FINALS COVERAGE:

20 MCQs on GBL and NCBA (Basics)

20 MCQs on Secrecy of Bank Deposits, AMLA and PDIC

60 Essay Qs on Secrecy of Bank Deposits, AMLA and PDIC

Secrecy of Bank Deposits Law: RA 1405

Purpose

Sec. 1, RA 1405

Encouragement- to the people to deposit their money; and

Discourage- private hoarding so that the same may be properly utilized by banks in authorized loans to assist in the economic development of the country.

Prohibited Acts

Section 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office Section 3. It shall be unlawful for any official or employee of a banking institution to disclose to any person other than those XXXXXXX

Deposits Covered

Sec. 2, RA 1405. 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,

Ejercito vs. Sandiganbayan

Sec. 6, RA 8367 : An Act Providing for the Regulation of the Organization and Operation of Non-Stock Savings and Loan Associations. All deposits of whatever nature with an Association (Savings and Loan) in the Philippines are hereby considered as of an absolutely confidential nature Sec. 8, RA 6426: Foreign Currency Deposit Act of the Philippines.

All foreign currency deposits authorized under this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, absolutely confidential nature 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). Exceptions

Bank Secrecy Law:

Upon written permission of the depositor, or

In cases of impeachment, or

Upon order of a competent court in cases of bribery or dereliction of duty of public officials, or

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

Mellon Bank, NA vs. Magsino

Anti-Graft Law

Philippine National Bank vs. Gancayco Banco Filipino Savings and Mortgage Bank vs. Purisima Anti-Money Laundering Act : RA 9160

Section 4. Money Laundering Offense. Money laundering is a crime whereby the proceeds of an unlawful activity are transacted, thereby making them appear to have originated from legitimate sources.

Upon order of any competent court in cases of violation, the AMLC may inquire into or examine any particular deposit or investment when it is established that:

There is probable cause that the deposits or investments are related to an unlawful activity; or

A money laundering offense.

However, no court order is required in the following unlawful activities:

Kidnapping for ransom (RPC)

Violations of the Comprehensive Dangerous Drugs Act of 2002 (RA 9165)

Hijacking and other violations under RA 6235 : An Act Prohibiting Certain Acts Inimical to Civil Aviation, and for Other Purposes

Destructive arson and murder including those perpetrated by terrorists against non-combatant persons and similar targets.

Periodic or Special Examination

Conducted by the Monetary Board in the following instances:

After being satisfied that there is reasonable ground to believe that a bank fraud or serious irregularity has been or is being committed and it is necessary to look into the deposit to establish such irregularity or fraud. Examinations made by an independent auditor hired by the bank to conduct its regular audit provided that the examination is for audit purposes only and the results thereof shall be for exclusive use of the bank. In Camera Inspection by the Ombudsman

Sec. 15 (8), RA 6770: Ombudsman Act

Administer oaths, issue subpoena and subpoena duces tecum, and take testimony in any investigation or inquiry, including the power to examine and have access to bank accounts and records.

Marquez vs. Desierto

Disclosure of Dormant Accounts: RA 3936

All banks shall forward to the Insular Treasurer a statement, under oath of all credits and deposits held by them in favor of persons known to be dead, or who have not made further deposits or withdrawals during the preceding ten (10) years or more.

Authority of the Commissioner of Internal Revenue to Inquire into Deposits: Sec. 6, NIRC

Authority of the Commissioner to inquire into Bank Deposit Accounts. - Notwithstanding any contrary provision of Republic Act No. 1405 and other general or special laws, the Commissioner is hereby authorized to inquire into the bank deposits of:

1. a decedent to determine his gross estate; and

2. any taxpayer who has filed an application for compromise of his tax liability under Sec. 204 (A) (2) of this Code by reason of financial incapacity to pay his tax liability. Waiver by DOSRI: Sec. 26, RA 7653: THE NCBA

Bank Deposits and Investments. - in excess of five percent (5%) of the capital and surplus of the bank, or in the maximum amount permitted by law, whichever is lower, shall be required by the lending bank to waive the secrecy of his deposits of whatever nature in all banks in the Philippines.

Rules of Court on Garnishment

A legal proceeding whereby money or property due a debtor but in the possession of another is applied to the payment of the debt owed to the plaintiff.

China Banking Corporation vs. Ortega Secrecy and Exemption from Attachment and Garnishment of Foreign Currency Deposits

Salvacion vs. Central Bank of the Philipines Estrada vs. Desierto Penalties

Section 5, RA 1405. Any violation of this law will subject offender upon conviction, to an imprisonment of not more than five years or a fine of not more than twenty thousand pesos or both, in the discretion of the court.Anti-Money Laundering Act: RA 9194

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

Covered Institutions: Sec.3

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 by the Bangko Sentral ng Pilipinas (BSP)

Insurance companies, holding companies and all other institutions supervised or regulated by the Insurance Commission (IC)

Securities dealers, brokers, pre-need companies, foreign exchange corporations, investment houses, trading advisers, as well as other entities supervised or regulated by the Securities and Exchange Commission (SEC)

Obligations of Covered Institutions

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

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

(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.

