferring or
securing title covering readily marketable, non-
Deposit Insurance:
perishable goods which must be fully covered by
insurance.
*All deposits of any bank are insured with the
PDIC. DOSRI ACCOUNTS:
*Obligation to pay the premium lies on the bank.
Risk insured against: closure of banks due to Sec. 36 of the General Banking Law states that:
liquidity problems. No director or officer of any bank shall, directly
*Insured deposit under the law means the net or indirectly, for himself or as the
representative or agent of others, borrow from such
amount due to any depositor for deposits in an
bank nor shall he become a guarantor, endorser or
insured bank but should not exceed P250,000. If surety for loans from such bank to others, or in
the depositor has two or more accounts with the any manner be an obligor or incur any contractual
same bank, the maximum coverage of P250,000 liability to the bank except with the written
pertains to the sum of all such accounts approval of the majority of all the directors of the
maintained in the same right and capacity. bank, excluding the director concerned:
Provided, That such written approval shall not be

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required for loans, other credit accommodations 3. The loan or financial accommodation is
and advances granted to officers under a from: a. his bank, or b. a bank that is a
fringe benefit plan approved by the Bangko subsidiary of a bank holding company of
Sentral. The required approval shall be entered which both his bank and lending bank are
upon the records of the bank and a copy of subsidiaries, c. a bank in which a
such entry shall be transmitted forthwith to the controlling proportion of the shares is
appropriate supervising and examining department owned by the same interest that owns a
of the Bangko Sentral. controlling proportion of the shares of his
Dealings of a bank with any of its directors, bank; and
officers or stockholders and their related interests 4. The loan or financial accommodation of the
shall be upon terms not less favorable to the bank director, officer or stockholder, singly or
than those offered to others. with that of his related interest, is in excess
After due notice to the board of directors of the of 5% of the capital and surplus of the
bank, the office of any bank director or officer lending bank or in the maximum amount
who violates the provisions of this Section may permitted by law, whichever is lower.
be declared vacant and the director or officer Examples:
shall be 1. If there is interlocking directors subject to
subject to the penal provisions of the New Central DOSRI restrictions
Bank Act. 2. General partner is either a director, officer,
The Monetary Board may regulate the amount of stockholder or related interest of a lending
loans, credit accommodations and guarantees bank subject to DOSRI restrictions
that may be extended, directly or indirectly, by 3. Stranger applied for a loan and a property
a bank to its directors, officers, stockholders was collateral: a. if the property is owned by
and their related interests, as well as investments stranger alone not subject to DOSRI
of such bank in enterprises owned or controlled by restrictions; b. if the property is co-owned
said directors, officers, stockholders and their by a director, officer, stockholder or related
related interests. However, the outstanding loans, interest of the bank subject to DOSRI
credit accommodations and guarantees which a restrictions
bank may extend to each of its stockholders, 4. A director, officer, stockholder, or related
directors, or officers and their related interests, interests owned more than 20% share in a
shall be limited to an amount equivalent to corporation (borrower) subject to DOSRI
their respective unencumbered deposits and restriction.
book value of their paid-in capital contribution Restrictions:
in the bank: Provided, however, That loans, 1. Procedural requirement: The account
credit accommodations and guarantees secured should be upon written approval of all the
by assets considered as non-risk by the
director of the lending bank excluding the
Monetary Board shall be excluded from such
limit: Provided, further, That loans, credit director concerned.
accommodations and advances to officers in the 2. Arms Length Rule: The account should be
form of fringe benefits granted in accordance upon terms not less favorable to the bank
with rules as may be prescribed by the than those offered to others.
Monetary Board shall not be subject to the 3. Reportorial requirement: The resolution
individual limit. approving the loan shall be entered in the
The Monetary Board shall define the term related records of the bank and a copy of the entry
interests. shall be transmitted forthwith to the
The limit on loans, credit accommodations and
Supervising and Examination Sector of the
guarantees prescribed herein shall not apply to
loans, credit accommodations and guarantees BSP.
extended by a cooperative bank to its
cooperative shareholders. Foreclosure of Mortgage
Purpose: To protect the general public from the
abuse of the directors, officers, stockholders and Sec. 47 of the General Banking Law provides
related interests of the bank. that: In the event of foreclosure, whether judicially
Requisites: or extra-judicially, of any mortgage on real estate
1. The borrower is a director, officer or any which is security for any loan or other credit
stockholder of a bank; accommodation granted, the mortgagor or debtor
2. He contract a loan or any form of financial whose real property
accommodation; has been sold for the full or partial payment
of his obligation shall have the right within
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one year after the sale of the real estate, to Sec. 11 of the General Banking Law provides
redeem the property by paying the amount due that: Foreign individuals and non-bank
under the mortgage deed, with interest thereon at corporations may own or control up to forty
rate specified in the mortgage, and all the costs percent (40%) of the voting stock of a domestic
and expenses incurred by the bank or bank. This rule shall apply to Filipinos and
institution from the sale and custody of said domestic non-bank corporations.
property less the income derived there from. The percentage of foreign-owned voting stocks in a
However, the purchaser at the auction sale bank shall be determined by the citizenship of the
concerned whether in a judicial or extra-judicial individual stockholders in that bank. The
foreclosure shall have the right to enter upon and citizenship of the corporation which is a
take possession of such property immediately stockholder in a bank shall follow the citizenship of
after the date of the confirmation of the the controlling stockholders of the corporation,
auction sale and administer the same in irrespective of the place of incorporation.
accordance with law. Any petition in court to General Rule: Banks are partly nationalized
enjoin or restrain the conduct of foreclosure *The 60% minimum threshold must be satisfied by
proceedings instituted pursuant to this the bank.
provision shall be given due course only upon *Filipino ownership voting stocks owned by
the filing by the petitioner of a bond in an Filipinos
amount fixed by the court conditioned that he will Examples:
pay all the damages which the bank may X bank has 1M voting stocks: 600,000 owned by
suffer by the enjoining or the restraint of the Filipinos and 400,000 owned by foreigners. The
foreclosure proceeding. bank complied with the 60% requirement.
Notwithstanding Act 3135,juridical persons
whose property is being sold pursuant to an X bank has 1M voting shares: 400,000 owned by
extra judicial foreclosure, shall have the right Filipinos; 400,000 owned by foreigners and
to redeem the property in accordance with this 200,000 owned by Y Corporation.
provision until, but not after, the registration of Q: Does the 60% requirement satisfied?
the certificate of foreclosure sale with the A: IT DEPENDS. Depending on the citizenship of Y
applicable Register of Deeds which in no case shall Corporation. If the majority controlling
be more than three (3) months after foreclosure, stockholders are Filipino thus Y Corporation is a
whichever is earlier. Owners of property that has Filipino citizen hence the 60% is complied with. If
been sold in a foreclosure sale prior to the Y corporation is controlled by a foreigners there is
effectivity of this Act shall retain their non-compliance of the 60% requirement.
redemption rights until their expiration. *The 40% requirement is applicable not only to
foreigners but also to individual Filipino
Prohibited acts of Borrowers: shareholders and domestic non-bank corporation.
*If the corporation acquiring is a bank the 40%
Sec. 55.2 of the General Banking Law states threshold is not applicable.
that: No borrower of a bank shall - Examples:
(a) Fraudulently overvalue property offered as 600,000 owned by Filipinos; 400,000 owned by
security for a loan or other credit accommodation foreigners
from the bank; A owned 500,000 shares
(b) Furnish false or make misrepresentation or *A single Filipino stockholders can only own upto
suppression of material facts for the purpose of 40% of the voting stock of the bank.
obtaining, renewing, or increasing a loan or other
credit accommodation or extending the period A Corporation which is not a banking institution
thereof; 500,000 shares
(c) Attempt to defraud the said bank in the event *A domestic non-bank corporation can only own
of a court action to recover a loan or other credit upto 40% of the voting stock of the bank.
accommodation; or
(d) Offer any director, officer, employee or agent 800,000 owned by Filipinos; 200,000 owned by
of a bank any gift, fee, commission, or any other foreigners
form of compensation in order to influence such In the 800,000 owned by Filipinos; 400,000 of
persons into approving a loan or other credit which is owned by A and the 200,000 is owned by
accommodation application. A Corporation
In A Corporation, A is a stockholder owning 50% of
Ownership of Banks: the controlling stock of A Corporation.
Q: Is this allowed?

