Banking Laws Lecture

7/30/2019 Banking Laws Lecture

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

Section 9. Disqualifications. - In addition to the disqualifications imposed by Republic Act No. 6713, a member of the Monetary

Board is disqualified from being a director, officer, employee, consultant, lawyer, agent or stockholder of any bank, quasi-bank or any other institution which is subject to supervision or examination by the Bangko Sentral, in which case such member shall resign from, and divesthimself of any and all interests in such institution before assumption of office as member of the Monetary Board.

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

during their tenure.

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

Section 10. Removal. - The President may remove any member of the Monetary Board for any of the following reasons:

(a) If the member is subsequently disqualified under the provisions of Section 8 of this Act; or

(b) If he is physically or mentally incapacitated that he cannot properly discharge his duties and responsibilities and suchincapacity has lasted for more than six (6) months; or

(c) If the member is guilty of acts or operations which are of fraudulent or illegal character or which are manifestly opposed to theaims and interests of the Bangko Sentral; or

(d) If the member no longer possesses the qualifications specified in Section 8 of this Act.

Section 11. Meetings. - The Monetary Board shall meet at least once a week. The Board may be called to a meeting by theGovernor of the Bangko Sentral or by two (2) other members of the Board.

The presence of four (4) members shall constitute a quorum: Provided, That in all cases the Governor or his duly designatedalternate shall be among the four (4).

Unless otherwise provided in this Act, all decisions of the Monetary Board shall require the concurrence of at least four (4)

members.

The Bangko Sentral shall maintain and preserve a complete record of the proceedings and de liberations of the Monetary Board,including the tapes and transcripts of the stenographic notes, either in their original form or in microfilm.

Section 12. Attendance of the Deputy Governors. - The Deputy Governors may attend the meetings of the Monetary Board with theright to be heard.

Section 13. Salary. - The salary of the Governor and the members of the Monetary Board from the private sector shall be fixed bythe President of the Philippines at a sum commensurate to the importance and responsibility attached to the position.

Section 14. Withdrawal of Persons Having a Personal Interest. - In addition to the requirements of Republic Act No. 6713, anymember of the Monetary Board with personal or pecuniary interest in any matter in the agenda of the Monetary Board shall disclose hisinterest to the Board and shall retire from the meeting when the matter is taken up. The decision taken on the matter shall be made public.

The minutes shall reflect the disclosure made and the retirement of the member concerned from the meeting.

Section 15. Exercise of Authority. - In the exercise of its authority, the Monetary Board shall:

(a) issue rules and regulations it considers necessary for the effective discharge of the responsibilities and exercise of the powersvested upon the Monetary Board and the Bangko Sentral. The rules and regulations issued shall be reported to the President andthe Congress within fifteen (15) days from the date of their issuance;

(b) direct the management, operations, and administration of the Bangko Sentral, reorganize its personnel, and issue such rulesand regulations as it may deem necessary or convenient for this purpose. The legal units of the Bangko Sentral shall be under theexclusive supervision and control of the Monetary Board;

(c) establish a human resource management system which shall govern the selection, hiring, appointment, transfer, promotion, or

dismissal of all personnel. Such system shall aim to establish professionalism and excellence at all levels of the Bangko Sentral inaccordance with sound principles of management.

A compensation structure, based on job evaluation studies and wage surveys and subject to the Board's approval, shall beinstituted as an integral component of the Bangko Sentral's human resource development program: Provided, That the Monetary Boardshall make its own system conform as closely as possible with the principles provided for under Republic Act No. 6758: Provided, however,That compensation and wage structure of employees whose positions fall under salary grade 19 and below shall be in accordance with therates prescribed under Republic Act No. 6758.

On the recommendation of the Governor, appoint, fix the remunerations and other emoluments, and remove personnel of theBangko Sentral, subject to pertinent civil service laws: Provided, That the Monetary Board shall have exclusive and final authority topromote, transfer, assign, or reassign personnel of the Bangko Sentral and these personnel actions are deemed made in the interest of theservice and not disciplinary: Provided, further, That the Monetary Board may delegate such authority to the Governor under such guidelinesas it may determine.



(d) adopt an annual budget for and authorize such expenditures by the Bangko Sentral as are in the interest of the effectiveadministration and operations of the Bangko Sentral in accordance with applicable laws and regulations; and

(e) indemnify its members and other officials of the Bangko Sentral, including personnel of the departments performingsupervision and examination functions against all costs and expenses reasonably incurred by such persons in connection with anycivil or criminal action, suit or proceedings to which he may be, or is, made a party by reason of the performance of his functionsor duties, unless he is finally adjudged in such action or proceeding to be liable for negligence or misconduct.

In the event of a settlement or compromise, indemnification shall be provided only in connection with such matters covered by thesettlement as to which the Bangko Sentral is advised by external counsel that the person to be indemnified did not commit any negligence

or misconduct.

The costs and expenses incurred in defending the aforementioned action, suit or proceeding may be paid by the Bangko Sentral inadvance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the member, officer, or employee to repay the amount advanced should it ultimately be determined by the Monetary Board that he is not entitled to be indemnifiedas provided in this subsection.

Section 16. Responsibility. - Members of the Monetary Board, officials, examiners, and employees of the Bangko Sentral whowillfully violate this Act or who are guilty of negligence, abuses or acts of malfeasance or misfeasance or fail to exercise extraordinarydiligence in the performance of his duties shall be held liable for any loss or injury suffered by the Bangko Sentral or other bankinginstitutions as a result of such violation, negligence, abuse, malfeasance, misfeasance or failure to exercise extraordinary diligence.

Similar responsibility shall apply to members, officers, and employees of the Bangko Sentral for: (1) the disclosure of anyinformation of a confidential nature, or any information on the discussions or resolutions of the Monetary Board, or about the confidential

operations of the Bangko Sentral, unless the disclosure is in connection with the performance of official functions with the Bangko Sentral,or is with prior authorization of the Monetary Board or the Governor; or (2) the use of such information for personal gain or to the detrimentof the Government, the Bangko Sentral or third parties: Provided, however, That any data or information required to be submitted to thePresident and/or the Congress, or to be published under the provisions of this Act shall not be considered confidential.

ARTICLE IIITHE GOVERNOR AND DEPUTY GOVERNORS OF THE BANGKO SENTRAL

Section 17. Powers and Duties of the Governor. - The Governor shall be the chief executive officer of the Bangko Sentral. Hispowers and duties shall be to:

(a) prepare the agenda for the meetings of the Monetary Board and to submit for the consideration of the Board the policies andmeasures which he believes to be necessary to carry out the purposes and provisions of this Act;

(b) execute and administer the policies and measures approved by the Monetary Board;

(c) direct and supervise the operations and internal administration of the Bangko Sentral. The Governor may delegate certain of his administrative responsibilities to other officers or may assign specific tasks or responsibilities to any full-time member of theMonetary Board without additional remuneration or allowance whenever he may deem fit or subject to such rules and regulationsas the Monetary Board may prescribe;

(d) appoint and fix the remunerations and other emoluments of personnel below the rank of a department head in accordance withthe position and compensation plans approved by the Monetary Board, as well as to impose disciplinary measures uponpersonnel of the Bangko Sentral, subject to the provisions of Section 15(c) of this Act: Provided, That removal of personnel shallbe with the approval of the Monetary Board;

(e) render opinions, decisions, or rulings, which shall be final and executory until reversed or modified by the Monetary Board, on

matters regarding application or enforcement of laws pertaining to institutions supervised by the Bangko Sentral and lawspertaining to quasi-banks, as well as regulations, policies or instructions issued by the Monetary Board, and the implementationthereof; and

(f) exercise such other powers as may be vested in him by the Monetary Board.

Section 18. Representation of the Monetary Board and the Bangko Sentral. - The Governor of the Bangko Sentral shall be theprincipal representative of the Monetary Board and of the Bangko Sentral and, in such capacity and in accordance with the instructions of the Monetary Board, he shall be empowered to:

(a) represent the Monetary Board and the Bangko Sentral in all dealings with other offices, agencies and ins trumentalities of theGovernment and all other persons or entities, public or private, whether domestic, foreign or international;

(b) sign contracts entered into by the Bangko Sentral, notes and securities issued by the Bangko Sentral, all reports, balancesheets, profit and loss statements, correspondence and other documents of the Bangko Sentral.

The signature of the Governor may be in facsimile whenever appropriate;

(c) represent the Bangko Sentral, either personally or through counsel, including private counsel, as may be authorized by theMonetary Board, in any legal proceedings, action or specialized legal studies; and

(d) delegate his power to represent the Bangko Sentral, as provided in subsections (a), (b) and (c) of this section, to other officersupon his own responsibility: Provided, however, That in order to preserve the integrity and the prestige of his office, the Governor of the Bangko Sentral may choose not to participate in preliminary discussions with any multilateral banking or financial institutionon any negotiations for the Government within or outside the Philippines. During the negotiations, he may instead be representedby a permanent negotiator.





confidential and may be used by the examiners only in connection with their supervisory and examination responsibility or by the BangkoSentral in an appropriate legal action it has initiated involving the deposit account.

Section 27. Prohibitions. - In addition to the prohibitions found in Republic Act Nos. 3019 and 6713, personnel of the BangkoSentral are hereby prohibited from:

(a) being an officer, director, lawyer or agent, employee, consultant or stockholder, directly or indirectly, of any institution subjectto supervision or examination by the Bangko Sentral, except non-stock savings and loan associations and provident fundsorganized exclusively for employees of the Bangko Sentral, and except as otherwise provided in this Act;

(b) directly or indirectly requesting or receiving any gift, present or pecuniary or material benefit for himself or another, from anyinstitution subject to supervision or examination by the Bangko Sentral;

(c) revealing in any manner, except under orders of the court, the Congress or any government office or agency authorized bylaw, or under such conditions as may be prescribed by the Monetary Board, information relating to the condition or business of any institution. This prohibition shall not be held to apply to the giving of information to the Monetary Board or the Governor of theBangko Sentral, or to any person authorized by either of them, in writing, to receive such information; and

(d) borrowing from any institution subject to supervision or examination by the Bangko Sentral shall be prohibited unless saidborrowings are adequately secured, fully disclosed to the Monetary Board, and shall be subject to such further rules andregulations as the Monetary Board may prescribe: Provided, however, That personnel of the supervising and examiningdepartments are prohibited from borrowing from a bank under their supervision or examination.

Section 28. Examination and Fees. - The supervising and examining department head, personally or by deputy, shall examine thebooks of every banking institution once in every twelve (12) months, and at such other times as the Monetary Board by an affirmative voteof five (5) members, may deem expedient and to make a report on the same to the Monetary Board: Provided, That there shall be aninterval of at least twelve (12) months between annual examinations.

The bank concerned shall afford to the head of the appropriate supervising and examining departments and to his authorizeddeputies full opportunity to examine its books, cash and available assets and general condition at any time during banking hours whenrequested to do so by the Bangko Sentral: Provided, however, That none of the reports and other papers relative to such examinationsshall be open to inspection by the public except insofar as such publicity is incidental to the proceedings hereinafter authorized or isnecessary for the prosecution of violations in connection with the business of such institutions.

Banking and quasi-banking institutions which are subject to examination by the Bangko Sentral shall pay to the Bangko Sentral,within the first thirty (30) days of each year, an annual fee in an amount equal to a percentage as may be prescribed by the MonetaryBoard of its average total assets during the preceding year as shown on its end-of-month balance sheets, after deducting cash on handand amounts due from banks, including the Bangko Sentral and banks abroad.

Section 29. Appointment of Conservator. - Whenever, on the basis of a report submitted by the appropriate supervising or

examining department, the Monetary Board finds that a bank or a quasi-bank is in a state of continuing inability or unwillingness to maintaina condition of liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary Board may appoint a conservator with such powers as the Monetary Board shall deem necessary to take charge of the assets, liabilities, and the management thereof,reorganize the management, collect all monies and debts due said institution, and exercise all powers necessary to restore its viability. Theconservator shall report and be responsible to the Monetary Board and shall have the power to overrule or revoke the actions of theprevious management and board of directors of the bank or quasi-bank.

The conservator should be competent and knowledgeable in bank operations and management. The conservatorship shall notexceed one (1) year.

The conservator shall receive remuneration to be fixed by the Monetary Board in an amount not to exceed two-thirds (2/3) of the

salary of the president of the institution in one (1) year, payable in twelve (12) equal monthly payments: Provided, That, if at any time withinone-year period, the conservatorship is terminated on the ground that the institution can operate on its own, the conservator shall receivethe balance of the remuneration which he would have received up to the end of the year; but if the conservatorship is terminated on other grounds, the conservator shall not be entitled to such remaining balance. The Monetary Board may appoint a conservator connected withthe Bangko Sentral, in which case he shall not be entitled to receive any remuneration or emolument from the Bangko Sentral during theconservatorship. The expenses attendant to the conservatorship shall be borne by the bank or quasi-bank concerned.

The Monetary Board shall terminate the conservatorship when it is satisfied that the institution can continue to operate on its ownand the conservatorship is no longer necessary. The conservatorship shall likewise be terminated should the Monetary Board, on the basisof the report of the conservator or of its own findings, determine that the continuance in business of the institution would involve probableloss to its depositors or creditors, in which case the provisions of Section 30 shall apply.

Section 30. Proceedings in Receivership and Liquidation. - Whenever, upon report of the head of the supervising or examiningdepartment, the Monetary Board finds that a bank or quasi-bank:

(a) is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this shall not includeinability to pay caused by extraordinary demands induced by financial panic in the banking community;

(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or

(c) cannot continue in business without involving probable losses to its depositors or creditors; or

(d) has willfully violated a cease and desist order under Section 37 that has become final, involving acts or transactions whichamount to fraud or a dissipation of the assets of the institution; in which cases, the Monetary Board may summarily and withoutneed for prior hearing forbid the institution from doing business in the Philippines and designate the Philippine Deposit InsuranceCorporation as receiver of the banking institution.



For a quasi-bank, any person of recognized competence in banking or finance may be designed as receiver.

The receiver shall immediately gather and take charge of all the assets and liabilities of the institution, administer the same for thebenefit of its creditors, and exercise the general powers of a receiver under the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the institution: Provided, Thatthe receiver may deposit or place the funds of the institution in non-speculative investments. The receiver shall determine as soon aspossible, but not later than ninety (90) days from take over, whether the institution may be rehabilitated or otherwise placed in such acondition so that it may be permitted to resume business with safety to its depositors and creditors and the general public: Provided, Thatany determination for the resumption of business of the institution shall be subject to prior approval of the Monetary Board.

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

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

(2) convert the assets of the institutions to money, dispose of the same to creditors and other parties, for the purpose of paying thedebts of such institution in accordance with the rules on concurrence and preference of credit under the Civil Code of the

Philippines and he may, in the name of the institution, and with the assistance of counsel as he may retain, institute such actionsas may be necessary to collect and recover accounts and assets of, or defend any action against, the institution. The assets of aninstitution under receivership or liquidation shall be deemed in custodia legis in the hands of the receiver and shall, from themoment the institution was placed under such receivership or l iquidation, be exempt from any order of garnishment, levy,attachment, or execution.

The actions of the Monetary Board taken under this section or under Section 29 of this Act shall be final and executory, and maynot be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdictionor with such grave abuse of discretion as to amount to lack or excess of jurisdiction. The petition for certiorari may only be filed by thestockholders of record representing the majority of the capital stock within ten (10) days from receipt by the board of directors of theinstitution of the order directing receivership, liquidation or conservatorship.

The designation of a conservator under Section 29 of this Act or the appointment of a receiver under this section shall be vestedexclusively with the Monetary Board. Furthermore, the designation of a conservator is not a precondition to the designation of a receiver.

Section 31. Distribution of Assets. - In case of liquidation of a bank or quasi-bank, after payment of the cost of proceedings,

including reasonable expenses and fees of the receiver to be allowed by the court, the receiver shall pay the debts of such institution,under order of the court, in accordance with the rules on concurrence and preference of credit as provided in the Civil Code.

Section 32. Disposition of Revenues and Earnings. - All revenues and earnings realized by the receiver in winding up the affairsand administering the assets of any bank or quasi-bank within the purview of this Act shall be used to pay the costs, fees and expensesmentioned in the preceding section, salaries of such personnel whose employment is rendered necessary in the discharge of the liquidationtogether with other additional expenses caused thereby. The balance of revenues and earnings, after the payment of all said expenses,shall form part of the assets available for payment to creditors.

Section 33. Disposition of Banking Franchise. - The Bangko Sentral may, if public interest so requires, award to an institution, uponsuch terms and conditions as the Monetary Board may approve, the banking franchise of a bank under liquidation to operate in the areawhere said bank or its branches were previously operating: Provided, That whatever proceeds may be realized from such award shall be

subject to the appropriate exclusive disposition of the Monetary Board.

Section 34. Refusal to Make Reports or Permit Examination. - Any officer, owner, agent, manager, director or officer-in-charge of

any institution subject to the supervision or examination by the Bangko Sentral within the purview of this Act who, being required in writingby the Monetary Board or by the head of the supervising and examining department willfully refuses to file the required report or permit anylawful examination into the affairs of such institution shall be punished by a fine of not less than Fifty thousand pesos (P50,000) nor morethan One hundred thousand pesos (P100,000) or by imprisonment of not less than one (1) year nor more than five (5) years, or both, in thediscretion of the court.

Section 35. False Statement. - The willful making of a false or misleading statement on a material fact to the Monetary Board or to

the examiners of the Bangko Sentral shall be punished by a fine of not less than One hundred thousand pesos (P100,000) nor more thanTwo hundred thousand pesos (P200,000), or by imprisonment of not more than (5) years, or both, at the discretion of the court.

Section 36. Proceedings Upon Violation of This Act and Other Banking Laws, Rules, Regulations, Orders or Instructions. -Whenever a bank or quasi-bank, or whenever any person or entity willfully violates this Act or other pertinent banking laws being enforcedor implemented by the Bangko Sentral or any order, instruction, rule or regulation issued by the Monetary Board, the person or personsresponsible for such violation shall unless otherwise provided in this Act be punished by a fine of not less than Fifty thousand pesos(P50,000) nor more than Two hundred thousand pesos (P200,000) or by imprisonment of not less than two (2) years nor more than ten(10) years, or both, at the discretion of the court.

Whenever a bank or quasi-bank persists in carrying on its business in an unlawful or unsafe manner, the Board may, withoutprejudice to the penalties provided in the preceding paragraph of this section and the administrative sanctions provided in Section 37 of this

Act, take action under Section 30 of this Act.