Covered Transactions: Sec. 3

A single, series, or combination of transactions involving a total amount in excess of 500,000 pesos or an equivalent amount in foreign currency based on the prevailing exchange rate within 5 consecutive banking days EXCEPT those between a covered institution and a person who, at the time of the transaction, was a properly identified client and the amount is commensurate with the business or financial capacity of the client; or those with an underlying legal or trade obligation, purpose, origin or economic justification.

A single, series or combination or pattern of unusually large and complex transactions in excess of 500,000 pesos especially cash deposits and investments having no credible purpose or origin, underlying trade obligation or contract.

Suspicious Transactions

Transactions, regardless of the amount involved, where the following circumstances exist: there is no underlying legal or trade obligation, purpose or economic justification;

the client is not properly identified;

the amount involved is not commensurate with the business or financial capacity of the client;

taking into account all known circumstances, it may be perceived that the clients transaction is structured in order to avoid being the subject of reporting requirements under the Act;

any circumstance relating to the transaction which is observed to deviate from the profile of the client and/or the clients past transactions with the covered institution;

the transaction is in any way related to an unlawful activity or offense under this Act that is about to be, is being or has been committed; or

any transaction that is similar or analogous to the foregoing.

When Committed

Money laundering is a crime whereby the proceeds of an unlawful activity are transacted, thereby making 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 unlawful activity, 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.

Unlawful Activities

Kidnapping for ransom

Drug offenses

Graft and corrupt practices

Plunder

Robbery and extortion

Jueteng and masiao

Piracy on the high seas

Qualified theft

Swindling

Smuggling

Electronic Commerce crimes

Hijacking, destructive arson and murder, including those perpetrated against non-combatant persons (terrorist acts)

Securities fraud

Felonies or offenses of a similar nature punishable under penal laws of other countries

AMLC

The AMLC is the Philippines financial intelligence unit, which is tasked to implement the AMLA. It is composed of the Governor of the Bangko Sentral ng Pilipinas (BSP) as Chairman & the Commissioner of the Insurance Commission (IC) and the Chairman of the Securities and Exchange Commission (SEC) as members. The AMLC is authorized to: Require and receive covered or suspicious transaction reports from covered institutions.

Issue orders to determine the true identity of the owner of any monetary instrument or property that is the subject of a covered or suspicious transaction report, and to request the assistance of a foreign country if the Council believes it is necessary.

Institute civil forfeiture and all other remedial proceedings through the Office of the Solicitor General.

Cause the filing of complaints with the Department of Justice or the Ombudsman for the prosecution of money laundering offenses.

Investigate suspicious transactions, covered transactions deemed suspicious, money laundering activities and other violations of the AMLA.

Secure the order of the Court of Appeals to freeze any monetary instrument or property alleged to be the proceeds of unlawful activity.

Implement such measures as may be necessary and justified to counteract money laundering.

Receive and take action on any request from foreign countries for assistance in their own anti-money laundering operations.

Develop educational programs to make the public aware of the pernicious effects of money laundering and how they can participate in bringing the offenders to the fold of the law.

Enlist the assistance of any branch of government for the prevention, detection and investigation of money laundering offenses and the prosecution of offenders. In this connection, the AMLC can require intelligence agencies of the government to divulge any information that will facilitate the work of the Council in going after money launderers.

Impose administrative sanctions on those who violate the law, and the rules, regulations, orders and resolutions issued in connection with the enforcement of the law.

Freezing of Monetary Instrument or Property

A. FREEZE ORDER:

Upon determination of probable cause that any deposit or similar account is in any way related to an unlawful activity, AMLC may issue a freeze order, which shall be effective immediately, on the account for a period not exceeding 15 days (extendible upon order of court, tolled pending decision)

B. NOTICE TO DEPOSITOR:

Depositor shall be notified simultaneously with the issuance of freeze order and he has 72 hours upon receipt of notice to explain why the freeze order should be lifted

C. AMLC has 72 hours to dispose of the depositors explanation (automatically dissolve the freeze order)

D. TRO or writ of injunction not allowed to issue against any freeze order, EXCEPT CA or SC

Authority to Inquire into Bank Deposits

Exception to Secrecy of Bank Deposits Act (RA 1405), RA 6426 and RA 8791 and other laws.

AMLC may inquire into or examine any particular deposit or investment with any banking institution or non-bank financial institution upon order of any competent court in cases of violation of this Act when it has been established that there is probable cause that the deposits or investments involved are in any way related to a money laundering offense.