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A: NO. 50% of 200,000 is indirectly owned by a established under Section 2(i) and (ii) of this Act:
Filipino individual, the 40% threshold is violated. Provided, That said banking corporations shall
*The 40% threshold includes both direct and establish stock option plans for their officers and
indirect ownership of shares of the bank.
employees as the resources or assets of these
Act Liberalizing Entry of Foreign Banks: corporations may allow in the best business
judgment of their respective boards of directors,
Sec. 2 of Republic Act No. 7721 provides that: pursuant to the Corporation Code of the
The Monetary Board may authorize foreign banks Philippines.
to operate in the Philippine banking system
To qualify to establish a branch or a subsidiary,
through any of the following modes of entry: (i) by
acquiring, purchasing or owning up to sixty the foreign bank applicant must be widely-owned
percent (60%) of the voting stock of an existing and publicly-listed in its country of origin, unless
bank; (ii) by investing in up to sixty percent (60%) the foreign bank applicant is owned by the
of the voting stock of a new banking subsidiary government of its country of origin.
incorporated under the laws of the Philippines; or General Rule: Foreigners must own only upto 40%
(iii) by establishing branches with full banking of the voting shares of a bank.
authority: Provided, That a foreign bank may avail
Exception: Foreign bank can own upto 60% of the
itself of only one (1) mode of entry: Provided,
further, That a foreign bank or a Philippine voting shares of a bank.
corporation may own up to a sixty percent (60%) of
the voting stock of only one (1) domestic bank or Directors and Officers:
new banking subsidiary.
Sec. 3 of Republic Act No. 7721 states that: In Composition:
approving entry applications of foreign banks, the Sec. 15 of the General Banking Law states that:
The provisions of the Corporation Code to the
Monetary Board shall: (i) ensure geographic
contrary notwithstanding, there shall be at least
representation and complementation; (ii) consider five (5), and a maximum of fifteen (15) members of
strategic trade and investment relationships the board or directors of a bank, two (2) of whom
between the Philippines and the country of shall be independent directors. An "independent
incorporation of the foreign bank; (iii) study the director" shall mean a person other than an officer
demonstrated capacity, global reputation for or employee of the bank, its subsidiaries or
financial innovations and stability in a competitive affiliates or related interests.
Non-Filipino citizens may become members of
environment of the applicant; (iv) see to it that
the board of directors of a bank to the extent
reciprocity rights are enjoyed by Philippine banks of the foreign participation in the equity of said
in the applicant's country; and (v) consider bank.
willingness to fully share their technology. The meetings of the board of directors may be
Only those among the top one hundred fifty (150) conducted through modern technologies such as,
foreign banks in the world or the top five (5) banks but not limited to, teleconferencing and video-
in their country of origin as of the date of conferencing.
Sec. 19 of the General Banking Law states that:
application shall be allowed entry in accordance
Except as otherwise provided in the Rural
with Section 2 (ii) and (iii) hereof. Banks Act, no appointive or elective public
In the exercise of this authority, the Monetary official whether full-time or part-time shall at the
Board shall adopt such measures as may be same time serve as officer of any private bank,
necessary to: (i) ensure that at all times the control save in cases where such service is incident to
of seventy percent (70%) of the resources or assets financial assistance provided by the government
or a government owned or controlled
of the entire banking system is held by domestic
corporation to the bank or unless otherwise
banks which are at least majority-owned by provided under existing laws.
Filipinos; (ii) prevent a dominant market position General Rule: The Board of Directors is composed
by one bank or the concentration of economic of 5 to 15 members only.
power in one or more financial institutions, or in Exception: In case of merger
corporations, participations, partnerships, groups Sec. 16 of the General Banking Law provides
or individuals with related interests; and (iii) that: To maintain the quality of bank management
and afford better protection to depositors and the
secure the listing in the Philippine Stock Exchange
public in general the Monetary Board shall
of the shares of stocks of banking corporations prescribe, pass upon and review the qualifications
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and disqualifications of individuals elected or Bangko Sentral and any other evidences of
appointed bank directors or officers and disqualify indebtedness or obligations the servicing
those found unfit. and repayment of which are fully
After due notice to the board of directors of guaranteed by the Republic of the
the bank, the Monetary Board may disqualify, Philippines, until the minimum required
suspend or remove any bank director or officer capital ratio has been restored. In case
who commits or omits an act which render him of a bank merger or consolidation, or
unfit for the position. when a bank is under rehabilitation under
In determining whether an individual is fit and a program approved by the Bangko Sentral,
proper to hold the position of a director or officer of Monetary Board may temporarily relieve the
a bank, regard shall be given to his integrity, surviving bank, consolidated bank, or
experience, education, training, and competence. constituent bank or corporations under
Justification: Police power rehabilitation from full compliance with the
Reason: Banking institution is imbued with public required capital ratio under such
interest. conditions as it may prescribe. Before the
effectivity of rules which the Monetary
Regulations to maintain liquidity and security: Board is authorized to prescribe under
this provision, Section 22 of the General
1. Sec. 34 of the General Banking Law Banking Act, as amended, Section 9 of the
provides that: The Monetary Board shall Thrift Banks Act, and all pertinent rules
prescribe the minimum ratio which the net issued pursuant thereto, shall continue to
worth of a bank must bear to its total risk be in force.
assets which may include contingent 2. The law imposes limits on loans, credit
accounts. accommodations and guarantees that may
For purposes of this Section, the Monetary be extended by banks.
Board may require such ratio be 3. Sec. 36 of the General Banking Law
determined on the basis of the net worth states that: No director or officer of any
and risk assets of a bank and its bank shall, directly or indirectly, for
subsidiaries, financial or otherwise, as himself or as the representative or agent
well as prescribe the composition and of others, borrow from such bank nor shall
the manner of determining the net worth he become a guarantor, endorser or surety
and total risk assets of banks and their for loans from such bank to others, or in
subsidiaries: Provided, That in the exercise any manner be an obligor or incur any
of this authority, the Monetary Board shall, contractual liability to the bank except with
to the extent feasible conform to the written approval of the majority of all
internationally accepted standards, the directors of the bank, excluding the
including those of the Bank for director concerned: Provided, That such
International Settlements (BIS), relating written approval shall not be required for
to risk-based capital requirements: loans, other credit accommodations and
Provided further, That it may alter or advances granted to officers under a
suspend compliance with such ratio fringe benefit plan approved by the Bangko
whenever necessary for a maximum Sentral. The required approval shall be
period of one (1) year: Provided, finally, entered upon the records of the bank
That such ratio shall be applied uniformly and a copy of such entry shall be
to banks of the same category. In case a transmitted forthwith to the appropriate
bank does not comply with the prescribed supervising and examining department of
minimum ratio, the Monetary Board may the Bangko Sentral.
limit or prohibit the distribution of net Dealings of a bank with any of its
profits by such bank and may require that directors, officers or stockholders and
part or all of the net profits be used to their related interests shall be upon terms
increase the capital accounts of the not less favorable to the bank than those
bank until the minimum requirement has offered to others.
been met The Monetary Board may, After due notice to the board of directors of
furthermore, restrict or prohibit the the bank, the office of any bank director
acquisition of major assets and the making or officer who violates the provisions of
of new investments by the bank, with this Section may be declared vacant and
the exception of purchases of readily the director or officer shall be subject to
marketable evidences of indebtedness of
the Republic of the Philippines and of the
8
 the penal provisions of the New Central the Board in the maximum maturities,
Bank Act. as well as related terms and conditions for
The Monetary Board may regulate the various types of bank loans and other
amount of loans, credit accommodations credit accommodations. Any change by
and guarantees that may be extended, the Board in the maximum maturities shall
directly or indirectly, by a bank to its apply only to loans and other credit
directors, officers, stockholders and their accommodations made after the date of
related interests, as well as investments of such action. The Monetary Board shall
such bank in enterprises owned or regulate the interest imposed on micro
controlled by said directors, officers, finance borrowers by lending investors and
stockholders and their related interests. similar lenders such as, but not limited
However, the outstanding loans, credit to, the unconscionable rates of interest
accommodations and guarantees which a collected on salary loans and similar credit
bank may extend to each of its accommodations.
stockholders, directors, or officers and 7. Sec. 57 of the General Banking Law
their related interests, shall be limited to states that: No bank or quasi-bank shall
an amount equivalent to their respective declare dividends, if at the time of
unencumbered deposits and book value declaration:
of their paid-in capital contribution in 57.1 Its clearing account with the Bangko
the bank: Provided, however, That loans, Sentral is overdrawn; or
credit accommodations and guarantees 57.2 It is deficient in the required
secured by assets considered as non-risk liquidity floor for government deposits for
by the Monetary Board shall be five (5) or more consecutive days, or
excluded from such limit: Provided, 57.3 It does not comply with the liquidity
further, That loans, credit accommodations standards/ratios prescribed by the Bangko
and advances to officers in the form of Sentral for purposes of determining funds
fringe benefits granted in accordance available for dividend declaration; or
with rules as may be prescribed by the 57.4 It has committed a major violation as
Monetary Board shall not be subject to may be determined by the Bangko Sentral.
the individual limit.
The Monetary Board shall define the term Other functions of the Bangko Sentral:
related interests.
The limit on loans, credit A. Emergency Loan
accommodations and guarantees Sec. 84 of the New Central Bank Act
prescribed herein shall not apply to states that: In periods of national
loans, credit accommodations and and/or local emergency or of imminent
guarantees extended by a cooperative financial panic which directly threaten
bank to its cooperative shareholders. monetary and banking stability, the
4. The law imposes restrictions on the value of Monetary Board may, by a vote of at
collaterals on loans. least five (5) of its members, authorize
5. Sec. 41 of the General Banking Law the Bangko Sentral to grant
provides that: The Monetary Board is extraordinary loans or advances to
hereby authorized to issue such regulations banking institutions secured by assets
as it may deem necessary with respect to as defined hereunder: Provided, That
unsecured loans or other credit while such loans or advances are
accommodations that may be granted by outstanding, the debtor institution shall
banks. not, except upon prior authorization by
6. Sec. 43 of the General Banking Law the Monetary Board, expand the total
provides that: The Monetary Board, may, volume of its loans or investments.
similarly in accordance with the authority The Monetary Board may, at its
granted to it in Section 106 of the New discretion, likewise authorize the
Central Bank Act, and taking into Bangko Sentral to grant emergency
account the requirements of the economy loans or advances to banking
for the effective utilization of long-term institutions, even during normal
funds, prescribe the maturities, as well periods, for the purpose of assisting a
as related terms and conditions for bank in a precarious financial condition
various types of bank loans and other or under serious financial pressures
credit accommodations. Any change by brought by unforeseen events, or events

