MANUAL OF REGULATIONS FOR NON-BANK FINANCIAL INSTITUTIONS · FOREWORD The 2008 Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) is an updated compilation of regulations

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FOREWORD

The 2008 Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) isan updated compilation of regulations and policies issued by the Bangko Sentral ng Pilipinas(BSP) for financial institutions under its supervision. Available in hard and soft copies, it is aconvenient reference and guide for said financial institutions in the conduct of their operations.

The updated MORNBFI incorporates regulatory policies issued to align bankingpractices on risk management, good corporate governance, and capital adequacy, accountingand reporting with international standards. It also includes rules implementing legislativereform measures, the more significant of which are the General Banking Law of 2000, theAnti-Money Laundering Act of 2001 and the Special Purpose Vehicle Act of 2002.

In providing easy access to this information, the updated MORNBFI seeks to facilitatecompliance with the supervisory and regulatory requirements of BSP that will contribute tothe enhancement of its partnership with financial institutions under its supervision, andultimately to the strengthening of the Philippine Banking System and the economy.

AMANDO M. TETANGCO, JR. Governor

PREFACE(2008 Revised Edition)

The 2008 Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) isthe latest updated edition from the initial issuance in 1996 . The updates consist of the significantpolicy developments and changes in statutory laws. It shall serve as the principal source ofbanking regulations issued by the Monetary Board and the Governor of the BSP and shall becited as the authority for enjoining compliance with the rules and regulations embodiedtherein.

To accomplish the work of proposing revision to the Old Manual, the Monetary Boardof the BSP, in its Resolution No. 1203 dated December 7, 1994, directed the creation of amulti-departmental Ad Hoc Review Committee. The Committee was officially constitutedunder Office Order No. 2 Series of 1995 and was reconstituted several times thereafter.Under the aforesaid office order, the Committee is tasked to update the Manuals on acontinuing basis (i) to incorporate relevant issuances (ii) propose revision/deletion of provisionswhich have become obsolete, redundant, irrelevant or inconsistent with laws/regulations(iii) reformulate provisions as the need arises and (iv) oversee printing of the Manuals/Updates in coordination with the Corporate Affairs Office.

The present Committee, as reconstituted under Office Order No. 430, Seriesof 2007 dated 08 June 2007, is composed of: Mr. Alberto A. Reyes, Director, CentralPoint of Contact Department (CPCD) II, Chairman; Atty. Magdalena D. Imperio, DeputyDirector, Office of the General Counsel and Legal Services (OGCLS), Vice Chairman;Ms. Ma. Corazon T. Alva, Acting Deputy Director, Examination Department (ED) I;Ms. Ma. Belinda G. Caraan, Acting Deputy Director/Head, Financial Consumer AffairsGroup (FCAG); Atty. Lord Eileen S. Tagle, Legal Officer III, OGCLS; Ms. Maria CynthiaM. Sison, Bank Officer IV, Office of the Supervisory Policy Development (OSPD);Ms. Concepcion A. Garcia, Bank Officer IV, OSPD; Atty. Florabelle S. Madrid, Manager,CPCD I, members; and Mr. Nestor A. Espenilla, Jr., Deputy Governor, Supervisionand Examination Sector, Adviser.

The Committee Secretariat is composed of Ms. Celedina P. Garbosa, Acting Manager,CPCD II, Head; Ms. Ma. Corazon B. Bilgera, Bank Officer II, OSPD; Ms. Ma. Cecilia U. Contreras,Supervision and Examination Specialist I, CPCD II, members.

The Bangko Sentral ng Pilipinas

INSTRUCTIONS TO USERS(2008 Revised Edition)

The Manual of Regulations for Non-Bank Financial Institutions (the “Manual”) containsthe rules and regulations which govern non-bank financial institutions (NBFIs) subject tothe supervision of the Bangko Sentral ng Pilipinas (BSP) under existing laws, i.e. : Quasi-banks (Q Regulations), NSSLAs (S Regulations), Pawnshops (P Regulations), and other NBFIs,trust entities, subsidiaries and affiliates of banks and quasi-banks (N Regulations).

The Manual is divided into four (4) books Q, S, P or N. Each book is divided intoparts. Each part is divided into sections containing four (4) digits and the letter Q, S, P or N,as applicable, i.e., 4143Q. The first digit “4” means that the regulation is applicable toNBFIs; the second digit “1” refers to the Part number, and the third and fourth digits “4”and “3” refer to the section number.

Sections may contain subsections represented by number/s after the decimal point,i.e., 4143Q.1.

To illustrate, Subsection 4143Q.1 indicates:

Main Section on “Disqualification of Directors/Trustees and Officers”

Subsection on “Persons disqualified to become officers”

4 1 4 3 Q . 1

Regulation addressed to quasi-banks

Part One on “Organization, Management and Administration"

Regulations addressed to NBFIs

The runners in the upper-right or left hand corners of each page show the sections/subsections of the regulations and the cut-off date of the regulatory issuances included inthe page of the Manual where the runner is shown.

ix

MANUAL OF REGULATIONS FOR NON-BANK FINANCIAL INSTITUTIONS

S REGULATIONS(Regulations Governing Non-Stock Savings and Loan Associations)

TABLE OF CONTENTS

PART ONE - ORGANIZATION, MANAGEMENT AND ADMINISTRATION

A. SCOPE OF AUTHORITY

SECTION 4101S Scope of Authority of Non-Stock Savings and Loan Associations4101S.1 Membership4101S.2 Organizational requirements

SECTIONS 4102S - 4105S (Reserved)

B. CAPITALIZATION

SECTION 4106S Capital4106S.1 Revaluation surplus


C. (RESERVED)


D. NET WORTH-TO-RISK ASSETS RATIO

SECTION 4116S Capital-to-Risk Assets

SECTION 4117S Withdrawable Share Reserve

SECTION 4118S Surplus Reserve for Ledger Discrepancies

SECTION 4119S Reserve for Office Premises, Furniture, Fixtures and Equipment

SECTION 4120S (Reserved)

x

E. (RESERVED)


F. NET INCOME DISTRIBUTION

SECTION 4126S Limitations on Distribution of Net Income4126S.1 Reporting and verification4126S.2 Recording of net income for distribution


G. TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS

SECTION 4141S Definition; Qualifications; Responsibilities and Duties ofTrustees4141S.1 Definition of trustees4141S.2 Qualifications of trustees4141S.3 Powers and authority of the board of trustees4141S.4 General responsibility of the board of trustees4141S.5 Duties and responsibilities of the board of

trustees

SECTION 4142S Definition and Qualifications of Officers4142S.1 Definition of officers4142S.2 Qualifications of officers

SECTION 4143S Disqualifications of Trustees and Officers4143S.1 Persons disqualified to become trustees4143S.2 Persons disqualified to become officers4143S.3 Disqualification procedures4143S.4 Effect of non-possession of qualifications or

possession of disqualifications4143S.5 (Reserved)4143S.6 Watchlisting

SECTION 4144S Compensation of Trustees, Officers and Employees4144S.1 Compensation increases4144S.2 Liability for loans contrary to law

SECTION 4145S Bonding of Officers and Employees

SECTION 4146S Agents and Representatives

xi


SECTION 4148S Full-Time Manager for NSSLAs


H. BRANCHES AND OTHER OFFICES

SECTION 4151S Establishment of Branches/Extension Offices4151S.1 Application4151S.2 Conditions precluding acceptance/processing of

application4151S.3 Internal control system4151S.4 Permit to operate


I. BUSINESS DAYS AND HOURS

SECTION 4156S Business Days and Hours


J. REPORTS

SECTION 4161S Records4161S.1 Uniform system of accounts4161S.2 Philippine Financial Reporting Standards/

Philippine Accounting Standards

SECTION 4162S Reports4162S.1 Categories and signatories of reports4162S.2 Manner of filing4162S.3 Sanctions and procedures for filing and payment

of fines


SECTION 4164S Internal Audit Function4164S.1 Status4164S.2 Scope4164S.3 Qualification standards of the internal auditor4164S.4 Code of Ethics and Internal Auditing Standards

xii


K. INTERNAL CONTROL

SECTION 4171S External Auditor

SECTION 4172S Financial Audit4172S.1 Audited financial statements of NSSLAs4172S.2 Posting of audited financial statements


SECTION 4180S Selection, Appointment and Reporting Requirements forExternal Auditors; Sanction; Effectivity

L. MISCELLANEOUS PROVISIONS

SECTION 4181S Publication Requirements

SECTION 4182S Business Name

SECTION 4183S Prohibitions


SECTION 4190S Duties and Responsibilities of NSSLAs and Their Directors/Officers in All Cases of Outsourcing of NSSLA Functions

SECTIONS 4191S (Reserved)

SECTION 4192S Prompt Corrective Action Framework

SECTION 4193S Supervision by Risks

SECTION 4194S Market Risk Management

SECTION 4195S Liquidity Risk Management

SECTION 4196S - 4198S (Reserved)

SECTION 4199S General Provision on Sanctions

xiii

PART TWO - DEPOSIT AND BORROWING OPERATIONS

A. DEMAND DEPOSITS

SECTION 4201S Checking Accounts


B. SAVINGS DEPOSITS

SECTION 4206S Definition

SECTION 4207S Minimum Deposit

SECTION 4208S Withdrawals

SECTION 4209S Dormant Savings Deposits


C. (RESERVED)


D. TIME DEPOSITS


SECTION 4222S Minimum Term and Size of Time Deposits

SECTION 4223S Withdrawals of Time Deposits


E. - F. (RESERVED)


G. INTEREST ON DEPOSITS

SECTION 4241S Interest on Savings Deposits

xiv

SECTION 4242S Interest on Time Deposits4242S.1 Time of payment4242S.2 Treatment of matured time deposits


H. (RESERVED)


I. SUNDRY PROVISIONS ON DEPOSIT OPERATIONS

SECTION 4261S Opening and Operation of Deposit Accounts4261S.1 Who may open deposit accounts4261S.2 Identification of member-depositors4261S.3 Number of deposit accounts4261S.4 Signature card4261S.5 Passbook and certificate of time deposit4261S.6 Deposits in checks and other cash items


J. (RESERVED)


K. OTHER BORROWINGS

SECTION 4286S Borrowings



PART THREE - LOANS AND INVESTMENTS

A. LOANS IN GENERAL

SECTION 4301S Authority; Loan Limits; Maturity of Loans

SECTION 4302S Basic Requirements in Granting Loans

SECTION 4303S Loan Proceeds

xv

SECTION 4304S Loan Repayment

SECTION 4305S Interest and Other Charges4305S.1 - 4305S.2 (Reserved)4305S.3 Interest in the absence of contract4305S.4 Escalation clause; when allowable4305S.5 Interest accrual on past due loans

SECTION 4306S Past Due Accounts4306S.1 Accounts considered past due4306S.2 Extension/renewal of loans4306S.3 Write-off of loans as bad debts4306S.4 Updating of information provided to credit

information bureaus

SECTION 4307S "Truth in Lending Act" Disclosure Requirements4307S.1 Definition of terms4307S.2 Information to be disclosed4307S.3 Inspection of contracts covering credit

transactions4307S.4 Posters4307S.5 Penal provisions


SECTION 4312S Grant of Loans and Other Credit Accommodations4312S.1 General Guidelines (Deleted by Circular No.

622 dated 16 September 2008)412S.2 – 4312S.3 (Reserved)4312S.4 Signatories (Deleted by Circular No. 622

dated 16 September 2008)

Secs. 4313S – 4320S (Reserved)

B. SECURED LOANS

SECTION 4321S Kinds of Security


C. – D. (RESERVED)


xvi

E. LOANS/CREDIT ACCOMMODATIONS TO TRUSTEES, OFFICERS,STOCKHOLDERS AND THEIR RELATED INTERESTS

SECTION 4356S General Policy

SECTION 4357S Direct/Indirect Borrowings; Ceilings

SECTION 4358S Records; Reports


SECTION 4370S Sanctions

F. - I. (RESERVED)


J. OTHER OPERATIONS

SECTION 4391S Fund Investments4391S.1 - 4391S.2 (Reserved)4391S.3 Investment in debt and marketable equity securities4391S.4 - 4391S.10 (Reserved)


K. MISCELLANEOUS PROVISIONS



PART FOUR - (RESERVED)


PART FIVE - (RESERVED)


xvii

PART SIX - MISCELLANEOUS

A. OTHER OPERATIONS

SECTION 4601S Fines and Other Charges4601S.1 Guidelines on the imposition of monetary

penalties


SECTION 4631S Revocation/Suspension of NSSLA License


B. SUNDRY PROVISIONS

SECTION 4651S Notice of Dissolution

SECTION 4652S Confidential Information

SECTION 4653S Examination by the BSP

SECTION 4654S Applicability of Other Rules

SECTION 4655S Annual Fees on Non-Stock Savings and Loan Association

SECTION 4656S Basic Law Governing Non-Stock Savings and LoanAssociation

SECTION 4657S NSSLA Premises and Other Fixed Assets4657S.1 Accounting for NSSLAs premises; Other fixed

assets4657S.2 (Reserved)4657S.3 Reclassification of real and other properties

acquired as NSSLA premises4657S.4 - 4657S.8 (Reserved)4657S.9 Batas Pambansa Blg. 344 - An Act to Enhance

the Mobility of Disabled Persons by RequiringCertain Buildings, Institutions, Establishmentsand Public Utilities to Install Facilities and OtherDevices

xviii


SECTION 4660S Disclosure of Remittance Charges and Other RelevantInformation


SECTION 4691S Anti-Money Laundering Regulations4691S.1 - 4691S.8 (Reserved)4691S.9 Sanctions and penalties


SECTION 4695S Valid Identification (ID) Cards for Financial Transactions



List of Appendices08.12.31

xix

LIST OF APPENDICES

No. SUBJECT MATTER

S - 1 Safeguards in Bonding of NSSLA Accountable Officers and Employees

S - 2 List of Reports Required from Non-Stock Savings and Loan AssociationsAnnex S-2-a - Reporting Guidelines on Crimes/Losses

S - 3 Guidelines on Prescribed Reports Signatories and Signatory AuthorizationAnnex S-3-a - Format of Resolution for Signatories of Category A-1

ReportsAnnex S-3-b - Format of Resolution for Signatories of Category A-2

ReportsAnnex S-3-c - Format of Resolution for Signatories of Categories A-3

and B Reports

S - 4 Format-Disclosure Statement of Loan/Credit Transaction

S - 5 Abstract of "Truth in Lending Act" (Republic Act No. 3765)

S - 6 Anti-Money Laundering RegulationsAnnex S-6-a - Certification of Compliance with Anti-Money

Laundering RegulationsAnnex S-6-b - Rules on Submission of Covered Transaction Reports

and Suspicious Transaction Reports by CoveredInstitutions

S - 7 Revised Implementing Rules and Regulations R.A. No. 9160, asamended by R.A. No. 9194

S - 8 Guidelines to Govern the Selection, Appointment and the ReportingRequirement for External Auditors of NSSLAs

§§ 4101S - 4101S.208.12.31

Manual of Regulations for Non-Bank Financial Institutions S RegulationsPart I - Page 1


Section 4101S Scope of Authority ofNon-Stock Savings and Loan AssociationsAn NSSLA shall include any non-stock, non-profit corporation engaged in the business ofaccumulating the savings of its members andusing such accumulations for loans tomembers to service the needs of householdsby providing long-term financing for homebuilding and development and for personalfinance. An NSSLA may also engage in adeath benefit program meant exclusively forthe benefit of its members.

An NSSLA shall accept deposits fromand grant loans to its members only andshall not transact business with the generalpublic.

§ 4101S.1 Membershipa. NSSLAs shall issue a certificate of

membership to every qualified memberand shall maintain a registry of theirmembers.

b. An NSSLA shall confine itsmembership to a well-defined group ofpersons.

A well-defined group shall consist of anyof the following:

(1) Employees, officers, and trustees ofone company, including member-retirees;

(2) Government employees belongingto the same office, branch, or department,including member-retirees; and

(3) Immediate members of thefamilies up to the second degree ofconsanguinity or affinity of those fallingunder Items “(1)” and “(2)” above.

NSSLAs whose articles of incorporationand by-laws were approved and registeredprior to the effectivity of R. A. No. 8367 and

which limit and/or allow membershipcoverage broader or narrower than theforegoing definition, shall be allowed tocontinue as such.

The Monetary Board may, ascircumstances warrant, require NSSLAsmentioned in the immediately precedingparagraph to amend their by-laws to complywith the concept of a well-defined group.

c. In no case shall the total amount ofentrance fees exceed one percent (1%) ofthe amount to be contributed or otherwisepaid-in by the particular member: Provided,That for new members, the fee shall be basedon the amount of contributions computed inaccordance with the revaluation of the assetsof the NSSLA.

§ 4101S.2 Organizational requirements1

a. Articles of Incorporation; by-lawsThe articles of incorporation and by-laws of aproposed NSSLA, or any amendmentthereto, shall not be registered with the SECunless accompanied by a certificate ofapproval from the Monetary Board.

b. Application for approval. The articlesof incorporation and by-laws of a proposedNSSLA, both accomplished in the prescribedforms, shall be submitted to the MonetaryBoard through the appropriate department ofthe SES together with a covering applicationfor the approval thereof, signed by a majorityof the board of trustees and verified by oneof them. The application shall include:

(1) The proposed articles ofincorporation and by-laws together with thenames and addresses of the incorporators,trustees and officers, with a statement of theircharacter, experience,and general fitness toengage in the non-stock savings and loanbusiness;

1 See SEC Circular No. 3 dated 16 February 2006.

PART ONE

ORGANIZATION, MANAGEMENT AND ADMINISTRATION

§§ 4101S.2 - 4116S08.12.31

S Regulations Manual of Regulations for Non-Bank Financial InstitutionsPart I - Page 2

(2) An itemized statement of theestimated receipts and expenditures of theproposed NSSLA for the first year;

(3) Filing fee of P1,000; and(4) Such other information as the

Monetary Board may require.c. Grounds for disapproval of

application. The Monetary Board may denythe application to organize an NSSLA on thebasis of a finding that:

(1) The NSSLA is being organized forany purpose other than to engage in thebusiness of a legitimate NSSLA;

(2) The NSSLA’s financial program isunsound;

(3) The proposed members areadequately served by one (1) or moreexisting NSSLAs; and

(4) There exist other reasons which theMonetary Board may consider as sufficientground for such disapproval.

d. Certificate of authority to operate;revocation or suspension thereof. NSSLAs,prior to transacting business, shall procurea certificate of authority to transact businessfrom the Monetary Board. After due noticeand hearing, the Monetary Board may revokeor suspend, for such period as it determines,the certificate of authority of any NSSLA, thesolvency of which is imperiled by losses orirregularities, or of any NSSLA whichwillfully violates any provision of R. A. No.8367, these rules or any pertinent law orregulation.(As amended by CL-2008-078 dated 15 December 2008)

Secs. 4102S - 4105S (Reserved)

B. CAPITALIZATION

Sec. 4106S Capital. NSSLAs established after14 August 2001, shall have a minimumcapital contribution of at least P1.0 million.The minimum capital contributionrequirement shall also apply to all pendingapplications to establish NSSLAs receivedprior to 14 August 2001.

Members who have contributedP1,000 or more to the capital of an NSSLAmay increase their capital contribution.Partial withdrawal from the amount paidby a member as capital contribution,during his membership, may be allowedunless the by laws of the NSSLA provideotherwise, and subject to such rules andregulations as the Monetary Board mayprescribe in the matter of such withdrawalof capital contribution. However, in nocase, shall such partial withdrawaldiminish the member’s capitalcontribution to less than P1,000.

Members of NSSLAs may participatein the profits of the NSSLA on the basis oftheir respective capital contributions onthe date distribution of net income isapproved by its board of trustees.(As amended by Circular No. 573 dated 22 June 2007)

§ 4106S.1 Revaluation surplus. Incases of both retiring and new members,a revaluation surplus shall be added to theircontributions by imputing their respectiveproportionate shares in the withdrawableshare reserve and the reserve for furniture,fixtures, and furnishings.


C. (RESERVED)


D. NET WORTH-TO-RISK ASSETS RATIO

Sec. 4116S Capital-to-Risk Assets. Thecombined capital accounts of each NSSLAshall not be less than an amount equal toten percent (10%) of its risk assets which isdefined as its total assets minus thefollowing assets:

a. Cash on hand;b. Evidences of indebtedness of the

Republic of the Philippines and of the BSPand any other evidences of indebtedness/

§§ 4116S - 4118S08.12.31


obligations, the servicing and repayment ofwhich are fully guaranteed by the Republicof the Philippines;

c. Loans to the extent covered by hold-out on, or assignment of, deposits maintainedin the lending NSSLA and held in thePhilippines;

d. Office premises, depreciated;e. Furniture, fixtures and equipment,

depreciated;f. Real estate mortgage loans insured

by the Home Guarantee Corporation to theextent of the amount of the insurance; and

g. Other non-risk items as the MonetaryBoard may, from time to time, authorize tobe deducted from total assets.

The Monetary Board shall prescribe themanner of determining the total assets of suchNSSLA for the purpose of this Section, butcontingent accounts shall not be includedamong total assets.

Whenever the capital accounts of anNSSLA are deficient with respect to thepreceding paragraph, the Monetary Board,after considering the report of the appropriatedepartment of the SES on the state of solvencyof the NSSLA concerned, shall limit orprohibit the distribution of net income andshall require that part or all of net income beused to increase the capital accounts of theNSSLA until the minimum requirement hasbeen met. The Monetary Board may, afterconsidering the aforesaid report of theappropriate department of the SES, and if theamount of the deficiency justifies it, restrictor prohibit the making of new investmentsof any sort by the NSSLA with the exceptionof the purchases of evidence of indebtednessincluded under Item “b” of this Section untilthe minimum required capital ratio has beenrestored.(As amended by Circular No. 573 dated 22 June 2007)

Sec. 4117S Withdrawable Share ReserveNSSLAs shall create a withdrawable sharereserve which shall consist of two percent (2%)

of the total capital contributions of themembers.

An amount corresponding to thewithdrawable share reserve shall be set upby the NSSLA, such amount invested inbonds or evidences of indebtedness of theRepublic of the Philippines or of itssubdivisions, agencies or instrumentalities,the servicing and repayment of which arefully guaranteed by the Republic of thePhilippines, and evidences of indebtednessof the BSP.

For a uniform interpretation of theprovisions of this Section, the following shallserve as guidelines:

a. The withdrawable share reserveshall be set up from the undivided profitsof the NSSLA and shall be funded in theform of cash deposited as a separateaccount and/or an investment allowedunder this Section;

b. Should there be an increase in thecapital contribution, the reserve shall becorrespondingly adjusted at the end of eachmonth from undivided profits, if any; and

c. The reserve shall be adjusted firstbefore the NSSLA shall declare anddistribute to its members any portion of itsnet income at any time of the year.(As amended by Circular No. 573 dated 22 June 2007)

Sec. 4118S Surplus Reserve for LedgerDiscrepancies. Whenever an NSSLA has adiscrepancy between its general ledgeraccounts and their respective subsidiaryledgers, the board of trustees of the NSSLAshall set up from the undivided profits ofthe NSSLA, if any, a surplus reserve, in anamount equivalent to the amount of thediscrepancy, and this reserve shall not beavailable for distribution to members or forany other purpose unless and until thediscrepancy is accounted for. The board oftrustees shall also direct the employeeresponsible for the discrepancy to accountfor said discrepancy: Provided, That the

§§ 4118S - 4126S.108.12.31


failure of the employee to do so shall constituteas ground for his dismissal if the discrepancyis of serious or recurring nature.

NSSLAs shall report such discrepanciesto the appropriate department of the SES withinfifteen (15) days from discovery.(As amended by Circular No. 573 dated 22 June 2007)

Sec. 4119S Reserve for Office Premises,Furniture, Fixtures and Equipment. NSSLAsshall set aside five percent (5%) of their yearlynet income until it amounts to at least fivepercent (5%) of the total assets as a reservefor a building fund to cover the cost ofconstruction or acquisition of officepremises, and of the purchase of officefurniture, fixtures and equipment.

An NSSLA which, as determined by itsboard of trustees, has adequate office premises,furniture, fixtures and equipment necessary forthe conduct of its business need not set up thereserve: Provided, That this fact should becertified by its board of trustees in a resolutionto be submitted to the appropriate departmentof the SES for verification and approval:Provided, however, That in case reserves hadbeen set up, the NSSLA so exempted mayrevert the reserves to free surplus.(As amended by Circular No. 573 dated 22 June 2007)

Sec. 4120S (Reserved)

E. (RESERVED)


F. NET INCOME DISTRIBUTION

Sec. 4126S Limitations on Distribution ofNet Income

a. Basis for participation in profitsMember-depositors of an NSSLA mayparticipate in the profits of the NSSLA onthe basis of their capital contributions onthe date distribution of net income tomembers is approved by its board oftrustees/directors.

b. Level of withdrawable sharereserve. No NSSLA shall distribute any ofits net income to its members if thewithdrawable share reserve requiredunder Sec. 4117S is less than, or if by suchdistribution would be reduced below, theamount specified in said Section. Thereserve shall be adjusted first before theNSSLA shall distribute its net income atany time of the year.

c. Capital- to-risk assets ratio.NSSLAs shall not distribute any of its netincome to their members if their capital-to-risk assets ratio is below the levelrequired under Sec. 4116S.

d. Discrepancies between generalledger and subsidiary ledger accounts. Thesurplus reserves set up as required underSec. 4118S shall not be reverted to freesurplus for distribution to members unlessand until the discrepancy between thegeneral ledger accounts and their respectivesubsidiary ledgers for which the surplusreserve has been set up ceases to exist.

e. Other unbooked capitaladjustments required by BSP, whether ornot allowed to be set up on a staggeredbasis. The unbooked valuation reserves andother unbooked capital adjustmentsrequired by the BSP, whether or not allowedto be set up on a staggered basis, shall bededucted from the amount of net incomeavailable for distribution to members.

f. Interest and other income earnedbut not yet collected/received, net ofreserve for uncollected interest on loansAccrued interest and other income not yetreceived but already recorded by anNSSLA, net of allowance for uncollectedinterest on loans, shall be deducted fromthe amount of net income available fordistribution to members.(As amended by Circular No. 573 dated 22 June 2007

§ 4126S.1 Reporting and verificationDeclaration of income for distribution tomembers shall be reported by an NSSLA

§§ 4126S.1 - 4141S.308.12.31


concerned to the appropriate department ofthe SES in the prescribed form (RevisedBSP Form No. 7-26-25H).

Pending verification of above mentionedreport by the appropriate department of theSES, the NSSLA concerned shall not makeany announcement or communication on theintended distribution of net income nor shallany actual distribution be made thereon.

In any case, the declaration may beannounced and the income distributed, ifafter twenty (20) business days from thedate of the report required herein shallhave been received by the BSP, no adviceagainst such distribution has been receivedby the NSSLA concerned.(As amended by Circular No. 573 dated 22 June 2007)

§ 4126S.2 Recording of net income fordistribution. The liability for members’share in the net income distribution shallbe taken up in the books upon receipt ofBSP approval thereof, or if no suchapproval is received, after twenty (20)business days from the date the requiredReport on Distributable Net Income wasreceived by the appropriate department ofthe SES whichever comes earlier. Amemorandum entry may be made totrustees and for full disclosure purposes,the amount of income for distribution maybe disclosed in the financial statements bymeans of a footnote which should includea statement to the effect that the distributionis subject to review by the BSP.(As amended by Circular No. 573 dated 22 June 2007)


G. TRUSTEES, OFFICERS, EMPLOYEESAND AGENTS

Sec. 4141S Definition; Qualifications;Responsibilities and Duties of Trustees. Forpurposes of this Section, the following shallbe the definition, qualifications,responsibilities and duties of trustees.

§ 4141S.1 Definition of trustees. Trusteesshall include: (a) those who are named as suchin the articles of incorporation; (b) those dulyelected in subsequent meetings of theNSSLA’s members; and (c) those elected tofill vacancies in the board of trustees.

§ 4141S.2 Qualifications of trustees. Noperson shall be eligible as trustee of an NSSLAunless he is a member of good standing ofsuch NSSLA.

In addition, such person shall have thequalifications and none of the disqualificationsas provided in pertinent laws and BSP rules.

A trustee shall have the followingminimum qualifications:

a. He shall be at least twenty-five (25)years of age at the time of his election/appointment;

b. He shall be at least a college graduateor have at least five (5) years experience inbusiness, or shall have undergone any BSPtraining in NSSLA or banking operations:Provided, however, That undergraduateseligible to be elected as trustees in theNSSLA’s by-laws may be allowed as maybe approved by the Monetary Board;

c. He must have attended a specialseminar on corporate governance for boardof trustees conducted or accredited by theBSP; and

d. He must be fit and proper for theposition of a trustee of the NSSLA. In determiningwhether a person is fit and proper for the positionof a trustee, the following matters must beconsidered: integrity/probity, competence,education, diligence, and experience/training.

The foregoing qualifications for trusteesshall be in addition to those already requiredor prescribed by R.A. No. 8367, as amended,and other existing applicable laws andregulations.

§ 4141S.3 Powers and authority of theboard of trustees. The corporate powers ofan NSSLA shall be exercised, its businessconducted, and all its property shall be

controlled and held by its board of trustees.The powers of the board of trustees asconferred by law are original and cannotbe revoked by the members. The trusteeshold their office charged with the duty toact for the NSSLA in accordance with theirbest judgment.

§ 4141S.4 General responsibility of theboard of trustees. The position of an NSSLAtrustee is a position of trust. A trusteeassumes certain responsibilities to differentconstituencies or stakeholders (e.g., theNSSLA itself, its member-depositors andother creditors, its management andemployees and the public at large). Theseconstituencies or stakeholders have the rightto expect that the institution is being run ina prudent and sound manner.

The board of trustees is primarilyresponsible for the corporate governance ofthe NSSLA. To ensure good governance ofthe NSSLA, the board of trustees shouldestablish strategic objectives, policies andprocedures that will guide and direct theactivities of the NSSLA and the means toattain the same as well as the mechanismfor monitoring management’s performance.While the management of the day-to-dayaffairs of the institution is the responsibilityof the management team, the board oftrustees is, however, responsible formonitoring and overseeing managementaction.

§ 4141S.5 Duties and responsibilities ofthe board of trustees. To ensure prudent andefficient administration of NSSLAs, thefollowing guidelines shall govern theresponsibilities and duties of the board oftrustees of NSSLAs:

a. Specific duties and responsibilities ofthe board of trustees

(1) To select and appoint officers who arequalified to administer the NSSLA affairseffectively and soundly and to establishadequate selection process for all personnel.

It is the primary responsibility of the boardof trustees to appoint competentmanagement team at all times. The boardof trustees should apply fit and properstandards on key personnel. Integrity,technical expertise and experience in theinstitution’s business, either current orplanned, should be the key considerationsin the selection process. And becausemutual trust and a close workingrelationship are important, the board oftrustees’ choice should share its generaloperating philosophy and vision for theinstitution. The board of trustees shall establishan appropriate compensation package for allpersonnel which shall be consistent with theinterest of all stakeholders.

(2) To establish objectives and drawup a business strategy for achieving them.Consistent with the institution’s objectives,business plans should be established to directits on-going activities. The board of trusteesshould ensure that performance against planis regularly reviewed, with corrective actiontaken as needed.

(3) To conduct the affairs of theinstitution with high degree of integrity.Since reputation is a very valuable asset,it is in the institution’s best interest thatin dealings with its members, it observesa high standard of integrity. The board oftrustees should prescribe corporatevalues, codes of conduct and otherstandards of appropriate behavior foritself, the senior management and otheremployees. Among other matters,activities and transactions that couldresult or potentially result in conflict ofinterest, personal gain at the expense ofthe institution, or unethical conduct shallbe strictly prohibited. It shall providepolicies that will prevent the use of thefacilities of the NSSLA in furtherance ofcriminal and other illegal activities.

(4) To prescribe a clear assignment ofresponsibilities and decision-makingauthorities, incorporating a hierarchy of

§§ 4141S.3 - 4141S.508.12.31


required approvals from individuals to theboard of trustees. The board of trustees shallestablish in writing the limits of thediscretionary powers of each officer,committee, sub-committee and such othergroup for the purpose of lending, investingor committing the NSSLA to any financialundertaking or exposure to risk at any time.The board of trustees shall have a scheduleof matters and authorities reserved to it fordecision, such as major capital expenditures,equity investments and divestments.

(5) To effectively supervise theNSSLA’s affairs. The board of trustees shallestablish a system of checks and balanceswhich applies in the first instance to theboard itself. Among the members of theboard, an effective system of checks andbalances must exist. The system shall alsoprovide a mechanism for effective checkand control by the board of trustees overthe chief executive officer and keymanagers and by the latter over the lineofficers of the NSSLA.

(6) To monitor, assess and control theperformance of management. The board oftrustees shall put in place an appropriatereporting system so that it is provided withrelevant and timely information to be ableto effectively assess the performance ofmanagement. For this purpose, it mayconstitute a governance committee.

(7) To adopt and maintain adequaterisk management policy. The board oftrustees shall be responsible for theformulation and maintenance of writtenpolicies and procedures relating to themanagement of risks throughout theinstitution. The risk management policyshall include:

(a) a comprehensive risk managementapproach;

(b) a detailed structure of limits,guidelines and other parameters used togovern risk-taking;

(c) a clear delineation of lines ofresponsibilities for managing risk;

(d) an adequate system for measuringrisk; and

(e) effective internal controls and acomprehensive risk-reporting process.

The board of trustees may constitute acommittee for this purpose.

(8) To constitute the Audit Committee.The Audit Committee shall be composedof trustees, preferably with accounting andfinance experience. Said audit committeeprovides oversight of the institution’sinternal and external auditors. It shall beresponsible for the setting up of the internalaudit department and for the appointmentof the internal auditor as well as theindependent external auditor. It shallmonitor and evaluate the adequacy andeffectiveness of the internal control system.

(9) To meet regularly. To properlydischarge its function, the board of trusteesshall meet regularly. Independent views inboard meetings shall be given fullconsideration and all such meetings shall beduly minuted.

(10) To keep the individual membersof the board and the members informed. Itis the duty of the board of trustees to presentto all its members and to the stakeholdersa balanced and understandable assessmentof the NSSLA’s performance and financialcondition. It should also provide appropriateinformation that flows internally and to thepublic. All members of the board shall havereasonable access to any information aboutthe institution.

(11) To ensure that the NSSLA hasbeneficial influence on the economy. Theboard of trustees has a continuingresponsibility to provide those services andfacilities which will be supportive of thenational economy.

(12) To assess at least annually its per-formance and effectiveness as a body, aswell as its various committees, the chiefexecutive officer and the NSSLA itself. Thecomposition of the board of trustees shallalso be reviewed regularly with the end in

§ 4141S.508.12.31


view of having a balanced membership.Towards this end, a system and procedurefor evaluation shall be adopted which mayinclude, but not limited to, the setting ofbenchmark and peer group analysis.

(13) To keep their authority within thepowers of the institution as prescribed inthe articles of incorporation, by-laws andin existing laws, rules and regulations. Toconduct and maintain the affairs of theinstitution within the scope of its authorityas prescribed in its charter and in existinglaws and regulations, the board of trusteesshall appoint a compliance officer who shallbe responsible for coordinating, monitoringand facilitating compliance with existinglaws and regulations. The compliance officershall be vested with appropriate authorityand provided with appropriate support andresources. It may also constitute acompliance committee.

b. Specific duties and responsibilitiesof a trustee

(1) To conduct fair business transactionswith the NSSLA and to ensure that personalinterest does not bias board decisions.Trustees should, whenever possible, avoidsituations that would give rise to a conflictof interest. If transactions with the institutioncannot be avoided, it should be done in theregular course of business and upon termsnot less favorable to the institution than thoseoffered to others. The basic principle to beobserved is that a trustee should not usehis position to make profit or to acquirebenefit or advantage for himself and/or hisrelated interests. He should avoid situationsthat would compromise his impartiality.

(2) To act honestly and in good faith,with loyalty and in the best interest of theNSSLA, its members, regardless of theamount of their capital contributions, andcreditors, if any. A trustee must always actin good faith, with the care which anordinarily prudent man would exerciseunder similar circumstances. While a trusteeshould always strive to promote the interest

of all members, he shall also give dueregard to the rights and interests of otherstakeholders.

(3) To devote time and attentionnecessary to properly discharge theirduties and responsibilities. Trustees shalldevote sufficient time to familiarizethemselves with the institution’s business.They must be constantly aware of theinstitution’s condition and beknowledgeable enough to contributemeaningfully to the board’s work. Theymust attend and actively participate inboard and committee meetings, requestand review meeting materials, askquestions and request explanations. If aperson cannot give sufficient time andattention to the affairs of the institution, heshall neither accept his nomination nor runfor election as member of the board oftrustees.

(4) To act judiciously. Before decidingon any matter brought before the board oftrustees, every trustee should thoroughlyevaluate the issues, ask questions and seekclarifications when necessary.

(5) To exercise independent judgment.A trustee should view each problem/situation objectively. When adisagreement with others occurs, heshould carefully evaluate the situation andstate his position. He should not be afraidto take a position even though it might beunpopular. Corollarily, he should supportplans and ideas that he thinks will bebeneficial to the institution.

(6) To have a working knowledge ofthe statutory and regulatory requirementsaffecting the NSSLA, including the contentof its articles of incorporation and by-laws,the requirements of the BSP, and whereapplicable, the requirements of otherregulatory agencies.A trustee also keepshimself informed of the industrydevelopments and business trends in orderto safeguard the institution’scompetitiveness.

§ 4141S.508.12.31


(7) To observe confidentiality. Trusteesmust observe the confidentiality of non-public information acquired by reason oftheir position as trustees. They may notdisclose said information to any otherperson without the authority of the board.

Sec. 4142S Definition and Qualificationsof Officers. Officers shall include thePresident, Vice-President, GeneralManager, Corporate Secretary, Treasurerand others mentioned as officers of theNSSLA, or whose duties as such aredefined in the by-laws.

The minimum qualifications for trusteesprescribed in Sec. 4141S are also applicableto officers.

§ 4142S.1 Definition of officersOfficers shall include the president,executive vice president, senior vicepresident, vice president, generalmanager, secretary, treasurer, and othersmentioned as officers of the NSSLA, orthose whose duties as such are defined inthe by-laws, or are generally known to bethe officers of the NSSLA (or any of itsbranches and offices other than the headoffice) either through announcement,representation, publication or any kindof communication made by the NSSLA.A person holding the posit ion ofchairman, vice-chairman or any otherposition of the board who also performsfunctions of management such as thoseordinarily performed by regular officersshall also be considered an officer.

§ 4142S.2 Qualifications of officersAn officer shall have the followingminimum qualifications:

a. He shall be at least twenty-one (21)years of age;

b. He shall be at least a collegegraduate or have at least five (5) yearsexperience in NSSLA or banking operationsor related activities or in a field related to

his position and responsibilities, or haveundergone training in NSSLA or bankingoperations acceptable to the appropriatedepartment of the SES;

c. He must be fit and proper for theposition of an officer of the NSSLA. Indetermining whether a person is fit andproper for the position of an officer, thefollowing matters must be considered:integrity/probity, competence, education,diligence, and experience/training. Theforegoing qualifications for officers shall bein addition to those already required orprescribed by R.A. No. 8367, as amended,and other existing applicable laws andregulations.

Sec. 4143S Disqualification of Trustees andOfficers. The following regulations shallgovern the disqualification of NSSLAs’trustees and officers.

§ 4143S.1 Persons disqualified tobecome trustees. Without prejudice tospecific provisions of law prescribingdisqualifications for trustees, the followingare disqualified from becoming trustees:

a. Permanently disqualified. Trustees/officers/employees permanently disqualifiedby the Monetary Board from holding adirector/trustee position:

(1) Persons who have been convicted byfinal judgment of a court for offenses involvingdishonesty or breach of trust such as but notlimited to, estafa, embezzlement, extortion,forgery, malversation, swindling, theft,robbery, falsification, bribery, violation ofB.P. Blg. 22, violation of Anti- Graft andCorrupt Practices Act and prohibited actsand transactions under Section 7 ofR.A. No. 6713 (Code of Conduct and EthicalStandards for Public Officials andEmployees);

(2) Persons who have been convictedby final judgment of a court sentencingthem to serve a maximum term ofimprisonment of more than six (6) years;

§§ 4141S.5 - 4143S.108.12.31


(3) Persons who have been convictedby final judgment of the court for violationof banking/quasi-banking/NSSLA laws,rules and regulations;

(4) Persons who have been judiciallydeclared insolvent, spendthrift orincapacitated to contract;

(5) Trustees, officers or employees ofclosed banks/QBs/trust entities who werefound to be culpable for such institution’sclosure as determined by the MonetaryBoard;

(6) Trustees and officers of banks, QBsand trust entities found by the MonetaryBoard as administratively liable for violationof banking laws, rules and regulationswhere a penalty of removal from office isimposed, and which finding of the MonetaryBoard has become final and executory; or

(7) Trustees and officers of banks, QBsand trust entities or any person found bythe Monetary Board to be unfit for theposition of trustees or officers because theywere found administratively liable byanother government agency for violationof banking laws, rules and regulations orany offense/violation involving dishonestyor breach of trust, and which finding of saidgovernment agency has become final andexecutory.

b. Temporarily disqualified. Trustees/officers/employees disqualified by theMonetary Board from holding a trusteeposition for a specific/indefinite period oftime. Included are:

(1) Persons who refuse to fully disclosethe extent of their business interest or anymaterial information to the appropriatedepartment of the SES when requiredpursuant to a provision of law or of a circular,memorandum, rule or regulation of the BSP.This disqualification shall be in effect as longas the refusal persists;

(2) Trustees who have been absent orwho have not participated for whateverreasons in more than fifty percent (50%) ofall meetings, both regular and special, of

the board of trustees during theirincumbency, and trustees who failed tophysically attend for whatever reasons inat least twenty-five percent (25%) of allboard meetings in any year, except thatwhen a notarized certification executed bythe corporate secretary has been submittedattesting that said trustees were given theagenda materials prior to the meeting andthat their comments/decisions thereonwere submitted for deliberation/discussionand were taken up in the actual boardmeeting, said trustees shall be consideredpresent in the board meeting. Thisdisqualification applies only for purposesof the immediately succeeding election;

(3) Persons who are delinquent in thepayment of their obligations as definedhereunder:

(a) Delinquency in the payment ofobligations means that an obligation of aperson with an NSSLA where he/she is atrustee or officer, or at least two (2)obligations with other banks/FIs, underdifferent credit lines or loan contracts, arepast due pursuant to existing regulations;

(b) Obligations shall include allborrowings from a bank/QB/trust entity/NSSLA/other FIs obtained by:

(i) A trustee or officer for his ownaccount or as the representative or agentof others or where he/she acts as aguarantor, endorser or surety for loans fromsuch FIs;

(ii) The spouse or child under theparental authority of the trustee or officer;

(iii) Any person whose borrowings orloan proceeds were credited to the accountof, or used for the benefit of a trustee orofficer;

(iv) A partnership of which a trustee orofficer, or his/her spouse is the managingpartner or a general partner owning acontrolling interest in the partnership; and

(v) A corporation, association or firmwholly-owned or majority of the capital ofwhich is owned by any or a group of persons

§ 4143S.108.12.31


mentioned in the foregoing Items “(i)”, “(ii)”and “(iv)”;

This disqualification shall be in effectas long as the delinquency persists.

(4) Persons who have been convictedby a court for offenses involving dishonestyor breach of trust such as, but not limited to,estafa, embezzlement, extortion, forgery,malversation, swindling, theft, robbery,falsification, bribery, violation of B.P. Blg. 22,violation of Anti-Graft and Corrupt PracticesAct and prohibited acts and transactions underSection 7 of R.A. No. 6713 (Code of Conductand Ethical Standards for Public Officials andEmployees), violation of banking laws, rulesand regulations or those sentenced to servea maximum term of imprisonment of morethan six (6) years but whose conviction hasnot yet become final and executory;

(5) Trustees and officers of closed banksQBs/trust entities/NSSLAs and other FIsunder BSP supervision/regulation pendingtheir clearance by the Monetary Board;

(6) Trustees disqualified for failure toobserve/discharge their duties andresponsibilities prescribed under existingregulations. This disqualification appliesuntil the lapse of the specific period ofdisqualification or upon approval by theMonetary Board on recommendation bythe appropriate department of the SES ofsuch trustees’ election/re-election;

(7) Trustees who failed to attend thespecial seminar on corporate governancefor board of trustees required by BSP. Thisdisqualification applies until the trusteeconcerned had attended such seminar;

(8) Persons dismissed/terminatedfrom employment for cause. Thisdisqualification shall be in effect untilthey have cleared themselves ofinvolvement in the alleged irregularityor upon clearance, on their request, fromthe Monetary Board after showing goodand justifiable reasons, or after the lapseof five (5) years from the time they wereofficially advised by the appropriate

department of the SES of theirdisqualification;

(9) Those under preventive suspension;(10) Persons with derogatory records as

certified by, or on the official files of, thejudiciary, NBI, PNP, quasi-judicial bodies,other government agencies, internationalpolice, monetary authorities and similaragencies or authorities of foreign countriesfor irregularities or violations of any law,rules and regulations that would adverselyaffect the integrity of the trustee/officer orthe ability to effectively discharge hisduties. This disqualification applies untilthey have cleared themselves of thealleged irregularities/violations or after alapse of five (5) years from the time thecomplaint, which was the basis of thederogatory record, was initiated;

(11) Trustees and officers of banks,QBs and trust entities found by theMonetary Board as administratively liablefor violation of banking laws, rules andregulations where a penalty of removalfrom office is imposed, and which findingof the Monetary Board is pending appealbefore the appellate court, unlessexecution or enforcement thereof isrestrained by the court;

(12) Trustees and officers of banks, QBsand trust entities or any person found bythe Monetary Board to be unfit for theposition of trustees or officers because theywere found administratively liable byanother government agency for violationof banking laws, rules and regulations orany offense violation involving dishonestyor breach of trust, and which finding of saidgovernment agency is pending appealbefore the appellate court, unlessexecution or enforcement thereof isrestrained by the court; and

(13) Trustees and officers of banks, QBsand trust entities found by the MonetaryBoard as administratively liable for violationof banking laws, rules and regulationswhere a penalty of suspension from office

§ 4143S.108.12.31


or fine is imposed, regardless whetherthe finding of the Monetary Board is finaland executory or pending appeal beforethe appellate court, unless execution orenforcement thereof is restrained by thecourt. The disqualification shall be in effectduring the period of suspension or so longas the fine is not fully paid.(As amended by Circular Nos. 584 dated 28 September 2007 and

513 dated 10 February 2006)

§ 4143S.2 Persons disqualified tobecome officers

a. The disqualifications for trusteesmentioned in Subsec. 4143S.1 shalllikewise apply to officers, except thosestated in Items “b(2)” and “b(7)”.

b. Except as may be authorized by theMonetary Board or the Governor, thespouse or a relative within the seconddegree of consanguinity or affinity of anyperson holding the position of chairman,vice chairman, president, executive vicepresident or any position of equivalentrank, general manager, treasurer, chiefcashier or chief accountant is disqualifiedfrom holding or being elected or appointedto any of said positions in the same NSSLA;and the spouse or relative within thesecond degree of consanguinity or affinityof any person holding the position ofmanager, cashier, or accountant of a branchor office of an NSSLA is disqualified fromholding or being appointed to any of saidpositions in the same branch or office;

c. Except as may otherwise beallowed under C.A. No. 108, otherwiseknown as “The Anti-Dummy Law,” asamended, foreigners cannot be officers oremployees of NSSLAs; and

d. Any appointive or elective publicofficial, whether full time or part time,except in cases where such service isincident to financial assistance provided bythe government or GOCCs or in casesallowed under existing law.

§ 4143S.3 Disqualification proceduresa. The board of trustees and

management of every NSSLAs shall beresponsible for determining the existenceof the ground for disqualification of theNSSLA’s trustee/officer or employee andfor reporting the same to the BSP. Whilethe concerned NSSLA may conduct its owninvestigation and impose appropriatesanction/s as are allowable, this shall bewithout prejudice to the authority of theMonetary Board to disqualify a trusteeofficer/employee from being electedappointed as trustee/officer in any FI underthe supervision of the BSP. Grounds fordisqualification made known to the NSSLAshall be reported to the appropriatedepartment of the SES within seventy-two(72) hours from knowledge thereof.

b. On the basis of knowledge andevidence on the existence of any of thegrounds for disqualification mentioned inSubsecs. 4143S.1 and 4143S.2, the trusteeor officer concerned shall be notified inwriting either by personal service orthrough registered mail with registry returnreceipt card at his/her last known addressby the appropriate department of the SESof the existence of the ground for his/herdisqualification and shall be allowed tosubmit within fifteen (15) calendar daysfrom receipt of such notice an explanationon why he/she should not be disqualifiedand included in the watchlisted file,together with the evidence in support ofhis/her position. The head of saiddepartment may allow an extension onmeritorious ground.

c. Upon receipt of the reply/explanationof the trustee/officer concerned, theappropriate department of the SES shallproceed to evaluate the case. The trustee/officer concerned shall be afforded theopportunity to defend/clear himself/herself.

d. If no reply has been received fromthe trustee/officer concerned upon the

§§ 4143S.1 - 4143S.308.12.31


expiration of the period prescribed underItem “b” above, said failure to reply shall bedeemed a waiver and the appropriatedepartment of the SES shall proceed toevaluate the case based on available records/evidence.

e. If the ground for disqualification isdelinquency in the payment of obligation,the concerned trustee or officer shall be givena period of thirty (30) calendar days withinwhich to settle said obligation or, restore itto its current status or, to explain whyhe/she should not be disqualified andincluded in the watchlisted file, before theevaluation on his disqualification andwatchlisting is elevated to the MonetaryBoard.

f. For trustees/officers of closed QBs,trust entities, NSSLAs or other FIs under BSPsupervision, the concerned department ofthe SES shall make appropriaterecommendation to the Monetary Boardclearing said trustees/officers when there isno pending case/complaint or evidenceagainst them. When there is evidence that atrustees/officer has committed irregularity,the appropriate department of the SES shallmake recommendation to the MonetaryBoard that his/her case be referred to the OSIfor further investigation and that he/she beincluded in the masterlist of temporarilydisqualified persons until the final resolutionof his/her case. Trustees/officers withpending cases/complaints shall also beincluded in said masterlist of temporarilydisqualified persons upon approval by theMonetary Board until the final resolution oftheir cases. If the trustee/officer is clearedfrom involvement in any irregularity, theappropriate department of the SES shallrecommend to the Monetary Board his/herdelisting. On the other hand, if the trusteeofficer concerned is found to be responsiblefor the closure of the institution, theconcerned department of the SES shallrecommend to the Monetary Board his/herdelisting from the masterlist of temporarily

disqualified persons and his/her inclusion inthe masterlist of permanently disqualifiedpersons.

g. If the disqualification is based ondismissal from employment for cause, theappropriate department of the SES shall, asmuch as practicable, endeavor to establishthe specific acts or omissions constituting theoffense or the ultimate facts which resultedin the dismissal to be able to determine if thedisqualification of the trustee/officerconcerned is warranted or not. Theevaluation of the case shall be made for thepurpose of determining if disqualificationwould be appropriate and not for the purposeof passing judgment on the findings anddecision of the entity concerned. Theappropriate department of the SES maydecide to recommend to the Monetary Boarda penalty lower than disqualification (e.g.,reprimand, suspension, etc.) if, in itsjudgment the act committed or omitted bythe trustee/officer concerned does notwarrant disqualification.

h. All other cases of disqualification,whether permanent or temporary shall beelevated to the Monetary Board for approvaland shall be subject to the proceduresprovided in paragraphs “a”, “b”, “c” and “d”above.

i. Upon approval by the MonetaryBoard, the concerned trustee/officer shallbe informed by the appropriate departmentof the SES in writing either by personalservice or through registered mail withregistry return receipt card, at his/her lastknown address of his/her disqualificationfrom being elected/ appointed as trustee/officer in any FI under the supervision ofBSP and/or of his/her inclusion in themasterlist of watchlisted persons sodisqualified.

j. The board of trustees of theconcerned institution shall be immediatelyinformed of cases of disqualificationapproved by the Monetary Board and shallbe directed to act thereon not later than the

§ 4143S.308.12.31

Manual of Regulations for Non-Bank Financial Institutions S Regulations Part I - Page 13

following board meeting. Within seventy-two (72) hours thereafter, the corporatesecretary shall report to the Governor ofthe BSP through the appropriate departmentof the SES the action taken by the board onthe trustee/officer involved.

k. Persons who are elected orappointed as trustee or officer in any of theBSP supervised institutions for the first timebut are subject to any of the grounds fordisqualification provided for under Subsecs.4143S.1 and 4143S.2, shall be afforded theprocedural due process prescribed above.

l. Whenever a trustee/officer iscleared in the process mentioned underItem “c” above or, when the ground fordisqualification ceases to exist, he/she wouldbe eligible to become trustee or officer ofany bank, QB, trust entity or any institutionunder the supervision of the BSP only uponprior approval by the Monetary Board. Itshall be the responsibility of the appropriatedepartment of the SES to elevate to theMonetary Board the lifting of thedisqualification of the concerned trustee/officer and his/her delisting from themasterlist of watchlisted persons.(As amended by Circular No. 584 dated 28 September 2007)

§ 4143S.4 Effect of non-possession ofqualifications or possession ofdisqualifications. Trustees/officers electedor appointed without possessing thequalifications in Subsecs. 4141S.2/4142S.2or possessing any of the disqualifications asenumerated in Subsecs.4143S.1/4143S.2,shall vacate their respective positionsimmediately.

§ 4143S.5 (Reserved)

§ 4143S.6 Watchlisting. To provide theBSP with a central information file to be usedas reference in passing upon and reviewingthe qualifications of persons elected orappointed as trustee or officer of an NSSLA,the SES shall maintain a watchlist of

disqualified NSSLA trustees/ officers underthe following procedures:

a. Watchlist categories. Watchlistingshall be categorized as follows:

(1) Disqualification File “A” (Permanent)- T r u s t e e s / o f f i c e r s / e mp l o y e e spermanently disqualified by the MonetaryBoard from holding a trustee/officer positionin any institution under the supervision/regulation of BSP.

(2) Disqualification File “B” (Temporary)- T r u s t e e s / o f f i c e r s / e m p l o y e e stemporarily disqualified by the MonetaryBoard from holding a trustee/officer positionin any institution under the supervision/regulation of BSP.

b. Inclusion of trustees/officers/employees in the watchlist. Uponrecommendation by the appropriatedepartment of the SES, the inclusion oftrustees/officers/employees in watchlistdisqualification files “A” and “B” on the basisof decisions, actions or reports of the courts,banks, QBs, other NSSLAs and FIs under BSPsupervision, BSP, NBI or any otheradministrative agencies shall first be approvedby the Monetary Board.

c. Notification of trustees/officers/employees. Upon approval by the MonetaryBoard, the concerned trustee/officer/employee shall be informed throughregistered mail, with registry return receiptcard at his/her last known address of his/ herinclusion in the masterlist of watchlistedpersons disqualified to be a trustee/officer inany FI under the supervision of the BSP.

d. Confidentiality. Watchlisting shall befor internal use only and may not be accessedor queried upon by outside parties includingbanks, QBs, trust entities, NSSLAs or otherFIs under BSP supervision except with theauthority of the person concerned and withthe approval of the Deputy Governor, SES,or the Governor, or the Monetary Board.

The BSP will disclose information onits watchlist files only upon submission ofa duly accomplished and notarized

§§ 4143S.3 - 4143S.608.12.31


authorization from the concerned personand approval of such request by the DeputyGovernor, SES or the Governor or theMonetary Board. The prescribedauthorization form to be submitted to theconcerned department of the SES is inAppendix Q-45.

NSSLAs can gain access to informationin the said watchlist for the sole purpose ofscreening their applicants for hiring and/or confirming their elected trustees andappointed officers. NSSLAs must obtain thesaid authorization on an individual basis.

e. Delisting. All delistings shall beapproved by the Monetary Board uponrecommendation of the appropriatedepartment of the SES except in cases ofpersons known to be dead, where delistingshall be automatic upon proof of death andneed not be elevated to the MonetaryBoard. Delisting may be approved by theMonetary Board in the following cases:

(1) Watchlist – Disqualification File “B”(Temporary) –

(a) After the lapse of the specific periodof disqualification;

(b) When the conviction by the courtfor crimes involving dishonesty, breach oftrust and/or violation of banking lawsbecomes final and executory, in whichcase the trustee/officer/employee is relistedto Watchlist – Disqualification File “A”(Permanent);

(c) Upon favorable decision orclearance by the appropriate body, i.e.,court, NBI, bank, QB, trust entity or suchother agency/body where the concernedindividual had derogatory record. Trustees/officers/employees delisted from theWatchlist – Disqualification File “B” otherthan those upgraded to Watchlist –Disqualification File “A” shall be eligiblefor re-employment with any bank, QB,trust entity, NSSLA or other FI under BSPsupervision.(As amended by CL-2007-001 dated 04 January 2007 and

CL-2006-046 dated 21 December 2006)

Sec. 4144S Compensation of Trustees,Officers and Employees. No trustee, officeror employee of an NSSLA shall receive fromsuch NSSLA and no NSSLA shall pay to anytrustee, officer, or employee of such NSSLA,any commission, emolument, gratuity orreward based on the volume or number ofloans made, or based on the interest or feescollected thereon. Nothing in this Section,however, prohibits or limits any of thefollowing:

a. Receipt or payment of salaries oftrustees, officers and employees;

b. Receipt or payment of commissionsto agents whether or not based on thevolume or number of loans or on theinterest and fees collected thereon; or

c. Receipt or payment of bonuses oftrustees, officers or employees if suchbonuses are based on the profits and noton the volume or number of loans madeor on the interest or fees collected thereon.

§ 4144S.1 Compensation increases.Allincreases in compensation, in any form, ofall trustees and trustee-officers in excess often percent (10%) thereof per annum shallrequire the approval of the BSP.

§ 4144S.2 Liability for loans contraryto law. No NSSLA shall make or purchaseany loan or investment not authorized orpermitted under R.A. No. 8367, and anytrustee, officer or employee, who on behalfof any such NSSLA, knowingly makes orpurchases any such loan or investment orwho knowingly consents thereto shall bepersonally liable to the NSSLA for the fullamount of any such loan or investment.

Sec. 4145S Bonding of Officers andEmployees. All officers and employees ofan NSSLA who, in the regular discharge oftheir duties have access to money ornegotiable securities shall, before enteringupon such duties, furnish to the employingNSSLA a good and sufficient bond and

§§ 4143S.6 - 4145S08.12.31


providing for indemnity to the NSSLA againstthe loss of money or securities, by reason oftheir dishonesty. The bond of the cashier,assistant cashier, treasurer, and otheremployees having money accountabilityshall not be less than their average dailyaccountability. The bond must be issued bya reputable bonding company duly licensedby the Insurance Commission and approvedby the BSP. Capital contribution or a cashbond deposited with the NSSLA or with abank, may also be allowed.

To protect the funds of depositors andcreditors, the Monetary Board mayregulate/ restrict the payment by theNSSLA of compensation, allowances, fees,bonuses, and fringe benefits to its trusteesand officers in exceptional cases and whenthe circumstances warrant, such as, but notlimited to the following:

a. When the NSSLA is found by theMonetary Board to be conducting businessin an unsafe or unsound manner;

b. When the NSSLA is found by theMonetary Board to be in an unsatisfactoryfinancial condition such as, but not limitedto, the following cases:

(1) Its capital is impaired; and(2) It has suffered continuous losses

from operations for the past three (3) years.In the presence of any one (1) or more ofthe circumstances mentioned above, theMonetary Board may impose the followingrestrictions in the compensation and otherbenefits of trustees and officers:

(a) Except for the financial assistanceto meet expenses for the medical,maternity, education and other emergencyneeds of the trustees or officers or theirimmediate family, other forms of financialassistance may be suspended.

(b) When the total compensationpackage including salaries, allowances, feesand bonuses of trustees and officers aresignificantly excessive as compared withindustry averages, the Monetary Board mayorder their reduction to reasonable levels.

Sec. 4146S Agents and RepresentativesNo person shall act as an agent or salesrepresentative of an NSSLA or operate anagency without obtaining a license fromthe Monetary Board. No license is requiredfor a collector of an NSSLA but no personshall hold himself out or act as collectorunless he is authorized as a collector inwriting by such NSSLA.


Sec. 4148S Full-Time Manager for NSSLAsNSSLAs with total assets of at leastP5.0 million shall maintain a full-timemanager to take charge of the operations ofthe NSSLA. The manager shall possess all thequalifications and shall not have anydisqualification under Subsecs. 4142S.2 and4143S.2, respectively.



Sec. 4151S Establishment of Branches/Extension Offices. Prior BSP authority shallbe obtained before operating a branch orother offices.

§ 4151S.1Application.The applicationshall be prescribed by the appropriatedepartment of the SES and accompanied bythe following minimum requirements:

a. Sketch of the location of the proposedoffice which shall be within the compoundof the mother firm’s branch office;

b. Itemized statement of estimatedreceipts and expenses of the NSSLA inconnection with such branch or extensionoffice;

c. Description or enumeration ofservice facilities that will cater to the depositand credit needs of members of the NSSLA;

d. Financial statements for the yearimmediately preceding the date ofapplication;

§§ 4145S - 4151S.108.12.31


e. Certification as to the actualnumber of members that will be servicedby the branch/extension office; and

f. Undertaking that the branch/extension office will service only membersof the NSSLA.

§ 4151S.2 Conditions precludingacceptance/processing of application. Theapplication shall not be accepted/processedin any of the following cases:

a. The NSSLA’s operation during theyear immediately preceding the date offiling of application was unprofitable;

b. Total capital accounts of theNSSLA are less than P100 million as ofthe date of filing of the application;

c. Total number of members to beserved in the proposed branch/extensionoffice is less than 500; or

d. Non-compliance by the NSSLAwith any of the pertinent provisions ofbanking laws, rules, regulations andpolicies of the BSP.

§ 4151S.3 Internal control system. TheNSSLA shall submit to the appropriatedepartment of the SES a system of internalsafeguards and control measures to beadopted for compliance by the staff of theproposed branch/extension office.

§ 4151S.4 Permit to operate. Actualoperation shall commence only after apermit to operate has been issued by theBSP.



Sec. 4156S Business Days and HoursNSSLAs may, with the prior approval of theappropriate department of the SES, adoptsuch business days and hours as may beconvenient for them. NSSLAs shall be openfor business during business hours and days

except when extraordinary instancescaused by unforeseen, unavoidable eventdirectly affect the NSSLA’s ability to openfor business. NSSLAs shall postconspicuously at all times in their place ofbusiness their schedule of regular businesshours and days.


J. REPORTS

Sec. 4161S Records. NSSLAs shall have atrue and accurate account, record orstatement of their daily transactions. Themaking of any false entry or the willfulomission of entries relevant to anytransaction is a ground for the MonetaryBoard for the imposition of administrativesanctions under Section 37 of R.A.No. 7653, without prejudice to the criminalliability of the director or officer responsibletherefore under Sections 35 and 36 of R.A.No. 7653 and/or the applicable provisionsof the Revised Penal Code. Records shallbe up to-date and shall contain sufficientdetail so that an audit trail is established.

§ 4161S.1 Uniform System ofAccounts. NSSLAs are required to patterntheir charts of accounts and recordingsystems after the Uniform System ofAccounts prescribed for NSSLAs includingreportorial and publication requirements.The voucher system of accounting or theticket system, or such other accountingsystem acceptable to the BSP as well asthe prescribed chart of accounts shall beadopted for use by NSSLAs.

§ 4161S.2 Philippine FinancialReporting Standards/Philippine AccountingStandards

Statement of policy. It is the policy ofthe Bangko Sentral to promote fairness,transparency and accuracy in financialreporting. It is in this light that the BSP aims

§§ 4151S.1 - 4161S.208.12.31


to adopt all PFRS and PAS issued by theASC to the greatest extent possible.

NSSLAs shall adopt the PFRS and PASwhich are in accordance with GAAP inrecording transactions and in thepreparation of financial statements andreports to BSP. However, in cases wherethere are differences between BSPregulations and PFRS/PAS as when morethan one (1) option are allowed or certainmaximum or minimum limits areprescribed by the PFRS/PAS, the option orlimit prescribed by BSP regulations shallbe adopted by all NSSLA/FIs.

For purposes hereof, the PFRS/PASshall refer to issuances of the ASC andapproved by the PRC.

Accounting treatment for prudentialreporting. For prudential reporting, FIs shalladopt in all respect the PFRS and PASexcept as follows:

a. In preparing consolidated financialstatements, only investments in financialallied subsidiaries except insurancesubsidiaries shall be consolidated on a line-by-line basis; while insurance and non-financial allied subsidiaries shall beaccounted for using the equity method.Financial/non-financial allied/non-alliedassociates shall be accounted for using theequity method in accordance with theprovisions of PAS 28 “Investments inAssociates”;

b. For purposes of preparing separatefinancial statements, financial/non-financialallied/non-allied subsidiaries/associates,including insurance subsidiaries/associates,shall also be accounted for using the equitymethod; and

c. FIs shall be required to meet theBSP recommended valuation reserves.

Government grants extended in the formof loans bearing nil or low interest rates shallbe measured upon initial recognition at itsfair value (i.e., the present value of thefuture cash flows of the financial instrumentdiscounted using the market interest rate).

The difference between the fair value andthe net proceeds of the loan shall berecorded under “Unearned Income-Others”, which shall be amortized over theterm of the loan using the effective interestmethod.

The provisions on government grantsshall be applied retroactively to alloutstanding government grants received.NSSLAs that adopted an accountingtreatment other than the foregoing shallconsider the adjustment as a change inaccounting policy, which shall beaccounted for in accordance with PAS 8.

Notwithstanding the exceptions inItems “a”, “b” and “c”, the audited annualfinancial statements required to besubmitted to the BSP in accordance withAppendix S-2 shall in all respect be PFRS/PAS compliant: Provided, That FIs shallsubmit to the BSP adjusting entriesreconciling the balances in the financialstatements for prudential reporting withthat in the audited annual financialstatements.(As amended by Circular No. 572 dated 22 June 2007)

Sec. 4162S Reports. NSSLAs shall submitto the appropriate department of the SESthe reports in prescribed form listed inAppendix S-2.

§ 4162S.1 Categories and signatoriesof reports. For purposes of designating thesignatories of reports, certain weekly,monthly, quarterly, semi-annual, and annualstatements/reports required to be submittedto the BSP are hereby grouped into CategoryA-1, A-2, A-3 and Category B, as enumeratedin Appendix S-3.

Category A-1 reports shall be signed bythe NSSLA’s chief executive officer (whomay be the president or chairman of theboard, or designated in the by-laws), or inhis absence, by the executive vice presidentor the officer duly authorized under aresolution approved by the board of

§§ 4161S.2 - 4162S.108.12.31


trustees and by the chief finance officer(i.e., controller or chief accountant, whoshall likewise be duly authorized by theNSSLA’s board of trustees in a formatprescribed in Appendix S-3a.

Category A-2 reports of the head officeof the NSSLA shall be signed by theNSSLA’s president or senior vice-president/equivalent position. Offices/units(such as branch) reports in this categoryshall be signed by their respectivemanagers/officers-in-charge. Likewise, thesigning authority in this category shall becontained in a resolution approved by theboard of trustees in the format prescribedin Appendix S-3b.

Category A-3 and B reports are thoserequired to be submitted to the BSP and arenot included in Categories A-1 and A-2. Theyshall be signed by officers or their alternates,who shall be duly designated by the board oftrustees. A copy of the board resolution withformat as prescribed in Appendix S-3c,covering the initial designation and subsequentchanges in signatories and alternates, shall besubmitted to the appropriate department ofthe SES within three (3) days from the date ofresolution.

If a report is submitted to the BSP underthe signature of an officer who is not listedor included in any of the resolutionsmentioned above, the appropriatedepartment of the SES shall refuse toacknowledge the report as valid or considerthe report as not having been submitted atall. If such a report is not resubmitted by theNSSLA under the signature of a dulyauthorized signing officer, administrativesanctions/penalties shall be imposed on theerring NSSLA for the late reporting or failureto submit the required report, as the casemay be.

§ 4162S.2 Manner of filing. Thesubmission of the reports shall be effectedby filing them personally with theappropriate department of the SES or with

the BSP Regional Offices or by sendingthem registered mail or special delivery,unless otherwise specified in the circularor memorandum of the Monetary Board orthe BSP.

§ 4162S.3 Sanctions and procedures forfiling and payment of fines. Failure to submitthe above reports on or before the specifieddates shall subject the person responsibleor entity concerned to the penalties providedby law.