Section 37. Administrative Sanctions on Banks and Quasi-banks. - Without prejudice to the criminal sanctions against the culpable

persons provided in Sections 34, 35, and 36 of this Act, the Monetary Board may, at its discretion, impose upon any bank or quasi-bank,their directors and/or officers, for any willful violation of its charter or by-laws, willful delay in the submission of reports or publications



thereof as required by law, rules and regulations; any refusal to permit examination into the affairs of the institution; any willful making of afalse or misleading statement to the Board or the appropriate supervising and examining department or its examiners; any will ful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order,instruction or ruling by the Governor; or any commission of irregularities, and/or conducting business in an unsafe or unsound manner asmay be determined by the Monetary Board, the following administrative sanctions, whenever applicable:

(a) fines in amounts as may be determined by the Monetary Board to be appropriate, but in no case to exceed Thirty thousandpesos (P30,000) a day for each violation, taking into consideration the attendant circumstances, such as the nature and gravity of the violation or irregularity and the size of the bank or quasi-bank;

(b) suspension of rediscounting privileges or access to Bangko Sentral credit facilities;

(c) suspension of lending or foreign exchange operations or authority to accept new deposits or make new investments;

(d) suspension of interbank clearing privileges; and/or

(e) revocation of quasi-banking license.

Resignation or termination from office shall not exempt such director or officer from administrative or criminal sanctions.

The Monetary Board may, whenever warranted by circumstances, preventively suspend any director or officer of a bank or quasi-bank pending an investigation: Provided, That should the case be not finally decided by the Bangko Sentral within a period of one hundredtwenty (120) days after the date of suspension, said director or officer shall be reinstated in his position: Provided, further, That when the

delay in the disposition of the case is due to the fault, negligence or petition of the director or officer, the period of delay shall not becounted in computing the period of suspension herein provided.

The above administrative sanctions need not be applied in the order of their severity.

Whether or not there is an administrative proceeding, if the institution and/or the directors and/or officers concerned continue with or otherwise persist in the commission of the indicated practice or violation, the Monetary Board may issue an order requiring the institutionand/or the directors and/or officers concerned to cease and desist from the indicated practice or violation, and may further order thatimmediate action be taken to correct the conditions resulting from such practice or violation. The cease and desist order shall beimmediately effective upon service on the respondents.

The respondents shall be afforded an opportunity to defend their action in a hearing before the Monetary Board or any committeechaired by any Monetary Board member created for the purpose, upon request made by the respondents within five (5) days from their receipt of the order. If no such hearing is requested within said period, the order shall be final. If a hearing is conducted, all issues shall be

determined on the basis of records, after which the Monetary Board may either reconsider or make final its order.

The Governor is hereby authorized, at his discretion, to impose upon banking institutions, for any failure to comply with therequirements of law, Monetary Board regulations and policies, and/or instructions issued by the Monetary Board or by the Governor, finesnot in excess of Ten thousand pesos (P10,000) a day for each violation, the imposition of which shall be final and executory until reversed,modified or lifted by the Monetary Board on appeal.

Section 38. Operating Departments of the Bangko Sentral. - The Monetary Board shall, in accordance with its authority under this Act, determine and provide for such operating departments and other offices, including a public information office, of the Bangko Sentral asit deems convenient for the proper and efficient conduct of the operations and the accomplishment of the objectives of the Bangko Sentral.The functions and duties of such operating departments and other offices shall be determined by the Monetary Board.

ARTICLE VREPORTS AND PUBLICATIONS

Section 39. Reports and Publications. - The Bangko Sentral shall publish a general balance sheet showing the volume andcomposition of its assets and liabilities as of the last working day of the month within sixty (60) days after the end of each month except for the month of December, which shall be submitted within ninety (90) days after the end hereof.

The Monetary Board shall publish and submit the following reports to the President and to the Congress:

(a) not later than ninety (90) days after the end of each quarter, an analysis of economic and financial developments, including thecondition of net international reserves and monetary aggregates;

(b) within ninety (90) days after the end of the year, the preceding year's budget and profit and loss statement of the BangkoSentral showing in reasonable detail the result of its operations;

(c) one hundred twenty (120) days after the end of each semester, a review of the state of the financial system; and

(d) as soon as practicable, abnormal movements in monetary aggregates and the general price level, and, not later than seventy-two (72) hours after they are taken, remedial measures in response to such abnormal movements.

Section 40. Annual Report. - Before the end of March of each year, the Bangko Sentral shall publish and submit to the Presidentand the Congress an annual report on the condition of the Bangko Sentral including a review of the policies and measures adopted by theMonetary Board during the past year and an analysis of the economic and financial circumstances which gave rise to said policies andmeasures.

The annual report shall also include a statement of the financial condition of the Bangko Sentral and a statistical appendix whichshall present, as a minimum, the following data:



(a) the monthly movement of monetary aggregates and their components;

(b) the monthly movement of purchases and sales of foreign exchange and of the international reserves of the Bangko Sentral;

(c) the balance of payments of the Philippines;

(d) monthly indices of consumer prices and of import and export prices;

(e) the monthly movement, in summary form, of exports and imports, by volume and value;

(f) the monthly movement of the accounts of the Bangko Sentral and of other banks;

(g) the principal data on government receipts and expenditures and on the status of the public debt, both domestic and foreign;and

(h) the texts of the major legal and administrative measures adopted by the Government and the Monetary Board during the year which relate to the functions or operations of the Bangko Sentral or of the financial system.

The Bangko Sentral shall publish another version of the annual report in terms understandable to the layman.

Failure to comply with the reportorial requirements pursuant to this article without justifiable reason as may be determined by theMonetary Board shall cause the withholding of the salary of the personnel concerned until the requirements are complied with.

Section 41. Signatures on Statements. - The balance sheets and other financial statements of the Bangko Sentral shall be signedby the officers responsible for their preparation, by the Governor, and by the auditor of the Bangko Sentral.

ARTICLE VIPROFITS, LOSSES, AND SPECIAL ACCOUNTS

Section 42. Fiscal Year. - The fiscal year of the Bangko Sentral shall begin on January first and end on December thirty-first of each year.

Section 43. Computation of Profits and Losses. - Within the first thirty (30) days following the end of each year, the Bangko Sentral

shall determine its net profits or losses. In the calculation of net profits, the Bangko Sentral shall make adequate allowance or establishadequate reserves for bad and doubtful accounts.

Section 44. Distribution of Net Profits. - Within the first sixty (60) days following the end of each fiscal year, the Monetary Boardshall determine and carry out the distribution of the net profits, in accordance with the following rule:

Fifty percent (50%) of the net profits shall be carried to surplus and the remaining fifty percent (50%) shall revert back to theNational Treasury, except as otherwise provided in the transitory provisions of this Act.

Section 45. Revaluation Profits and Losses. - Profits or losses arising from any revaluation of the Bangko Sentral's net assets or liabilities in gold or foreign currencies with respect to the Philippine peso shall not be included in the computation of the annual profits andlosses of the Bangko Sentral. Any profits or losses arising in this manner shall be offset by any amounts which, as a consequence of suchrevaluations, are owed by the Philippines to any international or regional intergovernmental financial institution of which the Philippines is amember or are owed by these institutions to the Philippines. Any remaining profit or loss shall be carried in a special frozen account whichshall be named "Revaluation of International Reserve" and the net balance of which shall appear either among the liabilities or among theassets of the Bangko Sentral, depending on whether the revaluations have produced net profits or net losses.

The Revaluation of International Reserve account shall be neither credited nor debited for any purposes other than thosespecifically authorized in this section.

Section 46. Suspense Accounts. - Sections 43 and 43-A of Republic Act No. 265, as amended, creating the Monetary Adjustment

Account (MAA) and the Exchange Stabilization Adjustment Account (ESAA), respectively, are hereby repealed. Amounts outstanding as of the effective date of this Act based on these accounts shall continue to be for the account of the Central Bank and shall be governed by thetransitory provisions of this Act.

The Revaluation of International Reserve (RIR) account as of the effective date of this Act of the Central Bank shall continue to befor the account of the same entity and shall be governed by the provisions of Section 44 of Republic Act No. 265, as amended, untilotherwise provided for in accordance with the transitory provisions of this Act.

ARTICLE VII

THE AUDITOR

Section 47. Appointment and Personnel. - The Chairman of the Commission on Audit shall act as the ex officio auditor of theBangko Sentral and, as such, he is empowered and authorized to appoint a representative who shall be the auditor of the Bangko Sentraland, in accordance with law, fix his salary, and to appoint and fix salaries and number of personnel to assist said representative in his work.The salaries and other emoluments shall be paid by the Commission. The auditor of the Bangko Sentral and personnel under him may beremoved only by the Chairman of the Commission.

The representative of the Chairman of the Commission must be a certified public accountant with at least ten (10) years experienceas such. No relative of any member of the Monetary Board or the Chairman of the Commission within the sixth degree of consanguinity or affinity shall be appointed such representative.



CHAPTER II — THE BANGKO SENTRAL AND THE MEANS OF PAYMENT

ARTICLE ITHE UNIT OF MONETARY VALUE

Section 48. The Peso. - The unit of monetary value in the Philippines is the "peso," which is represented by the sign "P."

The peso is divided into one hundred (100) equal parts called "centavos," which are represented by the sign "c."

ARTICLE IIISSUE OF MEANS OF PAYMENT

A. CURRENCY

Section 49. Definition of Currency. - The word "currency" is hereby defined, for purposes of this Act, as meaning all Philippinenotes and coins issued or circulating in accordance with the provisions of this Act.

Section 50. Exclusive Issue Power. - The Bangko Sentral shall have the sole power and authority to issue currency, within theterritory of the Philippines. No other person or entity, public or private, may put into circulation notes, coins or any other object or documentwhich, in the opinion of the Monetary Board, might circulate as currency, nor reproduce or imitate the facsimiles of Bangko Sentral noteswithout prior authority from the Bangko Sentral.

The Monetary Board may issue such regulations as it may deem advisable in order to prevent the circulation of foreign currency or

of currency substitutes as well as to prevent the reproduction of facsimiles of Bangko Sentral notes.

The Bangko Sentral shall have the authority to investigate, make arrests, conduct searches and seizures in accordance with law,for the purpose of maintaining the integrity of the currency.

Violation of this provision or any regulation issued by the Bangko Sentral pursuant thereto shall constitute an offense punishable byimprisonment of not less than five (5) years but not more than ten (10) years. In case the Revised Penal Code provides for a greater penalty, then that penalty shall be imposed.

Section 51. Liability for Notes and Coins. - Notes and coins issued by the Bangko Sentral shall be liabilities of the Bangko Sentral

and may be issued only against, and in amounts not exceeding, the assets of the Bangko Sentral. Said notes and coins shall be a first andparamount lien on all assets of the Bangko Sentral.

The Bangko Sentral's holdings of its own notes and coins shall not be considered as part of its currency issue and, accordingly,shall not form part of the assets or liabilities of the Bangko Sentral.

Section 52. Legal Tender Power. - All notes and coins issued by the Bangko Sentral shall be fully guaranteed by the Governmentof the Republic of the Philippines and shall be legal tender in the Philippines for all debts, both public and private: Provided, however, That,unless otherwise fixed by the Monetary Board, coins shall be legal tender in amounts not exceeding Fifty pesos (P50.00) for denominationsof Twenty-five centavos and above, and in amounts not exceeding Twenty pesos (P20.00) for denominations of Ten centavos or less.

Section 53. Characteristics of the Currency. - The Monetary Board, with the approval of the President of the Philippines, shallprescribe the denominations, dimensions, designs, inscriptions and other characteristics of notes issued by the Bangko Sentral: Provided,however, That said notes shall state that they are liabilities of the Bangko Sentral and are fully guaranteed by the Government of theRepublic of the Philippines. Said notes shall bear the signatures, in facsimile, of the President of the Philippines and of the Governor of theBangko Sentral.

Similarly, the Monetary Board, with the approval of the President of the Philippines, shall prescribe the weight, fineness, designs,denominations and other characteristics of the coins issued by the Bangko Sentral. In the minting of coins, the Monetary Board shall givefull consideration to the availability of suitable metals and to their relative prices and cost of minting.

Section 54. Printing of Notes and Mining of Coins. - The Monetary Board shall prescribe the amounts of notes and coins to beprinted and minted, respectively, and the conditions to which the printing of notes and the minting of coins shall be subject. The MonetaryBoard shall have the authority to contract institutions, mints or firms for such operations.

All expenses incurred in the printing of notes and the minting of coins shall be for the account of the Bangko Sentral.

Section 55. Interconvertibility of Currency. - The Bangko Sentral shall exchange, on demand and without charge, Philippinecurrency of any denomination for Philippine notes and coins of any other denomination requested. If for any reason the Bangko Sentral istemporarily unable to provide notes or coins of the denominations requested, it shall meet its obligations by delivering notes and coins of the denominations which most nearly approximate those requested.

Section 56. Replacement of Currency Unfit for Circulation. - The Bangko Sentral shall withdraw from circulation and shalldemonetize all notes and coins which for any reason whatsoever are unfit for circulation and shall replace them by adequate notes andcoins: Provided, however, That the Bangko Sentral shall not replace notes and coins the identification of which is impossible, coins whichshow signs of filing, clipping or perforation, and notes which have lost more than two-fifths (2/5) of their surface or all of the signaturesinscribed thereon. Notes and coins in such mutilated conditions shall be withdrawn from circulation and demonetized without compensationto the bearer.

Section 57. Retirement of Old Notes and Coins. - The Bangko Sentral may call in for replacement notes of any series or denomination which are more than five (5) years old and coins which are more than (10) years old.

Notes and coins called in for replacement in accordance with this provision shall remain legal tender for a period of one (1) year from the date of call. After this period, they shall cease to be legal tender but during the following year, or for such longer period as the



Monetary Board may determine, they may be exchanged at par and without charge in the Bangko Sentral and by agents duly authorized bythe Bangko Sentral for this purpose. After the expiration of this latter period, the notes and coins which have not been exchanged shallcease to be a liability of the Bangko Sentral and shall be demonetized. The Bangko Sentral shall also demonetize all notes and coins whichhave been called in and replaced.

B. DEMAND DEPOSITS

Section 58. Definition. - For purposes of this Act, the term "demand deposits" means all those liabilities of the Bangko Sentral andof other banks which are denominated in Philippine currency and are subject to payment in legal tender upon demand by the presentationof checks.

Section 59. Issue of Demand Deposits. - Only banks duly authorized to do so may accept funds or create liabilities payable inpesos upon demand by the presentation of checks, and such operations shall be subject to the control of the Monetary Board inaccordance with the powers granted it with respect thereto under this Act.

Section 60. Legal Character. - Checks representing demand deposits do not have legal tender power and their acceptance in the

payment of debts, both public and private, is at the option of the creditor: Provided, however, That a check which has been cleared andcredited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited tohis account.

CHAPTER III — GUIDING PRINCIPLES OF MONETARY ADMINISTRATION BY THE BANGKO SENTRAL

ARTICLE I

DOMESTIC MONETARY STABILIZATION

Section 61. Guiding Principle. - The Monetary Board shall endeavor to control any expansion or contraction in monetaryaggregates which is prejudicial to the attainment or maintenance of price stability.

Section 62. Power to Define Terms. - For purposes of this article and of this Act, the Monetary Board shall formulate definitions of monetary aggregates, credit and prices and shall make public such definitions and any changes thereof.

Section 63. Action When Abnormal Movements Occur in the Monetary Aggregates, Credit, or Price Level. - Whenever abnormal

movements in the monetary aggregates, in credit, or in prices endanger the stability of the Philippine economy or important sectors thereof,the Monetary Board shall:

(a) take such remedial measures as are appropriate and within the powers granted to the Monetary Board and the Bangko Sentralunder the provisions of this Act; and

(b) submit to the President of the Philippines and the Congress, and make public, a detailed report which shall include, as aminimum, a description and analysis of:

(1) the causes of the rise or fall of the monetary aggregates, of credit or of prices;

(2) the extent to which the changes in the monetary aggregates, in credit, or in prices have been reflected in changes inthe level of domestic output, employment, wages and economic activity in general, and the nature and significance of anysuch changes; and

(3) the measures which the Monetary Board has taken and the other monetary, fiscal or administrative measures which itrecommends to be adopted.

Whenever the monetary aggregates, or the level of credit, increases or decreases by more than fifteen percent (15%), or the cost of living index increases by more than ten percent (10%), in relation to the level existing at the end of the corresponding month of thepreceding year, or even though any of these quantitative guidelines have not been reached when in its judgment the circumstances sowarrant, the Monetary Board shall submit the reports mentioned in this section, and shall state therein whether, in the opinion of the Board,said changes in the monetary aggregates, credit or cost of living represent a threat to the stability of the Philippine economy or of importantsectors thereof.

The Monetary Board shall continue to submit periodic reports to the President of the Philippines and to Congress until it considersthat the monetary, credit or price disturbances have disappeared or have been adequately controlled.

ARTICLE IIINTERNATIONAL MONETARY STABILIZATION

Section 64. International Monetary Stabilization. - The Bangko Sentral shall exercise its powers under this Act to preserve theinternational value of the peso and to maintain its convertibility into other freely convertible currencies primarily for, although not necessarilylimited to, current payments for foreign trade and invisibles.

Section 65. International Reserves. - In order to maintain the international stability and convertibility of the Philippine peso, the

Bangko Sentral shall maintain international reserves adequate to meet any foreseeable net demands on the Bangko Sentral for foreigncurrencies.

In judging the adequacy of the international reserves, the Monetary Board shall be guided by the prospective receipts andpayments of foreign exchange by the Philippines. The Board shall give special attention to the volume and maturity of the Bangko Sentral'sown liabilities in foreign currencies, to the volume and maturity of the foreign exchange assets and liabilities of other banks operating in thePhilippines and, insofar as they are known or can be estimated, the volume and maturity of the foreign exchange assets and liabilities of allother persons and entities in the Philippines.





(d) foreign governments and their instrumentalities; and

(e) other entities or persons which the Monetary Board is hereby empowered to authorize as foreign exchange dealers, subject tosuch rules and regulations as the Monetary Board shall prescribe.

In order to maintain the convertibility of the peso, the Bangko Sentral may, at the request of any banking institution operating in thePhilippines, buy any quantity of foreign exchange offered, and sell any quantity of foreign exchange demanded, by such institution,provided that the foreign currencies so offered or demanded are freely convertible into gold or United States dollars. This requirement shallnot apply to demands for foreign notes and coins.