9
which, though foreseeable, could not be (a) furnish an acceptable undertaking to
prevented by the bank concerned: indemnify and hold harmless from suit
Provided, however, That the Monetary a conservator whose appointment the
Board has ascertained that the bank is Monetary Board may find necessary at
not insolvent and has the assets defined any time; and
hereunder to secure the advances: (b) provide acceptable security which, in
Provided, further, That a concurrent vote the judgment of the Monetary Board,
of at least five (5) members of the would be adequate to supplement,
Monetary Board is obtained. where necessary, the assets tendered by
The amount of any emergency loan or the banking institution to collateralize
advance shall not exceed the sum of the subsequent tranche.
fifty percent (50%) of total deposits and In connection with the exercise of these
deposit substitutes of the banking powers, the prohibitions in Section 128
institution and shall be disbursed in of this Act shall not apply insofar as it
two (2) or more tranches. The amount of refers to acceptance as collateral of
the first tranche shall be limited to shares and their acquisition as a result
twenty-five percent (25%) of the total of foreclosure proceedings, including
deposit and deposit substitutes of the the exercise of voting rights pertaining
institution and shall be secured by to said shares: Provided, however, That
government securities to the extent of should the Bangko Sentral acquire any
their applicable loan values and other of the shares it has accepted as
unencumbered first class collaterals collateral as a result of foreclosure
which the Monetary Board may proceedings, the Bangko Sentral shall
approve: Provided, That if as determined dispose of said shares by public bidding
by the Monetary Board, the within one (1) year from the date of
circumstances surrounding the consolidation of title by the Bangko
emergency warrant a loan or advance Sentral.
greater than the amount provided Whenever a financial institution incurs
hereinabove, the amount of the first an overdraft in its account with the
tranche may exceed twenty-five percent Bangko Sentral, the same shall be
(25%) of the bank's total deposit and eliminated within the period prescribed
deposit substitutes if the same is in Section 102 of this Act.
adequately secured by applicable loan B. Appointment of Conservator
values of government securities and Sec. 29 of the New Central Bank Act
unencumbered first class collaterals states that: Whenever, on the basis of a
approved by the Monetary Board, and report submitted by the appropriate
the principal stockholders of the supervising or examining department,
institution furnish an acceptable the Monetary Board finds that a bank
undertaking to indemnify and hold or a quasi-bank is in a state of
harmless from suit a conservator whose continuing inability or unwillingness to
appointment the Monetary Board may maintain a condition of liquidity deemed
find necessary at any time. adequate to protect the interest of
Prior to the release of the first tranche, depositors and creditors, the Monetary
the banking institution shall submit to Board may appoint a conservator with
the Bangko Sentral a resolution of its such powers as the Monetary Board
board of directors authorizing the shall deem necessary to take charge of
Bangko Sentral to evaluate other assets the assets, liabilities, and the
of the banking institution certified by its management thereof, reorganize the
external auditor to be good and management, collect all monies and
available for collateral purposes should debts due said institution, and exercise
the release of the subsequent tranche all powers necessary to restore its
be thereafter applied for. viability. The conservator shall report
The Monetary Board may, by a vote of and be responsible to the Monetary
at least five (5) of its members, Board and shall have the power to
authorize the release of a subsequent overrule or revoke the actions of the
tranche on condition that the principal previous management and board of
stockholders of the institution: directors of the bank or quasi-bank.