For willful delay in the submission ofreports, the following rules shall apply:

a. Definition of Terms. The followingdefinitions shall apply:

(1) Report shall refer to all writtenreports/statements required of an NSSLAto be submitted to the BSP periodically orwithin a specified period.

(2) Willful delay in the submission ofreports shall refer to the failure of anyNSSLA to submit on time the report definedin Item “(1)” above. Failure to submit areport on time due to fortuitous events, suchas fire and other natural calamities andpublic disorders, shall not be considered aswillful delay.

(3) Examination shall include, but need notbe limited to, the verification, review, audit,investigation and inspection of the books andrecords, business affairs, administration andfinancial condition of any NSSLA including thereproduction of the records as well as thetaking possession of the books and records andkeeping them under BSP custody after givingproper receipts therefore. It shall also includethe interview of the directors and personnelof any NSSLA.

(4) Refusal to permit examination shallmean any act or omission which impedes,delays or obstructs the duly authorized BSPofficer/examiner/employee from conductingan examination, including the act of refusingto honor a letter of authority to examinepresented by any officer/examiner/employee of the BSP.

§§ 4162S.1 - 4162S.308.12.31


b. Fines for willful delay insubmission of reports. NSSLAs incurringwillful delay in the submission of requiredreports shall pay a fine in accordance withthe following schedule:

(1) For Categories A-1, A-2 and A-3 reportsPer day of defaultuntil the report is filed P180

(2) For Category B reportsPer day of defaultuntil the report is filed 60

Delay or default shall start to run on theday following the last day required for thesubmission of reports. However, should thelast day of filing fall on a non-working dayin the locality where the reporting NSSLAis situated, delay or default shall start to runon the day following the next working day.The due date/deadline for submission ofreports to BSP as prescribed under Sec.4162S governing the frequency anddeadlines indicated in Appendix S-2 shallbe automatically moved to the nextbusiness day whenever a half-daysuspension of business operations ingovernment offices is declared due to anemergency such as typhoon, floods, etc.

For the purpose of establishing delay ordefault, the date of acknowledgment by theappropriate department of the SES or the BSPRegional Offices/Units appearing on thecopies of such reports filed or submitted orthe date of mailing postmarked on theenvelope/the date of registry or specialdelivery receipt, as the case may be, shallbe considered as the date of filing.

Delayed schedules/attachments andamendments shall be considered latereporting subject to above penalties.

c. Sanctions for willful refusal to permitexamination/making of false statement

(1) Any NSSLA which shall willfullyrefuse to permit examination shall pay a fineof P3,000 daily from the day of refusal andfor as long as such refusal lasts.

The provisions of Section 34 of R. A.No. 7653 shall apply to any agent,manager, or other officer-in-charge of anyNSSLA who willfully refuses any lawfulexamination into the affairs of such NSSLA.

The willful making of a false statementor misleading statement on a material factto department of the BSP charged with theregulation of NSSLAs or to his examinershall be punished in accordance withSection 36 of R. A. No. 7653.

(2) Procedures in imposing the fine(a) The BSP officer/examiner/employee

shall report the refusal of the NSSLA topermit examination to the head of theappropriate department of BSP, who shallforthwith make a written demand upon theNSSLA concerned for such examination.If the NSSLA continues to refuse saidexamination without any satisfactoryexplanation therefor, the BSP officer/examiner/employee concerned shallsubmit a report to that effect to theappropriate department head.

(b) The fine shall be imposed startingon the day following the receipt by theappropriate department of the writtenreport submitted by the BSP officer/examiner/employee concerned regardingthe continued refusal of the NSSLA topermit the desired examination.

d. Manner of payment or collectionof fines. The regulations embodied in Sec.4601S shall be observed in the collection ofthe fines from NSSLAs.

e. Appeal to the Monetary Board.NSSLAs may appeal to the Monetary Boarda ruling of the appropriate departmentimposing a fine.

f. Other penalties. The foregoingpenalties shall not preclude the applicationof, or shall be without prejudice to, otheradministrative sanctions as well as to thefiling of criminal case as provided for inthe other provisions of the law, as may bewarranted by the nature of the offense.(As amended by Circular No. 585 dated 15 October 2007)

§ 4162S.308.12.31



Sec. 4164S Internal Audit FunctionInternal audit is an independent, objectiveassurance and consulting function establishedto examine, evaluate and improve theeffectiveness of risk management, internalcontrol, and governance processes of anorganization.

§ 4164S.1 Status. The internal auditfunction must be independent of theactivities audited and from day-to-dayinternal control process. It must be free toreport audit results, findings, opinions,appraisals and other information to theappropriate level of management. It shallhave authority to directly access andcommunicate with any officer or employee,to examine any activity or entity of theinstitution, as well as to access any records,files or data whenever relevant to theexercise of its assignment. The AuditCommittee or senior management shouldtake all necessary measures to provide theappropriate resources and staffing thatwould enable internal audit to achieve itsobjectives.

§ 4164S.2 Scope. The scope of internalaudit shall include:

a. Examination and evaluation of theadequacy and effectiveness of the internalcontrol systems;

b. Review of the application andeffectiveness of risk managementprocedures and risk assessmentmethodologies;

c Review of the management andfinancial information systems, including theelectronic information system and electronicbanking services;

d. Assessment of the accuracy andreliability of the accounting system and ofthe resulting financial reports;

e. Review of the systems andprocedures of safeguarding assets;

f. Review of the system of assessingcapital in relation to the estimate oforganizational risk;

g. Transaction testing and assessmentof specific internal control procedures; and

h. Review of the compliance systemand the implementation of establishedpolicies and procedures.

§ 4164S.3 Qualification standards ofthe internal auditor. The internal auditorof a UB or a KB must be a CPA and musthave at least five (5) years experience inthe regular audit (internal or external) of aUB or KB as auditor-in-charge, seniorauditor or audit manager. He must possessthe knowledge, skills, and othercompetencies to examine all areas inwhich the institution operates. Professionalcompetence as well as continuing trainingand education shall be required to face-upto the increasing complexity and diversityof the institution’s operations.

The internal auditor of a TB, QB, trustentity or national Coop Bank must be a CPAwith at least five (5) years experience inthe regular audit (internal or external) of aTB, QB, trust entity or national Coop Bankas auditor-in-charge, senior auditor or auditmanager or, in lieu thereof, at least three (3)years experience in the regular audit (internalor external) of a UB or KB as auditor-incharge, senior auditor or audit manager.

The internal auditor of an RB, NSSLA orlocal Coop Bank must be at least anAccounting graduate with two (2) yearsexperience in external audit or in the regularaudit of an RB, NSSLA or local Coop Bankor, in lieu thereof, at least one (1) yearexperience in the regular audit (internal orexternal) of a UB, KB, TB, QB, trust entityor national Coop Bank as auditor-in-charge,senior auditor or audit manager.

A qualified internal auditor of a UB or aKB shall be qualified to audit TBs, QBs, trustentities, national cooperative banks, RBs,NSSLAs, local cooperative banks,

§§ 4163S - 4164S.308.12.31


subsidiaries and affiliates engaged in alliedactivities, and other FIs under BSPsupervision.

A qualified internal auditor of a TB ornational cooperative bank shall likewise bequalified to audit QBs, trust entities, RBs,NSSLAs, local cooperative banks,subsidiaries and affiliates engaged in alliedactivities, and other financial institutionsunder BSP supervision.

§ 4164S.4 Code of Ethics and InternalAuditing Standards. The internal auditorshould conform with the Code ofProfessional Ethics for CPAs and ensurecompliance with sound internal auditingstandards, such as the Institute of InternalAuditors’ International Standards for theProfessional Practice of Internal Auditing(e-mail: [email protected]; Web: http://www.theiia.org.) and other supplementalstandards issued by regulatory authorities/government agencies. The Standards addressindependence and objectivity, professionalproficiency, scope of work, performance ofaudit work, management of internal audit,quality assurance reviews, communicationand monitoring of results.


K. INTERNAL CONTROL

Sec. 4171S External Auditor. NSSLAs exceptthose with total resources of P10.0 millionor less, shall engage the services of anindependent Certified Public Accountant toaudit their books of accounts at least once ayear, or as often as necessary.

Sec. 4172S Financial Audit. NSSLAs shallcause an annual financial audit by anexternal auditor acceptable to the BSP notlater than thirty (30) calendar days after theclose of the calendar year or the fiscal yearadopted by the NSSLA. Report of such auditshall be submitted to the board of directors

and the appropriate department of the SESnot later than 120 calendar days after theclose of the calendar year or the fiscal yearadopted by the NSSLA. The report to theBSP shall be accompanied by the:(1) certification by the external auditor onthe: (a) dates of start and termination ofaudit; (b) date of submission of the financialaudit report and certification under oathstating that no material weakness or breachin the internal control and riskmanagement systems was noted in thecourse of the audit of the NSSLA to theboard of directors; and (c) the absence ofany direct or indirect financial interest andother circumstances that may impair theindependence of the external auditor; (2)reconciliation statement between the AFSand the balance sheet and incomestatement for NSSLA submitted to the BSPincluding copies of adjusting entries on thereconciling items; and (3) other informationthat may be required by the BSP.

In addition, the external auditor shallbe required by the NSSLA to submit to theboard of directors, a LOC indicating anymaterial weakness or breach in theinstitution’s internal control and riskmanagement systems within thirty (30)calendar days after submission of thefinancial audit report. If no materialweakness or breach is noted to warrant theissuance of an LOC, a Certification underoath stating that no material weakness orbreach in the internal control and riskmanagement systems was noted in thecourse of the audit of the NSSLA shall besubmitted in its stead, together with thefinancial audit report.

Material weakness shall be defined as asignificant control deficiency, orcombination of deficiencies, that results inmore than a remote likelihood that a materialmisstatement of the financial statements willnot be detected or prevented by the entity’sinternal control. A material weakness doesnot mean that a material misstatement has

§§ 4164S.3 - 4172S08.12.31


occurred or will occur, but that it couldoccur. A control deficiency exists when thedesign or operation of a control does notallow management or employees, in thenormal course of performing their assignedfunctions, to prevent or detect misstatementson a timely basis. A significant deficiency isa control deficiency, or combination ofcontrol deficiencies, that adversely affects theentity’s ability to initiate, authorize, record,process, or report financial data reliably inaccordance with GAAP. The term more thanremote likelihood shall mean that futureevents are likely to occur or are reasonablypossible to occur.

The board of directors, in a regular orspecial meeting, shall consider and act onthe financial audit report and thecertification under oath submitted in lieuof the LOC and shall submit, within thirty(30) banking days after receipt of thereports, a copy of its resolution to theappropriate department of the SES. Theresolution shall show, among other things,the actions(s) taken on the reports and thenames of the directors present and absent.

The board shall likewise consider andact on the LOC and shall submit, within thirty(30) banking days after receipt thereof, acopy of its resolution together with said LOCto the appropriate department of the SES. Theresolution shall show the action(s) taken onthe findings and recommendations and, thenames of the directors present and absent,among other things.

The LOC shall be accompanied by thecertification of the external auditor of the dateof its submission to the board of directors.

NSSLAs under BSP supervision whichare under the concurrent jurisdiction of theCOA shall be exempt from theaforementioned annual financial audit by anacceptable external auditor: Provided, Thatwhen warranted by supervisory concernsuch as material weakness/breach ininternal control and/or risk managementsystems, the Monetary Board may, upon

recommendation of the appropriatedepartment of the SES, require the financialaudit to be conducted by an external auditoracceptable to the BSP, at the expense ofthe institution concerned: Provided further,That when circumstances such as, but notlimited to, loans from multilateral financialinstitutions, privatization, or public listingwarrant, the financial audit of the concernedinstitution by an acceptable external auditormay also be allowed.

NSSLAs under the concurrentjurisdiction of the BSP and COA shall,however, submit a copy of the AAR of theCOA to the appropriate department of theSES within thirty (30) banking days afterreceipt of the report by the board ofdirectors. The AAR shall be accompaniedby the: (1) certification by the institutionconcerned on the date of receipt of the AARby the board of directors; (2) reconciliationstatement between the AFS in the AAR andthe balance sheet and income statementof the NSSLA submitted to the BSP,including copies of adjusting entries on thereconciling items; and (3) other informationthat may be required by the BSP.

The board of directors of said institutions,in a regular or special meeting, shall considerand act on the AAR, as well as on thecomments and observations and shall submit,within thirty (30) banking days after receiptof the report, a copy of its resolution to theappropriate department of the SES. Theresolution shall show the action(s) taken onthe report, including the comments andobservations and the names of the directorspresent and absent, among other things.

NSSLAs as well as external auditors shallstrictly observe the requirements in thesubmission of the financial audit report andreports required to be submitted underAppendix Q-33.

The audited annual financial statementsrequired to be submitted shall in all respectbe PFRS/PAS compliant: Provided, ThatNSSLAs shall submit to the BSP adjusting

§ 4172S08.12.31


entries reconciling the balances in thefinancial statements for prudential reportingwith that in the audited annual financialstatements.

The reports and certifications ofinstitutions concerned, schedules andattachments required under this Subsectionshall be considered Category B reports,delayed submission of which shall be subjectto the penalties under Subsec. 4162S.3(As amended by Circular Nos. 554 dated 22 December 2006 and

540 dated 09 August 2006)

§ 4172S.1 Audited Financial Statementsof NSSLAs. The following rules shall governthe utilization and submission of AFS ofNSSLAs.

For purposes of this Section, AFS shallinclude the balance sheets, incomestatements, statements of changes in equity,statements of cash flows and notes to financialstatements which shall include among otherinformation, disclosure of the volume of pastdue loans as well as loan-loss provisions. Onthe other hand, financial audit report shallrefer to the AFS and the opinion of the auditor.The AFS of NSSLAs with subsidiaries shallbe presented side by side on a solo basis(parent) and on a consolidated basis (parentand subsidiaries).(Circular No. 540 dated 09 August 2006)

§ 4172S.2 Posting of audited financialstatements. NSSLAs shall post inconspicuous places in their head offices, alltheir branches and other offices, as well as intheir respective websites, their latest financialaudit report.(Circular No. 540 dated 09 August 2006)


Sec. 4180S Selection, Appointment andReporting Requirements for External Auditors;Sanction; Effectivity. Under Section 58, R.A.No. 8791, the Monetary Board may requirean NSSLA to engage the services of an

independent auditor to be chosen by theNSSLA concerned from a list of certifiedpublic accountants acceptable to theMonetary Board.

It is the policy of the BSP to promotehigh ethical and professional standards inpublic accounting practice and toencourage coordination and sharing ofinformation between external auditors andregulatory authorities of banks, QBs,NSSLAs, and/or trust entities to ensureeffective audit and supervision of theseinstitutions and to avoid unnecessaryduplication of efforts. In furtherance of thispolicy and to ensure that reliance byregulatory authorities and the public on theopinion of external auditors is well-placed,the BSP hereby prescribes the rules andregulations that shall govern the selection,appointment, reporting requirements anddelisting for external auditors of banks, QBs,NSSLAs, and/ or trust entities, theirsubsidiaries and affiliates engaged in alliedactivities and other FIs which under speciallaws are subject to BSP supervision.

The selection of external auditors shallbe valid for a period of three (3) years. BSPselected external auditors shall apply forthe renewal of their selection every threeyears.The provisions of Items “A” and “B”of Appendix S-8 shall likewise apply foreach application for renewal.

The SES shall make an annualassessment of the performance of externalauditors and will recommend deletion fromthe list even prior to the three (3) -yearrenewal period, if based on assessment,the external auditors’ report did not complywith BSP requirements.

External auditors who meet therequirements specified in this Section shallbe included in the list of BSP selectedexternal auditors. In case of partnership,inclusion in the list of BSP selected externalauditors shall apply to the audit firm onlyand not to the individual signing partnersor auditors under its employment.

§§ 4172S - 4180S08.12.31


The BSP will circularize to all banks,QBs, trust entities and NSSLAs the list ofselected external auditors once a year. TheBSP, however, shall not be liable for anydamage or loss that may arise from itsselection of the external auditors to beengaged by banks, QBs, trust entities orNSSLAs for regular audit or specialengagements.

a. Rules and regulations. The rules andregulations to govern the selection anddelisting by the BSP of external auditors ofNSSLAs and their subsidiaries and affiliatesengaged in allied activities are shown inAppendix S-8.

b. Sanctions. The applicable sanctions/penalties prescribed under Sections 36 and37 of R. A. No. 7653 to the extent applicableshall be imposed on the NSSLA, its auditcommittee and the directors approving thehiring of external auditors who are not inthe BSP list of selected auditors for banks,QBs, NSSLAs, and trust entities or forhiring, and/or retaining the services of theexternal auditor in violation of any of theprovisions of this Section and for non-compliance with the Monetary Boarddirective under Item “I” in Appendix S-8.Erring external auditors may also bereported by the BSP to the PRC forappropriate disciplinary action.(As amended by Circular No. 529 dated 11 May 2006)


Sec. 4181S Publication RequirementsNSSLAs shall, within 120 calendar daysafter the close of the calendar year or theirfiscal year, as the case may be, furnishthe Monetary Board and post in any ofthe NSSLAs’ bulletin boards or in anyother conspicuous place a copy of theirfinancial statements showing, in suchform and detail as the Monetary Boardshall require, the amount and characterof the assets and liabilities of the NSSLAsat the end of the preceding fiscal year.

The Monetary Board may, in addition tothe foregoing, require the disclosure ofsuch other information as it shall deemnecessary for the protection of themembers of the NSSLA.

The consolidated statements ofcondition of an NSSLA and its subsidiariesand associates shall conform with theguidelines of PAS 27 “Consolidated andSeparate Financial Statements”, except thatfor purposes of consolidated financialstatements, only investments in financialallied subsidiaries except insurancesubsidiaries shall be consolidated on aline-by-line basis; while insurance andnon-financial allied subsidiaries shall beaccounted for using the equity method.Financial/non-financial allied/non-alliedassociates shall be accounted for using theequity method in accordance with theprovisions of PAS 28 “Investments inAssociates”. For purposes of separatefinancial statements, investments infinancial/non-financial allied/non-alliedsubsidiaries/associates, including insurancesubsidiaries/associates, shall be accountedfor using the equity method.(As amended by Circular No. 494 dated 20 September 2005)

Sec. 4182S Business Name1. NSSLAsorganized or operating under R.A. No.8367 and licensed by the BSP shall includein their names the words “Savings and LoanAssociation”. Such NSSLAs shall display ina conspicuous place at their business officesa sign including, among other things, thefollowing words: “Authorized by the BangkoSentral ng Pilipinas”.(As amended by CL Nos. 2008-053 dated 21 August 2008 and

2008-007 dated 05 February 2008)

Sec. 4183S Prohibitionsa. No person, association, partnership

or corporation shall do business as anNSSLA, or shall use the terms “Savings andLoan Association” or any other title orname tending to give the public impression

§§ 4180S - 4183S08.12.31


1 See SEC Circular Nos. 5 dated 17 July 2008 and 14 dated 24 October 2000

that it is engaged in the operations andactivities of an NSSLA unless so authorizedunder R.A. No. 8367 and these regulations.

b. The use by an NSSLA of any othername or title or combination of names andtitles or any other deviation from therequirements of this Section shall not beauthorized except upon prior approval of theMonetary Board.

c. NSSLAs shall not issue, publish orcause or permit to be issued or published,any advertisement that it is doing orpermitted to do business which is prohibitedby law to an NSSLA.

d. No NSSLA shall advertise orrepresent itself to its members or to the publicas a bank, or as a trust company.


Sec. 4190S Duties and Responsibilitiesof NSSLAs and their Directors/Officersin All Cases of Outsourcing of NSSLAFunctions. The rules on outsourcing ofbanking functions as shown in AppendixQ-37 shall be adopted in so far as theyare applicable to NSSLAs.(As amended by Circular Nos. 610 dated 26 May 2008,

596 dated 11 January 2008, 548 dated 25 September

2006 and 543 dated 08 September 2006)


Sec. 4192S Prompt Corrective ActionFramework. The framework for theenforcement of PCA on banks which is inAppendix Q-40 shall govern the PCA takenon NSSLAs to the extent applicable, or byanalogy.(Circular No. 523 dated 31 March 2006)

Sec. 4193S Supervision by Risks. Theguidelines on supervision by risk inAppendix Q-42 which prov ideguidance on how QBs should identify,measure, monitor and control risks

shall govern the supervision by risks ofNSSLAs to the extent applicable.

The guidelines set forth theexpectations of the BSP with respect tothe management of risks and are intendedto provide more consistency in how therisk-focused supervision function isapplied to these risks. The BSP will reviewthe risks to ensure that an NSSLA’sinternal risk management processes areintegrated and comprehensive. AllNSSLAs should follow the guidance in riskmanagement efforts.(Circular No. 510 dated 03 February 2006)

Sec. 4194S Market Risk ManagementThe guidelines on market r iskmanagement for QBs as shown inAppendix Q-43 shall govern the marketrisk management of NSSLAs to the extentapplicable.

The guidelines set forth theexpectations of the BSP with respect tothe management of market risk and areintended to provide more consistency inhow the risk-focused supervision isapplied to this risk. NSSLAs are expectedto have an integrated approach to riskmanagement to identify, measure,monitor and control risks. Market riskshould be reviewed together with otherrisks to determine overall risk profile.

The BSP is aware of the increasingdiversity of financial products and thatindustry techniques for measuring andmanaging market risk are continuouslyevolving. As such, the guidelines areintended for general application; specificapplication will depend to some extent onthe size, complexity and range of activitiesundertaken by NSSLAs.(Circular No. 544 dated 15 September 2006)

Sec. 4195S Liquidity Risk Management.The guidelines on liquidity riskmanagement for QBs as shown in

§§ 4183S - 4195S08.12.31


Appendix Q-44 shall govern the liquidityrisk management of NSSLAs to theextent applicable.

The guidelines set forth theexpectations of the BSP with respect tothe management of liquidity risk and areintended to provide more consistency inhow the risk-focused supervisionfunction is applied to this risk. NSSLAsare expected to have an integratedapproach to risk management to identify,measure, monitor and control risks.Liquidity risk should be reviewedtogether with other risks to determineoverall risk profile.

These guidelines are intended forgeneral application; specific applicationwill depend on the size and sophisticationof a particular NSSLA and the nature andcomplexity of its activities.(Circular No. 545 dated 15 September 2006)


Sec. 4199S General Provision onSanctions. Unless otherwise provided, anyviolation of the provisions of this Part shallbe subject to the sanctions provided inSections 34, 35, 36 and 37 of R.A. No. 7653,whenever applicable.

§§ 4195S - 4199S 08.12.31


Manual of Regulations for Non-Bank Financial Institutions S RegulationsPart II - Page 1

08.12.31

A. DEMAND DEPOSITS

Section 4201S Checking Accounts. NoNSSLA shall have or carry upon its booksfor any person any demand, commercialor checking account, or any credit to bewithdrawn upon the presentation of anynegotiable check or draft.


B. SAVINGS DEPOSITS

Sec. 4206S Definition. Savings depositsare deposits evidenced by a passbookconsisting of funds deposited to the creditof one (1) or more individuals with respectto which the depositor may withdrawanytime, unless prior notice in writing ofan intended withdrawal is required by theNSSLA.

Sec. 4207S Minimum Deposit. Savingsdeposits with NSSLAs may be openedwith a minimum deposit of P100.

Sec. 4208S Withdrawals. Withdrawalfrom a savings deposit shall be madethrough the presentation to the NSSLA ofa duly accomplished withdrawal sliptogether with the depositor’s passbook.

NSSLAs shall reserve the right torequire the depositor to give prior writtennotice of withdrawal of not more than thirty(30) days.

NSSLAs may limit the number ofwithdrawals that a depositor may make:Provided, That the number of thewithdrawals allowed shall not be less thanthree (3) times a month. A service chargeto be determined by the board of trusteesof the NSSLA and approved by the BSP,

§§ 4201S - 4240S

may be charged by the NSSLA for everywithdrawal made in excess of the maximumnumber allowed in any one (1) month.

Sec. 4209S Dormant Savings DepositsNSSLAs may charge a fee, the amount ofwhich shall be approved by the BSP forthe maintenance of dormant savingsdeposits. Savings deposit shall be classifiedas dormant if no deposit or withdrawal hasbeen made for the last two (2) years.


C. (RESERVED)


D. TIME DEPOSITS


Sec. 4222S Minimum Term and Size ofTime Deposits

a. Term - No time deposit shall beaccepted for a term of less than thirty (30)days.

b. Minimum Size - NSSLAs shall notrequire a minimum amount of timedeposit greater than P1,000.

Sec. 4223S Withdrawals of TimeDeposits. The withdrawal of a timedeposit can be made only by presentationof the certificate of time deposit on theday of or after its maturity.


E. - F. (RESERVED)


PART TWO

DEPOSIT AND BORROWING OPERATIONS

Manual of Regulations for Non-Bank Financial InstitutionsS RegulationsPart II - Page 2

08.12.31§§ 4241S - 4261S.5

G. INTEREST ON DEPOSITS

Sec. 4241S Interest on Savings DepositsSavings deposits of NSSLAs shall not besubject to any interest rate ceiling.

Sec. 4242S Interest on Time DepositsInterest on time deposits shall not be subjectto any interest rate ceiling.

§ 4242S.1 Time of payment. Intereston time deposits may be paid at maturityor upon withdrawal or in advance:Provided, however, That interest paid inadvance shall not exceed the interest forone (1) year.

§ 4242S.2 Treatment of maturedtime deposits. A time deposit notwithdrawn or renewed on its due date shallbe treated as a savings deposit and shallearn an interest from maturity to the dateof actual withdrawal or renewal at a rateapplicable to savings deposits.

Secs.4243S - 4250S (Reserved)

H. (RESERVED)


I. SUNDRY PROVISIONS ON DEPOSIT OPERATIONS

Sec. 4261S Opening and Operation ofDeposit Accounts. The following are basicprovisions on the opening and operation ofdeposit accounts of NSSLAs.

§ 4261S.1 Who may open depositaccounts. Only members who havecontributed P1,000 or more to the capitalof the NSSLA may open deposit accountswith NSSLAs. A natural person, althoughlacking capacity to contract, maynevertheless open a savings or time

deposit account for himself, provided hehas sufficient discretion. However, hecannot withdraw therefrom, exceptthrough, or with the assistance of a guardianauthorized to act for him. Parents maydeposit for their minor children, andguardians for their wards.

Notwithstanding the provisions of thepreceding paragraph, the cashier,bookkeeper and their assistants, and otheremployees of an NSSLA whose duties entailthe handling of cash or checks are prohibitedfrom opening savings deposit accounts withthe head office or branch of the NSSLA inwhich they are assigned as such.

§ 4261S.2 Identification of member-depositors. NSSLAs shall be responsiblefor the proper identification of theirmember-depositors.

§ 4361S.3 Number of deposit accountsA member-depositor may open and havemore than one (1) savings deposit in hisown name in the same capacity, and hemay open and have various deposits indifferent capacities such as guardian, agent,or trustee for others.

§ 4261S.4 Signature card. A signaturecard bearing at least three (3) specimensignatures of each member-depositor shallbe required upon opening of a depositaccount.

§ 4261S.5 Passbook and certificateof time deposit. A savings depositpassbook, signed by the receiving teller andan authorized officer, shall be issued to amember-depositor showing, among otherthings, his name and address, accountnumber, date, amount of deposit, interestcredits and balance. NSSLAs shall pre-number their savings deposit passbooks. Inthe case of a time deposit, a certificate oftime deposit signed by two (2) authorizedofficers, shall be issued to the member-

Manual of Regulations for Non-Bank Financial Institutions S RegulationsPart II - Page 3

08.12.31§§ 4261S.5 - 4299S

depositor containing, among other things,his name, amount of deposit, date whenthe deposit was made, its due date andinterest rate.

§ 4261S.6 Deposits in checks andother cash items. Checks and other cashitems may be accepted for deposit byNSSLAs: Provided, That withdrawalsfrom such deposits shall not be made untilthe check or other cash item is collected.


J. (RESERVED)


K. OTHER BORROWINGS

Sec. 4286S Borrowings. An NSSLA mayborrow money or incur such obligation upto not more than twenty percent (20%) ofthe total assets of the NSSLA, from any

public lending institution, and from privatebanking institutions, and such privatelending institutions as may be approvedby the Monetary Board: Provided, Thatthe proceeds of such loan shall be usedexclusively to meet the normal creditrequirements of its members. TheMonetary Board may, in meritoriouscases, raise the ceiling on the borrowingcapacity of an NSSLA to not more thanthirty percent (30%) of its total assets.NSSLAs organized by employees of anentity or a corporation may borrow fundsfrom said entity or corporation, but notvice-versa.


Sec. 4299S General Provision onSanctions. Unless otherwise provided,any violation of the provisions of this Partshall be subject to the sanctions providedin Sections 34, 35, 36 and 37 of R.A. No.7653, whenever applicable.

Manual of Regulations for Non-Bank Financial Institutions S RegulationsPart III - Page 1

A. LOANS IN GENERAL

Section 4301S Authority; Loan Limits;Maturity of Loans. The board of trusteesof NSSLAs shall prescribe their own rulesand regulations governing creditoperations of the NSSLAs within theframework of the terms and conditionsembodied in this Section.

a. Loan limit to a single borrower. AnNSSLA may grant loans not exceeding theamount deposited and/or contributed by themember-borrower plus his twelve (12)months salary or retirement pension fromhis employment, or up to seventy percent(70%) of the fair market value of any propertyacceptable as collateral on first mortgage thathe may put up by way of security: Provided,That direct indebtedness to an NSSLA of anymember-borrower for money borrowedwith the exception of money borrowedagainst obligations of the BSP or of thePhilippine Government, or borrowed withthe full guarantee of the PhilippineGovernment in the payment of principaland interest, shall not exceed fifteenpercent (15%) of the unimpaired capitaland surplus of the NSSLA.

For purposes of this Section, regularincome of persons who are self-employedshall be their average monthly incomeduring the twelve (12)-month periodimmediately preceding the date of loanapplication.

b. Limitations on lending authority.NSSLAs shall not commit to make anyloan for amounts in excess of the total ofthe following amounts:

(1) Amount of cash available for loanpurposes;

(2) Amount of cash which can bereadily realized upon the sale or

§§ 4301S - 4302S08.12.31

PART THREE

LOANS AND INVESTMENTS

redemption of permissible investmentsmade by NSSLAs; and

(3) Amount of credit available for loanpurposes from government or private FIs.

c. Maximum loan maturity. No loangranted by NSSLAs shall have a maturitydate of more than five (5) years except loanson the security of unencumbered real estatefor the purpose of home building and homedevelopment which may be granted withmaturities not exceeding twenty-five (25)years and medium or long-term loans tofinance agricultural projects.

Sec. 4302S Basic Requirements inGranting Loans

a. Application. A member-borrowerapplying for a loan must submit an applicationstating the purpose of the loan and such otherinformation as may be required by theNSSLA. The loan application and otherrequired documents shall form part of creditinformation file of the member-borrower inthe NSSLA.

b. Credit investigation. No loan shallbe approved unless prior investigation hasbeen made to determine the credit standingof the applicant and/or the fair market valueof the property offered as security and thereport thereon shall be made part of the loanapplication: Provided, however, That thisrequirement may be waived by an NSSLAin the case of permanent employee or wageearner who is borrowing an amount notexceeding his deposit plus his twelve (12)months regular salary or retirement pension.

c. Credit information file/collateralfile. An NSSLA shall maintain as far aspracticable, a credit information file whichmust contain, among other things, themember-borrower’s application and financialrecord. Other information relative to the

Manual of Regulations for Non-Bank Financial InstitutionsS RegulationsPart III - Page 2

§§ 4302S - 4305S.508.12.31

member-borrower, where applicable, shallalso be maintained which must containamong other things, the collateral and otherdocuments pertinent to the loan.

d. Loan approvals. Loans shall beapproved by the NSSLA’s board of trusteesor if approved by a body or officer/s dulyauthorized by the board, such loan mustbe confirmed by the board of trustees.

e. Loan agreements. For each loangranted by an NSSLA, a promissory notemust be executed by the member-borrowerin favor of the NSSLA expressing suchparticulars as the amount of the loan, dategranted, due date, interest rate and othersimilar information.

f. Inscription of lien. In case ofmortgage loans, no release against anapproved loan shall be made before theinscription of the mortgage.

Sec. 4303S Loan Proceeds. NSSLAs shallin no case require member-borrowers todeposit a portion of the loan proceeds,whether in the form of savings or timedeposits. Where, subsequent to the releaseof the loan proceeds, member-borrowersopen deposit accounts or make additionaldeposits to their existing accounts, no partof such new deposits shall be covered by astipulation prohibiting or limiting withdrawalwhile new portion of their loans areoutstanding: Provided, however, That thisprohibition shall not apply in cases of loanssecured by a hold-out on deposits to theextent of the unencumbered amount of thedeposit existing at the time of the filing ofthe above-mentioned loan application.

Sec. 4304S Loan Repayment. The treasurer,cashier or paymaster of the firmemploying a member-borrower shall berequired, pursuant to R.A. No. 8367, tomake deductions from the salary, wage,income or retirement pension of themember-borrower in accordance with theterms of his loan, and all other deductionsauthorized by the member-borrower, to

remit such deductions to the NSSLAconcerned and to collect such reasonable feefor his services as may be authorized byrules promulgated by the Monetary Board.

Sec. 4305S Interest and Other Charges.The following rules shall govern the ratesof interest and other charges on loansgranted by NSSLAs.

§§ 4305S.1 - 4305S.2 (Reserved)

§ 4305S.3 Interest in the absence ofcontract. In the absence of expresscontract, the rate of interest for the loan orforbearance of any money, goods or creditand the rate allowed in judgment shall betwelve percent (12%) per annum.

§ 4305S.4 Escalation clause; whenallowable. Parties to an agreementpertaining to a loan or forbearance ofmoney, goods or credits may stipulatethat the rate of interest agreed upon maybe increased in the event that theapplicable maximum rate of interest isincreased by the Monetary Board:Provided, That such stipulations are validonly if there is also a stipulation in theagreement that the rate of interest agreedupon shall be reduced in the event thatthe applicable maximum rate of interestis reduced by law or by the MonetaryBoard: Provided, further, That theadjustment in the rate of interest agreedupon shall take effect on or after theeffectivity of the increase or decrease inthe maximum rate of interest.

§ 4305S.5 Interest accrual on pastdue loans. NSSLAs shall not accrueinterest income on loans which are alreadypast due or on loan installments which arein arrears, regardless of whether the loansare secured or unsecured. Interest on pastdue loans or loans installments in arrearsshall be taken up as income only whenactual payments thereon are received.


§§ 4305S.5 - 4306S.308.12.31

Interest income on past due loan arisingfrom discount amortization (and not fromthe contractual interest of the account) shallbe accrued as provided in PAS 39.(As amended by Circular No. 494 dated 20 September 2005)

Sec. 4306S Past Due Accounts. Past dueaccounts of an NSSLA shall, as a generalrule, refer to all accounts which are not paidat maturity.

§ 4306S.1 Accounts considered pastdue. The following shall be considered aspast due:

a. A loan or receivable payable ondemand not paid upon written demand asrequired herein or within one (1) year fromdate of grant or renewal, whichever comesearlier.

NSSLAs shall, in case of non-paymentof a demand loan, make a written demandwithin six (6) months following the grantof such loan. The demand shall indicate aperiod of payment which shall not be laterthan six (6) months from date of saiddemand.

b. The total outstanding balance of a loanor receivable payable in installments, inaccordance with the following schedules: Mode of Payment Installments in Arrears

Monthly 6 or more Quarterly 2 or more Semestral 1 or more Annual 1 or more

Provided, however, That when the totalamount of arrearages reaches twentypercent (20%) of the total outstandingbalance of the loan, the entire totaloutstanding balance of the loan shall beconsidered as past due, irrespective of thenumber of installments in arrears: Provided,further, That the modes of payment otherthan those listed above (e.g., daily, weeklyor semi-monthly), the entire outstandingbalance of the loan/receivable shall beconsidered as past due when the totalamount of arrearages reaches ten percent(10%) of the total loan/receivable balance;

c. Any due and unpaid loaninstallment or portion hereof, from the timethe obligor defaults for the purpose ofobligations as defined in Sec. 4143S(d); and

d. All items in litigation as defined inthe Manual of Accounts for NSSLAs.

§ 4306S.2 Extension/renewal of loansExtension of the period of payment of loansmay be allowed under the followingcircumstances:

a. For production loans, the extensionshall not exceed one-half (1/2) of the originalperiod: Provided, That thirty percent (30%)of the loan shall have been paid. A secondextension shall not exceed one-half (1/2) ofthe period of the first extension; and

b. For consumer loans, the extensionshall not exceed one-half (1/2) of theoriginal period: Provided, That thirty percent(30%) of the loan shall have been paid.

Loans payable in periodic installmentsmay be renewed for the full amount ofloans: Provided, That at least thirty percent(30%) of the loan shall have been paid.

§ 4306S.3 Write-off of loans as baddebts. To maximize the protection ofmembers of NSSLAs against misfeasanceand malfeasance of the trustees and officersthereof, the Monetary Board adopted thefollowing regulations on writing-off of loansby NSSLAs.

a. The term loan shall include all typesof credit accommodations granted to, andadvances made by the NSSLA for theaccount of the borrowers/debtors, includingthe interest thereon recorded in the books.

b. Writing-off of loans by an NSSLAshall be made not more than twice a yearby its board of trustees; and

c. Notice/application for write-off ofloans shall be submitted, in the prescribedform to the appropriate department of theSES at least thirty (30) days prior to theintended date of write-off: Provided, Thatno such loans with an aggregate outstandingamount of P15,000 or more, as certified in


said notice/application, shall be written-offwithout the prior approval of:

(1) The Monetary Board, in case ofloans to trustees and officers of the NSSLA,direct or indirect; or

(2) The head of the appropriatedepartment of the SES, subject toconfirmation by the Monetary Board, incase of loans other than those mentionedin Item “(1)” above.

§ 4306S.4 Updating of informationprovided to credit information bureausNSSLAs which have provided adverseinformation, such as the past due orlitigation status of loan accounts, to creditinformation bureaus, or any organizationperforming similar functions, shall submitmonthly reports to these bureaus ororganizations on the full payment orsettlement of the previously reportedaccounts within five (5) business days fromthe end of the month when such fullpayment was received. For this purpose,it shall be the responsibility of thereporting NSSLAs to ensure that theirdisclosure of any information about theirborrowers/clients is with the consent ofborrowers concerned.(Circular No. 589 dated 18 December 2007)

Sec. 4307S “Truth in Lending Act”Disclosure Requirements. NSSLAs arerequired to strictly adhere to the provisionsof R. A. No. 3765, otherwise known asthe “Truth in Lending Act,” and shall makethe true and effective cost of borrowing anintegral part of every loan contract.

a. Transactions covered(1) Any loan, mortgage, deed of trust,

advance and discount;(2) Any conditional sales contract, any

contract to sell, or sale or contract of saleof property or services, either for presentor future delivery, under which, part or allof the price is payable subsequent to themaking of such sale or contract;

(3) Any option, demand, lien, pledge,or other claim against, or for delivery of,property or money;

(4) Any purchase, or other acquisitionof, or any credit upon the security of anyobligation or claim arising out of any ofthe foregoing; and

(5) Any transaction or series oftransactions having a similar purpose oreffect.

b. Transactions not coveredConsidering that the specific purpose

of the law is the full disclosure of the truecost of credit, the following categories ofcredit transactions are outside the scopeof the above regulations:

(1) Credit transactions which do notinvolve the payment of any finance chargeby the debtor; and

(2) Credit transactions in which thedebtor is the one specifying a definite andfixed set of credit terms such as bank deposits,insurance contracts, sale of bonds, etc.

§ 4307S.1 Definition of termsa. Creditor (who shall furnish the

information) means any person engagedin a finance charge.

The term creditor shall include, but shallnot be limited to, banks and bankinginstitutions, insurance and bondingcompanies, savings and loan associations,credit unions, financing companies,installment houses, real estate dealers,lending investors, pawnshops, and anyother person or entity engaged in thebusiness of extending credit who requiresas an incident to the extension of credit,the payment of a finance charge.

b. Person means any individual,corporation, partnership, NSSLA, or otherorganized group of persons, or the legalsuccessor or representative of the foregoing,and includes the Philippine Government orany agency thereof, or any othergovernment, or any of its politicalsubdivisions, or any agency of the foregoing.

§§ 4306S.3 - 4307S.108.12.31


c. Cash price or delivered price (incase of trade transactions) is the amount ofmoney which would constitute fullpayment upon delivery of the property(except money) or service purchased at thecreditor’s place of business. In the case offinancial transactions, cash price representsthe amount of money received by thedebtor upon consummation of the credittransaction, net of finance chargescollected at the time the credit isextended(if any).

d. Down payment represents the amountpaid by the debtor at the time of thetransaction in partial payment for theproperty or service purchased.

e. Trade-in represents the value of anasset, agreed upon by the creditor anddebtor, given at the time of the transactionin partial payment for the property orservice purchased.

f. Non-finance charges correspond tothe amounts advanced by the creditor foritems normally associated with theownership of the property or of theavailment of the service purchased whichare not incident to the extension of credit.For example, in the case of the purchaseof an automobile on credit, the creditormay advance the insurance premium aswell as the registration fee for the accountof the debtor.

g. Amount to be financed consists ofthe cash price plus non-finance charges lessthe amount of the down payment and valueof the trade-in.

h. Finance charge represents theamount to be paid by the debtor incidentto the extension of credit such as interestor discounts, collection fees, creditinvestigation fees, attorney’s fees, andother service charges. The total financecharge represents the difference between(i) the aggregate consideration (downpayment plus installments) on the part of

the debtor, and (ii) the sum of the cash priceand non-finance charges.

i. Simple annual rate is the uniformpercentage which represents the ratio, onan annual basis, between the financecharges and the amount to be financed.

In the case of single payment uponmaturity, the simple annual rate (R) inpercent is determined by the followingmethod:

finance charge 12R = amount to x maturity period x 100

be financed in months

In the case of the normal installmenttype of credit of at least one (1) year induration, where installment payments ofequal amount are made in regular timeperiods spaced not more than one (1) yearapart, R in percent is computed by thefollowing method: No. of payments

finance charge in a yearR = 2 x amount to x total number x 100

be financed of payments plus one

In cases where the credit matures in lessthan one (1) year [e.g., installment paymentsare required every month for six (6) months],the same formula will apply except that thenumber of payments in a year would referto the number of installment periods, asdefined in the credit contract, as if the creditmatures in one (1) year. For example, thenumber of payments in a year would betwelve (12) for this purpose in cases wheresix (6) monthly installment payments arecalled for in the credit transaction1.

In cases where credit terms provide forpremium or penalty charges depending on,say, the timelines of the debtor’s payments,the annual rate to be disclosed in writing shallbe the rate for regular payments, i.e., thepremium and penalty need not be taken intoaccount in the determination of the annual

§ 4307S.108.12.31

1 This can be determined by dividing twelve (12), the number of months in a year, by the number or fraction of monthsbetween installment payments.


rate. Such premium or penalty charges shall,however, be indicated in the credit contract.

§ 4307S.2 Information to be disclosedNSSLAs shall furnish to each person towhom credit is extended, prior to theconsummation of the transaction, a clearstatement in writing setting forth thefollowing information to be disclosed.

a. The cash price or delivered priceof the property or service to be acquired;

b. The amounts, if any, to be creditedas down payment and/or trade-in;

c. The difference between theamounts set forth under Items “a” and “b”;

d. The charges, individually itemized,which are paid or to be paid by such personin connection with the transaction but whichare not incident to the extension of credit;

e. The total amount to be financed;f. The finance charges expressed in

terms of pesos and centavos; andg. The percentage that the finance charge

bears to the total amount to be financedexpressed as a simple annual rate on theoutstanding unpaid balance of the obligation.

The contract covering the credittransaction, or any other document to beacknowledged and signed by the debtor,shall indicate the above seven (7) items ofinformation. In addition, the contract ordocument shall specify additional charges,if any, which will be collected in casecertain stipulations in the contract are notmet by the debtor.

In case the seven (7) items ofinformation mentioned in this Subsectionare not disclosed in the contract coveringthe credit transaction, said items to theextent applicable, shall be disclosed inanother document in the form (AppendixS-4) prescribed by the Monetary Board, tobe signed by the debtor and appended tothe main contract. A copy of the disclosurestatement shall be furnished the borrower.

§ 4307S.3 Inspection of contractscovering credit transactions. NSSLAs shallkeep in their office or place of business copiesof contracts covering all credit transactionsentered into by them which involve theextension of credit to another and thepayment of finance charges therefor. Suchcopies shall be available for inspection orexamination by the appropriatedepartment of the SES.

§ 4307S.4 Posters. An abstract ofR.A. No. 3765 (Appendix S-5) shall bereproduced in a format which is sixty (60)cm. wide and seventy-five (75) cm. long,and posted on a conspicuous place in theNSSLAs’ place(s) of business.

§ 4307S.5 Penal provisionsa. NSSLAs which in connection with

any credit transaction fail to disclose to anyperson any information in violation of thisSection or any regulation issued hereaftershall be liable to such person in the amountof P100 or in an amount equal to twice thefinance charge required by such NSSLAsin connection with such transactions,whichever is the greater, except that suchliability shall not exceed P2,000 on anycredit transaction. Action to recover suchpenalty may be brought by such personwithin one (1) year from the date of theoccurrence of the violation, in any court ofcompetent jurisdiction. In any action underthis Subsection in which any person isentitled to a recovery, the NSSLAs shallbe liable for reasonable attorney’s fees andcourt costs as determined by the court.

b. Except as specified in Item “a”above, nothing contained in this rule shallaffect the validity or enforceability of anycontract or transaction.

c. Any person who willfully violatesany provision of this Section or regulationissued hereafter shall be fined by not less

§§ 4307S.1 - 4307S.508.12.31


than P1,000 nor more than P5,000 orimprisonment for not less than six (6) months,nor more than one (1) year or both.

d. No punishment or penaltyprovided by this Section shall apply to thePhilippine Government or any agency orany political subdivision thereof.


Sec. 4312S Grant of Loans and OtherCredit Accomodations. (Deleted by Circular

No. 622 dated 16 September 2008)

§ 4312S.1 General guidelines. (Deleted

by Circular No. 622 dated 16 September 2008)

§§ 4312S.2 - 4312S.3 (Reserved)

§ 4312S.4 Signatories. (Deleted by

Circular No. 622 dated 16 September 2008)


B. SECURED LOANS

Sec. 4321S Kinds of Security. Loans byan NSSLA may be secured by any or all ofthe following:

a. Mortgages on registered real estate;b. Chattel mortgages on harvested or

stored crops of non-perishable character;c. Chattel mortgages on livestock,

tools, equipment or machinery, suppliesor materials, merchandise and otherpersonal properties;

d. Assignment of quedans whichgives the right of disposal of readilymarketable products;

e. Time and/or savings deposits and/orcapital contribution;

f. Pledge of bonds, stock and othersecurities of the GOCC and other bonds,stocks or securities which are non-speculativein nature;

g. Land transfer certificates issued bythe government to tenant farmers, underthe agrarian reform program to the extent

of sixty percent (60%) of the value of thefarm holdings: Provided, That acertification shall be first secured from theoffice of the Registry of Deeds to the effectthat the Land Transfer Certificate beingpresented is valid; and

h. Other securities as may beapproved by the Monetary Board.


C. - D. (RESERVED)


E. LOANS/CREDITACCOMMODATIONS TO TRUSTEES,

OFFICERS, STOCKHOLDERS ANDTHEIR RELATED INTERESTS

Sec. 4356S General Policy. The transactionsof all trustees or officers with the NSSLAshall not be under terms more favorablethan those transacted with other members.

Sec. 4357S Direct/Indirect Borrowings;Ceilings. No NSSLA shall directly orindirectly make any loan to any trustee orofficer of such NSSLA, either for himself oras agent or as partner of another, except withthe written approval of the majority of thetrustees of the NSSLA, excluding the trusteeconcerned: Provided, That the aggregateloans to such trustees and officers shall notexceed twenty percent (20%) of the totalcapital contributions of the NSSLA.

Sec. 4358S Records; Reports. In all casesof accommodations granted to trustees andofficers under Sec. 4357S, the writtenapproval of the majority of the trustees ofthe NSSLA, excluding the trusteeconcerned, shall be entered upon therecords of the NSSLA and a copy of suchentry shall be transmitted forthwith to theappropriate department of the SES withintwenty (20) business days from the date ofapproval.

§§ 4307S.5 - 4358S08.12.31



Sec. 4370S Sanctions. The office of any trusteeor officer of an NSSLA who violates theprovisions of these rules on accommodationsgranted to trustee and officers shallimmediately become vacant and said trusteesor officer shall be punished by imprisonmentof not more than one (1) year nor more thanten (10) years and by a fine of not less thanP5,000 nor more than P50,000 pursuant toSection 15 of R.A. No. 8367.

F. - I. (RESERVED)


J. OTHER OPERATIONS

Sec. 4391S Fund Investments. An NSSLAmay invest its funds in any or all of thefollowing:

a. In bonds and securities in anaggregate amount not exceeding ten percent(10%) of its total assets; any investment inexcess of ten percent (10%) shall require theprior approval of the BSP: Provided, ThatNSSLAs may invest available funds in excessof ten percent (10%) of total assets in soundnon-speculative enterprise, particularly inreadily marketable and high gradecommercial papers, bonds and securitiesissued by the Government of the Philippinesor any of its political subsidiaries,instrumentalities or corporations includingGOCCs, subject to the following conditions:

(1) The credit needs of the membersshall be served/satisfied first;

(2) The investment in any one (1)corporation (excluding the Government ofthe Philippines, any of its politicalsubdivisions, instrumentalities, orcorporations including GOCCs), shall notexceed twenty-five percent (25%) of theNSSLA’s combined capital accounts; and

(3) The additional investment may be upto another ten percent (10%) of the NSSLA’stotal assets;

b. In real property, in an aggregateamount not exceeding at any one time fivepercent (5%) of the total assets of suchNSSLA; and

c. In furniture, fixtures, furnishings andequipment, and leasehold improvements forits offices, in amount not exceeding at anyone time ten percent (10%), of its total capitalcontribution.

§§ 4391S.1 - 4391S.2 (Reserved)

§ 4391S.3 Investments in debt andmarketable equity securities. Theclassification, accounting procedures,valuation, sales and transfers ofinvestments in debt securities andmarketable equity securities shall be inaccordance with the guidelines inAppendices Q-20 and Q-20-a.

Penalties and sanctions. Thefollowing penalties and sanctions shallbe imposed on FIs and concernedofficers found to violate the provisionsof these regulations:

a. Fines of P2,000/banking day to beimposed on NSSLAs for each violation,reckoned from the date the violation wascommitted up to the date i t wascorrected; and

b. Sanctions to be imposed onconcerned officers:

(1) First offense – reprimand theofficers responsible for the violation; and

(2) Subsequent offenses–suspension-of ninety (90) days without pay for officersresponsible for the violation.(Circular No. 476 dated 16 February 2005 as amended by

Circular Nos. 628 dated 31 October 2008 and 626 dated

23 October 2008)

§§ 4391S.4 - 4391S.10 (Reserved)


K. MISCELLANEOUS PROVISIONS


§§ 4359S - 4398S08.12.31


Sec. 4399S General Provision onSanctions. Unless otherwise provided,any violation of the provisions of this

Part shall be subject to the sanctionsprovided in Sections 34, 35, 36 and 37of R.A. No. 7653, whenever applicable.

§ 4399S 08.12.31

Manual of Regulations for Non-Bank Financial Institutions

08.12.31

S RegulationsPart IV - Page 1

§§ 4401S - 4499S

PART FOUR

Sections 4401S - 4499S (Reserved)


08.12.31

S RegulationsPart V - Page 1

PART FIVE

Sections 4501S - 4599S (Reserved)

§§ 4501S - 4599S

Manual of Regulations for Non-Bank Financial Institutions S RegulationsPart VI - Page 1

§§ 4601S - 4601S.108.12.31

PART SIX

MISCELLANEOUS

A. OTHER OPERATIONS

Sec. 4601S Fines and Other Charges. Thefollowing regulations shall governimposition of monetary penalties onNSSLAs, their trustees and/or officers andpayment of such penalties or fines andother charges by NSSLAs.(As amended by Circualr No. 585 dated 15 October 2007)

§ 4601S.1 Guidelines on theimposition of monetary penalties;Payment of penalties or fines. Thefollowing are the guidelines on theimposition of monetary penalties onNSSLAs, their trustees and/or officers andthe payment of such penalties or fines andother charges by NSSLAs:

a. Definition of terms. For purposesof the imposition of monetary penalties,the following definitions are adopted:

(1) Continuing offenses/violations areacts, ommisions or transactions enteredinto, in violation of laws, BSP rules andregulations, Monetary Board directives,and orders of the Governor which persistfrom the time the particular acts werecommitted or omitted or the transactionswere entered into until the same werecorrected/rectified by subsequent acts ortransactions. They shall be penalized on aper calendar day basis from the time theacts were committed/omitted or thetransactions were effected up to the timethey were corrected/rectified.

(2) Transactional offenses/violationsare acts, omissions or transactions enteredinto in violation of laws, BSP rules andregulations, Monetary Board directives,and orders of the Governor which cannotbe corrected/rectified by subsuquent actsor transactions. They shall be meted with

one (1)-time monetary penalty on a pertransaction basis.

(3) Continuing penalty refers to themonetary penalty imposed on continuingoffenses/violations on a per calendar daybasis reckoned from the time the offense/violation occurred or was committed untilthe same was corrected/rectified.

(4) Transactional penalty refers to aone (1)-time penalty imposed on atransactional offense/violation.

b. Basis for the computation of theperiod or duration of penalty. Thecomputation of the period or duration ofall penalties shall be based on calendardays.

For this purpose the terms “per bankingday”, “per business day”, “per day” and/or “a day” as used in this Manual, and otherBSP rules and regulations shall mean “percalendar day” and/or “calendar day” as thecase may be.

c. Additional charge for late paymentof monetary penalty. Late payment ofmonetary penalty shall be subject to anadditional charge of six percent (6%) perannum to be computed from the time saidpenalty becomes due and payable up tothe time of actual payment.

d. Appeal or request forreconsideration. A one (1)-time appeal orrequest for reconsideration on themonetary penalty approved by theGovernor/Monetary Board to be imposedon the NSSLA, its directors and/or officersshall be allowed: Provided, That the sameis filed with the appropriate department ofthe SES within fifteen (15) calendar daysfrom receipt of the Statement of Account/billing letter. The appropriate departmentof the SES shall evaluate the appeal orrequest for reconsideration of the NSSLA/

Manual of Regulations for Non-Bank Financial InstitutionsS RegulationsPart VI - Page 2

§§ 4601S.1 - 4631S08.12.31

individual and make recommendationsthereon within thirty (30) calendar daysfrom receipt thereof. The appeal or requestfor reconsideration on the monetarypenalty approved by the Governor/Monetary Board shall be elevated to theMonetary Board for resolution/decision.The running of the penalty period in caseof continuing penalty and/or the period forcomputing additonal charge shall beinterrupted from the time the appeal orrequest for reconsideration was receivedby the appropriate department of the SESup to the time that the notice of theMonetary Board decision was received bythe NSSLA/individual concerned.

e. Due date; payment of penalty orfines by NSSLAs. The penalty approved bythe Governor/MB to be imposed on theNSSLA, its directors and/or officers shallbecome due and payable fifteen (15)calendar days from receipt of the Statementof Account from the BSP. For NSSLAswhich maintain DDA with the BSP,penalties which remain unpaid after thelapse of the fifteen-day period shall beautomatically debited against theircorresponding DDA on the followingbusiness day without additional charge. Ifthe balance of the concerned NSSLA’sDDA is insufficient to cover the amount ofthe penalty, said penalty shall already besubject to an additional charge of sixpercent (6%) per annum to be reckonedfrom the business day immediatelyfollowing the end of said fifteen (15)-dayperiod up to the day of actual payment.

Failure to settle the full amount of thefines within the period or on the dayprescribed herein shall, in addition to theadditonal penalty as provided in item “c”above, make an NSSLA, its trustees andofficers liable to the sanctions imposedunder Sec. 4199S.(As amended by Circular No. 585 dated 15 October 2007)


Sec. 4631S Revocation/Suspension ofNSSLA License. In reference to Section22 of R.A. No. 8367 or the “RevisedNon-Stock Savings and Loan AssociationAct of 1997”, the Monetary Board, upondue notice and hearing, has the authorityto either revoke or suspend the license ofany NSSLA for such period as it deemsnecessary, based on any of the followinggrounds:

a. Suspension of license:(1) Repeated violations (uncorrected

similar examination findings for the lasttwo examinations, regular or special) ofany of the provisions of R.A. No. 8367,and/or any rules or regulationspromulgated to implement said law, orBSP directives and/or instructions; and

(2) Paid-up capital is impaired bycontinuing losses for the last two (2) fiscalyears.

Lifting of the suspension of license shallbe approved by the Monetary Board uponrecommendation of the appropriate BSPsupervising department.

b. Revocation of license:(1) When the solvency of the NSSLA

is imperiled by losses and irregularities;(2) When the NSSLA willfully violates

any provision of R.A. No. 8367, any ruleor regulation promulgated to implementsaid law and BSP directives and/orinstructions;

(3) When the NSSLA is conductingbusiness in an unsafe and unsound manner;

(4) When it is unable to pay itsliabilities as they become due in theordinary course of business;

(5) When it has insufficient realizableassets, as determined by the BSP, to meetits liabilities.

(6) When it cannot continue inbusiness without involving probable lossesto its members or creditors; and

(7) When it has willfully violated acease and desist order of the MonetaryBoard involving acts or transactions which


§§ 4631S - 4654S08.12.31

amount to fraud or a dissipation of assetsof the institution.

As to the effects of the revocation/suspension of license of the NSSLA, theNSSLA is prohibited from engaging in thebusiness of accumulating the savings of itsmembers and using such accumulationsfor loans to its members, subject toapplicable sanctions and penaltiesprovided by law in case of violation thereof.After the cessation of its operations due torevocation of its license, the NSSLA shouldproceed with its dissolution, inacccordance with the provisions under theCorporation Code. The dissolution of acorporation involves the termination of itscorporate existence, at least, as far as theright to go on doing ordinary business isconcerned, and the winding up its affairs,the payments of its debts and distributionof its assets among the members orstakeholders or other persons involved.The board of trustees of the corporation alsohas the option of adopting a plan for thedistribution of its assets, as stated underSection 95 of the Corporation Code.

After the revocation/suspension of itslicense, the Monetary Board may direct theboard of trustees of the NSSLA to proceedwith the voluntary dissolution of thecorporation. In the event that the board oftrustees refuses to effectuate suchdissolution, the Monetary Board may referthe matter to the Solicitor General for thefiling of a quo warranto case against thecorporation in accordance with theprovision under the Corporation Code.



Sec. 4651S Notice of Dissolution. NSSLAscontemplating to dissolve shall give writtennotice thereof to the Monetary Boardthrough the appropriate department of theSES at least thirty (30) days before takingsteps to effect dissolution.

Sec. 4652S Confidential Information. Notrustee, officer or employee of NSSLAs orof the BSP shall disclose any informationrelating to member-borrowers and theirapplications or to the operations of theNSSLAs unless permitted by the MonetaryBoard of the BSP: Provided, however, Thatin the case of NSSLAs under examination,the head of the appropriate department ofthe SES may furnish findings of examinationto the office or firm where such NSSLAsdo business.

All deposits of whatever nature withNSSLAs are considered absolutelyconfidential in nature, and may not beexamined, inquired or looked into by anyperson, government official, bureau oroffice, except upon written permission ofthe depositor, or in cases of impeachment,or upon order of competent court in casesof bribery or dereliction of duty of publicofficials or in cases where the moneydeposited or invested is the subject matterof litigation.

No official or employee of NSSLAsshall disclose to any person any informationconcerning said deposits, except in casesmentioned in the preceding paragraph.Any official or employee of NSSLAs whoviolates this Section shall be punishedunder R.A. No. 1405, as amended.

Sec. 4653S Examination by the BSP. Thehead of the appropriate department of theSES, personally or by deputy, shall makeat least once a year and at such other timesas he or the Monetary Board may deemnecessary and expedient, an examination,inspection or investigation of the books andrecords, business affairs, administration andfinancial condition of NSSLAs.

Sec. 4654S Applicability of Other RulesOther rules and regulations applicableto the examination of thrift banks,insofar as they are applicable and notinconsistent with these rules shall applyto NSSLAs.


§§ 4655S - 4657S.908.12.31

Sec. 4655S Annual Fees on Non-StockSavings and Loan Association. Forpurposes of computing the annual feeschargeable against NSSLAs, the term TotalAssessable Assets shall be the amountreferred to as the total assets under Section28 of R.A. No. 7653 (end-of-quarter totalassets per balance sheet, after deductingcash on hand and amounts due from banks,including the BSP and banks abroad).

Average Assessable Assets (AAAs)shall be the summation of end-of-quartertotal assessable assets divided by thenumber of quarters in operation during theparticular assessment period.

The prescribed rate of annual fees forNSSLAs, assessable only when actualexamination is conducted for the year, shallbe one-fortieth of one percent (1/40 of 1%)of AAAs for 2002 or P100,000 whicheveris lower, payable within thirty (30) daysfrom receipt of the bill. Failure to pay thebill within the prescribed period shallsubject the NSSLAs to administrativesanctions.

Sec. 4656S Basic Law Governing Non-Stock Savings and Loan AssociationsR.A. No. 8367, as amended, known as the"Revised Non-Stock Savings and LoanAssociation Act of 1997", regulates theorganization and operation of NSSLAs.

Sec. 4657S NSSLA Premises and OtherFixed Assets. The following rules shallgovern the premises and other fixed assetsof NSSLAs.

§ 4657S.1 Accounting for NSSLAspremises; Other fixed assets. NSSLApremises, furniture, fixture and equipmentshall be accounted for using the cost modelunder PAS 16 "Property, Plant andEquipment"(Circular No. 494 dated 20 September 2005)

§4657S.2 (Reserved)

§ 4657S.3 Reclassification of real andother properties acquired as NSSLApremises. ROPA reclassified either as RealProperty-Land or Real Property-Buildingshall be booked at their ROPA balance, netof any valuation reserves: Provided, Thatonly such acquired asset or a portionthereof that will be immediately used orearmarked for future use may bereclassified and booked as Real Property-Land/Building.

NSSLAs, prior to the reclassification oftheir ROPA accounts to Real Property-Land/Building, shall first secure prior BSPapproval before effecting thereclassification and shall submit, in case offuture use, justification and plans forexpansion/use.

§§ 4657S.4 - 4657S.8 (Reserved)

§ 4657S.9 Batas Pambansa Blg. 344 -An Act to Enhance the Mobility ofDisabled Persons by Requiring CertainBuildings, Institutions, Establishments andPublic Utilities to Install Facilities andOther Devices. In order to promote therealization of the rights of disabled personsto participate fully in the social life and thedevelopment of the societies in which theylive and the enjoyment of the opportunitiesavailable to other citizens, no license orpermit for the construction, repair orrenovation of public and private buildingsfor public use, educational institutions,airports, sports and recreation centers andcomplexes, shopping centers orestablishments, public parking places,workplaces, public utilities, shall be grantedor issued unless the owner or operatorthereof shall install and incorporate in suchbuilding, establishment or public utility,such architectural facilities or structuralfeatures as shall reasonably enhance themobility of disabled persons such assidewalks, ramps, railings, and the like. Iffeasible, all such existing buildings,


§§ 4657S.9 - 4691S.908.12.31

institutions, establishments, or publicutilities may be renovated or altered toenable the disabled persons to have accessto them.

Secs. 4658S - 4659 (Reserved)

Sec. 4660S Disclosure of RemittanceCharges and Other Relevant InformationIt is the policy of the BSP to promote theefficient delivery of competitively-pricedremittance services by banks and otherremittance service providers by promotingcompetition and the use of innovativepayment systems, strengthening thefinancial infrastructure, enhancing access toformal remittance channels in the sourceand destination countries, deepening thefinancial literacy of consumers, andimproving transparency in remittancetransactions, consistent with soundpractices.

Towards this end, NBFIs under BSPsupervision, including FXDs/MCs and RAs,providing overseas remittance servicesshall disclose to the remittance sender andto the recipient/beneficiary, the followingminimum items of information regardingremittance transactions, as defined herein:

a. Transfer/remittance fee - charge forprocessing/sending the remittance from thecountry of origin to the country ofdestination and/or charge for receiving theremittance at the country of destination;

b. Exchange rate - rate of conversionfrom foreign currency to local currency,e.g., peso-dollar rate;

c. Exchange rate differential/spread -foreign exchange mark-up or thedifference between the prevailing BSPreference/guiding rate and the exchange/conversion rate;

d. Other currency conversion charges- commisions or service fees, if any;

e. Other related charges - e.g.,surcharges, postage, text message ortelegram;

f. Amount/currency paid out in therecipient country - exact amount of moneythe recipient should receive in local currencyor foreign currency; and

g. Delivery time to recipients/beneficiaries - delivery period of remittanceto beneficiary stated in number of days,hours or minutes.

Non-bank remittance serviceproviders shall l ikewise post saidinformation in their respective websitesand display them prominently inconspicuous places within their premisesand/or remittance/service centers.(Circular No. 534 dated 26 June 2006)


Sec. 4691S Anti-Money LaunderingRegulations. Banks, OBUs, QBs, trustentities, NSSLAs, pawnshops, and all otherinstitutions, including their subsidiaries andaffiliates supervised and/or regulated by theBSP, otherwise known as "coveredinstitutions" shall comply with theprovisions of R.A. No. 9160, as amended,otherwise known as the "Anti-MoneyLaundering Act of 2001" and its RevisedIRRs in Appendix S-7 and those inAppendix S-6.(As amended by Circular No. 612 dated 13 June 2008)

§§ 4691S.1 - 4691S.8 (Reserved)

§ 4691S.9 Sanctions and penaltiesa. Whenever a covered institution

violates the provisions of Section 9 of R.A.No. 9160, as amended, or of this Section,the officer(s) or other persons responsiblefor such violation shall be punished by afine of not less than P50,000 nor morethan P200,000 or by imprisonment of notless than two (2) years nor more than ten(10) years, or both, at the discretion of thecourt pursuant to Section 36 of R.A. No.7653, otherwise known as "The NewCentral Bank Act".


§§ 4691S.9 - 4695S08.12.31

b. Without prejudice to the criminalsanctions prescribed above against theculpable persons, the Monetary Boardmay, at its discretion, impose upon anycovered institution, its directors and/orofficers for any violation of Section 9 ofR.A. No. 9160, as amended, theadministrative sanctions provided underSection 37 of R.A. No. 7653.


Sec. 4695S Valid Identification Cards forFinancial Transactions. The followingguidelines govern the acceptance of validID cards for all types of financialtransactions by NSSLAs, including financialtransactions involving OFWs, in order topromote access of Filipinos to servicesoffered by formal FIs, particularly thoseresiding in the remote areas, as well as toencourage and facilitate remittances ofOFWs through the banking system:

a. Clients who engage in a financialtransaction with covered institutions for thefirst time shall be required to present theoriginal and submit a clear copy of at leastone (1) valid photo-bearing ID documentissued by an official authority.

For this purpose, the term officialauthority shall refer to any of the following:

(1) Government of the Republic of thePhilippines;

(2) Its political subdivisions andinstrumentalities;

(3) GOCCs; and(4) Private entities or institutions

registered with or supervised or regulatedeither by the BSP or SEC or IC.

Valid IDs include the following:(a) Passport(b) Driver's license(c) PRC ID(d) NBI clearance(e) Police clearance(f) Postal ID

(g) Voter's ID(h) Barangay certification(i) GSIS e-card(j) SSS card(k) Senior Citizen card(l) OWWA ID(m) OFW ID(n) Seaman's Book(o) Alien Certification of Registration/

Immigrant Certificate of Registration(p) Government office and GOCC ID

(e.g., AFP, HDMF IDs)(q) Certification from the NCWDP(r) DSWD certification(s) IBP ID; and(t) Company IDs issued by private

entities or institutions registered with orsupervised or regulated either by the BSP,SEC, or IC.

b. Students who are beneficiaries ofremittances/fund transfers who are not yetof voting age may be allowed to presentthe original and submit a clear copy of one(1) valid photo-bearing school ID dulysigned by the principal or head of theschool.

c. NSSLAs shall require their clients tosubmit a clear copy of one (1) valid ID on aone-time basis only, or at thecommencement of a business relationship.They shall require their clients to submit anupdated photo and other relevant informationwhenever the need for it arises.