Exceptions

However, no court order is required in the following unlawful activities:

Kidnapping for ransom (RPC)

Violations of the Comprehensive Dangerous Drugs Act of 2002 (RA 9165)

Hijacking and other violations under RA 6235 : An Act Prohibiting Certain Acts Inimical to Civil Aviation, and for Other Purposes

Destructive arson and murder including those perpetrated by terrorists against non-combatant persons and similar targets.

Philippine Deposit Insurance Corporation (PDIC) RA 3591,as amended

PDIC-General Info.

Philippine Deposit Insurance Corporation.

Founded June 22, 1963 under R.A. 3591,as amended by R.A. 9576, April 29, 2009.

Attached to the Department of Finance.

Insure the deposits of all banks which is entitled to the benefits of insurance.

Basic Policy: Promote and safeguard the interest of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits.

Insured Deposit means the amount due to any bona fide depositor for legitimate deposits in an insured bank net of any obligation of the depositor to the insured bank as of the date of closure, but not to exceed P500,000.00.

Statutory Liability. PDIC is governed primarily by the provisions of the law creating it. Hence, liability is statutory and rests upon the existence of deposits with the insured bank, NOT on the negotiability of the certificate evidencing the deposit. Case: PDIC vs. CA, December 22, 1997.

Deposit Required to be insured. Deposits of all commercial banks, savings and mortgage banks, rural banks, private development banks, cooperative banks, savings and loan associations, as well as branches and agencies in the Philippines of foreign banks and all other corporations authorized to perform banking functions. Deposit: any unpaid balance of money or its equivalent received by the bank in the usual course of business and for which it has given or its obliged to give credit to a commercial, checking, savings, time or thrift account, or which is evidenced by a passbook check and /or certificate of deposit.

Case: PDIC vs. CA, April 30, 2003Commencement of Liability. Upon actual takeover of the closed bank.

Notice. To depositors by whatever means the BOD deemed appropriate.

Publication. Notice is published once a week for 3 consecutive weeks in a newspaper of general circulation or a newspaper circulated where the closed bank are located if appropriate.

Deposit Accounts not Entitled to Payment. R.A. 9576 provides the ff. exclusions:

1. Investment products such as bonds, securities and trust accounts; 2. Deposit Accounts which are unfunded, fictitious or fraudulent; 3. Deposit products constituting or emanating from unsafe and unsound banking practices; and 4. Deposits that are determined to be proceeds of an unlawful activity as defined under the Anti-Money Laundering Law.Extent of Liability. Up to P500,00.00 per depositor.

Determination of Insured Deposits. All deposits in the bank maintained in the same right and capacity for the benefit of the depositor either in his own name or in the name of others shall be added together.

Joint Account regardless of whether the conjunction used is and or and/or, shall be insured separately from any individually-owned deposit account.

Accounts held jointly by two or more natural persons or two or more juridical persons or entities, the maximum insured deposit shall be divided into as many equal shares are there are persons unless a different sharing is stipulated.

If account is held by a juridical person jointly with one or more natural person, the maximum insured deposit shall be presumed to belong entirely to the juridical person.

Payment. Whenever a bank is closed by the MB, PDIC shall pay insured deposits:

By cash or

By making available to each depositor a transferred deposit in another insured bank in an amount equal to insured deposit of such depositor.

Effect of Payment by PDIC. Subrogation of rights of the depositor against the closed bank to the extent of such payment.

Preferred Credit. Partake the nature of public funds.

Delay. Failure to settle claim within 6 months from date of filing of claim due to grave abuse of discretion, gross negligence, bad faith or malice. The responsible director, officers of employees of PDIC shall upon conviction be imprisoned from 6 months to 1 year.

Exception: Validity of claim requires resolution of issues or facts by another agency.

Prescription. 2 years from actual takeover of the closed bank by the receiver or failure to enforce claim within 2 years after the 2 year period to file a claim unless otherwise waived by PDIC.

Still subject to receive dividends and payments from the proceeds of the assets of the bank.

Power to Examine Banks and Deposit Accounts. With prior approval from Monetary Board.

No examination within 12 months from the last examination.

Special Examination: BOD in coordination with the BSP, by affirmative vote of a majority if there is threatened or impending closure of the bank.

Splitting of Deposits. Deposit account with an outstanding balance over the maximum insured amount is broken down or transferred to other accounts in the name of other persons who have no beneficial ownership within 120 days immediately preceeding the closure or declaration of bank holiday for the purpose of availing the maximum deposit insurance coverage.

TRO and Injunction. No other court except CA may issue against PDIC

SC may issue restraining order or injunction when the matter is of extreme urgency involving a constitutional issue. Provided, the party applying shall furnish a bond in an amount fixed by the court in favor of PDIC if the court should finally decide that the applicant was not entitled to relief sought.