10
 The conservator should be competent Sec. 30 of the New Central Bank Act
and knowledgeable in bank operations provides that: Whenever, upon report
and management. The conservatorship of the head of the supervising or
shall not exceed one (1) year. examining department, the Monetary
The conservator shall receive Board finds that a bank or quasi-bank:
remuneration to be fixed by the (a) is unable to pay its liabilities as they
Monetary Board in an amount not to become due in the ordinary course of
exceed two-thirds (2/3) of the salary of business: Provided, That this shall not
the president of the institution in one include inability to pay caused by
(1) year, payable in twelve (12) equal extraordinary demands induced by
monthly payments: Provided, That, if at financial panic in the banking
any time within one-year period, the community;
conservatorship is terminated on the (b) has insufficient realizable assets, as
ground that the institution can operate determined by the Bangko Sentral, to
on its own, the conservator shall receive meet its liabilities; or
the balance of the remuneration which (c) cannot continue in business without
he would have received up to the end of involving probable losses to its
the year; but if the conservatorship is depositors or creditors; or
terminated on other grounds, the (d) has willfully violated a cease and
conservator shall not be entitled to such desist order under Section 37 that has
remaining balance. The Monetary Board become final, involving acts or
may appoint a conservator connected transactions which amount to fraud or
with the Bangko Sentral, in which case a dissipation of the assets of the
he shall not be entitled to receive any institution; in which cases, the
remuneration or emolument from the Monetary Board may summarily and
Bangko Sentral during the without need for prior hearing forbid the
conservatorship. The expenses institution from doing business in the
attendant to the conservatorship shall Philippines and designate the Philippine
be borne by the bank or quasi-bank Deposit Insurance Corporation as
concerned. receiver of the banking institution.
The Monetary Board shall terminate the For a quasi-bank, any person of
conservatorship when it is satisfied that recognized competence in banking or
the institution can continue to operate finance may be designed as receiver.
on its own and the conservatorship is The receiver shall immediately gather
no longer necessary. The and take charge of all the assets and
conservatorship shall likewise be liabilities of the institution, administer
terminated should the Monetary Board, the same for the benefit of its creditors,
on the basis of the report of the and exercise the general powers of a
conservator or of its own findings, receiver under the Revised Rules of
determine that the continuance in Court but shall not, with the exception
business of the institution would of administrative expenditures, pay or
involve probable loss to its depositors or commit any act that will involve the
creditors, in which case the provisions transfer or disposition of any asset of
of Section 30 shall apply. the institution: Provided, That the
*Experiencing liquidity problems only. receiver may deposit or place the funds
Powers of Conservator: of the institution in non-speculative
1. To take charge of the assets, investments. The receiver shall
liabilities, and the management determine as soon as possible, but not
thereof; later than ninety (90) days from
2. To reorganize the management of takeover, whether the institution may
the subject bank; be rehabilitated or otherwise placed in
3. To collect all monies and debts due such a condition so that it may be
said institutions; and permitted to resume business with
4. To exercise all powers necessary to safety to its depositors and creditors
restore its viability and the general public: Provided, That
Except: Those already perfected any determination for the resumption of
C. Appointment of Receiver business of the institution shall be