The foregoing shall be in addition tothe customer identification requirementsunder Rule 9.1.c of the Revised IRRs ofR.A. No. 9160, as amended (Appendix S-7)

For purposes of this Section, financialtransactions may include remittances,among others, as fal l ing under thedefinition of transaction. Under theAnti-Money Laundering Act of 2001, asamended, a financial transaction is any actestablishing any right or obligation orgiving rise to any contractual or legalrelationship between the parties thereto.


§§ 4695S - 4699S08.12.31

It also includes any movement of funds byany means with a covered institution.(Circular No. 564 dated 03 April 2007 as amended by Circular

No. 608 dated 20 May 2008)


Sec. 4699S General Provision onSanctions Unless otherwise provided, anyviolation of the provisions of this Part shallbe subject to the sanctions provided inSections 34, 35, 36 and 37 of R. A. No.7653, whenever applicable.

Manual of Regulations for Non-Bank Financial Institutions S RegulationsAppendix S-I - Page 1

APP. S-108.12.31

SAFEGUARDS IN BONDING OF NSSLA ACCOUNTABLEOFFICERS AND EMPLOYEES

(Appendix to Sec. 4145S)

1. The Teller. He should not beallowed to accumulate more than a specificmaximum amount to be determined by theassociation but in no case to exceedP10,000 in cash at any given time while inthe performance of his duties. Theprocedures in this regard are as follows:

a. Cash. All cash in excess of themaximum amount determined by theassociation shall be turned over to thecashier. When deposits received by a tellerwill increase his cash in excess of themaximum limit, the teller shallimmediately make a cash turn-over of, atleast, the excess. Thus, although histransactions during the day may total morethan the maximum limit, the amount ofmoney directly in his custody at any giventime will never exceed the limit.

b. Checks and Other Cash Items(COCIs). All COCIs received by a tellershould be stamped as “non-negotiable.”The stamping should be made diagonallyon the face of the check. Thus, all checksthat are received by the tellers lose theirfurther negotiability. There should,however, be an agreement with theassociation’s depository banks wherebythey will accept for deposit only to theaccount of the association the COCIpreviously stamped by the tellers as “non-negotiable.” Therefore, only the associationand nobody else can further negotiate thesechecks, and only the association’s

depository bank will accept them andsolely for deposit to its account. Thus, evenin the remote possibility that someonepresents a COCI stolen from the associationto one of its depository banks, it will not beaccepted for encashment.

2. The COCIs Clerk. In view of thefact that all COCIs received by the tellersare stamped “non-negotiable” as detailedabove, the COCIs clerk who records andprocesses these checks carries noaccountabilities whatsoever. From themoment that a check is received up to themoment that it is deposited to the accountof the association with one of its depositorybanks, that check is just a piece of paper tobe processed and recorded. It will onlyreassume its negotiability upon its receiptby the association’s depository bank. Incases, however, where checks arereceived by mail, the COCIs clerk shall becharged with the duty of stamping thechecks as “non-negotiable.”

3. As an added precautionarymeasure, the manager/accountant/loanofficer should check from time to timewhether all COCIs received are stamped“non-negotiable.” In the event that a COCIis not so stamped and it results in financialloss on the part of the association, theemployee charged with the duty to stampand who failed to do so, shall be heldpersonally responsible, together with themanager/accountant/loan officer, for the loss.

Manual of R

egulations for Non-B

ank Financial Institutions

APP. S-2

08.12.31

LIST OF REPORTS REQUIRED FROM NON-STOCK SAVINGS AND LOAN ASSOCIATIONS(Appendix to Sec. 4162S)

A-2 BSP 7-26-02H 4162S (As

amended by M-029 dated 09.24.07)

A-2 Unnumbered 4691S (Rev. May

2002 as amended by Cir. No. 612 dated 06.03.08)

A-2 Unnumbered 4691S

A-3 BSP 7-26-03H 4162S (As amended

by M-2007-

029 dated 09.24.07)

A-3 BSP 7-26-18.1H 4358S

Consolidated Statement of Condition

Report on Suspicious Transactions

Report on Covered Transactions

Consolidated Statement of Income and Expenses

Copy of entry in NSSLA records of written approval ofmajority of directors on credit accommodation todirectors and officers with accompanying Certificationon Loans Granted to Directors/Officers

on or before the end ofthe immediate followingmonth

10th business day fromdate of transaction/knowledge

-do-

on or before the end ofthe immediate followingmonth

20th business day fromdate of approval

Quarterly

Astransaction

occurs

-do-

Quarterly

Asapproved

Original to SDC

Original and duplicate -Anti-Money LaunderingCouncil (AMLC)

-do-

Original to SDC

Original - ISD I

Submission SubmissionCategory Form No. MOR Ref. Report Title Frequency Deadline Procedure

S Regulations

Appendix S-2 - Page 1

APP. S-2

08.12.31

S Regulations


Manual of R



A-3 Unnumbered 4162S (CL-050

dated 10.04.07 and CL-059 dated 11.28.07)

B 4172S

B BSP 7-26-01H 4162S

4162SSES IIForm 15(NP08-TB) As

amendedbyM-024dated

07.31.08

B BSP 7-26-20H 4162S

B BSP 7-26-25H 4126S

Report on Borrowings of BSP Personnel

Audited/Unaudited Financial Statements required inSec. 4181S accompanied by annual report1 (tomembers, if any)

Information Sheet

Biographical Data of Directors/Officers- If submitted in diskette form - Notarized first page ofeach of the directors'/officers' bio-data saved indiskette and control prooflist- If sent by electronic mail - Notarized first page ofBiographical Data or Notarized list of names ofDirectors/Officers whose Biographical Data weresubmitted thru electronic mail to be faxed to SDC (CLdated 01.09.01)

Report on Crimes/Losses

Dividends Declaration

Quarterly

Annually

Annually2

Annually2

and aschangesoccur

As crime/incidentoccurs

As declared

15th banking days afterend of reference quarter

120th/60th day afterend of fiscal year asrequired in Sec. 4181S

30th day after calendaryear-end

January 31st and 15thbusiness day from thedate of the meeting ofthe board of directors inwhich the directors/officers are elected orappointed

See Annex S-2-a forguidelines on reportingcrimes and losses

10th business day afterdate of declaration

Original to SDC

Original - ISD I

-do-

Electronic mail or disketteform to SDC or if hard copyoriginal to appropriatedepartment of the SES,duplicate to SDC

-do-

-do-


1 Required of NSSLAs with total resources of P 10 million or more2 Not required where no change occurs

Manual of R



APP. S-2

08.12.31

B - 4126S

B - 4306S.3

B - 4162S.1

B Unnumbered 4691S

Unnumbered 4691S(no prescribed form)

4162S

B

Report of Discrepancies of Accounts

Notice/Application for Write-Off of Loans

Board Resolution on NSSLA's signatories to reportssubmitted to Bangko Sentral

Plan of action to comply with Anti-Money Launder-ing requirements

Certification of compliance with existing anti-moneylaundering regulations

Audit Engagement Contract

General Information Sheet

Everytime adiscrepancy

occurs1

As write-offoccurs

Asauthorized

-

Annually

As contractis signed

Annually

15th day from discoveryof discrepancy

30th day prior to theintended date of write-off

3rd day from date ofresolution

30th business day from31 July 2000 or fromopening of theinstitution

20th business day afterend of reference year

15th calendar day fromdate of signing of contract

30th day from date ofannual stockholders'meeting

-do-

-do-

-do-

-do-

-do-

-do-

Drop Box - SEC CentralReceiving SectionOriginal - SECDuplicate - BSP


1 Not required where the discrepancies do not exceed 1% of NSSLA's net worth or P100,000, whichever is lower

S Regulations


S RegulationsAppendix S-2 - Page 4


APP. S-208.12.31

Annex S-2-a

REPORTING GUIDELINES ON CRIMES/LOSSES

1. NSSLAs shall report on thefollowing matters through theappropriate supervising and examiningdepartment:

a. Crimes whether consummated,frustrated or attempted against property/facil i t ies (such as robbery, theft ,swindling or estafa, forgery and otherdeceits) and other crimes involving loss/destruction of property of the NSSLAwhen the amount involved in each crimeis P20,000 or more.

Crimes involving NSSLA personnel,regardless of whether or not such crimesinvolve the loss/destruction of propertyof the NSSLA, even if the amountinvolved is less than those abovespecified, shall likewise be reported tothe BSP.

b. Incidents involving material loss,destruction or damage to the institution’sproperty/facilities, other than arising from

a crime, when the amount involved perincident is P20,000 or more.

2. The following guidelines shall beobserved in the preparation andsubmission of the report.

a. The report shall be prepared intwo (2) copies and shall be submittedwithin f ive (5) business days fromknowledge of the crime or incident, theoriginal to the appropriate supervisingdepartment and the duplicate to the BSPSecurity Coordinator, thru the Director,Security Investigation and TransportDepartment.

b. Where a thorough investigationand evaluation of facts is necessary tocomplete the report, an initial reportsubmitted within the five (5)-business daydeadline may be accepted: Provided,That a complete report is submitted notlater than fifteen (15) business days fromtermination of investigation.


APP. S-308.12.31

S Regulations Appendix S-3 - Page 1

GUIDELINES ON PRESCRIBED REPORTS SIGNATORIES AND SIGNATORY AUTHORIZATION

(Appendix to Subsec. 4162S.1)

Category A-1 reports shall be signedby the chief executive officer, or in hisabsence, by the executive vice-president,and by the comptroller, or in his absence,by the chief accountant, or by officersholding equivalent positions. Thedesignated signatories in this category,including their specimen signatures, shallbe contained in a resolution approved bythe board of directors in the formatprescribed in Annex S-3-a.

Category A-2 reports of head officesshall be signed by the president, executivevice-presidents, vice-presidents or officersholding equivalent positions. Such reportsof other offices/units (such as branches)shall be signed by their respective

managers/officers in-charge. Likewise, thesigning authority in this category shall becontained in a resolution approved by theboard of directors in the format prescribedin Annex S-3-b.

Categories A-3 and B reports shall besigned by officers or their alternates, whoshall be duly designated by the board ofdirectors. A copy of the board resolution,with format as prescribed in Annex S-3-c.

Copies of the board resolutions on thereport signatory designations shall besubmitted to the appropriate supervisingand examining department of the BSPwithin three (3) business days from the dateof resolution.


APP. S-308.12.31


Annex S-3-a

FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORY A-1 REPORTS

Resolution No. _____

Whereas, it is required under Subsec. 4162S.1 that Category A-1 reports be signed by theChief Executive Officer, or in his absence, by the Executive Vice-President, and by theComptroller, or in his absence, by the Chief Accountant, or by officers holding equivalent positions.

Whereas, it is also required that aforesaid officers of the institution be authorized undera resolution duly approved by the institution's Board of Directors;

Whereas, we, the members of the Board of Directors of (Name of Institution) ,are conscious that, in designating the officials who would sign said Category A-1 reports,we are actually empowering and authorizing said officers to represent and act for or in behalfof the Board of Directors in particular and (Name of Institution) in general;

Whereas, this Board has full faith and confidence in the institution's Chief ExecutiveOfficer, Executive Vice-President, Comptroller and Chief Accountant, as the case may be,and, therefore, assumes responsibility for all the acts which may be performed by aforesaidofficers under their delegated authority;

Now, therefore, we, the members of the Board of Directors, resolve, as it is herebyresolved that:

1. Mr.____________ President _________________Specimen Signature

or Executive

2. Mr.____________ Vice-President _________________Specimen Signature

and3. Mr.____________ Comptroller _________________

Specimen Signature or Chief

4. Mr.____________ Accountant _________________Specimen Signature

are hereby authorized to sign Category A-1 reports of (Name of Institution) .

Done in the City of ________________ Philippines, this ____day of , 20____.

CHAIRMAN OF THE BOARD

DIRECTOR DIRECTOR

DIRECTOR DIRECTOR

DIRECTOR DIRECTOR

ATTESTED BY: ______________________

CORPORATE SECRETARY


APP. S-308.12.31


Whereas, it is required under Subsec. 4162S.1 that Category A-2 reports of head officesbe signed by the President, Executive Vice-Presidents, Vice-Presidents or officers holdingequivalent positions, and that such reports of other offices be signed by the respectivemanagers/officers-in-charge;


Whereas, we, the members of the Board of Directors of (Name of Institution) , areconscious that, in designating the officials who would sign said Category A-2 reports, we areactually empowering and authorizing said officers to represent and act for or in behalf of theBoard of Directors in particular and (Name of Institution) in general;

Whereas, this Board has full faith and confidence in the institution's President (and/orthe Executive Vice-President, etc., as the case may be) and, therefore, assumes responsibilityfor all the acts which may be performed by aforesaid officers under their delegated authority;


Name of Officer Specimen Signature Position Title Report No. _____________ ________________ __________ _________

are hereby authorized to sign the Category A-2 reports of (Name of Institution) .

Done in the City of ________________ Philippines, this ____day of ____, 20____.

_________________________CHAIRMAN OF THE BOARD

DIRECTOR DIRECTOR

DIRECTOR DIRECTOR

DIRECTOR DIRECTOR

ATTESTED BY:

CORPORATE SECRETARY

Annex S-3-b




APP. S-308.12.31


Annex S-3-c

FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORIESA-3 AND B REPORTS


Whereas, it is required under Subsec. 4162S.1 that Categories A-3 and B reports besigned by officers or their alternates;


Whereas, we the members of the Board of Directors of (Name of Institution) , areconscious that, in designating the officials who would sign said Categories A-3 and B reports,we are actually empowering and authorizing said officers to represent and act for or inbehalf of the Board of Directors in particular and (Name of Institution) in general;

Whereas, this Board has full faith and confidence in the institution's authorized signatoriesand, therefore, assumes responsibility for all the acts which may be performed by aforesaidofficers under their delegated authority;


Name of Authorized Signatory/Alternate Specimen Signature Position Title Report

1. Authorized(Alternate)


etc.



_________________________CHAIRMAN OF THE BOARD

DIRECTOR DIRECTOR

DIRECTOR DIRECTOR

DIRECTOR DIRECTOR

ATTESTED BY:

CORPORATE SECRETARY

APP S-408.12.31

Manual of Regulations for Non-Bank Financial Institutions S Regulations Appendix S-4 - Page 1

FORMAT-DISCLOSURE STATEMENT OF LOAN/CREDIT TRANSACTION(Appendix to Subsec. 4307S.2)

(Business Name of Creditor)

DISCLOSURE STATEMENT OF LOAN/CREDIT TRANSACTION (SINGLE PAYMENTOR INSTALLMENT PLAN)

(As required under R.A. 3765, Truth in Lending Act)

Name of Borrower

Address

1. Cash/Purchase Price ________________or Net Proceeds of Loan (Item Purchased)

2. LESS: Downpayment and/or Trade-in Value (Not applicable for loan transaction)3. Unpaid Balance of Cash/Purchase Price or Net Proceeds of Loan

4. Non-Finance Charges [Advanced by Seller/Creditor]:a. Insurance Premium Pb. Taxesc. Registration Feesd. Documentary/Science Stampse. Notarial Feesf. Others:

Total Non-Finance Charges

5. Amount to be Financed (Items 3 + 4)

P

P

APP. S-408.12.31



P

P

6. Finance Charges1

a. Interest _______% p.a.from ________ to ________

[ ] Simple [ ] Monthly[ ] Compound [ ] Quarterly

[ ] Semi-Annual[ ] Annual

b. Discountsc. Service/Handling Chargesd. Collection Chargese. Credit Investigation Feesf. Appraisal Feesg. Attorney’s/Legal Feesh. Other charges incidental to the

extension of credit (specify): _______________ _______________ _______________

Total Non-Finance Charges

7. Percentage of Finance Charges to Total Amount Financed(Computed in accordance with Subsec. 4307S.1) _______________%

8. Effective Interest Rate _______________%(Method of computation attached)

9. Paymenta. Single Payment due ____________________

(Date) b. Total Installment Payments

(Payable in __________ weeks/months @ P__________) P

P

1 Time price differential should be disclosed as a finance charge. If an itemization cannot be made, a lump-sum figure may

be reported under Other charges incidental to the extension of credit in Item 6h.

APP S-408.12.31


10. Additional charges in case certain stipulations in the contract are not met by thedebtor:

Nature Rate Amount

CERTIFIED CORRECT:

_______________________ (Signature of Creditor/

Authorized Representative Over Printed Name)

_________________________ Position

I ACKNOWLEDGE RECEIPT OF A COPY OF THIS STATEMENT PRIOR TO THECONSUMMATION OF THE CREDIT TRANSACTION AND THAT I UNDERSTAND ANDFULLY AGREE TO THE TERMS AND CONDITIONS THEREOF.

(Signature of Buyer/Borrower Over Printed Name)

DATE ____________________

NOTICE TO BUYER/BORROWER: YOU ARE ENTITLED TO A COPY OF THIS PAPER WHICH YOU SHALL SIGN.


APP. S-508.12.31

ABSTRACT OF “TRUTH IN LENDING ACT” (Republic Act No. 3765)(Appendix to Subsec. 4307S.4)

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

Sec. 2. Declaration of Policy. It is herebydeclared to be the policy of the State to protectits citizens from a lack of awareness of thetrue cost of credit to the user by assuring afull disclosure of such cost with a view ofpreventing the uninformed use of credit tothe detriment of the national economy.

xxx xxx xxx

Sec. 3. As used in this Act, the term -

xxx xxx xxx

(3) “Finance charge” includes interest, fees,service charges, discounts, and such othercharges incident to the extension of creditas the Board may by regulation prescribe.

xxx xxx xxx

Sec. 4. Any creditor shall furnish to eachperson to whom credit is extended, priorto the consummation of the transaction aclear statement in writing setting forth, tothe extent applicable and in accordancewith rules and regulations prescribed bythe Board, the following information:

(1) the cash price or delivered priceof the property or service to be acquired;

(2) the amounts, if any, to be creditedas down payment and/or trade-in;

(3) the difference between theamounts set forth under clauses (1) and (2);

(4) the charges, individually itemized,which are paid or to be paid by such personin connection with the transaction but whichare not incident to the extension of credit;

(5) the total amount to be financed;(6) the finance charge expressed in

terms of pesos and centavos; and

(7) the percentage that the financecharge bears to the total amount to befinanced expressed as a simple annual rateon the outstanding unpaid balance of theobligation.

xxx xxx xxx

Sec. 6. (a) Any creditor who in connectionwith any credit transaction fails to disclose toany person any information in violation ofthis Act or any regulation issued thereundershall be liable to such person in the amountof P100 or in an amount equal to twice thefinance charge required by such creditor inconnection with such transaction, whicheveris the greater, except that such liability shallnot exceed P2,000 on any credit transaction.

xxx xxx xxx

(c) Any person who willfully violatesany provision of this Act or any regulationissued thereunder shall be fined by not lessthan P1,000 nor more than P5,000 orimprisonment for not less than 6 monthsnor more than one year or both.

xxx xxx xxx

(d) Any final judgment hereafterrendered in any criminal proceeding underthis Act to the effect that a defendant haswillfully violated this Act shall be primafacie evidence against such defendant inan action or proceeding brought by anyother party against such defendant underthis Act as to all matters respecting whichsaid judgment would be an estoppel asbetween the parties thereto.

Sec. 7. This Act shall become effectiveupon approval.

Approved, 22 June 1963.



APP. S-608.12.31

Banks, QBs, trust entities and all otherinstitutions, and their subsidiaries andaffiliates supervised or regulated by the BSP(covered institutions) shall strictly complywith the provisions of Section 9 of R.A.No. 9160 and the following rules andregulations on anti-money laundering.

1. Customer identification. Coveredinstitutions shall establish and record thetrue identity of its clients based on officialdocuments. They shall maintain a systemof verifying the true identity of theirclients and, in case of corporate clients,require a system of verifying their legalexistence and organizational structure, aswell as the authority and identification ofall persons purporting to act on theirbehalf.

When establishing business relationsor conducting transactions (particularlyopening of deposit accounts, acceptingdeposit substitutes, entering into trust andother fiduciary transactions, renting ofsafety deposit boxes, performingremittances and other large cashtransactions) covered institutions shouldtake reasonable measures to establish andrecord the true identity of their clients.Said client identification may be based onofficial or other reliable documents andrecords.

a. In cases of corporate and otherlegal entities, the following measuresshould be taken, when necessary:

(1) Verification of the legal existenceand structure of the client from theappropriate agency or from the client itselfor both, proof of incorporation, includinginformation concerning the customer’sname, legal form, address, directors,principal officers and provisions regulatingthe power behind the entity.

(2) Verification of the authority andidentification of the person purporting toact on behalf of the client.

b. In case of doubt as to whethertheir purported clients or customers areacting for themselves or for another,reasonable measures should be taken toobtain the true identity of the persons onwhose behalf an account is opened or atransaction conducted.

c. The provisions of existing laws tothe contrary notwithstanding, anonymousaccounts, accounts under fictitious names,and all other similar accounts shall beabsolutely prohibited. In case wherenumbered accounts is allowed (i.e., pesoand foreign currency non-checkingnumbered accounts), covered institutionsshould ensure that the client is identifiedin an official or other identifyingdocuments.

The BSP may conduct annual testingsolely limited to the determination of theexistence and the identity of the ownersof such accounts.

Covered institutions shall phase outwithin a period of one (1) year from 2 April2001 or upon their maturity, whichever isearlier, anonymous accounts or accountsunder fictitious names as well asnumbered accounts being kept ormanaged by them, which are notexpressly allowed under existing law.

d. The identity of existing clients orbeneficial owners of deposits and otherfunds held or being managed by thecovered institutions should be renewed/updated at least every other year.

e. All records of all transactions ofcovered institutions shall be maintainedand safely stored for five (5) years fromthe dates of transactions. With respect toclosed accounts, the records on customer

ANTI-MONEY LAUNDERING REGULATIONS(Appendix to Section 4691S)

Manual of Regulations for Non-Bank Financial InstitutionsS RegulationsAppendix S-6 - Page 2

APP. S-608.12.31

identification, account files and businesscorrespondence, shall be preserved andsafely stored for at least five (5) years fromthe dates when they were closed.

Such records must be sufficient to permitreconstruction of individual transactions soas to provide, if necessary, evidence forprosecution of criminal behaviour.

f. Special attention should be givento all complex, unusual large transactions,and all unusual patterns of transactions,which have no apparent or visible lawfulpurpose. The background and purpose ofsuch transactions should, as far as possible,be examined, the findings established inwriting, and be available to helpsupervisors, auditors and law enforcementagencies.

g. Covered institutions should not, orshould at least avoid, transacting businesswith criminals. Reasonable measuresshould be adopted to prevent the use oftheir facilities for laundering of proceedsof crimes and other illegal activities.

2. Programs against moneylaundering. Programs against moneylaundering should be developed. Theseprograms, should include, as a minimum:

a. The development of internalpolicies, procedures and controls,including the designation of complianceofficers at management level, andadequate screening procedures to ensurehigh standards when hiring employees;

b. An ongoing employee trainingprogram; and

c. An audit function to test the system.

3. Submission of plans of actionCovered institutions shall submit a plan ofaction on how to comply with therequirements of App. S-6 nos. 1, 2 and 4within thirty (30) business days from 31July 2000 or from opening of theinstitution.

4. Required reporting of certaintransactions. If there is reasonable groundto believe that the funds are proceeds ofan unlawful activity as defined under R.A.No. 9160 and/or its IRRs, the transactionsinvolving such funds or attempts to transactthe same, should be reported to the Anti-Money Laundering Council (AMLC) inaccordance with Rules 5.2 and 5.3 of theAMLA IRRs.

a. Report on suspicious transactions.1

Banks shall report covered transactions andsuspicious transactions, as defined in Rules5.2 and 5.3 of the AMLA IRRs, to the AMLCusing the forms prescribed by the AMLC.Reportable transactions shall include thefollowing:

(1) Outward remittances withoutvisible lawful purpose;

(2) Inward remittances without visiblelawful purpose or without underlying tradetransactions;

(3) Unusual purchases of foreignexchange without visible lawful purpose;

(4) Unusual sales of foreign exchangewhose sources are not satisfactorilyestablished;

(5) Complex, unusual largetransactions, and all unusual patterns oftransactions, which have no apparent orvisible lawful purpose;

(6) Funds being managed or held asdeposit substitutes if there is reasonableground to believe that the same are proceedsof criminal and other illegal activities; and

(7) Suspicious Transaction Indicatorsor “Red Flags” as a Guide in theSubmission to the AMLC of Reports ofSuspicious Transactions Relating ToPotential or Actual Financing of Terrorism.

(a) Wire transfers between accounts,without visible economic or businesspurpose, especially if the wire transfers areeffected through countries which areidentified or connected with terroristactivities.

1Amended by AMLC Resolution No. 292 dated 11.20.03 (Annex S-6-b)



APP. S-608.12.31

(b) Sources and/or beneficiaries of wiretransfers are citizens of countries which areidentified or connected with terroristactivities.

(c) Repetitive deposits or withdrawalsthat cannot be explained or do not makesense.

(d) Value of the transaction is over andabove what the client is capable of earning.

(e) Client is conducting a transactionthat is out of the ordinary for his knownbusiness interest.

(f) Deposits being made byindividuals who have no knownconnection or relation with the accountholder.

(g) An individual receiving remittances,but has no family members working in thecountry from which the remittance ismade.

(h) Client was reported and/ormentioned in the news to be involved interrorist activities.

(i) Client is under investigation by lawenforcement agencies for possibleinvolvement in terrorist activities.

(j) Transactions of individuals,companies or non-governmentalorganizations (NGOs) that are affiliated orrelated to people suspected of beingconnected to a terrorist group or a groupthat advocates violent overthrow of agovernment.

(k) Transactions of individuals,companies or NGOs that are suspected asbeing used to pay or receive funds fromrevolutionary taxes.

(l) The NGO does not appear to haveexpenses normally related to relief orhumanitarian effort.

(m) The absence of contributions fromdonors located within the country of originof the NGO.

(n) A mismatch between the patternand size of financial transactions on the onehand and the stated purpose and activityof the NGO on the other.

(o) Incongruities between apparentsources and amount of funds raised ormoved by the NGO.

(p) Any other transaction that is similar,identical or analogous to any of theforegoing.

(8) All other suspicious transactions/activities which can be reported withoutviolating any law.

The report on suspicious transactionsshall provide the following minimuminformation:

(a) Name or names of the partiesinvolved.

(b) A brief description of thetransaction or transactions.

(c) Date or date the transaction(s)occurred.

(d) Amount(s) involved in everytransaction.

(e) Such other relevant informationwhich can be of help to the authoritiesshould there be an investigation.

b. Exemption from Bank SecrecyLaw. When reporting covered transactionsto the AMLC, covered institutions and theirofficers, employees, representatives,agents, advisors, consultants or associatesshall not be deemed to have violated R.A.No. 1405, as amended; R.A. No. 6426, asamended; R.A. No. 8791 and other similarlaws, but are prohibited fromcommunicating, directly or indirectly, inany manner or by any means, to any personthe fact that a covered transaction reportwas made, the contents thereof, or anyother information in relation thereto. Incase of violation thereof, the concernedofficer, employee, representative, agent,advisor, consultant or associate of thecovered institution, shall be criminallyliable. However, no administrative,criminal or civil proceedings, shall lieagainst any person for having made acovered transaction report in the regularperformance of his duties and in good faith,whether or not such reporting results in any


APP. S-608.12.31

criminal prosecution under R.A. No. 9160or any other Philippine law.

c. Prohibition from disclosure of thecovered transaction report. Whenreporting covered transactions to theAMLC, covered institutions and theirofficers, employees, representatives,agents, advisors, consultants or associatesare prohibited from communicating,directly or indirectly, in any manner or byany means, to any person, entity, themedia, the fact that a covered transactionreport was made, the contents thereof, orany other information in relation thereto.Neither may such reporting be publishedor aired in any manner or form by the massmedia, electronic mail, or other similardevices. In case of violation thereof, the

concerned officer, employee, representative,agent, advisor, consultant or associate of thecovered institution, or media shall be heldcriminally liable.

5. Certification of compliance withanti-money laundering regulations.Covered institution shall submit annuallyto the BSP thru the appropriate supervisingand examining department a certification(Annex S-6-a) signed by the President orofficer of equivalent rank and by theirCompliance Officer to the effect that theyhave monitored compliance with existinganti-money laundering regulations.

The certification shall be submitted inaccordance with Appendix S-2 and shallbe considered a Category A-2 report.

Manual of Regulations for Non-Bank Financial Institutions S RegulationsAppendix S-6 - Page 5

APP. S-6 08.12.31

Pursuant to the provisions of Section 2 of BSP Circular No. 279 dated 2 April 2001, wehereby certify:

1. That we have monitored (Name of NSSLA)’s compliance with R.A. No. 9160(Anti-Money Laundering Act of 2001) as well as with BSP Circular Nos. 251, 253,259 and 302;

2. That the NSSLA is complying with the required customer identification, documentationof all new clients, and continued monitoring of customer’s activities;

3. That the NSSLA is also complying with the requirement to record all transactionsand to maintain such records including the record of customer identification for atleast five (5) years;

4. That the NSSLA does not maintain anonymous or fictitious accounts; and

5. That we conduct regular anti-money laundering training sessions for all NSSLAofficers and selected staff members holding sensitive positions.

(Name of President or officer (Name of Compliance Officer) of equivalent rank)

SUBSCRIBED AND SWORN to before me, _____ this ____ day of ____________,affiant/s exhibiting to me their Residence Certificates as follows:

Community Date/PlaceName Tax Cert. No Issued

Doc. No. _________; Notary PublicPage No. _________;Book No. _________;Series of 20___

Annex S-6-a

CERTIFICATION OF COMPLIANCEWITH ANTI-MONEY LAUNDERING REGULATIONS

C E R T I F I C A T I O N


APP. S-608.12.31


1. All covered institutions are requiredto file Suspicious Transaction Reports (STRs)on transactions involving all kinds ofmonetary instruments or property.

2. Banks shall file covered transactionreports (CTRs) on transactions involving allkinds of monetary instruments or property,i.e., in cash or non-cash, whether indomestic or foreign currency.

3. Covered institutions, other thanbanks, shall file CTRs on transactions incash or foreign currency or other monetaryinstruments (other than checks) orproperties. Due to the nature of thetransactions in the stock exchange, only thebrokers-dealers shall be required to fileCTRs and STRs. The PSE, PCD, SCCP andtransfer agents are exempt from filing CTRs.They, are however, required to file STRswhen the transactions that pass throughthem are deemed to be suspicious.

4. Where the covered institutionengages in bulk transactions with a bank,i.e., deposits of premium payments in bulkor settlements of trade, and the bulktransactions do not distinguish clients and

Annex S-6-b

AMLC Resolution No. 292

RULES ON SUBMISSION OF COVERED TRANSACTION REPORTS ANDSUSPICIOUS TRANSACTION REPORTS BY COVERED INSTITUTIONS1

(Annex to Appendix S-6)

their respective transaction amounts, saidcovered institutions shall be required to fileCTRs on its clients whose transactionsexceed P500,000 and are included in thebulk transactions.

5. With respect to insurancecompanies, when the total amount of thepremiums for the entire year, regardlessof the mode of payment (monthly,quarterly, semi-annually or annually),exceeds P500,000, such amount shall bereported as a covered transaction, even ifthe amounts of the amortizations are lessthan the threshold amount. The CTR shallbe filed upon payment of the first premiumamount, regardless of the mode ofpayment. Under this rule, the insurancecompany shall file the CTR only once everyyear until the policy matures or rescinded,whichever comes first.

6. The submission of CTRs is deferreduntil the AMLC directs otherwise.Submission of STRs, however, are notdeferred and covered institutions aremandated to submit such STRs when thecircumstances so require.

1a. The Anti-Money Laundering Council (AMLC), in the exercise of its authority under Sections 7(1) and 9 of Republic ActNo. 9160, otherwise known as the “Anti-Money Laundering Act of 2001”, as amended, and its Revised Implementing Rules andRegulations, resolved to:

(1) Defer reporting by covered institutions to AMLC of the following “non-cash, no/low risk covered transactions:· Transactions between banks and the BSP;· Transactions between banks operating in the Philippines;· Internal operating expenses of the banks;· Transactions between banks and government agencies;· Transactions involving transfer of funds from one deposit account to another deposit account of the same person within

the same bank;· Roll-overs of placements of time deposits; and· Loan interest/principal payment debited against borrower’s deposit account maintained with the lending bank.(2) Request the BSP-supervised institutions, through the Association of Bank Compliance Officers (ABCOMP), to determine

and report to AMLC the specific transactions falling within the purview of the aforesaid BSP-identified categories on “non-cash,no/low risk” covered transactions.

b. All covered institutions should:(1) Submit corresponding electronic copy versions, in the required format, of those STRs previously submitted in hard copy

or the hard copy version of those submitted only in electronic form, as the case may be, retroactive to 05 January 2004; and(2) Re-submit in required electronic form, those CTRs that have been submitted previously in hard copy or in diskette not

in the required format, retroactive to 23 March 2003.


APP. S-708.12.31

RULE 1TITLE

Rule 1.a. Title. - These Rules shall beknown and cited as the “Revised Rulesand Regulations ImplementingR.A. No. 9160”, ( the Anti-MoneyLaundering Act of 2001 [AMLA]), asamended by R.A. No. 9194.

Rule 1.b. Purpose. - These Rules arepromulgated to prescribe the proceduresand guidelines for the implementation ofthe AMLA, as amended by R.A. No. 9194.

RULE 2DECLARATION OF POLICY

Rule 2. Declaration of Policy. - It ishereby declared the policy of the Stateto protect the integrity and confidentialityof bank accounts and to ensure that thePhilippines shall not be used as a money-laundering site for the proceeds of anyunlawful activity. Consistent with itsforeign policy, the Philippines shallextend cooperation in transnationalinvestigations and prosecutions ofpersons involved in money launderingactivities wherever committed.

RULE 3DEFINITIONS

Rule 3. Definitions. – For purposes of thisAct, the following terms are hereby definedas follows:

Rule 3.a. Covered Institution refers to:

Rule 3.a.1. Banks, offshore bankingunits, quasi-banks, trust entities, non-stock

REVISED IMPLEMENTING RULES AND REGULATIONSR.A. NO. 9160, AS AMENDED BY R.A. NO. 9194

(Appendix to Sec. 4691S)

savings and loan associations, pawnshops,and all other institutions, including theirsubsidiaries and affiliates supervised and/or regulated by the Bangko Sentral ngPilipinas (BSP).

(a) A subsidiary means an entity morethan fifty percent (50%) of the outstandingvoting stock of which is owned by a bank,quasi-bank, trust entity or any otherinstitution supervised or regulated by theBSP.

(b) An affiliate means an entity atleast twenty percent (20%) but notexceeding fifty percent (50%) of thevoting stock of which is owned by abank, quasi-bank, trust entity, or anyother insti tution supervised and/orregulated by the BSP.

Rule 3.a.2. Insurance companies,insurance agents, insurance brokers,professional reinsurers, reinsurancebrokers, holding companies, holdingcompany systems and all other personsand entities supervised and/or regulated bythe Insurance Commission (IC).

(a) An insurance company includesthose entities authorized to transactinsurance business in the Philippines,whether life or non-life and whetherdomestic, domestically incorporated orbranch of a foreign entity. A contract ofinsurance is an agreement whereby oneundertakes for a consideration toindemnify another against loss, damageor liability arising from an unknown orcontingent event. Transacting insurancebusiness includes making or proposingto make, as insurer, any insurancecontract, or as surety, any contract ofsuretyship as a vocation and not asmerely incidental to any other legitimate


APP. S-708.12.31

business or activity of the surety, doingany kind of business specif icallyrecognized as constituting the doing ofan insurance business within themeaning of Presidential Decree (P.D.)No. 612, as amended, including areinsurance business and doing orproposing to do any business insubstance equivalent to any of theforegoing in a manner designed to evadethe provisions of P.D. No. 612, asamended.

(b) An insurance agent includesany person who solicits or obtainsinsurance on behalf of any insurancecompany or transmits for a personother than himself an application for apolicy or contract of insurance to orf rom such company or o f fe r s o rassumes to act in the negotiation ofsuch insurance.

(c) An insurance broker includes anyperson who acts or aids in any manner insoliciting, negotiating or procuring themaking of any insurance contract or inplacing risk or taking out insurance, onbehalf of an insured other than himself.

(d) A professional reinsurer includesany person, partnership, association orcorporation that transacts solely andexclusively reinsurance business in thePhilippines, whether domestic,domestically incorporated or a branch ofa foreign entity. A contract of reinsuranceis one by which an insurer procures athird person to insure him against loss orliability by reason of such originalinsurance.

(e) A reinsurance broker includesany person who, not being a dulyauthorized agent, employee or officer ofan insurer in which any reinsurance iseffected, acts or aids in any manner innegotiating contracts of reinsurance orplacing risks of effecting reinsurance, forany insurance company authorized to dobusiness in the Philippines.

(f) A holding company includes anyperson who directly or indirectly controlsany authorized insurer. A holding companysystem includes a holding companytogether with its controlled insurers andcontrolled persons.

Rule 3.a.3. (i) Securities dealers,brokers, salesmen, associated persons ofbrokers or dealers, investment houses,investment agents and consultants, tradingadvisors, and other entities managingsecurities or rendering similar services, (ii)mutual funds or open-end investmentcompanies, close-end investmentcompanies, common trust funds, pre-needcompanies or issuers and other similarentities; (iii) foreign exchange corporations,money changers, money payment,remittance, and transfer companies andother similar entities, and (iv) other entitiesadministering or otherwise dealing incurrency, commodities or financialderivatives based thereon, valuableobjects, cash substitutes and other similarmonetary instruments or propertysupervised and/or regulated by theSecurities and Exchange Commission(SEC).

(a) A securities broker includes aperson engaged in the business of buyingand selling securities for the account ofothers.

(b) A securities dealer includes anyperson who buys and sells securities forhis/her account in the ordinary course ofbusiness.

(c) A securities salesman includes anatural person, employed as such or as anagent, by a dealer, issuer or broker to buyand sell securities.

(d) An associated person of a brokeror dealer includes an employee thereofwho directly exercises control orsupervisory authority, but does not includea salesman, or an agent or a person whosefunctions are solely clerical or ministerial.


APP. S-708.12.31

(e) An investment house includes anenterprise which engages or purports toengage, whether regularly or on anisolated basis, in the underwriting ofsecurities of another person or enterprise,including securities of the Government andits instrumentalities.

(f) A mutual fund or an open-endinvestment company includes aninvestment company which is offeringfor sale or has outstanding, anyredeemable security of which it is theissuer.

(g) A closed-end investment companyincludes an investment company otherthan open-end investment company.

(h) A common trust fund includes afund maintained by an entity authorizedto perform trust functions under a writtenand formally established plan,exclusively for the collective investmentand reinvestment of certain moneyrepresenting participation in the planreceived by it in its capacity as trustee,for the purpose of administration, holdingor management of such funds and/orproperties for the use, benefit oradvantage of the trustor or of othersknown as beneficiaries.

(i) A pre-need company or issuerincludes any corporation supervised and/or regulated by the SEC and is authorizedor licensed to sell or offer for sale pre-needplans. Pre-need plans are contracts whichprovide for the performance of futureservice(s) or payment of future monetaryconsideration at the time of actual need,payable either in cash or installment bythe planholder at prices stated in thecontract with or without interest orinsurance coverage and includes life,pension, education, internment and otherplans, which the Commission may, fromtime to time, approve.

(j) A foreign exchange corporationincludes any enterprise which engagesor purports to engage, whether regularly

or on an isolated basis, in the sale andpurchase of foreign currency notes and suchother foreign-currency denominatednon-bank deposit transactions as may beauthorized under its articles ofincorporation.

(k) Investment Advisor/Agent/Consultant shall refer to any person:

(1) who for an advisory fee isengaged in the business of advisingothers, either directly or throughcirculars, reports, publications orwritings, as to the value of any securityand as to the advisability of trading in anysecurity; or

(2) who for compensation and as partof a regular business, issues orpromulgates, analyzes reports concerningthe capital market, except:

(a) any bank or trust company;(b) any journalist, reporter, columnist,

editor, lawyer, accountant,teacher;

(c) the publisher of any bonafidenewspaper, news, business orfinancial publication of generaland regular circulation, includingtheir employees;

(d) any contract market;(e) such other person not within the

intent of this definition, providedthat the furnishing of such serviceby the foregoing persons is solelyincidental to the conduct of theirbusiness or profession.

(3) any person who undertakes themanagement of portfolio securities ofinvestment companies, including thearrangement of purchases, sales orexchanges of securities.

(l) A moneychanger includes anyperson in the business of buying or sellingforeign currency notes.

(m) A money payment, remittance andtransfer company includes any person offeringto pay, remit or transfer or transmit moneyon behalf of any person to another person.


APP. S-708.12.31

(n) “Customer” refers to any person orentity that keeps an account, or otherwisetransacts business, with a coveredinstitution and any person or entity onwhose behalf an account is maintained ora transaction is conducted, as well as thebeneficiary of said transactions. Acustomer also includes the beneficiary ofa trust, an investment fund, a pension fundor a company or person whose assets aremanaged by an asset manager, or a grantorof a trust. It includes any insurance policyholder, whether actual or prospective.

(o) “Property” includes any thing oritem of value, real or personal, tangible orintangible, or any interest therein or anybenefit, privilege, claim or right with respectthereto.

Rule 3.b. Covered Transaction is atransaction in cash or other equivalentmonetary instrument involving a totalamount in excess of Php500,000.00 withinone (1) banking day.

Rule 3.b.1.Suspicious transactions aretransactions, regardless of amount, where anyof the following circumstances exists:

(1) There is no underlying legal ortrade obligation, purpose or economicjustification;

(2) The client is not properly identified;(3) The amount involved is not

commensurate with the business orfinancial capacity of the client;

(4) Taking into account all knowncircumstances, it may be perceived thatthe client’s transaction is structured inorder to avoid being the subject ofreporting requirements under the act;

(5) Any circumstance relating to thetransaction which is observed to deviatefrom the profile of the client and/or theclient’s past transactions with the coveredinstitution;

(6) The transaction is in any way relatedto an unlawful activity or any money

laundering activity or offense under this actthat is about to be, is being or has beencommitted; or

(7) Any transaction that is similar,analogous or identical to any of theforegoing.

Rule 3.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) Securit ies or negotiable

instruments, bonds, commercial papers,deposit certificates, trust certificates,custodial receipts or deposit substituteinstruments, trading orders, transactiontickets and confirmations of sale orinvestments and money marketinstruments;

(4) Contracts or policies ofinsurance, life or non-life, and contractsof suretyship; and

(5) Other similar instruments whereti t le thereto passes to another byendorsement, assignment or delivery.

Rule 3.d. Offender refers to any personwho commits a money launderingoffense.

Rule 3.e. Person refers to any natural orjuridical person.

Rule 3.f. Proceeds refers to an amountderived or realized from an unlawfulactivity. It includes:

(1) All material results, profits, effectsand any amount realized from anyunlawful activity;

(2) All monetary, financial oreconomic 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 i tems for the f inancing,


APP. S-708.12.31

operations, and maintenance of anyunlawful activity.

Rule 3.g. Supervising Authority refers tothe BSP, the SEC and the IC. Where theBSP, SEC or IC supervision applies only tothe registration of the covered institution,the BSP, the SEC or the IC, within the limitsof the AMLA, shall have the authority torequire and ask assistance from thegovernment agency having regulatorypower and/or licensing authority over saidcovered institution for the implementationand enforcement of the AMLA and theseRules.

Rule 3.h. Transaction refers to any actestablishing any right or obligation or givingrise to any contractual or legal relationshipbetween the parties thereto. It also includesany movement of funds by any means witha covered institution.

Rule 3.i. Unlawful activity refers to any actor omission or series or combination thereofinvolving or having relation, to the following:

(A) Kidnapping for ransom under Article267 of Act No. 3815, otherwise known asthe Revised Penal Code, as amended;

(1) Kidnapping for ransom

(B) Sections 4, 5, 6, 8, 9, 10, 12, 13,14, 15 and 16 of R.A. No. 9165, otherwiseknown as the Comprehensive DangerousDrugs Act of 2002;

(2) Importation of prohibited drugs;(3) Sale of prohibited drugs;(4) Administration of prohibited drugs;(5) Delivery of prohibited drugs(6) Distribution of prohibited drugs(7) Transportation of prohibited drugs(8) Maintenance of a Den, Dive or

Resort for prohibited users(9) Manufacture of prohibited drugs(10)Possession of prohibited drugs(11)Use of prohibited drugs

(12)Cultivation of plants which aresources of prohibited drugs

(13)Culture of plants which are sourcesof prohibited drugs

(C) Section 3 paragraphs b, c, e, g, hand i of R.A. No. 3019, as amended,otherwise known as the Anti-Graft andCorrupt Practices Act;

(14)Directly or indirectly requesting orreceiving any gift, present, share,percentage or benefit for himself or for anyother person in connection with anycontract or transaction between theGovernment and any party, wherein thepublic officer in his official capacity has tointervene under the law;

(15) Directly or indirectly requestingor receiving any gift, present or otherpecuniary or material benefit, for himselfor for another, from any person for whomthe public officer, in any manner orcapacity, has secured or obtained, or willsecure or obtain, any government permitor license, in consideration for the helpgiven or to be given, without prejudice toSection 13 of R.A. No. 3019;

(16) Causing any undue injury to anyparty, including the government, or givingany private party any unwarranted benefits,advantage or preference in the dischargeof his official, administrative or judicialfunctions through manifest partiality,evident bad faith or gross inexcusablenegligence;

(17) Entering, on behalf of thegovernment, into any contract or transactionmanifestly and grossly disadvantageous tothe same, whether or not the public officerprofited or will profit thereby;

(18) Directly or indirectly havingfinancial or pecuniary interest in anybusiness contract or transaction inconnection with which he intervenes ortakes part in his official capacity, or inwhich he is prohibited by the Constitutionor by any law from having any interest;


APP. S-708.12.31

(19) Directly or indirectly becominginterested, for personal gain, or havingmaterial interest in any transaction or actrequiring the approval of a board, panel orgroup of which he is a member, and whichexercise of discretion in such approval,even if he votes against the same or hedoes not participate in the action of theboard, committee, panel or group.

(D) Plunder under R.A. No. 7080, asamended;

(20) Plunder through misappropriation,conversion, misuse or malversation ofpublic funds or raids upon the publictreasury;

(21) Plunder by receiving, directly orindirectly, any commission, gift, share,percentage, kickbacks or any other form ofpecuniary benefit from any person and/orentity in connection with any governmentcontract or project or by reason of the officeor position of the public officer concerned;

(22) Plunder by the illegal or fraudulentconveyance or disposition of assetsbelonging to the National Government orany of its subdivisions, agencies,instrumentalities or government-owned orcontrolled corporations or their subsidiaries;

(23) Plunder by obtaining, receiving oraccepting, directly or indirectly, any sharesof stock, equity or any other form of interestor participation including the promise offuture employment in any businessenterprise or undertaking;

(24) Plunder by establishing agricultural,industrial or commercial monopolies or othercombinations and/or implementation ofdecrees and orders intended to benefitparticular persons or special interests;

(25) Plunder by taking undueadvantage of official position, authority,relationship, connection or influence tounjustly enrich himself or themselves at theexpense and to the damage and prejudiceof the Filipino people and the republic ofthe Philippines.

(E) Robbery and extortion underArticles 294, 295, 296, 299, 300, 301 and302 of the Revised Penal Code, asamended;

(26) Robbery with violence orintimidation of persons;

(27) Robbery with physical injuries,committed in an uninhabited place and bya band, or with use of firearms on a street,road or alley;

(28) Robbery in an uninhabited houseor public building or edifice devoted toworship.

(F) Jueteng and Masiao punished asillegal gambling under P.D. No. 1602;

(29) Jueteng;(30) Masiao.

(G) Piracy on the high seas under theRevised Penal Code, as amended and P.D.No. 532;

(31) Piracy on the high seas;(32) Piracy in inland Philippine waters;(33) Aiding and abetting pirates and

brigands.

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

(34) Qualified theft.

(I) Swindling under Article 315 of theRevised Penal Code, as amended;

(35) Estafa with unfaithfulness or abuseof confidence by altering the substance,quality or quantity of anything of valuewhich the offender shall deliver by virtueof an obligation to do so, even though suchobligation be based on an immoral or illegalconsideration;

(36) Estafa with unfaithfulness or abuseof confidence by misappropriating orconverting, to the prejudice of another,money, goods or any other personalproperty received by the offender in trust oron commission, or for administration, orunder any other obligation involving the


APP. S-708.12.31

duty to make delivery or to return the same,even though such obligation be totally orpartially guaranteed by a bond; or bydenying having received such money,goods, or other property;

(37) Estafa with unfaithfulness orabuse of confidence by taking undueadvantage of the signature of the offendedparty in blank, and by writing anydocument above such signature in blank,to the prejudice of the offended party orany third person;

(38) Estafa by using a fictitious name,or falsely pretending to possess power,influence, qualifications, property, credit,agency, business or imaginarytransactions, or by means of other similardeceits;

(39) Estafa by altering the quality,fineness or weight of anything pertainingto his art or business;

(40) Estafa by pretending to havebribed any government employee;

(41) Estafa by postdating a check, orissuing a check in payment of an obligationwhen the offender has no funds in the bank,or his funds deposited therein were notsufficient to cover the amount of the check;

(42) Estafa by inducing another, bymeans of deceit, to sign any document;

(43) Estafa by resorting to somefraudulent practice to ensure success in agambling game;

(44) Estafa by removing, concealing ordestroying, in whole or in part, any courtrecord, office files, document or any otherpapers.

(J) Smuggling under R.A. Nos. 455and 1937;

(45) Fraudulent importation of any vehicle;(46) Fraudulent exportation of any

vehicle;(47) Assisting in any fraudulent

importation;(48) Assisting in any fraudulent

exportation;

(49) Receiving smuggled article afterfraudulent importation;

(50) Concealing smuggled article afterfraudulent importation;

(51) Buying smuggled article afterfraudulent importation;

(52) Selling smuggled article afterfraudulent importation;

(53) Transportation of smuggled articleafter fraudulent importation;

(54) Fraudulent practices againstcustoms revenue.

(K) Violations under R.A. No. 8792,otherwise known as the ElectronicCommerce Act of 2000;

K.1. Hacking or cracking, which refers to:(55) unauthorized access into or

interference in a computer system/server orinformation and communication system; or

(56) any access in order to corrupt, alter,steal, or destroy using a computer or othersimilar information and communicationdevices, without the knowledge and consentof the owner of the computer or informationand communications system, including

(57) the introduction of computerviruses and the like, resulting in thecorruption, destruction, alteration, theft orloss of electronic data messages orelectronic document;

K.2. Piracy, which refers to:(58) the unauthorized copying,

reproduction,(59) the unauthorized dissemination,

distribution,(60) the unauthorized importation,(61) the unauthorized use, removal,

alteration, substitution, modification,(62) the unauthorized storage,

uploading, downloading, communication,making available to the public, or

(63) the unauthorized broadcasting, ofprotected material, electronic signature orcopyrighted works including legallyprotected sound recordings or phonograms


APP. S-708.12.31

or information material on protected works,through the use of telecommunicationnetworks, such as, but not limited to, theinternet, in a manner that infringesintellectual property rights;

K.3. Violations of the Consumer Act orR.A. No. 7394 and other relevant orpertinent laws through transactionscovered by or using electronic datamessages or electronic documents:

(64) Sale of any consumer product thatis not in conformity with standards underthe Consumer Act;

(65) Sale of any product that has beenbanned by a rule under the Consumer Act;

(66) Sale of any adulterated or mislabeledproduct using electronic documents;

(67) Adulteration or misbranding of anyconsumer product;

(68) Forging, counterfeiting orsimulating any mark, stamp, tag, label orother identification device;

(69) Revealing trade secrets;(70) Alteration or removal of the

labeling of any drug or device held for sale;(71) Sale of any drug or device not

registered in accordance with theprovisions of the E-Commerce Act;

(72) Sale of any drug or device by anyperson not licensed in accordance with theprovisions of the E-Commerce Act;

(73) Sale of any drug or device beyondits expiration date;

(74) Introduction into commerce ofany mislabeled or banned hazardoussubstance;

(75) Alteration or removal of thelabeling of a hazardous substance;

(76) Deceptive sales acts and practices;(77) Unfair or unconscionable sales

acts and practices;(78) Fraudulent practices relative to

weights and measures;(79) False representations in

advertisements as the existence of awarranty or guarantee;

(80) Violation of price tagrequirements;

(81) Mislabeling consumer products;(82) False, deceptive or misleading

advertisements;(83) Violation of required disclosures

on consumer loans;(84) Other violations of the provisions

of the E-Commerce Act;

(L) Hijacking and other violationsunder R.A. No. 6235; destructive arsonand murder, as defined under the RevisedPenal Code, as amended, including thoseperpetrated by terrorists against non-combatant persons and similar targets;

(85) Hijacking;(86) Destructive arson;(87) Murder;(88) Hijacking, destructive arson or

murder perpetrated by terrorists againstnon-combatant persons and similar targets;

(M) Fraudulent practices and otherviolations under R.A. No. 8799, otherwiseknown as the Securities Regulation Codeof 2000;

(89) Sale, offer or distribution ofsecurities within the Philippines without aregistration statement duly filed with andapproved by the SEC;

(90) Sale or offer to the public of anypre-need plan not in accordance with therules and regulations which the SEC shallprescribe;

(91) Violation of reportorialrequirements imposed upon issuers ofsecurities;

(92) Manipulation of security prices bycreating a false or misleading appearance ofactive trading in any listed security traded inan Exchange or any other trading market;

(93) Manipulation of security prices byeffecting, alone or with others, a series oftransactions in securities that raises theirprices to induce the purchase of a security,whether of the same or different class, of


APP. S-708.12.31

the same issuer or of a controlling, controlledor commonly controlled company byothers;

(94) Manipulation of security prices byeffecting, alone or with others, a series oftransactions in securities that depressestheir price to induce the sale of a security,whether of the same or different class, ofthe same issuer or of a controlling,controlled or commonly controlledcompany by others;

(95) Manipulation of security prices byeffecting, alone or with others, a series oftransactions in securities that creates activetrading to induce such a purchase or salethough manipulative devices such as markingthe close, painting the tape, squeezing thefloat, hype and dump, boiler roomoperations and such other similar devices;

(96) Manipulation of security prices bycirculating or disseminating information thatthe price of any security listed in anExchange will or is likely to rise or fallbecause of manipulative market operationsof any one or more persons conducted forthe purpose of raising or depressing theprice of the security for the purpose ofinducing the purchase or sale of suchsecurity;

(97) Manipulation of security prices bymaking false or misleading statements withrespect to any material fact, which he knewor had reasonable ground to believe wasso false and misleading, for the purpose ofinducing the purchase or sale of any securitylisted or traded in an Exchange;

(98) Manipulation of security prices byeffecting, alone or with others, any seriesof transactions for the purchase and/or saleof any security traded in an Exchange forthe purpose of pegging, fixing or stabilizingthe price of such security, unless otherwiseallowed by the Securities Regulation Codeor by the rules of the SEC;

(99) Sale or purchase of any securityusing any manipulative deceptive device orcontrivance;

(100) Execution of short sales or stop-loss order in connection with the purchaseor sale of any security not in accordancewith such rules and regulations as the SECmay prescribe as necessary and appropriatein the public interest or the protection ofthe investors;

(101) Employment of any device,scheme or art i f ice to defraud inconnection with the purchase and sale ofany securities;

(102) Obtaining money or property inconnection with the purchase and sale ofany security by means of any untruestatement of a material fact or any omissionto state a material fact necessary in orderto make the statements made, in the lightof the circumstances under which theywere made, not misleading;

(103) Engaging in any act, transaction,practice or course of action in the sale andpurchase of any security which operatesor would operate as a fraud or deceit uponany person;

(104) Insider trading;(105) Engaging in the business of buying

and selling securities in the Philippines as abroker or dealer, or acting as a salesman, oran associated person of any broker or dealerwithout any registration from theCommission;

(106) Employment by a broker ordealer of any salesman or associatedperson or by an issuer of any salesman,not registered with the SEC;

(107) Effecting any transaction in anysecurity, or reporting such transaction, inan Exchange or using the facility of anExchange which is not registered with theSEC;

(108) Making use of the facility of aclearing agency which is not registeredwith the SEC;

(109) Violations of margin requirements;(110) Violations on the restrictions on

borrowings by members, brokers anddealers;


APP. S-708.12.31

(111) Aiding and Abetting in anyviolations of the Securities RegulationCode;

(112) Hindering, obstructing ordelaying the filing of any documentrequired under the Securities RegulationCode or the rules and regulations of theSEC;

(113) Violations of any of the provisionsof the implementing rules and regulationsof the SEC;

(114) Any other violations of any of theprovisions of the Securities Regulation Code.

(N) Felonies or offenses of a similarnature to the afore-mentioned unlawfulactivities that are punishable under the penallaws of other countries.

In determining whether or not a felonyor offense punishable under the penal lawsof other countries, is “of a similar nature”,as to constitute the same as an unlawfulactivity under the AMLA, the nomenclatureof said felony or offense need not beidentical to any of the predicate crimeslisted under Rule 3.i.

RULE 4 MONEY LAUNDERING OFFENSE

Rule 4.1. Money Laundering Offense. -Money laundering is a crime whereby theproceeds of an unlawful activity as hereindefined are transacted, thereby makingthem appear to have originated fromlegitimate sources. It is committed by thefollowing:

(a) Any person knowing that anymonetary instrument or property represents,involves, or relates to, the proceeds of anyunlawful activity, transacts or attempts totransact said monetary instrument orproperty.

(b) Any person knowing that anymonetary instrument or property involvesthe proceeds of any unlawful activity,performs or fails to perform any act as aresult of which he facilitates the offense of

money laundering referred to in paragraph(a) above.

(c) Any person knowing that anymonetary instrument or property isrequired under this Act to be disclosed andfiled with the Anti-Money LaunderingCouncil (AMLC), fails to do so.

RULE 5JURISDICTION OF MONEY

LAUNDERING CASES AND MONEYLAUNDERING INVESTIGATION

PROCEDURES

Rule 5.1. Jurisdiction of MoneyLaundering Cases. - The Regional TrialCourts shall have the jurisdiction to try allcases on money laundering. Thosecommitted by public officers and privatepersons who are in conspiracy with suchpublic officers shall be under thejurisdiction of the Sandiganbayan.

Rule 5.2. Investigation of MoneyLaundering Offenses. - The AMLC shallinvestigate:

(a) Suspicious transactions;(b) Covered transactions deemed sus-

picious after an investigation conductedby the AMLC;

(c) Money laundering activities; and(d) Other violations of this act.

Rule 5.3. Attempts at Transactions. -Section 4 (a) and (b) of the AMLA providesthat any person who attempts to transact anymonetary instrument or propertyrepresenting, involving or relating to theproceeds of any unlawful activity shall beprosecuted for a money laundering offense.Accordingly, the reports required underRule 9.3 (a) and (b) of these Rules shallinclude those pertaining to any attempt byany person to transact any monetaryinstrument or property representing,involving or relating to the proceeds of anyunlawful activity.


APP. S-708.12.31

RULE 6PROSECUTION OF MONEY

LAUNDERING

Rule 6.1. Prosecution of Money Laundering(a) Any person may be charged with

and convicted of both the offense of moneylaundering and the unlawful activity asdefined under Rule 3 (i) of the AMLA.

(b) Any proceeding relating to theunlawful activity shall be given precedenceover the prosecution of any offense orviolation under the AMLA without prejudiceto the application Ex-Parte by the AMLCto the Court of Appeals for a Freeze Orderwith respect to the monetary instrumentor property involved therein and resort to otherremedies provided under the AMLA, the rulesof court and other pertinent laws and rules.

Rule 6.2. When the AMLC finds, afterinvestigation, that there is probable causeto charge any person with a moneylaundering offense under Section 4 of theAMLA, it shall cause a complaint to befiled, pursuant to Section 7 (4) of the AMLA,before the Department of Justice or theOmbudsman, which shall then conductthe preliminary investigation of the case.

Rule 6.3. After due notice and hearing inthe preliminary investigation proceedingsbefore the Department of Justice, or theOmbudsman, as the case may be, and thelatter should find probable cause of amoney laundering offense, it shall file thenecessary information before the RegionalTrial Courts or the Sandiganbayan.

Rule 6.4. Trial for the money launderingoffense shall proceed in accordance withthe Code of Criminal Procedure or the Rulesof Procedure of the Sandiganbayan, as thecase may be.

Rule 6.5. Knowledge of the offender thatany monetary instrument or property

represents, involves, or relates to theproceeds of an unlawful activity or that anymonetary instrument or property is requiredunder the AMLA to be disclosed and filedwith the AMLC, may be established by directevidence or inferred from the attendantcircumstances.

Rule 6.6. All the elements of every moneylaundering offense under Section 4 of theAMLA must be proved by evidencebeyond reasonable doubt, including theelement of knowledge that the monetaryinstrument or property represents, involvesor relates to the proceeds of any unlawfulactivity.

Rule 6.7. No element of the unlawfulactivity, however, including the identityof the perpetrators and the details of theactual commission of the unlawfulactivity need be established by proofbeyond reasonable doubt. The elementsof the offense of money laundering areseparate and distinct from the elementsof the felony or offense constituting theunlawful activity.

RULE 7CREATION OF ANTI-MONEY

LAUNDERING COUNCIL (AMLC)

Rule 7.1.a. Composition. - The Anti-Money Laundering Council is herebycreated and shall be composed of theGovernor of the BSP as Chairman, theCommissioner of the InsuranceCommission and the Chairman of theSEC as members.

Rule 7.1.b. Unanimous Decision. - TheAMLC shall act unanimously in dischargingits functions as defined in the AMLA and inthese Rules. However, in the case of theincapacity, absence or disability of anymember to discharge his functions, theofficer duly designated or authorized to


APP. S-708.12.31

discharge the functions of the Governor ofthe BSP, the Chairman of the SEC or theInsurance Commissioner, as the case maybe, shall act in his stead in the AMLC.

Rule 7.2. Functions. - The functions ofthe AMLC are defined hereunder:

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

(2) to issue orders addressed to theappropriate Supervising Authority or thecovered institution to determine the trueidentity of the owner of any monetaryinstrument or property subject of a coveredor suspicious transaction report, or requestfor assistance from a foreign State, orbelieved by the Council, on the basis ofsubstantial evidence, to be, in whole or inpart, wherever located, representing,involving, or related to, directly orindirectly, in any manner or by any means,the proceeds of an unlawful activity;

(3) to institute civil forfeitureproceedings and all other remedialproceedings through the Office of theSolicitor General;

(4) to cause the filing of complaintswith the Department of Justice or theOmbudsman for the prosecution ofmoney laundering offenses;

(5) to investigate suspicioustransactions and covered transactionsdeemed suspicious after an investigationby the AMLC, money laundering activitiesand other violations of this Act;

(6) to apply before the Court ofAppeals, Ex-Parte, for the freezing of anymonetary instrument or property allegedto be proceeds of any unlawful activity asdefined under Section 3(i) hereof;

(7) to implement such measures asmay be inherent, necessary, implied,incidental and justified under the AMLA tocounteract money laundering. Subject tosuch limitations as provided for by law, theAMLC is authorized under Rule 7 (7) of the

AMLA to establish an information sharingsystem that will enable the AMLC to store,track and analyze money launderingtransactions for the resolute prevention,detection and investigation of moneylaundering offenses. For this purpose,the AMLC shall install a computerizedsystem that will be used in the creationand maintenance of an informationdatabase;

(8) to receive and take action in respectof any request from foreign states forassistance in their own anti-moneylaundering operations as provided in theAMLA. The AMLC is authorized underSections 7 (8) and 13 (b) and (d) of the AMLAto receive and take action in respect ofany request of foreign states for assistancein their own anti-money launderingoperations, in respect of conventions,resolutions and other directives of theUnited Nations (UN), the UN SecurityCouncil, and other internationalorganizations of which the Philippines isa member. However, the AMLC mayrefuse to comply with any such request,convention, resolution or directive wherethe action sought therein contravenes theprovisions of the Constitution, or theexecution thereof is likely to prejudice thenational interest of the Philippines.

(9) to develop educational programson the pernicious effects of moneylaundering, the methods and techniquesused in money laundering, the viable meansof preventing money laundering and theeffective ways of prosecuting and punishingoffenders.

(10) to enlist the assistance of anybranch, department, bureau, office,agency or instrumentali ty of thegovernment, including government-owned and -controlled corporations, inundertaking any and all anti-moneylaundering operations, which may includethe use of its personnel, facilities andresources for the more resolute


APP. S-708.12.31

prevention, detection and investigation ofmoney laundering offenses andprosecution of offenders. The AMLC mayrequire the intelligence units of theArmed Forces of the Philippines, thePhi l ipp ine Nat iona l Po l ice , theDepartment of Finance, the Departmentof Justice, as well as their attachedagencies , and o ther domes t ic ortransnational governmental or non-governmental organizations or groupsto divulge to the AMLC all informationthat may, in any way, facilitate theresolute prevention, investigation andprosecut ion of money launder ingoffenses and other violations of theAMLA.

(11) To impose administrativesanctions for the violation of laws, rules,regulations and orders and resolutionsissued pursuant thereto.

Rule 7.3. Meetings. - The AMLC shallmeet every first Monday of the month, oras often as may be necessary at the call ofthe Chairman.

RULE 8CREATION OF A SECRETARIAT

Rule 8.1. The Executive Director. - TheSecretariat shall be headed by anExecutive Director who shall be appointedby the AMLC for a term of five (5) years.He must be a member of the PhilippineBar, at least thirty-five (35) years of age,must have served at least five (5) yearseither at the BSP, the SEC or the IC and ofgood moral character, unquestionableintegrity and known probity. He shall beconsidered a regular employee of the BSPwith the rank of Assistant Governor, andshall be entitled to such benefits andsubject to such rules and regulations, aswell as prohibitions, as are applicable toofficers of similar rank.

Rule 8.2. Composition. - In organizing theSecretariat, the AMLC may choose fromthose who have served, continuously orcumulatively, for at least five (5) years inthe BSP, the SEC or the IC. All membersof the Secretariat shall be consideredregular employees of the BSP and shallbe entitled to such benefits and subject tosuch rules and regulations as areapplicable to BSP employees of similarrank.

Rule 8.3. Detail and Secondment. - TheAMLC is authorized under Section 7 (10) ofthe AMLA to enlist the assistance of the BSP,the SEC or the IC, or any other branch,department, bureau, office, agency orinstrumentality of the government, includinggovernment-owned and controlledcorporations, in undertaking any and all anti-money laundering operations. This includesthe use of any member of their personnelwho may be detailed or seconded to theAMLC, subject to existing laws and CivilService Rules and Regulations. Detailedpersonnel shall continue to receive theirsalaries, benefits and emoluments from theirrespective mother units. Seconded personnelshall receive, in lieu of their respectivecompensation packages from their respectivemother units, the salaries, emoluments andall other benefits to which their AMLCSecretariat positions are entitled to.

Rule 8.4. Confidentiality Provisions. - Themembers of the AMLC, the ExecutiveDirector, and all the members of theSecretariat, whether permanent, on detail oron secondment, shall not reveal, in anymanner, any information known to them byreason of their office. This prohibition shallapply even after their separation from theAMLA. In case of violation of this provision,the person shall be punished in accordancewith the pertinent provisions of the CentralBank Act.


APP. S-708.12.31

RULE 9PREVENTION OF MONEY

LAUNDERING; CUSTOMERIDENTIFICATION REQUIREMENTS

AND RECORD KEEPING

Rule 9.1. Customer IdentificationRequirements

Rule 9.1.a. Customer Identification. -Covered institutions shall establish andrecord the true identity of its clientsbased on official documents. They shallmaintain a system of verifying the trueidentity of their clients and, in case ofcorporate clients, require a system ofverifying their legal existence andorganizational structure, as well as theauthority and identification of all personspurporting to act on their behalf. Coveredinstitutions shall establish appropriatesystems and methods based oninternationally compliant standards andadequate internal controls for verifyingand recording the true and full identityof their customers.

Rule 9.1.b. Trustee, Nominee andAgent Accounts. - When dealing withcustomers who are acting as trustee,nominee, agent or in any capacity for andon behalf of another, covered institutionsshall verify and record the true and fullidentity of the person(s) on whose behalfa transaction is being conducted.Covered institutions shall also establishand record the true and full identity ofsuch trustees, nominees, agents andother persons and the nature of theircapacity and duties. In case a coveredinstitution has doubts as to whether suchpersons are being used as dummies incircumvention of existing laws, it shallimmediately make the necessaryinquiries to verify the status of thebusiness relationship between theparties.