The Bangko Sentral shall effect its exchange transactions between foreign currencies and the Philippine peso at the ratesdetermined in accordance with the provisions of Section 74 of this Act.

Section 71. Foreign Asset Position of the Bangko Sentral. - The Bangko Sentral shall endeavor to maintain at all times a netpositive foreign asset position so that its gross foreign exchange assets will always exceed its gross foreign liabilities. In the event that theequivalent amount in pesos of the foreign exchange liabilities of the Bangko Sentral exceed twice the equivalent amount in pesos of theforeign exchange assets of the bank, the Bangko Sentral shall, within sixty (60) days from the date the limit is exceeded, submit a report tothe Congress stating the origin of these liabilities, and the manner in which they will be paid.

Section 72. Emergency Restrictions on Exchange Operations. - In order to achieve the primary objective of the Bangko Sentral asset forth in Section 3 of this Act, or protect the international reserves of the Bangko Sentral in the imminence of, or during an exchangecrisis, or in time of national emergency and to give the Monetary Board and the Government time in which to take constructive measures toforestall, combat, or overcome such a crisis or emergency, the Monetary Board, with the concurrence of at least five (5) of its members andwith the approval of the President of the Philippines, may temporarily suspend or restrict sales of exchange by the Bangko Sentral, and

may subject all transactions in gold and foreign exchange to license by the Bangko Sentral, and may require that any foreign exchangethereafter obtained by any person residing or entity operating in the Philippines be delivered to the Bangko Sentral or to any bank or agentdesignated by the Bangko Sentral for the purpose, at the effective exchange rate or rates: Provided, however, That foreign currencydeposits made under Republic Act No. 6426 shall be exempt from these requirements.

Section 73. Acquisition of Inconvertible Currencies. - The Bangko Sentral shall avoid the acquisition and holding of currencieswhich are not freely convertible, and may acquire such currencies in an amount exceeding the minimum balance necessary to cover current demands for said currencies only when, and to the extent that, such acquisition is considered by the Monetary Board to be in thenational interest. The Monetary Board shall determine the procedures which shall apply to the acquisition and disposition by the BangkoSentral of foreign exchange which is not freely utilizable in the international market.

Section 74. Exchange Rates. - The Monetary Board shall determine the exchange rate policy of the country.

The Monetary Board shall determine the rates at which the Bangko Sentral shall buy and sell spot exchange, and shall establishdeviation limits from the effective exchange rate or rates as i t may deem proper. The Bangko Sentral shall not collect any additionalcommissions or charges of any sort, other than actual telegraphic or cable costs incurred by it.

The Monetary Board shall similarly determine the rates for other types of foreign exchange transactions by the Bangko Sentral,including purchases and sales of foreign notes and coins, but the margins between the effective exchange rates and the rates thusestablished may not exceed the corresponding margins for spot exchange transactions by more than the additional costs or expensesinvolved in each type of transactions.

Section 75. Operations with Foreign Entities. - The Monetary Board may authorize the Bangko Sentral to grant loans to and receive

loans from foreign banks and other foreign or international entities, both public and private, and may engage in such other operations withthese entities as are in the national interest and are appropriate to its character as a central bank. The Bangko Sentral may also act asagent or correspondent for such entities.

Upon authority of the Monetary Board, the Bangko Sentral may pledge any gold or other assets which it possesses as securityagainst loans which it receives from foreign or international entities.

ARTICLE IIIREGULATION OF FOREIGN EXCHANGE OPERATIONS OF THE BANKS

Section 76. Foreign Exchange Holdings of the Banks. - In order that the Bangko Sentral may at all times have foreign exchange

resources sufficient to enable it to maintain the international stability and convertibility of the peso, or in order to promote the domesticinvestment of bank resources, the Monetary Board may require the banks to sell to the Bangko Sentral or to other banks all or part of their surplus holdings of foreign exchange. Such transfers may be required for all foreign currencies or for only certain of such currencies,according to the decision of the Monetary Board. The transfers shall be made at the rates established under the provisions of Section 74 of this Act.

The Monetary Board may, whenever warranted, determine the net assets and net liabilities of banks and shall, in making such a

determination, take into account the bank's networth, outstanding liabilities, actual and contingent, or such other financial or performanceratios as may be appropriate under the circumstances. Any such determination of net assets and net liabilities shall be applied in all banksuniformly and without discrimination.

Section 77. Requirement of Balanced Currency Position. - The Monetary Board may require the banks to maintain a balancedposition between their assets and liabilities in Philippine pesos or in any other currency or currencies in which they operate. The banksshall be granted a reasonable period of time in which to adjust their currency positions to any such requirement.

The powers granted under this section shall be exercised only when special circumstances make such action necessary, in theopinion of the Monetary Board, and shall be applied to a ll banks alike and without discrimination.



Section 78. Regulation of Non-spot Exchange Transactions. - In order to restrain the banks from taking speculative positions withrespect to future fluctuations in foreign exchange rates, the Monetary Board may issue such regulations governing bank purchases andsales of non-spot exchange as it may consider necessary for said purpose.

Section 79. Other Exchange Profits and Losses. - The banks shall bear the risks of non-compliance with the terms of the foreign

exchange documents and instruments which they buy and sell, and shall also bear any other t ypically commercial or banking risks,including exchange risks not assumed by the Bangko Sentral under the provisions of the preceding section.

Section 80. Information on Exchange Operations. - The banks shall report to the Bangko Sentral the volume and composition of their purchases and sales of gold and foreign exchange each day, and must furnish such additional information as the Bangko Sentral may

request with reference to the movements in their accounts in foreign currencies.

The Monetary Board may also require other persons and entities to report to it currently all transactions or operations in gold, in anyshape or form, and in foreign exchange whether entered into or undertaken by them directly or through agents, or to submit such data asmay be required on operations or activities giving rise to or in connection with or relating to a gold or foreign exchange transaction. TheMonetary Board shall prescribe the forms on which such declarations must be made. The accuracy of the declarations may be verified bythe Bangko Sentral by whatever inspection it may deem necessary.

ARTICLE IVLOANS TO BANKING AND OTHER FINANCIAL INSTITUTIONS

A. CREDIT POLICY

Section 81. Guiding Principles. - The rediscounts, discounts, loans and advances which the Bangko Sentral is authorized to extendto banking institutions under the provisions of the present article of this Act shall be used to influence the volume of credit consistent withthe objective of price stability.

B. NORMAL CREDIT OPERATIONS

Section 82. Authorized Types of Operations. - Subject to the principle stated in the preceding section of this Act, the BangkoSentral may normally and regularly carry on the following credit operations with banking institutions operating in the Philippines:

(a) Commercial credits. - The Bangko Sentral may rediscount, discount, buy and sell bills, acceptances, promissory notes andother credit instruments with maturities of not more than one hundred eighty (180) days from the date of their rediscount, discountor acquisition by the Bangko Sentral and resulting from transactions related to:

(1) the importation, exportation, purchase or sale of readily saleable goods and products, or their transportation within the

Philippines; or

(2) the storing of non-perishable goods and products which are duly insured and deposited, under conditions assuringtheir preservation, in authorized bonded warehouses or in other places approved by the Monetary Board.

(b) Production credits. - The Bangko Sentral may rediscount, discount, buy and sell bills, acceptances, promissory notes and other credit instruments having maturities of not more than three hundred sixty (360) days from the date of their rediscount, discount or acquisition by the Bangko Sentral and resulting from transactions related to the production or processing of agricultural, animal,mineral, or industrial products. Documents or instruments acquired in accordance with this subsection shall be secured by apledge of the respective crops or products: Provided, however, That the crops or products need not be pledged to secure thedocuments if the original loan granted by the Bangko Sentral is secured by a lien or mortgage on real estate property seventypercent (70%) of the appraised value of which equals or exceeds the amount of the loan granted.

(c) Other credits. - Special credit instruments not otherwise rediscountable under the immediately preceding subsections (a) and(b) may be eligible for rediscounting in accordance with rules and regulations which the Bangko Sentral shall prescribe. Whenever necessary, the Bangko Sentral shall provide funds from non-inflationary sources: Provided, however, That the Monetary Boardshall prescribe additional safeguards for disbursing these funds.

(d) Advances. - The Bangko Sentral may grant advances against the following kinds of collaterals for fixed periods which, with theexception of advances against collateral named in clause (4) of the present subsection, shall not exceed one hundred eighty (180)days:

(1) gold coins or bullion;

(2) securities representing obligations of the Bangko Sentral or of other domestic institutions of recognized solvency;

(3) the credit instruments to which reference is made in subsection (a) of this section;

(4) the credit instruments to which reference is made in subsection (b) of this section, for periods which shall not exceedthree hundred sixty (360) days;

(5) utilized portions of advances in current amount covered by regular overdraft agreements related to operationsincluded under subsections (a) and (b) of this section, and certified as to amount and liquidity by the institution solicitingthe advance;

(6) negotiable treasury bills, certificates of indebtedness, notes and other negotiable obligations of the Governmentmaturing within three (3) years from the date of the advance; and



(7) negotiable bonds issued by the Government of the Philippines, by Philippine provincial, city or municipalgovernments, or by any Philippine Government instrumentality, and having maturities of not more than ten (10) yearsfrom the date of advance.

The rediscounts, discounts, loans and advances made in accordance with the provisions of this section may not be renewed or extendedunless extraordinary circumstances fully justify such renewal or extension.

Advances made against the collateral named in clauses (6) and (7) of subsection (d) of this section may not exceed eighty percent(80%) of the current market value of the collateral.

C. SPECIAL CREDIT OPERATION

Section 83. Loans for Liquidity Purposes. - The Bangko Sentral may extend loans and advances to banking institutions for a periodof not more than seven (7) days without any collateral for the purpose of providing liquidity to the banking system in times of need.

D. EMERGENCY CREDIT OPERATION

Section 84. Emergency Loans and Advances. - In periods of national and/or local emergency or of imminent financial panic whichdirectly threaten monetary and banking stability, the Monetary Board may, by a vote of at least five (5) of its members, authorize theBangko Sentral to grant extraordinary loans or advances to banking institutions secured by assets as defined hereunder: Provided, Thatwhile such loans or advances are outstanding, the debtor institution shall not, except upon prior authorization by the Monetary Board,expand the total volume of its loans or investments.

The Monetary Board may, at its discretion, likewise authorize the Bangko Sentral to grant emergency loans or advances to bank inginstitutions, even during normal periods, for the purpose of assisting a bank in a precarious financial condition or under serious financialpressures brought by unforeseen events, or events which, though foreseeable, could not be prevented by the bank concerned: Provided,however, That the Monetary Board has ascertained that the bank is not insolvent and has the assets defined hereunder to secure theadvances: Provided, further, That a concurrent vote of at least five (5) members of the Monetary Board is obtained.

The amount of any emergency loan or advance shall not exceed the sum of fifty percent (50%) of total deposits and depositsubstitutes of the banking institution and shall be disbursed in two (2) or more tranches. The amount of the first tranche shall be limited totwenty-five percent (25%) of the total deposit and deposit substitutes of the institution and shall be secured by government securities to theextent of their applicable loan values and other unencumbered first class collaterals which the Monetary Board may approve: Provided,That if as determined by the Monetary Board, the circumstances surrounding the emergency warrant a loan or advance greater than theamount provided hereinabove, the amount of the first tranche may exceed twenty-five percent (25%) of the bank's total deposit and depositsubstitutes if the same is adequately secured by applicable loan values of government securities and unencumbered first class collateralsapproved by the Monetary Board, and the principal stockholders of the institution furnish an acceptable undertaking to indemnify and holdharmless from suit a conservator whose appointment the Monetary Board may find necessary at any time.

Prior to the release of the first tranche, the banking institution shall submit to the Bangko Sentral a resolution of its board of directors authorizing the Bangko Sentral to evaluate other assets of the banking institution certified by its external auditor to be good andavailable for collateral purposes should the release of the subsequent tranche be thereafter applied for.

The Monetary Board may, by a vote of at least five (5) of its members, authorize the release of a subsequent tranche on conditionthat the principal stockholders of the institution:

(a) furnish an acceptable undertaking to indemnify and hold harmless from suit a conservator whose appointment the MonetaryBoard may find necessary at any time; and

(b) provide acceptable security which, in the judgment of the Monetary Board, would be adequate to supplement, wherenecessary, the assets tendered by the banking institution to collateralize the subsequent tranche.

In connection with the exercise of these powers, the prohibitions in Section 128 of this Act shall not apply insofar as it re fers toacceptance as collateral of shares and their acquisition as a result of foreclosure proceedings, including the exercise of voting rightspertaining to said shares: Provided, however, That should the Bangko Sentral acquire any of the shares i t has accepted as col lateral as aresult of foreclosure proceedings, the Bangko Sentral shall dispose of said shares by public bidding within one (1) year from the date of consolidation of title by the Bangko Sentral.

Whenever a financial institution incurs an overdraft in i ts account with the Bangko Sentral, the same shall be eliminated within theperiod prescribed in Section 102 of this Act.

E. CREDIT TERMS

Section 85. Interest and Rediscount. - The Bangko Sentral shall collect interest and other appropriate charges on all loans and

advances it extends, the closure, receivership or liquidations of the debtor-institution notwithstanding. This provision shall applyprospectively.

The Monetary Board shall fix the interest and rediscount rates to be charged by the Bangko Sentral on its credit operations inaccordance with the character and term of the operation, but after due consideration has been given to the credit needs of the market, thecomposition of the Bangko Sentral's portfolio, and the general requirements of the national monetary policy. Interest and rediscount ratesshall be applied to all banks of the same category uniformly and without discrimination.

Section 86. Endorsement. - The documents rediscounted, discounted, bought or accepted as collateral by the Bangko Sentral inthe course of the credit operations authorized in this article shall bear the endorsement of the institution from which they are received.

Section 87. Repayment of Credits. - Documents rediscounted, discounted or accepted as collateral by the Bangko Sentral must bewithdrawn by the borrowing institution on the dates of their maturities, or upon liquidation of the obligations which they represent or to whichthey relate whenever said obligations have been liquidated prior to their dates of maturity.



Banks shall have the right at any time to withdraw any documents which they have presented to the Bangko Sentral as collateral,upon payment in full of the corresponding debt to the Bangko Sentral, including interest charges.

Section 88. Other requirements. - The Monetary Board may prescribe, within the general powers granted to it under this Act,additional conditions which borrowing institutions must satisfy in order to have access to the credit of the Bangko Sentral. These conditionsmay refer to the rates of interest charged by the banks, to the purposes for which their loans in general are destined, and to any other clearly definable aspect of the credit policy of the bank.

Section 89. Provisional Advances to the National Government. - The Bangko Sentral may make direct provisional advances with or without interest to the National Government to finance expenditures authorized in i ts annual appropriation: Provided, That said advances

shall be repaid before the end of three (3) months extendible by another three (3) months as the Monetary Board may allow following thedate the National Government received such provisional advances and shall not, in their aggregate, exceed twenty percent (20%) of theaverage annual income of the borrower for the last three (3) preceding fiscal years.

ARTICLE VOPEN MARKET OPERATIONS FOR THE ACCOUNT OF THE BANGKO SENTRAL

Section 90. Principles of Open Market Operations. - The open market purchases and sales of securities by the Bangko Sentralshall be made exclusively in accordance with its primary objective of achieving price stability.

Section 91. Purchases and Sales of Government Securities. - In order to achieve the objectives of the national monetary policy, theBangko Sentral may, in accordance with the principle stated in Section 90 of this Act and with such rules and regulations as may beprescribed by the Monetary Board, buy and sell in the open market for its own account:

(a) evidences of indebtedness issued directly by the Government of the Philippines or by its political subdivisions; and

(b) evidences of indebtedness issued by government instrumentalities and fully guaranteed by the Government.

The evidences of indebtedness acquired under the provisions of this section must be freely negotiable and regularly serviced andmust be available to the general public through banking institutions and local government treasuries in denominations of a th ousand pesosor more.

Section 92. Issue and Negotiation of Bangko Sentral Obligations. - In order to provide the Bangko Sentral with effectiveinstruments for open market operations, the Bangko Sentral may, subject to such rules and regulations as the Monetary Board mayprescribe and in accordance with the principles stated in Section 90 of this Act, issue, place, buy and sell freely negotiable evidences of indebtedness of the Bangko Sentral: Provided, That issuance of such certificates of indebtedness shall be made only in cases of extraordinary movement in price levels. Said evidences of indebtedness may be issued directly against the international reserve of the

Bangko Sentral or against the securities which it has acquired under the provisions of Section 91 of this Act, or may be issued withoutrelation to specific types of assets of the Bangko Sentral.

The Monetary Board shall determine the interest rates, maturities and other characteristics of said obligations of the BangkoSentral, and may, if it deems it advisable, denominate the obligations in gold or foreign currencies.

Subject to the principles stated in Section 90 of this Act, the evidences of indebtedness of the Bangko Sentral to which this sectionrefers may be acquired by the Bangko Sentral before their maturity, either through purchases in the open market or through redemptions atpar and by lot if the Bangko Sentral has reserved the right to make such redemptions. The evidences of indebtedness acquired or redeemed by the Bangko Sentral shall not be included among its assets, and shall be immediately retired and cancelled.

ARTICLE VICOMPOSITION OF BANGKO SENTRAL'S PORTFOLIO

Section 93. Review of the Bangko Sentral's Portfolio. - At least once every month the Monetary Board shall review the portfolio of the Bangko Sentral in relation to its future credit policy.

In reviewing the Bangko Sentral's portfolio, the Monetary Board shall especially consider whether a sufficiently large part of theportfolio consists of assets with early maturities, in order that a contraction in Bangko Sentral credit may be effected promptly whenever thenational monetary policy so requires.

ARTICLE VIIBANK RESERVES

Section 94. Reserve Requirements. - In order to control the volume of money created by the credit operations of the bankingsystem, all banks operating in the Philippines shall be required to maintain reserves against their deposit liabilities: Provided, That theMonetary Board may, at its discretion, also require all banks and/or quasi-banks to maintain reserves against funds held in trust and

liabilities for deposit substitutes as defined in this Act. The required reserves of each bank shall be proportional to the volume of its depositliabilities and shall ordinarily take the form of a deposit in the Bangko Sentral. Reserve requirements shall be applied to a ll banks of thesame category uniformly and without discrimination.

Reserves against deposit substitutes, if imposed, shall be determined in the same manner as provided for reserve requirementsagainst regular bank deposits, with respect to the imposition, increase, and computation of reserves.

The Monetary Board may exempt from reserve requirements deposits and deposit substitutes with remaining maturities of two (2)years or more, as well as interbank borrowings.