11
subject to prior approval of the executory, and may not be restrained or
Monetary Board. set aside by the court except on petition
If the receiver determines that the for certiorari on the ground that the
institution cannot be rehabilitated or action taken was in excess of
permitted to resume business in jurisdiction or with such grave abuse of
accordance with the next preceding discretion as to amount to lack or
paragraph, the Monetary Board shall excess of jurisdiction. The petition for
notify in writing the board of directors of certiorari may only be filed by the
its findings and direct the receiver to stockholders of record representing the
proceed with the liquidation of the majority of the capital stock within ten
institution. The receiver shall: (10) days from receipt by the board of
(1) file ex parte with the proper regional directors of the institution of the order
trial court, and without requirement of directing receivership, liquidation or
prior notice or any other action, a conservatorship. The designation of a
petition for assistance in the liquidation conservator under Section 29 of this Act
of the institution pursuant to a or the appointment of a receiver under
liquidation plan adopted by the this section shall be vested exclusively
Philippine Deposit Insurance with the Monetary Board. Furthermore,
Corporation for general application to the designation of a conservator is not a
all closed banks. In case of quasi- precondition to the designation of a
banks, the liquidation plan shall be receiver.
adopted by the Monetary Board. Upon *There is a bank closure.
acquiring jurisdiction, the court shall,
upon motion by the receiver after due Close Now, Hear Later Scheme:
notice, adjudicate disputed claims
against the institution, assist the Sec. 29 of the New Central Bank Act states that:
enforcement of individual liabilities of Whenever, on the basis of a report submitted by
the stockholders, directors and officers, the appropriate supervising or examining
and decide on other issues as may be department, the Monetary Board finds that a bank
material to implement the liquidation or a quasi-bank is in a state of continuing inability
plan adopted. The receiver shall pay the or unwillingness to maintain a condition of
cost of the proceedings from the assets liquidity deemed adequate to protect the interest of
of the institution. depositors and creditors, the Monetary Board may
(2) convert the assets of the institutions appoint a conservator with such powers as the
to money, dispose of the same to Monetary Board shall deem necessary to take
creditors and other parties, for the charge of the assets, liabilities, and the
purpose of paying the debts of such management thereof, reorganize the management,
institution in accordance with the rules collect all monies and debts due said institution,
on concurrence and preference of credit and exercise all powers necessary to restore its
under the Civil Code of the Philippines viability. The conservator shall report and be
and he may, in the name of the responsible to the Monetary Board and shall have
institution, and with the assistance of the power to overrule or revoke the actions of the
counsel as he may retain, institute such previous management and board of directors of the
actions as may be necessary to collect bank or quasi-bank.
and recover accounts and assets of, or The conservator should be competent and
defend any action against, the knowledgeable in bank operations and
institution. The assets of an institution management. The conservatorship shall not exceed
under receivership or liquidation shall one (1) year.
be deemed in custodia legis in the hands The conservator shall receive remuneration to be
of the receiver and shall, from the fixed by the Monetary Board in an amount not to
moment the institution was placed exceed two-thirds (2/3) of the salary of the
under such receivership or liquidation, president of the institution in one (1) year, payable
be exempt from any order of in twelve (12) equal monthly payments: Provided,
garnishment, levy, attachment, or That, if at any time within one-year period, the
execution. conservatorship is terminated on the ground that
The actions of the Monetary Board the institution can operate on its own, the
taken under this section or under conservator shall receive the balance of the
Section 29 of this Act shall be final and remuneration which he would have received up to
the end of the year; but if the conservatorship is
12
terminated on other grounds, the conservator shall subject to supervision of the Bangko Sentral.
not be entitled to such remaining balance. The Supervision shall include the following:
Monetary Board may appoint a conservator 4.1. The issuance of rules of, conduct or the
connected with the Bangko Sentral, in which case establishment standards of operation for uniform
he shall not be entitled to receive any application to all institutions or functions covered,
remuneration or emolument from the Bangko taking into consideration the distinctive character
Sentral during the conservatorship. The expenses of the operations of institutions and the
attendant to the conservatorship shall be borne by substantive similarities of specific functions to
the bank or quasi-bank concerned. which such rules, modes or standards are to be
The Monetary Board shall terminate the applied;
conservatorship when it is satisfied that the 4.2 The conduct of examination to determine
institution can continue to operate on its own and compliance with laws and regulations if the
the conservatorship is no longer necessary. The circumstances so warrant as determined by the
conservatorship shall likewise be terminated Monetary Board;
should the Monetary Board, on the basis of the 4.3 Overseeing to ascertain that laws and
report of the conservator or of its own findings, regulations are complied with;
determine that the continuance in business of the 4.4 Regular investigation which shall not be
institution would involve probable loss to its oftener than once a year from the last date of
depositors or creditors, in which case the examination to determine whether an institution
provisions of Section 30 shall apply. is conducting its business on a safe or sound
*No prior hearing is necessary in appointing a basis: Provided, That the
receiver and in closing the bank. It is enough that deficiencies/irregularities found by or discovered
subsequent judicial review is provided for. Indeed, by an audit shall be immediately addressed;
to require such previous hearing would not only be 4.5 Inquiring into the solvency and liquidity of
impractical but would tend to defeat the very the institution; or
purpose of the law when it invested the Monetary 4.6 Enforcing prompt corrective action.
Board with such authority. The Bangko Sentral shall also have supervision
Purpose: To avoid creation of panic from the over the operations of and exercise regulatory
depositors or public. powers over quasi-banks, trust entities and other
Reason: The government has responsibility to see financial institutions which under special laws
to it that the person dealing with the bank is are subject to Bangko Sentral supervision.
protected. For the purposes of this Act, quasi-banks
shall refer to entities engaged in the borrowing
Effects of receivership and liquidation: of funds through the issuance, endorsement or
1. Suspension of operation assignment with recourse or acceptance of deposit
2. The assets under receivership or liquidation substitutes as defined in Section 95 of
shall be deemed in custodia legis in the Republic Act No. 7653 (hereafter the New
hands of the receiver and shall be exempt Central Bank Act) for purposes of re-lending or
from garnishment, levy, attachment or purchasing of receivables and other obligations.
execution
3. Bank is not liable to pay interest on Money Function:
deposits during the period of suspension of
operation Sec. 50 of the New Central Bank Act states that:
Reason: There is no source of income The Bangko Sentral shall have the sole power and
4. Banks under liquidation retain their legal authority to issue currency, within the territory of
personality the Philippines. No other person or entity, public or
*The bank can sue and be sued but any private, may put into circulation notes, coins or
case should be initiated and prosecuted any other object or document which, in the opinion
through the liquidator. of the Monetary Board, might circulate as
5. There will be no preference even if the currency, nor reproduce or imitate the facsimiles of
claimant-depositor obtained a writ of Bangko Sentral notes without prior authority from
preliminary attachment. the Bangko Sentral.
The Monetary Board may issue such regulations as
Supervision of Banks: it may deem advisable in order to prevent the
circulation of foreign currency or of currency
Sec. 4 of the General Banking Law states that: substitutes as well as to prevent the reproduction
The operations and activities of banks shall be of facsimiles of Bangko Sentral notes.
The Bangko Sentral shall have the authority to
investigate, make arrests, conduct searches and
13
seizures in accordance with law, for the purpose of 5. Any circumstance relating to the
maintaining the integrity of the currency. transaction which is observed to deviate
Violation of this provision or any regulation issued from the profile of the client and/or the
by the Bangko Sentral pursuant thereto shall clients past transactions with the covered
constitute an offense punishable by imprisonment institution;
of not less than five (5) years but not more than ten 6. The transaction is in any way related to an
(10) years. In case the Revised Penal Code provides unlawful activity or any money laundering
for a greater penalty, then that penalty shall be activity or offense under this ACT that is
imposed. about to be, is being or has been
committed; or
Anti-Money Laundering Act: 7. Any transaction that is similar, analogous
or identical to any of the foregoing.
Sec. 4.1 of Republic Act 9160 states that:
Money laundering is a crime whereby the Sec. 3.i. of Republic Act 9160 states that:
proceeds of an unlawful activity AS HEREIN Unlawful activity" refers to any act or omission or
DEFINED are transacted, thereby making them series or combination thereof involving or having
appear to have originated from legitimate sources. relation, to the following:
It is committed by the following: (A) Kidnapping for ransom under Article 267 of Act
a) Any person knowing that any monetary No. 3815, otherwise known as the Revised Penal
instrument or property represents, involves, or Code, as amended; (14) Kidnapping for ransom
relates to, the proceeds of any unlawful activity, (B) Sections 4, 5, 6, 8, 9, 10, 12,13, 14, 15 and 16
transacts or attempts to transact said monetary of Republic Act No.9165, otherwise known as the
instrument or property. COMPREHENSIVE Dangerous Drugs Act of 2002;
b) Any person knowing that any monetary (14) Importation of prohibited drugs;
instrument or property involves the proceeds of (15) Sale of prohibited drugs;
any unlawful activity, performs or fails to perform (16) Administration of prohibited drugs;
any act as a result of which he facilitates the (17) Delivery of prohibited drugs
offense of money laundering referred to in (18) Distribution of prohibited drugs
paragraph (a) above. (19) Transportation of prohibited drugs
c) Any person knowing that any monetary (20) Maintenance of a Den, Dive or Resort for
instrument or property is required under this Act prohibited users
to be disclosed and filed with the Anti-Money (21) Manufacture of prohibited drugs
Laundering (22) Possession of prohibited drugs
Council (AMLC), fails to do so. (23) Use of prohibited drugs
(24) Cultivation of plants which are sources of
Definitions: prohibited drugs
(25) Culture of plants which are sources of
Covered Transaction is a transaction in cash or prohibited drugs
other equivalent monetary instrument involving (C) Section 3 paragraphs b, c, e, g, h and i of
total amount in excess of P500,000 within one Republic Act No. 3019, as amended, otherwise
banking day. known as the Anti-Graft and Corrupt Practices Act;
*P500,000 is the threshold/controlling (14) Directly or indirectly requesting or receiving
Suspicious Transaction are transactions, any gift, present, share, percentage or benefit for
regardless of amount, where any of the following himself or for any other person in connection with
circumstances exists: any contract or transaction between the
1. There is no underlying legal or trade Government and any party, wherein the public
obligation, purpose or economic officer in his official capacity has to intervene
justification; under the law;
2. The client is not properly identified; (15) Directly or indirectly requesting or receiving
3. The amount involved is not commensurate any gift, present or other pecuniary or material
with the business or financial capacity of benefit, for himself or for another, from any person
the client; for whom the public officer, in any manner or
4. Taking into account all known capacity, has secured or obtained, or will secure or
circumstances, it may be perceived that the obtain, any government permit or license, in
clients transaction is structured in order to consideration for the help given or to be given,
avoid being the subject of reporting without prejudice to Section 13 of R.A. 3019;
requirements under the ACT; (16) Causing any undue injury to any party,
including the government, or giving any private
party any unwarranted benefits, advantage or
14
preference in the discharge of his official, (26) Robbery with violence or intimidation of
administrative or judicial functions through persons;
manifest partiality, evident bad faith or gross (27) Robbery with physical injuries, committed in
inexcusable negligence; an uninhabited place and by a band, or with use of
(17) Entering, on behalf of the government, into firearms on a street, road or alley;
any contract or transaction manifestly and grossly (28) Robbery in an uninhabited house or public
disadvantageous to the same, whether or not the building or edifice devoted to worship.
public officer profited or will profit thereby; (F) Jueteng and Masiao punished as illegal
(18) Directly or indirectly having financial or gambling under Presidential Decree No. 1602;
pecuniary interest in any business contract or (29) Jueteng;
transaction in connection with which he intervenes (30) Masiao.
or takes part in his official capacity, or in which he (G) Piracy on the high seas under the Revised
is prohibited by the Constitution or by any law Penal Code, as amended and Presidential Decree
from having any interest; No. 532;
(19) Directly or indirectly becoming interested, for (31) Piracy on the high seas;
personal gain, or having material interest in any (32) Piracy in inland Philippine waters;
transaction or act requiring the approval of a (33) Aiding and abetting pirates and brigands.
board, panel or group of which he is a member, (H) Qualified theft under Article 310 of the Revised
and which exercise of discretion in such approval, Penal Code, as amended;
even if he votes against the same or he does not (34) Qualified theft.
participate in the action of the board, committee, (I) Swindling 'under Article 315 of the Revised
panel or group. Penal Code, as amended;
(D) Plunder under Republic Act No. 7080, as (35) Estafa with unfaithfulness or abuse of
amended; confidence by altering the substance, quality or
(20) Plunder through misappropriation, conversion, quantity of anything of value which the offender
misuse or malversation of public funds or raids shall deliver by virtue of an obligation to do so,
upon the public treasury; even though such obligation be based on an
(21) Plunder by receiving, directly or indirectly, any immoral or illegal consideration;
commission, gift, share, percentage, kickbacks or (36) Estafa with unfaithfulness or abuse of
any other form of pecuniary benefit from any confidence by misappropriating or converting, to
person and/or entity in connection with any the prejudice of another, money, goods or any
government contract or project or by reason of the other personal property received by the offender in
office or position of the public officer concerned; trust or on commission, or for administration, or
(22) Plunder by the illegal or fraudulent under any other obligation involving the duty to
conveyance or disposition of assets belonging to make delivery or to return the same, even though
the National Government or any of its subdivisions, such obligation be totally or partially guaranteed
agencies, instrumentalities or government-owned by a bond; or by denying having received such
or controlled corporations or their subsidiaries; money, goods, or other property;
(23) Plunder by obtaining, receiving or accepting, (37) Estafa with unfaithfulness or abuse of
directly or indirectly, any shares of stock, equity or confidence by taking undue advantage of the
any other form of interest or participation signature of the offended party in blank, and by
including the promise of future employment in any writing any document above such signature in
business enterprise or undertaking; blank, to the prejudice of the offended party or any
(24) Plunder by establishing agricultural, industrial third person;
or commercial monopolies or other combinations (38) Estafa by using a fictitious name, or falsely
and/or implementation of decrees and orders pretending to possess power, influence,
intended to benefit particular persons or special qualifications, property, credit, agency, business or
interests; imaginary transactions, or by means of other
(25) Plunder by taking undue advantage of official similar deceits;
position, authority, relationship, connection or (39) Estafa by altering the quality, fineness or
influence to unjustly enrich himself or themselves weight of anything pertaining to his art or
at the expense and to the damage and prejudice of business;
the Filipino people and the Republic of the (40) Estafa by pretending to have bribed any
Philippines government employee;
(E) Robbery and extortion under Articles 294, 295, (41) Estafa by postdating a check, or issuing a
296, 299, 300, 301 and 302 of the Revised Penal check in payment of an obligation when the
Code, as amended; offender has no funds in the bank, or his funds