Rule 9.1.c. Minimum Information/Documents Required for IndividualCustomers. - Covered institutions shallrequire customers to produce originaldocuments of identity issued by an officialauthority, bearing a photograph of thecustomer. Examples of such documentsare identity cards and passports. Thefollowing minimum information/documents shall be obtained fromindividual 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 GovernmentService and Insurance System number;

(9) Specimen signature;(10) Source of fund(s); and(11) Names of beneficiaries in case of

insurance contracts and wheneverapplicable.

Rule 9.1.d. Minimum Information/Documents Required for Corporate andJuridical Entities. - Before establishingbusiness relationships, coveredinstitutions shall endeavor to ensure thatthe customer is a corporate or juridicalentity which has not been or is not inthe process of being, dissolved, woundup or voided, or that its business oroperations has not been or is not in theprocess of being, closed, shut down,phased out, or terminated. Dealingswith shell companies and corporations,being legal entities which have nobusiness substance in their own right butthrough which financial transactionsmay be conducted, should beundertaken with extreme caution. The


APP. S-708.12.31

following minimum information/documents shall be obtained fromcustomers that are corporate or juridicalentities, including shell companies andcorporations:

(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 thecapital stock;

(6) Contact numbers;(7) Beneficial owners, if any; and(8) Verification of the authority and

identification of the person purporting toact on behalf of the client.

Rule 9.1.e. Prohibition Against CertainAccounts. Covered institutions shallmaintain accounts only in the true and fullname of the account owner or holder. Theprovisions of existing laws to the contrarynotwithstanding, anonymous accounts,accounts under fictitious names, and allother similar accounts shall be absolutelyprohibited.

Rule 9.1.f. Prohibition Against Openingof Accounts Without Face-to-faceContact. - No new accounts shall beopened and created without face-to-facecontact and full compliance with therequirements under Rule 9.1.c of these Rules.

Rule 9.1.g. Numbered Accounts. - Pesoand foreign currency non-checkingnumbered accounts shall be allowed:Provided, That the true identity of thecustomers of all peso and foreign currencynon-checking numbered accounts aresatisfactorily established based on officialand other reliable documents and records,and that the information and documentsrequired under the provisions of these

Rules are obtained and recorded by thecovered institution. No peso and foreigncurrency non-checking accounts shall beallowed without the establishment of suchidentity and in the manner herein provided.The BSP may conduct annual testing forthe purpose of determining the existenceand true identity of the owners of suchaccounts. The SEC and the IC may conductsimilar testing more often than once a yearand covering such other related purposesas may be allowed under their respectivecharters.

Rule 9.2. Record Keeping Requirements

Rule 9.2.a. Record Keeping: Kinds ofRecords and Period for Retention. – Allrecords of all transactions of coveredinstitutions shall be maintained and safelystored for five (5) years from the dates oftransactions. Said records and files shallcontain the full and true identity of theowners or holders of the accounts involvedin the covered transactions and all othercustomer identification documents.Covered institutions shall undertake thenecessary adequate security measures toensure the confidentiality of such file.Covered institutions shall prepare andmaintain documentation, in accordancewith the aforementioned clientidentification requirements, on theircustomer accounts, relationships andtransactions such that any account,relationship or transaction can be soreconstructed as to enable the AMLC, and/or the courts to establish an audit trail formoney laundering.

Rule 9.2.b. Existing and New Accountsand New Transactions. - All records ofexisting and new accounts and of newtransactions shall be maintained and safelystored for five (5) years from 17 October2001 or from the dates of the accounts ortransactions, whichever is later.


APP. S-708.12.31

Rule 9.2.c. Closed Accounts.- With respectto closed accounts, the records on customeridentification, account files and businesscorrespondence shall be preserved andsafely stored for at least five (5) years fromthe dates when they were closed.

Rule 9.2.d. Retention of Records in Casea Money Laundering Case has been Filedin Court. – If a money laundering casebased on any record kept by the coveredinstitution concerned has been filed incourt, said file must be retained beyond theperiod stipulated in the three (3) immediatelypreceding sub-Rules, as the case may be,until it is confirmed that the case has beenfinally resolved or terminated by the court.

Rule 9.2.e. Form of Records. – Recordsshall be retained as originals in such formsas are admissible in court pursuant toexisting laws and the applicable rulespromulgated by the Supreme Court.

Rule 9.3. Reporting of CoveredTransactions. -

Rule 9.3.a. Period of Reporting CoveredTransactions and SuspiciousTransactions.- Covered institutions shall report to theAMLC all covered transactions andsuspicious transactions within five (5)working days from occurrence thereof,unless the supervising authority concernedprescribes a longer period not exceedingten (10) working days.

Should a transaction be determined tobe both a covered and a suspicioustransaction, the covered institution shallreport the same as a suspicioustransaction.

The reporting of covered transactionsby covered institutions shall be deferredfor a period of sixty (60) days after theeffectivity of R.A. No. 9194, or as may bedetermined by the AMLC, in order toallow the covered insti tutions to

configure their respective computersystems; provided that, all coveredtransactions during said defermentperiod shall be submitted thereafter.

Rule 9.3.b. Covered and SuspiciousTransaction Report Forms. - The CoveredTransaction Report (CTR) and theSuspicious Transaction Report (STR) shallbe in the forms prescribed by the AMLC.

Rule 9.3.b.1. Covered institutions shalluse the existing forms for CoveredTransaction Reports and SuspiciousTransaction Reports, until such time asthe AMLC has issued new sets of forms.

Rule 9.3.b.2. Covered TransactionReports and Suspicious TransactionReports shall be submitted in a securedmanner to the AMLC in electronic form,either via diskettes, leased lines, orthrough internet facilities, with thecorresponding hard copy for suspicioustransactions. The f inal f low andprocedures for such reporting shall bemapped out in the manual of operationsto be issued by the AMLC.

Rule 9.3.c. Exemption from BankSecrecy Laws. – When reportingcovered or suspicious transactions to theAMLC, covered institutions and theirofficers and employees, shall not bedeemed to have violated R.A. No. 1405,as amended, R.A. No. 6426, asamended, R.A. No. 8791 and othersimilar laws, but are prohibited fromcommunicating, directly or indirectly, inany manner or by any means, to anyperson the fact that a covered orsuspicious transaction report was made,the contents thereof, or any otherinformation in relation thereto. In caseof violation thereof, the concernedofficer and employee of the coveredinstitution, shall be criminally liable.


APP. S-708.12.31

Rule 9.3.d. Confidentiality Provisions. –When reporting covered transactions orsuspicious transactions to the AMLC,covered institutions and their officers,employees, representatives, agents,advisors, consultants or associates areprohibited from communicating, directlyor indirectly, in any manner or by anymeans, to any person, entity, or the media,the fact that a covered transaction reportwas made, the contents thereof, or anyother information in relation thereto.Neither may such reporting be publishedor aired in any manner or form by the massmedia, electronic mail, or other similardevices. In case of violation hereof, theconcerned officer, employee,representative, agent, advisor, consultantor associate of the covered institution, ormedia shall be held criminally liable.

Rule 9.3.e. Safe Harbor Provisions. – Noadministrative, criminal or civilproceedings, shall lie against any personfor having made a covered transactionreport or a suspicious transaction report inthe regular performance of his duties andin good faith, whether or not suchreporting results in any criminalprosecution under this Act or any otherPhilippine law.

RULE 10APPLICATION FOR FREEZE ORDERS

Rule 10.1. When the AMLC May Applyfor the Freezing of Any MonetaryInstrument or Property. -

(a) After an investigation conducted bythe AMLC and upon determination thatprobable cause exists that a monetaryinstrument or property is in any way relatedto any unlawful activity as defined underSection 3 (i), the AMLC may file an Ex-Parteapplication before the Court of Appeals forthe issuance of a freeze order on anymonetary instrument or property subject

thereof prior to the institution or in the courseof, the criminal proceedings involving theunlawful activity to which said monetaryinstrument or property is any way related.

(b) Considering the intricate anddiverse web of related and interlockingaccounts pertaining to the monetaryinstrument(s) or property(ies) that anyperson may create in the different coveredinstitutions, their branches and/or otherunits, the AMLC may apply to the Court ofAppeals for the freezing, not only of themonetary instruments or properties in thenames of the reported owner(s)/holder(s),and monetary instruments or propertiesnamed in the application of the AMLC butalso all other related web of accountspertaining to other monetary instrumentsand properties, the funds and sources ofwhich originated from or are related to themonetary instrument(s) or property(ies)subject of the freeze order(s).

(c) The freeze order shall be effectivefor twenty (20) days unless extended bythe Court of Appeals upon application bythe AMLC.

Rule 10.2. Definition of Probable Cause- Probable cause includes such facts andcircumstances which would lead areasonably discreet, prudent or cautiousman to believe that an unlawful activityand/or a money laundering offense is aboutto be, is being or has been committed andthat the account or any monetary instrumentor property subject thereof sought to befrozen is in any way related to said unlawfulactivity and/or money laundering offense.

Rule 10.3. Duty of Covered InstitutionUpon Receipt Thereof. –

Rule 10.3.a. Upon receipt of the notice ofthe freeze order, the covered institutionconcerned shall immediately freeze themonetary instrument or property andrelated web of accounts subject thereof.


APP. S-708.12.31

Rule 10.3.b. The covered institution shalllikewise immediately furnish a copy of thenotice of the freeze order upon the owneror holder of the monetary instrument orproperty or related web of accounts subjectthereof.

Rule 10.3.c. Within twenty-four (24) hoursfrom receipt of the freeze order, the coveredinstitution concerned shall submit to theCourt of Appeals and the AMLC, by personaldelivery, a detailed written return on thefreeze order, specifying all the pertinent andrelevant information which shall include thefollowing:

1. The account number(s);2. The name(s) of the account owner(s)

or holder(s);3. The amount of the monetary

instrument, property or related web ofaccounts as of the time they were frozen;

4. All relevant information as to thenature of the monetary instrument orproperty;

5. Any information on the related webof accounts pertaining to the monetaryinstrument or property subject of the freezeorder; and

6. The time when the freeze thereontook effect.

Rule 10.4. Definition of Related Web ofAccounts. -

Related Web of Accounts pertaining tothe money instrument or property subject ofthe freeze order is defined as those accounts,the funds and sources of which originatedfrom and/or are materially linked to themonetary instrument(s) or property(ies)subject of the freeze order(s).

Upon receipt of the freeze order issuedby the court of appeals and uponverification by the covered institution thatthe related web of accounts originated fromand/or are materially linked to themonetary instrument or property subjectof the freeze order, the covered institution

shall freeze these related web of accountswherever these funds may be found.

The return of the covered institutionas required under rule 10.3.c shall includethe fact of such freezing and an explanationas to the grounds for the identification ofthe related web of accounts.

Rule 10.5. Extension of the Freeze Order. -Before the twenty (20) day period of thefreeze order issued by the court of appealsexpires, the AMLC may apply in the samecourt for an extension of said period. Uponthe timely filing of such application andpending the decision of the Court ofAppeals to extend the period, said periodshall be deemed suspended and the freezeorder shall remain effective.

However, the covered institution shallnot lift the effects of the freeze order withoutsecuring official confirmation from theAMLC.

Rule 10.6. Prohibition Against Issuanceof Freeze Orders Against Candidates foran Electoral Office During ElectionPeriod. - No assets shall be frozen to theprejudice of a candidate for an electoraloffice during an election period.

RULE 11AUTHORITY TO INQUIRE INTO

BANK DEPOSITS

Rule 11.1. Authority to Inquire into BankDeposits with Court Order. -Notwithstanding the provisions of R.A. No.1405, as amended; R.A. No. 6426, asamended; R.A. No. 8791, and other laws,the AMLC may inquire into or examineany particular deposit or investment with anybanking institution or non-bank financialinstitution and their subsidiaries and affiliatesupon order of any competent court in casesof violation of this Act, when it has beenestablished that there is probable cause thatthe deposits or investments involved are


APP. S-708.12.31

related to an unlawful activity as definedin Section 3 (i) hereof or a moneylaundering offense under Section 4hereof; except in cases as providedunder Rule 11.2.

Rule 11.2. Authority to Inquire intoBank Deposits Without Court Order.- The AMLC may inqui re in to orexamine deposit and investments withany banking institution or non-bankf inanc ia l ins t i tu t ion and the i rsubsidiaries and affiliates without aCour t Order where any o f thefo l lowing unlawfu l ac t iv i t ies a reinvolved:

(a) Kidnapping for ransom underArticle 267 of Act No. 3815, otherwiseknown as the Revised Penal Code, asamended;

(b) Sections 4,5,6, 8, 9, 10. 12, 13, 14,15 and 16 of R.A. No. 9165, otherwiseknown as the Comprehensive DangerousDrugs Act of 2002;

(c) Hijacking and other violationsunder R.A. No. 6235; destructive arsonand murder, as defined under theRevised Penal Code, as amended,including those perpetrated by terroristsagainst non-combatant persons andsimilar targets.

Rule 11.2.a. Procedure For ExaminationWithout A Court Order. - Where any ofthe unlawful activities enumerated underthe immediately preceding Rule 11.2 areinvolved, and there is probable causethat the deposits or investments with anybanking or non-banking f inancialinstitution and their subsidiaries andaffiliates are in anyway related to theseunlawful activities the AMLC shall issuea resolution authorizing the inquiry intoor examination of any deposit orinvestment with such banking or non-banking financial institution and theirsubsidiaries and affiliates concerned.

Rule 11.2.b. Duty of the banking institutionor non- banking institution upon receipt ofthe AMLC Resolution. - The bankinginstitution or the non-banking financialinstitution and their subsidiaries andaffiliates shall, immediately upon receipt ofthe AMLC Resolution, allow the AMLC and/or its authorized representative(s) full accessto all records pertaining to the deposit orinvestment account.

Rule 11.3. - BSP Authority to Examinedeposits and investments; AdditionalException to the Bank Secrecy Act. -To ensure compliance with this act, theBSP may inquire into or examine anyparticular deposit or investment withany banking institution or non-bankf inanc ia l ins t i tu t ion and the i rsubsidiaries and affiliates when theexamination is made in the course ofa periodic or special examination, inaccordance wi th the ru les o fexamination of the BSP.

Rule 11.3.a. BSP Rules of Examination- The BSP shall promulgate its rules ofexamination for ensuring complianceby banks and non-bank f inanc ia linstitutions and their subsidiaries andaffiliates with the AMLA and theserules.

Any findings of the BSP which mayconstitute a violation of any provision ofthis act shall be transmitted to the AMLCfor appropriate action.

RULE 12FORFEITURE PROVISIONS

Rule 12.1. Authority to Institute CivilForfeiture Proceedings. – The AMLC isauthorized under Section 7 (3) of theAMLA to insti tute civil forfeitureproceedings and all other remedialproceedings through the Office of theSolicitor General.


APP. S-708.12.31

Rule 12.2. When Civil Forfeiture May beApplied. – When there is a SuspiciousTransaction Report or a CoveredTransaction Report deemed suspicious afterinvestigation by the AMLC, and the courthas, in a petition filed for the purpose,ordered the seizure of any monetaryinstrument or property, in whole or in part,directly or indirectly, related to said report,the Revised Rules of Court on civil forfeitureshall apply.

Rule 12.3. Claim on Forfeited Assets. -Where the court has issued an order offorfeiture of the monetary instrument orproperty in a criminal prosecution for anymoney laundering offense under Section 4of the AMLA, the offender or any otherperson claiming an interest therein mayapply, by verified petition, for a declarationthat the same legitimately belongs to him,and for segregation or exclusion of themonetary instrument or propertycorresponding thereto. The verified petitionshall be filed with the court which renderedthe judgment of conviction and order offorfeiture within fifteen (15) days from thedate of the order of forfeiture, in default ofwhich the said order shall become final andexecutory. This provision shall apply in bothcivil and criminal forfeiture.

Rule 12.4. Payment in Lieu of Forfeiture- Where the court has issued an order offorfeiture of the monetary instrument orproperty subject of a money launderingoffense under Section 4 of the AMLA, andsaid order cannot be enforced because anyparticular monetary instrument or propertycannot, with due diligence, be located, orit has been substantially altered, destroyed,diminished in value or otherwise renderedworthless by any act or omission, directlyor indirectly, attributable to the offender,or it has been concealed, removed,converted or otherwise transferred toprevent the same from being found or to

avoid forfeiture thereof, or it is locatedoutside the Philippines or has been placedor brought outside the jurisdiction of thecourt, or it has been commingled withother monetary instruments or propertybelonging to either the offender himselfor a third person or entity, therebyrendering the same difficult to identify orbe segregated for purposes of forfeiture,the court may, instead of enforcing theorder of forfeiture of the monetaryinstrument or property or part thereof orinterest therein, accordingly order theconvicted offender to pay an amount equalto the value of said monetary instrumentor property. This provision shall apply inboth civil and criminal forfeiture.

RULE 13MUTUAL ASSISTANCE AMONG

STATES

Rule 13.1. Request for Assistance from aForeign State. - Where a foreign statemakes a request for assistance in theinvestigation or prosecution of a moneylaundering offense, the AMLC mayexecute the request or refuse to executethe same and inform the foreign state ofany valid reason for not executing therequest or for delaying the executionthereof. The principles of mutuality andreciprocity shall, for this purpose, be at alltimes recognized.

Rule 13.2. Powers of the AMLC to Act ona Request for Assistance from a ForeignState. - The AMLC may execute a requestfor assistance from a foreign state by: (1)tracking down, freezing, restraining andseizing assets alleged to be proceeds ofany unlawful activity under the procedureslaid down in the AMLA and in these Rules;(2) giving information needed by theforeign state within the procedures laiddown in the AMLA and in these Rules; and(3) applying for an order of forfeiture of any


APP. S-708.12.31

monetary instrument or property in thecourt: Provided, That the court shall notissue such an order unless the applicationis accompanied by an authenticated copyof the order of a court in the requesting stateordering the forfeiture of said monetaryinstrument or property of a person who hasbeen convicted of a money launderingoffense in the requesting state, and acertification or an affidavit of a competentofficer of the requesting state stating thatthe conviction and the order of forfeitureare final and that no further appeal lies inrespect of either.

Rule 13.3. Obtaining Assistance fromForeign States. - The AMLC may make arequest to any foreign state for assistancein (1) tracking down, freezing, restrainingand seizing assets alleged to be proceedsof any unlawful activity; (2) obtaininginformation that it needs relating to anycovered transaction, money launderingoffense or any other matter directly orindirectly related thereto; (3) to the extentallowed by the law of the foreign state,applying with the proper court therein foran order to enter any premises belongingto or in the possession or control of, any orall of the persons named in said request,and/or search any or all such persons namedtherein and/or remove any document,material or object named in said request:Provided, That the documentsaccompanying the request in support of theapplication have been duly authenticatedin accordance with the applicable law orregulation of the foreign state; and (4)applying for an order of forfeiture of anymonetary instrument or property in theproper court in the foreign state: Provided,That the request is accompanied by anauthenticated copy of the order of theRegional Trial Court ordering the forfeitureof said monetary instrument or propertyof a convicted offender and an affidavit ofthe clerk of court stating that the conviction

and the order of forfeiture are final and thatno further appeal lies in respect of either.

Rule 13.4. Limitations on Requests forMutual Assistance. - The AMLC may refuseto comply with any request for assistancewhere the action sought by the requestcontravenes any provision of the Constitutionor the execution of a request is likely toprejudice the national interest of thePhilippines, unless there is a treaty betweenthe Philippines and the requesting staterelating to the provision of assistance inrelation to money laundering offenses.

Rule 13.5. Requirements for Requests forMutual Assistance from Foreign States. -A request for mutual assistance from aforeign state must (1) confirm that aninvestigation or prosecution is beingconducted in respect of a moneylaunderer named therein or that he hasbeen convicted of any money launderingoffense; (2) state the grounds on whichany person is being investigated orprosecuted for money laundering or thedetails of his conviction; (3) givesufficient particulars as to the identity ofsaid person; (4) give particulars sufficientto identify any covered insti tutionbelieved to have any information,document, material or object which maybe of assistance to the investigation orprosecution; (5) ask from the coveredinstitution concerned any information,document, material or object which maybe of assistance to the investigation orprosecution; (6) specify the manner inwhich and to whom said information,document, material or object obtainedpursuant to said request, is to beproduced; (7) give all the particularsnecessary for the issuance by the court inthe requested state of the writs, orders orprocesses needed by the requesting state;and (8) contain such other information asmay assist in the execution of the request.


APP. S-708.12.31

Rule 13.6. Authentication of Documents -For purposes of Section 13 (f) of the AMLAand Section 7 of the AMLA, a document isauthenticated if the same is signed orcertified by a judge, magistrate or equivalentofficer in or of, the requesting state, andauthenticated by the oath or affirmation ofa witness or sealed with an official or publicseal of a minister, secretary of state, orofficer in or of, the government of therequesting state, or of the personadministering the government or adepartment of the requesting territory,protectorate or colony. The certificate ofauthentication may also be made by asecretary of the embassy or legation,consul general, consul, vice consul,consular agent or any officer in the foreignservice of the Philippines stationed in theforeign state in which the record is kept,and authenticated by the seal of his office.

Rule 13.7. Suppletory Application of theRevised Rules of Court. –

Rule 13.7.1. For attachment of Philippineproperties in the name of personsconvicted of any unlawful activity asdefined in Section 3 (i) of the AMLA,execution and satisfaction of final judgmentsof forfeiture, application for examination ofwitnesses, procuring search warrants,production of bank documents and othermaterials and all other actions not specifiedin the AMLA and these Rules, and assistancefor any of the aforementioned actions, whichis subject of a request by a foreign state,resort may be had to the proceedingspertinent thereto under the Revised Rulesof Court.

Rule 13.7.2. Authority to Assist the UnitedNations and other InternationalOrganizations and Foreign States. – TheAMLC is authorized under Section 7 (8)and 13 (b) and (d) of the AMLA to receiveand take action in respect of any request

of foreign states for assistance in their ownanti-money laundering operations. It is alsoauthorized under Section 7 (7) of the AMLAto cooperate with the NationalGovernment and/or take appropriateaction in respect of conventions,resolutions and other directives of theUnited Nations (UN), the UN SecurityCouncil, and other internationalorganizations of which the Philippines is amember. However, the AMLC may refuseto comply with any such request,convention, resolution or directive wherethe action sought therein contravenes theprovision of the Constitution or theexecution thereof is likely to prejudice thenational interest of the Philippines.

Rule 13.8. Extradition. – The Philippines shallnegotiate for the inclusion of moneylaundering offenses as defined under Section4 of the AMLA among the extraditableoffenses in all future treaties. With respect,however, to the state parties that aresignatories to the United Nations ConventionAgainst Transnational Organized Crime thatwas ratified by the Philippine Senate on 22October 2001, money laundering is deemedto be included as an extraditable offense inany extradition treaty existing between saidstate parties, and the Philippines shall includemoney laundering as an extraditable offensein every extradition treaty that may beconcluded between the Philippines and anyof said state parties in the future.

RULE 14PENAL PROVISIONS

Rule 14.1. Penalties for the Crime ofMoney Laundering.

Rule 14.1.a. Penalties under Section 4 (a)of the AMLA. - The penalty of imprisonmentranging from seven (7) to fourteen (14) yearsand a fine of not less than Php3.0 Millionbut not more than twice the value of the


APP. S-708.12.31

monetary instrument or property involvedin the offense, shall be imposed upon aperson convicted under Section 4 (a) of theAMLA.

Rule 14.1.b. Penalties under Section 4 (b)of the AMLA. - The penalty ofimprisonment from four (4) to seven (7)years and a fine of not less than Php1.5Million but not more than Php3.0 Million,shall be imposed upon a person convictedunder Section 4 (b) of the AMLA.

Rule 14.1.c. Penalties under Section 4 (c)of the AMLA. - The penalty ofimprisonment from six (6) months to four(4) years or a fine of not less thanPhp100,000.00 but not more thanPhp500,000.00, or both, shall be imposedon a person convicted under Section 4(c)of the AMLA.

Rule 14.1.d. Administrative Sanctions. - (1)After due notice and hearing, the AMLC shall,at its discretion, impose fines upon anycovered institution, its officers and employees,or any person who violates any of theprovisions of R.A. No. 9160, as amended byR.A. No. 9194 and rules, regulations, ordersand resolutions issued pursuant thereto. Thefines shall be in amounts as may bedetermined by the council, taking intoconsideration all the attendant circumstances,such as the nature and gravity of the violationor irregularity, but in no case shall such finesbe less than Php100,000.00 but not to exceedPhp500,000.00. The imposition of theadministrative sanctions shall be withoutprejudice to the filing of criminal chargesagainst the persons responsible for theviolations.

Rule 14.2. Penalties for Failure to KeepRecords - The penalty of imprisonmentfrom six (6) months to one (1) year or afine of not less than Php100,000.00 but notmore than Php500,000.00, or both, shall

be imposed on a person convicted underSection 9 (b) of the AMLA.

Rule 14.3. Penalties for MaliciousReporting. - Any person who, with malice,or in bad faith, reports or files a completelyunwarranted or false information relativeto money laundering transaction againstany person shall be subject to a penalty ofsix (6) months to four (4) yearsimprisonment and a fine of not less thanPhp100,000.00 but not more thanPhp500,000.00, at the discretion of thecourt: Provided, That the offender is notentitled to avail the benefits of theProbation Law.

Rule 14.4. Where Offender is a JuridicalPerson. - If the offender is a corporation,association, partnership or any juridicalperson, the penalty shall be imposed uponthe responsible officers, as the case maybe, who participated in, or allowed by theirgross negligence the commission of thecrime. If the offender is a juridical person,the court may suspend or revoke its license.If the offender is an alien, he shall, in additionto the penalties herein prescribed, bedeported without further proceedings afterserving the penalties herein prescribed. If theoffender is a public official or employee, heshall, in addition to the penalties prescribedherein, suffer perpetual or temporaryabsolute disqualification from office, as thecase may be.

Rule 14.5. Refusal by a Public Official orEmployee to Testify. - Any public officialor employee who is called upon to testifyand refuses to do the same or purposelyfails to testify shall suffer the same penaltiesprescribed herein.

Rule 14.6. Penalties for Breach ofConfidentiality. – The punishment ofimprisonment ranging from three (3) toeight (8) years and a fine of not less than


APP. S-708.12.31

Php500,000.00 but not more than Php1.0Million, shall be imposed on a personconvicted for a violation under Section 9(c).In case of a breach of confidentiality that ispublished or reported by media, theresponsible reporter, writer, president,publisher, manager and editor-in-chief shallbe liable under this act.

RULE 15PROHIBITIONS AGAINST POLITICAL

HARASSMENT

Rule 15.1. Prohibition against PoliticalPersecution. - The AMLA and these Rulesshall not be used for political persecution orharassment or as an instrument to hampercompetition in trade and commerce. No casefor money laundering may be filed to theprejudice of a candidate for an electoral officeduring an election period.

Rule 15.2. Provisional RemediesApplication; Exception. –

Rule 15.2.a. - The AMLC may apply, in thecourse of the criminal proceedings, forprovisional remedies to prevent themonetary instrument or property subjectthereof from being removed, concealed,converted, commingled with otherproperty or otherwise to prevent its beingfound or taken by the applicant orotherwise placed or taken beyond thejurisdiction of the court. However, noassets shall be attached to the prejudice ofa candidate for an electoral office duringan election period.

Rule 15.2.b. - Where there is convictionfor money laundering under Section 4 ofthe AMLA, the court shall issue ajudgment of forfeiture in favor of theGovernment of the Philippines withrespect to the monetary instrument orproperty found to be proceeds of one ormore unlawful activities. However, no

assets shall be forfeited to the prejudiceof a candidate for an electoral office duringan election period.

RULE 16RESTITUTION

Rule 16. Restitution. - Restitution for anyaggrieved party shall be governed by theprovisions of the New Civil Code.

RULE 17IMPLEMENTING RULES ANDREGULATIONS AND MONEYLAUNDERING PREVENTION

PROGRAMS

Rule 17.1. Implementing Rules andRegulations. –

(a) Within thirty (30) days from theeffectivity of R.A. No. 9160, as amendedby R.A. No. 9194, the BSP, the InsuranceCommission and the Securities andExchange Commission shall promulgatethe Implementing Rules and Regulationsof the AMLA, which shall be submitted tothe Congressional Oversight Committeefor approval.

(b) The Supervising Authorities, theBSP, the SEC and the IC shall, under theirown respective charters and regulatoryauthority, issue their Guidelines andCirculars on anti-money laundering toeffectively implement the provisions of R.A.No. 9160, as amended by R.A. No. 9194.

Rule 17.2. Money Laundering PreventionPrograms. –

Rule 17.2.a. Covered institutions shallformulate their respective moneylaundering prevention programs inaccordance with Section 9 and otherpertinent provisions of the AMLA and theseRules, including, but not limited to,information dissemination on moneylaundering activities and their prevention,


APP. S-708.12.31

detection and reporting, and the training ofresponsible officers and personnel ofcovered institutions, subject to suchguidelines as may be prescribed by theirrespective supervising authority. Everycovered institution shall submit its ownmoney laundering program to thesupervising authority concerned within thenon-extendible period that the supervisingauthority has imposed in the exercise ofits regulatory powers under its owncharter.

Rule 17.2.b. Every money launderingprogram shall establish detailedprocedures implementing acomprehensive, institution-wide “know-your-client” policy, set-up an effectivedissemination of information on moneylaundering activities and their prevention,detection and reporting, adopt internalpolicies, procedures and controls,designate compliance officers atmanagement level, institute adequatescreening and recruitment procedures, andset-up an audit function to test the system.

Rule 17.2.c. Covered institutions shall adopt,as part of their money laundering programs,a system of flagging and monitoringtransactions that qualify as suspicioustransactions, regardless of amount or coveredtransactions involving amounts below thethreshold to facilitate the process ofaggregating them for purposes of futurereporting of such transactions to the AMLCwhen their aggregated amounts breach thethreshold. All covered institutions, includingbanks insofar as non-deposit and non-government bond investment transactionsare concerned, shall incorporate in theirmoney laundering programs the provisionsof these Rules and such other guidelines forreporting to the AMLC of all transactions thatengender the reasonable belief that a moneylaundering offense is about to be, is being,or has been committed.

Rule 17.3. Training of Personnel. - Coveredinstitutions shall provide all their responsibleofficers and personnel with efficient andeffective training and continuing educationprograms to enable them to fully comply withall their obligations under the AMLA andthese Rules.

Rule 17.4. Amendments. - These Rules orany portion thereof may be amended byunanimous vote of the members of theAMLC and submitted to the CongressionalOversight Committee as provided forunder Section 19 of R.A. No. 9160, asamended by R.A. No. 9194.

RULE 18CONGRESSIONAL OVERSIGHT

COMMITTEE

Rule 18.1. Composition of CongressionalOversight Committee. - There is herebycreated a Congressional OversightCommittee composed of seven (7)members from the Senate and seven (7)members from the House ofRepresentatives. The members from theSenate shall be appointed by the SenatePresident based on the proportionalrepresentation of the parties or coalitionstherein with at least two (2) Senatorsrepresenting the minority. The membersfrom the House of Representatives shall beappointed by the Speaker also based onproportional representation of the parties orcoalitions therein with at least two (2)members representing the minority.

Rule 18.2. Powers of the CongressionalOversight Committee. - The OversightCommittee shall have the power topromulgate its own rules, to oversee theimplementation of this Act, and to reviewor revise the implementing rules issued bythe Anti-Money Laundering Council withinthirty (30) days from the promulgation ofthe said rules.


APP. S-708.12.31

RULE 19APPROPRIATIONS FOR AND BUDGET

OF THE AMLC

Rule 19.1. Budget. – The budget of 25Million Pesos appropriated by Congressunder the AMLA shall be used to defray theinitial operational expenses of the AMLC.Appropriations for succeeding years shallbe included in the General AppropriationsAct. The BSP shall advance the fundsnecessary to defray the capital outlay,maintenance and other operating expensesand personnel services of the AMLC subjectto reimbursement from the budget of theAMLC as appropriated under the AMLA andsubsequent appropriations.

Rule 19.2. Costs and Expenses. - The budgetshall answer for indemnification for legalcosts and expenses reasonably incurred forthe services of external counsel inconnection with any civil, criminal oradministrative action, suit or proceedings towhich members of the AMLC and theExecutive Director and other members ofthe Secretariat may be made a party byreason of the performance of their functionsor duties. The costs and expenses incurredin defending the aforementioned action, suitor proceeding may be paid by the AMLC inadvance of the final disposition of suchaction, suit or proceeding upon receipt ofan undertaking by or on behalf of themember to repay the amount advancedshould it be ultimately determined that saidmember is not entitled to suchindemnification.

RULE 20SEPARABILITY CLAUSE

Rule 20. Separability Clause. – If anyprovision of these Rules or the applicationthereof to any person or circumstance is

held to be invalid, the other provisions ofthese Rules, and the application of suchprovision or Rule to other persons orcircumstances, shall not be affectedthereby.

RULE 21REPEALING CLAUSE

Rule 21. Repealing Clause. – All laws,decrees, executive orders, rules andregulations or parts thereof, including therelevant provisions of R.A. No. 1405, asamended; R.A. No. 6426, as amended;R.A. No. 8791, as amended, and othersimilar laws, as are inconsistent with theAMLA, are hereby repealed, amended ormodified accordingly.

RULE 22EFFECTIVITY OF THE RULES

Rule 22. Effectivity. – These Rules shall takeeffect after its approval by the CongressionalOversight Committee and fifteen (15) daysafter its complete publication in the OfficialGazette or in a newspaper of generalcirculation.

RULE 23TRANSITORY PROVISIONS

Rule 23.1. - Transitory Provisions. - Existingfreeze orders issued by the AMLC shallremain in force for a period of thirty (30)days after effectivity of this act, unlessextended by the Court of Appeals.

Rule 23.2. - Effect of R.A. No. 9194 onCases for Extension of Freeze OrdersResolved by the Court of Appeals. - Allexisting freeze orders which the Court ofAppeals has extended shall remaineffective, unless otherwise dissolved bythe same court.


APP. S-808.12.31

A. GENERAL REQUIREMENTSOnly external auditors included in the

list of BSP selected external auditors shall beengaged by banks, QBs, trust entities orNSSLAs for regular audit or specialengagements. The external auditor to behired shall also be in-charge of the audit ofthe entity’s subsidiaries and affiliates engagedin allied activities: Provided, That the externalauditor shall be changed or the lead andconcurring partner shall be rotated every five(5) years or earlier: Provided, further, Thatthe rotation of the lead and concurring partnershall have an interval of at least two (2) years.

Banks, QBs, trust entities or NSSLAswhich have engaged their respectiveexternal auditors for a consecutive period offive (5) years or more as of 26 November2003 (effectivity of Circular No. 410) shallhave a one (1) year period from said datewithin which to either change their externalauditors or rotate the lead and/or concurringpartner. The following are the selectionrequirements for external auditors:

1. No external auditor may beengaged by a bank, QB, trust entity orNSSLA if he or any member of hisimmediate family has or has committedto acquire any direct or indirect financialinterest in the bank, QB, trust entity orNSSLA, its subsidiaries and affiliates, or ifhis independence is considered impairedunder the circumstances specified in theCode of Professional Ethics for CPAs. Inthe case of a partnership, this limitation shallapply to the partners, associates and theauditor-in-charge of the engagement andmembers of their immediate family;

2. The external auditor and themembers of the audit team do not have/shall not have outstanding loans or anycredit accommodations (except credit card

obligations which are normally available toother credit card holders and fully securedauto loans and housing loans which are notpast due) with the bank, QB, trust entity orNSSLA, its subsidiaries and affiliates at thetime of signing the engagement and duringthe engagement. In the case of partnership,this prohibition shall apply to the partnersand the auditor-in-charge of the engagement;

3. The external auditor must not becurrently engaged nor was engaged duringthe preceding year in providing the followingservices to the bank, QB, trust entity orNSSLA its subsidiaries and affiliates:

a. Internal audit functions;b. Information systems design,

implementation and assessment; andc. Such other services which could

affect his independence as may bedetermined by the Monetary Board;

4. The external auditor, auditor-in-charge and members of the audit team mustadhere to the highest standards ofprofessional conduct and shall carry outservices in accordance with relevant ethicaland technical standards, such as the GAASand the Code of Professional Ethics forCPAs;

5. The external auditor should havethe following track record in conductingexternal audits:

a. The external auditor for a UB or KBmust have at least twenty (20) existingcorporate clients with resources of at leastP50.0 million each and at least one (1)existing client UB or KB in the regular auditor in lieu thereof, the external auditor orthe auditor-in-charge of the engagementmust have at least five (5) years experiencein the regular audit of UBs or KBs;

b. The external auditor for a TB, QB,bank, trust entity and national Coop Bank

GUIDELINES TO GOVERN THE SELECTION, APPOINTMENT AND THEREPORTING REQUIREMENT FOR EXTERNAL AUDITORS OF

NON-STOCK SAVINGS AND LOAN ASSOCIATIONS(Appendix to Sec. 4180S)


APP. S-808.12.31

must have at least ten (10) existing corporateclients with resources of at least P25.0 millioneach and at least one (1) existing client TB,QB, trust entity or national Coop Bank in theregular audit or in lieu thereof, the externalauditor or the auditor-in-charge of theengagement must have at least five (5) yearsexperience in the regular audit of TBs, QBs,trust entities or national Coop Banks:Provided, That an external auditor who hasbeen selected by the BSP to audit a UB orKB is automatically qualified to audit a TB,QB, trust entity or national Coop Bank; and

c. The external auditor for an RB orlocal Coop Bank must have at least three(3) years track record in conducting externalaudit: Provided, That an external auditorwho has been selected by the BSP to audita UB, KB, TB, QB, trust entity and nationalCoop bank is automatically qualified toaudit an RB, local Coop Bank and NSSLA;

6. A bank, QB, trust entity or NSSLAshall not engage the services of an externalauditor whose partner or auditor-in-chargeof audit engagement during the precedingyear had been hired or employed by thebank, QB, trust entity, NSSLA, itssubsidiaries and affiliates as chief executiveofficer, chief financial officer, controller, chiefaccounting officer or any position ofequivalent rank; and

7. The external auditor mustundertake to keep for at least five (5) yearsall audit or review working papers insufficient detail to support the conclusionsin the audit report which shall be madeavailable to the BSP upon request. Workingpapers shall include, but shall not be limitedto, pre-audit analysis, audit scope anddetailed work program.

B. APPLICATION AND PRE-QUALIFICATION REQUIREMENTS

The application for BSP selection shallbe signed by the external auditor or themanaging partner, in case of partnership andshall be submitted to the appropriate

department of the SES together with thefollowing documents/information:

1. An undertaking:a. That the external auditor, partners,

associates, auditor-in-charge of theengagement and the members of theirimmediate family shall not acquire anydirect or indirect financial interest with abank, QB, trust enti ty, NSSLA, i tssubsidiaries and affiliates. Neither shallthe external auditor, partners, associatesand auditor-in-charge accept an auditengagement with a bank, QB, trust entity,NSSLA, its subsidiaries and affiliateswhere they or any member of theirimmediate family have any direct orindirect financial interest and that theirindependence is not considered impairedunder the circumstances specified in theCode of Professional Ethics for CPAs;

b. That the external auditor, partners,associates, auditor- in-charge andmembers of the audit team do not havenor shall apply for loans or any creditaccommodations (except normal creditcard obligations and fully secured autoloans and housing loans) nor shall acceptan audit engagement with a bank, QB,trust entity, NSSLA, its subsidiaries andaffiliates where they have outstandingloans or any credit accommodations(except normal credit card obligations andfully secured auto loans and housing loanswhich are not past due);

c. That the external auditor shall notaccept an audit engagement with a bank,QB, trust entity, NSSLA, its subsidiaries andaffiliates where he was engaged during thepreceding year in providing the followingservices:

1. Internal audit functions;2. Information systems design,

implementation and assessment; and3. Such other services, which could

affect his independence as may bedetermined by the Monetary Board fromtime to time.


APP. S-808.12.31

This requirement shall not, however,affect audit engagement existing as of26 November 2003 (effectivity of CircularNo. 410).

d. That the external auditor andmembers of the audit team shall adhere tothe highest standards of professionalconduct and shall carry out their servicesin accordance with relevant ethical andtechnical standards of the accountingprofession;

e. That the lead or concurring partnerand auditor-in-charge shall not acceptemployment with the bank,QB, trust entity,NSSLA, its subsidiaries and affiliates beingaudited during the engagement period andwithin a period of one (1) year after theaudit engagement;

f. That the external auditor shall notaccept an audit engagement with a bank, QB,trust entity, NSSLA, its subsidiaries andaffiliates where an officer (i.e., chiefexecutive officer, chief financial officer,controller, chief accounting officer or othersenior officer of equivalent rank) had been apartner of the external auditor or had workedfor the audit firm and had been the auditor-in-charge of the audit engagement of saidentities during the year immediatelypreceding the engagement;

g. That the external auditor shall keepall audit or review working papers for at leastfive (5) years in sufficient detail to supportthe conclusions in the audit report; and

h. That the audit work shall includeassessment of the audited institution’scompliance with BSP rules and regulations,such as, but not limited to the following:

1. CAR; and2. Loans and other risk assets review

and classification.2. Other documents/information:a. List of existing corporate clients

with resources of at least P50.0 millioneach for external auditor of a UB or KB; fora TB, QB, trust entity, NSSLA, and nationalCoop Bank, list of existing corporate clients

with resources of at least P25.0 millioneach; and list of existing clients and/ordetails of three (3) years track record inexternal audit for external auditors of an RB,NSSLA and a local Coop Bank;

b. If the external auditor for a UB or KBhas no existing UB or KB client, and theexternal auditor for a TB, QB, trust entity andnational Coop Bank, has no existing client TBor national Coop Bank, a notarizedcertification that the external auditor or theauditor-in-charge of the engagement has atleast five (5) years experience in the regularaudit of banks of appropriate categorymentioning the banks they have audited;

c. Updated PRC license (for individualauditors) and business license for thepartnership;

d. Copy of the proposed engagementcontract between the bank, QB, trust entityor NSSLA and the external auditor whereapplicable; and

e. Certification from PRC that theexternal auditor, lead partner, concurringpartner, auditor-in-charge and members ofthe audit team have no derogatoryinformation, previous conviction or anypending investigation. However, in theevent that the certification cannot beobtained because of the pendency of a case,the BSP may dispense with thisrequirement upon determination by theMonetary Board that the case involvespurely legal question, or does not, in anyway, negate the auditor’s adherence to thehighest standards of professional conductnor degrade his integrity and objectivity.

C. REQUIRED REPORTS1. To enable the BSP to take timely

and appropriate remedial action, theexternal auditor must report to the BSPwithin thirty (30) calendar days afterdiscovery, the following cases:

a. Any material finding involving fraudor dishonesty (including cases that wereresolved during the period of audit); and


APP. S-808.12.31

b. Any potential losses the aggregateof which amounts to at least one percent(1%) of the capital.

2. The external auditor shall reportdirectly to the BSP within fifteen (15) calendardays the occurrence of the following:

a. Termination or resignation as externalauditor and stating the reason therefor;

b. Discovery of a material breach oflaws or BSP rules and regulations such as,but not limited to:


and classification.c. Findings on matters of corporate

governance that may require urgent actionby the BSP;

3. In case there are no matters toreport (e.g., fraud, dishonesty, breach oflaws, etc.) the external auditor shall submitdirectly to the BSP within fifteen (15)calendar days after the closing of the auditengagement a notarized certification thatthere is none to report.

The management of the bank, QB,trust entity, NSSLA, its subsidiaries andaffiliates shall be informed of the adversefindings and the external auditor’s reportto the BSP shall include its explanation and/or corrective action.

The management of the bank, QB,trust entity, NSSLA, its subsidiaries andaffiliates shall be given the opportunity tobe present in the discussions between theBSP and the external auditor regarding theaudit findings, except in circumstanceswhere the external auditor believes thatthe entity’s management is involved infraudulent conduct.

It is, however, understood that theaccountability of an external auditor is basedon matters within the normal coverage of anaudit conducted in accordance with GAAS.

D. DEFINITION OF TERMSFor purposes of these guidelines, the

following terms shall be defined as follows:

1. Subsidiary. A corporation or firmmore than fifty percent (50%) of theoutstanding voting stock of which isdirectly or indirectly owned, controlled orheld with power to vote by a bank, QB,trust entity or NSSLA.

2. Affiliate. A corporation, not morethan fifty percent (50%) but not less thanten percent (10%) of the outstanding votingstock of which is directly or indirectlyowned, controlled or held with power tovote by a bank, QB, trust entity, NSSLAand a juridical person that is undercommon control with the bank, QB, trustentity or NSSLA.

3. Control. Exists when the parentowns directly or indirectly more than onehalf of the voting power of an enterpriseunless, in exceptional circumstance, it canbe clearly demonstrated that suchownership does not constitute control.Control may also exist even whenownership is one half or less of the votingpower of an enterprise when there is:

a. Power over more than one-half ofthe voting rights by virtue of an agreementwith other stockholders;

b. Power to govern the financial andoperating policies of the enterprise undera statute or an agreement;

c. Power to appoint or remove themajority of the members of the board ofdirectors or equivalent governing body;

d. Power to cast the majority votes atmeetings of the board of directors orequivalent governing body; or

e. Any other arrangement similar toany of the above.

4. Associate. Any director, officer,manager or any person occupying a similarstatus or performing similar functions in theaudit firm including employees performingsupervisory role in the auditing process.

5. Partner. All partners includingthose not performing audit engagements.

6. Lead Partner. Also referred to asthe engagement partner/partner-in-charge/


APP. S-808.12.31

managing partner who is responsible forsigning the audit report on the consolidatedfinancial statements of the audit client, andwhere relevant, the individual audit reportof any entity whose financial statementsform part of the consolidated financialstatements.

7. Concurring Partner. The partnerwho is responsible for reviewing the auditreport.

8. Auditor-in-charge. Refers to theteam leader of the audit engagement.

E. INCLUSION IN BSP LISTIn case of partnership, inclusion in the

list of BSP-selected external auditors shallapply to the audit firm only and not to theindividual signing partners or auditorsunder its employment. The BSP willcircularize to all banks, QBs, trust entitiesand NSSLAs the list of selected externalauditors once a year. The BSP, however,shall not be liable for any damage or lossthat may arise from its selection of theexternal auditors to be engaged by banks,QBs, trust entities, or NSSLAs, for regularaudit or special engagements.

F. SPECIFIC REVIEWWhen warranted by supervisory

concern, the Monetary Board may, at theexpense of the bank, QB, trust entity,NSSLA, its subsidiaries and affiliates requirethe external auditor to undertake a specificreview of a particular aspect of theoperations of these institutions. The reportshall be submitted to the BSP and the auditedinstitution simultaneously, within thirty (30)calendar days after the conclusion of saidreview.

G. AUDIT ENGAGEMENT CONTRACTBanks, QBs, trust entities, and NSSLAs,

shall submit the audit engagement contractbetween them, their subsidiaries andaffiliates and the external auditor to theappropriate department of the SES within

fifteen (15) calendar days from signingthereof. Said contract shall include thefollowing provisions:

1. That the bank, QB, trust entity, orNSSLA shall be responsible for keepingthe auditor fully informed of existing andsubsequent changes to prudential,regulatory and statutory requirements ofthe BSP and that both parties shall complywith said requirements;

2. That disclosure of information bythe external auditor to the BSP as requiredunder Items "C" and "F" hereof, shall beallowed; and

3. That both parties shall comply withall of the requirements under theseguidelines.

H. DELISTING OF EXTERNAL AUDITORS1. Grounds for delistingExternal auditors may be delisted from

the list of BSP-selected external auditor forthe bank, QB, trust entity or NSSLA forviolation of, or non-compliance with anyprovision of these guidelines or in case ofdissolution of the audit firm except whensaid dissolution was solely for the purposeof admitting new partner/s and the newpartner/s have complied with therequirements of these guidelines.

2. Procedure for delistingAn external auditor shall only be

delisted upon prior notice to him and aftergiving him the opportunity to be heard anddefend himself by presenting witnesses/evidence in his favor. Delisted externalauditor may re-apply for BSP selection afterthe period prescribed by the MonetaryBoard.

I. AUDIT BY THE BOARD OFDIRECTORSPursuant to Section 58 of R.A. No.

8791, otherwise known as “The GeneralBanking Law of 2000” the Monetary Boardmay also direct the board of directors of abank, QB, trust entity, NSSLA or the


APP. S-808.12.31

individual members thereof, to conduct,either personally or by a committee createdby the board, an annual balance sheet auditof the bank, QB, trust entity or NSSLA toreview the internal audit and the internal

control system of the concerned entity andto submit a report of such audit to theMonetary Board within thirty (30) calendardays after the conclusion thereof.(As amended by Circular No. 529 dated 11 May 2006)

iii


P REGULATIONS(Regulations Governing Pawnshops)

TABLE OF CONTENTS

PART ONE - ORGANIZATION, MANAGEMENT AND ADMINISTRATION


SECTION 4101P Scope of Authority of Pawnshops4101P.1 Form of organization4101P.2 Organizational requirements4101P.3 Prior Bangko Sentral licensing to perform quasi-

banking functions 4101P.4 Posting of BSP Certificate and Authority to Operate

SECTION 4102P Definition of Terms

SECTIONS 4103P - 4105P (Reserved)

B. CAPITALIZATION

SECTION 4106P Capital of Pawnshops


C. - F. (RESERVED)


G. DIRECTORS/TRUSTEES, OFFICERS AND EMPLOYEES

SECTION 4141P Bonding of Officers and Employees

SECTION 4142P (Reserved)

iv

SECTION 4143P Disqualification of Directors/Trustees and Officers4143P.1 Persons disqualified to become directors/trustees4143P.2 Persons disqualified to become officers4143P.3 Disqualification procedures4143P.4 Effect of possession of disqualifications4143P.5 (Reserved)4143P.6 Watchlisting



SECTION 4151P Establishment of Branches4151P.1 Definition of term4151P.2 Operations and functions4151P.3 Basis for establishment4151P.4 Capital requirement4151P.5 Documentary requirements4151P.6 Date of opening for business



SECTION 4156P Business Days and Hours


J. RECORDS AND REPORTS

SECTION 4161P Records4161P.1 Uniform system of accounts4161P.2 Philippine Financial Reporting Standards/

Philippine Accounting Standards

SECTION 4162P Reports4162P.1 Categories of and signatories to reports4162P.2 Manner of filing4162P.3 Sanctions


v

K. INTERNAL CONTROL

SECTION 4171P Safekeeping of Pawns and Records and Insurance of OfficeBuilding

SECTION 4172P Separation of Pawnshop Business from Other Businesses



SECTION 4181P Business Name

SECTION 4182P Closing or Transfer of Business


SECTION 4190P Duties and Responsibilities of Pawnshops and their Directors/Officers in All Cases of Outsourcing of Pawnshop Functions


SECTION 4192P Prompt Corrective Action Framework

SECTION 4193P Supervision by Risks

SECTION 4194P Market Risk Management

SECTION 4195P Liquidity Risk Management


SECTION 4199P General Provision on Sanctions

PART TWO - BORROWING OPERATIONS

A. - J. (RESERVED)


K. OTHER BORROWINGS

SECTION 4286P Borrowings Constituting Quasi-Banking Functions

vi



PART THREE - LOANS AND INVESTMENTS

A. LOANS IN GENERAL

SECTION 4301P Loan Limits

SECTION 4302P Interest and Other Charges

SECTION 4303P Past Due Accounts; Renewal/Redemption of Pawns


SECTION 4305P Interest Accrual on Past Due Loans


B. SECURED LOANS

SECTION 4321P Kinds of Security

SECTION 4322P Pawn Ticket4322P.1 Contents of pawn ticket4322P.2 Sanctions

SECTION 4323P Reminder to Pawner; Notice to the Public

SECTION 4324P Public Auction of Pawns


C. - J. (RESERVED)

SECTIONS 4336P- 4395P (Reserved)

K. MISCELLANEOUS



vii

PART FOUR (RESERVED)


PART FIVE (RESERVED)


PART SIX - MISCELLANEOUS

A. OTHER OPERATIONS

SECTION 4601P Fines and Other Charges4601P.1 Guidelines on the imposition of monetary

penalties



SECTION 4651P Supervisory Powers of the Bangko Sentral

SECTION 4652P Basic Law Governing Pawnshops

SECTION 4653P Accounting for Pawnshop Premises; Other Fixed Assets


SECTION 4657P Batas Pambansa Blg. 344 - An Act to Enhance the Mobility ofDisabled Persons by Requiring Certain Buildings, Institutions,Establishments and Public Utilities to Install Facilities and OtherDevices


SECTION 4660P Disclosure of Remittance Charges and Other RelevantInformation


viii

SECTION 4691P Anti-Money Laundering Regulations4691P.1 - 4691P.8 (Reserved)4691P.9 Sanctions and penalties


SECTION 4695P Valid Identification Cards for Financial Transactions


SECTION 4699P Administrative Sanctions


ix

LIST OF APPENDICES

No. SUBJECT MATTER

P - 1 Chart of Accounts and Description of Loan Register of Pawnshops

P - 2 List of Reports Required from PawnshopsAnnex P-2-a - Reporting Guidelines on Crimes/Losses

P - 3 Guidelines on Prescribed Reports Signatories and Signatory AuthorizationAnnex P-3-a - Format of Resolution for Signatories of Category A-1

ReportsAnnex P-3-b - Format of Resolution for Signatories of Category A-2

ReportsAnnex P-3-c - Format of Resolution for Signatories of Categies A-3

and B Reports

P - 4 Standard Pawn Ticket

P-4-a Terms and Conditions of Standard Pawn Ticket

P - 5 Anti-Money Laundering RegulationsAnnex P-5-a - Certification of Compliance with Anti-Money

Laundering RegulationsAnnex P-5-b - Rules on Submission of Covered Transaction Reports


P - 6 Revised Implementing Rules and Regulations R.A. No. 9160, asamended by R.A. No. 9194

§§ 4101P - 4101P.208.12.31

Manual of Regulations for Non-Bank Financial Institutions P RegulationsPart I - Page 1

1 See SEC Circular No. 3 dated 16 February 2006.

PART ONE

ORGANIZATION, MANAGEMENT AND ADMINISTRATION


Section 4101P Scope of Authority ofPawnshops. A duly organized and licensedpawnshop has, in general, the power toengage in the business of lending money onthe security of personal property within theframework and limitations of P.D. No. 114and the following regulations, subject to theregulatory and supervisory powers of theBangko Sentral ng Pilipinas (BSP).

§ 4101P.1 Form of organization. Apawnshop may be established as a singleproprietorship, a partnership or corporation.

Only Filipino citizens may establish andown a pawnshop organized as a singleproprietorship. A pawnshop established asa single proprietorship by a non-Filipinoowner prior to 29 January 1973 maycontinue as such during the lifetime of theregistered owner.

If a pawnshop is organized as apartnership, at least seventy percent (70%)of its capital shall be owned by Filipinocitizens. Pawnshops established aspartnerships prior to 29 January 1973,with non-Fil ipino partners whoseaggregate holdings amount to more thanthirty percent (30%) of the capital mayretain the percentage of their aggregateholdings as of 29 January 1973, and saidpercentage shall not be increased, but maybe reduced, and once reduced shall notbe increased thereafter beyond thirtypercent (30%) of the capital stock of suchpawnshop.

In the case of a pawnshop organized asa corporation, at least seventy percent (70%)of the voting stock therein shall be ownedby citizens of the Philippines, or if there beno capital stock, at least seventy percent

(70%) of the members entitled to vote shallbe citizens of the Philippines.

Pawnshops registered as a corporationwith foreign equity participation in excessof thirty percent (30%) of the voting stock,or members entitled to vote, of thepawnshop may retain the percentage offoreign equity as of 29 January 1973, andsaid percentage shall not be increased, butmay be reduced and once reduced, shall notbe increased thereafter beyond thirty percent(30%) of the voting stock, or number ofmembers entitled to vote, of such pawnshop.

The percentage of foreign-owned votingstock in a pawnshop corporation shall bedetermined by the citizenship of itsindividual stockholders. If the voting stockin a pawnshop corporation is held byanother corporation, the percentage offoreign ownership in that pawnshop, shallbe computed on the basis of the foreigncitizenship of the individuals owning votingstocks in, or members entitled to vote of,the stockholder corporation.

§ 4101P.2 Organizational requirements1

Any person or entity desiring to establish apawnshop shall register with the Bureau ofTrade Regulation and Consumer Protection(BTRCP), in the case of a singleproprietorship, or with the Securities andExchange Commission (SEC), in the case ofa partnership/corporation.

Pawnshops with foreign equityparticipation shall also register with theBoard of Investments.

After registering with the BTRCP or withthe SEC, the single proprietorship or thepartnership/corporation, as the case may be,shall secure a business license from the cityor municipality where the pawnshop is tobe established and operated, in accordance

§§ 4101P.2 - 4101P.308.12.31

P Regulations Manual of Regulations for Non-Bank Financial InstitutionsPart I - Page 2

with the requirements of the pertinentordinance in that city or municipality.

The following documents shall be filedwith the BTRCP, the SEC and/or the BSP inaccordance with the forms prescribed by them:

a. Application under oath (BTRCP) form;b. Articles of Partnership/Incorporation

(for partnerships and/or corporations);c. List of partners/stockholders/

directors/officers;d. Personal data sheet of owners/

partners/incorporators/directors/officers;e. Projected financial statements

covering the first twelve (12) months ofoperations;

f. Certificate of incorporation orregistration with SEC or BTRCP;

g. City/municipal license; andh. Such other documents as may be

required by the BTRCP, the SEC, or the BSP.Before commencing actual business

operations, the single proprietorship,partnership or corporation shall file with theBSP an information sheet signed by theproprietor, managing partner or presidentunder oath.(As amended by CL-2008-078 dated 15 December 2008)

§ 4101P.3 Prior Bangko Sentrallicensing to perform quasi-bankingfunctions. Pawnshops desiring to engage inquasi-banking functions shall first obtain aCertificate of Authority from the BSPpursuant to BSP regulations.

a. Definition of quasi-banking functions.Quasi-banking functions consist of thefollowing:

(1) Borrowing funds for the borrower’sown account;

(2) Twenty (20) or more lenders at anyone time;

(3) Methods of borrowing: issuance,endorsement, or acceptance of debtinstruments of any kind, other than deposits,such as:

(a) acceptances;(b) promissory notes;

(c) participations;(d) certificates of assignment or similar

instruments with recourse;(e) trust certificates;(f) repurchase agreements; and(g) such other instruments as the

Monetary Board may determine; and(4) Purpose:(a) relending, or(b) purchasing receivables or other

obligations.As used in the definition of quasi-

banking functions, the following terms andphrases shall be understood as follows:

Borrowing shall refer to all forms ofobtaining or raising funds through any of themethods and for any of the purposesprovided in (3) and (4) above, whether theborrower’s liability thereby is treated as realor contingent.

For the borrower’s own account shallrefer to the assumption of liability in one’sown capacity and not in representation, oras an agent or trustee, of another.

Purchasing of receivables or otherobligations shall refer to the acquisition ofclaims collectible in money, includinginterbank borrowings or borrowingsbetween financial institutions (FIs), or ofsecurities, of any amount and maturity, fromdomestic or foreign sources.

Relending shall refer to the extension ofloans by an institution with antecedentborrowing transactions. Relending shall bepresumed in the absence of expressstipulation, when the institution is regularlyengaged in lending.

Regularly engaged in lending shall referto the practice of extending loans, advances,discounts or rediscounts as a matter ofbusiness, i.e., continuous or consistentlending as distinguished from isolatedlending transactions.

b. Guidelines on lender count. Thefollowing guidelines shall govern lendercount on borrowings or funds mobilized bypawnshops:

§§ 4101P.3 - 4101P.408.12.31


(1) For purposes of ascertaining thenumber of lenders/placers to determinewhether or not a pawnshop is engaged inquasi-banking functions, the names ofpayees on the face of each debt instrumentshall serve as the primary basis for countingthe lenders/placers except when proof to thecontrary is adduced such as the officialreceipts or documents other than the debtinstrument itself. In such case the actual/reallenders/placers as appearing in such proof,shall be the basis for counting the numberof lenders/placers.

In a debt instrument issued to two (2) ormore named payees under an and/or and orarrangement, the number of payeesappearing on the instrument shall be thebasis for counting the number of lenders/placers: Provided, however, That a debtinstrument issued in the name of a husbandand wife followed by the word spouses,whether under an and, and/or, or orarrangement or in the name of a designatedpayee under an in trust for (ITF) arrangementshall be counted as one (1) borrowing/placement.

(2) Each debt instrument payable tobearer, shall be counted as one (1) lender/placer, except when the pawnshop canprove that there is only one owner for severaldebt instruments so payable.

(3) Two (2) or more debt instrumentsissued to the same payee, irrespective of thedate and amount, shall be counted as one(1) borrowing or placement.

(4) Debt instruments underwritten byinvestment houses or traded by securitiesdealers/brokers whether on a firm, standbyor best-efforts basis shall be counted on thebasis of the number of purchasers thereofand shall not be treated as having beenissued solely to the underwriter or trader:Provided, however, That in case of unsolddebt instruments in a firm commitmentunderwriting, the underwriter shall becounted as a lender.

(5) Each buyer, assignee, and/or indorseeshall be counted in determining the numberof lenders/placers of funds mobilized throughsale, assignment, and/ or endorsement ofsecurities or receivables on a without recoursebasis whenever the terms and/or attendantdocumentation, practice, or circumstancesindicate that the sale, assignment, and/orendorsement thereof legally obligates thepawnshop to repurchase or reacquire thesecurities/receivables sold, assigned, endorsedor to pay the buyer, assignee, or indorsee atsome subsequent time.

(6) Funds obtained by way of advancesfrom stockholders, directors/trustees orofficers, regardless of nature, shall beconsidered borrowed funds or fundsmobilized and such stockholders, directors/trustees or officers shall be counted indetermining the number of lenders/placers.

§ 4101P.4 Posting of BSP Certificateand Authority to Operate1. Pawnshops shallpermanently display the original copy of theCertificate of Registration (COR) or Authorityto Operate (AO) issued by the BSP to theirhead office or branch, respectively, in aconspicuous place in their premises,preferably at the window or door that isclearly visible to the general public.

Failure to display the original copy ofthe COR or AO shall be deemed a violationsubject to a penalty of one thousand pesos(P1,000.00) each for the first three (3) offenses.

For subsequent violation, automaticcancellation of the COR or AO issued tothe pawnshop head office or branch, as thecase may be, and issuance of a letter to thecity or municipality concerned advisingthem of the cancellation of the COR/AO andrecommending the revocation of theirbusiness/mayor’s permit(s). It is understoodthat if the COR of the head office iscancelled, the AO of the branch(es) is/arelikewise cancelled.(M- 2008-003 dated 22 January 2008)

1 Posting of BSP Certificate and Authority to Operate shall be effective starting 28 February 2009.

§§ 4102P - 4141P08.12.31


Sec. 4102P Definition of Termsa. Pawnshop shall refer to a person or

entity engaged in the business of lendingmoney on personal property delivered assecurity for loans. The term shall besynonymous, and may be usedinterchangeably, with pawnbroker orpawnbrokerage.

b. Pawner shall refer to the borrowerfrom a pawnshop.

c. Pawnee shall refer to the pawnshopor pawnbroker.

d. Pawn is the personal propertydelivered by the pawner to the pawnee assecurity for a loan.

e. Pawn ticket is the pawnbroker’sreceipt for a pawn.

f. Property shall include only suchpersonal property as may actually bedelivered to the control and possession ofthe pawnee.

g. Voting stock is that portion of theauthorized capital which is subscribedand entitled to vote.

h. Vital records shall consist of theLoans Extended/Paid Registers, GeneralLedger/Journal covering the current and atleast the preceding two (2) years ofoperations, unused accountable forms andpermanent pawnshop records, e.g.,articles of incorporation/co-partnership,stock certificates, etc.

i. Bulky pawns shall refer tohousehold appliances, office machines andthe like, which occupy considerable amountof space, i.e., measuring at least 1.5 x 1.5 x0.5 feet.

j. Premises shall refer to the area wherethe pawnshop conducts its business andmaintains office. It includes office or storagespaces maintained and/or used by thepawnshop which are adjacent to thepawnshop’s location.

Secs. 4103P - 4105P (Reserved)

B. CAPITALIZATION

Sec. 4106P Capital of PawnshopsPawnshops shall have a minimum paid-incapital of P100,000.

Paid-in capital shall mean cash andother properties, including real estate andimprovements thereon: Provided, That suchproperties are necessary for the conduct ofthe pawnshop business.

Properties forming part of capital inaccordance with the preceding paragraphmay be valued at acquisition cost lessdepreciation or at any other value notexceeding the appraised value as fixed byan independent appraiser, at the option ofthe contributor, partner or proprietor.

The value of properties forming part ofcapital in accordance with the immediatelypreceding two paragraphs shall not exceedtwenty-five percent (25%) of paid-in capitaland surplus: Provided, however, That forpawnshops existing as at 29 January 1973whose value of properties exceeds theprescribed ratio, such percentage may beretained or reduced but shall not beincreased thereafter. Should the ratio, on theother hand, fall below the prescribed level,it may be increased but not beyond twenty-five percent (25%).


C. - F. (RESERVED)


G. DIRECTORS/TRUSTEES, OFFICERSAND EMPLOYEES

Sec. 4141P Bonding of Officers andEmployees. Accountable officers andemployees, especially those who haveaccess to pawned articles, of pawnshopsshall be required to post bonds of reputable

§§ 4141P - 4143P.108.12.31


companies accredited by the InsuranceCommissioner.

Sec. 4142P (Reserved)

Sec. 4143P Disqualification of Directors/Trustees and Officers. The followingregulations shall govern the disqualificationof pawnshop directors/trustees and officers.

§ 4143P.1 Persons disqualified tobecome directors/trustees. Withoutprejudice to specific provisions of lawprescribing disqualifications for directors/trustees, the following are disqualified frombecoming directors/trustees of pawnshops:

a. Permanently disqualifiedDirectors/trustees/officers/employees

permanently disqualified by the MonetaryBoard from holding a director/trustee position:

(1) Persons who have been convictedby final judgment of the court for offensesinvolving dishonesty or breach of trust suchas estafa, embezzlement, extortion, forgery,malversation, swindling and theft;

(2) Persons who have been convictedby final judgment of the court for violationof banking laws;

(3) Persons who have been judiciallydeclared insolvent, spendthrift orincapacitated to contract; or

(4) Directors/trustees, officers oremployees of closed institutions under thesupervisory and regulatory powers of theBSP who were responsible for suchinstitutions’ closure as determined by theMonetary Board.

b. Temporarily disqualifiedDirectors/ trustees/officers/employees

disqualified by the Monetary Board fromholding a director/trustee position for aspecific/indefinite period of time. Includedare:

(1) Persons who refuse to fully disclosethe extent of their business interest to theappropriate department of the SES whenrequired pursuant to a provision of law or of

a circular, memorandum or rule or regulationof the BSP. This disqualification shall be ineffect as long as the refusal persists;

(2) Directors/trustees who have beenabsent or who have not participated forwhatever reasons in more than fifty percent(50%) of all meetings, both regular andspecial, of the board of directors/trusteesduring their incumbency, or any twelve (12)-month period during said incumbency. Thisdisqualification applies for purposes of thesucceeding election;


(a) Delinquency in the payment ofobligations means that an obligation of aperson with the institution where he/she isa director/trustee or officer, or at least two(2) obligations with other FIs, under differentcredit lines or loan contracts, are past duepursuant to Secs. X306, 4306Q, 4306S and4303P;

(b) Obligations shall include allborrowings from any FI obtained by:

(i) A director/trustee or officer for his ownaccount or as the representative or agent ofothers or where he/she acts as a guarantor,endorser or surety for loans from such FIs;

(ii) The spouse or child under the parentalauthority of the director/trustee or officer;

(iii) Any person whose borrowings orloan proceeds were credited to the accountof, or used for the benefit of a director/trustee or officer;

(iv) A partnership of which a director/trustee or officer, or his/her spouse is themanaging partner or a general partnerowning a controlling interest in thepartnership; and

(v) A corporation, association or firmwholly-owned or majority of the capital ofwhich is owned by any or a group ofpersons mentioned in the foregoing Items“(i)”, “(ii)” and “(iv)”;

This disqualification shall be in effect aslong as the delinquency persists.