Since the requirement to maintain bank reserves is imposed primarily to control the volume of money, the Bangko Sentral shall notpay interest on the reserves maintained with it unless the Monetary Board decides otherwise as warranted by circumstances.



Section 95. Definition of Deposit Substitutes. - The term "deposit substitutes" is defined as an alternative form of obtaining fundsfrom the public, other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrower's ownaccount, for the purpose of relending or purchasing of receivables and other obligations. These instruments may include, but need not belimited to, bankers acceptances, promissory notes, participations, certificates of assignment and similar instruments with recourse, andrepurchase agreements. The Monetary Board shall determine what specific instruments shall be considered as deposit substitutes for thepurposes of Section 94 of this Act: Provided, however, That deposit substitutes of commercial, industrial and other non -financial companiesfor the limited purpose of financing their own needs or the needs of their agents or dealers shall not be covered by the provisions of Section94 of this Act.

Section 96. Required Reserves Against Peso Deposits. - The Monetary Board may fix and, when it deems necessary, alter the

minimum reserve ratios to peso deposits, as well as to deposit substitutes, which each bank and/or quasi-bank may maintain, and suchratio shall be applied uniformly to all banks of the same category as well as to quasi-banks.

Section 97. Required Reserves Against Foreign Currency Deposits. - The Monetary Board is similarly authorized to prescribe andmodify the minimum reserve ratios applicable to deposits denominated in foreign currencies.

Section 98. Reserves Against Unused Balances of Overdraft Lines. - In order to facilitate Bangko Sentral control over the volumeof bank credit, the Monetary Board may establish minimum reserve requirements for unused balances of overdraft lines.

The powers of the Monetary Board to prescribe and modify reserve requirements against unused balances of overdraft lines shallbe the same as its powers with respect to reserve requirements against demand deposits.

Section 99. Increase in Reserve Requirements. - Whenever in the opinion of the Monetary Board it becomes necessary to increase

reserve requirements against existing liabilities, the increase shall be made in a gradual manner and shall not exceed four percentage

points in any thirty-day period. Banks and other affected financial institutions shall be notified reasonably in advance of the date on whichsuch increase is to become effective.

Section 100. Computation on Reserves. - The reserve position of each bank or quasi-bank shall be calculated daily on the basis of the amount, at the close of business for the day, of the institution's reserves and the amount of its liability accounts against which reservesare required to be maintained: Provided, That with reference to holidays or non-banking days, the reserve position as calculated at theclose of the business day immediately preceding such holidays and non-banking days shall apply on such days.

For the purpose of computing the reserve position of each bank or quasi-bank, its principal office in the Philippines and all itsbranches and agencies located therein shall be considered as a single unit.

Section 101. Reserve Deficiencies. - Whenever the reserve position of any bank or quasi-bank, computed in the manner specifiedin the preceding section of this Act, is below the required minimum, the bank or quasi-bank shall pay the Bangko Sentral one-tenth of one

percent (1/10 of 1%) per day on the amount of the deficiency or the prevailing ninety-one-day treasury bill rate plus three percentagepoints, whichever is higher: Provided, however, That banks and quasi-banks shall ordinarily be permitted to offset any reserve deficiencyoccurring on one or more days of the week with any excess reserves which they may hold on other days of the same week and shall berequired to pay the penalty only on the average daily deficiency during the week. In cases of abuse, the Monetary Board may deny anybank or quasi-bank the privilege of offsetting reserve deficiencies in the aforesaid manner.

If a bank or quasi-bank chronically has a reserve deficiency, the Monetary Board may limit or prohibit the making of new loans or investments by the institution and may require that part or all of the net profits of the institution be assigned to surplus.

The Monetary Board may modify or set aside the reserve deficiency penalties provided in this section, for part or the entire period of a strike or lockout affecting a bank or a quasi-bank as defined in the Labor Code, or of a national emergency affecting operations of banksor quasi-banks. The Monetary Board may also modify or set aside reserved deficiency penalties for rehabilitation program of a bank.

Section 102. Interbank Settlement. - The Bangko Sentral shall establish facilities for interbank clearing under such rules and

regulations as the Monetary Board may prescribe: Provided, That the Bangko Sentral may charge administrative and other fees for themaintenance of such facilities.

The deposit reserves maintained by the banks in the Bangko Sentral in accordance with the provisions of Section 94 of this Actshall serve as basis for the clearing of checks and the settlement of interbank balances, subject to such rules and regulations as theMonetary Board may issue with respect to such operations: Provided, That any bank which incurs on overdrawing in its deposit accountwith the Bangko Sentral shall fully cover said overdraft, including interest thereon at a rate equivalent to one-tenth of one percent (1/10 of 1%) per day or the prevailing ninety-one-day treasury bill rate plus three percentage points, whichever is higher, not later than the nextclearing day: Provided, further, That settlement of clearing balances shall not be effected for any account which continues to be overdrawnfor five (5) consecutive banking days until such time as the overdrawing is fully covered or otherwise converted into an emergency loan or advance pursuant to the provisions of Section 84 of this Act: Provided, finally, That the appropriate clearing office shall be officially notifiedof banks with overdrawn balances. Banks with existing overdrafts with the Bangko Sentral as of the effectivity of this Act shall, within suchperiod as may be prescribed by the Monetary Board, either convert the overdraft into an emergency loan or advance with a plan of payment, or settle such overdrafts, and that, upon failure to so comply herewith, the Bangko Sentral shall take such action against the bankas may be warranted under this Act.

Section 103. Exemption from Attachment and Other Purposes. - Deposits maintained by banks with the Bangko Sentral as part of their reserve requirements shall be exempt from attachment, garnishments, or any other order or process of any court, government agencyor any other administrative body issued to satisfy the claim of a party other than the Government, or its political subdivisions or instrumentalities.

ARTICLE VIIISELECTIVE REGULATION OF BANK OPERATIONS

Section 104. Guiding Principle. - The Monetary Board shall use the powers granted to it under this Act to ensure that the supply,availability and cost of money are in accord with the needs of the Philippine economy and that bank credit is not granted for speculativepurposes prejudicial to the national interests. Regulations on bank operations shall be applied to all banks of the same category uniformlyand without discrimination.





Government or its respective subdivisions or instrumentality, as the case may be: Provided, however, That the Bangko Sentral shall notguarantee the placement of said securities, and shall not subscribe to their issue except to replace its maturing holdings of securities withthe same type as the maturing securities.

Section 118. Methods of Placing Government Securities. - The Bangko Sentral may place the securities to which the precedingsection refers through direct sale to financial institutions and the public.

The Bangko Sentral shall not be a member of any stock exchange or syndicate, but may intervene therein for the sole purpose of regulating their operations in the placing of government securities.

The Government, or its political subdivisions or instrumentalities, shall reimburse the Bangko Sentral for the expenses incurred inthe placing of the aforesaid securities.

Section 119. Servicing and Redemption of the Public Debt. - The servicing and redemption of the public debt shall also be effectedthrough the Bangko Sentral.

B. BANGKO SENTRAL SUPPORT OF THE GOVERNMENT SECURITIES MARKET

Section 120. The Securities Stabilization Fund. - There shall be established a "Securities Stabilization Fund" which shall beadministered by the Bangko Sentral for the account of the Government.

The operations of the Securities Stabilization Fund shall consist of purchases and sales, in the open market, of bonds and other evidences of indebtedness issued or fully guaranteed by the Government. The purpose of these operations shall be to increase the liquidity

and stabilize the value of said securities in order thereby to promote investment in government obligations.

The Monetary Board shall use the resources of the Fund to prevent, or moderate, sharp fluctuations in the quotations of saidgovernment obligations, but shall not endeavor to alter movements of the market resulting from basic changes in the pattern or level of interest rates.

The Monetary Board shall issue such regulations as may be necessary to implement the provisions of this section.

Section 121. Resources of the Securities Stabilization Fund. - Subject to Section 132 of this Act, the resources of the SecuritiesStabilization Fund shall come from the balance of the fund as held by the Central Bank under Republic Act No. 265 as of the effective dateof this Act.

Section 122. Profits and Losses of the Fund. - The Securities Stabilization Fund shall retain net profits which it may make on its

operations, regardless of whether said profits arise from capital gains or from interest earnings. The Fund shall correspondingly bear anynet losses which it may incur.

ARTICLE IIIFUNCTIONS AS FINANCIAL ADVISOR OF THE GOVERNMENT

Section 123. Financial Advice on Official Credit Operations. - Before undertaking any credit operation abroad, the Government,through the Secretary of Finance, shall request the opinion, in writing, of the Monetary Board on the monetary implications of thecontemplated action. Such opinions must similarly be requested by all political subdivisions and instrumentalities of the Government beforeany credit operation abroad is undertaken by them.

The opinion of the Monetary Board shall be based on the gold and foreign exchange resources and obligations of the nation and onthe effects of the proposed operation on the balance of payments and on monetary aggregates.

Whenever the Government, or any of its political subdivisions or instrumentalities, contemplates borrowing within the Philippines,the prior opinion of the Monetary Board shall likewise be requested in order that the Board may render an opinion on the probable effects of the proposed operation on monetary aggregates, the price level, and the balance of payments.

Section 124. Representation on the National Economic and Development Authority. - In order to assure effective coordinationbetween the economic, financial and fiscal policies of the Government and the monetary, credit and exchange policies of the BangkoSentral, the Deputy Governor designated by the Governor of the Bangko Sentral shall be an ex officio member of the National Economicand Development Authority Board.

CHAPTER VI — PRIVILEGES AND PROHIBITIONS

ARTICLE IPRIVILEGES

Section 125. Tax Exemptions. - The Bangko Sentral shall be exempt for a period of five (5) years from the approval of this Act fromall national, provincial, municipal and city taxes, fees, charges and assessments.

The exemption authorized in the preceding paragraph of this section shall apply to all property of the Bangko Sentral, to theresources, receipts, expenditures, profits and income of the Bangko Sentral, as well as to all contracts, deeds, documents and transactionsrelated to the conduct of the business of the Bangko Sentral: Provided, however, That said exemptions shall apply only to such taxes, fees,charges and assessments for which the Bangko Sentral itself would otherwise be liable, and shall not apply to taxes, fees, charges, or assessments payable by persons or other entities doing business with the Bangko Sentral: Provided, further, That foreign loans and other obligations of the Bangko Sentral shall be exempt, both as to principal and interest, from any and all taxes if the payment o f such taxes hasbeen assumed by the Bangko Sentral.

Section 126. Exemption from Customs Duties. - The provision of any general or special law to the contrary notwithstanding, theimportation and exportation by the Bangko Sentral of notes and coins, and of gold and other metals to be used for purposes authorized



under this Act, and the importation of all equipment needed for bank note production, minting of coins, metal refining and other securityprinting operations shall be fully exempt from all customs duties and consular fees and from all other taxes, assessments and chargesrelated to such importation or exportation.

Section 127. Applicability of the Civil Service Law. - Appointments in the Bangko Sentral, except as to those which are policy-

determining, primarily confidential or highly technical in nature, shall be made only according to the Civil Service Law and regulations:Provided, That no qualification requirements for positions in the Bangko Sentral shall be imposed other than those set by the MonetaryBoard: Provided, further, That, the Monetary Board or Governor, in accordance with Sections 15(c) and 17(d) of this Act, respectively, maywithout need of obtaining prior approval from any other government agency, appoint personnel in the Bangko Sentral whose services aredeemed necessary in order not to unduly disrupt the operations of the Bangko Sentral.

Officers and employees of the Bangko Sentral, including all members of the Monetary Board, shall not engage directly or indirectlyin partisan activities or take part in any election except to vote.

ARTICLE IIPROHIBITIONS

Section 128. Prohibitions. - The Bangko Sentral shall not acquire shares of any kind or accept them as collateral, and shall notparticipate in the ownership or management of any enterprise, either directly or indirectly.

The Bangko Sentral shall not engage in development banking or financing: Provided, however, That outstanding loans obtained or extended for development financing shall not be affected by the prohibition of this section.

CHAPTER VII — TRANSITORY PROVISIONS

Section 129. Phase-out of Fiscal Agency Functions. - Unless circumstances warrant otherwise and approved by the CongressOversight Committee, the Bangko Sentral shall, within a period of three (3) years but in no case longer than five (5) years from the approvalof this Act, phase out all fiscal agency functions provided for in Sections 117, 118, 119, and 120 as well as in other pertinent provisions of this Act and transfer the same to the Department of Finance.

Section 130. Phase-out of Regulatory Powers Over the Operations of Finance Corporations and Other Institutions Performing Similar Functions. - The Bangko Sentral shall, within a period of five (5) years from the effectivity of this Act, phase out its regulatorypowers over finance companies without quasi-banking functions and other institutions performing similar functions as provided in existinglaws, the same to be assumed by the Securities and Exchange Commission.

Section 131. Implementing Details. - The Bangko Sentral shall be made operational by the performance of the following acts:

(a) the President shall constitute the Monetary Board by appointing the members thereof within sixty (60) days from the effectivityof this Act; and

(b) the transfer of such assets and liabilities from the Central Bank to the Bangko Sentral as provided in Section 132 shall becompleted within ninety (90) days from the constitution of the Monetary Board.

All incumbent personnel in the Central Bank as of the date of the approval of this Act shall continue to exercise their duties andfunctions as personnel of the Bangko Sentral subject to the provisions of Section 133: Provided, That such personnel in the Central Bankas may be necessary for the purpose of implementing Section 132 may be assigned by the Bangko Sentral Monetary Board to the CentralBank.

Section 132. Transfer of Assets and Liabilities. - Upon the effectivity of this Act, three (3) members of the Monetary Board, whichmay include the Governor, in representation of the Bangko Sentral, the Secretary of Finance and the Secretary of Budget and Management

in representation of the National Government, and the Chairmen of the Committees on Banks of the Senate and the House of Representatives shall determine the assets and liabilities of the Central Bank which may be transferred to or assumed by the BangkoSentral. The Committee shall complete its work within ninety (90) days from the constitution of the Monetary Board submitting acomprehensive report with all its findings and justification.

The following guidelines shall be strictly observed in the determination of which assets and liabilities shall be transferred to theBangko Sentral:

(a) the Monetary Board and the Secretary of Finance shall have primary responsibility for working out creative monetary andfinancial solutions to retire the Central Bank liabilities and losses at the least cost to the Government;

(b) the Bangko Sentral shall remit seventy-five percent (75%) of its net profits to a special deposit account (sinking fund) until suchtime as the net liabilities of the Central Bank shall have been liquidated through generally accepted finance mechanisms such as,but not limited to, write-offs, set-offs, condonation, collections, reappraisal, revaluation and bond issuance by the National

Government, or to the National Government as dividends;

(c) the assets and liabilities to be transferred shall be limited to an amount that will enable the Bangko Sentral to perform itsresponsibilities adequately and operate on a viable basis: Provided, That the assets shall exceed the liabilities as certified by theCommission on Audit (COA), by an initial amount of Ten billion pesos (P10,000,000,000);

(d) liabilities to be assumed by the Bangko Sentral shall include liability for notes and coins in circulation as of the effective date of this Act; and

(e) any asset or liability of the Central Bank not transferred to the Bangko Sentral shall be retained and administered, disposed of and liquidated by the Central Bank itself which shall continue to exist as the CB Board of Liquidators only for the purposesprovided in this paragraph but not later than twenty-five (25) years or until such time that liabilities have been liquidated: Provided,That the Bangko Sentral may financially assist the Central Bank of Liquidators in the liquidation of CB liabilities: Provided, finally,



That upon disposition of said retained assets and liquidation of said retained liabilities, the Central Bank shall be deemedabolished.

All actions taken by the Bangko Sentral Monetary Board under this section shall be reported to Congress and the President withinthirty (30) days.

Section 133. Mandate to Organize. - The Bangko Sentral shall be organized by the Monetary Board without being subject to the

provisions of Republic Act No. 7430, by adopting if it so desires, an entirely new staffing pattern on organizational structure to suit theoperations of the Bangko Sentral under this Act. No preferential or priority right shall be given to or enjoyed by any personnel for appointment to any position in the new staffing pattern, nor shall any personnel be considered as having prior or vested rights with respect

to retention in the Bangko Sentral or in any position which may be created in the new staffing pattern, even if he should be the incumbent of a similar position prior to organization. The formulation of the program of organization shall be completed within six (6) months after theeffectivity of this Act, and shall be fully implemented within a period of six (6) months thereafter. Personnel who may not be retained aredeemed separated from the service.

Section 134. Separation Benefits. - Pursuant to Section 15 of this Act, the Monetary Board is authorized to provide separationincentives, and all those who shall retire or be separated from the service on account of reorganization under the preceding section shall beentitled to such incentives, which shall be in addition to all gratuities and benefits to which they may be entitled under existing laws.

Section 135. Repealing Clause. - Except as may be provided for in Section 46 and 132 of this Act, Republic Act No. 265, as

amended, the provisions of any other law, special charters, rule or regulation issued pursuant to said Republic Act No. 265, as amended, or parts thereof, which may be inconsistent with the provisions of this Act are hereby repealed. Presidential Decree No. 1792 is likewiserepealed.

Section 136. Transfer of Powers. - All powers, duties and functions vested by law in the Central Bank of the Philippines notinconsistent with the provisions of this Act shall be deemed transferred to the Bangko Sentral ng Pilipinas. All references to the CentralBank of the Philippines in any law or special charters shall be deemed to refer to the Bangko Sentral.

Section 137. Separability Clause. - If any provision or section of this Act or the application thereof to any person or circumstance isheld invalid, the other provisions or sections of this Act, and the application of such provision or section to other persons or circumstances,shall not be affected thereby.

Section 138. Effectivity Clause. - This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in two(2) national newspapers of general circulation.

Approved: June 14, 1993



REPUBLIC ACT No. 1405

AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS WITH ANY BANKING INSTITUTION AND PROVIDINGPENALTY THEREFOR.

Section 1. It is hereby declared to be the policy of the Government to give encouragement to the people to deposit their money in bankinginstitutions and to discourage private hoarding so that the same may be properly utilized by banks in authorized loans to assist in theeconomic development of the country.

Section 2. 1 All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by

the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidentialnature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon writtenpermission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation.

Section 3. It shall be unlawful for any official or employee of a banking institution to disclose to any person other than those mentioned inSection two hereof any information concerning said deposits.

Section 4. All Acts or parts of Acts, Special Charters, Executive Orders, Rules and Regulations which are inconsistent with the provisionsof this Act are hereby repealed.