15
deposited therein were not sufficient to cover the a manner that infringes intellectual property
amount of the check; rights;
(42) Estafa by inducing another, by means of K.3. Violations of the Consumer Act or Republic
deceit, to sign any document; Act No. 7394 and other relevant or pertinent laws
(43) Estafa by resorting to some fraudulent through transactions covered by or using
practice to ensure success in a gambling game; electronic data messages or electronic documents:
(44) Estafa by removing, concealing or destroying, (64) Sale of any consumer product that is not in
in whole or in part, any court record, office files, conformity with standards under the Consumer
document or any other papers. Act;
(J) Smuggling under Republic Act Nos. 455 and (65) Sale of any product that has been banned by a
1937; rule under the Consumer Act; ,
(45) Fraudulent importation of any vehicle; (66) Sale of any adulterated or mislabeled product
(46) Fraudulent exportation of any vehicle; using electronic documents;
(47) Assisting in any fraudulent importation; (67) Adulteration or misbranding of any consumer
(48) Assisting in any fraudulent exportation; product;
(49) Receiving smuggled article after fraudulent (68) Forging, counterfeiting or simulating any
importation; mark, stamp, tag, label or other identification
(50) Concealing smuggled article after fraudulent device;
importation; (69) Revealing trade secrets;
(51) Buying smuggled article after fraudulent (70) Alteration or removal of the labeling of any
importation; drug or device held for sale;
(52) Selling smuggled article after fraudulent (71) Sale of any drug or device not registered in
importation; accordance with the provisions of the E-Commerce
(53) Transportation of smuggled article after Act;
fraudulent importation; (72) Sale of any drug or device by any person not
(54) Fraudulent practices against customs revenue. licensed in accordance with the provisions of the
(K) Violations under Republic Act No. 8792, E-Commerce Act;
otherwise known as the Electronic Commerce Act (73) Sale of any drug or device beyond its
of 2000; expiration date;
K.1. Hacking or cracking, which refers to: (74) Introduction into commerce of any mislabeled
(55) unauthorized access into or interference in a or banned hazardous substance;
computer system/server or information and (75) Alteration or removal of the labeling of a
communication system; or hazardous substance;
(56) any access in order to corrupt, alter, steal, or (76) Deceptive sales acts and practices;
destroy using a computer or other similar (77) Unfair or unconscionable sales acts and
information and communication devices, without practices;
the knowledge and consent of the owner of the (78) Fraudulent practices relative to weights and
computer or information and communications measures;
system, including (79) False representations in advertisements as the
(57) the introduction of computer viruses and the existence of a warranty or guarantee;
like, resulting in the corruption, destruction, (80) Violation of price tag requirements;
alteration, theft or loss of electronic data messages (81) Mislabeling consumer products;
or electronic document; (82) False, deceptive or misleading advertisements;
K.2. Piracy, which refers to: (83) Violation of required disclosures on consumer
(58) the unauthorized copying, reproduction, loans;
(59) the unauthorized dissemination, distribution, (84) Other violations of the provisions of the E-
(60) the unauthorized importation, Commerce Act;
(61) the unauthorized use, removal, alteration, (L) Hijacking and other violations under Republic
substitution, modification, Act No. 6235; destructive arson and murder, as
(62) the unauthorized storage, uploading, defined under the Revised Penal Code, as
downloading, communication, making available to amended, including those perpetrated by terrorists
the public, or against non-combatant persons and similar
(63) the unauthorized broadcasting, of protected targets;
material, electronic signature or copyrighted works (85) Hijacking;
including legally protected sound recordings or (86) Destructive arson;
phonograms or information material on protected (87) Murder;
works, through the use of telecommunication
networks, such but not limited to, the internet, in