(4) Persons convicted for offensesinvolving dishonesty, breach of trust or violationof banking laws but whose conviction has notyet become final and executory;

(5) Directors/trustees and officers ofclosed institutions under the supervisory andregulatory powers of the BSP pending theirclearance by the Monetary Board;

(6) Directors/trustees disqualified forfailure to observe/discharge their duties andresponsibilities prescribed under existingregulations. This disqualification appliesuntil the lapse of the specific period ofdisqualification or upon approval by theMonetary Board on recommendation by theappropriate department of the SES of suchdirectors’/trustees’ election/reelection;

(7) Persons dismissed fromemployment for cause. This disqualificationshall be in effect until they have clearedthemselves of involvement in the allegedirregularity or upon clearance, on theirrequest, from the Monetary Board aftershowing good and justifiable reasons, orafter the lapse of five (5) years from the timethey were officially advised by theappropriate department of the SES of theirdisqualification;

(8) Those under preventive suspension; and(9) Persons with derogatory records

with the NBI, court, police, Interpol andmonetary authority (central bank) of othercountries (for foreign directors/trustees andofficers) involving violation of any law, ruleor regulation of the Government or any ofits instrumentalities adversely affecting theintegrity and/or ability to discharge theduties of a director/trustee/officer. Thisdisqualification applies until they havecleared themselves of involvement in thealleged irregularity.(As amended by Circular No. 584 dated 28 September 2007)

§ 4143P.2 Persons disqualified tobecome officers

a. The disqualifications for directors/trustees mentioned in Subsec. 4143P.1 shall

likewise apply to officers, except thosestated in Item “b(2)”.

b. Except as may be authorized by theMonetary Board or the Governor, the spouseor a relative within the second degree ofconsanguinity or affinity of any personholding the position of chairman, president,executive vice president or any position ofequivalent rank, general manager, treasurer,chief cashier or chief accountant isdisqualified from holding or being electedor appointed to any of said positions in thesame pawnshop and the spouse or relativewithin the second degree of consanguinityor affinity of any person holding the positionof manager, cashier, or accountant of abranch or office of a pawnshop isdisqualified from holding or being appointedto any of said positions in the same branchor office.

§ 4143P.3 Disqualification proceduresa. The board of directors/trustees and

management of every institution shall beresponsible for determining the existence ofthe ground for disqualification of theinstitution’s director/trustee/officer oremployee and for reporting the same to theBSP. While the concerned institution mayconduct its own investigation and imposeappropriate sanction/s as are allowable, thisshall be without prejudice to the authorityof the Monetary Board to disqualify adirector/trustee/officer/employee from beingelected/appointed as director/trustee/officerin any FI under the supervision of the BSP.Grounds for disqualification made knownto the institution shall be reported to theappropriate department of the SES of the BSPwithin seventy-two (72) hours fromknowledge thereof.

b. On the basis of knowledge andevidence on the existence of any of thegrounds for disqualification mentioned inSubsecs. 4143P.1 and 4143P.2, the director/trustee or officer concerned shall be notifiedin writing either by personal service or

§§ 4143P.1 - 4143P.308.12.31


through registered mail with registry returnreceipt card at his/her last known addressby the appropriate department of the SES ofthe existence of the ground for his/herdisqualification and shall be allowed tosubmit within fifteen (15) calendar days fromreceipt of such notice an explanation onwhy he/she should not be disqualified andincluded in the watchlisted file, together withthe evidence in support of his/ her position.The head of said department may allow anextension on meritorious ground.

c. Upon receipt of the reply/explanation of the director/trustee/officerconcerned, the appropriate department ofthe SES shall proceed to evaluate the case.The director trustee/officer concerned shallbe afforded the opportunity to defend/clearhimself/herself.

d. If no reply has been received fromthe director/trustee/officer concerned uponthe expiration of the period prescribed underItem “b” above, said failure to reply shall bedeemed a waiver and the appropriatedepartment of the SES shall proceed toevaluate the case based on available records/evidence.

e. If the ground for disqualification isdelinquency in the payment of obligation,the concerned director/trustee or officer shallbe given a period of thirty (30) calendar dayswithin which to settle said obligation or,restore it to its current status or, to explainwhy he/she should not be disqualified andincluded in the watchlisted file, before theevaluation on his disqualification andwatchlisting is elevated to the MonetaryBoard.

f. For directors/trustees/officers ofclosed banks, the concerned department ofthe SES shall make appropriaterecommendation to the Monetary Boardclearing said directors/trustees/officers whenthere is no pending case/complaint orevidence against them. When there isevidence that a director/trustees/officer hascommitted irregularity, the appropriate

department of the SES shall makerecommendation to the Monetary Board thathis/her case be referred to the OSI for furtherinvestigation and that he/she be included inthe masterlist of temporarily disqualifiedpersons until the final resolution of his/hercase. Directors/trustees/officers withpending cases/complaints shall also beincluded in said masterlist of temporarilydisqualified persons upon approval by theMonetary Board until the final resolution oftheir cases. If the director/trustees/officer iscleared from involvement in any irregularity,the appropriate department of the SES shallrecommend to the Monetary Board his/herdelisting. On the other hand, if the director/trustee/officer concerned is found to beresponsible for the closure of the institution,the concerned department of the SES shallrecommend to the Monetary Board his/herdelisting from the masterlist of temporarilydisqualified persons and his/her inclusionin the masterlist of permanently disqualifiedpersons.

g. If the disqualification is based ondismissal from employment for cause, theappropriate department of the SES shall, asmuch as practicable, endeavor to establishthe specific acts or omissions constitutingthe offense or the ultimate facts whichresulted in the dismissal to be able todetermine if the disqualification of thedirector/trustee/officer concerned iswarranted or not. The evaluation of the caseshall be made for the purpose of determiningif disqualification would be appropriate andnot for the purpose of passing judgment onthe findings and decision of the entityconcerned. The appropriate department ofthe SES may decide to recommend to theMonetary Board a penalty lower thandisqualification (e.g., reprimand, suspension,etc.) if, in its judgment the act committed oromitted by the director trustees/officerconcerned does not warrant disqualification.

h. All other cases of disqualification,whether permanent or temporary shall be

§ 4143P.308.12.31


elevated to the Monetary Board for approvaland shall be subject to the proceduresprovided in Items “a”, “b”, “c” and “d” above.

i. Upon approval by the MonetaryBoard, the concerned director/trustees/officer shall be informed by the appropriatedepartment of the SES in writing either bypersonal service or through registered mailwith registry return receipt card, at his/herlast known address of his/her disqualificationfrom being elected/appointed as directortrustee/officer in any FI under the supervisionof BSP and/or of his/her inclusion in the masterlist of watchlisted persons so disqualified.

j. The board of directors/trustees of theconcerned institution shall be immediatelyinformed of cases of disqualificationapproved by the Monetary Board and shallbe directed to act thereon not later than thefollowing board meeting. Within seventy-two (72) hours thereafter, the corporatesecretary shall report to the Governor of theBSP through the appropriate department ofthe SES the action taken by the board on thedirector/trustee/officer involved.

k. Persons who are elected or appointedas director/trustees or officer in any of the BSP-supervised institutions for the first time but aresubject to any of the grounds fordisqualification provided for under Subsecs.4143P.1 and 4143P.2 shall be afforded theprocedural due process prescribed above.

l. Whenever a director/trustee/officeris cleared in the process mentioned underItem “c” above or, when the ground fordisqualification ceases to exist, he/she wouldbe eligible to become director/trustees orofficer of any bank, QB, trust entity or anyinstitution under the supervision of the BSPonly upon prior approval by the MonetaryBoard. It shall be the responsibility of theappropriate department of the SES to elevateto the Monetary Board the lifting of thedisqualification of the concerned director/trustee/officer and his/her delisting from themasterlist of watchlisted persons.(As amended by Circular No. 584 dated 28 September 2007)

§ 4143P.4 Effect of possession ofdisqualifications. Directors/trustees/officerselected or appointed possessing any of thedisqualifications as enumerated herein, shallvacate their respective positionsimmediately.

§ 4143P.5 (Reserved)

§ 4143P.6 Watchlisting. To provide theBSP with a central information file to be usedas reference in passing upon and reviewingthe qualifications of persons elected orappointed as directors/trustee or officer ofan institution under the supervisory andregulatory powers of the BSP, the SES shallmaintain a watchlist of disqualified directors/trustees/officers under the followingprocedures:


(1) Disqualification File “A” (Permanent)– Directors/trustees/officers/employeespermanently disqualified by the MonetaryBoard from holding a director/trustee/officerposition.

(2) Disqualification File “B” (Temporary)– Directors/trustees/officers/employeestemporarily disqualified by the MonetaryBoard from holding a director/ trustee/officerposition.

b. Inclusion of directors/trustees/officers/employees in the watchlist. Uponrecommendation by the appropriatedepartment of the SES, the inclusion ofdirectors/trustees/officers/employees inwatchlist disqualification files “A” and “B”on the basis of decisions, actions or reportsof the courts, institutions under thesupervisory and regulatory powers of theBSP,NBI or other administrative agenciesshall first be approved by the MonetaryBoard.

c. Notification of directors/trustees/officers/employees. Upon approval by theMonetary Board, the concerned director/trustee/officer/employee shall be informed

§§ 4143P.3 - 4143P.608.12.31


through registered mail, with registry returnreceipt card, at his last known address ofhis inclusion in the masterlist of watchlistedpersons disqualified to be a director/trusteeofficer in any institution under thesupervisory and regulatory powers of theBSP.

d. Confidentiality. Watchlisting shallbe for internal use only and may not beaccessed or queried upon by outside partiesincluding such institutions under thesupervisory and regulatory powers of theBSP, except with the authority of the personconcerned and with the approval of theDeputy Governor, SES, the Governor, or theMonetary Board.

The BSP will disclose information onits watchlist files only upon submission ofa duly accomplished and notarizedauthorization from the concerned personand approval of such request by the DeputyGovernor, SES or the Governor or theMonetary Board. The prescribedauthorization form to be submitted to theconcerned department of the SES is inAppendix Q-45.

Pawnshops can gain access toinformation in the said watchlist for theso le purpose o f sc reening the i rapplicants for hiring and/or confirmingtheir elected directors/trustees andappointed officers. Pawnshops mustobtain the said authorization on anindividual basis.

e. Delisting. All delistings shall beapproved by the Monetary Board uponrecommendation of the appropriatedepartment of the SES except in cases ofpersons known to be dead where delistingshall be automatic upon proof of death andneed not be elevated to the Monetary Board.Delisting may be approved by the MonetaryBoard in the following cases:

(1) Watchlist - Disqualification File“B” (Temporary) -


(b) When the conviction by the courtfor crimes involving dishonesty, breach oftrust and/or violation of banking lawsbecomes final and executory, in which casethe director/trustee/officer/employee isrelisted to Watchlist – Disqualification File“A” (Permanent); or

(c) Upon favorable decision or clearanceby the appropriate body, i.e., court, NBI,institutions under the supervisory andregulatory powers of the BSP, or such otheragency/body where the concerned individualhad derogatory record.

Directors/trustees/officers/employeesdelisted from the Watchlist – DisqualificationFile “B” other than those upgraded to Watchlist– Disqualification File “A” shall be eligible forre-employment with any institution under thesupervisory and regulatory powers of the BSP.(As amended by CL-2007-001 dated 04 January 2007 and CL-2006-046 dated 21 December 2006)



Sec. 4151P Establishment of BranchesNo pawnshop shall open, maintain oroperate a branch office without firstapplying for and obtaining from the BSP,through the appropriate department of theSES, authority to operate such branch whichshall be processed in accordance with thefollowing guidelines.

§ 4151P.1 Definition of term. As usedin these rules the term branch office shallinclude any place of business outside themain office of a pawnshop, wherepawnshop operations or transactions or anyphase thereof are conducted by saidpawnshop under the control and supervisionof a head or main office.

§ 4151P.2 Operations and functionsThe operations/transactions of a branchoffice shall likewise be governed by the

§§ 4143P.6 - 4151P.208.12.31


provisions of P.D. No. 114 governingoperations/transactions of a head office, aswell as by other pertinent laws, BSP rulesand regulations.

The primary purpose of branching shallbe to provide an additional source of creditto small borrowers left unserved by thebanking and other FIs.

§ 4151P.3 Basis for establishmentBranch offices shall be allowed on the basisof the head office’s ability to conductoperations, as well as correspondentarrangements. The appropriate departmentof the SES shall not process an applicationfor branching of a pawnshop which has anapproved but unopened branch.

§ 4151P.4 Capital requirement.Uponcompliance with the minimum paid-incapital of P100,000, permission to open amaximum of one (1) branch may be granted,subject to the provisions of the rules onbranching.

Additional paid-in capital of P100,000shall be required for each additionalbranch.

§ 4151P.5 Documentary requirementsThe following documents shall be filed withthe appropriate department of the SES of theBSP in connection with an application tooperate a branch:

a. Bank certification on paid-in capitaldeposit;

b. Bio-data of the proposed manager andaccountable employees;

c. Information on branch location,facilities (such as vault), bonding andinsurance;

d. Certified true copy of the boardresolution authorizing the establishment ofthe branch (in case of corporation); and

e. Business and/or economicjustification (including data) for theestablishment of the branch, etc.

§ 4151P.6 Date of opening forbusiness. A branch office shall open forbusiness within six (6) months from receiptof its authority to operate said branch,otherwise, the authority is automaticallyrevoked.



Sec. 4156P Business Days and HoursPawnshops shall transact business at aminimum of five (5) days a week, for aminimum of six (6) hours a day, both to beselected by them. They may, at theirdiscretion, remain open beyond the aboverequirement for as long as they deem itnecessary. The business hours and businessdays shall be posted conspicuously at alltimes at the door of the pawnshop.

Exemption from the above requirementshall be granted to pawnshops in troubledareas after due evaluation of their requests.

Special public holidays proclaimed forlocal government shall be regular workingdays.


J. RECORDS AND REPORTS

Sec. 4161P Records. The accounting periodof all pawnshops shall be on the calendaryear basis.

The accounting records of pawnshopsshall consist of records of original entry andbooks of final entry.

The records of original entry shall consistof pawn tickets, official receipts, vouchersand other supporting documents. The booksof final entry shall consist of the generalledger, subsidiary ledgers and registers ofloans extended and loans paid.

Pawnshops may use any form of register:Provided, That (a) it contains spaces and

§§ 4151P.2 - 4161P08.12.31


columns adequate to substantially reflect thedata required by the BSP, (b) said register iswith a permanent binding, and (c) no registerwith loose leaves or detachable pages shallbe allowed. The Chart of Accounts andDescription of Loan Registers of Pawnshopsprovided in Appendix P-1 shall be followed.

No pawnbroker or other persons shallalter or erase any entry made in the registersof a pawnshop.

No pawnshop shall destroy or disposeof any record, ledger, book, or documentfor at least three (3) years from the datethereof.

§ 4161P.1 Uniform System ofAccounts. Pawnshops shall strictly adopt/implement the Uniform System of Accountsprescribed for pawnshops in the recordingof daily transactions including reportorialrequirements.

§ 4161P.2 Philippine Financial ReportingStandards/Philippine Accounting StandardsStatement of policy. It is the policy of theBSP to promote fairness, transparency andaccuracy in financial reporting. It is in thislight that the BSP aims to adopt all PFRS andPAS issued by the ASC to the greatest extentpossible.

Pawnshops shall adopt the PFRS andPAS which are in accordance with generallyaccepted accounting principles in recordingtransactions and in the preparation offinancial statements and reports to BSP.However, in cases where there aredifferences between BSP regulations andPFRS/PAS as when more than one (1) optionare allowed or certain maximum orminimum limits are prescribed by the PFRS/PAS, the option or limit prescribed by BSPregulations shall be adopted by all banks/ FIs.

For purposes hereof, the PFRS/PAS shallrefer to issuances of the ASC and approvedby the PRC.

Accounting treatment for prudentialreporting. For prudential reporting, FIs shall

adopt in all respect the PFRS and PASexcept as follows:

a. In preparing consolidated financialstatements, only investments in financialallied subsidiaries except insurancesubsidiaries shall be consolidated on aline-by-line basis; while insurance andnon-financial allied subsidiaries shall beaccounted for using the equity method.Financial/non-financial allied/non-alliedassociates shall be accounted for using theequity method in accordance with theprovisions of PAS 28 “Investments inAssociates”.


c. FIs shall be required to meet the BSPrecommended valuation reserves.

Government grants extended in the formof loans bearing nil or low interest rates shallbe measured upon initial recognition at itsfair value (i.e., the present value of the futurecash flows of the financial instrumentdiscounted using the market interest rate).The difference between the fair value andthe net proceeds of the loan shall be recordedunder “Unearned Income-Others”, whichshall be amortized over the term of the loanusing the effective interest method.

The provisions on government grantsshall be applied retroactively to alloutstanding government grants received.Pawnshops that adopted an accountingtreatment other than the foregoing shallconsider the adjustment as a change inaccounting policy, which shall be accountedfor in accordance with PAS 8.

Notwithstanding the exceptions in Items“a”, “b” and “c”, the audited annual financialstatements required to be submitted to theBSP in accordance with Appendix P-2 shallin all respect be PFRS/PAS compliant:Provided, That FIs shall submit to the BSP

§§ 4161P - 4161P.208.12.31


adjusting entries reconciling the balances inthe financial statements for prudentialreporting with that in the audited annualfinancial statements.(As amended by Circular No. 572 dated 22 June 2007)

Sec. 4162P Reports. Pawnshops shallsubmit to the appropriate department of theSES of the BSP the reports listed in AppendixP-2 in the forms as may be prescribed bythe Deputy Governor, SES, BSP.

Any change in, or amendment to, thearticles of incorporation/co-partnership, by-laws or material documents required to besubmitted to the BSP shall be reported bysubmitting copies of the amended articlesof incorporation, by-laws or materialdocument to the appropriate department ofthe SES within fifteen (15) days followingsuch change.(As amended by CL-2007-059 dated 28 November 2007, CL-

2007-050 dated 04 October 2007, and M-2007-028 dated 24

September 2007)

§ 4162P.1 Categories of and signatoriesto reports. Reports required to be submittedto the BSP are classified into Categories A-1,A-2, A-3 and B reports as indicated in thelist of reports required to be submitted tothe BSP in Appendix P-2.

Appendix P-3 prescribes the signatoriesfor each report category and the requirementson signatory authorization. Reportssubmitted in computer media shall besubject to the same requirements.

A report submitted to the BSP under thesignature of an officer who is not authorizedin accordance with the requirements in thisSubsection shall be considered as not havingsubmitted.

§ 4162P.2 Manner of filing. Thesubmission of the reports shall be effectedby filing them personally with theappropriate department of the SES or withthe BSP Regional Offices/Units, or bysending them by registered mail or special

delivery through private couriers, unlessotherwise specified in the circular ormemorandum of the BSP.

§ 4162P.3 Sanctionsa. Definition of terms. For purposes of

these rules, the following definitions shallapply:

(1) Report shall refer to any report orstatement required of a pawnshop to besubmitted to the BSP periodically or withina specified period.

(2) Faulty report shall refer to aninaccurate/improperly accomplishedreport.

(3) Willful delay or default in thesubmission of reports shall refer to the failureof a pawnshop to submit a report on time.Failure to submit a report on time due tofortuitous events, such as fire and othernatural calamities and public disorders,including strike or lockout affecting apawnshop as defined in the Labor Code ora national emergency affecting operationsof pawnshops, shall not be considered aswillful delay.

(4) False Statement shall refer to anyuntruthful data or information or falsehoodsmade in a report to the BSP or its authorizedagents, with intent to deceive or mislead.Any false statement which tends to favorthe pawnshop submitting the report shallbe prima facie evidence of intent to deceiveor mislead.

(5) Repeated violation shall mean thecommission of the same offense for at leasttwo (2) times.

(6) Persistent violation shall mean thecommission of the same offense for at leastthree (3) times.

(7) Offense shall refer to submission offaulty report, willful delay in submission ofreports, or making of false statements inreports.

b. Fine for submission of faulty report.Any pawnshop which submits a faulty reportshall pay to the BSP a fine of P30 per day

§§ 4161P.2 - 4162P.308.12.31


which shall accrue beginning on the sixthbusiness day from the day the written noticeof faulty report is received by the pawnshopconcerned until a correct report issubmitted.

c. Fines for willful delay in submissionof reports. Pawnshops incurring willfuldelay in the submission of required reportsshall pay a fine in accordance with thefollowing schedule:

I. For Categories A-1, A-2 and A-3 reportsPer day of default P 90until the report is filed

II. For Category B reportsPer day of default P 30until the report is filed

Delay or default shall start to run on theday following the last day required for thesubmission of reports. However, should thelast day of filing fall on a non-working dayin the locality where the reportingpawnshop is situated, delay or default shallstart to run on the day following the nextworking day. The due date/deadline forsubmission of reports to BSP as prescribedunder Sec. 4162P governing the frequencyand deadlines indicated in Appendix P-2shall be automatically moved to the nextbanking day whenever a half-daysuspension of business operations ingovernment offices is declared due to anemergency such as typhoon, floods, etc.

For the purpose of establishing delayor default, the date of acknowledgmentby the appropriate department of the SESor the BSP Regional Offices/Unitsappearing on the copies of such reportsfiled or submitted or the date of mailingpostmarked on the envelope or the dateof registry or special delivery receipt, asthe case may be, shall be considered asthe date of filing.

Delayed schedules or attachmentsand amendments shall be considered latereporting subject to the above penalties.

d. Fines for making false statements.Any pawnshop which makes a falsestatement in any of its reports to the BSP orits authorized agents shall pay to the BSP afine in accordance with the followingschedule:

(1) On the first andsecond offense, afine payable on theday following thereceipt of BSP advice

(2) On repeated P600 and P120for every day ofdelay in paymentuntil the fine is fullypaid

(3) On persistent Suspension, after violations due hearing, of the

p a w n s h o p ' sdirectors/officers/p r o p r i e t o r /managing partner

Any false statement made in a previousreport which was not immediately knownbut was discovered only in later reports shallconstitute only one (1) violation. The penaltyshall operate on the sixth working daycounted from receipt of notice ofsubmission of a false statement from the BSPor its authorized agents until a correctstatement is submitted.

e. Manner of collection and paymentof fines. A pawnshop shall be billed bythe appropriate department of the SES. Thepawnshop shall thereupon remit theamount of the fine to the BSP thru theappropriate department of the SES. Failureof a pawnshop to effect the settlement ofthe full amount of the fine within a periodof fifteen (15) days from receipt of the billshall subject it to other administrativesanctions and/or to the penal provisionsof P.D. No. 114.

f. Appeal to the Monetary Board. Apawnshop may appeal to the MonetaryBoard a ruling of the appropriate departmentof the SES imposing any penalty prescribedherein.

§ 4162P.308.12.31


P300 and P60 forevery day of delayin payment until thefine is fully paid

g. Payment of the penalties byinstallments

(1) The head of the appropriate departmentof the SES may approve requests for paymentof penalties by installments: Provided, That thepawnshop’s cash position is not sufficient to paythe penalty in full, as determined by thatdepartment based on the pawnshop’s lateststatement of condition duly certified by itspresident/manager/proprietor/managingpartner, as the case may be. The request shallbe made in writing.

(2) The maximum number ofinstallment payments shall be inaccordance with the followingschedule:

Amount of Penalty No. of InstallmentsP500 and below Two (2) equal monthly

installmentsP501 - 750 Three (3) equal monthly

installmentsP751 - 1,000 Four (4) equal monthly

installmentsP1,001 - 2,000 Six (6) equal monthly

installmentsP2,001 - 5,000 Eight (8) equal monthly

installmentsP5,001 and above Ten (10) equal monthly

installments

Default in payment of any installment shallrender the unpaid amount payable in full.

h. The appropriate department of the SESshall refuse registration of new pawnshopsthe owner(s) of which owned anotherpawnshop which closed or ceasedoperations without paying previouslyassessed penalties.(As amended by Circular No. 585 dated 15 October 2007)


K. INTERNAL CONTROL

Sec. 4171P Safekeeping of Pawns andRecords and Insurance of Office BuildingPawns must be kept inside the safe orconcrete vault; however, bulky pawns maybe placed outside the safe or vault but withinthe pawnshop premises.

Vital records must be kept inside the safeor vault when not in use. Other pawnshoprecords/documents may be placed in filingcabinets/shelves outside the vault or safe butwithin the pawnshop premises.

The office building/premises and allpawns of the pawnshop, except those whichare kept inside a fireproof vault, must beinsured against fire.

Sec. 4172P Separation of PawnshopBusiness from Other Businesses. Anyperson or entity engaged in the pawnshopbusiness and, at the same time, engaged inother businesses not directly related norincidental to the business of a pawnshop,shall keep such businesses distinct andseparate from the pawnshop operation.



Sec. 4181P Business Name1. No person orentity shall advertise or hold itself out asbeing engaged in pawnshop operations oruse in connection with its business titlethe words pawnshop, pawnbroker,pawnbrokerage, or words of similarimport, or transact in any manner thebusiness of a pawnshop without havingfirst complied with the provisions ofP.D. No. 114 and of these regulations.(As amended by CL Nos. 053 dated 21 August 2008 and

007 dated 05 February 2008)

Sec. 4182P Closing or Transfer of BusinessNo pawnshop shall close or transfer its placeof business within three (3) months followingthe maturity of any loan or pledge, or beforeany pawn shall have been sold or disposed ofas provided for under existing regulations.

Any pawnshop may transfer its place ofbusiness from one location to another withinthe territorial limits of the city ormunicipality upon compliance with thefollowing requirements:

§§ 4162P.3 - 4182P08.12.31


1 See SES Circular Nos. 5 dated 17 July 2008 and 14 dated 24 October 2000.

a. Notice of transfer shall bepublished in English and in Pilipino or inthe local dialect in two (2) dailynewspapers of general circulation in thecity or municipality where the pawnshopis closing business, and posted in aconspicuous place in the premises to bevacated and to be transferred to;

b. The notice shall be published for atleast three (3) consecutive days, the last dayof which shall be five (5) days before theactual transfer; and

c. Notice shall contain the followinginformation:

(1) Date of transfer;(2) Address of the premises to be

vacated; and(3) Address of the premises to which

the pawnshop intends to transfer.In remote areas where newpapers are not

available, the publication shall be compliedwith by posting notices at the city hall ormunicipal building of the city or municipalitywhere the pawnshop has its place of business.


Sec. 4190P Duties and Responsibilities ofPawnshops and their Directors/Officers inAll Cases of Outsourcing of PawnshopFunctions. The rules on outsourcing ofbanking functions as shown in AppendixQ-37 shall be adopted in so far as they areapplicable to pawnshops.(As amended by Circular Nos. 610 dated 26 May 2008, 596 dated

11 January 2008, 548 dated 25 September 2006 and 543 dated

08 September 2006)


Sec. 4192P Prompt Corrective ActionFramework. The framework for theenforcement of prompt corrective action(PCA) on banks which is in Appendix Q-40,shall govern the PCA taken on pawnshopsto the extent applicable, or by analogy.(Circular No. 523 dated 31 March 2006)

Sec. 4193P Supervision by Risks. Theguidelines on supervision by risk inAppendix Q-42 which provide guidanceon how QBs should identify, measure,monitor and control risks shall govern thesupervision by risks of pawnshops to theextent applicable.

The guidelines set forth theexpectations of the BSP with respect to themanagement of risks and are intended toprovide more consistency in how the risk-focused supervision function is applied tothese risks. The BSP will review the risksto ensure that a pawnshop’s internal riskmanagement processes are integrated andcomprehensive. All pawnshops shouldfollow the guidance in risk managementefforts.(Circular No. 510 dated 03 February 2006)

Sec. 4194P Market Risk ManagementThe guide l ines on marke t r i skmanagement for QBs as shown inAppendix Q-43 shall govern the marketrisk management of pawnshops to theextent applicable.

The guidelines set forth the expectationsof the BSP with respect to the managementof market risk and are intended to providemore consistency in how the risk-focusedsupervision is applied to this risk.Pawnshops are expected to have anintegrated approach to risk management toidentify measure, monitor and control risks.Market risk should be reviewed togetherwith other risks to determine overall riskprofile.

The BSP is aware of the increasingdiversity of financial products and thatindustry techniques for measuring andmanaging market risk are continuouslyevolving. As such, the guidelines areintended for general application; specificapplication will depend to some extent onthe size, complexity and range of activitiesundertaken by pawnshops.(Circular No. 544 dated 15 September 2006)

§§ 4182P - 4194P08.12.31


Sec. 4195P Liquidity Risk ManagementThe guidelines on l iquidity riskmanagement for QBs as shown inAppendix Q-44 shall govern the liquidityrisk management of pawnshops to theextent applicable.

The guidelines set forth theexpectations of the BSP with respect to themanagement of liquidity risk and areintended to provide more consistencyin how the risk-focused supervisionfunc t ion i s appl ied to th i s r i sk .Pawnshops are expected to have anintegrated approach to risk managementto ident i fy , measure, monitor and

control risks. Liquidity risk should bereviewed together with other risks todetermine overall risk profile.

These guidelines are intended forgeneral application; specific applicationwill depend on the size and sophisticationof a particular pawnshop and the nature andcomplexity of its activities.(Circular No. 545 dated 15 September 2006)


Sec. 4199P General Provision on Sanctions. Anyviolation of the provisions of this Part shall besubject to Section 18 of P.D. No. 114.

§§ 4195P - 4199P08.12.31


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§§ 4201P - 4299P08.12.31

PART TWO

BORROWING OPERATIONS

A. – J. (RESERVED)

Secs. 4201P – 4285P (Reserved)

K. OTHER BORROWINGS

Section 4286P Borrowings ConstitutingQuasi-Banking Functions. Borrowing fromtwenty (20) or more lenders for the purposeof relending or purchase of receivables orother obligations, which constitutes quasi-

banking functions as defined in Subsec.4101P.3, shall be subject to prior BSPauthority on performance of quasi-bankingfunctions under BSP regulations.

Secs. 4287P – 4298P (Reseved)

Sec. 4299P General Provision onSanctions. Any violation of the provisionsof this Part shall be subject to Sections 36and 37 of R.A. No. 7653.

Manual of Regulations for Non-Bank Financial Institutions P RegulationsPart III - Page 1

PART THREE

LOANS AND INVESTMENTS

A. LOANS IN GENERAL

Section 4301P Loan Limits. Pawnshopsmay grant such amount of loans as maybe agreed upon between the parties:Provided, That the amount of a loan shallin no case be less than thirty percent(30%) of the appraised value of thesecurity offered for the loan, unless thepawner manifests in writing that he isapplying for a lesser amount. Pawnshopsshall not under-appraise the securityoffered for the loan for the purpose ofdefeating the restriction prescribed bythis Section.

Sec. 4302P Interest and Other ChargesThe rate of interest, including commissions,premiums, fees and other charges, on anyloan or forbearance of money extendedby a pawnshop shall not be subject to anyceiling.

No pawnshop shall collect interest onloans in advance for a period of more thanone (1) year.

Sec. 4303P Past Due Accounts; Renewal/Redemption of Pawns. A loan may berenewed for such amount and period asmay be agreed upon between thepawnshop and the pawner, subject to thesame conditions as are provided in this Partfor new loans.

A pawner who fails to pay or renewhis obligation with a pawnshop on the dateit falls due shall have ninety (90) days fromthe date of maturity of the loan withinwhich to redeem the pawn by paying theprincipal amount of the loan plus theamount of interest that shall have accruedthereon. The amount of interest due and

payable after the maturity date of the loanshall be computed upon redemption basedon the sum of the principal loan andinterest earned as of the date of maturity.The procedures to be followed in case thepawner fails to redeem his pawn areprescribed in Sec. 4323P.


Sec. 4305P Interest Accrual on PastDue Loans. Interest income on past dueloan arising from discount amortization(and not from the contractual interest ofthe account) shall be accrued as providedin PAS 39.(Circular No. 494 dated 20 September 2005)

Sec. 4306P - 4320P (Reserved)

B. SECURED LOANS

Sec. 4321P Kinds of Security. Onlypersonal property that is capable of beingphysically delivered to the control andpossession of the pawnshop shall beaccepted as security for loans. Certainspecified chattels, such as guns, knives, orsimilar weapons, whose reception in pawnis expressly prohibited by other laws,decrees, or regulations, shall not beaccepted by pawnshops as security forloans.

Sec. 4322P Pawn Ticket. Pawnshopsshall at the time of the loan, deliver to eachpawner a pawn ticket which shall containthe following:

a. Name and residence of the pawner;b. Date the loan is granted;c. Amount of the principal loan;

§§ 4301P - 4322P08.12.31

P RegulationsPart III - Page 2


d. Interest rate in percent;e. Period of maturity;f. Description of the pawn;g. Expiry date of redemption period;h. Signature of the pawnshop's

authorized representative;i. Signature or thumbmark of the

pawner or his authorized representative;and

j. Such other terms and conditions asmay be agreed upon between thepawnshop and the pawner.

§ 4322P.1 Contents of pawn ticketThe contents of the face of the standardpawn ticket, prescribed for pawnshopspursuant to the requirements of P.D. No.114, and the terms and conditions on thereverse side thereof, are prescribed inAppendices P-4 and P-4-a. Suplusage datashall be avoided.

Additional terms and conditions whichpawnshops may wish to incorporate shallbe subject to prior approval by theappropriate department of the SES.

Pawn tickets shall not be smaller than8" x 5".

Pawn tickets shall at least be induplicate. The first copy shall contain theword "Original" and the second copy shallbe marked "Duplicate".

Pawn tickets shall be seriallynumbered.

Pawnshops may choose the color andquality of the paper used as pawn ticket.

§ 4322P.2 Sanctions. Any pawnshopwhich violates or fails to comply with therequirements of Subsec. 4322P.1 shall paya fine of P500 and shall be liable for suchother administrative sanctions as the BSPmay impose. The owner, partner, manager,or officer-in-charge of the pawnshopresponsible for the violation or non-compliance shall be jointly liable with thepawnshop.

Sec. 4323P Reminder to Pawner; Noticeto the Public. On or before the expirationof the ninety (90)-day grace period allowedin Sec. 4303P, the pawnshop shall dulynotify the pawner in writing that the pawnshall be sold or otherwise disposed of inthe event that the pawner fails to redeemthe pawn within the ninety (90)-day graceperiod, specifying in the same notificationthe date, hour and place where the saleshall take place. If upon the expiration ofthe ninety (90)-day grace period, thepawner fails to redeem his pawn, thepawnshop may sell or dispose of the pawnonly after it has published a notice of publicauction of unredeemed articles held assecurity for loans in at least two (2)newspapers circulated in the city ormunicipality where the pawnshop has itsplace of business, six (6) days prior to thedate set for the public auction.

The notice shall be in English and inPilipino or in the local dialect and shallcontain the following:

a. Name and address of the owner ofthe pawnshop; and

b. Date and hour of the auction sale.In remote areas where newspapers are

neither published nor circulated, thepublication shall be complied with by postingnotices at the city hall or municipal buildingof the city or municipality and in two (2) otherconspicuous public places where thepawnshop has its place of business.

Sec. 4324P Public Auction of Pawns. Nopawnshop shall sell or otherwise disposeof any article or thing received as securityfor a loan except by public auction at anyof the following places:

a. Pawnshop's place of business; orb. Any public place within the

territorial limits of the municipality or citywhere the pawnshop conducts its business.

The auction shall be conducted underthe control and direction of a duly licensed

§§ 4322P - 4324P08.12.31

Manual of Regulations for Non-Bank Financial Institutions P RegulationsPart III - Page 3

auctioneer. In cities and municipalitieswhere there is no duly licensed auctioneer,the public auction may be conducted by anotary public of the city or province wherethe pawnshop has its place of business.

The Auction Sheet/Book containingentries of auctioned pawned articles dulysigned by the auctioneer or notary publicunder oath shall be maintained by thepawnshop.

Sècs. 4325P - 4335P (Reserved)

C. - J. (RESERVED)


K. MISCELLANEOUS


Sec. 4399P General Provisions onSanctions. Any violation of the provisionsof this Part shall be subject to Section 18of P.D. No. 114.

§§ 4324P - 4399P08.12.31

Manual of Regulations for Non-Bank Financial Institutions P RegulationsPart IV - Page 1

§§ 4401P - 4499P08.12.31

PART FOUR

Sections. 4401P - 4499P (Reserved)

Manual of Regulations for Non-Bank Financial Institutions P RegulationsPart V - Page 1

§§ 4501P - 4599P08.12.31

PART FIVE

Sections. 4501P - 4599P (Reserved)

Manual of Regulations for Non-Bank Financial Institutions P RegulationsPart VI - Page 1

PART SIX

MISCELLANEOUS

§§ 4601P - 4601P.108.12.31

A. OTHER OPERATIONS

Sec. 4601P Fines and Other Charges. Thefollowing regulations shall governimposition of monetary penalties onpawnshops, their trustees and/or officersand the payment of such penalties or finesand other charges by pawnshops.(Circular No. 585 dated 15 October 2007)

§4601P.1 Guidelines on the impositionof monetary penalties; Payment ofpenalties or fines. The following are theguidelines on the imposition of monetarypenalties on pawnshops, their directorsand/or officers.

a. Definition of terms. For purposesof the imposition of monetary penalties, thefollowing definitions are adopted:

(1) Continuing offenses/violations areacts, omissions or transactions entered into,in violation of laws, BSP rules andregulations, Monetary Board directives, andorders of the Governor which persist fromthe time the particular acts were committedor omitted or the transactions were enteredinto until the same were corrected/rectifiedby subsequent acts or transactions. They shallbe penalized on a per calendar day basisfrom the time the acts were committed/omitted or the transactions were effected upto the time they were corrected/rectified.

(2) Transactional offenses/violationsare acts, omissions or transactions enteredinto in violation of laws, BSP rules andregulations, Monetary Board directives,and orders of the Governor which cannotbe corrected/rectified by subsequent actsor transactions. They shall be meted withone (1)-time monetary penalty on a pertransaction basis.

(3) Continuing penalty refers to themonetary penalty imposed on continuingoffenses/violations on a per calendar daybasis reckoned from the time the offense/violation occured or was committed untilthe same was corrected/rectified.


b. Basis for the computation of theperiod or duration of penalty. Thecomputation of the period or duration of allpenalties shall be based on calendar days.

For this purpose the terms "per bankingday", "per business day", "per day" and/or"a day" as used in this Manual, and otherBSP rules and regulations shall mean "percalendar day" and/or "calendar day" as thecase may be.

c. Additional charge for late paymentof monetary penalty. Late payment ofmonetary penalty shall be subject to anadditional charge of six percent (6%) perannum to be computed from the time saidpenalty becomes due and payable up tothe time of actual payment. The penaltyapproved by the Governor/MB to beimposed on the pawnshop, its directorsand/or officers shall become due andpayable fifteen (15) calendar days fromreceipt of the Statement of Account fromthe BSP. For pawnshops which maintainDDA with the BSP, penalties which remainunpaid after the lapse of the fifteen-dayperiod shall be automatically debitedagainst their corresponding DDA on thefollowing business day without additionalcharge. If the balance of the concernedpawnshop's DDA is insufficient to coverthe amount of the penalty, said penalty shallalready be subject to an additional charge

P RegulationsPart VI - Page 2


§§ 4601P.1 - 4657P08.12.31

of six percent (6%) per annum to bereckoned from the business dayimmediately following the end of saidfifteen (15)-day period up to the day ofactual payment.

d. Appeal or request forreconsideration. A one (1)-time appeal orrequest for reconsideration on themonetary penalty approved by theGovernor/Monetary Board to be imposedon the pawnshop, its directors and/orofficers shall be allowed: Provided, That thesame is filed with the appropriatedepartment of the SES within fifteen (15)calendar days from receipt of the Statementof Account/billing letter. The appropriatedepartment of the SES shall evaluate theappeal or request for reconsideration of thepawnshop/individual and makerecommendations thereon within thirty (30)calendar days from receipt thereof. Theappeal or request for reconsideration on themonetary penalty approved by theGovernor/Monetary Board shall beelevated to the Monetary Board forresolution/decision. The running of thepenalty period in case of continuingpenalty and/or the period for computingadditional charge shall be interrupted fromthe time the appeal or request forreconsideration was received by theappropriate department of the SES up to thetime that the notice of the Monetary Boarddecision was recieved by the pawnshop/individual concerned.(Circular No. 585 dated 15 October 2007)



Section 4651P Supervisory Powers of theBangko Sentral. The head of theappropriate department of the SES and hisduly designated representatives areauthorized to conduct an examination,inspection, or investigation of books,

records, business affairs, administration,and financial condition of any pawnshop,whenever said official deems it necessaryfor the effective implementation of P.D.No. 114, and other pertinent rules andregulations. Said official and his dulydesignated representatives may administeroaths to any director, officer, or employeeof the pawnshop.

If, upon such examination, inspection,or investigation, the official or his deputiesshall establish that the pawnshop isviolating or is not complying with therequirements of P.D. No. 114 and of theprovisions of other pertinent rules andregulations, said official shall immediatelyinform the Monetary Board of his findingsand recommendations, and the MonetaryBoard shall take appropriate actions to stopsuch violation or non-compliance, andpunish the persons responsible.

Sec. 4652P Basic Law GoverningPawnshops. P.D. No. 114, known as thePawnshop Regulation Act, regulates theestablishment and operation ofpawnshops.

Sec. 4653P Accounting for PawnshopPremises; Other Fixed Assets. Pawnshoppremises, furniture, fixture and equipmentshall be accounted for using the cost modelunder PAS 16 "Property, Plant andEquipment".(Circular No. 494 dated 20 September 2005)


Sec. 4657P Batas Pambansa Blg. 344 –An Act to Enhance the Mobility ofDisabled Persons by Requiring CertainBuildings, Institutions, Establishments andPublic Utilities to Install Facilities andOther Devices. In order to promote therealization of the rights of disabled personsto participate fully in the social life and thedevelopment of the societies in which they


§§ 4657P - 4691P08.12.31

live and the enjoyment of the opportunitiesavailable to other citizens, no license orpermit for the construction, repair orrenovation of public and private buildingsfor public use, educational institutions,airports, sports and recreation centers andcomplexes, shopping centers orestablishments, public parking places,workplaces, public utilities, shall be grantedor issued unless the owner or operatorthereof shall install and incorporate in suchbuilding, establishment or public utility,such architectural facilities or structuralfeatures as shall reasonably enhance themobility of disabled persons such assidewalks, ramps, railings and the like. Iffeasible, all such existing buildings,institutions, etablishments, or public utilitiesmay be renovated or altered to enable thedisabled persons to have access to them.


Sec. 4660P Disclosure of RemittanceCharges and Other Relevant InformationIt is the policy of the BSP to promote theefficient delivery of the competitively-pricedremittance services by banks and otherremittance service providers by promotingcompetition and the use of innovativepayment systems, strengthening thefinancial infrastructure, enhancing accessto formal remittance channels in the sourceand destination countries, deepening thefinancial literacy of consumers, andimproving transparency in remittancetransactions, consistent with soundpractices.


a. Transfer/remittance fee - charge forprocessing/sending the remittance from the

country of origin to the country ofdestination and/or charge for receiving theremittance at the country of destination;


c. Exchange rate differential/spread -foreign exchange mark-up or thedifference between the prevailing BSPreference/guiding rate and the exchange/conversion rate;

d. Other currency conversion charges- commissions or service fees, if any;


f. Amount/currency paid out in therecipient country - exact amount of moneythe recipient should receive in localcurrency or foreign currency; and

g. Delivery time to recipients/beneficiaries - delivery period of remittanceto beneficiary stated in number of days,hours or minutes.

Non-bank remittance service providersshall likewise post said information in theirrespective websites and display themprominently in conspicuous places withintheir premises and/or remittance/servicecenters.(Circular No. 534 dated 26 June 2006)


Sec. 4691P Anti-Money LaunderingRegulations. Banks, OBUs, QBs, trustentities, NSSLAs, pawnshops, and allother insti tutions, including theirsubsidiaries and affiliates supervisedand/or regulated by the BSP, otherwiseknown as "covered institutions" shallcomply with the provisions of R.A. No.9160, as amended, otherwise known as the"Anti-Money Laundering Act of 2001 " andits Revised IRRs in Appendix P-6 and thosein Appendix P-5.(As amended by Circular No. 612 dated 13 June 2008)

P RegulationsPart VI - Page 4


§§ 4691P.1 - 4691P.8 (Reserved)

§ 4691P.9 Sanctions and penaltiesa. Whenever a covered institution

violates the provisions of Section 9 ofR.A. No. 9160, as amended, or of thisSection, the officer(s) or other personsresponsible for such violation shall bepunished by a fine of not less than P50,000nor more than P200,000 or byimprisonment of not less than two (2) yearsnor more than ten (10) years, or both, atthe discretion of the court pursuant toSection 36 of R.A. No. 7653, otherwiseknown as "The New Central Bank Act".

b. Without prejudice to the criminalsanctions prescribed above against theculpable persons, the Monetry Board may,at its discretion, impose upon any coveredinstitutions, its directors and/or officers for anyviolation of Section 9 of R.A. No. 9160, asamended, the administrative sanctionsprovided under Section 37 of R.A. No. 7653.


Sec. 4695P Valid IdentificationI Cards forFinancial Transactions. The followingguidelines govern the acceptance of valid IDcards for all types of financial transactionsby pawnshops, including financialtransaction involving OFWs, in order topromote access of Filipinos to servicesoffered by formal FIs, particularly thoseresiding in the remote areas, as well as toencourage and facilitate remittances ofOFWs through the banking system:


For this purpose, the term officialauthority shall refer to any of the following:





Valid IDs include the following:(a) Passport(b) Driver’s license(c) PRC ID(d) NBI clearance(e) Police clearance(f) Postal ID(g) Voter’s ID(h) Barangay certification(i) GSIS e-Card(j) SSS card(k) Senior Citizen card(l) OWWA ID(m) OFW ID(n) Seaman’s Book(o) Alien Certification of Registration/

Immigrant Certificate of Registration(p) Government office and GOCC ID

(e.g., AFP, HDMF IDs)(q) Certification from the NCWDP(r) DSWD certification(s) IBP ID; and(t) Company IDs issued by private

entities or institutions registered with orsupervised or regulated either by the BSP,SEC or IC.


c. Pawnshops shall require theirclients to submit a clear copy of one (1)valid ID on a one-time basis only, or atthe commencement of a businessrelationship. They shall require theirclients to submit an updated photo andother relevant information whenever theneed for it arises.

§§ 4691P.1 - 4695P08.12.31


The foregoing shall be in addition to thecustomer identification requirementsunder Rule 9.1.c of the Revised IRRs ofR.A. No. 9160, as amended (Appendix P-6).

For purposes of this Section, financialtransactions may include remittances,among others, as falling under thedefinition of transaction. Under theAnti-Money Laundering Act of 2001, asamended, a financial transaction is any actestablishing any right or obligation orgiving rise to any contractual or legalrelationship between the parties thereto.It also includes any movement of funds byany means with a covered institution.(Circular No. 564 dated 03 April 2007 as amended by Circular

No. 608 dated 20 May 2008)


Sec. 4699P Administrative Sanctions. TheMonetary Board shall impose uponpawnshops, their owners, partners,directors and officers for any violation ofthe provisions of the rules on pawnshops,P.D. No. 114, pertinent laws or any orderor instruction of the Monetary Board or itsauthorized official; or any commission ofirregularities in the conduct of its business,the following administrative sanctions:

a. For a violation consummated at asingle instance and not punishable on aper-day basis, a fine of not more than P500;or for a violation which is continuing andpunishable on a per-day basis, a fine of notmore than P600 for every day of violationor non-compliance; and/or

b. Suspension or, after due hearing,removal of partners/directors or officers.

For purposes of this Section, the phraseany commission of irregularities in theconduct of its business shall include any actor omission described hereunder:

(1) Failure to produce pawn uponredemption or in any other case where thepawnshop has the obligation to produce thepawn;

(2) Allowing the redemption of pawnwithout the surrender of the correspondingoriginal pawn ticket/substitute pawn ticket/affidavit of loss;

(3) Falsifying pawn tickets;(4) Actual collection of interest in

advance and or service charges withoutreflecting the same on the pawn ticket;

(5) Tampering or substitution of pawn;(6) Failure to issue official receipts for

amounts collected; and(7) Any other act or omission analogous

to the above-enumerated acts and omissions.

§§ 4695P - 4699P08.12.31


APP. P-108.12.31

P RegulationsAppendix P-1 - Page 1

A. General Ledger. The General Ledgeris the controlling record of all subsidiaryledger accounts. The general ledgeraccounts shall be grouped as follows:

(1) Assets - Asset accounts shall consistof the following:

(a) Cash on hand and in banks;(b) Pledge loans;(c) Land;(d) Building;(e) Furniture and fixtures;(f) Office equipment;(g) Leasehold improvements;(h) Investment in securities; and(I) Other assets.Other assets shall include all assets not

included in any of the above classification,such as prepaid expenses, advances,accounts receivables.

(2) Liabilities - Liabilities representobligations of the pawnshop, such as:

(a) Loans payable;(b) Accounts payable; and(c) Other liabilities.Other liabilities are liabilities not included

in the above classification, such as SSSPremiums and medicare, tax withheld, accruals.

(3) Capital - Capital at the end of the yearis the excess of assets over liabilities, orthe sum of paid-in capital, surplus orretained earnings accounts and net incomefor the year. The accounts under this groupshall consist of the following:

(a) Capital/capital stock;(b) Drawings;(c) Retained earnings; and(d) Net income for the year.

CHART OF ACCOUNTS AND DESCRIPTIONOF LOAN REGISTER OF PAWNSHOPS

(Appendix to Sec. 4161P)

(4) Income - This account represents the"general ledger control" account for allincome of the pawnshop. An "IncomeSubsidiary Ledger" shall be maintainedand the total of this ledger shall equal thebalance of "Income Control" account ofthe general ledger at all times.

The "Income Subsidiary Ledger" shallcontain the following accounts:

(a) Interests - pledge loans;(b) Service charges;(c) Gain or loss at auction sale;(d) Interests on securities; and(e) Other income

(5) Expenses - The expenses account shallinclude the following:

(a) Salaries and allowances;(b) Interest on borrowed money;(c) Rental;(d) Depreciation;(e) Light and water;(f) Taxes and licenses;(g) SSS contribution;(h) Costs of telephone, postage and/

or telegram;(i) Stationery and/or supplies; and(j) Miscellaneous expenses.

B. Registers. The following registers shallbe maintained to trace loan transactions.

(1) Loans Extended Register - Everypawnbroker shall keep a "Loans ExtendedRegister" in which shall be entered in ink,at the time of each loan or pledgetransaction, an accurate account anddescription in English, with correspondingtranslation in the local dialect, the followingminimum data:

APP. P-108.12.31

Manual of Regulations for Non-Bank Financial InstitutionsP RegulationsAppendix P-1 - Page 2

(k) Signature or thumbmark of the pawnerand the name of the pawner written byand signature of the witness to thethumbmarking.

(2) Loans Paid Register - A "Loans PaidRegister" shall be maintained in which shallbe entered in ink, the principal and interestpayments of loans. It shall contain thefollowing minimum data:

(a) Date of payment;(b) Number of pawn ticket;(c) Name of pawner;(d) Principal amount; and(e) Amount of interest paid.

(a) Date of transaction;(b) Number of pawn ticket;(c) Amount of money loaned or

principal;(d) Rate of interest to be paid, in percent;(e) Service charge collected;(f) Description of pawn;(g) Appraised value of pawn;(h) Name of pawner;(i) Address of pawner;(j) Description of the pawner,

including:(i) Nationality;(ii) Sex; and(iii) General appearance; and

P Regulations

Appendix P-2 - Page 1

Manual of R



APP. P-2

08.12.31

LIST OF REPORTS REQUIRED FROM PAWNSHOPS(Appendix to Sec. 4162P)

A-2 BSP 7-26-02.C 4162P(Asamendedby M-028dated09.24.07)

A-2 BSP 7-26-03.C 4162P(AsamendedM-028dated09.24.07)

A-2 BSP 7-26-02.1C 4161P

A-2 Unnumbered 4691P(Rev. May2002 asamendedby Cir. No.612 dated06.03.08)

A-2 Unnumbered 4691P

A-2 Unnumbered 4691P

CSOC(head office and branches)

CSIE(head office and branches)

Breakdown of Pledged Loans According to Size




1 Formerly SED V

on or before 31stJanuary following end ofthe reference year

-do-

January 31st


-do-


Annually

-do-

-do-

Astransaction

occurs

-do-

Annually

Original - SDCFor HO, schedule oflisting of its branches

Original - ISD1

-do-


-do-

Original - ISD1


APP. P-2

08.12.31

P Regulations

Appendix P-2 - Page 2

Manual of R


ank Financial Institutions 1 Formerly SED V

A-3 Unnumbered 4162P(CL-059dated11.28.07andCL-050dated10.04.07)

B BSP 7-26-01.C 4101P.2

B BSP 7-26-01.1C 4101P.2

B Unnumbered 4162P(no prescribed form)

B 4162P

B 4162P

B Unnumbered 4691P

B

Report on the Borrowings of BSP Personnel

Information Sheet

Personal Data Sheet of Owner/Partner/Incorporator/Director/Officer

Annual Report of Management to StockholdersCovering Results of Operations for the Previous Year

Audited Financial Statement for the Previous YearEnded Prepared by the External Auditor

Loss/Destruction of Pawned Articles/PawnshopProperty Caused by Crimes or Fortuitous Events

Plan of action to comply with Anti-Money Launderingrequirements


-do-

Uponregistration

-do-

Annually

-do-

As incidentoccurs

-

Annually

15th banking days afterend of reference quarter

within 15th day aschange/s occur/s

-

31 March following endof each year

-do-

See Annex P-2-a forguidelines on reportingcrimes and losses

30th business day from31 July 2000 or fromopening of the institution


Original - SDC

Original - ISD1

-do-

Original - ISD1

-do-

-do-

-do-



APP. P-208.12.31

Manual of Regulations for Non-Bank Financial Institutions P RegulationsAppendix P-2 - Page 3

1. Pawnshops shall report on thefollowing matters through the appropriatedepartment of the SES:

a. Crimes whether consummated,frustrated or attempted against pawnedarticles/property/facilities (such as robbery,theft, swindling or estafa, forgery and otherdeceits) and other crimes involving loss/destruction of pawn/property of thepawnshop: Provided, That if no pawnedarticle is involved, the amount involvedin each crime is P20,000 or more.

Crimes involving the pawnshoppersonnel, regardless of whether or notsuch crimes involve the loss/destructionof pawned articles/property of thepawnshop, even if the amount involvedis less than those above specified, shalllikewise be reported to the BSP.

b. Incidents involving material loss,destruction or damage to the institution'spawned articles/property/facilities, otherthan arising from a crime: Provided, That

if no pawned article is involved, the amountinvolved per incident is P20,000 or more.

2. The following guidelines shall beobserved in the preparation and submissionof the report.

a. The report shall be prepared in two(2) copies and shall be submitted withinfive (5) business days from knowledgeof the crime or incident, the originalto the appropr ia te appropr ia tedepartment of the SES and the duplicateto the BSP Security Coordinator, thru theDirector, Security Investigation andTransport Department.

b. Where a thorough investigation andevaluation of facts is necessary to completethe report, an initial report submitted withinthe five (5) business day deadline may beaccepted: Provided, That a complete reportis submitted not later than fifteen (15)business days from termination ofinvestigation.

Annex P-2-a

REPORTING GUIDELINES ON CRIMES/LOSSES



APP. P-308.12.31

GUIDELINES ON PRESCRIBED REPORTS SIGNATORIESAND SIGNATORY AUTHORIZATION

(Appendix to Subsec. 4162P.1 )

Category A-1 reports shall be signedby the chief executive officer, or in hisabsence, by the executive vice-president,and by the comptroller, or in his absence,by the chief accountant, or by officersholding equivalent positions. Thedesignated signatories in this category,including their specimen signatures, shallbe contained in a resolution approved bythe board of directors in the formatprescribed in Annex P-3-a.

Category A-2 reports of head officesshall be signed by the president,executive vice-presidents, vice-presidents or officers holding equivalentpositions. Such reports of other offices/units (such as branches) shall be signedby their respective managers/officers in-charge. Likewise, the signing authorityin this category shall be contained in aresolution approved by the board ofdirectors in the format prescribed inAnnex P-3-b.

Categories A-3 and B reports shall besigned by officers or their alternates, whoshall be duly designated in a resolutionapproved by the board of directors in theformat as prescribed in Annex P-3-c.

Copies of the board resolutions on thereport signatory designations shall besubmitted to the appropriate department ofthe SES within three (3) days from the dateof resolution.

In the case of pawnshops organized assingle proprietorship or partnership, thereports shall be signed by the proprietoror managing partner, as the case may be,in place of chief executive officer orpresident. Other signatories shall beauthorized by the proprietor/managingpartner in a letter of authority to be submittedto the appropriate department of the SESindicating the names, positions and specimensignatures of the designated signatories aswell as the reports they are to sign.


APP. P-308.12.31


Annex P-3-a



Whereas, it is required under Subsec. 4162S.1 that Category A-1 reports be signed bythe chief executive officer, or in his absence, by the executive vice-president, and by thecomptroller, or in his absence, by the chief accountant, or by officers holding equivalent positions.


Whereas, we, the members of the Board of Directors of (Name of Institution) ,are conscious that, in designating the officials who would sign said Category A-1 reports,we are actually empowering and authorizing said officers to represent and act for or in behalfof the Board of Directors in particular and (Name of Institution) in general;

Whereas, this Board has full faith and confidence in the institution's Chief ExecutiveOfficer, Executive Vice-President, Comptroller and Chief Accountant, as the case may be,and, therefore, assumes responsibility for all the acts which may be performed by aforesaidofficers under their delegated authority;


1. Mr.____________ President _________________Specimen Signature

or Executive

2. Mr.____________ Vice-President _________________Specimen Signature

and3. Mr.____________ Comptroller _________________

Specimen Signature or Chief

4. Mr.____________ Accountant _________________Specimen Signature

are hereby authorized to sign Category A-1 reports of (Name of Institution) .


___________________________CHAIRMAN OF THE BOARD

___________________ ___________________ DIRECTOR DIRECTOR___________________ ___________________ DIRECTOR DIRECTOR___________________ ___________________ DIRECTOR DIRECTOR

ATTESTED BY: _______________________

CORPORATE SECRETARY


APP. P-308.12.31


Whereas, it is required under Subsec. 4162P.1 that Category A-2 reports of head officesbe signed by the president, executive vice-presidents, vice-presidents or officers holdingequivalent positions, and that such reports of other offices be signed by the respectivemanagers/officers-in-charge;



Whereas, this Board has full faith and confidence in the institution's President (and/orthe Executive Vice-President, etc., as the case may be) and, therefore, assumes responsibilityfor all the acts which may be performed by aforesaid officers under their delegated authority;


Name of Officer Specimen Signature Position Title Report No. _____________ ________________ __________ _________



__________________________CHAIRMAN OF THE BOARD

___________________ ___________________ DIRECTOR DIRECTOR



ATTESTED BY:

________________________CORPORATE SECRETARY

Annex P-3-b




APP. P-308.12.31

Annex P-3-c

FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORIESA-3 AND B REPORTS


Whereas, it is required under Subsec. 4162P.1 that Categories A-3 and B reports besigned by officers or their alternates;


Whereas, we the members of the Board of Directors of (Name of Institution) , areconscious that, in designating the officials who would sign said Categories A-3 and B reports,we are actually empowering and authorizing said officers to represent and act for or inbehalf of the Board of Directors in particular and (Name of Institution) in general;

Whereas, this Board has full faith and confidence in the institution's authorized signatoriesand, therefore, assumes responsibility for all the acts which may be performed by aforesaidofficers under their delegated authority;


Name of Authorized Signatory/Alternate Specimen Signature Position Title Report



etc.



___________________________CHAIRMAN OF THE BOARD

___________________ ___________________ DIRECTOR DIRECTOR___________________ ___________________ DIRECTOR DIRECTOR___________________ ___________________ DIRECTOR DIRECTOR

ATTESTED BY:________________________

CORPORATE SECRETARY


APP. P-408.12.31

Serial No.

STANDARD PAWN TICKET(Appendix to Subsec. 4322P.1)

(Name of Pawnshop)

(Address of Pawnshop)

Date Loan Granted: , 20 Maturity Date ,20 Expiry Date of Redemption Period:

,20

Mr./Mrs./Miss a resident offor a loan of PESOS (P ) with an interestof percent ( %) P.M./P.A., has pledged to this Pawnee in securityfor the loan article(s) described below appraised at PESOS ( P ) subject to the termsand conditions stated on the reverse side hereof.

(Description of the pawn) Principal P Interest P Service Charge P Net Proceeds P

(Signature or Thumbmark) (Signature or Thumbmark) Pawner Pawnshop's Authorized Representative

PAWNER IS ADVISED TO READ AND UNDERSTAND THE TERMS AND CONDITIONSON REVERSE SIDE HEREOF

APP. P-4-a08.12.31

Manual of Regulations for Non-Bank Financial Institutions P RegulationsAppendix P-4-a - Page 1

TERMS AND CONDITIONS OF STANDARD PAWN TICKET

1. The pawner hereby accepts thepawnshop's appraisal as proper.

2. The interest rate stipulated herein is inaccordance with the existing policy of theMonetary Board.

The pawnshop hereby agrees not tocollect in advance interest for a period ofmore than one (1) year.

3. The service charge is equivalent to onepercent (1%) of the principal loan, but notexceeding five pesos (P5.00). No othercharges shall be collected.

4. This loan is renewable for such amountand period as may be agreed upon betweenthe pawnshop and the pawner, subject tothe requirements of P.D. No. 114 for a newloan.

5. Upon maturity of this loan, as indicatedon the face of this ticket, the pawner stillhas ninety (90) days from maturity datewithin which to redeem the pawn by payingthe principal loan plus the interest that shallhave accrued thereon. The amount ofinterest due and payable after the maturitydate of the loan and during the redemptionperiod shall be computed upon redemptionat the same rate of interest provided in No.2 based on the sum of the principal loanand interest earned as of the date ofmaturity.

6. The pawnshop shall send a writtenreminder to pawner, before the expiration

of the ninety (90)-day grace period, thatthe pawn shall be sold or disposed of inthe event the pawner fails to redeem thepawn within the ninety (90)-day graceperiod.

7. The parties hereby agree that this ticketshall be surrendered at maturity date uponpayment of the loan. In case of loss ordestruction of this ticket, the pawner herebyundertakes to personally present an affidavitto the pawnshop before the redemptionperiod expires. It is hereby agreed upon thatthe pawnshop has a period of two (2) dayswithin which to verify from its records before(1) indicating on the affidavit that it shall takethe place of the original pawn ticket forpurposes of redemption; or (2) issuing asubstitute ticket, the original pawn ticketthereby being deemed cancelled.

8. The pawner hereby agrees not to assign,sell or in any other way alienate the pawnsecuring this loan as evidenced by the pawnticket without prior written consent of thepawnshop and subject to the terms andconditions of this contract.

9. In case of pre-payment of this loan bypawner, the interest collected in advanceshall accrue in full to the pawnshop.

10. The pawner shall not be entitled to theexcess of the public auction sale priceover the amount of principal interest andservice fee; neither shall the pawnshop beentitled to recover the defeciency from thepawner.



APP. P-508.12.31

Banks, QBs, trust entities and all otherinstitutions, and their subsidiaries andaffiliates supervised or regulated by theBSP (covered institutions) shall strictlycomply with the provisions of Section 9 ofR.A. No. 9160 and the following rules andregulations on anti-money laundering.

1. Customer identification. Coveredinstitutions shall establish and record thetrue identity of its clients based on officialdocuments. They shall maintain a systemof verifying the true identity of their clientsand, in case of corporate clients, require asystem of verifying their legal existenceand organizational structure, as well as theauthority and identification of all personspurporting to act on their behalf.

When establishing business relations orconducting transactions (particularlyopening of deposit accounts, acceptingdeposit substitutes, entering into trust andother fiduciary transactions, renting ofsafety deposit boxes, performingremittances and other large cashtransactions) covered institutions shouldtake reasonable measures to establish andrecord the true identity of their clients. Saidclient identification may be based onofficial or other reliable documents andrecords.

a. In cases of corporate and other legalentities, the following measures should betaken, when necessary:

(1) Verification of the legal existenceand structure of the client from theappropriate agency or from the client itselfor both, proof of incorporation, includinginformation concerning the customer’sname, legal form, address, directors,principal officers and provisions regulatingthe power behind the entity.


b. In case of doubt as to whether theirpurported clients or customers are actingfor themselves or for another, reasonablemeasures should be taken to obtain the trueidentity of the persons on whose behalf anaccount is opened or a transactionconducted.

c. The provisions of existing laws tothe contrary notwithstanding, anonymousaccounts, accounts under fictitious names,and all other similar accounts shall beabsolutely prohibited. In case wherenumbered accounts is allowed (i.e., pesoand foreign currency non-checkingnumbered accounts), covered institutionsshould ensure that the client is identifiedin an official or other identifyingdocuments.

The BSP may conduct annual testingsolely limited to the determination of theexistence and the identity of the owners ofsuch accounts.

Covered institutions shall phase outwithin a period of one (1) year from 2 April2001 or upon their maturity, whichever isearlier, anonymous accounts or accountsunder fictitious names as well as numberedaccounts being kept or managed by them,which are not expressly allowed underexisting law.

d. The identity of existing clients orbeneficial owners of deposits and otherfunds held or being managed by thecovered institutions should be renewed/updated at least every other year.

e. All records of all transactions ofcovered institutions shall be maintainedand safely stored for five (5) years from thedates of transactions. With respect to closed

ANTI-MONEY LAUNDERING REGULATIONS(Appendix to Section 4691P)


APP. P-508.12.31

accounts, the records on customeridentification, account files and businesscorrespondence, shall be preserved andsafely stored for at least five (5) years fromthe dates when they were closed.

Such records must be sufficient topermit reconstruction of individualtransactions so as to provide, if necessary,evidence for prosecution of criminalbehaviour.

f. Special attention should be givento all complex, unusual large transactions,and all unusual patterns of transactions,which have no apparent or visible lawfulpurpose. The background and purpose ofsuch transactions should, as far as possible,be examined, the findings established inwriting, and be available to helpsupervisors, auditors and law enforcementagencies.

g. Covered institutions should not, orshould at least avoid, transacting businesswith criminals. Reasonable measuresshould be adopted to prevent the use oftheir facilities for laundering of proceedsof crimes and other illegal activities.


a. The development of internalpolicies, procedures and controls, includingthe designation of compliance officers atmanagement level, and adequatescreening procedures to ensure highstandards when hiring employees;



3. Submission of plans of actionCovered institutions shall submit a plan ofaction on how to comply with therequirements of App. P-5 nos. 1, 2 and 4within thirty (30) business days from July31, 2000 or from opening of the institution.

4. Required reporting of certaintransactions. If there is reasonable groundto believe that the funds are proceeds ofan unlawful activity as defined under R.A.No. 9160 and/or its IRRs, the transactionsinvolving such funds or attempts to transactthe same, should be reported to the Anti-Money Laundering Council (AMLC) inaccordance with Rules 5.2 and 5.3 of theAMLA IRRs.








(6) Funds being managed or held asdeposit substitutes if there is reasonableground to believe that the same areproceeds of criminal and other illegalactivities; and

(7) Suspicious Transaction Indicators or“Red Flags” as a guide in the submissionto the AMLC of reports of suspicioustransactions relating to potential or actualfinancing of terrorism.


1 Amended by AMLC Resolution No. 292 dated 11.20.03 (Annex P-5-b).



APP. P-508.12.31

(b) Sources and/or beneficiaries of wiretransfers are citizens of countries which areidentified or connected with terroristactivities.




(f) Deposits being made byindividuals who have no known connectionor relation with the account holder.

(g) An individual receivingremittances, but has no family membersworking in the country from which theremittance is made.


(i) Client is under investigation bylaw enforcement agencies for possibleinvolvement in terrorist activities.


(k) Transactions of individuals,companies or NGOs that are suspected asbeing used to pay or receive funds fromrevolutionary taxes.