Section 5. Any violation of this law will subject offender upon conviction, to an imprisonment of not more than five years or a fine of notmore than twenty thousand pesos or both, in the discretion of the court.

Section 6. This Act shall take effect upon its approval.

Approved: September 9, 1955

Footnote

1This Section and Section 3 were both amended by PD No. 1792 issued January 16, 1981, PD 1792 was expressly repealed by

Sec 135 of R.A. No. 7653, approved June 14, 1993. The original sections 2 and 3 of R.A. No.1405 are hereby reproduced for reference, as follows; "Sec 2 All deposits of whatever nature with banks or banking institutions in the Philippines including

investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are herebyconsidered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, governmentofficial, bureau or office, except upon written per-mission of the depositor, or in cases of impeachment, or upon order of acompetent court in cases of bribery or dereliction of duty of public officials. or in cases where the money deposited or invested isthe subject matter of the litigation," "Sec. 3. It shall be unlawful for any official or employee of a banking institution to disclose toany person other than those mentioned in Section two hereof any information concerning said deposits."

http://www.lawphil.net/statutes/presdecs/pd1981/pd_1792_1981.html

http://www.lawphil.net/statutes/repacts/ra1993/ra_7653_1993.html






AN ACT INSTITUTING A FOREIGN CURRENCY DEPOSIT SYSTEM IN THE PHILIPPINES, AND FOR OTHER PURPOSES.

Section 1. Title. – This act shall be known as the "Foreign Currency Deposit Act of the Philippines."

Section 2. Authority to deposit foreign currencies . – Any person, natural or juridical, may, in accordance with the provisions of this Act,deposit with such Philippine banks in good standing, as may, upon application, be designated by the Central Bank for the purpose, foreigncurrencies which are acceptable as part of the international reserve, except those which are required by the Central Bank to besurrendered in accordance with the provisions of Republic Act Numbered two hundred sixty-five (Now Rep. Act No. 7653).

Section 3. Authority of banks to accept foreign currency deposits. – The banks designated by the Central Bank under Section two hereof shall have the authority:

(1) To accept deposits and to accept foreign currencies in trust Provided , That numbered accounts for recording and servicing of said deposits shall be allowed;

(2) To issue certificates to evidence such deposits;

(3) To discount said certificates;

(4) To accept said deposits as collateral for loans subject to such rules and regulations as may be promulgated by the CentralBank from time to time; and

(5) To pay interest in foreign currency on such deposits.

Section 4. Foreign currency cover requirements. – Except as the Monetary Board may otherwise prescribe or allow, the depository banksshall maintain at all times a one hundred percent foreign currency cover for their liabilities, of which cover at least fifteen percent shall be inthe form of foreign currency deposit with the Central Bank, and the balance in the form of foreign currency loans or securities, which loansor securities shall be of short term maturities and readily marketable. Such foreign currency loans may include loans to domesticenterprises which are export-oriented or registered with the Board of Investments, subject to the limitations to be prescribed by theMonetary Board on such loans. Except as the Monetary Board may otherwise prescribe or allow, the foreign currency cover shall be in thesame currency as that of the corresponding foreign currency deposit liability. The Central Bank may pay interest on the foreign currencydeposit, and if requested shall exchange the foreign currency notes and coins into foreign currency instruments drawn on its depositorybanks. (As amended by PD No. 1453, June 11, 1978.)

Depository banks which, on account of networth, resources, past performance, or other pertinent criteria, have been qualified by theMonetary Board to function under an expanded foreign currency deposit system, shall be exempt from the requirements in the precedingparagraph of maintaining fifteen percent (15%) of the cover in the form of foreign currency deposit with the Central Bank. Subject to prior Central Bank approval when required by Central Bank regulations, said depository banks may extend foreign currency loans to a nydomestic enterprise, without the limitations prescribed in the preceding paragraph regarding maturity and marketability, and such loansshall be eligible for purposes of the 100% foreign currency cover prescribed in the preceding paragraph. (As added by PD No. 1035.)

Section 5. Withdrawability and transferability of deposits. – There shall be no restriction on the withdrawal by the depositor of his deposit or on the transferability of the same abroad except those arising from the contract between the depositor and the bank.

Section 6. Tax exemption. – All foreign currency deposits made under this Act, as amended by PD No. 1035, as well as foreign currencydeposits authorized under PD No. 1034, including interest and all other income or earnings of such deposits, are hereby exempted fromany and all taxes whatsoever irrespective of whether or not these deposits are made by residents or nonresidents so long as the depositsare eligible or allowed under aforementioned laws and, in the case of nonresidents, irrespective of whether or not they are engaged in tradeor business in the Philippines. (As amended by PD No. 1246, prom. Nov. 21, 1977 .)

Section 7. Rules and regulations. – The Monetary Board of the Central Bank shall promulgate such rules and regulations as may benecessary to carry out the provisions of this Act which shall take effect after the publications in the Official Gazette and in a newspaper of national circulation for at least once a week for three consecutive weeks. In case the Central Bank promulgates new rules and regulationsdecreasing the rights of depositors, rules and regulations at the time the deposit was made shall govern.

Section 8. Secrecy of foreign currency deposits. – All foreign currency deposits authorized under this Act, as amended by PD No. 1035, aswell as foreign currency deposits authorized under PD No. 1034, are hereby declared as and considered of an absolutely confidentialnature and, except upon the written permission of the depositor, in no instance shall foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative, or any other entity whether public or private; Provided, however, That said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. (As amended by PD No. 1035, and further amended by PD No. 1246, prom. Nov. 21, 1977.)

Section 9. Deposit insurance coverage. – The deposits under this Act shall be insured under the provisions of Republic Act No. 3591, asamended (Philippine Deposit Insurance Corporation), as well as its implementing rules and regulations: Provided , That insurance paymentshall be in the same currency in which the insured deposits are denominated.

Section 10. Penal provisions. – Any willful violation of this Act or any regulation duly promulgated by the Monetary Board pursuant heretoshall subject the offender upon conviction to an imprisonment of not less than one year nor more than five years or a fine of not less thanfive thousand pesos nor more than twenty-five thousand pesos, or both such fine and imprisonment at the discretion of the court.

Section 11. Separability clause. – The provisions of this Act are hereby declared to be separable and in the event one or more of suchprovisions are held unconstitutional, the validity of other provisions shall not be affected thereby.

Section 12. Repealing clause. – All acts, executive orders, rules and regulations, or parts thereof, which are inconsistent with anyprovisions of this Act are hereby repealed, amended or modified accordingly, without prejudice, however, to deposits made thereunder.














Section 12-A. Amendatory enactments and regulations. – In the event a new enactment or regulation is issued decreasing the rightshereunder granted, such new enactment or regulation shall not apply to foreign currency deposits already made or existing at the time of issuance of such new enactment or regulation, but such new enactment or regulation shall apply only to foreign currency deposits madeafter its issuance. (As added by PD No. 1246, prom. Nov. 21, 1977.)

Section 13. Effectivity. – This Act shall take effect upon its approval.

Approved, April 4, 1974


AN ACT TO REQUIRE THE DISCLOSURE OF FINANCE CHARGES IN CONNECTION WITH EXTENSIONS OF CREDIT.

Section 1. This Act shall be known as the "Truth in Lending Act."

Section 2. Declaration of Policy. It is hereby declared to be the policy of the State to protect its citizens from a lack of awareness of the truecost of credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy.

Section 3. As used in this Act, the term

(1) "Board" means the Monetary Board of the Central Bank of the Philippines.

(2) "Credit" means any loan, mortgage, deed of trust, advance, or discount; any conditional sales contract; any contract to sell, or sale or contract of sale of property or services, either for present or future delivery, under which part or all of the price is payablesubsequent to the making of such sale or contract; any rental-purchase contract; any contract or arrangement for the hire,bailment, or leasing of property; any option, demand, lien, pledge, or other claim against, or for the delivery of, property or money;any purchase, or other acquisition of, or any credit upon the security of, any obligation of claim arising out of any of the foregoing;and any transaction or series of transactions having a similar purpose or effect.

(3) "Finance charge" includes interest, fees, service charges, discounts, and such other charges incident to the extension of creditas the Board may be regulation prescribe.

(4) "Creditor" means any person engaged in the business of extending credit (including any person who as a regular businesspractice make loans or sells or rents property or services on a time, credit, or installment basis, either as principal or as agent)who requires as an incident to the extension of credit, the payment of a finance charge.

(5) "Person" means any individual, corporation, partnership, association, or other organized group of persons, or the legalsuccessor or representative of the foregoing, and includes the Philippine Government or any agency thereof, or any other government, or of any of its political subdivisions, or any agency of the foregoing.

Section 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Board, thefollowing 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 arenot 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.

Section 5. The Board shall prescribe such rules and regulations as may be necessary or proper in carrying out the provisions of this Act. Any rule or regulation prescribed hereunder may contain such classifications and differentiations as in the judgment of the Board arenecessary or proper to effectuate the purposes of this Act or to prevent circumvention or evasion, or to facilitate the enforcement of this Act,or any rule or regulation issued thereunder.

Section 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation o f this

Act or any regulation issued thereunder shall be liable to such person in the amount of P100 or in an amount equal to twice the financecharged required by such creditor in connection with such transaction, whichever is the greater, except that such liability shall not exceedP2,000 on any credit transaction. Action to recover such penalty may be brought by such person within one year from the date of theoccurrence of the violation, in any court of competent jurisdiction. In any action under this subsection in which any person is entitled to arecovery, the creditor shall be liable for reasonable attorney's fees and court costs as determined by the court.



(b) Except as specified in subsection (a) of this section, nothing contained in this Act or any regulation contained in this Act or anyregulation thereunder shall affect the validity or enforceability of any contract or transactions.

(c) Any person who willfully violates any provision of this Act or any regulation issued thereunder shall be fined by not less thanP1,00 or more than P5,000 or imprisonment for not less than 6 months, nor more than one year or both.

(d) No punishment or penalty provided by this Act shall apply to the Philippine Government or any agency or any politicalsubdivision thereof.

(e) A final judgment hereafter rendered in any criminal proceeding under this Act to the effect that a defendant has willfully violated

this Act shall be prima facie evidence against such defendant in an action or proceeding brought by any other party against suchdefendant under this Act as to all matters respecting which said judgment would be an estoppel as between the parties thereto.

Section 7. This Act shall become effective upon approval.

Approved: June 22, 1963



Congress of the PhilippinesTwelfth Congress

REPUBLIC ACT NO. 9160

September 29, 2001

AN ACT DEFINING THE CRIME OF MONEY LAUNDERING, PROVIDING PENALTIES THEREFOR AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. – This Act shall be known as the "Anti-Money Laundering Act of 2001."

Section 2. Declaration of Policy. – It is hereby declared the policy of the State to protect and preserve the integrity and confidentiality of bank accounts and to ensure that the Philippines shall not be used as a money laundering site for the proceeds of any unlawful activity.Consistent with its foreign policy, the State shall extend cooperation in transnational investigations and prosecutions of persons involved inmoney laundering activities whenever committed.

Section 3. Definitions. For purposes of this Act, the following terms are hereby defined as follows:

(a) "Covered Institution " refers to:

(1) banks, non-banks, quasi-banks, trust entities, and all other institutions and their subsidiaries and affiliates supervisedor regulated by the Bangko Sentral ng Pilipinas (BSP);

(2) Insurance companies and all other institutions supervised or regulated by the Insurance Commission; and

(3) (i) securities dealers, brokers, salesmen, investment houses and other similar entities managing securities or rendering services as investment agent, advisor, or consultant, (ii) mutual funds, close and investment companies,common trust funds, pre-need companies and other similar entities, (iii) foreign exchange corporations, money changers,money payment, remittance, and transfer companies and other similar entities, and (iv) other entities administering or otherwise dealing in currency, commodities or financial derivatives based thereon, valuable objects, cash substitutes andother similar monetary instruments or property supervised or regulated by Securities and Exchange Commission.

(b) "Covered transaction " is a single, series, or combination of transactions involving a total amount in excess of Four millionPhilippine pesos (Php4,000,000.00) or an equivalent amount in foreign currency based on the prevailing exchange rate within five

(5) consecutive banking days except those between a covered institution and a person who, at the time of the transaction was aproperly identified client and the amount is commensurate with the business or financial capacity of the client; or those with anunderlying legal or trade obligation, purpose, origin or economic justification.

It likewise refers to a single, series or combination or pattern of unusually large and complex transactions in excess of Four millionPhilippine pesos (Php4,000,000.00) especially cash deposits and investments having no credible purpose or origin, underlyingtrade obligation or contract.

(c) "Monetary Instrument " refers to:

(1) coins or currency of legal tender of the Philippines, or of any other country;

(2) drafts, checks and notes;

(3) securities or negotiable instruments, bonds, commercial papers, deposit certificates, trust certificates, custodialreceipts or deposit substitute instruments, trading orders, transaction tickets and confirmations of sale or investments andmoney marked instruments; and

(4) other similar instruments where title thereto passes to another by endorsement, assignment or delivery.

(d) "Offender " refers to any person who commits a money laundering offense.

(e) "Person " refers to any natural or juridical person.

(f) "Proceeds " refers to an amount derived or realized from an unlawful activity.

(g) "Supervising Authority " refers to the appropriate supervisory or regulatory agency, department or office supervising or regulating the covered institutions enumerated in Section 3(a).

(h) "Transaction " refers to any act establishing any right or obligation or giving rise to any contractual or legal relationshipbetween the parties thereto. It also includes any movement of funds by any means with a covered institution.

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

(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code, as amended;

(2) Sections 3, 4, 5, 7, 8 and 9 of Article Two of Republic Act No. 6425, as amended, otherwise known as the DangerousDrugs Act of 1972;



(3) Section 3 paragraphs B, C, E, G, H and I of Republic Act No. 3019, as amended; otherwise known as the Anti-Graftand Corrupt Practices Act;

(4) Plunder under Republic Act No. 7080, as amended;

(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the Revised Penal Code, as amended;

(6) Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602;

(7) Piracy on the high seas under the Revised Penal Code, as amended and Presidential Decree No. 532;

(8) Qualified theft under, Article 310 of the Revised Penal Code, as amended;

(9) Swindling under Article 315 of the Revised Penal Code, as amended;

(10) Smuggling under Republic Act Nos. 455 and 1937;

(11) Violations under Republic Act No. 8792, otherwise known as the Electronic Commerce Act of 2000;

(12) Hijacking and other violations under Republic Act No. 6235; destructive arson and murder, as defined under theRevised Penal Code, as amended, including those perpetrated by terrorists against non-combatant persons and similar targets;

(13) Fraudulent practices and other violations under Republic Act No. 8799, otherwise known as the SecuritiesRegulation Code of 2000;

(14) Felonies or offenses of a similar nature that are punishable under the penal laws of other countries.

Section 4. Money Laundering Offense. – Money laundering is a crime whereby the proceeds of an unlawful activity are transacted, therebymaking them appear to have originated from legitimate sources. It is committed by the following:

(a) Any person knowing that any monetary instrument or property represents, involves, or relates to the proceeds of any unlawfulactivity, transacts or attempts to transact said monetary instrument or property.

(b) Any person knowing that any monetary instrument or property involves the proceeds of any unlawful activity, performs or fails

to perform any act as a result of which he facilitates the offense of money laundering referred to in paragraph (a) above.

(c) Any person knowing that any monetary instrument or property is required under this Act to be disclosed and filed with the Anti-Money Laundering Council (AMLC), fails to do so.

Section 5. Jurisdiction of Money Laundering Cases. – The regional trial courts shall have jurisdiction to try all cases on money laundering.Those committed by public officers and private persons who are in conspiracy with such public officers shall be under the jurisdiction of theSandiganbayan.

Section 6. Prosecution of Money Laundering. –

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

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

Section 7. Creation of Anti-Money Laundering Council (AMLC). – The Anti-Money Laundering Council is hereby created and shall becomposed of the Governor of the Bangko Sentral ng Pilipinas as chairman, the Commissioner of the Insurance Commission and theChairman of the Securities and Exchange Commission as members. The AMLC shall act unanimously in the discharge of its functions asdefined hereunder:

(1) to require and receive covered transaction reports from covered institutions;

(2) to issue orders addressed to the appropriate Supervising Authority or the covered institution to determine the true identity of the owner of any monetary instrument or property subject of a covered transaction report or request for assistance from a foreignState, or believed by the Council, on the basis of substantial evidence to be in whole or in part, whenever located, representing,

involving, or related to, directly or indirectly, in any manner or by any means, the proceeds of an unlawful activity;

(3) to institute civil forfeiture proceedings and all other remedial proceedings through the Office of the Solicitor General;

(4) to cause the filing of complaints with the Department of Justice or the Ombudsman for the prosecution of money launderingoffenses;

(5) to initiate investigations of covered transactions, money laundering activities and other violations of this Act;

(6) to freeze any monetary instrument or property alleged to be proceed of any unlawful activity;

(7) to implement such measures as may be necessary and justified under this Act to counteract money laundering;



(8) to receive and take action in respect of, any request from foreign states for assistance in their own anti-money launderingoperations provided in this Act;

(9) to develop educational programs on the pernicious effects of money laundering, the methods and techniques used in moneylaundering, the viable means of preventing money laundering and the effective ways of prosecuting and punishing offenders; and

(10) to enlist the assistance of any branch, department, bureau, office, agency or instrumentality of the government, includinggovernment-owned and –controlled corporations, in undertaking any and all anti-money laundering operations, which may includethe use of its personnel, facilities and resources for the more resolute prevention, detection and investigation of money launderingoffenses and prosecution of offenders.

Section 8. Creation of a Secretariat. – The AMLC is hereby authorized to establish a secretariat to be headed by an Executive Director who shall be appointed by the Council for a term of five (5) years. He must be a member of the Philippine Bar, at least thirty-five (35) yearsof age and of good moral character, unquestionable integrity and known probity. All members of the Secretariat must have served for atleast five (5) years either in the Insurance Commission, the Securities and Exchange Commission or the Bangko Sentral ng Pilipinas (BSP)and shall hold full-time permanent positions within the BSP.

Section 9. Prevention of Money Laundering; Customer Identification Requirements and Record Keeping. –

(a) Customer Identification, - Covered institutions shall establish and record the true identity of its clients based on officialdocuments. They shall maintain a system of verifying the true identity of their clients and, in case of corporate clients, require asystem of verifying their legal existence and organizational structure, as well as the authority and identification of all personspurporting to act on their behalf.

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

(b) Record Keeping – All records of all transactions of covered institutions shall be maintained and safely stored for five (5) yearsfrom the date of transactions. With respect to closed accounts, the records on customer identification, account files and businesscorrespondence, shall be preserved and safety stored for at least five (5) years from the dates when they were closed.