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(88) Hijacking, destructive arson or murder otherwise allowed by the Securities Regulation
perpetrated by terrorists against non-combatant Code or by the rules of the SEC;
persons and similar targets; (99) Sale or purchase of any security using any
(M) Fraudulent practices and other violations manipulative deceptive device or contrivance;
under Republic Act No. 8799, otherwise known as (100) Execution of short sales or stop-loss order in
the Securities Regulation Code of 2000; connection with the purchase or sale of any
(89) Sale, offer or distribution of securities within security not in accordance with such rules and
the Philippines without a registration statement regulations as the SEC may prescribe as necessary
duly filed with and approved by the SEC; and appropriate in the public interest or the
(90) Sale or offer to the public of any pre-need plan protection of the investors;
not in accordance with the rules and regulations (101) Employment of any device, scheme or artifice
which the SEC shall prescribe; to defraud in connection with the purchase and
(91) Violation of reportorial requirements imposed sale of any securities;
upon issuers of securities; (102) Obtaining money or property in connection
(92) Manipulation of security prices by creating a with the purchase and sale of any security by
false or misleading appearance of active trading in means of any untrue statement of a material fact
any listed security traded in an Exchange or any or any omission to state a material fact necessary
other trading market; in order to make the statements made, in the light
(93) Manipulation of security prices by effecting, of the circumstances under which they were made,
alone or with others, a series of transactions in not misleading;
securities that raises their prices to induce the (103) Engaging in any act, transaction, practice or
purchase of a security, whether of the same or course of action in the sale and purchase of any
different class, of the same issuer or of a security which operates or would operate as a
controlling, controlled or commonly controlled fraud or deceit upon any person;
company by others; (104) Insider trading;
(94) Manipulation of security prices by effecting, (105) Engaging in the business of buying and
alone or with others, series of transactions in selling securities in the Philippines as a broker or
securities that depresses their price to induce the dealer, or acting as a salesman, or an associated
sale of a security, whether of the same or different person of any broker or dealer without any
class, of the same issuer or of a controlling, registration from the Commission;
controlled or commonly controlled company by (106) Employment by a broker or dealer of any
others; salesman or associated person or by an issuer of
(95) Manipulation of security prices by effecting, any salesman, not registered with the SEC; ,
alone or with others, a series of transactions in (107) Effecting any transaction in any security, or
securities that creates active trading to induce reporting such transaction, in an Exchange or
such a purchase or sale though manipulative using the facility of an Exchange which is not
devices such as marking the close, painting the registered with the SEC;
tape, squeezing the float, hype and dump, boiler (108) Making use of the facility of a clearing agency
room operations and such other similar devices; which is not registered with the SEC;
(96) Manipulation of security prices by circulating (109) Violations of margin requirements;
or disseminating' information that the price of any (110) Violations on the restrictions on borrowings
security listed in an Exchange will or is likely to by members, brokers and dealers;
rise or fall because of manipulative market (111) Aiding and Abetting in any violations of the
operations of anyone or more persons conducted Securities Regulation Code;
for the purpose of raising or depressing the price of (112) Hindering, obstructing or delaying the filing
the security for the purpose of inducing the of any document required under the Securities
purchase or sale of such security; Regulation Code or the rules and regulations of the
(97) Manipulation of security prices by making SEC;
false or misleading statements with respect to any (113) Violations of any of the provisions of the
material fact; which he knew or had reasonable implementing rules and regulations of the SEC;
ground to believe was so false and misleading, for (114) Any other violations of any of the provisions
the purpose of inducing the purchase or sale of of the Securities Regulation Code.
any security listed or traded in an Exchange; (N) Felonies or offenses of a similar nature to the
(98) Manipulation of security prices by effecting, afore-mentioned unlawful activities that are
alone or with others, any series of transactions for punishable under the penal laws of other
the purchase and/or sale of any security traded in countries.
an Exchange for the purpose of pegging, fixing or In determining whether or not a felony or offense
stabilizing the price of such security, unless punishable under the penal laws of other