(n) A mismatch between the patternand size of financial transactions on the onehand and the stated purpose and activity ofthe NGO on the other.










b. Exemption from Bank SecrecyLaw. When reporting covered transactionsto the AMLC, covered institutions and theirofficers, employees, representatives,agents, advisors, consultants or associatesshall not be deemed to have violated R.A.No. 1405, as amended; R.A. No. 6426, asamended; R.A. No. 8791 and other similarlaws, but are prohibited fromcommunicating, directly or indirectly, inany manner or by any means, to any personthe fact that a covered transaction reportwas made, the contents thereof, or anyother information in relation thereto. Incase of violation thereof, the concernedofficer, employee, representative, agent,advisor, consultant or associate of thecovered institution, shall be criminallyliable. However, no administrative,criminal or civil proceedings, shall lieagainst any person for having made acovered transaction report in the regularperformance of his duties and in good faith,


APP. P-508.12.31

whether or not such reporting results in anycriminal prosecution under R.A. 9160 or anyother Philippine law.

c. Prohibition from disclosure of thecovered transaction report. When reportingcovered transactions to the AMLC, coveredinstitutions and their officers, employees,representatives, agents, advisors, consultantsor associates are prohibited fromcommunicating, directly or indirectly, in anymanner or by any means, to any person,entity, the media, the fact that a coveredtransaction report was made, the contentsthereof, or any other information in relationthereto. Neither may such reporting bepublished or aired in any manner or formby the mass media, electronic mail, or othersimilar devices. In case of violation thereof,the concerned officer, employee,

representative, agent, advisor, consultant orassociate of the covered institution, ormedia shall be held criminally liable.

5. Certification of compliance withanti-money laundering regulationsCovered ins t i tu t ion sha l l submi tannually to the BSP thru the appropriatesupervising and examining departmenta certification (Annex P-5-a) signed bythe President or officer of equivalentrank and by their Compliance Officerto the effect that they have monitoredcompliance with existing anti-moneylaundering regulations.

The certification shall be submittedin accordance with Appendix P-2 andshall be considered a Category A-2report.

APP. P-505.12.31


APP. P-5 08.12.31



1. That we have monitored (Name of Pawnshop)’s compliance with R.A. No. 9160(Anti-Money Laundering Act of 2001), as well as with BSP Circular Nos. 251, 253,259 and 302;

2. That the Pawnshop is complying with the required customer identification, docu-mentation of all new clients, and continued monitoring of customer’s activities;

3. That the Pawnshop is also complying with the requirement to record all transactionsand to maintain such records including the record of customer identification for atleast five (5) years;

4. That the Pawnshop does not maintain anonymous or fictitious accounts; and

5. That we conduct regular anti-money laundering training sessions for all Pawnshopofficers and selected staff members holding sensitive positions.

(Name of President or officer of equivalent rank) (Name of Compliance Officer)

SUBSCRIBED AND SWORN to before me, _____ this ____ day of ___________, affiant/sexhibiting to me their Community Tax Certificate No.(s) as follows:



Annex P-5-a

CERTIFICATION OF COMPLIANCEWITH ANTI-MONEY LAUNDERING REGULATIONS


APP. P-508.12.31


2. Banks shall file Covered TransactionReports (CTRs) on transactions involving allkinds of monetary instruments or property,i.e., in cash or non-cash, whether indomestic or foreign currency.

3. Covered institutions, other thanbanks, shall file CTRs on transactions incash or foreign currency or other monetaryinstruments (other than checks) orproperties. Due to the nature of thetransactions in the stock exchange, only thebrokers-dealers shall be required to fileCTRs and STRs. The PSE, PCD, SCCP andtransfer agents are exempt from filing CTRs.They, are however, required to file STRswhen the transactions that pass throughthem are deemed to be suspicious.

4. Where the covered institutionengages in bulk transactions with a bank,i.e., deposits of premium payments in bulkor settlements of trade, and the bulktransactions do not distinguish clients and

Annex P-5-b


RULES ON SUBMISSION OF COVERED TRANSACTION REPORTS ANDSUSPICIOUS TRANSACTION REPORTS BY COVERED INSTITUTIONS

their respective transaction amounts, saidcovered institutions shall be required to fileCTRs on its clients whose transactionsexceed P500,000 and are included in thebulk transactions.

5. With respect to insurancecompanies, when the total amount of thepremiums for the entire year, regardlessof the mode of payment (monthly,quarterly, semi-annually or annually),exceeds P500,000, such amount shall bereported as a covered transaction, evenif the amounts of the amortizations areless than the threshold amount. The CTRshall be filed upon payment of the firstpremium amount, regardless of the modeof payment. Under this rule, theinsurance company shall file the CTRonly once every year until the policymatures or rescinded, whichever comesfirst.



APP. P-608.12.31

RULE 1TITLE

Rule 1.a. Title. - These Rules shall beknown and cited as the “Revised Rules andRegulations Implementing R.A. No. 9160”,(the Anti-Money Laundering Act of 2001[AMLA]), as amended by R.A. No. 9194.



Rule 2. Declaration of Policy. - It is herebydeclared the policy of the State to protectthe integrity and confidentiality of bankaccounts and to ensure that the Philippinesshall not be used as a money-launderingsite for the proceeds of any unlawfulactivity. Consistent with its foreign policy,the Philippines shall extend cooperationin transnational investigations andprosecutions of persons involved in moneylaundering activities wherever committed.

RULE 3DEFINITIONS



Rule 3.a.1. Banks, offshore bankingunits, quasi-banks, trust entities, non-stocksavings and loan associations, pawnshops,and all other institutions, including their


(Appendix to Sec. 4691P)

subsidiaries and affiliates supervised and/or regulated by the Bangko Sentral ngPilipinas (BSP).


(b) An affiliate means an entity at leasttwenty percent (20%) but not exceeding fiftypercent (50%) of the voting stock of whichis owned by a bank, quasi-bank, trust entity,or any other institution supervised and/orregulated by the BSP.

Rule 3.a.2. Insurance companies,insurance agents, insurance brokers,professional reinsurers, reinsurance brokers,holding companies, holding companysystems and all other persons and entitiessupervised and/or regulated by theInsurance Commission (IC).

(a) An insurance company includesthose entities authorized to transactinsurance business in the Philippines,whether life or non-life, and whetherdomestic, domestically incorporated orbranch of a foreign entity. A contract ofinsurance is an agreement whereby oneundertakes for a consideration to indemnifyanother against loss, damage or liabilityarising from an unknown or contingentevent. Transacting insurance businessincludes making or proposing to make, asinsurer, any insurance contract, or as surety,any contract of suretyship as a vocation andnot as merely incidental to any otherlegitimate business or activity of the surety,doing any kind of business specificallyrecognized as constituting the doing of aninsurance business within the meaning of


APP. P-608.12.31

Presidential Decree (P.D.) No. 612, asamended, including a reinsurancebusiness and doing or proposing to doany business in substance equivalent toany of the foregoing in a manner designedto evade the provisions of P.D. No. 612,as amended.

(b) An insurance agent includes anyperson who solicits or obtains insuranceon behalf of any insurance company ortransmits for a person other than himselfan application for a policy or contract ofinsurance to or from such company oroffers or assumes to act in the negotiationof such insurance.


(d) A professional reinsurer includesany person, partnership, association orcorporation that transacts solely andexclusively reinsurance business in thePhilippines, whether domestic,domestically incorporated or a branch ofa foreign entity. A contract of reinsuranceis one by which an insurer procures a thirdperson to insure him against loss or liabilityby reason of such original insurance.

(e) A reinsurance broker includesany person who, not being a dulyauthorized agent, employee or officerof an insurer in which any reinsuranceis effected, acts or aids in any mannerin negotiating contracts of reinsuranceor placing risks of effecting reinsurance,for any insurance company authorizedto do business in the Philippines.

(f) A holding company includes anyperson who directly or indirectly controlsany authorized insurer. A holdingcompany system includes a holdingcompany together with its controlledinsurers and controlled persons.

Rule 3.a.3. (i) Securities dealers, brokers,salesmen, associated persons of brokers ordealers, investment houses, investmentagents and consultants, trading advisors,and other entities managing securities orrendering similar services, (ii) mutual fundsor open-end investment companies, close-end investment companies, common trustfunds, pre-need companies or issuers andother similar entities; (iii) foreign exchangecorporations, money changers, moneypayment, remittance, and transfercompanies and other similar entities, and(iv) other entities administering orotherwise dealing in currency,commodities or financial derivatives basedthereon, valuable objects, cash substitutesand other similar monetary instruments orproperty supervised and/or regulated bythe Securities and Exchange Commission(SEC).





(e) An investment house includes anenterprise which engages or purports toengage, whether regularly or on anisolated basis, in the underwriting ofsecurities of another person or enterprise,including securities of the Governmentand its instrumentalities.


APP. P-608.12.31

(f) A mutual fund or an open-endinvestment company includes an investmentcompany which is offering for sale or hasoutstanding, any redeemable security ofwhich it is the issuer.


(h) A common trust fund includes afund maintained by an entity authorizedto perform trust functions under a writtenand formally established plan, exclusivelyfor the collective investment andreinvestment of certain money representingparticipation in the plan received by it in itscapacity as trustee, for the purpose ofadministration, holding or management ofsuch funds and/or properties for the use,benefit or advantage of the trustor or ofothers known as beneficiaries.

(i) A pre-need company or issuerincludes any corporation supervised and/or regulated by the SEC and is authorizedor licensed to sell or offer for sale pre-needplans. Pre-need plans are contracts whichprovide for the performance of futureservice(s) or payment of future monetaryconsideration at the time of actual need,payable either in cash or installment by theplanholder at prices stated in the contract withor without interest or insurance coverage andincludes life, pension, education, internmentand other plans, which the Commission may,from time to time, approve.

(j) A foreign exchange corporationincludes any enterprise which engages orpurports to engage, whether regularly oron an isolated basis, in the sale andpurchase of foreign currency notes and suchother foreign-currency denominated non-bank deposit transactions as may beauthorized under its articles of incorporation.


(1) who for an advisory fee is engagedin the business of advising others, eitherdirectly or through circulars, reports,

publications or writings, as to the value ofany security and as to the advisability oftrading in any security; or



editor, lawyer, accountant, teacher;(c) the publisher of any bonafide

newspaper, news, business or financialpublication of general and regularcirculation, including their employees;


intent of this definition, provided that thefurnishing of such service by the foregoingpersons is solely incidental to the conductof their business or profession.



(m) A money payment, remittanceand transfer company includes any personoffering to pay, remit or transfer ortransmit money on behalf of any personto another person.

(n) “Customer” refers to any personor entity that keeps an account, orotherwise transacts business, with acovered institution and any person orentity on whose behalf an account ismaintained or a transaction is conducted,as well as the beneficiary of saidtransactions. A customer also includes thebeneficiary of a trust, an investment fund,a pension fund or a company or personwhose assets are managed by an assetmanager, or a grantor of a trust. It includesany insurance policy holder, whetheractual or prospective.


APP. P-608.12.31

(o) “Property” includes any thing oritem of value, real or personal, tangible orintangible, or any interest therein or anybenefit, privilege, claim or right withrespect thereto.

Rule 3.b. Covered Transaction is atransaction in cash or other equivalentmonetary instrument involving a totalamount in excess of PhP500,000.00 withinone (1) banking day.

Rule 3.b.1. Suspicious transactions aretransactions, regardless of amount, whereany of the following circumstances exist:

(1) There is no underlying legal or tradeobligation, purpose or economicjustification;



(4) Taking into account all knowncircumstances, it may be perceived that theclient’s transaction is structured in order toavoid being the subject of reportingrequirements under the act;


(6) The transaction is in any way relatedto an unlawful activity or any moneylaundering activity or offense under this actthat is about to be, is being or has beencommitted; or



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 andconfirmations of sale or investments andmoney market instruments;

(4) Contracts or policies of insurance,life or non-life, and contracts of suretyship;and

(5) Other similar instruments wheretitle thereto passes to another byendorsement, assignment or delivery.






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

Rule 3.g. Supervising Authority refers tothe BSP, the SEC and the IC. Where theBSP, SEC or IC supervision applies onlyto the registration of the coveredinstitution, the BSP, the SEC or the IC,within the limits of the AMLA, shall havethe authority to require and ask assistancefrom the government agency havingregulatory power and/or licensing authorityover said covered institution for theimplementation and enforcement of theAMLA and these Rules.


APP. P-608.12.31

Rule 3.h. Transaction refers to any actestablishing any right or obligation or givingrise to any contractual or legal relationshipbetween the parties thereto. It also includesany movement of funds by any means witha covered institution.

Rule 3.i. Unlawful activity refers to anyact or omission or series or combinationthereof involving or having relation, to thefollowing:


(1) Kidnapping for ransom.


(2) Importation of prohibited drugs;(3) Sale of prohibited drugs;(4) Administration of prohibited drugs;(5) Delivery of prohibited drugs;(6) Distribution of prohibited drugs;(7) Transportation of prohibited drugs;(8) Maintenance of a Den, Dive or

Resort for prohibited users;(9) Manufacture of prohibited drugs;(10)Possession of prohibited drugs;(11)Use of prohibited drugs;(12)Cultivation of plants which are

sources of prohibited drugs; and(13)Culture of plants which are sources

of prohibited drugs.


(14)Directly or indirectly requesting orreceiving any gift, present, share,percentage or benefit for himself or for anyother person in connection with anycontract or transaction between theGovernment and any party, wherein the

public officer in his official capacity has tointervene under the law;

(15) Directly or indirectly requesting orreceiving any gift, present or other pecuniaryor material benefit, for himself or foranother, from any person for whom thepublic officer, in any manner or capacity,has secured or obtained, or will secure orobtain, any government permit or license,in consideration for the help given or to begiven, without prejudice to Section 13 ofR.A. No. 3019;


(17) Entering, on behalf of thegovernment, into any contract ortransaction manifestly and grosslydisadvantageous to the same, whether ornot the public officer profited or will profitthereby;




(20) Plunder through misappropriation,conversion, misuse or malversation of


APP. P-608.12.31

public funds or raids upon the publictreasury;

(21) Plunder by receiving, directly orindirectly, any commission, gift, share,percentage, kickbacks or any other formof pecuniary benefit from any person and/or entity in connection with anygovernment contract or project or byreason of the office or position of the publicofficer concerned;

(22) Plunder by the illegal orfraudulent conveyance or disposition ofassets belonging to the National Governmentor any of its subdivisions, agencies,instrumentalities or government-ownedor-controlled corporations or theirsubsidiaries;



(25) Plunder by taking undueadvantage of official position, authority,relationship, connection or influence tounjustly enrich himself or themselves atthe expense and to the damage andprejudice of the Filipino people and theRepublic of the Philippines.

(E) Robbery and extortion underArticles 294, 295, 296, 299, 300, 301 and302 of the Revised Penal Code, as amended;



(28) Robbery in an uninhabited house orpublic building or edifice devoted to worship.





brigands.




(35) Estafa with unfaithfulness or abuseof confidence by altering the substance,quality or quantity of anything of valuewhich the offender shall deliver by virtueof an obligation to do so, even though suchobligation be based on an immoral orillegal consideration;

(36) Estafa with unfaithfulness or abuseof confidence by misappropriating orconverting, to the prejudice of another,money, goods or any other personalproperty received by the offender in trustor on commission, or for administration,or under any other obligation involving theduty to make delivery or to return thesame, even though such obligation betotally or partially guaranteed by a bond;or by denying having received suchmoney, goods, or other property;

(37) Estafa with unfaithfulness or abuseof confidence by taking undue advantageof the signature of the offended party inblank, and by writing any document abovesuch signature in blank, to the prejudiceof the offended party or any third person;

(38) Estafa by using a fictitious name,or falsely pretending to possess power,influence, qualifications, property, credit,


APP. P-608.12.31

agency, business or imaginary transactions,or by means of other similar deceits;



(41) Estafa by postdating a check, orissuing a check in payment of anobligation when the offender has nofunds in the bank, or his funds depositedtherein were not sufficient to cover theamount of the check;



(44) Estafa by removing, concealingor destroying, in whole or in part, anycourt record, office files, document or anyother papers.


(45) Fraudulent importation of anyvehicle;

(46) Fraudulent exportation of anyvehicle;

(47) Assisting in any fraudulentimportation;

(48) Assisting in any fraudulentexportation;


(50) Concealing smuggled articleafter fraudulent importation;



(53) Transportation of smuggledarticle after fraudulent importation;



K.1. Hacking or cracking, which refers to:(55) unauthorized access into or

interference in a computer system/server orinformation and communication system; or








(63) the unauthorized broadcasting, ofprotected material, electronic signature orcopyrighted works including legallyprotected sound recordings or phonogramsor information material on protected works,through the use of telecommunicationnetworks, such as, but not limited to, theinternet, in a manner that infringesintellectual property rights;



APP. P-608.12.31



(66) Sale of any adulterated ormislabeled product using electronicdocuments;

(67) Adulteration or misbranding ofany consumer product;







(74) Introduction into commerce of anymislabeled or banned hazardous substance;






(80) Violation of price tag requirements;(81) Mislabeling consumer products;(82) False, deceptive or misleading




(L) Hijacking and other violationsunder R.A. No. 6235; destructive arson

and murder, as defined under the RevisedPenal Code, as amended, including thoseperpetrated by terrorists against non-combatant persons and similar targets;







(92) Manipulation of security prices bycreating a false or misleading appearanceof active trading in any listed securitytraded in an Exchange or any other tradingmarket;

(93) Manipulation of security prices byeffecting, alone or with others, a series oftransactions in securities that raises theirprices to induce the purchase of a security,whether of the same or different class, ofthe same issuer or of a controlling,controlled or commonly controlledcompany by others;



APP. P-608.12.31

(95) Manipulation of security prices byeffecting, alone or with others, a series oftransactions in securities that creates activetrading to induce such a purchase or salethough manipulative devices such asmarking the close, painting the tape,squeezing the float, hype and dump, boilerroom operations and such other similardevices;

(96) Manipulation of security pricesby circulating or disseminating informationthat the price of any security listed in anExchange will or is likely to rise or fallbecause of manipulative market operationsof any one or more persons conducted forthe purpose of raising or depressing the priceof the security for the purpose of inducingthe purchase or sale of such security;

(97) Manipulation of security pricesby making false or misleading statementswith respect to any material fact, whichhe knew or had reasonable ground tobelieve was so false and misleading, forthe purpose of inducing the purchase orsale of any security listed or traded in anExchange;

(98) Manipulation of security pricesby effecting, alone or with others, anyseries of transactions for the purchase and/or sale of any security traded in anExchange for the purpose of pegging,fixing or stabilizing the price of suchsecurity, unless otherwise allowed by theSecurities Regulation Code or by the rulesof the SEC;

(99) Sale or purchase of any securityusing any manipulative deceptive deviceor contrivance;

(100) Execution of short sales or stop-loss order in connection with the purchaseor sale of any security not in accordancewith such rules and regulations as the SECmay prescribe as necessary andappropriate in the public interest or theprotection of the investors;

(101) Employment of any device,scheme or art i f ice to defraud in

connection with the purchase and sale ofany securities;








(109) Violations of marginrequirements;

(110) Violations on the restrictions onborrowings by members, brokers anddealers;




APP. P-608.12.31



(N) Felonies or offenses of a similarnature to the afore-mentioned unlawfulactivities that are punishable under thepenal laws of other countries.




(a) Any person knowing that anymonetary instrument or propertyrepresents, involves, or relates to, theproceeds of any unlawful activity, transactsor attempts to transact said monetaryinstrument or property.

(b) Any person knowing that anymonetary instrument or property involvesthe proceeds of any unlawful activity,performs or fails to perform any act as aresult of which he facilitates the offense ofmoney laundering referred to in paragraph(a) above.




PROCEDURES



(a) Suspicious transactions;(b) Covered transactions deemed sus-

picious after an investigation conductedby the AMLC;


Rule 5.3. Attempts at Transactions. -Section 4 (a) and (b) of the AMLA providesthat any person who attempts to transact anymonetary instrument or propertyrepresenting, involving or relating to theproceeds of any unlawful activity shall beprosecuted for a money laundering offense.Accordingly, the reports required under Rule9.3 (a) and (b) of these Rules shall includethose pertaining to any attempt by anyperson to transact any monetary instrumentor property representing, involving orrelating to the proceeds of any unlawfulactivity.


LAUNDERING


and convicted of both the offense of money


APP. P-608.12.31

laundering and the unlawful activity asdefined under Rule 3 (i) of the AMLA.




Rule 6.4. Trial for the money launderingoffense shall proceed in accordance withthe Code of Criminal Procedure or theRules of Procedure of the Sandiganbayan,as the case may be.

Rule 6.5. Knowledge of the offender thatany monetary instrument or propertyrepresents, involves, or relates to theproceeds of an unlawful activity or that anymonetary instrument or property is requiredunder the AMLA to be disclosed and filedwith the AMLC, may be established by directevidence or inferred from the attendantcircumstances.

Rule 6.6. All the elements of every moneylaundering offense under Section 4 of theAMLA must be proved by evidence beyondreasonable doubt, including the element ofknowledge that the monetary instrument orproperty represents, involves or relates tothe proceeds of any unlawful activity.

Rule 6.7. No element of the unlawfulactivity, however, including the identity ofthe perpetrators and the details of the actualcommission of the unlawful activity needbe established by proof beyond reasonabledoubt. The elements of the offense ofmoney laundering are separate and distinctfrom the elements of the felony or offenseconstituting the unlawful activity.



Rule 7.1.a. Composition. - The Anti-MoneyLaundering Council is hereby created andshall be composed of the Governor of theBSP as Chairman, the Commissioner of theInsurance Commission and the Chairmanof the SEC as members.

Rule 7.1.b. Unanimous Decision. - TheAMLC shall act unanimously indischarging its functions as defined in theAMLA and in these Rules. However, inthe case of the incapacity, absence ordisability of any member to discharge hisfunctions, the officer duly designated orauthorized to discharge the functions ofthe Governor of the BSP, the Chairman ofthe SEC or the Insurance Commissioner,as the case may be, shall act in his steadin the AMLC.

Rule 7.2. Functions. - The functions of theAMLC are defined hereunder:

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


APP. P-608.12.31






(7) to implement such measures asmay be inherent, necessary, implied,incidental and justified under the AMLAto counteract money laundering. Subjectto such limitations as provided for by law,the AMLC is authorized under Rule 7 (7)of the AMLA to establish an informationsharing system that will enable the AMLCto store, track and analyze moneylaundering transactions for the resoluteprevention, detection and investigation ofmoney laundering offenses. For thispurpose, the AMLC shall install acomputerized system that will be used inthe creation and maintenance of aninformation database;

(8) to receive and take action in respectof any request from foreign states forassistance in their own anti-moneylaundering operations as provided in theAMLA. The AMLC is authorized underSections 7 (8) and 13 (b) and (d) of the AMLAto receive and take action in respect of anyrequest of foreign states for assistance in theirown anti-money laundering operations, inrespect of conventions, resolutions and otherdirectives of the United Nations (UN), theUN Security Council, and other internationalorganizations of which the Philippines is amember. However, the AMLC may refuseto comply with any such request, convention,resolution or directive where the actionsought therein contravenes theprovisions of the Constitution, or theexecution thereof is likely to prejudicethe national interest of the Philippines.

(9) to develop educational programson the pernicious effects of moneylaundering, the methods and techniquesused in money laundering, the viablemeans of preventing money launderingand the effective ways of prosecuting andpunishing offenders.

(10) to enlist the assistance of any branch,department, bureau, office, agency orinstrumentality of the government,including government-owned and -controlledcorporations, in undertaking any and all anti-money laundering operations, which mayinclude the use of its personnel, facilities andresources for the more resolute prevention,detection and investigation of moneylaundering offenses and prosecution ofoffenders. The AMLC may require theintelligence units of the Armed Forces of thePhilippines, the Philippine National Police,the Department of Finance, the Departmentof Justice, as well as their attached agencies,and other domestic or transnationalgovernmental or non-governmentalorganizations or groups to divulge to theAMLC all information that may, in any way,facilitate the resolute prevention,


APP. P-608.12.31

investigation and prosecution of moneylaundering offenses and other violations ofthe AMLA.




Rule 8.1. The Executive Director. - TheSecretariat shall be headed by anExecutive Director who shall be appointedby 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, must haveserved at least five (5) years either at the BSP,the SEC or the IC and of good moralcharacter, unquestionable integrity andknown probity. He shall be considered aregular employee of the BSP with the rankof Assistant Governor, and shall be entitledto such benefits and subject to such rules andregulations, as well as prohibitions, as areapplicable to officers of similar rank.

Rule 8.2. Composition. - In organizing theSecretariat, the AMLC may choose fromthose who have served, continuously orcumulatively, for at least five (5) years inthe BSP, the SEC or the IC. All membersof the Secretariat shall be consideredregular employees of the BSP and shallbe entitled to such benefits and subject tosuch rules and regulations as are applicableto BSP employees of similar rank.

Rule 8.3. Detail and Secondment. - TheAMLC is authorized under Section 7 (10)of the AMLA to enlist the assistance of theBSP, the SEC or the IC, or any other branch,

department, bureau, office, agency orinstrumentality of the government, includinggovernment-owned and controlledcorporations, in undertaking any and all anti-money laundering operations. This includesthe use of any member of their personnelwho may be detailed or seconded to theAMLC, subject to existing laws and CivilService Rules and Regulations. Detailedpersonnel shall continue to receive theirsalaries, benefits and emoluments from theirrespective mother units. Seconded personnelshall receive, in lieu of their respectivecompensation packages from their respectivemother units, the salaries, emoluments andall other benefits to which their AMLCSecretariat positions are entitled to.

Rule 8.4. Confidentiality Provisions. - Themembers of the AMLC, the ExecutiveDirector, and all the members of theSecretariat, whether permanent, ondetail or on secondment, shall not reveal,in any manner, any information knownto them by reason of their office. Thisprohibition shall apply even after theirseparation from the AMLA. In case ofviolation of this provision, the personshall be punished in accordance with thepertinent provisions of the Central BankAct.



AND RECORD KEEPING


Rule 9.1.a. Customer Identification. -Covered institutions shall establish andrecord the true identity of its clientsbased on official documents. They shallmaintain a system of verifying the trueidentity of their clients and, in case of


APP. P-608.12.31

corporate clients, require a system ofverifying their legal existence andorganizational structure, as well as theauthority and identification of all personspurporting to act on their behalf. Coveredinstitutions shall establish appropriate systemsand methods based on internationallycompliant standards and adequate internalcontrols for verifying and recording the trueand full identity of their customers.

Rule 9.1.b. Trustee, Nominee and AgentAccounts. - When dealing with customerswho are acting as trustee, nominee,agent or in any capacity for and on behalfof another, covered institutions shallverify and record the true and full identityof the person(s) on whose behalf atransaction is being conducted. Coveredinstitutions shall also establish and recordthe true and full identity of such trustees,nominees, agents and other persons and thenature of their capacity and duties. In case acovered institution has doubts as to whethersuch persons are being used as dummies incircumvention of existing laws, it shallimmediately make the necessary inquiriesto verify the status of the business relationshipbetween the parties.

Rule 9.1.c. Minimum Information/Documents Required for IndividualCustomers. - Covered institutions shallrequire customers to produce originaldocuments of identity issued by an officialauthority, bearing a photograph of thecustomer. Examples of such documents areidentity cards and passports. The followingminimum information/documents shall beobtained 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;





Rule 9.1.d. Minimum Information/Documents Required for Corporate andJuridical Entities. - Before establishingbusiness relationships, coveredinstitutions shall endeavor to ensure thatthe customer is a corporate or juridicalentity which has not been or is not inthe process of being, dissolved, woundup or voided, or that its business oroperations has not been or is not in theprocess of being, closed, shut down,phased out, or terminated. Dealingswith shell companies and corporations,being legal entities which have nobusiness substance in their own right butthrough which financial transactionsmay be conducted, should beundertaken with extreme caution. Thefollowing minimum information/documents shall be obtained fromcustomers that are corporate or juridicalentities, including shell companies andcorporations:








APP. P-608.12.31



Rule 9.1.g. Numbered Accounts. - Pesoand foreign currency non-checkingnumbered accounts shall be allowed:Provided, That the true identity of thecustomers of all peso and foreign currencynon-checking numbered accounts aresatisfactorily established based on officialand other reliable documents and records,and that the information and documentsrequired under the provisions of theseRules are obtained and recorded by thecovered institution. No peso and foreigncurrency non-checking accounts shall beallowed without the establishment of suchidentity and in the manner herein provided.The BSP may conduct annual testing for thepurpose of determining the existence andtrue identity of the owners of such accounts.The SEC and the IC may conduct similartesting more often than once a year andcovering such other related purposes as maybe allowed under their respective charters.


Rule 9.2.a. Record Keeping: Kinds ofRecords and Period for Retention. – Allrecords of all transactions of coveredinstitutions shall be maintained and safelystored for five (5) years from the dates of

transactions. Said records and files shallcontain the full and true identity of theowners or holders of the accounts involvedin the covered transactions and all othercustomer identification documents.Covered institutions shall undertake thenecessary adequate security measures toensure the confidentiality of such file.Covered institutions shall prepare andmaintain documentation, in accordance withthe aforementioned client identificationrequirements, on their customer accounts,relationships and transactions such that anyaccount, relationship or transaction can beso reconstructed as to enable the AMLC,and/or the courts to establish an audit trailfor money laundering.


Rule 9.2.c. Closed Accounts. - With respectto closed accounts, the records on customeridentification, account files and businesscorrespondence shall be preserved andsafely stored for at least five (5) years fromthe dates when they were closed.


Rule 9.2.e. Form of Records. – Recordsshall be retained as originals in such formsas are admissible in court pursuant to


APP. P-608.12.31

existing laws and the applicable rulespromulgated by the Supreme Court.



Should a transaction be determinedto be both a covered and a suspicioustransaction, the covered institution shallreport the same as a suspicioustransaction.

The reporting of covered transactionsby covered institutions shall be deferredfor a period of sixty (60) days after theeffectivity of R.A. No. 9194, or as maybe determined by the AMLC, in order toallow the covered insti tutions toconfigure their respective computersystems; provided that, all coveredtransactions during said defermentperiod shall be submitted thereafter.



Rule 9.3.b.2. Covered TransactionReports and Suspicious TransactionReports shall be submitted in a securedmanner to the AMLC in electronic form,

either via diskettes, leased lines, orthrough internet facilities, with thecorresponding hard copy for suspicioustransactions. The f inal f low andprocedures for such reporting shall bemapped out in the manual ofoperations to be issued by the AMLC.


Rule 9.3.d. Confidentiality Provisions. –When reporting covered transactions orsuspicious transactions to the AMLC,covered institutions and their officers,employees, representatives, agents,advisors, consultants or associates areprohibited from communicating, directlyor indirectly, in any manner or by anymeans, to any person, entity, or themedia, the fact that a covered transactionreport was made, the contents thereof,or any other information in relationthereto. Neither may such reporting bepublished or aired in any manner or formby the mass media, electronic mail, orother similar devices. In case of violationhereof, the concerned officer, employee,representative, agent, advisor, consultantor associate of the covered institution,or media shall be held criminally liable.


APP. P-608.12.31

Rule 9.3.e. Safe Harbor Provisions. – Noadministrative, criminal or civilproceedings, shall lie against any person forhaving made a covered transaction reportor a suspicious transaction report in theregular performance of his duties and ingood faith, whether or not such reportingresults in any criminal prosecution underthis Act or any other Philippine law.



(a) After an investigation conductedby the AMLC and upon determination thatprobable cause exists that a monetaryinstrument or property is in any way relatedto any unlawful activity as defined underSection 3 (i), the AMLC may file an Ex-Parteapplication before the Court of Appeals forthe issuance of a freeze order on any monetaryinstrument or property subject thereof priorto the institution or in the course of, thecriminal proceedings involving the unlawfulactivity to which said monetary instrument orproperty is any way related.


(c) The freeze order shall be effective fortwenty (20) days unless extended by the Courtof Appeals upon application by the AMLC.

Rule 10.2. Definition of Probable Cause- Probable cause includes such facts andcircumstances which would lead areasonably discreet, prudent or cautiousman to believe that an unlawful activityand/or a money laundering offense is aboutto be, is being or has been committed andthat the account or any monetaryinstrument or property subject thereofsought to be frozen is in any way relatedto said unlawful activity and/or moneylaundering offense.









APP. P-608.12.31






Upon receipt of the freeze order issuedby the court of appeals and uponverification by the covered institution thatthe related web of accounts originated fromand/or are materially linked to themonetary instrument or property subjectof the freeze order, the covered institutionshall freeze these related web of accountswherever these funds may be found.

The return of the covered institution asrequired under rule 10.3.c shall include thefact of such freezing and an explanation asto the grounds for the identification of therelated web of accounts.

Rule 10.5. Extension of the Freeze Order.- Before the twenty (20) day period of thefreeze order issued by the court of appealsexpires, the AMLC may apply in the samecourt for an extension of said period. Uponthe timely filing of such application andpending the decision of the Court ofAppeals to extend the period, said periodshall be deemed suspended and the freezeorder shall remain effective.

However, the covered institution shallnot lift the effects of the freeze order withoutsecuring official confirmation from the AMLC.

Rule 10.6. Prohibition Against Issuance ofFreeze Orders Against Candidates for anElectoral Office During Election Period. -No assets shall be frozen to the prejudiceof a candidate for an electoral office duringan election period.


BANK DEPOSITS

Rule 11.1. Authority to Inquire into BankDeposits with Court Order. -Notwithstanding the provisions of R.A. No.1405, as amended; R.A. No. 6426, asamended; R.A. No. 8791, and other laws,the AMLC may inquire into or examineany particular deposit or investment with anybanking institution or non-bank financialinstitution and their subsidiaries and affiliatesupon order of any competent court in casesof violation of this Act, when it has beenestablished that there is probable cause thatthe deposits or investments involved arerelated to an unlawful activity as defined inSection 3 (i) hereof or a money launderingoffense under Section 4 hereof; except incases as provided under Rule 11.2.

Rule 11.2. Authority to Inquire into BankDeposits Without Court Order. - TheAMLC may inquire into or examinedeposit and investments with any bankinginstitution or non-bank financial institutionand their subsidiaries and affiliates withouta Court Order where any of the followingunlawful activities are involved:

(a) Kidnapping for ransom under Article267 of Act No. 3815, otherwise known asthe Revised Penal Code, as amended;

(b) Sections 4,5,6, 8, 9, 10, 12, 13, 14,15 and 16 of R.A. No. 9165, otherwiseknown as the Comprehensive DangerousDrugs Act of 2002;

(c) Hijacking and other violationsunder R.A. No. 6235; destructive arson andmurder, as defined under the Revised


APP. P-608.12.31

Penal Code, as amended, including thoseperpetrated by terrorists againstnon-combatant persons and similar targets.

Rule 11.2.a. Procedure For ExaminationWithout A Court Order. - Where any ofthe unlawful activities enumerated underthe immediately preceding Rule 11.2 areinvolved, and there is probable cause thatthe deposits or investments with anybanking or non-banking financialinstitution and their subsidiaries andaffiliates are in anyway related to theseunlawful activities the AMLC shall issue aresolution authorizing the inquiry into orexamination of any deposit or investmentwith such banking or non-banking financialinstitution and their subsidiaries andaffiliates concerned.

Rule 11.2.b. Duty of the bankinginstitution or non-banking institution uponreceipt of the AMLC Resolution. - Thebanking institution or the non-bankingfinancial institution and their subsidiariesand affiliates shall, immediately upon receiptof the AMLC Resolution, allow the AMLCand/or its authorized representative(s) fullaccess to all records pertaining to the depositor investment account.

Rule 11.3. - BSP Authority to Examinedeposits and investments; AdditionalException to the Bank Secrecy Act. - Toensure compliance with this act, the BSPmay inquire into or examine any particulardeposit or investment with any bankinginstitution or non-bank financial institutionand their subsidiaries and affiliates whenthe examination is made in the course of aperiodic or special examination, inaccordance with the rules of examinationof the BSP.

Rule 11.3.a. BSP Rules of Examination. -The BSP shall promulgate its rules ofexamination for ensuring compliance by

banks and non-bank financial institutionsand their subsidiaries and affiliates with theAMLA and these rules.



Rule 12.1. Authority to Institute CivilForfeiture Proceedings. – The AMLC isauthorized under Section 7 (3) of the AMLAto institute civil forfeiture proceedings andall other remedial proceedings through theOffice of the Solicitor General.

Rule 12.2. When Civil Forfeiture May beApplied. – When there is a SuspiciousTransaction Report or a CoveredTransaction Report deemed suspicious afterinvestigation by the AMLC, and the courthas, in a petition filed for the purpose,ordered the seizure of any monetaryinstrument or property, in whole or in part,directly or indirectly, related to said report,the Revised Rules of Court on civilforfeiture shall apply.

Rule 12.3. Claim on Forfeited Assets. -Where the court has issued an order offorfeiture of the monetary instrument orproperty in a criminal prosecution for anymoney laundering offense under Section4 of the AMLA, the offender or any otherperson claiming an interest therein mayapply, by verified petition, for a declarationthat the same legitimately belongs to him,and for segregation or exclusion of themonetary instrument or propertycorresponding thereto. The verified petitionshall be filed with the court which renderedthe judgment of conviction and order offorfeiture within fifteen (15) days from thedate of the order of forfeiture, in default ofwhich the said order shall become final and


APP. P-608.12.31

executory. This provision shall apply in bothcivil and criminal forfeiture.

Rule 12.4. Payment in Lieu of Forfeiture.- Where the court has issued an order offorfeiture of the monetary instrument orproperty subject of a money launderingoffense under Section 4 of the AMLA, andsaid order cannot be enforced because anyparticular monetary instrument or propertycannot, with due diligence, be located, orit has been substantially altered, destroyed,diminished in value or otherwise renderedworthless by any act or omission, directlyor indirectly, attributable to the offender,or it has been concealed, removed,converted or otherwise transferred toprevent the same from being found or toavoid forfeiture thereof, or it is locatedoutside the Philippines or has been placedor brought outside the jurisdiction of thecourt, or it has been commingled withother monetary instruments or propertybelonging to either the offender himself ora third person or entity, thereby renderingthe same difficult to identify or besegregated for purposes of forfeiture, thecourt may, instead of enforcing the orderof forfeiture of the monetary instrument orproperty or part thereof or interest therein,accordingly order the convicted offenderto pay an amount equal to the value of saidmonetary instrument or property. Thisprovision shall apply in both civil andcriminal forfeiture.

RULE 13MUTUAL ASSISTANCE AMONG

STATES

Rule 13.1. Request for Assistance from aForeign State. - Where a foreign statemakes a request for assistance in theinvestigation or prosecution of a moneylaundering offense, the AMLC may executethe request or refuse to execute the sameand inform the foreign state of any valid

reason for not executing the request or fordelaying the execution thereof. Theprinciples of mutuality and reciprocity shall,for this purpose, be at all times recognized.

Rule 13.2. Powers of the AMLC to Act ona Request for Assistance from a ForeignState. - The AMLC may execute a requestfor assistance from a foreign state by: (1)tracking down, freezing, restraining andseizing assets alleged to be proceeds ofany unlawful activity under the procedureslaid down in the AMLA and in these Rules;(2) giving information needed by theforeign state within the procedures laiddown in the AMLA and in these Rules; and(3) applying for an order of forfeiture of anymonetary instrument or property in thecourt: Provided, That the court shall notissue such an order unless the applicationis accompanied by an authenticated copyof the order of a court in the requestingstate ordering the forfeiture of saidmonetary instrument or property of aperson who has been convicted of amoney laundering offense in therequesting state, and a certification or anaffidavit of a competent officer of therequesting state stating that the convictionand the order of forfeiture are final and thatno further appeal lies in respect of either.

Rule 13.3. Obtaining Assistance fromForeign States. - The AMLC may make arequest to any foreign state for assistancein (1) tracking down, freezing, restrainingand seizing assets alleged to be proceedsof any unlawful activity; (2) obtaininginformation that it needs relating to anycovered transaction, money launderingoffense or any other matter directly orindirectly related thereto; (3) to the extentallowed by the law of the foreign state,applying with the proper court therein foran order to enter any premises belongingto or in the possession or control of, any orall of the persons named in said request,


APP. P-608.12.31

and/or search any or all such persons namedtherein and/or remove any document,material or object named in said request:Provided, That the documentsaccompanying the request in support of theapplication have been duly authenticatedin accordance with the applicable law orregulation of the foreign state; and (4)applying for an order of forfeiture of anymonetary instrument or property in theproper court in the foreign state: Provided,That the request is accompanied by anauthenticated copy of the order of theRegional Trial Court ordering the forfeitureof said monetary instrument or propertyof a convicted offender and an affidavit ofthe clerk of court stating that the convictionand the order of forfeiture are final and thatno further appeal lies in respect of either.

Rule 13.4. Limitations on Requests forMutual Assistance. - The AMLC may refuseto comply with any request for assistancewhere the action sought by the requestcontravenes any provision of the Constitutionor the execution of a request is likely toprejudice the national interest of thePhilippines, unless there is a treaty betweenthe Philippines and the requesting staterelating to the provision of assistance inrelation to money laundering offenses.

Rule 13.5. Requirements for Requests forMutual Assistance from Foreign States. -A request for mutual assistance from aforeign state must (1) confirm that aninvestigation or prosecution is beingconducted in respect of a moneylaunderer named therein or that he hasbeen convicted of any money launderingoffense; (2) state the grounds on whichany person is being investigated orprosecuted for money laundering or thedetails of his conviction; (3) give sufficientparticulars as to the identity of saidperson; (4) give particulars sufficient toidentify any covered institution believed

to have any information, document,material or object which may be ofassistance to the investigation orprosecution; (5) ask from the coveredinstitution concerned any information,document, material or object which maybe of assistance to the investigation orprosecution; (6) specify the manner inwhich and to whom said information,document, material or object obtainedpursuant to said request, is to beproduced; (7) give all the particularsnecessary for the issuance by the courtin the requested state of the writs, ordersor processes needed by the requestingstate; and (8) contain such otherinformation as may assist in the executionof the request.

Rule 13.6. Authentication of Documents- For purposes of Section 13 (f) of the AMLAand Section 7 of the AMLA, a document isauthenticated if the same is signed orcertified by a judge, magistrate orequivalent officer in or of, the requestingstate, and authenticated by the oath oraffirmation of a witness or sealed with anofficial or public seal of a minister, secretaryof state, or officer in or of, the governmentof the requesting state, or of the personadministering the government or adepartment of the requesting territory,protectorate or colony. The certificate ofauthentication may also be made by asecretary of the embassy or legation,consul general, consul, vice consul,consular agent or any officer in the foreignservice of the Philippines stationed in theforeign state in which the record is kept,and authenticated by the seal of his office.


Rule 13.7.1. For attachment of Philippineproperties in the name of personsconvicted of any unlawful activity as


APP. P-608.12.31

defined in Section 3 (i) of the AMLA,execution and satisfaction of final judgmentsof forfeiture, application for examination ofwitnesses, procuring search warrants,production of bank documents and othermaterials and all other actions not specifiedin the AMLA and these Rules, and assistancefor any of the aforementioned actions, whichis subject of a request by a foreign state,resort may be had to the proceedingspertinent thereto under the Revised Rulesof Court.

Rule 13.7.2. Authority to Assist the UnitedNations and other InternationalOrganizations and Foreign States. – TheAMLC is authorized under Section 7 (8)and 13 (b) and (d) of the AMLA to receiveand take action in respect of any requestof foreign states for assistance in theirown anti-money laundering operations.It is also authorized under Section 7 (7)of the AMLA to cooperate with theNational Government and/or takeappropriate action in respect ofconventions, resolutions and otherdirectives of the United Nations (UN),the UN Security Council, and otherinternational organizations of which thePhilippines is a member. However, theAMLC may refuse to comply with anysuch request, convention, resolution ordirective where the action sought thereincontravenes the provision of theConstitution or the execution thereof islikely to prejudice the national interestof the Philippines.

Rule 13.8. Extradition. – The Philippinesshall negotiate for the inclusion of moneylaundering offenses as defined underSection 4 of the AMLA among theextraditable offenses in all future treaties.With respect, however, to the state partiesthat are signatories to the United NationsConvention Against TransnationalOrganized Crime that was ratified by the

Philippine Senate on 22 October 2001,money laundering is deemed to be includedas an extraditable offense in anyextradition treaty existing between saidstate parties, and the Philippines shallinclude money laundering as anextraditable offense in every extraditiontreaty that may be concluded betweenthe Philippines and any of said stateparties in the future.



Rule 14.1.a. Penalties under Section 4 (a)of the AMLA. - The penalty ofimprisonment ranging from seven (7) tofourteen (14) years and a fine of not lessthan Php3.0 Million but not more thantwice the value of the monetary instrumentor property involved in the offense, shallbe imposed upon a person convictedunder Section 4 (a) of the AMLA.


Rule 14.1.c. Penalties under Section 4 (c)of the AMLA. - The penalty ofimprisonment from six (6) months to four(4) years or a fine of not less thanPhp100,000.00 but not more thanPhp500,000.00, or both, shall be imposedon a person convicted under Section 4(c)of the AMLA.

Rule 14.1.d. Administrative Sanctions. - (1)After due notice and hearing, the AMLC shall,at its discretion, impose fines upon any


APP. P-608.12.31

covered institution, its officers andemployees, or any person who violates anyof the provisions of R.A. No. 9160, asamended by R.A. No. 9194 and rules,regulations, orders and resolutions issuedpursuant thereto. The fines shall be inamounts as may be determined by thecouncil, taking into consideration all theattendant circumstances, such as the natureand gravity of the violation or irregularity,but in no case shall such fines be less thanPhp100,000.00 but not to exceedPhp500,000.00. The imposition of theadministrative sanctions shall be withoutprejudice to the filing of criminal chargesagainst the persons responsible for theviolations.

Rule 14.2. Penalties for Failure to KeepRecords - The penalty of imprisonmentfrom six (6) months to one (1) year or afine of not less than Php100,000.00 but notmore than Php500,000.00, or both, shallbe imposed on a person convicted underSection 9 (b) of the AMLA.


Rule 14.4. Where Offender is a JuridicalPerson. - If the offender is a corporation,association, partnership or any juridicalperson, the penalty shall be imposed uponthe responsible officers, as the case maybe, who participated in, or allowed bytheir gross negligence the commission of

the crime. If the offender is a juridicalperson, the court may suspend or revokeits license. If the offender is an alien, heshall, in addition to the penalties hereinprescribed, be deported without furtherproceedings after serving the penaltiesherein prescribed. If the offender is apublic official or employee, he shall, inaddition to the penalties prescribed herein,suffer perpetual or temporary absolutedisqualification from office, as the casemay be.


Rule 14.6. Penalties for Breach ofConfidentiality. – The punishment ofimprisonment ranging from three (3) toeight (8) years and a fine of not less thanPhp500,000.00 but not more thanPhp1.0 Million, shall be imposed on aperson convicted for a violation underSection 9(c). In case of a breach ofconfidentiality that is published orreported by media, the responsiblereporter, writer, president, publisher,manager and editor-in-chief shall beliable under this act.


HARASSMENT

Rule 15.1. Prohibition against PoliticalPersecution. - The AMLA and these Rulesshall not be used for political persecutionor harassment or as an instrument tohamper competit ion in trade andcommerce. No case for money launderingmay be fi led to the prejudice of acandidate for an electoral office during anelection period.


APP. P-608.12.31

Rule 15.2. Provisional RemediesApplication; Exception. – Rule 15.2.a. - The AMLC may apply, in thecourse of the criminal proceedings, forprovisional remedies to prevent the monetaryinstrument or property subject thereof frombeing removed, concealed, converted,commingled with other property orotherwise to prevent its being found or takenby the applicant or otherwise placed or takenbeyond the jurisdiction of the court.However, no assets shall be attached to theprejudice of a candidate for an electoraloffice during an election period.

Rule 15.2.b. - Where there is convictionfor money laundering under Section 4 ofthe AMLA, the court shall issue a judgmentof forfeiture in favor of the Government ofthe Philippines with respect to themonetary instrument or property found tobe proceeds of one or more unlawfulactivities. However, no assets shall beforfeited to the prejudice of a candidate foran electoral office during an electionperiod.

RULE 16RESTITUTION



PROGRAMS


(a) Within thirty (30) days from theeffectivity of R.A. No. 9160, as amendedby R.A. No. 9194, the BSP, the InsuranceCommission and the Securities andExchange Commission shall promulgate the

Implementing Rules and Regulations of theAMLA, which shall be submitted to theCongressional Oversight Committee forapproval.

(b) The Supervising Authorities, the BSP,the SEC and the IC shall, under their ownrespective charters and regulatory authority,issue their Guidelines and Circulars on anti-money laundering to effectively implement theprovisions of R.A. No. 9160, as amended byR.A. No. 9194.


Rule 17.2.a. Covered institutions shallformulate their respective moneylaundering prevention programs inaccordance with Section 9 and otherpertinent provisions of the AMLA and theseRules, including, but not limited to,information dissemination on moneylaundering activities and their prevention,detection and reporting, and the training ofresponsible officers and personnel ofcovered institutions, subject to suchguidelines as may be prescribed by theirrespective supervising authority. Everycovered institution shall submit its ownmoney laundering program to thesupervising authority concerned within thenon-extendible period that the supervisingauthority has imposed in the exercise of itsregulatory powers under its own charter.

Rule 17.2.b. Every money launderingprogram shall establish detailed proceduresimplementing a comprehensive, institution-wide “know-your-client” policy, set-up aneffective dissemination of information onmoney laundering activities and theirprevention, detection and reporting, adoptinternal policies, procedures and controls,designate compliance officers atmanagement level, institute adequatescreening and recruitment procedures, andset-up an audit function to test the system.


APP. P-608.12.31

Rule 17.2.c. Covered institutions shall adopt,as part of their money laundering programs, asystem of flagging and monitoring transactionsthat qualify as suspicious transactions,regardless of amount or covered transactionsinvolving amounts below the threshold tofacilitate the process of aggregating them forpurposes of future reporting of suchtransactions to the AMLC when theiraggregated amounts breach the threshold. Allcovered institutions, including banks insofaras non-deposit and non-government bondinvestment transactions are concerned, shallincorporate in their money launderingprograms the provisions of these Rules andsuch other guidelines for reporting to theAMLC of all transactions that engender thereasonable belief that a money launderingoffense is about to be, is being, or has beencommitted.

Rule 17.3. Training of Personnel. -Covered institutions shall provide all theirresponsible officers and personnel withefficient and effective training and continuingeducation programs to enable them to fullycomply with all their obligations under theAMLA and these Rules.



COMMITTEE

Rule 18.1. Composition of CongressionalOversight Committee. - There is herebycreated a Congressional Oversight Committeecomposed of seven (7) members from theSenate and seven (7) members from the Houseof Representatives. The members from the

Senate shall be appointed by the SenatePresident based on the proportionalrepresentation of the parties or coalitionstherein with at least two (2) Senatorsrepresenting the minority. The membersfrom the House of Representatives shallbe appointed by the Speaker also basedon proportional representation of theparties or coalitions therein with at leasttwo (2) members representing theminority.


RULE 19APPROPRIATIONS FOR AND

BUDGET OF THE AMLC

Rule 19.1. Budget. – The budget of Php25.0million appropriated by Congress underthe AMLA shall be used to defray the initialoperational expenses of the AMLC.Appropriations for succeeding years shallbe included in the General AppropriationsAct. The BSP shall advance the fundsnecessary to defray the capital outlay,maintenance and other operating expensesand personnel services of the AMLCsubject to reimbursement from the budgetof the AMLC as appropriated under theAMLA and subsequent appropriations.

Rule 19.2. Costs and Expenses. - The budgetshall answer for indemnification for legalcosts and expenses reasonably incurred for theservices of external counsel in connection withany civil, criminal or administrative action, suitor proceedings to which members of theAMLC and the Executive Director and other


APP. P-608.12.31

members of the Secretariat may be made aparty by reason of the performance of theirfunctions or duties. The costs and expensesincurred in defending the aforementionedaction, suit or proceeding may be paid by theAMLC in advance of the final disposition ofsuch action, suit or proceeding upon receiptof an undertaking by or on behalf of themember to repay the amount advancedshould it be ultimately determined that saidmember is not entitled to suchindemnification.


Rule 20. Separability Clause. – If anyprovision of these Rules or the applicationthereof to any person or circumstance isheld to be invalid, the other provisions ofthese Rules, and the application of suchprovision or Rule to other persons orcircumstances, shall not be affected thereby.


Rule 21. Repealing Clause. – All laws,decrees, executive orders, rules andregulations or parts thereof, including therelevant provisions of R.A. No. 1405, as

amended; R.A. No. 6426, as amended; R.A.No. 8791, as amended, and other similarlaws, as are inconsistent with the AMLA,are hereby repealed, amended or modifiedaccordingly.


Rule 22. Effectivity. – These Rules shalltake effect after its approval by theCongressional Oversight Committee andfifteen (15) days after its completepublication in the Official Gazette or in anewspaper of general circulation.


Rule 23.1. - Transitory Provisions. -Existing freeze orders issued by the AMLCshall remain in force for a period of thirty(30) days after effectivity of this act, unlessextended by the Court of Appeals.

Rule 23.2. - Effect of R.A. No. 9194 on Casesfor Extension of Freeze Orders Resolved bythe Court of Appeals. - All existing freeze orderswhich the Court of Appeals has extended shallremain effective, unless otherwise dissolved bythe same court.

iii


N REGULATIONS(Regulations Governing Other Non-Bank Financial Institutions)

TABLE OF CONTENTS

SECTION 4101N Applicable Regulations on Trust and Other FiduciaryActivities

SECTION 4102N Minimum Capital for Investment Houses

SECTION 4103N Prior Bangko Sentral Authority on Quasi-Banking Functions4103N.1 Quasi-banking functions4103N.2 Transactions not considered quasi-banking4103N.3 Delivery of securities4103N.4 Securities custodianship operations

SECTION 4104N Anti-Money Laundering Regulations4104N.1 - 4104N.8 (Reserved)4104N.9 Sanctions and penalties

SECTIONS 4105N - 4109N (Reserved)4109N.1 - 4109N.15 (Reserved)4109N.16 Qualification and accreditation of non-bank

financial institutions acting as trustee on anymortgage or bond issuance by any municipality,GOCC, or any body politic

SECTIONS 4110N - 4139N (Reserved)

SECTION 4140N Interlocking Directorships and Officerships4140N.1 Representatives of government


SECTION 4143N Disqualification of Directors and Officers4143N.1 Persons disqualified to become directors4143N.2 Persons disqualified to become officers4143N.3 Disqualification procedures4143N.4 Effect of possession of disqualifications4143N.5 (Reserved)4143N.6 Watchlisting

iv

SECTION 4144N Securities Custodianship and Securities Registry Operations4144N.1 Statement of policy4144N.2 Applicability of this regulation4144N.3 Prior Bangko Sentral approval4144N.4 Application for authority4144N.5 Pre-qualification requirements for a securities

custodian/registry4144N.6 Functions and responsibilities of a securities

custodian4144N.7 Functions and responsibilities of a securities

registry4144N.8 Protection of securities of the customer4144N.9 Independence of the registry and custodian4144N.10 Registry of scripless securities of the Bureau of

the Treasury4144N.11 Confidentiality4144N.12 Compliance with anti-money laundering laws

regulations4144N.13 Basic security deposit4144N.14 Reportorial requirements4144N.15 - 4144N.28 (Reserved)4144N.29 Sanctions


SECTION 4150N Rules of Procedure on Administrative Cases InvolvingDirectors and Officers of Trust Entities


SECTION 4157N Batas Pambansa Blg. 344 - An Act to Enchance the Mobilityof Disabled Persons by Requiring Certain Buildings,Institutions, Establishments and Public Utilities to InstallFacilities and other Devices


SECTION 4161N Philippine Financial Reporting Standards/PhilippineAccounting Standards

SECTION 4162N Reports4162N.1 Categories and signatories of reports4162N.2 Manner of filing4162N.3 Sanctions in case of willful delay in the

submission of reports

v

SECTION 4163N (Reserved)

SECTION 4164N Internal Audit Function4164N.1 Status4164N.2 Scope4164N.3 Qualification standards of the internal auditor4164N.4 Code of Ethics and Internal Auditing Standards


SECTION 4172N Financial Audit4172N.1 Audited financial statements of NBFIs4172N.2 Posting of audited financial statements


SECTION 4180N Selection, Appointment and Reporting Requirements forExternal Auditors; Sanction; Effectivity

SECTION 4181N Publication Requirements


SECTION 4190N Duties and Responsibilities of NBFIs and their Directors/Officers in All Cases of Outsourcing of NBFI Functions


SECTION 4192N Prompt Corrective Action Framework

SECTION 4193N Supervision by Risks

SECTION 4194N Market Risk Management

SECTION 4195N Liquidity Risk Management



SECTION 4301N Credit Card Operations; General Policy4301N.1 Definition of terms4301N.2 Risk management system4301N.3 Minimum requirements

vi

4301N.4 Information to be disclosed4301N.5 Interest accrual on past due loans4301N.6 Finance charges4301N.7 Deferral charges4301N.8 Late payment/penalty fees4301N.9 Confidentiality of information4301N.10 Suspension, termination of effectivity and

reactivation4301N.11 Inspection of records covering credit card

transactions4301N.12 Offsets4301N.13 Handling of complaints4301N.14 Unfair collection practices4301N.15 Sanctions

SECTION 4302N Classification of Credit Card Receivables

SECTION 4303N Updating of Information Provided to Credit InformationBureaus


SECTION 4312N Grant of Loans and Other Credit Accommodations4312N.1 General guidelines4312N.2 Purpose of loans and other credit accommodations4313N.3 Prohibited use of loan proceeds4312N.4 Signatories4312N.5 Sanctions

SECTION 4313N Bank DOSRI Rules and Regulations Applicable to GovernmentBorrowings in Government-Owned or Controlled FinancialInstitutions

SECTION 4314N Loans Against Personal Security


SECTION 4391N Investment in Debt and Marketable Equity Securities


vii



SECTION 4511N Foreign Exchange Dealers/Money Changers and/orRemittance Agents Operations4511N.1 Registration4511N.2 Application for registration4511N.3 Applicability of other laws/regulations4511N.4 Required seminar/training4511N.5 Sale and purchase of foreign currencies by FXDs/

MCs4511N.6 Application to sell/purchase foreign currencies by

FXDs/MCs4511N.7 Additional requirement4511N.8 Requirements for remittance agents4511N.9 AMLC reportorial requirements4511N.10 - 4511N.14 (Reserved)4511N.15 Sanctions4511N.16 Industry association


SECTION 4601N Fines and Other Charges4601N.1 Guidelines on the imposition of monetary penalties; Payment of penalties or fines


SECTION 4603N Non-Bank BSP Supervised Entities

SECTIONS 4604N- 4652N (Reserved)

SECTION 4653N Accounting for Financial Institution Premises; Other FixedAssets


SECTION 4660N Disclosure of Remittance Charges and Other RelevantInformation


viii

SECTION 4695N Valid Identification (ID) Cards for Financial Transactions


SECTION 4699N General Provision on Sanctions


ix

LIST OF APPENDICES

No. SUBJECT MATTER

N - 1 List of Reports Required from Non-Bank Financial Institutions

N - 2 Guidelines on Prescribed Reports Signatories and Signatory AuthorizationAnnex N-2-a - Format of Resolution for Signatories of Category A-2

ReportsAnnex N-2-b - Format of Resolution for Signatories of Category B

Reports

N - 3 Anti-Money Laundering RegulationsAnnex N-3-a - Certification of Compliance with Anti-Money

Laundering RegulationsAnnex N-3-b - Rules on Submission of Covered Transaction Reports


N - 4 Revised Implementing Rules and Regulations R.A. No. 9160, asamended by R.A. No. 9194

N - 5 Guidelines to Govern the Selection, Appointment and the ReportingRequirement for External Auditors of NBFIs

N - 6 Qualification Requirements for a Bank/NBFI Applying for Accreditationto Act as Trustee on any Mortgage or Bond Issued by any Municipality,Government-Owned or Controlled Corporation, or any Body Politic

N - 7 Format Certification

N - 8 Registration and Operations of Foreign Exchange Dealers/MoneyChangers and Remittance Agents

Manual of Regulations for Non-Bank Financial Institutions N RegulationsPage 1

BSP Manual of Regulations for Non-Bank Financial Institutions

N Regulations(Regulations Governing Other Non-Bank Financial Institutions)

instruments of any kind, other than deposits,such as:

(1) acceptances;(2) promissory notes;(3) participations;(4) certificates of assignment or similar

instruments with recourse;(5) trust certificates;(6) repurchase agreements; and(7) such other instruments as the

Monetary Board may determine; andd. Purpose:(1) relending, or(2) purchasing receivables or other

obligations.As used in the definition of quasi-

banking functions, the following terms andphrases shall be understood as follows:

Borrowing shall refer to all forms ofobtaining or raising funds through any ofthe methods and for any of the purposesprovided in c and d, above whether theborrower’s liability thereby is treated asreal or contingent.

For the borrower’s own account shallrefer to the assumption of liability in one’sown capacity and not in representation, oras an agent or trustee, of another.

Purchasing of receivables or otherobligations shall refer to the acquisition ofclaims collectible in money, includinginterbank borrowings or borrowingsbetween FIs, or of securities, of any amountand maturity, from domestic or foreign sources.

Relending shall refer to the extensionof loans by an institution with antecedentborrowing transactions. Relending shall bepresumed in the absence of expressstipulation, when the institution is regularlyengaged in lending.

Section 4101N Applicable Regulations onTrust and Other Fiduciary Activities. Trustoperations and investment managementactivit ies of NBFIs not performingquasi-banking functions shall be subjectto the applicable regulations on suchactivit ies of NBFIs performingquasi-banking functions in Part IV of theQ Regulations of this Manual, to theregulations in the other parts of the QRegulations addressed also to trust entitiesand to the regulations implementing theTruth in Lending Act in Sec. 4307Q.

Sec. 4102N Minimum Capital forInvestment Houses. Investment housesnot performing quasi-banking functionsshall also be subject to the minimum capitalrequirement in Sec. 4112Q of this Manual.

Sec. 4103N Prior Bangko SentralAuthority on Quasi-Banking FunctionsBorrowing by NBFIs from twenty (20) ormore lenders for the purpose of relendingor purchase of receivables or otherobligations, which constitutes quasi-banking functions, shall be subject to priorBangko Sentral ng Pilipinas (BSP) authorityon performance of quasi-banking functionsunder BSP regulations.

§ 4103N.1 Quasi-banking functionsQuasi-banking functions shall consist of thefollowing:

a. Borrowing funds for the borrower’sown account;

b. Twenty (20) or more lenders at anyone (1) time;

c. Methods of borrowing: issuance,endorsement, or acceptance of debt

§§ 4101N - 4103N.108.12.31

N RegulationsPage 2


Regularly engaged in lending shallrefer to the practice of extending loans,advances, discounts or rediscounts as amatter of business, i.e., continuous orconsistent lending as distinguished fromisolated lending transactions.

The following guidelines shall governlender count on borrowings or fundsmobilized by NBFIs not performing quasi-banking functions:

1. For purposes of ascertaining thenumber of lenders/placers to determinewhether or not an NBFI is engaged inquasi-banking functions, the names ofpayees on the face of each debt instrumentshall serve as the primary basis forcounting the lenders/placers except whenproof to the contrary is adduced such asthe official receipts or documents otherthan the debt instrument itself. In suchcase the actual/real lenders/placers asappearing in such proof, shall be the basisfor counting the number of lenders/placers.

In a debt instrument issued to two (2)or more named payees under an and/orand or arrangement, the number of payeesappearing on the instrument shall be thebasis for counting the number of lenders/placers: Provided, however, That a debtinstrument issued in the name of ahusband and wife followed by the wordspouses, whether under an and, and/or oror arrangement or in the name of adesignated payee under an in trust for (ITF)arrangement shall be counted as oneborrowing/placement.

2. Each debt instrument payable tobearer shall be counted as one (1) lender/placer, except when the NBFI can provethat there is only one (1) owner for severaldebt instruments so payable.

3. Two (2) or more debt instrumentsissued to the same payee, irrespective ofthe date and amount shall be counted asone (1) borrowing or placement.

4. Debt instruments underwritten byinvestment houses or traded by securitiesdealers/brokers whether on a firm, standbyor best efforts basis shall be counted on thebasis of the number or purchasers thereofand shall not be treated as having beenissued solely to the underwriter or trader:Provided, however, That in case of unsolddebt instruments in a firm commitmentunderwriting, the underwriter shall becounted as a lender.

5. Each buyer, assignee, and/orindorsee shall be counted in determiningthe number of lenders/placers of fundsmobilized through sale, assignment,and/or indorsement of securities orreceivables on a without recourse basiswhenever the terms and/or attendantdocumentation, practice, or circumstancesindicate that the sale, assignment, and/orindorsement thereof legally obligates theNBFI not performing quasi-bankingfunctions to repurchase or reacquire thesecurities/receivables sold, assigned,indorsed or to pay the buyer, assignee, orindorsee at some subsequent time.

6. Funds obtained by way ofadvances from stockholders, directors, orofficers, regardless of nature, shall beconsidered borrowed funds or fundsmobilized and such stockholders, directorsor officers shall be counted in determiningthe number of lenders/placers.

§ 4103N.2 Transactions notconsidered quasi-banking. The followingshall not constitute quasi-banking:

a. Borrowing by commercial,industrial and other non-financialcompanies, through the means listed inSubsec. 4103N.1 for the limited purposeof financing their own needs or the needsof their agents or dealers; and

b. The mere buying and selling withoutrecourse of instruments mentioned in Subsec.4103N.1: Provided, That:

§§ 4103N.1 - 4103N.208.12.31


(1) The institution selling withoutrecourse shall indicate or stamp inconspicuous print on the instrument/s, aswell as on the confirmation of sale, thephrase without recourse or sans recourseand the following statement:

(Name of non-bank) assumesno liability for the payment,

directly or indirectly, ofthis instrument.

(2) In the absence of the phrasewithout recourse or sans recourse and theabove-required accompanying statement,the instrument so issued, endorsed oraccepted shall automatically be consideredas falling within the purview of the ruleson quasi-banking:

Provided, further, That any of thefollowing practices or practices similarand/or tantamount thereto in connectionwith a without recourse transactionrenders such transaction as with recourseand within the purview of the rules onquasi-banking.

(a) Issuance of postdated checks by afinancial intermediary, whether for its ownaccount or as an agent of the debtinstrument issuer, in payment of the debtinstrument sold, assigned or transferredwithout recourse;

(b) Issuance by a financial intermediaryof any form of guaranty on sale transactionsor on negotiations or assignment of debtinstruments without recourse; or

(c) Payment with the funds of thefinancial intermediary which assigned, soldor transferred the debt instrument withoutrecourse, unless the financial intermediarycan show that the issuer has with the saidfinancial intermediary funds correspondingto the amount of the obligation.

Any investment house violating theprovisions of this Subsection shall be subjectto the sanctions provided in Sections 12 and16 of P.D. No. 129, as amended.

1 Effective 16 November 2004 under Circular No. 450 dated 06 September 2004.

§ 4103N.3 Delivery of securities1

a. Securities sold on a withoutrecourse basis allowed under Subsec.4101Q.3 (b) shall be delivered physicallyto the purchaser, or to his designatedcustodian duly accredited by the BSP, ifcertificated, or by means of book-entrytransfer to the appropriate securities accountof the purchaser or his designated BSPaccredited custodian in a registry for saidsecurities, if immobilized or dematerialized,while the confirmation of sale or documentof conveyance by the seller shall bephysically delivered to the purchaser. Thecustodian shall hold the securities in thename of the buyer: Provided, That an NBFIauthorized by the BSP to performcustodianship function may not be allowedto be custodian of securities issued or soldon a without recourse basis by said NBFI,its subsidiaries or affiliates, or of securitiesin bearer form.

The delivery shall be effected uponpayment and shall be evidenced by asecurities delivery receipt duly signed bythe authorized officer of the custodian anddelivered to the purchaser.

Sanctions. Violation of any provision ofItem “a” shall be subject to the followingsanctions/penalties:

(1) Monetary penaltiesFirst offense – Fine of P10,000 a day

for each violation reckoned from the datethe violation was committed up to the dateit was corrected.

Subsequent offenses – Fine of P20,000a day for each violation reckoned from thedate the violation was committed up to thedate it was corrected.

(2) Other sanctionsFirst offense – Reprimand for the

directors/officers responsible for theviolation.

Subsequent offense –(a) Suspension for ninety (90) days

without pay of directors/officers responsiblefor the violation;

§§ 4103N.2 - 4103N.308.12.31

N RegulationsPage 4


(b) Suspension or revocation of theaccreditation to perform custodianshipfunction;

(c) Suspension or revocation of theauthority to engage in quasi-bankingfunction; and/or

(d) Suspension or revocation of theauthority to engage in trust and otherfiduciary business.

b. The guidelines to implement thedelivery by the seller of securities to thebuyer or to his designated third partycustodian are shown in Appendix Q-38.