(c) Reporting of Covered Transactions. – Covered institutions shall report to the AMLC all covered transactions within five (5)working days from occurrence thereof, unless the Supervising Authority concerned prescribes a longer period not exceeding ten(10) working days.

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

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

Section 10. Authority to Freeze. – Upon determination that probable cause exists that any deposit or similar account is in any way relatedto an unlawful activity, the AMLC may issue a freeze order, which shall be effective immediately, on the account for a period not exceedingfifteen (15) days. Notice to the depositor that his account has been frozen shall be issued simultaneously with the issuance of the freezeorder. The depositor shall have seventy-two (72) hours upon receipt of the notice to explain why the freeze order should be lifted. The

AMLC has seventy-two (72) hours to dispose of the depositor's explanation. If it falls to act within seventy-two (72) hours from receipt of thedepositor's explanation, the freeze order shall automatically be dissolved. The fifteen (15)-day freeze order of the AMLC may be extendedupon order of the court, provided that the fifteen (15)-day period shall be tolled pending the court's decision to extend the period.

No court shall issue a temporary restraining order or writ of injunction against any freeze order issued by the AMLC except the Court of Appeals or the Supreme Court.

Section 11. Authority to inquire into Bank Deposits. – Notwithstanding the provisions of Republic Act No. 1405, as amended; Republic Act

No. 6426, as amended; Republic Act No. 8791, and other laws, the AMLC may inquire into or examine any particular deposit or investmentwith any banking institution or non-bank financial institution upon order of any competent court in cases of violation of this Act when it hasbeen established that there is probable cause that the deposits or investments involved are in any way related to a money launderingoffense: Provided , That this provision shall not apply to deposits and investments made prior to the effectivity of this Act.

Section 12. Forfeiture Provisions. –

(a) Civil Forfeiture. – When there is a covered transaction report made, and the court has, in a pet ition filed for the purposeordered seizure of any monetary instrument or property, in whole or in part, directly or indirectly, related to said report, the RevisedRules of Court on civil forfeiture shall apply.

(b) Claim on Forfeited Assets. – Where the court has issued an order of forfeiture of the monetary instrument or property in acriminal prosecution for any money laundering offense defined under Section 4 of this Act, the offender or any other personclaiming an interest therein may apply, by verified petition, for a declaration that the same legitimately belongs to him and for



segregation or exclusion of the monetary instrument or property corresponding thereto. The verified petition shall be filed with thecourt which rendered the judgment of conviction and order of forfeiture, within fifteen (15) days from the date of the order or forfeiture, in default of which the said order shall become final and executory. This provision shall apply in both civil and criminalforfeiture.

(c) Payment in Lieu of Forfeiture. – Where the court has issued an order of forfeiture of the monetary instrument or propertysubject of a money laundering offense defined under Section 4, and said order cannot be enforced because any particular monetary instrument or property cannot, with due diligence, be located, or it has been substantially altered, destroyed, diminishedin value or otherwise rendered worthless by any act or omission, directly or indirectly, attributable to the offender, or it has beenconcealed, removed, converted or otherwise transferred to prevent the same from being found or to avoid forfeiture thereof, or it is

located outside the Philippines or has been placed or brought outside the jurisdiction of the court, or it has been commingled withother monetary instruments or property belonging to either the offender himself or a third person or entity, thereby rendering thesame difficult to identify or be segregated for purposes of forfeiture, the court may, instead of enforcing the order of forfeiture of the monetary instrument or property or part thereof or interest therein, accordingly order the convicted offender to pay an amountequal to the value of said monetary instrument or property. This provision shall apply in both civil and criminal forfeiture.

Section 13. Mutual Assistance among States. –

(a) Request for Assistance from a Foreign State. – Where a foreign State makes a request for assistance in the investigation or prosecution of a money laundering offense, the AMLC may execute the request or refuse to execute the same and inform theforeign State of any valid reason for not executing the request or for delaying the execution thereof. The principles of mutualityand reciprocity shall, for this purpose, be at all times recognized.

(b) Power of the AMLC to Act on a Request for Assistance from a Foreign State . – The AMLC may execute a request for

assistance from a foreign State by: (1) tracking down, freezing, restraining and seizing assets alleged to be proceeds of anyunlawful activity under the procedures laid down in this Act; (2) giving information needed by the foreign State within theprocedures laid down in this Act; and (3) applying for an order of forfeiture of any monetary instrument or property in the court:Provided , That the court shall not issue such an order unless the application is accompanied by an authenticated copy of the order of a court in the requesting State ordering the forfeiture of said monetary instrument or properly of a person who has beenconvicted of a money laundering offense in the requesting State, and a certification of an affidavit of a competent officer of therequesting State stating that the conviction and the order of forfeiture are final and then no further appeal lies in respect or either.

(c) Obtaining Assistance from Foreign States. – The AMLC may make a request to any foreign State for assistance in (1)tracking down, freezing, restraining and seizing assets alleged to be proceeds of any unlawful activity; (2) obtaining informationthat it needs relating to any covered transaction, money laundering offense or any other matter directly or indirectly, relatedthereto; (3) to the extent allowed by the law of the Foreign State, applying with the proper court therein for an order to enter anypremises belonging to or in the possession or control of, any or all of the persons named in said request, and/or search any or allsuch persons named therein and/or remove any document, material or object named in said request: Provided , That thedocuments accompanying the request in support of the application have been duly authenticated in accordance with theapplicable law or regulation of the foreign State; and (4) applying for an order of forfeiture of any monetary instrument or propertyin the proper court in the foreign State: Provided , That the request is accompanied by an authenticated copy of the order of theregional trial court ordering the forfeiture of said monetary instrument or property of a convicted offender and an affidavit of theclerk of court stating that the conviction and the order of forfeiture are final and that no further appeal lies in respect of either.

(d) Limitations on Request for Mutual Assistance. – The AMLC may refuse to comply with any request for assistance wherethe action sought by the request contravenes any provision of the Constitution or the execution of a request is likely to prejudicethe national interest of the Philippines unless there is a treaty between the Philippines and the requesting State relating to theprovision of assistance in relation to money laundering offenses.

(e) Requirements for Requests for Mutual Assistance from Foreign State. – A request for mutual assistance from a foreignState must (1) confirm that an investigation or prosecution is being conducted in respect of a money launderer named therein or that he has been convicted of any money laundering offense; (2) state the grounds on which any person is being investigated or prosecuted for money laundering or the details of his conviction; (3) gives sufficient particulars as to the identity of said person; (4)give particulars sufficient to identity any covered institution believed to have any information, document, material or object whichmay be of assistance to the investigation or prosecution; (5) ask from the covered institution concerned any information,document, material or object which may be of assistance to the investigation or prosecution; (6) specify the manner in which andto whom said information, document, material or object detained pursuant to said request, is to be produced; (7) give all theparticulars necessary for the issuance by the court in the requested State of the writs, orders or processes needed by therequesting State; and (8) contain such other information as may assist in the execution of the request.

(f) Authentication of Documents. – For purposes of this Section, a document is authenticated if the same is signed or certifiedby a judge, magistrate or equivalent officer in or of, the requesting State, and authenticated by the oath or affirmation of a witnessor sealed with an official or public seal of a minister, secretary of State, or officer in or of, the government of the requesting State,or of the person administering the government or a department of the requesting territory, protectorate or colony. The certificate of authentication may also be made by a secretary of the embassy or legation, consul general, consul, vice consul, consular agent or any officer in the foreign service of the Philippines stationed in the foreign State in which the record is kept, and authenticated bythe seal of his office.

(g) Extradition. – The Philippines shall negotiate for the inclusion of money laundering offenses as herein defined amongextraditable offenses in all future treaties.

Section 14. Penal Provisions. –

(a) Penalties for the Crime of Money Laundering. The penalty of imprisonment ranging from seven (7) to fourteen (14) years

and a fine of not less than Three million Philippine pesos (Php 3,000,000.00) but not more than twice the value of the monetaryinstrument or property involved in the offense, shall be imposed upon a person convicted under Section 4(a) of this Act.

The penalty of imprisonment from four (4) to seven (7) years and a fine of not less than One million five hundred thousandPhilippine pesos (Php 1,500,000.00) but not more than Three million Philippine pesos (Php 3,000,000.00), shall be imposed upona person convicted under Section 4(b) of this Act.



The penalty of imprisonment from six (6) months to four (4) years or a fine of not less than One hundred thousand Philippinepesos (Php 100,000.00) but not more than Five hundred thousand Philippine pesos (Php 500,000.00), or both, shall be imposedon a person convicted under Section 4(c) of this Act.

(b) Penalties for Failure to Keep Records. The penalty of imprisonment from six (6) months to one (1) year or a fine of not less

than One hundred thousand Philippine pesos (Php 100,000.00) but not more than Five hundred thousand Philippine pesos (Php500,000.00), or both, shall be imposed on a person convicted under Section 9(b) of this Act.

(c) Malicious Reporting. Any person who, with malice, or in bad faith, report or files a completely unwarranted or falseinformation relative to money laundering transaction against any person shall be subject to a penalty of six (6) months to four (4)

years imprisonment and a fine of not less than One hundred thousand Philippine pesos (Php 100,000.00) but not more than Fivehundred thousand Philippine pesos (Php 500,000.00), at the discretion of the court: Provided, That the offender is not entitled toavail the benefits of the Probation Law.

If the offender is a corporation, association, partnership or any juridical person, the penalty shall be imposed upon the responsibleofficers, as the case may be, who participated in the commission of the crime or who shall have knowingly permitted or failed toprevent its commission. If the offender is a juridical person, the court may suspend or revoke its license. If the offender is an alien,he shall, in addition to the penalties herein prescribed, be deported without further proceedings after serving the penalties hereinprescribed. If the offender is a public official or employee, he shall, in addition to the penalties prescribed herein, suffer perpetualor temporary absolute disqualification from office, as the case may be;

Any public official or employee who is called upon to testify and refuses to do the same or purposely fails to testify shall suffer thesame penalties prescribed herein.

(d) Breach of Confidentiality. The punishment of imprisonment ranging from three (3) to eight (8) years and a fine of not lessthan Five hundred thousand Philippine pesos (Php 500,000.00) but not more than One million Philippine pesos (Php1,000,000.00), shall be imposed on a person convicted for a violation under Section 9(c).

Section 15. System of Incentives and Rewards. – A system of special incentives and rewards is hereby established to be given to theappropriate government agency and its personnel that led and initiated an investigation, prosecution and conviction of persons involved inthe offense penalized in Section 4 of this Act.

Section 16. Prohibitions Against Political Harassment. – This Act shall not be used for political prosecution or harassment or as aninstrument to hamper competition in trade and commerce.

No case for money laundering may be filed against and no assets shall be frozen, attached or forfeited to the prejudice of a candidate for an electoral office during an election period.

Section 17. Restitution. – Restitution for any aggrieved party shall be governed by the provisions of the New Civil Code.

Section 18. Implementing Rules and Regulations. – Within thirty (30) days from the effectivity of this Act, the Bangko Sentral ng Pilipinas,the Insurance Commission and the Securities and Exchange Commission shall promulgate the rules and regulations to implementeffectivity the provisions of this Act. Said rules and regulations shall be submitted to the Congressional Oversight Committee for approval.

Covered institutions shall formulate their respective money laundering prevention programs in accordance with this Act including, but notlimited to, information dissemination on money laundering activities and its prevention, detection and reporting, and the training of responsible officers and personnel of covered institutions.

Section 19. Congressional Oversight Committee. – There is hereby created a Congressional Oversight Committee composed of seven (7)members from the Senate and seven (7) members from the House of Representatives. The members from the Senate shall be appointedby the Senate President based on the proportional representation of the parties or coalitions therein with at least two (2) Senators

representing the minority. The members from the House of Representatives shall be appointed by the Speaker also based on proportionalrepresentation of the parties or coalitions therein with at least two (2) members representing the minority.

The Oversight Committee shall have the power to promulgate its own rules, to oversee the implementation of this Act, and to review or revise the implementing rules issued by the Anti-Money Laundering Council within thirty (30) days from the promulgation of the said rules.

Section 20. Appropriations Clause. – The AMLC shall be provided with an initial appropriation of Twenty-five million Philippine pesos (Php25,000,000.00) to be drawn from the national government. Appropriations for the succeeding years shall be included in the General

Appropriations Act.

Section 21. Separability Clause. – If any provision or section of this Act or the application thereof to any person or circumstance is held tobe invalid, the other provisions or sections of this Act, and the application of such provision or section to other persons or circumstances,shall not be affected thereby.

Section 22. Repealing Clause. – All laws, decrees, executive orders, rules and regulations or parts thereof, including the relevantprovisions of Republic Act No. 1405, as amended; Republic Act No. 6426, as amended; Republic Act No. 8791, as amended and other similar laws, as are inconsistent with this Act, are hereby repealed, amended or modified accordingly.

Section 23. Effectivity . – This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2)national newspapers of general circulation.

The provisions of this Act shall not apply to deposits and investments made prior to its effectivity.



RULES AND REGULATIONS IMPLEMENTING THE ANTI-MONEY LAUNDERING ACT OF 2001

(Republic Act No. 9160)

RULE 1 POLICY AND APPLICATION

Section 1. Title . - These Rules shall be known and cited as the "Rules and Regulations Implementing Republic Act No. 9160" (theAnti-Money Laundering Act of 2001 [AMLA]).

Sec. 2. Purpose. - These Rules are promulgated to prescribe the procedures and guidelines for the implementation of the AMLA.

Sec. 3. Declaration of Policy. – It is the policy of the State that:

(a) The integrity and confidentiality of bank accounts shall be protected and preserved;

(b) The Philippines shall not be used as a money laundering site for the proceeds of any unlawful activity; and

(c) Consistent with its foreign policy, the Philippines shall extend cooperation in transnational investigations and

prosecutions of persons involved in money laundering activities wherever committed.

Sec. 4. Definition of Terms . - (a) "Covered institutions" refer to the following:

(1) Banks, offshore banking units, quasi-banks, trust entities, non-stock savings and loan associations,pawnshops, and all other institutions including their subsidiaries and affiliates supervised and/or regulated bythe Bangko Sentral ng Pilipinas (BSP).

A subsidiary means an entity more than fifty percent (50%) of the outstanding voting stock of which is owned bya bank, quasi-bank, trust entity or any other institution supervised or regulated by the BSP.

An affiliate means an entity at least twenty percent (20%) but not exceeding fifty percent (50%) of the votingstock of which is owned by a bank, quasi-bank, trust entity, or any other institution supervised and/or regulated

by the BSP.

(2) Insurance companies, insurance agents, insurance brokers, professional reinsurers, reinsurance brokers,holding companies, holding company systems and all other persons and entities supervised and/or regulated bythe Insurance Commission (IC).

An insurance company includes those entities authorized to transact insurance business in the Philippines,whether life or non-life and whether domestic, domestically incorporated or branch of a foreign entity. Acontract of insurance is an agreement whereby one undertakes for a consideration to indemnify another againstloss, damage or liability arising from an unknown or contingent event. Transacting insurance business includesmaking or proposing to make, as insurer, any insurance contract, or as surety, any contract of suretyship as avocation and not as merely incidental to any other legitimate business or activity of the surety, doing any kind ofbusiness specifically recognized as constituting the doing of an insurance business within the meaning ofPresidential Decree (P. D.) No. 612, as amended, including a reinsurance business and doing or proposing to doany business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of P.D. No. 612, as amended.

An insurance agent includes any person who solicits or obtains insurance on behalf of any insurance companyor transmits for a person other than himself an application for a policy or contract of insurance to or from suchcompany or offers or assumes to act in the negotiation of such insurance.

An insurance broker includes any person who acts or aids in any manner in soliciting, negotiating or procuringthe making of any insurance contract or in placing risk or taking out insurance, on behalf of an insured otherthan himself.

A professional reinsurer includes any person, partnership, association or corporation that transacts solely andexclusively reinsurance business in the Philippines, whether domestic, domestically incorporated or a branch ofa foreign entity. A contract of reinsurance is one by which an insurer procures a third person to insure him

against loss or liability by reason of such original insurance.

A reinsurance broker includes any person who, not being a duly authorized agent, employee or officer of aninsurer in which any reinsurance is effected, acts or aids in any manner in negotiating contracts of reinsuranceor placing risks of effecting reinsurance, for any insurance company authorized to do business in thePhilippines.

A holding company includes any person who directly or indirectly controls any authorized insurer.

A holding company system includes a holding company together with its controlled insurers and controlledpersons.

http://www.chanrobles.com/republicactno9160.htm








(d) "Offender" refers to any person who commits a money laundering offense.

(e) "Person" refers to any natural or juridical person.

(f) "Proceeds" refers to an amount derived or realized from an unlawful activity. It includes: (1) All material results, profits, effects and any amount realized from any unlawful activity;

(2) All monetary, financial or economic means, devices, documents, papers or things used in or having anyrelation to any unlawful activity; and

(3) All moneys, expenditures, payments, disbursements, costs, outlays, charges, accounts, refunds and othersimilar items for the financing, operations, and maintenance of any unlawful activity.

(g) "Property" includes any thing or item of value, real or personal, tangible or intangible, or any interest therein or anybenefit, privilege, claim or right with respect thereto.

(h) "Supervising Authority" refers to the BSP, the SEC and the IC. Where the SEC supervision applies only to theincorporation of the registered institution, within the limits of the AMLA, the SEC shall have the authority to require andask assistance from the government agency having regulatory power and/or licensing authority over said coveredinstitution for the implementation and enforcement of the AMLA and these Rules.

(i) "Transaction" refers to any act establishing any right or obligation or giving rise to any contractual or legalrelationship between the parties thereto. It also includes any movement of funds by any means with a coveredinstitution.

Sec. 5. Limitations of the Rules. - (a) The provisions of the AMLA and these Rules shall not apply to deposits, investments, and all other accounts ofcustomers with covered institutions that were opened or created prior to the effectivity of the AMLA on October 17, 2001.Hence, no covered transaction reports, investigation and prosecution of money laundering cases, or any other actionauthorized under the AMLA, may be undertaken with respect to such deposits, investments and accounts as well astransactions or circumstances in relation thereto, that have been completed prior to October 17, 2001. However, theAMLA and these Rules shall apply to all movements of funds respecting such deposits, investments and accounts aswell as transactions or circumstances in relation thereto, that are initiated or commenced on or after October 17, 2001.