17
countries, is "of a similar nature", as to constitute
the same as an unlawful activity under the AMLA,
the nomenclature of said felony or offense need not
be identical to any of the predicate crimes listed
under Rule 3.i.

Safe Harbor Provisions:

Sec. 9.3.e of Republic Act 9160 states that: No

administrative, criminal or civil proceedings, shall
lie against any person for having made a covered
transaction report or a suspicious transaction
report in the regular performance of his duties and
in good faith, whether or not such reporting results
in any criminal prosecution under this Act or any
other Philippine law.

Truth in Lending Act:

Sec. 4 of Republic Act No. 3765 states that: Any

creditor shall furnish to each person to whom
credit is extended, prior to the consummation of
the transaction, a clear statement in writing setting
forth, to the extent applicable and in accordance
with rules and regulations prescribed by the
Board, the following information:
(1) the cash price or delivered price of the property
or service to be acquired;
(2) the amounts, if any, to be credited as down
payment and/or trade-in;
(3) the difference between the amounts set forth
under clauses (1) and (2);
(4) the charges, individually itemized, which are
paid or to be paid by such person in connection
with the transaction but which are not incident to
the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos
and centavos; and
(7) the percentage that the finance bears to the
total amount to be financed expressed as a simple
annual rate on the outstanding unpaid balance of
the obligation.
*Failure to comply with the Truth in Lending Act,
the contract of loan is still valid however, the bank
cannot recover finance charges.
Purpose: To avoid hidden charges; to know the
actual amount borrowed.

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