Sanctions. Violation of any of theprovisions of Appendix Q-38 shall besubject to the sanctions/penalties underSubsec. 4144N.29.(As amended by M-2007-002 dated 23 January 2007,

M-2006-009 dated 18 July 2006, M-2006-002 dated 05 June

2006 and Circular No. 524 dated 31 March 2006)

§ 4103N.4 Securities custodianshipoperations

a. Securities sold on a withoutrecourse basis shall be delivered to thepurchaser, or to his designated custodianduly accredited by the BSP: Provided, Thatthe other entity authorized by the BSP toperform custodianship function may not beallowed to be custodian of securities issuedor sold on a without recourse basis by saidentity, its subsidiaries or affiliates, or ofsecurities in bearer form. Existing securitiesbeing held under custodianship by otherentities under BSP supervision, which arenot in accordance with said regulation,must therefore, be delivered to a BSPaccredited third party custodian. However,other FIs under BSP supervision maymaintain custody of existing securities oftheir clients who are unable or unwillingto take delivery pursuant to the provisionsof this Subsection but who declined todeliver their existing securities to a BSPaccredited third party custodian subject tothe following conditions:

(1) the custody arrangements withclients have been in existence prior to05 November 2004 (effectivity date ofCircular 457 dated 14 October 2004);

(2) the dealing NBFI under BSPsupervision had been informed in writingby the client that he is not willing to havehis existing securities delivered to a thirdparty custodian;

(3) any BSP-regulated institution shallnot enter into securities transactions with aclient who has outstanding securities notdelivered to a BSP accredited third partycustodian; and

(4) it shall be the responsibility of anyBSP-regulated institution to satisfy itself thatthe person purchasing securities from it hasno outstanding securities holdings whichwere not delivered to a BSP accredited thirdparty custodian.

Sanctions. Without prejudice to thepenal and administrative sanctionsprovided for under Sections 36 and 37,respectively, of the R.A. No. 7653, violationof any provision of this Subsection shall besubject to the following sanctions/penalties:

(1) First offense –(a) Fine of up to P10,000 a day for the

institution for each violation reckoned fromthe date the violation was committed upto the date it was corrected; and

(b) Reprimand for the directors/officersresponsible for the violation.

(2) Second offense -(a) Fine of up to P20,000 a day for the


(b) Suspension for ninety (90) dayswithout pay of directors/officers responsiblefor the violation.

(3) Subsequent offenses –(a) Fine of up to P30,000 a day for the

institution for each violation from the datethe violation was committed up to the dateit was corrected;

§§ 4103N.3 - 4103N.408.12.31


(b) Suspension or revocation of theauthority to act as securities custodianand/or registry; and

(c) Suspension for 120 days without payof the directors/officers responsible for theviolation.

b. Sec. 4144N and its subsectionsshall also govern the securitiescustodianship and securities registryoperations relative to the sale of securitieson a without recourse basis.(As amended by M-2006-009 dated 18 July 2006, M-2006-002

dated 05 June 2006 and Circular No. 524 dated 31 March 2006)

Sec. 4104N Anti-Money LaunderingRegulations. Banks, OBUs, QBs, trustentities, NSSLAs, pawnshops, and all otherinstitutions, including their subsidiaries andaffiliates supervised and/or regulated by theBSP, otherwise known as “coveredinstitutions” shall comply with theprovisions of R.A. No. 9160, as amended,otherwise known as the “Anti-MoneyLaundering Act of 2001” and its RevisedImplementing Rules and Regulations(IRRs) in Appendix N-4 and those inAppendix N-3.(As amended by Circular No. 612 dated 13 June 2008)

§§ 4104N.1 - 4104N.8 (Reserved)

§ 4104N.9 Sanctions and penaltiesa. Whenever a covered institution

violates the provisions of Section 9 of R.A.No. 9160, as amended the officer(s) or otherpersons responsible for such violation shallbe punished by a fine of not less thanP50,000 nor more than P200,000 or byimprisonment of not less than two (2) yearsnor more than ten (10) years, or both, atthe discretion of the court pursuant toSection 36 of R.A. No. 7653, otherwiseknown as “The New Central Bank Act”.

b. Without prejudice to the criminalsanctions prescribed above against theculpable persons, the Monetary Boardmay, at its discretion, impose upon any

covered institution, its directors and/orofficers for any violation of Section 9 of R.A.No. 9160, as amended, the administrativesanctions provided under Section 37 of R.A.No. 7653.

Secs. 4105N - 4109N (Reserved)

§§ 4109N.1 - 4109N.15 (Reserved)

§ 4109N.16 Qualification andaccreditation of non-bank financialinstitutions acting as trustee on anymortgage or bond issuance by anymunicipality, GOCC, or any body politic

a. Applicability. NBFIs dulyaccredited by the BSP may act as trusteeon any mortgage or bond issued by anymunicipality, GOCC, or any body politic.

b. Application for accreditation. AnNBFI desiring to act as trustee on anymortgage or bond issued by anymunicipality, GOCC, or any body politicshall file an application for accreditationwith the appropriate department of the SES.The application shall be signed by thepresident or officer of equivalent rank ofthe NBFI and shall be accompanied by thefollowing documents:

(1) certified true copy of the resolutionof the institution’s board of directorsauthorizing the application; and

(2) a certification signed by thepresident or officer of equivalent rank thatthe institution has complied with all thequalification requirements for accreditation.

c. Qualification requirements. AnNBFI applying for accreditation to act astrustee on any mortgage or bond issued byany municipality, GOCC, or any bodypolitic must comply with the requirementsin Appendix N-6.

d. Independence of the trustee. AnNBFI is prohibited from acting as trusteeof a mortgage or bond issuance if anyelective or appointive official of the LGU,GOCC, or body politic which issued said

§§ 4103N.4 - 4109N.1608.12.31

N RegulationsPage 6


mortgage or bond and/or his related interestsown such number of shares of the NBFI thatwill allow him or his related interests to electat least one (1) member of the board ofdirectors of such NBFI or is directly orindirectly the registered or beneficial ownerof more than ten percent (10%) of any classof its equity security.

e. Investment and management ofthe funds. A domestic NBFI designated astrustee of a mortgage or bond issuancemay hold and manage, in accordance withthe provisions of the trust indenture oragreement, the proceeds of the mortgageor bond issuance and such assets and fundsof the issuing municipality, GOCC, orbody politic as may be required to bedelivered to the trustee under the trustindenture/agreement, subject to thefollowing conditions/restrictions:

(1) Pending the utilization of suchfunds pursuant to the provisions of the trustindenture/agreement, the same shall onlybe (i) deposited in any bank authorized toaccept deposits from the Government orgovernment entities: Provided, That thedepository bank is not a subsidiary oraffiliate of the trustee NBFI, or (ii) investedin peso-denominated treasury billsacquired/purchased from any securitiesdealer/entity, other than the trustee or anyof its unit/department, its subsidiary oraffiliate.

(2) Investments of funds constituting orforming part of the sinking fund created asthe primary source for the payment of theprincipal and interests due the mortgageor bonds shall also be limited to depositsin any bank authorized to accept depositsfrom the Government or governmententities and investments in governmentsecurities that are consistent with suchpurpose which must be acquired/purchased from any securities dealer/entity,other than the trustee or any of its unit/department, its subsidiary or affiliate.

f. Waiver of confidentiality. An NBFIdesignated as trustee of any mortgage orbond issued by any municipality, GOCC,or any body politic shall submit to theappropriate department of the SES a waiverof the confidentiality of information underSections 2 and 3 of R.A. No. 1405, asamended, duly executed by the issuer ofthe mortgage or bond in favor of the BSP.

g. Reportorial requirements. An NBFIauthorized by the BSP to act as trustee ofthe proceeds of mortgage or bond issuanceof a municipality, GOCC, or body politicshall comply with reportorial requirementsthat may be prescribed by the BSP.

h. Applicability of the rules andregulations on trust, other fiduciarybusiness and investment managementactivities. The provisions of the Rules andRegulations on Trust, Other FiduciaryBusiness and Investment ManagementActivities not inconsistent with theprovisions of this Subsection shall form partof these rules.

i. Sanctions. Without prejudice to thepenal and administrative sanctionsprovided for under Sections 36 and 37,respectively, of R.A. No. 7653, violationof any provision of this Subsection shall besubject to the following sanctions/penaltiesdepending on the gravity of the offense:

(1) First offense –(a) Fine of up to P10,000 a day for the


(b) Reprimand for the directors/officersresponsible for the violation.

(2) Second offense –(a) Fine of up to P20,000 a day for the

institution for each violation reckoned fromthe date the violation was committed upto the date it was corrected;

(b) Suspension for ninety (90) dayswithout pay for directors/officersresponsible for the violation; and

§ 4109N.1608.12.31


(c) Revocation of the authority to act astrustee on any mortgage or bond issuanceby any municipality, GOCC, or body politic.

(3) Subsequent offense –(a) Fine of up to P30,000 a day for the

institution for each violation reckoned fromthe date the violation was committed upto the date it was corrected;

(b) Suspension or revocation of thetrust license;

(c) Suspension for 120 days withoutpay of the directors/officers responsible forthe violation.


Sec. 4140N Interlocking Directorshipsand/or Officerships. In order to safeguardagainst the excessive concentration ofeconomic power, unfair competitiveadvantage or conflict of interest situationsto the detriment of others through theexercise by the same person or group ofpersons of undue influence over the policy-making and/or management functions ofsimilar FIs while at the same time allowingbanks, QBs and NBFIs without quasi-banking functions to benefit fromorganizational synergy or economies ofscale and effective sharing of managerialand technical expertise, the followingregulations shall govern interlockingdirectorships and/or officerships within thefinancial system consisting of banks, QBsand NBFIs.

For purposes of this Section, QBsshall refer to investment houses, financecompanies, trust entities and all otherQBs while NBFIs shall refer toinvestment houses, finance companies,trust entities, insurance companies,securities dealers/brokers, credit cardcompanies, NSSLAs, holding companies,investment companies, governmentNBFIs, asset management companies,insurance agencies/brokers, venturecapital corporations, FX dealers, money

changers, lending investors, pawnshops,fund managers, mutual building and loanassociations, remittance agents and all otherNBFIs without quasi-banking functions.

a. Interlocking directorships.While concurrent directorship may

be the least prejudicial of the variousrelationships cited in this Section to theinterests of the FIs involved, certainmeasures are still necessary to safeguardagainst the disadvantages that couldresult from indiscriminate concurrentdirectorship.

(1) Except as may be authorized by theMonetary Board or as otherwise providedhereunder, there shall be no concurrentdirectorships between QBs or between aQB and a bank; and

(2) Without the need for prior approvalof the Monetary Board, concurrentdirectorships between entities notinvolving an investment house shall beallowed in the following cases:

(a) A bank and one (1) or more of itssubsidiary bank/s, QB/s, and NBFI/s; and

(b) A QB and an NBFI.For purposes of the foregoing, a

husband and his wife shall be consideredas one (1) person.

b. Interlocking directorships andofficerships.

In order to prevent any conflict ofinterest resulting from the exercise ofdirectorship coupled with the reinforcinginfluence of an officer’s decision-makingand implementing powers, the followingrules shall be observed.

(1) Except as may be authorized by theMonetary Board or as otherwise providedhereunder, there shall be no concurrentdirectorship and officership between QBs,or between a QB and a bank, and betweena QB and an NBFI.

(2) Without the need for prior approvalof the Monetary Board, concurrentdirectorship and officership between abank and one (1) or more of its subsidiary

§§ 4109N.16 - 4140N08.12.31

N RegulationsPage 8


bank/s, QB/s, and NBFI/s, other thaninvestment house/s, shall be allowed.

c. Interlocking officerships.A concurrent officership in different FIs

may present more serious problems ofself-dealing and conflict of interest. Multiplepositions may result in poor governanceor unfair competitive advantage.Considering the full-time nature of officerpositions, the difficulties of serving two (2)offices at the same time, and the need foreffective and efficient management, thefollowing rules shall be observed:

As a general rule, there shall be noconcurrent officerships, includingsecondments, between QBs or between aQB and a bank or between a QB and anNBFI. For this purpose, secondment shallrefer to the transfer/detachment of a personfrom his regular organization for temporaryassignment elsewhere where theseconded employee remains the employeeof the home employer although his salariesand other remuneration may be borne bythe host organization.

However, subject to prior approval ofthe Monetary Board, concurrentofficerships, including secondments, maybe allowed in the following cases:

(1) Between a QB, other than aninvestment house, and not more than two(2) of its subsidiary bank/s, QB/s, andNBFI/s, other than investment house/s;

(2) Between two (2) QBs, or betweena QB, other than an investment house,and a bank, or between a QB and an NBFI:Provided, That at least twenty percent (20%)of the equity of each of the banks, QBs orNBFIs is owned by a holding company or aQB/bank and the interlocking arrangementis necessary for the holding company or theQB/bank to provide technical expertise ormanagerial assistance to its subsidiaries/affiliates;

(3) Between a QB and not more thantwo (2) of its subsidiary QB/s, andNBFI/s;

(4) Between a bank and not more thantwo (2) of its subsidiary bank/s, QB/s, andNBFIs, other than investment house/s;

(5) Between a bank and not more thantwo (2) of its subsidiary QB/s, and NBFI/s.

Aforementioned concurrent officershipsmay be allowed, subject to the followingconditions:

(a) that the positions do not involve anyfunctional conflict of interests;

(b) that any officer holding the positionsof president, chief executive officer, chiefoperating officer or chief financial officermay not be concurrently appointed to anyof said positions or their equivalent;

(c) that the officer involved, or hisspouse or any of his relatives within thefirst degree of consanguinity or affinity orby legal adoption, or a corporation,association or firm wholly- or majority-owned or controlled by such officer or hisrelatives enumerated above, does not ownin his/its own capacity more than twentypercent (20%) of the subscribed capitalstock of the entities in which the QB hasequity investments; and

(d) that where any of the positionsinvolved is held on full-time basis, adequatejustification shall be submitted to theMonetary Board; or

(6) Concurrent officership positionsin the same capacity which do notinvolve management functions, i.e.,internal auditors, corporate secretary,assistant corporate secretary and securityofficer, between a QB and one (1) ormore of its subsidiary QB/s and NBFI/s,or between a bank and one (1) or moreof its subsidiary QBs and NBFIs, orbetween bank/s, QB/s and NBFI/s, otherthan investment house/s: Provided, That atleast twenty percent (20%) of the equityof each of the banks, QBs and NBFIs isowned by a holding company or by any ofthe banks/QBs within the group.

For purposes of this Section, membersof a group or committee, including

§ 4140N08.12.31


sub-groups or sub-committees, whoseduties include functions of managementsuch as those ordinarily performed byregular officers, shall likewise be consideredas officers.

It shall be the responsibility of theCorporate Governance Committee toconduct an annual performance evaluationof the board of directors and seniormanagement. When a director or officerhas multiple positions, the Committeeshould determine whether or not saiddirector or officer is able to and has beenadequately carrying out his/her duties and,if necessary, recommend changes to theboard based upon said performance/review.(Circular No. 592 dated 28 December 2007)

§ 4140N.1 Representatives ofgovernment. The provisions of this Sectionshall apply to persons appointed to suchpositions as representatives of thegovernment or government-owned orcontrolled entities unless otherwiseprovided under existing laws.(Circular No. 592 dated 28 December 2007)


Sec. 4143N Disqualification of Directorsand Officers. The following regulationsshall govern the disqualification of directorsand officers of institutions under thesupervisory and regulatory powers of theBSP other than banks, QBs, NSSLAs andpawnshops.

§ 4143N.1 Persons disqualified tobecome directors. Without prejudice tospecific provisions of law prescribingdisqualifications for directors, the followingare disqualified from becoming directors:

a. Permanently disqualifiedDirectors/trustees/officers/employees

permanently disqualified by the MonetaryBoard from holding a director/trusteeposition:

(1) Persons who have been convictedby final judgment of the court for offensesinvolving dishonesty or breach of trust suchas estafa, embezzlement, extortion, forgery,malversation, swindling and theft;

(2) Persons who have been convictedby final judgment of the court for violationof banking laws;

(3) Persons who have been judiciallydeclared insolvent, spendthrift orincapacitated to contract; or

(4) Directors, trustees, officers oremployees of closed institutions under thesupervisory and regulatory powers of theBSP who were responsible for suchinstitutions’ closure as determined by theMonetary Board.

b. Temporarily disqualifiedDirectors/trustees/officers/employees

disqualified by the Monetary Board fromholding a director/trustee position for aspecific/indefinite period of time. Includedare:

(1) Persons who refuse to fully disclosethe extent of their business interest to theappropriate department of the SES whenrequired pursuant to a provision of law or ofa circular, memorandum or rule or regulationof the BSP. This disqualification shall be ineffect as long as the refusal persists;

(2) Directors who have been absent orwho have not participated for whateverreasons in more than fifty percent (50%) ofall meetings, both regular and special, ofthe board of directors during theirincumbency, or any twelve (12)-monthperiod during said incumbency. Thisdisqualification applies for purposes of thesucceeding election;


(a) Delinquency in the payment ofobligations means that an obligation of aperson with the institution where he/she isa director or officer, or at least two (2)obligations with other FIs, under different

§§ 4140N - 4143N.108.12.31

N RegulationsPage 10


credit lines or loan contracts, are past duepursuant to Secs. X306, 4306Q, 4306Sand 4303P;

(b) Obligations shall include allborrowings from any FI obtained by:

(i) A director, trustee or officer for hisown account or as the representative oragent of others or where he/she acts as aguarantor, endorser or surety for loans fromsuch FIs;

(ii) The spouse or child under theparental authority of the director, trusteeor officer;

(iii) Any person whose borrowings orloan proceeds were credited to the accountof, or used for the benefit of a director,trustee or officer;

(iv) A partnership of which a director,trustee or officer, or his/her spouse is themanaging partner or a general partnerowning a controlling interest in thepartnership; and

(v) A corporation, association or firmwholly-owned or majority of the capital ofwhich is owned by any or a group ofpersons mentioned in the foregoing Items“(i)”, “(ii)” and “(iv)”;

This disqualification shall be in effectas long as the delinquency persists.

(4) Persons convicted for offensesinvolving dishonesty, breach of trust orviolation of banking laws but whoseconviction has not yet become final andexecutory;

(5) Directors, trustees and officers ofclosed institutions under the supervisoryand regulatory powers of the BSP pendingtheir clearance by the Monetary Board;

(6) Directors and trustees disqualifiedfor failure to observe/discharge their dutiesand responsibilities prescribed underexisting regulations. This disqualificationapplies until the lapse of the specific periodof disqualification or upon approval by theMonetary Board on recommendation bythe appropriate department of the SES ofsuch directors’ election/re-election;

(7) Persons dismissed fromemployment for cause. This disqualificationshall be in effect until they have clearedthemselves of involvement in the allegedirregularity or upon clearance, on theirrequest, from the Monetary Board aftershowing good and justifiable reasons, orafter the lapse of five (5) years from thetime they were officially advised by theappropriate department of the SES of theirdisqualification;

(8) Those under preventivesuspension; and

(9) Persons with derogatory recordswith the NBI, court, police, Interpol andmonetary authority (central bank) of othercountries (for foreign directors and officers)involving violation of any law, rule orregulation of the Government or any of itsinstrumentalities adversely affecting theintegrity and/or ability to discharge theduties of a director/trustee/officer. Thisdisqualification applies until they havecleared themselves of involvement in thealleged irregularity.(As amended by Circular No. 584 dated 28 September 2007)

§ 4143N.2 Persons disqualified tobecome officers

a. The disqualifications for directorsmentioned in Subsec. 4143N.1 shalllikewise apply to officers, except thosestated in Item “b(2)”.

b. Except as may be authorized by theMonetary Board or the Governor, thespouse or a relative within the seconddegree of consanguinity or affinity of anyperson holding the position of chairman,president, executive vice president or anyposition of equivalent rank, generalmanager, treasurer, chief cashier or chiefaccountant is disqualified from holding orbeing elected or appointed to any of saidpositions in the same NBFI; and the spouseor relative within the second degree ofconsanguinity or affinity of any personholding the position of manager, cashier,

§§ 4143N.1 - 4143N.208.12.31


or accountant of a branch or office of anNBFI is disqualified from holding or beingappointed to any of said positions in thesame branch or office.

§ 4143N.3 Disqualification proceduresa. The board of directors and

management of every institution shall beresponsible for determining the existenceof the ground for disqualification of theinstitution’s director/officer or employeeand for reporting the same to the BSP.While the concerned institution mayconduct its own investigation and imposeappropriate sanction/s as are allowable, thisshall be without prejudice to the authorityof the Monetary Board to disqualify adirector/officer/employee from beingelected/appointed as director/officer in anyFI under the supervision of the BSP.Grounds for disqualification made knownto the institution shall be reported to theappropriate department of the SES withinseventy-two (72) hours from knowledgethereof.

b. On the basis of knowledge andevidence on the existence of any of thegrounds for disqualification mentioned inSubsecs. 4143N.1 and 4143N.2, thedirector or officer concerned shall benotified in writing either by personalservice or through registered mail withregistry return receipt card at his/her lastknown address by the appropriatedepartment of the SES of the existence ofthe ground for his/her disqualification andshall be allowed to submit within fifteen(15) calendar days from receipt of suchnotice an explanation on why he/she shouldnot be disqualified and included in thewatchlisted file, together with the evidencein support of his/her position. The head ofsaid department may allow an extensionon meritorious ground.

c. Upon receipt of the reply/explanation of the director/officerconcerned, the appropriate department of

the SES shall proceed to evaluate the case.The director/officer concerned shall beafforded the opportunity to defend/clearhimself/herself.

d. If no reply has been received fromthe director/officer concerned upon theexpiration of the period prescribed underItem “b” above, said failure to reply shallbe deemed a waiver and the appropriatedepartment of the SES shall proceed toevaluate the case based on availablerecords/evidence.

e. If the ground for disqualification isdelinquency in the payment of obligation,the concerned director or officer shall begiven a period of thirty (30) calendar dayswithin which to settle said obligation or,restore it to its current status or, to explainwhy he/she should not be disqualified andincluded in the watchlisted file, before theevaluation on his disqualification andwatchlisting is elevated to the MonetaryBoard.

f. For directors/officers of closedbanks, the concerned department of theSES shall make appropriaterecommendation to the Monetary Boardclearing said directors/officers when thereis no pending case/complaint or evidenceagainst them. When there is evidence thata director/officer has committedirregularity, the appropriate department ofthe SES shall make recommendation to theMonetary Board that his/her case bereferred to the OSI for further investigationand that he/she be included in the masterlistof temporarily disqualified persons until thefinal resolution of his/her case. Directors/officers with pending cases/complaints shallalso be included in said masterlist oftemporarily disqualified persons uponapproval by the Monetary Board until thefinal resolution of their cases. If the director/officer is cleared from involvement in anyirregularity, the appropriate department ofthe SES shall recommend to the MonetaryBoard his/her delisting. On the other hand,

§§ 4143N.2 - 4143N.308.12.31



if the director/officer concerned is found tobe responsible for the closure of theinstitution, the concerned department of theSES shall recommend to the Monetary Boardhis/her delisting from the masterlist oftemporarily disqualified persons and his/her inclusion in the masterlist ofpermanently disqualified persons.

g. If the disqualification is based ondismissal from employment for cause, theappropriate department of the SES shall, asmuch as practicable, endeavor to establishthe specific acts or omissions constitutingthe offense or the ultimate facts whichresulted in the dismissal to be able todetermine if the disqualification of thedirector/officer concerned is warranted ornot. The evaluation of the case shall bemade for the purpose of determining ifdisqualification would be appropriate andnot for the purpose of passing judgment onthe findings and decision of the entityconcerned. The appropriate department ofthe SES may decide to recommend to theMonetary Board a penalty lower thandisqualification (e.g., reprimand,suspension, etc.) if, in its judgment the actcommitted or omitted by the directorofficer concerned does not warrantdisqualification.

h. All other cases of disqualification,whether permanent or temporary shall beelevated to the Monetary Board forapproval and shall be subject to theprocedures provided in paragraphs “a”, “b”,“c” and “d” above.

i. Upon approval by the MonetaryBoard, the concerned director/officer shallbe informed by the appropriate departmentof the SES in writing either by personalservice or through registered mail withregistry return receipt card, at his/her lastknown address of his/her disqualificationfrom being elected/appointed as directorofficer in any FI under the supervision ofBSP and/or of his/her inclusion in themasterlist of watchlisted persons sodisqualified.

j. The board of directors of theconcerned institution shall be immediatelyinformed of cases of disqualificationapproved by the Monetary Board and shallbe directed to act thereon not later thanthe following board meeting. Withinseventy-two (72) hours thereafter, thecorporate secretary shall report to theGovernor of the BSP through theappropriate department of the SES theaction taken by the board on the director/officer involved.

k. Persons who are elected orappointed as director or officer in any ofthe BSP-supervised institutions for the firsttime but are subject to any of the groundsfor disqualification provided for underSubsecs. 4143N.1 and 4143N.2, shall beafforded the procedural due processprescribed above.

l. Whenever a director/officer iscleared in the process mentioned underItem “c” above or, when the ground fordisqualification ceases to exist, he/shewould be eligible to become director orofficer of any bank, QB, trust entity or anyinstitution under the supervision of the BSPonly upon prior approval by the MonetaryBoard. It shall be the responsibility of theappropriate department of the SES toelevate to the Monetary Board the liftingof the disqualification of the concerneddirector/officer and his/her delisting fromthe masterlist of watchlisted persons.(As amended by Circular No. 584 dated 28 September 2007)

§ 4143N.4 Effect of possession ofdisqualifications. Directors/officers electedor appointed possessing any of thedisqualifications as enumerated herein,shall vacate their respective positionsimmediately.

§ 4143N.5 (Reserved)

§ 4143N.6 Watchlisting. To providethe BSP with a central information file tobe used as reference in passing upon and

§§ 4143N.3 - 4143N.608.12.31


reviewing the qualifications of personselected or appointed as trustee or officer ofan institution under the supervisory andregulatory powers of the BSP, the SES shallmaintain a watchlist of disqualifieddirectors/trustees/officers under thefollowing procedures:


(1) Disqualification File “A”(Permanent) –Directors/trustees/officers/employees permanently disqualified bythe Monetary Board from holding a director/trustee/officer position.

(2) Disqualification File “B”(Temporary) – Directors/trustees/officers/employees temporarily disqualified by theMonetary Board from holding a director/trustee/officer position.

b. Inclusion of directors/trustees/officers/employees in the watchlist. Uponrecommendation by the appropriatedepartment of the SES, the inclusion ofdirectors/trustees/officers/employees inwatchlist disqualification files “A” and “B”on the basis of decisions, actions or reportsof the courts, institutions under thesupervisory and regulatory powers of theBSP, NBI or any other administrativeagencies shall first be approved by theMonetary Board.

c. Notification of directors/trustees/officer s/employees. Upon approval by theMonetary Board, the concerned director/trustee/officer/employee shall be informedthrough registered mail, with registryreturn receipt card, at his last knownaddress of his inclusion in the masterlist ofwatchlisted persons disqualified to be adirector/trustee/officer in any institutionunder the supervisory and regulatorypowers of the BSP.

d. Confidentiality. Watchlisting shallbe for internal use only and may not beaccessed or queried upon by outside partiesincluding such institutions under thesupervisory and regulatory powers of the

BSP, except with the authority of the personconcerned and with the approval of theDeputy Governor, SES, the Governor, or theMonetary Board.

The BSP will disclose information onits watchlist files only upon submission ofa duly accomplished and notarizedauthorization from the concerned personand approval of such request by the DeputyGovernor, SES or the Governor or theMonetary Board. The prescribedauthorization form to be submitted to theappropriate department of the SES is inAppendix Q-45.

FIs can gain access to information inthe said watchlist for the sole purpose ofscreening their applicants for hiring and/orconfirming their elected directors andappointed officers. FIs must obtain the saidauthorization on an individual basis.

e. Delisting. All delistings shall beapproved by the Monetary Board uponrecommendation of the appropriatedepartment of the SES except in cases ofpersons known to be dead where delistingshall be automatic upon proof of death andneed not be elevated to the MonetaryBoard. Delisting may be approved by theMonetary Board in the following cases:

(1) Watchlist - Disqualification File “B”(Temporary) -


(b) When the conviction by the courtfor crimes involving dishonesty, breach oftrust and/or violation of banking lawsbecomes final and executory, in whichcase the director/trustee/officer/employeeis relisted to Watchlist – DisqualificationFile “A” (Permanent); or

(c) Upon favorable decision orclearance by the appropriate body, i.e.,court, NBI, institutions under thesupervisory and regulatory powers of theBSP, or such other agency/body where theconcerned individual had derogatoryrecord.

§ 4143N.608.12.31



Directors/trustees/officers/employeesdelisted from the Watchlist –Disqualification File “B” other than thoseupgraded to Watchlist – Disqualification File“A” shall be eligible for re-employment withany institution under the supervisory andregulatory powers of the BSP.(As amended by CL-2007-001 dated 04 January 2007; and

CL-2006-046 dated 21 December 2006)

Sec. 4144N Securities Custodianship andSecurities Registry Operations. Thefollowing rules and regulations shallgovern securities custodianship andsecurities registry operations of NBFIsunder BSP supervision.

The guidelines to implement thedelivery by the seller of securities to thebuyer or to his designated third partycustodian are shown in Appendix Q-38.

Violation of any provision of theguidelines in Appendix Q-38 shall besubject to the sanctions/penalties underSubsec. 4144N.29.(As amended by M-2007-002 dated 23 January 2007;

M-2006-009 dated 06 July 2006, M-2006-002 dated 05 June

2006 and Circular No. 524 dated 31 March 2006)

§ 4144N.1 Statement of policy. It isthe policy of the BSP to promote theprotection of investors in order to gain theirconfidence and encourage theirparticipation in the development of thedomestic capital market. Therefore, thefollowing rules and regulations arepromulgated to enhance transparency ofsecurities transactions with the end in viewof protecting investors.

§ 4144N.2 Applicability of thisregulation. This regulation shall governsecurities custodianship and securitiesregistry operations of banks and NBFIsunder BSP supervision. It shall cover alltheir transactions in securities as definedin Section 3 of the SRC, whether exemptor required to be registered with the SEC,

that are sold, borrowed, purchased, traded,held under custody or otherwise transactedin the Philippines where at least one (1) ofthe parties is a bank or an NBFI under BSPsupervision. However, this regulation shallnot cover the operations of stock andtransfer agents duly registered with the SECpursuant to the provisions of SRC Rule36-4.1 and whose only function is tomaintain the stock and transfer book forshares of stock.

§ 4144N.3 Prior Bangko Sentralapproval. NBFIs under BSP supervisionmay act as securities custodian and/orregistry only upon prior Monetary Boardapproval.

§ 4144N.4 Application for authorityA BSP-supervised entity desiring to act assecurities custodian and/or registry shall filean application with the appropriatedepartment of the SES. The application shallbe signed by the highest ranking officer ofthe NBFI and shall be accompanied by acertified true copy of the resolution of theNBFI’s board of directors authorizing theNBFI to engage in securities custodianshipand/or registry.

§ 4144N.5 Pre-qualificationrequirements for a securities custodian/registry

a. It must be an NBFI under BSPsupervision;

b. It must have complied with theminimum capital accounts required underexisting regulations not lower than anadjusted capital of P 300.0 million or suchamounts as may be required by theMonetary Board in the future;

c. It must have a CAMELS compositerating of at least “4” (as rounded off) in thelast regular examination;

d. It must have in place acomprehensive risk management systemapproved by its board of directors

§§ 4143N.6 - 4144N.508.12.31


appropriate to its operations characterizedby a clear delineation of responsibility forrisk management, adequate riskmeasurement systems, appropriatelystructured risk limits, effective internalcontrol and complete, timely and efficientrisk reporting systems. In this connection,a manual of operations (which includescustody and/or registry operations) andother related documents embodying therisk management system must besubmitted to the appropriate department ofthe SES at the time of application forauthority and within thirty (30) days fromupdates;

e. It must have adequatetechnological capabilities and the necessarytechnical expertise to ensure theprotection, safety and integrity of clientassets, such as:

(1) It can maintain an electronicregistry dedicated to recording ofaccountabilities to its clients; and

(2) It has an updated andcomprehensive computer security systemcovering system, network andtelecommunication facilities that will:

(a) limit access only to authorizedusers;

(b) preserve data integrity; and(c) provide for audit trail of

transactions.f. It has complied, during the period

immediately preceding the date ofapplication, with the following:

(1) ceilings on credit accommodationto DOSRI; and

(2) single borrower’s limit.g. It has no reserve deficiencies

during the eight (8) weeks immediatelypreceding the date of application;

h. It has set up the prescribedallowances for probable losses, bothgeneral and specific, as of date ofapplication;

i. It has not been found engaging inunsafe and unsound practices during the

last six (6) months preceding the date ofapplication;

j. It has generally complied with laws,rules and regulations, orders or instructionsof the Monetary Board and/or BSPManagement;

k. It has submitted additionaldocuments/information which may berequested by the appropriate department ofthe SES, such as, but not limited to:

(1) Standard custody/registry agreementand other standard documents;

(2) Organizational structure of thecustody/registry business;

(3) Transaction flow; and(4) For those already in the custody or

registry business, a historical backgroundfor the past three (3) years;

l. It shall be conducted in a separateunit headed by a qualified person with atleast two (2) years experience in custody/registry operations; and

m. It can interface with the clearingand settlement system of any recognizedexchange in the country capable ofachieving a real time gross settlement oftrades.

§ 4144N.6 Functions and responsibilitiesof a securities custodian. A securitiescustodian shall have the following basicfunctions and responsibilities:

a. Safekeeps the securities of theclient;

b. Holds title to the securities in anominee capacity;

c. Executes purchase, sale and otherinstructions;

d. Performs at least a monthlyreconciliation to ensure that all positionsare properly recorded and accounted for;

e. Confirms tax withheld;f. Represents clients in corporate

actions in accordance with the directionprovided by the securities owner;

g. Conducts mark-to-market valuationand statement rendition;

§§ 4144N.5 - 4144N.608.12.31



h. Does earmarking of encumbrancesor liens such as, but not limited to, deedsof assignment and court orders; and

In addition to the above basic functions,it may perform the following value-addedservice to clients:

i. Acts as a collecting and payingagent: Provided, That the management offunds that may be collected shall be clearlydefined in the custody contract or in aseparate document or agreement attachedthereto: Provided, further, That thecustodian shall immediately make knownto the securities owner all payments madeand collections received with respect to thesecurities under custody; and

j. Securities borrowing and lendingoperations as agent.

§ 4144N.7 Functions andresponsibilities of a securities registry

a. Maintains an electronic registrybook;

b. Delivers confirmation of transactionsand other documents within agreed tradingperiods;

c. Issues registry confirmations fortransfers of ownership as it occurs;

d. Prepares regular statement ofsecurities balances at such frequency as maybe required by the owner on record but notless frequent than every quarter; and

e. Follows appropriate legaldocumentation to govern its relationshipwith the Issuer.

§ 4144N.8 Protection of securities ofthe customer. A custodian must incorporatethe following procedures in the dischargeof its functions in order to protect thesecurities of the customer:

a. Accounting and recording forsecurities. Custodians must employaccounting and safekeeping proceduresthat fully protect customer securities. It isessential that custodians segregatecustomer securities from one another andfrom its proprietary holdings to protect the

same from the claims of its generalcreditors.

All securities held under custodianshipshall be recorded in the books of thecustodian at the face value of said securitiesin a separate subsidiary ledger account“Securities Held Under Custodianship” ifbooked in the Bank Proper or the subsidiaryledger account “Safekeeping andCustodianship – Securities Held UnderCustodianship”, if booked in the TrustDepartment: Provided, That securities heldunder custodianship where the custodianalso performs securities borrowing andlending as agent shall be booked in theTrust Department.

b. Documentation. The appropriatedocumentation for custodianship shall bemade and it shall clearly define, amongothers, the authority, role, responsibilities,fees and provision for succession in theevent the custodian can no longer dischargeits functions. It shall be accepted in writingby the counterparties.

The governing custodianshipagreement shall be pre-numbered and thisnumber shall be referred to in allamendments and supplements thereto.

c. Confirmation of custody. Thecustodian shall issue a custody confirmationto the purchaser or borrower of securitiesto evidence receipt or transfer of securitiesas they occur. It shall contain, as aminimum, the following information on thesecurities under custody:

(1) Owner of securities;(2) Issuer;(3) Securities type;(4) Identification or serial numbers;(5) Quantity;(6) Face value; and(7) Other information, which may be

requested by the parties.d. Periodic reporting. The custodian

shall prepare at least quarterly (or asfrequent as the owner of securities willrequire) securities statements delivered tothe registered owner’s address on record.

§§ 4144N.6 - 4144N.808.12.31


Said statement shall present detailedinformation such as, but not limited to,inventory of securities, outstandingbalances, and market values.

§ 4144N.9 Independence of theregistry and custodian. A BSP-accreditedsecurities registry must be a third party withno subsidiary/affiliate relationship with theissuer of securities while a BSP-accreditedcustodian must be a third party with nosubsidiary/affiliate relationship with theissuer or seller of securities. An NBFIaccredited by BSP as securities custodianmay, however, continue holding securitiesit sold under the following cases:

a. where the purchaser is a relatedentity acting in its own behalf and not asagent or representative of another;

b. where the purchaser is anon-resident with existing global custodyagreement governed by foreign laws andconventions wherein the NBFI isdesignated as custodian or sub-custodian;and

c. upon approval by the BSP, wherethe purchaser is an insurance companywhose custody arrangement is eithergoverned by a global custody agreementwhere the NBFI is designated as custodianor sub-custodian or by a direct custodyagreement with features at par with thestandards set under this Subsection drawnor prepared by the parent company owningmore than fifty percent (50%) of the capitalstock of the purchaser and executed by thepurchaser itself and its custodian.

Purchases by non-residents andinsurance companies that are exemptedfrom the independence requirement of thisSubsection shall, however, be subject toall other provisions of this Subsection.

§ 4144N.10 Registry of ScriplessSecurities of the Bureau of the TreasuryThe Registry of Scripless Securities (RoSS),operated by the Bureau of the Treasury,

which is acting as a registry for governmentsecurities is deemed to be automaticallyaccredited for purposes of this Section andis likewise exempted from theindependence requirement under Subsec.4144N.9. However, securities registeredunder the RoSS shall only be considereddelivered if said securities were transferredby means of book entry to the appropriatesecurities account of the purchaser or hisdesignated custodian. Book entry transferto a sub-account for clients under theprimary account of the seller shall notconstitute delivery for purposes of thisSection.

§ 4144N.11 Confidentiality. A BSP-accredited securities custodian/registryshall not disclose to any unauthorizedperson any information relative to thesecurities under its custodianship/registry.The management shall likewise ensure theconfidentiality of client accounts of thecustody or registry unit from other unitswithin the same organization.

§ 4144N.12 Compliance with anti-money laundering laws/regulations. Forpurposes of compliance with therequirements of R.A. No. 9160, otherwiseknown as the “Anti-Money Laundering Actof 2001,” as amended, particularly theprovisions regarding customeridentification, record keeping and reportingof suspicious transactions, a BSP-accreditedcustodian may rely on referral by the seller/issuer of securities: Provided, That itmaintains a record of such referral togetherwith the minimum identification,information/documents required under thelaw and its implementing rules andregulations.

A BSP accredited custodian mustmaintain accounts only in the true and fullname of the owners of the security.However, said securities owners may beidentified by number or code in reports and

§§ 4144N.8 - 4144N.1208.12.31



correspondences to keep his identityconfidential.

Securities subject of pledge and/or deedof assignment as of 14 October 2004 (dateof Circular 457), may be held by a lendingNBFI up to the original maturity of the loanor full payment thereof, whichever comesearlier.

§ 4144N.13 Basic security depositSecurities held under custodianshipwhether booked in the Trust Departmentor carried in the regular books of the NBFIshall be subject to a security deposit forfaithful performance of duties at the rate of1/25 of one percent (1%) of the total facevalue or P500,000 whichever is higher.

However, securities held undercustodianship where the custodian alsoperforms securities borrowing and lendingas agent shall be subject to a higher basicsecurity deposit of one percent (1%) of thetotal face value. For this purpose, thefollowing subsidiary ledger account shallbe created in the Trust Department Books:

“Safekeeping and Custodianship -Securities Held Under Custodianship withSecurities Borrowing and Lending AsAgent”

Compliance shall be in the form ofgovernment securities deposited with theBSP eligible pursuant to existingregulations governing security for thefaithful performance of trust and otherfiduciary business.

§ 4144N.14 Reportorial requirementsAn accredited securities custodian shallcomply with reportorial requirements thatmay be prescribed by the BSP, which shallinclude as a minimum, the face and marketvalue of securities held undercustodianship.

§§ 4144N.15 - 4144N.28 (Reserved)

§ 4144N.29 Sanctions. Withoutprejudice to the penal and administrativesanctions provided for under Sections 36and 37, respectively, of the R.A. No. 7653,violation of any provision of this Sectionshall be subject to the following sanctionspenalties:

a. First offense –(1) Fine of up to P10,000 a day for the


(2) Reprimand for the directors/officersresponsible for the violation.

b. Second offense -(1) Fine of up to P20,000 a day for the


(2) Suspension for ninety (90) dayswithout pay of directors/officers responsiblefor the violation.

c. Subsequent offenses–(1) Fine of up to P30,000 a day for the

institution for each violation from the datethe violation was committed up to the dateit was corrected;

(2) Suspension or revocation of theauthority to act as securities custodianand/or registry; and

(3) Suspension for 120 days without payof the directors/officers responsible for theviolation.

Secs. 4145N – 4149N (Reserved)

Sec. 4150N Rules of Procedure onAdministrative Cases Involving Directorsand Officers of Trust Entities. The rulesof procedure on administrative casesinvolving directors and officers ofquasi-banks in Sec. 4150Q shall apply todirectors and officers of trust entities.


§§ 4144N.12 - 4156N08.12.31


Sec. 4157N Batas Pambansa Blg. 344 –AnAct To Enhance The Mobility Of DisabledPersons By Requiring Certain Buildings,Institutions, Establishments And PublicUtilities To Install Facilities And OtherDevices. In order to promote the realizationof the rights of disabled persons to participatefully in the social life and the developmentof the societies in which they live and theenjoyment of the opportunities available toother citizens, no license or permit for theconstruction, repair or renovation of publicand private buildings for public use,educational institutions, airports, sports andrecreation centers and complexes, shoppingcenters or establishments, public parkingplaces, workplaces, public utilities, shall begranted or issued unless the owner oroperator thereof shall install and incorporatein such building, establishment or publicutility, such architectural facilities orstructural features as shall reasonablyenhance the mobility of disabled persons suchas sidewalks, ramps, railings and the like.If feasible, all such existing buildings,institutions, establishments, or public utilitiesmay be renovated or altered to enable thedisabled persons to have access to them.

Secs. 4158N-4160N (Reserved)

Sec. 4161N Philippine Financial ReportingStandards/Philippine Accounting Standards

Statement of policy. It is the policy ofthe BSP to promote fairness, transparencyand accuracy in financial reporting. It is inthis light that the BSP aims to adopt all PFRSand PAS issued by the ASC to the greatestextent possible.

Other NBFIs not performing quasi-banking functions shall adopt the PFRS andPAS which are in accordance withgenerally accepted accounting principlesin recording transactions and in thepreparation of financial statements andreports to BSP. However, in cases wherethere are differences between BSP

regulations and PFRS/PAS as when morethan one (1) option are allowed or certainmaximum or minimum limits are prescribedby the PFRS/PAS, the option or limitprescribed by BSP regulations shall beadopted by banks.

For purposes hereof, the PFRS/PASshall refer to issuances of the ASC andapproved by the PRC.

Accounting treatment for prudentialreporting. For prudential reporting, FIs shalladopt in all respect the PFRS and PASexcept as follows:

a. In preparing consolidated financialstatements, only investments in financialallied subsidiaries except insurancesubsidiaries shall be consolidated on aline-by-line basis; while insurance andnon-financial allied subsidiaries shall beaccounted for using the equity method.Financial/non-financial allied/non-alliedassociates shall be accounted for using theequity method in accordance with theprovisions of PAS 28 “Investments inAssociates”.


c. FIs shall be required to meet theBSP recommended valuation reserves.

Government grants extended in theform of loans bearing nil or low interestrates shall be measured upon initialrecognition at its fair value (i.e., the presentvalue of the future cash flows of thefinancial instrument discounted using themarket interest rate). The differencebetween the fair value and the netproceeds of the loan shall be recordedunder “Unearned Income-Others”, whichshall be amortized over the term of the loanusing the effective interest method.

The provisions on government grantsshall be applied retroactively to all

§§ 4157N - 4161N08.12.31



outstanding government grants received. FIthat adopted an accounting treatment otherthan the foregoing shall consider theadjustment as a change in accountingpolicy, which shall be accounted for inaccordance with PAS 8.

Notwithstanding the exceptions inItems “a”, “b” and “c”, the audited annualfinancial statements required to besubmitted to the BSP in accordance withthe provision of Sec. 4172N shall in allrespect be PFRS/PAS compliant: Provided,That FIs shall submit to the BSP adjustingentries reconciling the balances in thefinancial statements for prudential reportingwith that in the audited annual financialstatements.(As amended by Circular Nos. 572 dated 22 June 2007 and

494 dated 20 September 2004)

Sec. 4162N Reports. NBFIs withoutquasi-banking functions but aresubsidiaries/affiliates of banks and QBs andinvestment houses without quasi-bankingfunctions but with trust operations shallsubmit to the appropriate department of theSES the reports listed in Appendix N-1 inthe forms as may be prescribed by theDeputy Governor, SES, BSP.

Any change in, or amendment to, thearticles of incorporation, by-laws ormaterial documents required to besubmitted to the BSP shall be reported bysubmitting copies of the amended articlesof incorporation, by-laws, or materialdocuments to the appropriate departmentof the SES within fifteen (15) daysfollowing such change.

§ 4162N.1 Categories and signatoriesof reports. Reports required to besubmitted to the BSP are classified intoCategories A-2 and B reports as indicatedin the list of reports required to besubmitted to the BSP in Appendix N-1.

Appendix N-2 prescribes the signatoriesfor each report category and the

requirements on signatory authorization.Reports submitted by NBFIs in computermedia shall be subject to the samerequirements.

A report submitted to the BSP underthe signature of an officer who is notauthorized in accordance with therequirements in this Subsection shall beconsidered as not having beensubmitted.

§ 4162N.2 Manner of filing. Thesubmission of the reports shall be effectedby filing them personally with theappropriate department of the SES or withthe BSP Regional Offices/Units, or bysending them by registered mail or specialdelivery through private couriers unlessotherwise specified in the circular ormemorandum of the BSP.

§ 4162N.3 Sanctions in case of willfuldelay in the submission of reports

a. Definition of terms. For purposesof this Subsection, the following definitionsshall apply:

(1) Report shall refer to any report orstatement required of an NBFI to besubmitted to the BSP periodically orwithin a specified period.

(2) Willful delay in the submission ofreports shall refer to the failure of an NBFIto submit a report on time. Failure tosubmit a report on time due to fortuitousevents, such as fire and other naturalcalamities and public disorders, includingstrike or lockout affecting an NBFI asdefined in the Labor Code or nationalemergency af fect ing operat ions ofNBFIs, shal l not be considered aswillful delay.

b. F ines fo r wi l l fu l de lay insubmission of reports. NBFIs incurringwill ful delay in the submission ofrequired reports shall pay a fine inaccordance wi th the fo l lowingschedule:

§§ 4161N - 4162N.308.12.31


I. For Categories A-2 reportsPer day of defaultuntil the report is filed P300

II. For Category B reportsPer day of defaultuntil the report is filed P 60

Delay or default shall start to run onthe day following the last day required forthe submission of reports. However,should the last day of filing fall on anon-working day in the locality where thereporting FI is situated, delay or defaultshall start to run on the day following thenext working day. The due date/deadlinefor submission of reports to BSP asprescribed under Sec. 4162N governingthe frequency and deadlines indicated inAppendix N-1 shall be automatically movedto the next business day whenever ahalf-day suspension of business operationsin government offices is declared due toan emergency such as typhoon, floods, etc.

For purposes of establishing delay ordefault, the date of acknowledgment by theappropriate department of the SES or the BSPRegional Offices/Units appearing on thecopies of such reports filed or submitted, orthe date of mailing postmarked on theenvelope/the date of registry/special deliveryreceipt, as the case may be, shall beconsidered as the date of filing by the NBFI.

c. Manner of payment or collection offines – NBFIs shall, within fifteen (15)calendar days from receipt of the statementof account from the appropriate departmentof the BSP, pay the fines imposed thereon forwillful delay on the submission of reports.(As amended by Circular No. 585 dated 15 October 2007)

Sec. 4163N (Reserved)

Sec. 4164N Internal Audit FunctionInternal audit is an independent, objectiveassurance and consulting functionestablished to examine, evaluate andimprove the effectiveness of risk

management, internal control, andgovernance processes of an organization.

§ 4164N.1 Status. The internal auditfunction must be independent of theactivities audited and from day-to-dayinternal control process. It must be free toreport audit results, findings, opinions,appraisals and other information to theappropriate level of management. It shallhave authority to directly access andcommunicate with any officer oremployee, to examine any activity orentity of the institution, as well as to accessany records, files or data whenever relevantto the exercise of its assignment. The AuditCommittee or senior management shouldtake all necessary measures to provide theappropriate resources and staffing thatwould enable internal audit to achieve itsobjectives.

§ 4164N.2 Scope. The scope of internalaudit shall include:

a. Examination and evaluation of theadequacy and effectiveness of the internalcontrol systems;

b. Review of the application andeffectiveness of risk management proceduresand risk assessment methodologies;

c. Review of the management andfinancial information systems, including theelectronic information system andelectronic banking services;

d. Assessment of the accuracy andreliability of the accounting system and ofthe resulting financial reports;

e. Review of the systems andprocedures of safeguarding assets;

f. Review of the system of assessingcapital in relation to the estimate oforganizational risk;

g. Transaction testing and assessmentof specific internal control procedures; and

h. Review of the compliance systemand the implementation of establishedpolicies and procedures.

§§ 4162N.3 - 4164N.208.12.31



§ 4164N.3 Qualification standards ofthe internal auditor. The internal auditorof subsidiaries and/or affiliates of a UB or aKB must be a CPA and must have at leastfive (5) years experience in the regularaudit (internal or external) of a UB or KB asauditor-in-charge, senior auditor or auditmanager. He must possess the knowledge,skills, and other competencies to examineall areas in which the institution operates.Professional competence as well ascontinuing training and education shall berequired to face up to the increasingcomplexity and diversity of the institution’soperations.

The internal auditor of subsidiariesand/or affiliates of a TB, QB, trust entityor national cooperative bank must be a CPAwith at least five (5) years experience inthe regular audit (internal or external) of aTB, QB, trust entity or national cooperativebank as auditor-in-charge, senior auditor oraudit manager or, in lieu thereof, at leastthree (3) years experience in the regularaudit (internal or external) of a UB or KB asauditor-in-charge, senior auditor or auditmanager.

The internal auditor of subsidiariesand/or affiliates of an RB, NSSLA or localcooperative bank must be at least anaccounting graduate with two (2) yearsexperience in external audit or in theregular audit of an RB, NSSLA or local coopbank or, in lieu thereof, at least one (1) yearexperience in the regular audit (internal orexternal) of a UB, KB, TB, QB, trust entityor national coop bank as auditor-in-charge,senior auditor or audit manager.

A qualified internal auditor of a UB ora KB shall be qualified to audit TBs, QBs,trust entities, national cooperative banks,RBs, NSSLAs, local coop banks,subsidiaries and affiliates engaged in alliedactivities, and other FIs under BSPsupervision.

A qualified internal auditor of a TB ornational coop bank shall likewise be

qualified to audit QBs, trust entities, RBs,NSSLAs, local coop banks, subsidiaries andaffiliates engaged in allied activities, andother FIs under BSP supervision.

§ 4164N.4 Code of Ethics and InternalAuditing Standards. The internal auditorshould conform with the Code ofProfessional Ethics for CPAs and ensurecompliance with sound internal auditingstandards, such as the Institute of InternalAuditors’ International Standards for theProfessional Practice of Internal Auditing(e-mail: [email protected]; Web: http://www.theiia.org.) and other supplementalstandards issued by regulatory authorities/government agencies. The standardsaddress independence and objectivity,professional proficiency, scope of work,performance of audit work, managementof internal audit, quality assurance reviews,communication and monitoring of results.


Sec. 4172N Financial Audit. NBFIs shallcause an annual financial audit by anexternal auditor acceptable to the BSP notlater than thirty (30) calendar days afterthe close of the calendar year or the fiscalyear adopted by the FI. Report of suchaudit shall be submitted to the board ofdirectors and the appropriate departmentof the SES not later than 120 calendardays after the close of the calendar yearor the fiscal year adopted by the FI. Thereport to the BSP shall be accompaniedby the: (1) certification by the externalauditor on the: (a) dates of start andtermination of audit; (b) date of submissionof the financial audit report and certificationunder oath stating that no materialweakness or breach in the internal controland risk management systems was noted inthe course of the audit of the FI to the boardof directors; and (c) the absence of any director indirect financial interest and other

§§ 4164N.3 - 4172N08.12.31


circumstances that may impair theindependence of the external auditor;(2) reconciliation statement between theAFS and the balance sheet and incomestatement for FI and trust departmentsubmitted to the BSP including copies ofadjusting entries on the reconciling items;and (3) other information that may berequired by the BSP.

In addition, the external auditor shallbe required by the FI to submit to the boardof directors, a LOC indicating any materialweakness or breach in the institution’sinternal control and risk managementsystems within thirty (30) calendar daysafter submission of the financial auditreport. If no material weakness or breachis noted to warrant the issuance of an LOC,a Certification under oath stating that nomaterial weakness or breach in the internalcontrol and risk management systems wasnoted in the course of the audit of the FIshall be submitted in its stead, together withthe financial audit report.

Material weakness shall be defined asa significant control deficiency, orcombination of deficiencies, that results inmore than a remote likelihood that amaterial misstatement of the financialstatements will not be detected orprevented by the entity’s internal control.A material weakness does not mean that amaterial misstatement has occurred or willoccur, but that it could occur. A controldeficiency exists when the design oroperation of a control does not allowmanagement or employees, in thenormal course of performing theirassigned functions, to prevent or detectmisstatements on a t imely basis.A significant deficiency is a controldeficiency, or combination of controldeficiencies, that adversely affects theentity’s ability to initiate, authorize, record,process, or report financial data reliably inaccordance with generally acceptedaccounting principles. The term more than

remote likelihood shall mean that futureevents are likely to occur or are reasonablypossible to occur.

The board of directors, in a regular orspecial meeting, shall consider and act onthe financial audit report and thecertification under oath submitted in lieuof the LOC and shall submit, within thirty(30) banking days after receipt of thereports, a copy of its resolution to theappropriate department of the SES. Theresolution shall show, among other things,the actions(s) taken on the reports and thenames of the directors present and absent.

The board shall likewise consider andact on the LOC and shall submit, withinthirty (30) banking days after receiptthereof, a copy of its resolution togetherwith said LOC to the appropriatedepartment of SES. The resolution shallshow the action(s) taken on the findings andrecommendations and, the names of thedirectors present and absent, among otherthings.

The LOC shall be accompanied by thecertification of the external auditor of thedate of its submission to the board ofdirectors.

Government-owned or controlledbanks, including their subsidiaries andaffiliates, as well as other FIs under BSPsupervision which are under theconcurrent jurisdiction of the COA shallbe exempt from the aforementionedannual financial audit by an acceptableexternal auditor: Provided, That whenwarranted by supervisory concern suchas material weakness/breach in internalcontrol and/or risk management systems,the Monetary Board may, uponrecommendation of the appropriatedepartment of the SES, require thefinancial audit to be conducted by anexternal auditor acceptable to the BSP, atthe expense of the institution concerned:Provided, further, That when circumstancessuch as, but not limited to, loans from

§ 4172N08.12.31



multilateral financial institutions,privatization, or public listing warrant, thefinancial audit of the concerned institutionby an acceptable external auditor may alsobe allowed.

Banks and other FIs under theconcurrent jurisdiction of the BSP and COAshall, however, submit a copy of the AARof the COA to the appropriate departmentof the SES within thirty (30) banking daysafter receipt of the report by the board ofdirectors. The AAR shall be accompaniedby the: (1) certification by the institutionconcerned on the date of receipt of the AARby the board of directors; (2) reconciliationstatement between the AFS in the AAR andthe balance sheet and income statementof the FI and trust department submitted tothe BSP, including copies of adjustingentries on the reconciling items; and(3) other information that may be requiredby the BSP.

The board of directors of saidinstitutions, in a regular or special meeting,shall consider and act on the AAR, as wellas on the comments and observations andshall submit, within thirty (30) banking daysafter receipt of the report, a copy of itsresolution to the appropriate department ofthe SES. The resolution shall show theaction(s) taken on the report, including thecomments and observations and the namesof the directors present and absent, amongother things.”

FIs as well as external auditors shallstrictly observe the requirements in thesubmission of the financial audit report andreports required to be submitted underAppendix Q-33.

The audited annual financial statementsrequired to be submitted shall in all respectbe PFRS/PAS compliant: Provided, That FIsshall submit to the BSP adjusting entriesreconciling the balances in the financialstatements for prudential reporting withthat in the audited annual financialstatements.

The reports and certifications ofinstitutions concerned, schedules andattachments required under this Subsectionshall be considered Category B reports,delayed submission of which shall besubject to the penalties under Subsec.4162N.3(As amended by Circular Nos. 554 dated 22 December 2006

and 540 dated 09 August 2006)

§4172N.1 Audited FinancialStatements of NBFIs. The following rulesshall govern the utilization and submissionof AFS of NBFIs.

For purposes of this Section, AFS shallinclude the balance sheets, incomestatements, statements of changes inequity, statements of cash flows and notesto financial statements which shall includeamong other information, disclosure of thevolume of past due loans as well as loan-lossprovisions. On the other hand, financialaudit report shall refer to the AFS and theopinion of the auditor. The AFS of NBFIswith subsidiaries shall be presented side byside on a solo basis (parent) and on aconsolidated basis (parent and subsidiaries).(Circular No. 540 dated 09 August 2006)

§ 4172N.2 Posting of audited financialstatements. FIs shall post in conspicuousplaces in their head offices, all theirbranches and other offices, as well as intheir respective websites, their latestfinancial audit report.(Circular No. 540 dated 09 August 2006)


Sec. 4180N Selection, Appointment andReporting Requirements for ExternalAuditors; Sanction; Effectivity. UnderSection 58, R.A. No. 8791, the MonetaryBoard may require subsidiaries andaffiliates of banks and QBs to engage theservices of an independent auditor to bechosen by the subsidiaries and affiliates of

§§ 4172N - 4180N08.12.31


banks and QBs concerned from a list of CPAsacceptable to the Monetary Board.

It is the policy of the BSP to promotehigh ethical and professional standards inpublic accounting practice and toencourage coordination and sharing ofinformation between external auditors andregulatory authorities of banks, QBs,NSSLAs, and/or trust entities to ensureeffective audit and supervision of theseinstitutions and to avoid unnecessaryduplication of efforts. In furtherance of thispolicy and to ensure that reliance byregulatory authorities and the public on theopinion of external auditors is well placed,the BSP hereby prescribes the rules andregulations that shall govern the selection,appointment, reporting requirements anddelisting for external auditors of banks,QBs, NSSLAs, and/or trust entities, theirsubsidiaries and affiliates engaged in alliedactivities and other financial institutionswhich under special laws are subject toBSP supervision.

The selection of external auditors shallbe valid for a period of three (3) years. BSPselected external auditors shall apply forthe renewal of their selection every three(3) years. The provisions of Items “A” and“B” of Appendix N-5 shall likewise applyfor each application for renewal.

The SES shall make an annualassessment of the performance of externalauditors and will recommend deletionfrom the list even prior to the three (3) -year renewal period, if based onassessment, the external auditors’ reportdid not comply with BSP requirements.

External auditors who meet therequirements specified in this Section shallbe included in the list of BSP selectedexternal auditors. In case of partnership,inclusion in the list of BSP selectedexternal auditors shall apply to the auditfirm only and not to the individual signingpartners or auditors under i tsemployment.

The BSP will circularize to all banks,QBs, trust entities and NSSLAs the list ofselected external auditors once a year. TheBSP, however, shall not be liable for anydamage or loss that may arise from itsselection of the external auditors to beengaged by banks, QBs, trust entities orNSSLAs for regular audit or specialengagements.

a. Rules and regulations. The rulesand regulations to govern the selection anddelisting by the BSP of external auditors oftrust entities and banks’/QBs’/trust entities’subsidiaries and affiliates engaged in alliedactivities and other financial institutions areshown in Appendix N-5.

b. Sanctions. The applicable sanctions/penalties prescribed under Sections 36 and37 of R. A. No. 7653 to the extentapplicable shall be imposed on the trustentity, its audit committee and thedirectors approving the hiring of externalauditors who are not in the BSP list ofselected auditors for banks, QBs, NSSLAs,and/or trust entities, or for hiring, and/orretaining the services of the externalauditor in violation of any of the provisionsof this Section and for non-compliance withthe Monetary Board directive under Item“I” in Appendix N-5. Erring externalauditors may also be reported by the BSPto the PRC for appropriate disciplinaryaction.(As amended by Circular No. 529 dated 11 May 2006)

Sec. 4181N Publication RequirementsThe quarterly CSOC of a trust entity andits subsidiaries and affiliates shall bepublished side by side with the statementof condition of its head office and itsbranches/other offices as of such dates asthe BSP may require within twenty (20)working days from receipt of call letter, inany newspaper of general circulation in thecountry in the prescribed format.

The CSOC of a QB/trust entity and itssubsidiaries and associates shall conform

§§ 4180N - 4181N08.12.31



with the guidelines of PAS 27“Consolidated and Separate FinancialStatements”, except that for purposes ofconsolidated financial statements, onlyinvestments in financial allied subsidiariesexcept insurance subsidiaries shall beconsolidated on a line-by-line basis; whileinsurance and non-financial all iedsubsidiaries shall be accounted for usingthe equity method. Financial/non-financialallied/non-allied associates shall beaccounted for using the equity method inaccordance with the provisions of PAS 28“Investments in Associates”. For purposesof separate f inancial statements,investments in financial/non-financialallied/non-allied subsidiaries/associates,including insurance subsidiaries/associates, shall be accounted for usingthe equity method.(As amended by Circular No. 494 dated 20 September 2004)


Sec. 4190N Duties and Responsibilitiesof NBFIs and their Directors/Officers inAll Cases of Outsourcing of NBFIFunctions. The rules on outsourcing ofbanking functions as shown in AppendixQ-37 shall be adopted in so far as they areapplicable to FIs.(As amended by Circular Nos. 610 dated 26 May 2008,

596 dated 11 January 2008, 548 dated 25 September 2006 and

543 dated 08 September 2006)


Sec. 4192N Prompt Corrective ActionFramework. The framework for theenforcement of PCA on banks which is inAppendix Q-40, shall govern the PCA takenon FIs to the extent applicable, or by analogy.(Circular No. 523 dated 31 March 2006)

Sec. 4193N Supervision by Risks. Theguidelines on supervision by risk inAppendix Q-42 which provide guidance on

how QBs should identify, measure, monitorand control risks shall govern thesupervision by risks of FIs to the extentapplicable.

The guidelines set forth theexpectations of the BSP with respect to themanagement of risks and are intended toprovide more consistency in how therisk-focused supervision function is appliedto these risks. The BSP will review the risksto ensure that an FI’s internal riskmanagement processes are integrated andcomprehensive. All FIs should follow theguidance in risk management efforts.(Circular No. 510 dated 03 February 2006)

Sec. 4194N Market Risk ManagementThe guidelines on market riskmanagement for QBs as shown inAppendix Q-43 shall govern the marketrisk management of FIs to the extentapplicable.

The guidelines set forth theexpectations of the BSP with respect to themanagement of market risk and areintended to provide more consistency inhow the risk-focused supervision is appliedto this risk. FIs are expected to have anintegrated approach to risk managementto identify, measure, monitor and controlrisks. Market risk should be reviewedtogether with other risks to determineoverall risk profile.

The BSP is aware of the increasingdiversity of financial products and thatindustry techniques for measuring andmanaging market risk are continuouslyevolving. As such, the guidelines areintended for general application; specificapplication will depend to some extent onthe size, complexity and range of activitiesundertaken by individual FIs.(Circular No. 544 dated 15 September 2006)

Sec. 4195N Liquidity Risk Management. Theguidelines on liquidity risk management forQBs as shown in Appendix Q-44 shall govern

§§ 4181N - 4195N08.12.31


the liquidity risk management of FIs to theextent applicable.

The guidelines set forth the expectationsof the BSP with respect to the managementof liquidity risk and are intended to providemore consistency in how the risk-focusedsupervision function is applied to this risk.FIs are expected to have an integratedapproach to risk management to identify,measure, monitor and control risks. Liquidityrisk should be reviewed together with otherrisks to determine overall risk profile.

These guidelines are intended for generalapplication; specific application will dependon the size and sophistication of a particularFI and the nature and complexity of itsactivities.(Circular No. 545 dated 15 September 2006)



Sec. 4301N Credit Card Operations;General Policy. The BSP shall foster thedevelopment of consumer credit throughinnovative products such as credit cardsunder conditions of fair and sound consumercredit practices. The BSP likewiseencourages competition and transparency toensure more efficient delivery of servicesand fair dealings with customers.

Towards this end, the following rulesand regulations shall govern the credit cardoperations of subsidiary/affiliate credit cardcompanies of banks/QBs, aligned withglobal best practices.

§ 4301N.1 Definition of termsa. Credit card. Means any card, plate,

coupon book or other credit device existingfor the purpose of obtaining money,property, labor or services on credit.

b. Credit card receivables. Representsthe total outstanding balance of creditcardholders arising from purchases of goodsand services, cash advances, annual

membership/renewal fees as well as interest,penalties, insurance fees, processing/servicefees and other charges.

c. Minimum amount due orminimum payment required. Means theminimum amount that the creditcardholder needs to pay on or before thepayment due date for a particular billingperiod/cycle as defined under the termsand conditions or reminders stated in thestatement of account/billing statementwhich may include: (1) total outstandingbalance multiplied by the requiredpayment percentage or a fixed amountwhichever is higher; (2) any amount whichis part of any fixed monthly installment thatis charged to the card; (3) any amount inexcess of the credit line; and (4) all pastdue amounts, if any.

d. Default or delinquency. Shallmean non-payment of, or payment of anyamount less than, the “Minimum AmountDue” or “Minimum Payment Required”within two (2) cycle dates, in which case,the “Total Amount Due” for the particularbilling period as reflected in the monthlystatement of account may be consideredin default or delinquent.

e. Acceleration clause. Shall meanany provision in the contract between thebank and the cardholder that gives thebank the right to demand the obligationin full in case of default or non-paymentof any amount due or for whatever validreason.

f. Subsidiary refers to a corporationor firm more than fifty percent (50%) ofthe outstanding voting stock of which isdirectly or indirectly owned, controlled orheld with the power to vote by a bank orother FI.

g. Affiliate refers to an entity linkeddirectly or indirectly to a bank or other FIthrough any one (1) or a combination of anyof the following:

(1) Ownership, control or power tovote, whether by permanent or temporary

§§ 4195N - 4301N.108.12.31



proxy or voting trust, or other similarcontracts, by a bank or other FI of at leastten percent (10%) or more of theoutstanding voting stock of the entity, orvice-versa;

(2) Interlocking directorship orofficership, except in cases involvingindependent directors as defined underexisting regulations;

(3) Common stockholders owning atleast ten percent (10%) of the outstandingvoting stock of each FI and the entity; or

(4) Management contract or anyarrangement granting power to the bankor other FI to direct or cause the direction ofmanagement and policies of the entity, orvice-versa.

§ 4301N.2 Risk management systemTo safeguard their interests, subsidiary/aff i l iate credit card companies ofbanks/QBs are required to establish anappropriate system for managing riskexposures from credit card operationswhich shall be documented in a completeand concise manner. The riskmanagement system shall cover theorganizational set-up, records and reports,accounting, policies and procedures andinternal control.

Written policies, procedures andinternal control guidelines shall beestablished on the following aspects ofcredit card operations:

a. Requirements for application;b. Solicitation and application

processing;c. Determination and approval of

credit limits;d. Pre-approved cards;e. Issuance, distribution and activation

of cards;f. Supplementary or extension cards;g. Cash advances;h. Billing and payments;i. Deferred payment program or

special installment plans;

j. Collection of past due accounts;k. Handling of accounts for write-off;l. Suspension, cancellation and

withdrawal or termination of card;m. Renewal of cards, upgrade or

downgrade of credit limit;n. Lost or stolen cards and their

replacement;o. Accounts of DOSRI and employees;p. Disposition of errors and/or

questions about the billing statementstatement of account and other customers’complaints; and

q. Dealings with marketing agents/collection agents.