(b) The AMLA and these Rules shall not be used for political persecution or harassment or as an instrument to hampercompetition in trade and commerce.

RULE 2 COMPOSITION AND PROCEEDINGS OF

THE ANTI-MONEY LAUNDERING COUNCIL

Section 1. Composition . – The members of the Anti-Money Laundering Council (AMLC) created under the AMLA shall be theGovernor of the BSP, the Insurance Commissioner and the Chairman of the SEC. The Governor of the BSP shall be the Chairman.

Sec. 2. Collegiality. – The AMLC is a collegial body where the Chairman and the members of the AMLC are entitled to one (1) voteeach.

Sec. 3. Unanimous Decision. – The AMLC shall act unanimously in discharging its functions as defined in the AMLA and in theseRules. However, in the case of the incapacity, absence or disability of any member to discharge his functions, the officer duly

designated or authorized to discharge the functions of the Governor of the BSP, the Chairman of the SEC or the InsuranceCommissioner, as the case may be, shall act in his stead in the AMLC.

Sec. 4. Delegation of Authority. – Action on routinary administrative matters may be delegated to any member of the AMLC or toany ranking official of the Secretariat under such guidelines as the AMLC may determine.

Sec. 5. Secretariat. –

(a) The Secretariat shall be headed by an Executive Director who shall be appointed by the AMLC for a term of five (5)years. He must be a member of the Philippine Bar, at least thirty-five (35) years of age and of good moral character,unquestionable integrity and known probity. He shall be considered a regular employee of the BSP with the rank ofAssistant Governor, and shall be entitled to such benefits and subject to such rules and regulations as are applicable toofficers of similar rank.

(b) Other than the Executive Director whose qualifications are provided for in the preceding paragraph, in organizing theSecretariat, the AMLC may only choose from among those who have served, continuously or cumulatively, for at leastfive (5) years in the BSP, the SEC or the IC, but who need not be incumbents therein at the time of their appointment inthe Secretariat. All members of the Secretariat shall be considered regular employees of the BSP and shall be entitled tosuch benefits and subject to such rules and regulations as are applicable to BSP employees of similar rank.

Sec. 6. Detail and Secondment of Personnel. – The AMLC is authorized under Section 7 (10) of the AMLA to enlist the assistanceof the BSP, the SEC or the IC or any other branch, department, bureau, office, agency or instrumentality of the government,including government-owned and –controlled corporations, in undertaking any and all anti-money laundering operations. Thisincludes the use of any member of their personnel who may be detailed or seconded to the AMLC, subject to existing laws andCivil Service Rules and Regulations.



Sec. 7. Confidentiality of Proceedings. – The members of the AMLC, the Executive Director, and all the members of theSecretariat, whether permanent, on detail or on secondment, shall not reveal in any manner except under orders of the court, theCongress or any government office or agency authorized by law, or under such conditions as may be prescribed by the AMLC,any information known to them by reason of their office. In case of violation of this provision, the person shall be punished inaccordance with the pertinent provisions of R. A. Nos. 3019, 6713 and 7653.

Sec. 8. Meetings. – The AMLC shall meet every first Monday of the month or as often as may be necessary at the call of theChairman. Subject to the rule on confidentiality in the immediately preceding section, the meetings of the AMLC may beconducted through modern technologies such as, but not limited to, teleconferencing and video-conferencing.

Sec. 9. Budget. – The budget appropriated by the Congress shall be used to defray operational expenses of the AMLC, includingindemnification for legal costs and expenses reasonably incurred for the services of external counsel or in connection with anycivil, criminal or administrative action, suit or proceedings to which members of the AMLC and the Executive Director and othermembers of the Secretariat may be made a party by reason of the performance of their functions or duties.

RULE 3 POWERS OF THE AMLC

Section 1. Authority to Initiate Investigations on the Basis of Voluntary Citizens’ Complaints and Government Agency Referrals. -

(a) Any person, including covered institutions not subject to any account secrecy laws and branches, departments,

bureaus, offices, agencies and instrumentalities of the government, including government-owned and –controlledcorporations, may report to the AMLC any activity that engenders reasonable belief that any money laundering offenseunder Section 4 of the AMLA and defined under Rule 4 of these Rules is about to be, is being or has been committed.

(b) The person so reporting shall file a Voluntary Citizens’ Complaint (VCC) or Government Referral (GR) in the formprescribed by the AMLC. The VCC and GR forms shall indicate that the members of the AMLC, the Executive Directorand all the members of the Secretariat are bound by the confidentiality rule provided in Section 7, Rule 2 of these Rules.The VCC shall be signed by the complainant. The GR shall be signed by the authorized representative of the governmentagency concerned, indicating his current position and rank therein.

(c) Any person who files a VCC or GR shall not incur any liability for all their acts in relation thereto that were done ingood faith. However, any person who, with malice, or in bad faith, reports or files a completely unwarranted or falseinformation relative to any money laundering transaction against any person shall be subject to the penalties providedfor under Section 14 (c) of the AMLA.

(d) On the basis of the VCC or GR, the AMLC may initiate investigation thereof, and based on the evidence gathered, theAMLC may cause the filing of criminal complaints with the Department of Justice or the Ombudsman for the prosecutionof money laundering offenses.

Sec. 2. Authority to Initiate Investigations on the Basis of Covered Transaction Reports. - (a) Covered Transactions . The mandatory duty and obligation of covered institutions to make reports to the AMLCcovers the following transactions:

(1) A single transaction involving an amount in excess of Four million Philippine pesos (Php4,000,000.00) or anequivalent amount in foreign currency based on the prevailing exchange rate where the client is not properlyidentified and/or the amount is not commensurate with his business or financial capacity.

(2) A single transaction involving an amount in excess of Four million Philippine pesos (Php4,000,000.00) or anequivalent amount in foreign currency based on the prevailing exchange rate which has no underlying legal ortrade obligation, purpose, origin, or economic justification.

(3) A series or combination of transactions conducted within five (5) consecutive banking days aggregating to atotal amount in excess of Four million Philippine pesos (Php4,000,000.00) or an equivalent in foreign currencybased on the prevailing exchange rate where the client is not properly identified and/or the amount is notcommensurate with his business or financial capacity.

(4) A series or combination of transactions conducted within five (5) consecutive banking days aggregating to atotal amount in excess of Four million Philippine pesos (Php4,000,000.00) or an equivalent in foreign currencybased on the prevailing exchange rate exchange rate where most, if not all the transactions, do not have anyunderlying legal or trade obligation, purpose, origin, or economic justification.

(5) A single unusually large and complex transaction in excess of Four million Philippine pesos

(Php4,000,000.00), especially a cash deposit or investment having no credible purpose or origin, underlyingtrade obligation or contract, regardless of whether or not the client is properly identified and/or the amount iscommensurate with his business or financial capacity.

(6) A series, combination or pattern of unusually large and complex transactions aggregating to, withoutreference to any period, a total amount in excess of Four million Philippine pesos (Php4,000,000.00), especiallycash deposits and/or investments having no credible purpose or origin, underlying trade obligation or contract,regardless of whether or not the client is properly identified and/or the amount is commensurate with hisbusiness or financial capacity.

(b) Obligation to Report Covered Transactions . All covered institutions supervised or regulated by the BSP, the SEC andthe IC shall report all covered transactions to the AMLC within five (5) working days from the date of the transaction orfrom the date when the covered institution concerned gained/acquired information/knowledge that the transaction is acovered transaction.



(c) Covered Transaction Report Form . The Covered Transaction Report (CTR) shall be in the form prescribed by theappropriate Supervising Authority and approved by the AMLC. It shall be signed by the employee(s) who dealt directlywith the customer in the transaction and/or who made the initial internal report within the covered institution, thecompliance officer or his equivalent, and a senior official of the bank with a rank not lower than senior vice-president.The CTR shall be filed with the AMLC in a central location, to be determined by the AMLC, as indicated in theinstructions on the CTR form.

(d) Exemption from Bank Secrecy Laws . When reporting covered transactions to the AMLC, banks and their officers,employees, representatives, agents, advisors, consultants or associates shall not be deemed to have violated R. A. No.1405, as amended, R. A. No. 6426, as amended, R. A. No. 8791 and other similar laws.

(e) Safe Harbor Provision. No administrative, criminal or civil proceedings shall lie against any person for having made acovered transaction report in the regular performance of his duties and in good faith, whether or not such reportingresults in any criminal prosecution under the AMLA or any other Philippine law.

(f) Filing of Criminal Complaints . On the basis of the CTR, the AMLC may initiate investigation thereof, and based on theevidence gathered, the AMLC may cause the filing of criminal complaints with the Department of Justice or theOmbudsman for the prosecution of money laundering offenses.

(g) Malicious Reporting. Any person who, with malice, or in bad faith, reports or files a completely unwarranted or falseinformation relative to any money laundering transaction against any person, shall be subject to a penalty ofimprisonment from six (6) months to four (4) years and a fine of not less than One hundred thousand Philippine pesos(Php100,000.00) but not more than Five hundred thousand Philippine pesos (Php500,000.00), at the discretion of thecourt: Provided, That the offender is not entitled to avail of the benefits under the Probation Law.

If the offender is a corporation, association, partnership or any juridical person, the penalty shall be imposed upon theresponsible officers, as the case may be, who participated or failed to prevent its commission. If the offender is ajuridical person, the court may suspend or revoke its license. If the offender is an alien, he shall, in addition to thepenalties herein prescribed, be deported without further proceedings after serving the penalties herein prescribed. If theoffender is a public official or employee, he shall, in addition to the penalties prescribed herein, suffer perpetual ortemporary absolute disqualification from office, as the case may be.

(h) Breach of Confidentiality. When reporting covered transactions to the AMLC, covered institutions and their officers,employees, representatives, agents, advisors, consultants or associates are prohibited from communicating, directly orindirectly, in any manner or by any means, to any person, entity, or the media, the fact that a covered transaction reportwas made, the contents thereof, or any other information in relation thereto. Neither may such reporting be published oraired in any manner or form by the mass media, electronic mail, or other similar devices. Violation of this provision shallconstitute the offense of breach of confidentiality punished under Section 14 (d) of the AMLA with imprisonment from

three (3) to eight (8) years and a fine of not less than Five hundred thousand Philippine pesos (Php500,000.00) but notmore than One million Philippine pesos (Php1,000,000.00).

(i) File of Covered Transactions. – Covered institutions shall maintain a complete file on all covered transactions thathave been reported to the AMLC. Covered institutions shall undertake the necessary adequate security measures toensure the confidentiality of such file. The file of covered transactions shall be kept for at least five (5) years: Provided,That if money laundering cases based thereon have been filed in court, the file must be retained beyond the five(5)-yearperiod until it is confirmed that the case has been finally resolved or terminated by the court.

Sec. 3. Authority to Freeze Accounts. – (a) The AMLC is authorized under Sections 6 (6) and 10 of the AMLA to freeze any account or any monetary instrumentor property subject thereof upon determination that probable cause exists that the same is in any way related to anyunlawful activity and/or money laundering offense. The AMLC may freeze any account or any monetary instrument orproperty subject thereof prior to the institution or in the course of, the criminal proceedings involving the unlawful

activity and/or money laundering offense to which said account, monetary instrument or property is any way related. Forpurposes of Section 10 of the AMLA and Section 3, Rule 3 of these Rules, probable cause includes such facts andcircumstances which would lead a reasonably discreet, prudent or cautious man to believe that an unlawful activityand/or a money laundering offense is about to be, is being or has been committed and that the account or any monetaryinstrument or property subject thereof sought to be frozen is in any way related to said unlawful activity and/or moneylaundering offense.

(b) The freeze order on such account shall be effective immediately for a period not exceeding fifteen (15) days.

(c) The AMLC must serve notice of the freeze order upon the covered institution concerned and the owner or holder ofthe deposit, investment or similar account, simultaneously with the issuance thereof. Upon receipt of the notice of thefreeze order, the covered institution concerned shall immediately stop, freeze, block, suspend or otherwise place underits absolute control the account and the monetary instrument or property subject thereof.

(d) The owner or holder of the account so notified shall have a non-extendible period of seventy-two (72) hours uponreceipt of the notice to file a verified explanation with the AMLC why the freeze order should be lifted. Failure of theowner or holder of the account to file such verified explanation shall be deemed waiver of his right to question the freezeorder.

(e) The AMLC shall have seventy-two (72) hours from receipt of the written explanation of the owner or holder of thefrozen account to resolve the same. If the AMLC fails to act within said period, the freeze order shall automatically bedissolved. However, the covered institution shall not lift the freeze order without securing official confirmation from theAMLC.

(f) Before the fifteen (15)-day period expires, the AMLC may apply in court for an extension of said period. Upon thetimely filing of such application and pending the decision of the court to extend the period, said period shall besuspended and the freeze order shall remain effective.





(g) In case the court denies the application for extension, the freeze order shall remain effective only for the balance ofthe fifteen (15)-day period.

(h) No court shall issue a temporary restraining order or writ of injunction against any freeze order issued by the AMLCor any court order extending period of effectivity of the freeze order except the Court of Appeals or the Supreme Court.

(i) No assets shall be frozen to the prejudice of a candidate for an electoral office during an election period.

Sec. 4. Authority to Inquire into Accounts . – (a) The AMLC is authorized under Section 7 (2) of the AMLA to issue orders addressed to the appropriate Supervising

Authority or any covered institution to determine and reveal the true identity of the owner of any monetary instrument orproperty subject of a covered transaction report, or a request for assistance from a foreign State, or believed by theAMLC, on the basis of substantial evidence, to be, in whole or in part, wherever located, representing, involving, orrelated to, directly or indirectly, in any manner or by any means, the proceeds of an unlawful activity. For purposes of theAMLA and these Rules, substantial evidence includes such relevant evidence as a reasonable mind might accept asadequate to support a conclusion.

(b) In case of any violation of the AMLA involving bank deposits and investments, the AMLC may inquire into orexamine any particular deposit or investment with any banking institution or non-bank financial institution upon order ofany competent court when the AMLC has established that there is probable cause that the deposits or investmentsinvolved are in any way related to any unlawful activity and/or money laundering offense. The AMLC may file theapplication for authority to inquire into or examine any particular bank deposit or investment in court, prior to theinstitution or in the course of, the criminal proceedings involving the unlawful activity and/or money laundering offenseto which said bank deposit or investment is any way related. For purposes of Section 11 of the AMLA and Section 4, Rule

3 of these Rules, probable cause includes such facts and circumstances which would lead a reasonably discreet,prudent or cautious man to believe that an unlawful activity and/or a money laundering offense is about to be, is being orhas been committed and that the bank deposit or investment sought to be inquired into or examined is in any wayrelated to said unlawful activity and/or money laundering offense.

Sec. 5. Authority to Institute Civil Forfeiture Proceedings. – The AMLC is authorized under Section 7 (3) of the AMLA to institutecivil forfeiture proceedings and all other remedial proceedings through the Office of the Solicitor General.

Sec. 6. Authority to Assist the United Nations and other International Organizations and Foreign States. – The AMLC isauthorized under Sections 7 (8) and 13 (b) and (d) of the AMLA to receive and take action in respect of any request of foreignstates for assistance in their own anti-money laundering operations. It is also authorized under Section 7 (7) of the AMLA tocooperate with the National Government and/or take appropriate action in respect of conventions, resolutions and otherdirectives of the United Nations (UN), the UN Security Council, and other international organizations of which the Philippines is amember. However, the AMLC may refuse to comply with any such request, convention, resolution or directive where the action

sought therein contravenes the provision of the Constitution or the execution thereof is likely to prejudice the national interest ofthe Philippines.

Sec. 7. Authority to Develop and Implement Educational Programs. – The AMLC is authorized under Section 7 (9) of the AMLA todevelop educational programs on the pernicious effects of money laundering, the methods and techniques used in moneylaundering, the viable means of preventing money laundering and the effective ways of prosecuting and punishing offenders.The AMLC shall conduct nationwide information campaigns to heighten awareness of the public of their civic duty as citizens toreport any and all activities which engender reasonable belief that a money laundering offense under Section 4 of the AMLA isabout to be, is being or has been committed.

Sec. 8. Authority to Issue, Clarify and Amend the Rules and Regulations Implementing R. A. No. 9160. – The AMLC is authorizedunder Sections 7 (7), 18 and 19 of the AMLA to promulgate as well as clarify and/or amend, as may be necessary, these Rules.The AMLC may make appropriate issuances for this purpose.

Sec. 9. Authority to Establish Information Sharing System. – Subject to such limitations as provided for by law, the AMLC isauthorized under Section 7 (7) of the AMLA to establish an information sharing system that will enable the AMLC to store, trackand analyze money laundering transactions for the resolute prevention, detection and investigation of money launderingoffenses. For this purpose, the AMLC shall install a computerized system that will be used in the creation and maintenance of aninformation database. The AMLC is also authorized, under Section 7 (9) of the AMLA to enter into memoranda of agreement withthe intelligence units of the Armed Forces of the Philippines, the Philippine National Police, the Department of Finance, theDepartment of Justice, as well as their attached agencies, and other domestic or transnational governmental or non-governmental organizations or groups for sharing of all information that may, in any way, facilitate the resolute prevention,investigation and prosecution of money laundering offenses and other violations of the AMLA.

Sec. 10. Authority to Establish System of Incentives and Rewards. – The AMLC is authorized under Section 15 of the AMLA toestablish a system of special incentives and rewards to be given to the appropriate government agency and its personnel that ledand initiated the investigation, prosecution, and conviction of persons involved in money laundering offenses under Section 4 ofthe AMLA. Any monetary reward shall be made payable out of the funds appropriated by Congress.

Sec. 11. Other Inherent, Necessary, Implied or Incidental Powers. – The AMLC shall perform such other functions and exercisesuch other powers as may be inherent, necessary, implied or incidental to the functions assigned, and powers granted, to itunder the AMLA for the purpose of carrying out the declared policy of the AMLA.

RULE 4 MONEY LAUNDERING OFFENSES

Section 1. Money Laundering Offenses and their Corresponding Penalties. – Money laundering is a crime whereby the proceedsof an unlawful activity are transacted, thereby making them appear to have originated from legitimate sources. It is a processcomprising of three (3) stages, namely, placement or the physical disposal of the criminal proceeds, layering or the separation ofthe criminal proceeds from their source by creating layers of financial transactions to disguise the audit trail, and integration or



the provision of apparent legitimacy to the criminal proceeds. Any transaction involving such criminal proceeds or attempt totransact the same during the placement, layering or integration stage shall constitute the crime of money laundering.

(a) When it is committed by a person who, knowing that any monetary instrument or property represents, involves, orrelates to, the proceeds of any unlawful activity, transacts or attempts to transact said monetary instrument or property,the penalty is imprisonment from seven (7) to fourteen (14) years and a fine of not less than Three million Philippinepesos (Php3,000,000.00) but not more than twice the value of the monetary instrument or property involved in theoffense.

(b) When it is committed by a person who, knowing that any monetary instrument or property involves the proceeds of

any unlawful activity, performs or fails to perform any act, as a result of which he facilitates the offense of moneylaundering referred to in paragraph (a) above, the penalty is imprisonment from four (4) to seven (7) years and a fine ofnot less than One million five hundred thousand Philippine pesos (Php1,500,000.00) but not more than Three millionPhilippine pesos (Php3,000,000.00).

(c) When it is committed by a person who, knowing that any monetary instrument or property is required under this Actto be disclosed and filed with the AMLC, fails to do so, the penalty is imprisonment from six (6) months to four (4) yearsor a fine of not less than One hundred thousand Philippine pesos (Php100,000.00) but not more than Five hundredthousand Philippine pesos (Php500,000.00), or both.

Sec. 2. Unlawful Activities. - These refer to any act or omission or series or combination thereof involving or having relation tothe following:

(a) Kidnapping for ransom under Article of Act No. 3815, the Revised Penal Code, as amended; (b) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the same Code;

(c) Qualified theft under Article 310 of the same Code; (d) Swindling under Article 315 of the same Code; (e) Piracy on the high seas under the same Code and Presidential Decree (P.D.) No. 532; (f) Destructive arson and murder as defined under the same Code and hijacking and other violations under Republic Act(R. A.) No. 6235, including those perpetrated by terrorists against non-combatant persons and similar targets; (g) Jueteng and Masiao punished as illegal gambling under P.D. No. 1602; (h) Smuggling under R. A. Nos. 455 and 1937; (i) Section 3, paragraphs B, C, E, G, H and I of R. A. No. 3019, the Anti-Graft and Corrupt Practices Act, as amended; (j) Sections 3, 4, 5, 7, 8 and 9 of Article Two of R. A. No. 6425, the Dangerous Drugs Act of 1972 as amended; (k) Plunder under R. A. No. 7080, as amended; (l) Violations under R. A. No. 8792, the Electronic Commerce ct of 2000; (m) Fraudulent practices and other violations under R. A. No. 8799, the Securities Regulation Code of 2000; and (n) Felonies or offenses of a similar nature that are punishable under the penal laws of other countries.

Sec. 3. Jurisdiction of Money Laundering Cases . – The Regional Trial Courts shall have the jurisdiction to try all cases on moneylaundering. Those committed by public officers and private persons who are in conspiracy with such public officers shall be

under the jurisdiction of the Sandiganbayan.

Sec. 4. Prosecution of Money Laundering . –

(a) Any person may be charged with and convicted of both the offense of money laundering and the unlawful activity asdefined under Section 3 (i) of the AMLA.

(b) Any proceeding relating to the unlawful activity shall be given precedence over the prosecution of any offense orviolation under the AMLA without prejudice to the issuance by the AMLC of a freeze order with respect to the deposit,investment or similar account involved therein and resort to other remedies provided under the AMLA.

(c) Knowledge of the offender that any monetary instrument or property represents, involves, or relates to the proceedsof an unlawful activity or that any monetary instrument or property is required under the AMLA to be disclosed and filed

with the AMLC, may be established by direct evidence or inferred from the attendant circumstances.

(d) All the elements of every money laundering offense under Section 4 of the AMLA must be proved by evidence beyondreasonable doubt, including the element of knowledge that the monetary instrument or property represents, involves orrelates to the proceeds of any unlawful activity. No element of the unlawful activity, however, including the identity of theperpetrators and the details of the actual commission of the unlawful activity need be established by proof beyondreasonable doubt. The elements of the offense of money laundering are separate and distinct from the elements of thefelony or offense constituting the unlawful activity.

(e) No case for money laundering may be filed to the prejudice of a candidate for an electoral office during an electionperiod. However, this prohibition shall not constitute a bar to the prosecution of any money laundering case filed incourt before the election period.

(f) The AMLC may apply, in the course of the criminal proceedings, for provisional remedies to prevent the monetary

instrument or property subject thereof from being removed, concealed, converted, commingled with other property orotherwise to prevent its being found or taken by the applicant or otherwise placed or taken beyond the jurisdiction of thecourt. However, no assets shall be attached to the prejudice of a candidate for an electoral office during an electionperiod.

(g) Where there is conviction for money laundering under Section 4 of the AMLA, the court shall issue a judgment offorfeiture in favor of the Government of the Philippines with respect to the monetary instrument or property found to beproceeds of one or more unlawful activities. However, no assets shall be forfeited to the prejudice of a candidate for anelectoral office during an election period.

(h) Restitution for any aggrieved party shall be governed by the provisions of the New Civil Code.

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RULE 5 PREVENTION OF MONEY LAUNDERING

Section 1. Customer Identification Requirements. –

(a) True Identity of Individuals as Clients. Covered institutions shall establish appropriate systems and methods basedon internationally compliant standards and adequate internal controls for verifying and recording the true and fullidentity of their customers.

For this purpose, they shall develop clear customer acceptance policies and procedures when conducting businessrelations or specific transactions, such as, but not limited to, opening of deposit accounts, accepting depositsubstitutes, entering into trust and other fiduciary transactions, renting of safety deposit boxes, performing remittancesand other large cash transactions.

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

(b) Minimum Information/Documents required for Individual Customers . Covered institutions shall require customers to

produce original documents of identity issued by an official authority, preferably bearing a photograph of the customer.Examples of such documents are identity cards and passports. Where practicable, file copies of documents of identityare to be kept. Alternatively, the identity card or passport number and/or other relevant details are to be recorded. Thefollowing minimum information/documents shall be obtained from individual customers:

(1) Name; (2) Present address; (3) Permanent address; (4) Date and place of birth; (5) Nationality; (6) Nature of work and name of employer or nature of self-employment/business; (7) Contact numbers; (8) Tax identification number, Social Security System number or Government Service and Insurance System

number; (9) Specimen signature; (10) Source of fund(s); and (11) Names of beneficiaries in case of insurance contracts and whenever applicable.

(c) Minimum Information/Documents Required for Corporate and Juridical Entities . Before establishing businessrelationships, covered institutions shall endeavor to ensure that the customer that is a corporate or juridical entity hasnot been or is not in the process of being, dissolved, wound up or voided, or that its business or operations has notbeen or is not in the process of being, closed, shut down, phased out, or terminated. Dealings with shell companies andcorporations, being legal entities which have no business substance in their own right but through which financialtransactions may be conducted, should be undertaken with extreme caution. The following minimuminformation/documents shall be obtained from customers that are corporate or juridical entities, including shellcompanies and corporations:

(1) Articles of Incorporation/Partnership; (2) By-laws;

(3) Official address or principal business address; (4) List of directors/partners; (5) List of principal stockholders owning at least two percent (2%) of the capital stock; (6) Contact numbers; (7) Beneficial owners, if any; and (8) Verification of the authority and identification of the person purporting to act on behalf of the client.

(d) Verification without Face-to-Face Contact. – To the extent and through such means allowed under existing laws andapplicable rules and regulations of the BSP, the SEC and the IC, covered institutions may create new accounts withoutface-to-face contact. However, such new accounts shall not be valid and effective unless the customer complies with therequirements under the two (2) immediately preceding subsections and such other requirements that have been or willbe imposed by the BSP, the SEC and the IC, as the case may be, pursuant to Rule 5 of these Rules and/or theirrespective charters, within ten (10) days from the creation of the new accounts. Unless such requirements have been

fully complied with, no transaction shall be honored by any covered institution respecting an account created withoutface-to-face contact.

(e) Acquisition of Another Covered Institution. – When a covered institution acquires the business of another coveredinstitution, either in whole or as a product portfolio, it is not necessary for the identity of all existing customers to be re-established: Provided, That all customer account records are acquired with the business and due diligence inquiries donot raise any doubt as to whether or not the acquired business has fully complied with all the requirements under theAMLA and these Rules.

(f) Risk-monitoring and Review . Covered institutions shall adopt programs for on-going monitoring of high-risk accountsand risk management, subject to such rules and regulations as may be prescribed by the appropriate SupervisingAuthority. Regular reviews of customer base should be undertaken to ensure that the nature of accounts and potentialrisks are properly identified, monitored and controlled.



(g) Prohibition against Certain Accounts . Covered institutions shall maintain accounts only in the true name of theaccount owner or holder. The provisions of existing laws to the contrary notwithstanding, anonymous accounts,accounts under fictitious names, incorrect name accounts and all other similar accounts shall be absolutely prohibited.

(h) Numbered Accounts. Peso and foreign currency non-checking numbered accounts shall be allowed: Provided, Thatthe true identity of the customer is satisfactorily established based on official and other reliable documents and records,and that the information and documents required under Section 1 (b) and (c) of Rule 5 of these Rules are obtained andrecorded by the covered institution. The BSP may conduct annual testing for the purpose of determining the existenceand true identity of the owners of such accounts.

Sec. 2. Recordkeeping Requirements. – Covered transactions shall prepare and maintain documentation on their customeraccounts, relationships and transactions such that any account, relationship or transaction can be so reconstructed as to enablethe AMLC, the law enforcement and prosecutorial authorities, and/or the courts to establish an audit trail for money laundering.

(a) Existing and New Accounts and New Transactions. All records of existing and new accounts and of new transactionsshall be maintained and safely stored for five (5) years from October 17, 2001 or from the dates of the accounts ortransactions, whichever is later.

(b) Closed Accounts. With respect to closed accounts, the records on customer identification, account files andbusiness correspondence shall be preserved and safely stored for at least five (5) years from the dates when they wereclosed.

(c) Retention of Records in Case a Money Laundering Case Has Been Filed in Court. – If a money laundering case basedon any record kept by the covered institution concerned has been filed in court, said file must be retained beyond theperiod stipulated in the two (2) immediately preceding subsections, as the case may be, until it is confirmed that the case

has been finally resolved or terminated by the court.

(d) Form of Records. – Records shall be retained as originals or certified true copies on paper, microfilm or electronicform: Provided, That such forms are admissible in court pursuant to existing laws and the applicable rules promulgatedby the Supreme Court.

(e) Penalties for Failure to Keep Records . The penalty of imprisonment from six (6) months to one (1) year or a fine of notless than One hundred thousand Philippine pesos (Php100,000.00) but not more than Five hundred thousand Philippinepesos (Php500,000.00), or both, shall be imposed on a person convicted for a violation of Section 9 (b) of the AMLA.

Sec. 3. Money Laundering Prevention Programs. – Covered institutions shall formulate their respective money launderingprevention programs in accordance with Section 9 and other pertinent provisions of the AMLA and Sections 1 and 2 of Rules 3and 4 and other pertinent provisions of these Rules, subject to such guidelines as may be prescribed by the SupervisingAuthority and approved by the AMLC. Every covered institution shall submit its own money laundering program to the

Supervising Authority concerned within a non-extendible period of sixty (60) days from the date of effectivity of these Rules.

Every money laundering program shall establish detailed procedures implementing a comprehensive, institution-wide "know-your-client" policy, set-up an effective dissemination of information on money laundering activities and their prevention,detection and reporting, adopt internal policies, procedures and controls, designate compliance officers at management level,institute adequate screening and recruitment procedures, and set-up an audit function to test the system.

Covered institutions shall adopt, as part of their money laundering programs, a system of flagging and monitoring transactionsthat qualify as covered transactions except that they involve amounts below the threshold to facilitate the process of aggregatingthem for purposes of future reporting of such transactions to the AMLC when their aggregated amounts breach the threshold.Covered institutions not subject to account secrecy laws shall incorporate in their money laundering programs the provisions ofSection 1, Rule 3 of these Rules and such other guidelines for the voluntary reporting to the AMLC of all transactions thatengender the reasonable belief that a money laundering offense is about to be, is being, or has been committed.

Sec. 4. Training of Personnel. – Covered institutions shall provide all their responsible officers and personnel with efficient andeffective training and continuing education programs to enable them to fully comply with all their obligations under the AMLAand these Rules.

RULE 6 FORFEITURE

Section 1. Civil Forfeiture. - When there is a covered transaction report made, and the court has, in a petition filed for the purposeordered seizure of any monetary instrument or property, in whole or in part, directly or indirectly, related to said report, theRevised Rules of Court on civil forfeiture shall apply. However, no assets shall be forfeited to the prejudice of a candidate for anelectoral office during an election period.

Sec. 2. Claim on Forfeited Assets. - Where the court has issued an order of forfeiture of the monetary instrument or property in acriminal prosecution for any money laundering offense under Section 4 of the AMLA, the offender or any other person claimingan interest therein may apply, by verified petition, for a declaration that the same legitimately belongs to him and for segregationor exclusion of the monetary instrument or property corresponding thereto. The verified petition shall be filed with the courtwhich rendered the judgment of conviction and order of forfeiture, within fifteen (15) days from the date of the order of forfeiture,in default of which the said order shall become final and executory. This provision shall apply in both civil and criminal forfeiture.

Sec. 3. Payment in lieu of Forfeiture . - Where the court has issued an order of forfeiture of the monetary instrument or propertysubject of a money laundering offense under Section 4 of the AMLA, and said order cannot be enforced because any particularmonetary instrument or property cannot, with due diligence, be located, or it has been substantially altered, destroyed,diminished in value or otherwise rendered worthless by any act or omission, directly or indirectly, attributable to the offender, orit has been concealed, removed, converted or otherwise transferred to prevent the same from being found or to avoid forfeiture



thereof, or it is located outside the Philippines or has been placed or brought outside the jurisdiction of the court, or it has beencommingled with other monetary instruments or property belonging to either the offender himself or a third person or entity,thereby rendering the same difficult to identify or be segregated for purposes of forfeiture, the court may, instead of enforcingthe order of forfeiture of the monetary instrument or property or part thereof or interest therein, accordingly order the convictedoffender to pay an amount equal to the value of said monetary instrument or property. This provision shall apply in both civil andcriminal forfeiture.

RULE 7 MUTUAL ASSISTANCE AMONG STATES

Section 1. Request for Assistance from a Foreign State . - Where a foreign state makes a request for assistance in theinvestigation or prosecution of a money laundering offense, the AMLC may execute the request or refuse to execute the sameand inform the foreign state of any valid reason for not executing the request or for delaying the execution thereof. The principlesof mutuality and reciprocity shall, for this purpose, be at all times recognized.

Sec. 2. Powers of the AMLC to Act on a Request for Assistance from a Foreign State . - The AMLC may execute a request forassistance from a foreign state by: (a) tracking down, freezing, restraining and seizing assets alleged to be proceeds of anyunlawful activity under the procedures laid down in the AMLA and in these Rules; (b) giving information needed by the foreignstate within the procedures laid down in the AMLA and in these Rules; and (c) applying for an order of forfeiture of any monetaryinstrument or property in the court: Provided, That the court shall not issue such an order unless the application is accompaniedby an authenticated copy of the order of a court in the requesting state ordering the forfeiture of said monetary instrument orproperty of a person who has been convicted of a money laundering offense in the requesting state, and a certification or anaffidavit of a competent officer of the requesting state stating that the conviction and the order of forfeiture are final and that nofurther appeal lies in respect of either.

Sec. 3. Obtaining Assistance From Foreign States . - The AMLC may make a request to any foreign state for assistance in (a)tracking down, freezing, restraining and seizing assets alleged to be proceeds of any unlawful activity; (b) obtaining informationthat it needs relating to any covered transaction, money laundering offense or any other matter directly or indirectly relatedthereto; (c) to the extent allowed by the law of the foreign state, applying with the proper court therein for an order to enter anypremises belonging to or in the possession or control of, any or all of the persons named in said request, and/or search any or allsuch persons named therein and/or remove any document, material or object named in said request: Provided, That thedocuments accompanying the request in support of the application have been duly authenticated in accordance with theapplicable law or regulation of the foreign state; and (d) applying for an order of forfeiture of any monetary instrument orproperty in the proper court in the foreign state: Provided, That the request is accompanied by an authenticated copy of the orderof the Regional Trial Court ordering the forfeiture of said monetary instrument or property of a convicted offender and an affidavitof the clerk of court stating that the conviction and the order of forfeiture are final and that no further appeal lies in respect of

either.

Sec. 4. Limitations on Requests for Mutual Assistance . - The AMLC may refuse to comply with any request for assistance wherethe action sought by the request contravenes any provision of the Constitution or the execution of a request is likely to prejudicethe national interest of the Philippines, unless there is a treaty between the Philippines and the requesting state relating to theprovision of assistance in relation to money laundering offenses.

Sec. 5. Requirements for Requests for Mutual Assistance from Foreign States . - A request for mutual assistance from a foreignstate must (a) confirm that an investigation or prosecution is being conducted in respect of a money launderer named therein orthat he has been convicted of any money laundering offense; (b) state the grounds on which any person is being investigated orprosecuted for money laundering or the details of his conviction; (c) give sufficient particulars as to the identity of said person;(d) give particulars sufficient to identify any covered institution believed to have any information, document, material or objectwhich may be of assistance to the investigation or prosecution; (e) ask from the covered institution concerned any information,document, material or object which may be of assistance to the investigation or prosecution; (f) specify the manner in which andto whom said information, document, material or object obtained pursuant to said request, is to be produced; (g) give all the

particulars necessary for the issuance by the court in the requested state of the writs, orders or processes needed by therequesting state; and (8) contain such other information as may assist in the execution of the request.

Sec. 6. Authentication of Documents . - For purposes of Section 13 of the AMLA and Rule 7 of these Rules, a document isauthenticated if the same is signed or certified by a judge, magistrate or equivalent officer in or of, the requesting state, andauthenticated by the oath or affirmation of a witness or sealed with an official or public seal of a minister, secretary of state, orofficer in or of, the government of the requesting state, or of the person administering the government or a department of therequesting territory, protectorate or colony. The certificate of authentication may also be made by a secretary of the embassy orlegation, consul general, consul, vice consul, consular agent or any officer in the foreign service of the Philippines stationed inthe foreign state in which the record is kept, and authenticated by the seal of his office.

Sec. 7. Extradition . – The Philippines shall negotiate for the inclusion of money laundering offenses as defined under Section 4 ofthe AMLA among the extraditable offenses in all future treaties.

RULE 8 AMENDMENTS AND EFFECTIVITY

S ti 1 A d t Th R l ti th f b d d b i t f th b f th AMLC