§ 4301N.3 Minimum requirementsBefore issuing credit cards, subsidiary/affiliate credit card companies of banks/QBsmust exercise proper diligence byascertaining that applicants possess goodcredit standing and are financially capableof fulfilling their credit commitments. Thenet take home pay of applicants who areemployed, the net monthly receipts of thoseengaged in trade or business, or the networth or cash flow inferred from depositsof those who are neither employed norengaged in trade or business or the creditbehavior exhibited by the applicant from hisother existing credit cards, or other lifestyleindicators such as but not limited to clubmemberships, ownership and location ofresidence and motor vehicle ownershipshall be determined and used as basis forsetting credit limits. The gross monthlyincome may also be used providedreasonable deductions are estimated forincome taxes, premium contributions, loanamortizations and other deductions.

All credit card applications, especiallythose solicited by third party representativesagents, shall undergo a strict credit riskassessment process and the informationstated thereon validated and verified bypersons other than those handlingmarketing.

§§ 4301N.1 - 4301N.308.12.31


§ 4301N.4 Information to be disclosedSubsidiary/affiliate credit card companies ofbanks/QBs shall disclose to each person towhom the credit card privilege is extendedin the agreement, contract or any equivalentdocument governing the issuance or use ofthe credit card or any amendment theretoor in such other statement furnished thecardholder from time to time, prior to theimposition of the charges and to the extentapplicable, the following information:

a. non-finance charges, individuallyitemized, which are paid or to be paid bythe cardholder in connection with thetransaction but which are not incident tothe extension of credit;

b. the percentage that the interestbears to the total amount to be financedexpressed as a simple monthly or annualrate, as the case may be, on the outstandingbalance of the obligation;

c. the effective interest rate perannum;

d. for installment loans, the numberof installments, amount and due dates orperiods of payment schedules to repay theindebtedness;

e. the default, late payment/penaltyfees or similar delinquency-related chargespayable in the event of late payments;

f. the conditions under which interestmay be imposed, including the timeperiod, within which any credit extendedmay be repaid without interest;

g. the method of determining thebalance upon which interest and/ordelinquency charges may be imposed;

h. the method of determining theamount of interest and/or delinquencycharges, including any minimum or fixedamount imposed as interest and/ordelinquency charge;

i. where one (1) or more periodicrates may be used to compute interest, eachsuch rate, the range of balances to which itis applicable, and the corresponding simpleannual rate; and

j. other fees, such as membership/renewal fees, processing fees, collectionfees, credit investigation fees and attorney’sfees.

k. for transactions made in foreigncurrencies and/or outside the Philippines,for dual currency accounts (peso and dollarbillings), as well as payments made bycredit cardholders in any currency otherthan the billing currency: the applicationof payments; the manner of conversionfrom the transaction currency and paymentcurrency to Philippine pesos or billingcurrency; definition or general descriptionof verifiable blended exchange/conversionrates (e.g., MASTERCARD and/or VISAInternational rates on the day the item wasprocessed/posted to the billing statement,plus mark-up, if any) including conversioncommission; and/or other currencyconversion charges and costs arising fromthe purchase by the card company offoreign currency to settle the customer’stransactions shall also be disclosed.

§ 4301N.5 Interest accrual on past dueloans. Interest income on past due loansarising from discount amortization (and notfrom the contractual interest of theaccounts) shall be accrued as provided inPAS 39.

§ 4301N.6 Finance charges. Theamount o f f inance charges inconnec t ion wi th any c red i t ca rdt ransac t ion sha l l re fe r to in teres tcharged to the cardholder.

§ 4301N.7 Deferral charges. The bankand the cardholder may, prior to theconsummation of the transaction, agreein writing to a deferral of all or part ofone or more unpaid installments and thebank may collect a deferral charge whichshall not exceed the rate previouslydisclosed pursuant to the provisions ondisclosure.

§§ 4301N.4 - 4301N.708.12.31



§ 4301N.8 Late payment/penalty feesNo late payment or penalty fee shall becollected from cardholders unless thecollection thereof is fully disclosed in thecontract between the issuer and thecardholder: Provided, That late paymentor penalty fees shall be based on theunpaid minimum amount due or aprescribed minimum fixed amount:Provided, further, That said late paymentor penalty fees may be based on the totaloutstanding balance of the credit cardobligation, including amounts payableunder installment terms or deferredpayment schemes, if the contract betweenthe issuer and the cardholder contains an“acceleration clause” and the totaloutstanding balance of the credit card isclassified and reported as past due.

§ 4301N.9 Confidentiality ofinformation. Subsidiary/affiliate credit cardcompanies of banks/QBs shall keep strictlyconfidential the data on the cardholder orconsumer, except under the followingcircumstances:

a. disclosure of information is withthe consent of the cardholder orconsumer;

b. release, submission or exchangeof customer information with other FIs,credit information bureaus, credit cardissuers, their subsidiaries and affiliates;

c. upon orders of court of competentjurisdiction or any government office oragency authorized by law, or under suchconditions as may be prescribed by theMonetary Board;

d. disclosure to collection agencies,counsels and other agents of the bank orcard company to enforce its rights againstthe cardholder;

e. disclosure to third party serviceproviders solely for the purpose of assistingor rendering services to the bank or cardcompany in the administration of its creditcard business; and

f. disclosure to third parties such asinsurance companies, solely for the purposeof insuring the bank from cardholder defaultor other credit loss, and the cardholder fromfraud or unauthorized charges.

§ 4301N.10 Suspension, terminationof effectivity and reactivation. Subsidiary/affiliate credit card companies of banks/QBs shall formulate criteria or parametersfor suspension, revocation and reactivationof the right to use the card and shall includein their contract with cardholders aprovision authorizing the issuer to suspendor terminate its effectivity, if circumstanceswarrant.

§ 4301N.11 Inspection of recordscovering credit card transactionsSubsidiary/affiliate credit card companiesof banks/QBs shall make available forinspection or examination by theappropriate department of the SEScomplete and accurate files on cardapplicant/cardholder to support theconsideration for approval of theapplication and determination of thecredit limit which shall be in accordancewith the verified debt repayment abilityand/or net worth of the card applicant/cardholder.

§ 4301N.12 Offsets. For purposes oftransparency and adequate disclosure, thecredit card issuer shall inform/notify thecredit cardholder in the agreement,contract or any equivalent documentgoverning the issuance or use of the creditcard that, pursuant to the provisions ofArticles 1278 to 1290 of the New CivilCode of the Philippines, as amended theuse of his credit card will subject hisdeposit/s with the bank to offset againstany amount/s due and payable on hiscredit card which have not been paid inaccordance with the terms of theagreement/contract.

§§ 4301N.8 - 4301N.1208.12.31


§ 4301N.13 Handling of complaintsSubsidiary/affiliate credit card companies ofbanks/QBs shall give cardholders at leasttwenty (20) calendar days from statementdate to examine charges posted in his/herstatement of account and inform the creditcard company in writing of any billing erroror discrepancy. Within ten (10) calendardays from receipt of such written notice, thecredit card company shall send a writtenacknowledgement to the cardholder unlessthe action required is taken within such ten(10)-day period.

Not later than two (2) billing cycles ortwo (2) months which in no case shallexceed ninety (90) days after receipt of thenotice and prior to taking any action tocollect the contested amount, or any partthereof, banks/subsidiary credit cardcompanies shall make appropriatecorrections in their records and/or send awritten explanation or clarification to thecardholder after conducting aninvestigation. Nothing in this Subsectionshall be construed to prohibit any actionby the bank/subsidiary credit card companyto collect any amount which has not beenindicated by the cardholder to contain abilling error or apply against the credit limitof the cardholder the amount indicated tobe in error.

§ 4301N.14 Unfair collectionpractices. Subsidiary/affiliate credit cardcompanies of banks/QBs, collectionagencies, counsels and other agents mayresort to all reasonable and legallypermissible means to collect amounts duethem under the credit card agreement:Provided, That in the exercise of their rightsand performance of duties, they mustobserve good faith and reasonable conductand refrain from engaging in unscrupulousor untoward acts. Without limiting thegeneral application of the foregoing, thefollowing conduct is a violation of thisSubsection:

a. the use or threat of violence or othercriminal means to harm the physical person,reputation, or property of any person;

b. the use of obscenities, insults, orprofane language which amount to acriminal act or offense under applicable laws;

c. disclosure of the names of creditcardholders who allegedly refuse to paydebts, except as allowed under Subsec.4301N.9;

d. threat to take any action that cannotlegally be taken;

e. communicating or threat tocommunicate to any person creditinformation which is known to be false,including failure to communicate that adebt is being disputed;

f. any false representation ordeceptive means to collect or attempt tocollect any debt or to obtain informationconcerning a cardholder; and

g. making contact at unreasonable/inconvenient times or hours which shall bedefined as contact before 6:00 A.M. or after10:00 P.M., unless the account is past duefor more than sixty (60) days or thecardholder has given express permissionor said times are the only reasonable orconvenient opportunities for contact.

§ 4301N.15 Sanctions. Violations of theprovisions of this Section shall be subjectto any or all of the following sanctionsdepending upon their severity:

a. Disqualification of the bankconcerned from the credit facilities of theBSP except as may be allowed underSection 84 of R.A. No. 7653;

b. Prohibition of the bank concernedfrom the extension of additional creditaccommodation against personal security; and

c. Penalties and sanctions providedunder Sections 36 and 37 of R.A. No. 7653.

Sec. 4302N Classification of Credit CardReceivables. Credit card receivables shall beclassified in accordance with age as follows:

§§ 4301N.13 - 4302N08.12.31



No. of days past due Classification91 - 120 Substandard

121 - 180 Doubtful 181 or more Loss

The foregoing is the minimumclassification requirement. Managementmay therefore formulate additional specificguidelines.

Sec. 4303N Updating of InformationProvided to Credit Information BureausFIs which have provided adverseinformation, such as the past due orlitigation status of loan accounts, to creditinformation bureaus, or any organizationperforming similar functions, shall submitmonthly reports to these bureaus ororganizations on the full payment orsettlement of the previously reportedaccounts within five (5) business days fromthe end of the month when such full paymentwas received. For this purpose, it shall bethe responsibility of the reporting FIs toensure that their disclosure of any informationabout their borrowers/clients is with theconsent of borrowers/clients concerned.(Circular No. 589 dated 18 December 2007)


Sec. 4312N Grant of Loans and OtherCredit Accommodations. The followingregulations shall be observed in the grantof loans and other credit accommodations.

§ 4312N.1 General guidelinesConsistent with safe and sound businesspractices, an NBFI shall grant loans or othercredit accommodations only in amounts andfor the periods of time essential for theeffective completion of the operation to befinanced.

Before granting loans or other creditaccommodations, an NBFI must ascertainthat the borrower, co-maker, endorser, surety

and/or guarantor, if applicable, is/arefinancially capable of fulfillinghis/their commitments to the NBFI. Forthis purpose, an NBFI shall obtain adequateinformation on his/their credit standing andfinancial capacities.

In addition to the usual informationsheet about the borrower, an NBFI shallrequire from the credit applicant thefollowing:

a. A copy of the latest ITR of theborrower and his co-maker, if applicable,duly stamped as received by the BIR;

b. Except as otherwise provided bylaw and in other regulations, if theborrower is engaged in business, a copyof the borrower’s latest financial statementsas submitted for taxation purposes to theBIR; and

c. A waiver of confidentiality of clientinformation and/or an authority of the NBFIto conduct random verification with the BIRin order to establish authenticity of the ITRand accompanying financial statementssubmitted by the client.

The documents under Items “a” and ”b”above shall be required to be submittedannually for as long as the loan and/orcredit accommodation is outstanding. Theconsistency of the data/figures in said ITRsand financial statements shall also bechecked and considered in the evaluationof the financial capacity andcreditworthiness of credit applicants. Thewaiver of confidentiality of clientinformation and/or an authority of the NBFIto conduct random verification with theBIR need not be submitted annually sinceonce submitted these documents remainvalid unless revoked.

Should the document(s) submitted proveto be spurious or incorrect in material detail,the NBFI may terminate any loan or othercredit accommodation granted on the basisof said document(s) and shall have the rightto demand immediate repayment orliquidation of the obligation. Moreover, the

§§ 4302N - 4312N.108.12.31


NBFI may seek redress from the court forany harm done by the borrower’s submissionof spurious documents.

The required submission of additionaldocuments shall cover loans, other creditaccommodations, and credit lines granted,restructured, renewed or extended after 02November 2006, including any availmentand/or re-availment against existing creditlines, except:

(1) Microfinance loans. Thisrepresents small loans granted to the basicsectors such as farmer-peasant, artisanalfisher folk, workers in the formal andinformal sector, migrant workers,indigenous peoples and culturalcommunities, women, differently-abledpersons, senior citizens, victims ofcalamities and disasters, youth andstudents, children, and urban poor, asdefined in the Social Reform and PovertyAlleviation Act of 1997 (R.A. No. 8425),and other loans granted to poor andlow-income households for theirmicroenterprises and small businesses.The maximum principal amount ofmicrofinance loans shall not exceedP150,000 and may be amortized on adaily, weekly, semi-monthly or monthlybasis, depending on the cash flowconditions of the borrowers. Said loans areusually unsecured, for relatively shortperiods of time (180 days) and oftenfeaturing joint and several guarantees ofone (1) or more persons;

(2) Loans to registered BMBEs;(3) Interbank loans;(4) Loans secured by hold-outs on or

assignment of deposits or other assetsconsidered non-risk by the Monetary Board;

(5) Loans to individuals who are notrequired to file ITRs under BIR regulations,as follows:

(a) Individuals whose grosscompensation income does not exceedtheir total personal and additionalexemptions, or whose compensation

income derived from one (1) employer doesnot exceed P60,000 and the income tax onwhich has been correctly withheld;

(b) Those whose income has beensubjected to final withholding tax;

(c) Senior citizens not required to filea return pursuant to R.A. No. 7432, asamended by R.A. No. 9257, in relation tothe provisions of the NIRC or the TaxReform Act of 1997; and

(d) An individual who is exempt fromincome tax pursuant to the provisions of theNIRC and other laws, general or special; and

(6) Loans to borrowers, whose onlysource of income is compensation and thecorresponding taxes on which has beenwithheld at source: Provided, That theborrowers submitted, in lieu of the ITR, acopy of their Employer’s Certificate ofCompensation Payment/Tax Withheld (BIRForm 2316) or their payslips for at leastthree (3) months immediately precedingthe date of loan application.

Loans to micro and small enterpriseswhich are not specifically exempted fromthe additional documentary requirementsspecified under the third paragraph of thisSubsection shall be exempted from saidadditional documentary requirement up to31 December 2011.

Consumer loans, with original amountsnot exceeding P2.0 million, are exemptedfrom updating requirements or the requiredannual submission of the samerequirements forwarded during the initialsubmission under this Subsection but notin their restructuring, renewal, orextensions or availment/re-availmentagainst existing credit lines: Provided, Thatthese loans are supported by ITRs or by BIRForm 2316 or payslips for at least three (3)months immediately preceding the date ofloan application, and financial statementssubmitted for taxation purposes to the BIR,as may be applicable at the time the loanswere granted, restructured, renewed, orextended.

§ 4312N.108.12.31



For purposes of this Section, thefollowing definitions shall apply:

1. Micro and small enterprises shallbe defined as any business activity orenterprise engaged in industry,agribusiness and/or services whether singleproprietorship, cooperative, partnership orcorporation whose total assets, inclusive ofthose arising from loans but exclusive ofthe land on which the particular businessentity’s office, plant and equipment aresituated, must have a value of up to P3.0million and P15.0 million, respectively, oras may be defined by the MSMEDevelopment Council or other competentgovernment agency.

2. Consumer loans is defined toinclude housing loans, loans for purchaseof car, household appliance(s), furniture andfixtures, loans for payment of educationaland hospital bills, salary loans and loans forpersonal consumption, including creditcard loans.(As amended by Circular Nos. 622 dated 16 September 2008,

and 549 dated 09 October 2006)

§ 4312N.2 Purpose of loans and othercredit accommodations. Before grantinga loan or other credit accommodation, anNBFI shall ascertain the purpose of the loanor other credit accommodation which shallbe clearly stated in the application and inthe contract between the NBFI andborrower. The proceeds of a loan or othercredit accommodation shall be utilizedonly for the purpose(s) stated in theapplication and contract; otherwise, theNBFI may terminate the loan or other creditaccommodation and demand immediaterepayment of the obligation.Notwithstanding the preceding sentence,the proceeds of a loan or other creditaccommodation may be utilized by theborrower for a purpose(s) other than thatoriginally stated in the application andcontract: Provided, That such other

purpose(s) is/are among those for which thelending NBFI may grant loans and othercredit accommodations under existing lawsand regulations: Provided, further, That suchutilization shall be with prior writtenapproval of duly authorized officer(s)committee/board of directors of the lendingNBFI and such written approval shall formpart of the contract between the NBFI andthe borrower.(Circular No. 622 dated 16 September 2008)

§ 4312N.3 Prohibited use of loanproceeds. NBFIs are prohibited fromrequiring their borrowers to acquire sharesof stock of the lending NBFI out of the loanor other credit accommodation proceedsfrom the same NBFI.(Circular No. 622 dated 16 September 2008)

§ 4312N.4 Signatories. NBFIs shallrequire that loans and other creditaccommodations be made under thesignature of the principal borrower and, in thecase of unsecured loans and other creditaccommodations to an individual borrower,at least one (1) co-maker, except that a co-maker is not required when the principalborrower has the financial capacity and agood track record of paying his obligations.(As amended by Circular No. 622 dated 16 September 2008)

§ 4312N.5 Sanctions. Any violation ofthe provisions of this Section shall besubject to the sanctions provided underSections 36 and 37 of R.A. No. 7653.

Sec. 4313N Bank DOSRI Rules andRegulations Applicable to GovernmentBorrowings in Government-Owned Or -Controlled Financial Institutions. Theprovisions of Secs. X326 to X337 of theManual of Regulations for Banks (MORB),to the extent applicable, shall also applyto loans, other credit accommodations,and guarantees granted to the National

§§ 4312N.1 - 4313N08.12.31


Government or Republic of thePhilippines, its political subdivisions andinstrumentalities as well as GOCCs,subject to the following clarifications:

a. Loans, other credit accommodations,and guarantees to the Republic of thePhilippines and/or its agencies/departments/bureaus shall be considered: (1) non-risk; and(2) not subject to any ceiling;

b. Loans, other credit accommodations,and/or guarantees to: (1) GOCCs; and(2) corporations where the Republic of thePhilippines, its agencies/departments/bureaus, and/or GOCCs own at leasttwenty percent (20%) of the subscribedcapital stock shall be considered indirectborrowings of the Republic of thePhilippines and shall form part of theindividual ceiling as well as the aggregateceiling: Provided, That the following loans,other credit accommodations, and/orguarantees to GOCCs and corporationswhere the Republic of the Philippines, itsagencies/departments/bureaus, and/orGOCCs own at least twenty percent (20%)of the subscribed capital stock, shall beexcluded from the thirty percent (30%)ceiling on unsecured loans under Secs.X330 and X331 of the MORB:

(1) Loans, other credit accommodations,and/or guarantees for the purpose ofundertaking priority infrastructure projectsconsistent with the Medium-TermDevelopment Plan/Medium-Term PublicInvestment Program of the NationalGovernment, duly certified as such by theSecretary of Socio-Economic Planning;

(2) Loans, other credit accommodations,and/or guarantees granted to participatingfinancial institutions (PFIs) in the lendingprograms of the government wherein thefunds borrowed are intended for relendingto other PFIs or end-user borrowers; and

(3) Loans, other credit accommodations,and/or guarantees granted for the purposeof providing (i) wholesale and retail loans

to the agricultural sector and MSMEs;and/or (ii) rediscounting and guaranteefacilities for loans granted to the said sectoror enterprises;

c. Loans, other credit accommodations,and/or guarantees granted to stateuniversities and colleges (SUCs) shall beexcluded from the thirty percent (30%)ceiling on unsecured loans under Secs.X330 and X331 of the MORB;

d. In view of the fiscal autonomygranted under R.A. No. 7653 and theindependence prescribed under theConstitution, the BSP shall be consideredan independent entity, hence, not a relatedinterest of the Republic of the Philippinesand/or its agencies/departments/bureaus.Loans, other credit accommodations andguarantees of the BSP shall be considered:(1) non-risk; and (2) not subject to anyceiling;

e. LGUs shall be considered separatefrom the Republic of the Philippines, othergovernment entities, and from one anotherdue to the full autonomy in the exercise oftheir proprietary functions and in themanagement of their economic enterprisesgranted to them under the LocalGovernment Code of the Philippines,subject to certain limitations provided bylaw, hence, not a related interest of theRepublic of the Philippines and/or itsagencies/departments/bureaus;

f. Local Water Districts (LWDs),although GOCCs shall be consideredseparate from the Republic of thePhilippines, other government entities, andfrom one another due to their fiscalindependence from the NationalGovernment, hence, not related interestsof the Republic of the Philippines and/orits agencies/department/bureaus, forpurposes of these regulations;

g. A director who acts as agovernment representative in the lendinginstitution shall not be excluded in the

§ 4313N08.12.31



deliberation as well as in thedetermination of majority of the directorsin cases of loans, other creditaccommodations, and guarantees to theRepublic of the Philippines and/or itsagencies/departments/bureaus; and

h. A director of the lending institutionshall be excluded in the deliberation as wellas in the determination of majority of thedirectors in cases of loans, other creditaccommodations, and guarantees to theborrowing government entity other than theRepublic of the Philippines, its agencies,departments or bureaus where said directoris also a director, officer or stockholder underexisting DOSRI regulations.(Circular No. 514 dated 06 March 2006 as amended by Circular

Nos. 635 dated 10 November 2008, 616 dated 30 July 2008,

and 580 dated 09 September 2007)

Sec. 4314N Loans Against PersonalSecurity. The grant, renewal, restructuringor extension of unsecured loans shall, inaddition to the requirements of Section4312N, be made under the signature of theprincipal borrower and at least one (1)co-maker, except that a co-maker is notrequired when the principal borrower hasthe financial capacity and a good trackrecord of paying his obligations.(Circular No. 622 dated 16 September 2008)


Sec. 4391N Investments in Debt andMarketable Equity Securities. Theclassification, accounting procedures,valuation, sales and transfers ofinvestments in debt securit ies andmarketable equity securities shall be inaccordance with the guidelines inAppendices Q-20 and Q-20- a.

Penal t ies and sanct ions . Thefollowing penalties and sanctions shallbe imposed on FIs and concernedofficers found to violate the provisionsof these regulations:

a. Fines of P2,000/day to be imposedon NBFIs for each violation, reckoned fromthe date the violation was committed up tothe date it was corrected; and

b. Sanctions to be imposed onconcerned officers:

(1) First offense – reprimand theofficers responsible for the violation; and

(2) Subsequent offenses – suspensionof ninety (90) days without pay for officersresponsible for the violation.(Circular No. 476 dated 16 February 2005 as amended by Circular

Nos. 628 dated 31 October 2008, 626 dated 23 October 2008

and 585 dated 15 October 2007)




Sec. 4511N Foreign Exchange Dealers/Money Changers and/or RemittanceAgents Operations. The following rules andregulations shall govern the registration andoperations of foreign exchange dealers(FXDs)/money changers (MCs) and/orremittance agents:

§ 4511N.1 Registration. Qualifiedpersons or non-bank institutions wishing toact as FXDs/MCs and/or remittance agentsare required to register with the BSP beforethey can operate as such.

For this purpose, the term moneychangers, interchangeably referred to asforeign exchange dealers, shall refer tothose regularly engaged in the business ofbuying and/or selling foreign currencies.

Remittance agents, on the otherhand, shall refer to persons or entitiesthat offer to remit, transfer or transmitmoney on behalf of any person toanother person and/or entity. Theseinclude money or cash couriers, moneyt ransmiss ion agents , remi t tancecompanies and the like.

§§ 4313N - 4511N.108.12.31


§ 4511N.2 Application for registrationThe application for a certificate of registrationto act as FXD/MC and/or remittance agent,in the prescribed form (Item “A”, AppendixN-8), must be duly supported by thefollowing documents:

a. Incorporation papers dulyauthenticated by the SEC (for corporation/partnership); or copy of the certificate ofregistration duly authenticated by theDepartment of Trade and Industry (DTI) (forsingle proprietorship);

b. Copy of business license/permitfrom the city or municipality havingterritorial jurisdiction over the place ofestablishment and operation;

c. List of stockholders/partners/proprietor/directors/principal officers as thecase maybe;

d. Notarized Deed of Undertaking(Item “B”, Appendix N-8) to strictly complywith the requirements of all relevant laws,rules and regulations, signed either by theowner, partner, president or officer ofequivalent rank; and

e. Any additional document which theBSP may require from time to time.

FXDs/MCs and remittance agentsexisting prior to 12 May 2005 (effectivitydate of Circular 471 dated 24 January 2005)may continue to operate as such: Provided,That an application for registrationsupported by documents mentionedabove has been filed within ninety (90)calendar days from 12 May 2005.

A certificate of registration to act asFXD/MC or remittance agent shall beissued by the BSP and shall become thebasis for an electronic registry of all BSPregistered FXDs/MCs and remittance agentsin the country.

§ 4511N.3 Applicability of other laws/regulations. FXDs/MCs and remittanceagents are subject to the provisions of R.A.No. 7653 and R.A. No. 9160, as amended,and its implementing rules and regulations,

particularly on customer identification,record keeping and reporting of coveredtransactions and suspicious transactions aswell as those which may hereafter beissued.

§ 4511N.4 Required seminar/trainingPrior to the issuance of the certificate ofregistration, the officer(s) as well as thepersonnel directly involved in foreignexchange operations shall attend a seminaron the requirements of the Anti-MoneyLaundering Act (AMLA) particularly oncustomer identification, record keeping andreporting of covered and suspicioustransactions, to be conducted by the AMLCor by any of its recognized or accreditedservice providers. The provisions of thisSection shall also apply to officersappointed after the issuance of thecertificate of registration.

The officer(s) in-charge and thepersonnel who attended the requiredseminar shall echo the said training to allemployees within thirty (30) calendar daysfrom such attendance or as new employeesare hired.

§ 4511N.5 Sale and purchase offoreign currencies by FXDs/MCs. Thefollowing minimum procedures shall beobserved on sale and purchase of foreigncurrencies by FXDs/MCs:

a. Official receipts, in case of sales, andaccountable forms in case of purchases, shallbe issued in numerical order to evidencesale/purchase of foreign currencies;

b. The amount of foreign currenciessold shall be indicated in the official receiptsboth in words and in figures. The staffserving the particular transaction as well asthe person buying/selling foreign currencyshall sign in their usual signatures on thereceipt;

c. A da i ly record o f fo re ignexchange t ransac t ions sha l l bemaintained where all foreign exchange

§§ 4511N.2 - 4511N.508.12.31



sale and purchase transactions shall beposted chronologically. The daily recordshall be kept on file at the FXD/MC premisesand shall be available for AMLC inspection/examination any time;

d. All copies of cancelled receipts shallbe marked and stamped “CANCELLED”for internal control purposes; and

e. Foreign exchange transactionsshall be conducted only at the entity’sprincipal place of business and otherauthorized branches.

§ 4511N.6 Application to sell/purchaseforeign currencies by FXDs/MCs. FXDs/MCs shall require the seller or buyer offoreign currency to fill up and sign anapplication form, which shall contain thefollowing minimum data and information:

a. For individual customers –(1) Date;(2) Printed name and signature of

customer;(3) Present address;(4) Permanent address;(5) Date and place of birth;(6) Telephone number;(7) Nationality;(8) Amount and currency sold/

purchased in words and figures; and(9) Source of foreign currency/ies or

purpose of purchaseb. For corporate/juridical customers -

In addition to a signed applicationcontaining the applicable information inItem “a” above, photocopies of thefollowing documents shall be required:

(1) Articles of incorporation/partnership;

(2) By-Laws;(3) Official address or principal

business address;(4) List of directors/partners/ principal

stockholders; and(5) Authority and identification of the

person purporting to act in behalf of theclient.

For subsequent transactions with thesame corporate client, FXDs/MCs need notrequire submission of additional documentsenumerated in Item “b” above unless thereare changes thereto.

As a means of further identification,FXDs/MCs shall require the presentationof a government-issued identificationdocument such as SSS/GSIS/voter’s ID,driver’s license or passport.

A sample of application to sell/purchaseforeign currencies is shown in Item “C”,Appendix N-8.

§ 4511N.7 Additional requirementFXDs/MCs shall require a notarizedapplication together with supportingdocuments (Item “D”, Appendix N-8.) incase of sale of foreign exchange exceedingUS$5,000 or its equivalent to the sameclient. FXDs/MCs shall see to it that thislimit on the sale of foreign exchange is notbreached by the splitting of a foreignexchange purchase into smaller amountsso as to make it appear that the purchasedoes not violate the prescribed limit.

There is deemed to be splitting offoreign exchange if the FXD/MC sellsforeign exchange to any one purchaserwithin a fifteen (15) banking day period, insuch individual amounts which, whencombined, amount to more than US$5,000or its equivalent.

§ 4511N.8 Requirements forremittance agents. RAs shall maintainaccurate and meaningful originatorinformation on funds transferred/remittedby requiring the sender/remitter to fill upand sign an application form, which shallcontain the following minimum data andinformation:

a. For individual customers -(1) Date;(2) Printed name and signature of

remitter;(3) Present address;

§§ 4511N.5 - 4511N.808.12.31


(4) Permanent address;(5) Date and place of birth;(6) Telephone number;(7) Nationality;(8) Amount and currency to be

remitted;(9) Source of foreign currency; and(10) Name of and relationship with

beneficiary/ies.b. For corporate/juridical customers

In addition to a signed applicationcontaining the applicable information inItem “a” , a photocopy of the authority andidentification of the person purporting toact in behalf of the client shall be required.

As a means of further identification, RAsshall require the presentation of agovernment-issued identificationdocument such as SSS/GSIS/voter’s ID,driver’s license or passport.

For purposes of compliance with therequirements, an RA may rely on thereferral of its office/correspondent bankabroad: Provided, That the RA maintains arecord of such referral together with theminimum identification, informationdocuments required under the law and itsimplementing rules and regulations.

§ 4511N.9 AMLC reportorialrequirements. FXDs/MCs and RAs arerequired to submit to the AMLC a reporton covered transactions and suspicioustransactions within five (5) banking daysfrom the date of said transaction or fromdate the FXDs/MCs and RAs gainedinformation that the transaction was donefor the purpose of laundering proceeds ofcriminal or other illegal activities or fromthe time the FXDs/MCs and RAs hadreasonably suspected that said transactionswere entered into for the purpose oflaundering proceeds of criminal and otherillegal activities.

For this purpose, covered transactionsshall refer to transactions in cash or other

equivalent monetary instrument involving atotal amount in excess of P500,000.00within one (1) banking day while suspicioustransactions are transactions, regardless ofamount, where any of the followingcircumstances exists:

a. There is no underlying legal ortrade obligation, purpose or economicjustification;

b. The client is not properly identified;c. The amount involved is not


d. Taking into account all knowncircumstances, it may be perceived that theclient’s transaction is structured in order toavoid being the subject of reportingrequirements under the AMLA;

e. Any circumstance relating to thetransaction which is observed to deviatefrom the profile of the client and/or theclient’s past transactions with the coveredinstitution;

f. The transaction is in any wayrelated to an unlawful activity or anymoney laundering activity or offense underthe AMLA that is about to be, is being orhas been committed; or

g. Any transaction that is similar,analogous or identical to any of theforegoing.

§ 4511N.10 - 4511N.14 (Reserved)

§ 4511N.15 Sanctions. Monetarypenalties and other sanctions for thefollowing violations committed by erringFXDs/MCs and RAs may be imposed:Nature of Violation/ Sanctions/Penalties

Exception

a. Operating without Applicable penaltiesprior BSP under Section 36 ofregistration R.A. No. 7653;

Watchlisting ofpa r tne r s /p r inc ipa lofficers

§§ 4511N.8 - 4511N.1508.12.31



b. Violation of any of Applicable penaltythe provisions of prescribed underR.A. No. 9160, as the Actamended and itsIRR

c. Other violations of Penalties and sanctionsthe provisions/ which may berequirements in imposed by thethis Section AMLC

§ 4511N.16 Industry associationMembership in an existing association ofBSP-registered FXDs/MCs as well as RAsis encouraged.


Sec. 4601N Fines and Other Charges. Thefollowing regulations shall governimposition of monetary penalties on NBFIs,their directors and/or officers and thepayment of such penalties or fines and othercharges by these entities .(Circular No. 585 dated 15 October 2007)

§4601N.1 Guidelines on theimposition of monetary penalties;Payment of penalties or fines. Thefollowing are the guidelines on theimposition of monetary penalties on NBFIs,their directors and/or officers and thepayment of such penalties or fines andother charges by these entities:

a. Definition of terms. For purposesof the imposition of monetary penalties,the following definitions are adopted:

(1) Continuing offenses/violations areacts, omissions or transactions entered into,in violation of laws, BSP rules andregulations, Monetary Board directives,and orders of the Governor which persistfrom the time the particular acts werecommitted or omitted or the transactionswere entered into until the same werecorrected/rectified by subsequent acts ortransactions. They shall be penalized on a

per calendar day basis from the time the actswere committed/omitted or the transactionswere effected up to the time they werecorrected/rectified.

(2) Transactional offenses/violationsare acts, omissions or transactions enteredinto in violation of laws, BSP rules andregulations, Monetary Board directives,and orders of the Governor which cannotbe corrected/rectified by subsequent actsor transactions. They shall be meted withone (1)-time monetary penalty on a pertransaction basis.

(3) Continuing penalty refers to themonetary penalty imposed on continuingoffenses/violations on a per calendar daybasis reckoned from the time the offense/violation occurred or was committed untilthe same was corrected/rectified.


b. Basis for the computation of theperiod or duration of penalty. Thecomputation of the period or duration of allpenalties shall be based on calendar days.

For this purpose the terms “per bankingday”, “per business day”, “per day” and/or“a day” as used in this Manual, and otherBSP rules and regulations shall mean “percalendar day” and/or “calendar day” as thecase may be.

c. Additional charge for late paymentof monetary penalty. Late payment ofmonetary penalty shall be subject to anadditional charge of six percent (6%) perannum to be computed from the time saidpenalty becomes due and payable up tothe time of actual payment. The penaltyapproved by the Governor/MB to beimposed on the NBFI, its directors and/orofficers shall become due and payable fifteen(15) calendar days from receipt of theStatement of Account from the BSP. Forbanks which maintain DDA with the BSP,penalties which remain unpaid after thelapse of the fifteen-day period shall be

§§ 4511N.15 - 4601N.108.12.31


automatically debited against theircorresponding DDA on the followingbusiness day without additional charge. Ifthe balance of the concerned NBFI’s DDAis insufficient to cover the amount of thepenalty, said penalty shall already besubject to an additional charge of sixpercent (6%) per annum to be reckonedfrom the business day immediatelyfollowing the end of said fifteen (15)-dayperiod up to the day of actual payment.

d. Appeal or request forreconsideration. A one (1)-time appeal orrequest for reconsideration on themonetary penalty approved by theGovernor/Monetary Board to be imposedon the NBFI, its directors and/or officersshall be allowed: Provided, That the sameis filed with the appropriate department ofthe SES within fifteen (15) calendar daysfrom receipt of the Statement of Accountbilling letter. The appropriate departmentof the SES shall evaluate the appeal orrequest for reconsideration of the NBFIindividual and make recommendationsthereon within thirty (30) calendar daysfrom receipt thereof. The appeal or requestfor reconsideration on the monetary penaltyapproved by the Governor/Monetary Boardshall be elevated to the Monetary Boardfor resolution/decision. The running of thepenalty period in case of continuingpenalty and/or the period for computingadditional charge shall be interrupted fromthe time the appeal or request forreconsideration was received by theappropriate department of the SES up tothe time that the notice of the MonetaryBoard decision was received by the NBFI/individual concerned.(Circular No. 585 dated 15 October 2007)


Sec. 4603N Non-Bank BSP SupervisedEntities. NBBSEs that may subsequently beauthorized to engage in FX forwards andswaps as dealers shall be covered by the

provisions under Subsecs. 4625Q to4625Q.9, and 4625Q.14.(Circular No. 591 dated 27 December 2007)


Sec. 4653N Accounting for FinancialInstitution Premises; Other Fixed AssetsFI premises, furniture, fixture andequipment shall be accounted for using thecost model under PAS 16 “Property, Plantand Equipment.”(Circular No. 494 dated 20 September 2004)


Sec. 4660N Disclosure of RemittanceCharges and Other Relevant InformationIt is the policy of the BSP to promote theefficient delivery of competitively-pricedremittance services by banks and otherremittance service providers by promotingcompetition and the use of innovativepayment systems, strengthening the financialinfrastructure, enhancing access to formalremittance channels in the source anddestination countries, deepening thefinancial literacy of consumers, andimproving transparency in remittancetransactions, consistent with sound practices.


a. Transfer/remittance fee - charge forprocessing/sending the remittance from thecountry of origin to the country ofdestination and/or charge for receiving theremittance at the country of destination;


c. Exchange rate differential/spread -foreign exchange mark-up or thedifference between the prevailing BSP

§§ 4601N.1 - 4660N08.12.31



reference/guiding rate and the exchangeconversion rate;

d. Other currency conversion charges- commissions or service fees, if any;


f. Amount/currency paid out in therecipient country - exact amount of moneythe recipient should receive in localcurrency or foreign currency; and

g. Delivery time to recipients/beneficiaries - delivery period ofremittance to beneficiary stated in numberof days, hours or minutes.

Non-bank remittance service providersshall likewise post said information in theirrespective websites and display themprominently in conspicuous places withintheir premises and/or remittance/servicecenters.(Circular No. 534 dated 26 June 2006)


Sec. 4695N Valid Identification Cards forFinancial Transactions. The followingguidelines govern the acceptance of validID cards for all types of financialtransactions by NBFIs, including financialtransactions involving OFWs, in order topromote access of Filipinos to servicesoffered by formal FIs, particularly thoseresiding in the remote areas, as well as toencourage and facilitate remittances ofOFWs through the banking system:


For this purpose, the term officialauthority shall refer to any of thefollowing:





Valid IDs include the following:(a) Passport;(b) Driver’s license;(c) PRC ID;(d) NBI clearance;(e) Police clearance;(f) Postal ID;(g) Voter’s ID;(h) Barangay certification;(i) GSIS e-Card;(j) SSS card;(k) Senior Citizen card;(l) OWWA ID;(m) OFW ID;(n) Seaman’s Book;(o) Alien Certification of Registration/

Immigrant Certificate of Registration;(p) Government office and GOCC ID

(e.g., AFP, HDMF IDs)(q) Certification from the NCWDP;(r) DSWD certification;(s) IBP ID; and(t) Company IDs issued by private

entities or institutions registered with orsupervised or regulated either by the BSP,SEC or IC.


c. NBFIs shall require their clients tosubmit a clear copy of one (1) valid ID ona one-t ime basis only, or at thecommencement of a businessrelationship. They shall require theirclients to submit an updated photo andother relevant information whenever theneed for it arises.

§§ 4660N - 4695N08.12.31


The foregoing shall be in addition to thecustomer identification requirements underRule 9.1.c of the Revised IRRs of R.A. No.9160, as amended (Appendix N-4).

For purposes of this Section, financialtransactions may include remittances,among others, as falling under the definitionof transaction. Under the Anti-MoneyLaundering Act of 2001, as amended,a financial transaction is any act establishingany right or obligation or giving rise to anycontractual or legal relationship between the

parties thereto. It also includes anymovement of funds by any means with acovered institution.(Circular No. 564 dated 03 April 2007 as amended by Circular

No. 608 dated 20 May 2008)


Sec. 4699N General Provision onSanctions. Any violation of the precedingprovisions shall be subject to Section 36 ofR.A. No. 7653.

§§ 4695N - 4699N08.12.31

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LIST OF REPORTS REQUIRED FROM NON-BANK FINANCIAL INSTITUTIONS(Appendix to Sec. 4162N)

A-2 BSP-7-26-02-A 4162N(M-008dated02.14.08)

BSP-7-26-03B

A-2 BSP-7-26-02 4162NSchedule 1(IHs only)

A-2 BSP-7-26-02 4162NSchedule 1

A-2 BSP-7-26-02 4162NSchedule 2(FCs only)


Consolidated Statement of Condition (CSOC)

Consolidated Statement of Income and Expenses (CSIE)

Control Prooflist

Schedule of Loans/Receivables, Trading AccountSecurities (TAS) - Loans and Underwritten DebtSecurities

Schedule of Loans/Receivables and Trading AccountSecurities - Loans

Schedule of Trading Account Securities - Investments,Available for Sale Securities and Investment in Bondsand Other Debt Instruments (IBODI)

Interest Rate and Maturities Matching

15th banking days afterend of the referencemonth

15th business day fromend of reference month

-do-

- do -

- do -

Monthly

Monthly

-do-

- do -

- do -

Email to SDC @[email protected]

messengerial or postalservices

Original - Appropriatedepartment of the SESDuplicate - SDC orc c : m a i l / e l e c t r o n i ctransmission

Separate report for HeadOffice and each Branch;and a ConsolidatedReport for Head Officeand Branches

-do-

-do-

- do -


APP. N

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A-2 BSP-7-26-02 4162NSchedule 6(FCs only)

A-2 BSP-7-26-03 4162N

A-2 BSP-7-26-23(Entities w/Trust/Fund ManagementOnly)

A-2 BSP-7-26-24 4162N(Rev. Aug.2003 perCL dated08.06.03)

A-2 Unnumbered 4101N(no prescribed form)(Entities with Trust/Fund ManagementOnly)

A-2 Unnumbered 4144N.12(Rev. May2002 asamendedby Cir. No.612 dated06.03.08)

Remaining Maturities of Selected Accounts

Schedule of Bills Payables and Bonds

Data on Firm's Businesses

Statement of Income and Expenses

Trust/Fund Management Operations

Credit and Equity Exposures to Individuals/Companies/Groups Aggregating P 1.0 Million andabove

Report on required and available reserves on Peso-denominated Common Trust Funds (CTFs), such othermanaged peso funds and TOFA-Others


Monthly

- do -

- do -

- do -

- do -

Quarterly

Weekly

Astransaction

occurs

15th business day fromend of reference month

- do -

- do -

- do -

- do -

15th business day fromend of reference quarter

3rd business dayfollowing referenceweek



- do -

- do -

- do -

- do -

Electronic submission/diskette - SDC

Fax to SDC




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A-2 Unnumbered 4144N.12

A-2 Unnumbered 4144N.12

A-2 Unnumbered (Cir. 609dated05.26.08as amendedby M-2008-022 dated06.26.08)

A-2 Unnumbered 4172N(no prescribedform)

4101N.16




Financial Reporting Package for Trust Institutions

Schedules:

Balance Sheet

A1 to A2 Main Report

B to B2 Details of Investments in Debt andEquity Securities

C to C2 Details of Loans and Receivables

D to D2 Wealth/Assets/Fund Management -UITF

E Fiduciary Accounts

E1 to E1b Other Fiduciary Services - UITF

Income Statement

Control Prooflist

Audit Engagement Contract

Waiver of the Confidentiality of Information underSections 2 and 3 of R.A. No. 1405, as amended

Astransaction

occurs

Annually

Quarterly

-do-

As contractis signed

Astransaction

occurs



20th banking day afterend of referencequarter

-do-

15th calendar day fromdate of signing ofcontract

To be submitted to theAnti-Money LaunderingCouncil

To be submitted to theappropriate departmentof the SES

[email protected]

-do-

Appropriate departmentof the SES

APP. N

-108.12.31

N R

egulationsA


Manual of R



A-3 Unnumbered 4162N(CL-2007-050 dated10.04.07and CL-2007-059dated11.28.07)

B BSP-7-26-01 4162N

SES II Form 15 4162N(NP08-TB) (As

amendedby M-2008-024 dated07.31.08)

B Unnumbered 4162N

B Unnumbered 4162N

B Unnumbered 4144N.12

B

Report on Borrowings of BSP Personnel

Information Sheet

Biographical Data of Directors/Officers- If submitted in diskette form - Notarized first page ofeach of the directors'/officers' bio-data saved in disketteand control prooflist- If sent by electronic mail - Notarized first page ofBiographical Data or Notarized list of names ofDirectors/Officers whose Biographical Data weresubmitted thru electronic mail to be faxed to SDC(CL dated 01.09.01)

Change of List of Directors/Officers

Board Resolution on NBFIs signatories of reportssubmitted to Bangko Sentral

Plan of action to comply with Anti-Money Launderingrequirements


Quarterly

Annually

Annuallyand as

changesoccur

As changeoccurs

Asauthorized

-

Annually

Original to SDC

Original - Appropriatedepartment of the SES

Corporate stockholdersshould also submitInformation Sheet

Electronic mail or disketteform to SDC or if hardcopy Original toappropriate department ofthe SES, Duplicate to SDC

Original - Appropriatedepartment of the SESDuplicate - SDC

To be submitted to theappropriate department ofthe SES


15 banking days afterend of reference quarter

January 31st

January 31st and 15thbusiness day from thedate of the meeting of theboard of directors inwhich the directors/officers are elected orappointed

Immediately afterchange

3rd day from date ofresolution

30th business day from31 July 2000 or fromopening of the institution



N RegulationsAppendix N-2 - Page 1


APP. N-208.12.31

GUIDELINES ON PRESCRIBED REPORTS SIGNATORIESAND SIGNATORY AUTHORIZATION

(Appendix to Subsec. 4162N.1)

Category A-2 reports of head officesshall be signed by the president, executivevice-presidents, vice-presidents or officersholding equivalent positions. Such reportsof other offices/units (such as branches)shall be signed by their respectivemanagers/officers in-charge. Likewise, thesigning authority in this category shall becontained in a resolution approved by theboard of directors in the format prescribedin Annex N-2-a.

Category B reports shall be signed byofficers or their alternates, who shall beduly designated in a resolution approvedby the board of directors in the format asprescribed in Annex N-2-b.

Copies of the board resolutions on thereport signatory designations shall besubmitted to the appropriate supervisingand examining department of the BSPwithin three (3) days from the date ofresolution.

Manual of Regulations for Non-Bank Financial InstitutionsN RegulationsAppendix N-2 - Page 2

APP. N-208.12.31

Whereas, it is required under Subsec. 4162N.1 that Category A-2 reports of head officesbe signed by the president, executive vice-presidents, vice-presidents or officers holdingequivalent positions, and that such reports of other offices be signed by the respectivemanagers/officers-in-charge;

Whereas, it is also required that aforesaid officers of the institution be authorized undera resolution duly approved by the institution’s Board of Directors;


Whereas, this Board has full faith and confidence in the institution’s President (and/orthe Executive Vice-President, etc., as the case may be) and, therefore, assumes responsibilityfor all the acts which may be performed by aforesaid officers under their delegated authority;


Name of Specimen Position Report Officer Signature Title No.

are hereby authorized to sign the Category A-2 reports of _______________________________. (Name of Institution)

Done in the City of ___________, Philippines, this _____ day of __________, 20__ .


DIRECTOR DIRECTOR

DIRECTOR DIRECTOR

DIRECTOR DIRECTOR

ATTESTED BY:

CORPORATE SECRETARY

Annex N-2-a





APP. N-208.12.31

Whereas, it is required under Subsec. 4162N.1 that Category B reports be signed byofficers or their alternates;

Whereas, it is also required that aforesaid officers of the institution be authorized undera resolution duly approved by the institution’s Board of Directors;

Whereas, we the members of the Board of Directors of (Name of Institution)_ areconscious that, in designating the officials who would sign said Category B reports, we areactually empowering and authorizing said officers to represent and act for or in behalf of theBoard of Directors in particular and (Name of Institution) in general;

Whereas, this Board has full faith and confidence in the institution’s authorized signatoriesand, therefore, assumes responsibility for all the acts which may be performed by aforesaidofficers under their delegated authority;


Name of Authorized Specimen Position Report Signatory/Alternate Signature Title No.


2. Authorized (Alternate)

etc.

are hereby authorized to sign the Category B reports of _______________________________. (Name of Institution)

Done in the City of __________, Philippines, this ____ day of ____________, 20__ .


DIRECTOR DIRECTOR

DIRECTOR DIRECTOR

DIRECTOR DIRECTORATTESTED BY:

CORPORATE SECRETARY

Annex N-2-b

FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORY B REPORTS




APP. N-308.12.31

Banks, QBs, trust entities and all otherinstitutions, and their subsidiaries andaffiliates supervised or regulated by theBSP (covered institutions) shall strictlycomply with the provisions of Section 9of R.A. No. 9160 and the following rulesand regulations on anti-money laundering.

1. Customer identification. Coveredinstitutions shall establish and record thetrue identity of its clients based on officialdocuments. They shall maintain a systemof verifying the true identity of theirclients and, in case of corporate clients,require a system of verifying their legalexistence and organizational structure, aswell as the authority and identificationof all persons purporting to act on theirbehalf.

When establishing business relations orconducting transactions (particularlyopening of deposit accounts, acceptingdeposit substitutes, entering into trust andother fiduciary transactions, renting of safetydeposit boxes, performing remittances andother large cash transactions) coveredinstitutions should take reasonablemeasures to establish and record the trueidentity of their clients. Said clientidentification may be based on official orother reliable documents and records.

a. In cases of corporate and other legalentities, the following measures should betaken, when necessary:

(1) Verification of the legal existenceand structure of the client from theappropriate agency or from the clientitself or both, proof of incorporation,including information concerning thecustomer’s name, legal form, address,directors, principal off icers andprovisions regulating the power behindthe entity.


b. In case of doubt as to whether theirpurported clients or customers are acting forthemselves or for another, reasonablemeasures should be taken to obtain the trueidentity of the persons on whose behalf anaccount is opened or a transactionconducted.

c. The provisions of existing laws tothe contrary notwithstanding, anonymousaccounts, accounts under fictitious names,and all other similar accounts shall beabsolutely prohibited. In case wherenumbered accounts is allowed (i.e., pesoand foreign currency non-checkingnumbered accounts), covered institutionsshould ensure that the client is identified inan official or other identifying documents.

The BSP may conduct annual testingsolely limited to the determination of theexistence and the identity of the owners ofsuch accounts.

Covered institutions shall phase outwithin a period of one (1) year from 2 April2001 or upon their maturity, whichever isearlier, anonymous accounts or accountsunder fictitious names as well as numberedaccounts being kept or managed by them,which are not expressly allowed underexisting law.

d. The identity of existing clients orbeneficial owners of deposits and otherfunds held or being managed by the coveredinstitutions should be renewed/updated atleast every other year.

e. All records of all transactions ofcovered institutions shall be maintained andsafely stored for five (5) years from the datesof transactions. With respect to closedaccounts, the records on customeridentification, account files and business

ANTI-MONEY LAUNDERING REGULATIONS(Appendix to Section 4104N)


APP. N-308.12.31

correspondence, shall be preserved andsafely stored for at least five (5) years fromthe dates when they were closed.

Such records must be sufficient topermit reconstruction of individualtransactions so as to provide, if necessary,evidence for prosecution of criminalbehaviour.

f. Special attention should be givento all complex, unusual large transactions,and all unusual patterns of transactions,which have no apparent or visible lawfulpurpose. The background and purposeof such transactions should, as far aspossible, be examined, the findingsestablished in writing, and be availableto help supervisors, auditors and lawenforcement agencies.

g. Covered institutions should not, orshould at least avoid, transacting businesswith criminals. Reasonable measures shouldbe adopted to prevent the use of theirfacilities for laundering of proceeds ofcrimes and other illegal activities.


a. The development of internalpolicies, procedures and controls, includingthe designation of compliance officers atmanagement level, and adequate screeningprocedures to ensure high standards whenhiring employees;



3. Submission of plans of actionCovered institutions shall submit a planof action on how to comply with therequirements of App. N-3 nos. 1, 2 and4 within thirty (30) business days from31 July 2000 or from opening of theinstitution.

4. Required reporting of certaintransactions. If there is reasonable groundto believe that the funds are proceeds of anunlawful activity as defined under R.A. No.9160 and/or its IRRs, the transactionsinvolving such funds or attempts to transactthe same, should be reported to the Anti-Money Laundering Council (AMLC) inaccordance with Rules 5.2 and 5.3 of theAMLA IRRs.








(6) Funds being managed or held asdeposit substitutes if there is reasonableground to believe that the same are proceedsof criminal and other illegal activities; and

(7) Suspicious transaction indicators or“red flags” as a guide in the submission tothe AMLC of reports of suspicioustransactions relating to potential or actualfinancing of terrorism.


1 Amended by AMLC Resolution No. 292 dated 11.20.03 (Annex N-3-b).



APP. N-308.12.31

(b) Sources and/or beneficiaries ofwire transfers are citizens of countrieswhich are identified or connected withterrorist activities.




(f) Deposits being made byindividuals who have no knownconnection or relation with the accountholder.

(g) An individual receivingremittances, but has no family membersworking in the country from which theremittance is made.


(i) Client is under investigation bylaw enforcement agencies for possibleinvolvement in terrorist activities.


(k) Transactions of individuals,companies or NGOs that are suspectedas being used to pay or receive funds fromrevolutionary taxes.



(n) A mismatch between the patternand size of financial transactions on the onehand and the stated purpose and activityof the NGO on the other.










b. Exemption from Bank Secrecy Law.When reporting covered transactions to theAMLC, covered institutions and their officers,employees, representatives, agents,advisors, consultants or associates shall notbe deemed to have violated R.A. No. 1405,as amended; R.A. No. 6426, as amended;R.A. No. 8791 and other similar laws, butare prohibited from communicating, directlyor indirectly, in any manner or by any means,to any person the fact that a coveredtransaction report was made, the contentsthereof, or any other information in relationthereto. In case of violation thereof, theconcerned officer, employee, representative,agent, advisor, consultant or associate of thecovered institution, shall be criminally liable.However, no administrative, criminal or civilproceedings, shall lie against any person forhaving made a covered transaction reportin the regular performance of his duties andin good faith, whether or not such reportingresults in any criminal prosecution underR.A. No. 9160 or any other Philippine law.


APP. N-308.12.31

c. Prohibition from disclosure of thecovered transaction report. Whenreporting covered transactions to theAMLC, covered institutions and theirofficers, employees, representatives,agents, advisors, consultants or associatesare prohibited from communicating,directly or indirectly, in any manner or byany means, to any person, entity, themedia, the fact that a covered transactionreport was made, the contents thereof, orany other information in relation thereto.Neither may such reporting be publishedor aired in any manner or form by the massmedia, electronic mail, or other similardevices. In case of violation thereof, theconcerned officer, employee, representative,

agent, advisor, consultant or associate ofthe covered institution, or media shall beheld criminally liable.

5. Certification of compliance withanti-money laundering regulationsCovered institution shall submit annuallyto the BSP thru the appropriate supervisingand examining department a certification(Annex N-3-a) signed by the President orofficer of equivalent rank and by theirCompliance Officer to the effect that theyhave monitored compliance with existinganti-money laundering regulations.

The certification shall be submitted inaccordance with Appendix N-1 and shallbe considered a Category A-2 report.

Manual of Regulations for Non-Bank Financial Institutions N RegulationsAppendix N-3 - Page 5

APP. N-3 08.12.31



1. That we have monitored (Name of NBFI)’s compliance with R.A. No. 9160 (Anti-Money Laundering Act of 2001) as well as with BSP Circular Nos. 251, 253, 259and 302;

2. That the NBFI is complying with the required customer identification, documentationof all new clients, and continued monitoring of customer’s activities;

3. That the NBFI is also complying with the requirement to record all transactions andto maintain such records including the record of customer identification for at leastfive (5) years;

4. That the NBFI does not maintain anonymous or fictitious accounts; and

5. That we conduct regular anti-money laundering training sessions for all NBFI officersand selected staff members holding sensitive positions.

_______________________________________ ___________________________ (Name of President or officer of equivalent rank) (Name of Compliance Officer)

SUBSCRIBED AND SWORN to before me, _____ this ___ day of ___________, affiant/sexhibiting to me their Community Tax Certificate No.(s) as follows:



Annex N-3-a

CERTIFICATION OF COMPLIANCE WITHANTI-MONEY LAUNDERING REGULATIONS

Manual of Regulations for Non-Banks Financial Institutions

APP. N-308.12.31



2. Banks shall file covered transactionreports (CTRs) on transactions involving allkinds of monetary instruments or property,i.e., in cash or non-cash, whether indomestic or foreign currency.

3. Covered institutions, other thanbanks, shall file CTRs on transactions in cashor foreign currency or other monetaryinstruments (other than checks) orproperties. Due to the nature of thetransactions in the stock exchange, only thebrokers-dealers shall be required to fileCTRs and STRs. The PSE, PCD, SCCP andtransfer agents are exempt from filingCTRs. They, are however, required to fileSTRs when the transactions that passthrough them are deemed to besuspicious.

4. Where the covered institutionengages in bulk transactions with a bank,i.e., deposits of premium payments in bulkor settlements of trade, and the bulk

Annex N-3-b


RULES ON SUBMISSION OF COVERED TRANSACTION REPORTS ANDSUSPICIOUS TRANSACTION REPORTS BY COVERED INSTITUTIONS

transactions do not distinguish clients andtheir respective transaction amounts, saidcovered institutions shall be required to fileCTRs on its clients whose transactionsexceed P500,000.00 and are included inthe bulk transactions.

5. With respect to insurancecompanies, when the total amount of thepremiums for the entire year, regardlessof the mode of payment (monthly,quarterly, semi-annually or annually),exceeds P500,000.00, such amount shallbe reported as a covered transaction, evenif the amounts of the amortizations are lessthan the threshold amount. The CTR shallbe filed upon payment of the first premiumamount, regardless of the mode ofpayment. Under this rule, the insurancecompany shall file the CTR only once everyyear until the policy matures or rescinded,whichever comes first.



APP. N-408.12.31

RULE 1TITLE

Rule 1.a. Title. - These Rules shall beknown and cited as the “Revised Rules andRegulations Implementing R.A. No. 9160”,(the Anti-Money Laundering Act of 2001[AMLA]), as amended by R.A. No. 9194.



Rule 2. Declaration of Policy. - It is herebydeclared the policy of the State to protectthe integrity and confidentiality of bankaccounts and to ensure that the Philippinesshall not be used as a money-launderingsite for the proceeds of any unlawfulactivity. Consistent with its foreign policy,the Philippines shall extend cooperationin transnational investigations andprosecutions of persons involved in moneylaundering activities wherever committed.

RULE 3DEFINITIONS



Rule 3.a.1. Banks, offshore bankingunits, quasi-banks, trust entities, non-stocksavings and loan associations, pawnshops,and all other institutions, including their


(Appendix to Sec. 4104N)

subsidiaries and affiliates supervised and/or regulated by the Bangko Sentral ngPilipinas (BSP).


(b) An affiliate means an entity at leasttwenty percent (20%) but not exceedingfifty percent (50%) of the voting stock ofwhich is owned by a bank, quasi-bank, trustentity, or any other institution supervisedand/or regulated by the BSP.

Rule 3.a.2. Insurance companies,insurance agents, insurance brokers,professional reinsurers, reinsurancebrokers, holding companies, holdingcompany systems and all other personsand entities supervised and/or regulated bythe Insurance Commission (IC).

(a) An insurance company includesthose entities authorized to transactinsurance business in the Philippines,whether life or non-life, and whetherdomestic, domestically incorporated orbranch of a foreign entity. A contract ofinsurance is an agreement whereby oneundertakes for a consideration to indemnifyanother against loss, damage or liabilityarising from an unknown or contingentevent. Transacting insurance businessincludes making or proposing to make, asinsurer, any insurance contract, or assurety, any contract of suretyship as avocation and not as merely incidental toany other legitimate business or activity ofthe surety, doing any kind of businessspecifically recognized as constituting thedoing of an insurance business within the


APP. N-408.12.31

meaning of Presidential Decree (P.D.)No. 612, as amended, including areinsurance business and doing orproposing to do any business insubstance equivalent to any of theforegoing in a manner designed toevade the provisions of P.D. No. 612,as amended.

(b) An insurance agent includes anyperson who solicits or obtains insuranceon behalf of any insurance company ortransmits for a person other than himselfan application for a policy or contract ofinsurance to or from such company oroffers or assumes to act in the negotiationof such insurance.


(d) A professional reinsurer includesany person, partnership, association orcorporation that transacts solely andexclusively reinsurance business in thePhilippines, whether domestic,domestically incorporated or a branch ofa foreign entity. A contract of reinsuranceis one by which an insurer procures a thirdperson to insure him against loss or liabilityby reason of such original insurance.

(e) A reinsurance broker includesany person who, not being a dulyauthorized agent, employee or officerof an insurer in which any reinsuranceis effected, acts or aids in any mannerin negotiating contracts of reinsuranceor placing risks of effecting reinsurance,for any insurance company authorizedto do business in the Philippines.

(f) A holding company includes anyperson who directly or indirectly controlsany authorized insurer. A holdingcompany system includes a holdingcompany together with its controlledinsurers and controlled persons.

Rule 3.a.3. (i) Securities dealers,brokers, salesmen, associated persons ofbrokers or dealers, investment houses,investment agents and consultants, tradingadvisors, and other entities managingsecurities or rendering similar services, (ii)mutual funds or open-end investmentcompanies, close-end investmentcompanies, common trust funds, pre-needcompanies or issuers and other similarentities; (iii) foreign exchangecorporations, money changers, moneypayment, remittance, and transfercompanies and other similar entities, and(iv) other entities administering orotherwise dealing in currency,commodities or financial derivatives basedthereon, valuable objects, cash substitutesand other similar monetary instruments orproperty supervised and/or regulated bythe Securities and Exchange Commission(SEC).





(e) An investment house includes anenterprise which engages or purports toengage, whether regularly or on anisolated basis, in the underwriting ofsecurities of another person or enterprise,including securities of the Governmentand its instrumentalities.


APP. N-408.12.31

(f) A mutual fund or an open-endinvestment company includes aninvestment company which is offering forsale or has outstanding, any redeemablesecurity of which it is the issuer.


(h) A common trust fund includes afund maintained by an entity authorizedto perform trust functions under a writtenand formally established plan, exclusivelyfor the collective investment andreinvestment of certain money representingparticipation in the plan received by it in itscapacity as trustee, for the purpose ofadministration, holding or management ofsuch funds and/or properties for the use,benefit or advantage of the trustor or ofothers known as beneficiaries.

(i) A pre-need company or issuerincludes any corporation supervised and/or regulated by the SEC and is authorizedor licensed to sell or offer for sale pre-needplans. Pre-need plans are contracts whichprovide for the performance of futureservice(s) or payment of future monetaryconsideration at the time of actual need,payable either in cash or installment by theplanholder at prices stated in the contract withor without interest or insurance coverage andincludes life, pension, education, internmentand other plans, which the Commission may,from time to time, approve.

(j) A foreign exchange corporationincludes any enterprise which engages orpurports to engage, whether regularly oron an isolated basis, in the sale andpurchase of foreign currency notes and suchother foreign-currency denominated non-bank deposit transactions as may beauthorized under its articles of incorporation.


(1) who for an advisory fee is engagedin the business of advising others, eitherdirectly or through circulars, reports,

publications or writings, as to the value ofany security and as to the advisability oftrading in any security; or



editor, lawyer, accountant, teacher;(c) the publisher of any bonafide

newspaper, news, business or financialpublication of general and regularcirculation, including their employees;


intent of this definition, provided that thefurnishing of such service by the foregoingpersons is solely incidental to the conductof their business or profession.



(m) A money payment, remittanceand transfer company includes any personoffering to pay, remit or transfer ortransmit money on behalf of any personto another person.

(n) “Customer” refers to any personor entity that keeps an account, orotherwise transacts business, with acovered institution and any person orentity on whose behalf an account ismaintained or a transaction is conducted,as well as the beneficiary of saidtransactions. A customer also includes thebeneficiary of a trust, an investment fund,a pension fund or a company or personwhose assets are managed by an assetmanager, or a grantor of a trust. It includesany insurance policy holder, whetheractual or prospective.


APP. N-408.12.31

(o) “Property” includes any thing oritem of value, real or personal, tangible orintangible, or any interest therein or anybenefit, privilege, claim or right withrespect thereto.

Rule 3.b. Covered Transaction is atransaction in cash or other equivalentmonetary instrument involving a totalamount in excess of PhP500,000.00 withinone (1) banking day.

Rule 3.b.1. Suspicious transactions aretransactions, regardless of amount, whereany of the following circumstances exist:

(1) There is no underlying legal or tradeobligation, purpose or economicjustification;



(4) Taking into account all knowncircumstances, it may be perceived that theclient’s transaction is structured in order toavoid being the subject of reportingrequirements under the act;


(6) The transaction is in any way relatedto an unlawful activity or any moneylaundering activity or offense under this actthat is about to be, is being or has beencommitted; or



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 andconfirmations of sale or investments andmoney market instruments;

(4) Contracts or policies of insurance,life or non-life, and contracts of suretyship;and

(5) Other similar instruments wheretitle thereto passes to another byendorsement, assignment or delivery.






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

Rule 3.g. Supervising Authority refers tothe BSP, the SEC and the IC. Where theBSP, SEC or IC supervision applies onlyto the registration of the coveredinstitution, the BSP, the SEC or the IC,within the limits of the AMLA, shall havethe authority to require and ask assistancefrom the government agency havingregulatory power and/or licensing authorityover said covered institution for theimplementation and enforcement of theAMLA and these Rules.


APP. N-408.12.31

Rule 3.h. Transaction refers to any actestablishing any right or obligation orgiving rise to any contractual or legalrelationship between the parties thereto.It also includes any movement of funds byany means with a covered institution.

Rule 3.i. Unlawful activity refers to anyact or omission or series or combinationthereof involving or having relation, to thefollowing:


(1) Kidnapping for ransom.


(2) Importation of prohibited drugs;(3) Sale of prohibited drugs;(4) Administration of prohibited drugs;(5) Delivery of prohibited drugs;(6) Distribution of prohibited drugs;(7) Transportation of prohibited drugs;(8) Maintenance of a den, dive or

resort for prohibited users;(9) Manufacture of prohibited drugs;(10)Possession of prohibited drugs;(11)Use of prohibited drugs;(12)Cultivation of plants which are

sources of prohibited drugs; and(13)Culture of plants which are sources

of prohibited drugs.


(14)Directly or indirectly requesting orreceiving any gift, present, share,percentage or benefit for himself or for anyother person in connection with anycontract or transaction between theGovernment and any party, wherein the

public officer in his official capacity has tointervene under the law;

(15) Directly or indirectly requestingor receiving any gift, present or otherpecuniary or material benefit, for himselfor for another, from any person for whomthe public officer, in any manner orcapacity, has secured or obtained, or willsecure or obtain, any government permitor license, in consideration for the helpgiven or to be given, without prejudice toSection 13 of R.A. No. 3019;


(17) Entering, on behalf of thegovernment, into any contract ortransaction manifestly and grosslydisadvantageous to the same, whether ornot the public officer profited or will profitthereby;




(20) Plunder through misappropriation,conversion, misuse or malversation of


APP. N-408.12.31

public funds or raids upon the publictreasury;

(21) Plunder by receiving, directly orindirectly, any commission, gift, share,percentage, kickbacks or any other formof pecuniary benefit from any person and/or entity in connection with anygovernment contract or project or byreason of the office or position of the publicofficer concerned;

(22) Plunder by the illegal orfraudulent conveyance or disposition ofassets belonging to the National Governmentor any of its subdivisions, agencies,instrumentalities or government-ownedor-controlled corporations or theirsubsidiaries;



(25) Plunder by taking undueadvantage of official position, authority,relationship, connection or influence tounjustly enrich himself or themselves atthe expense and to the damage andprejudice of the Filipino people and theRepublic of the Philippines.

(E) Robbery and extortion underArticles 294, 295, 296, 299, 300, 301 and302 of the Revised Penal Code, as amended;



(28) Robbery in an uninhabited house orpublic building or edifice devoted to worship.





brigands.




(35) Estafa with unfaithfulness or abuseof confidence by altering the substance,quality or quantity of anything of valuewhich the offender shall deliver by virtueof an obligation to do so, even though suchobligation be based on an immoral orillegal consideration;

(36) Estafa with unfaithfulness or abuseof confidence by misappropriating orconverting, to the prejudice of another,money, goods or any other personalproperty received by the offender in trustor on commission, or for administration,or under any other obligation involving theduty to make delivery or to return thesame, even though such obligation betotally or partially guaranteed by a bond;or by denying having received suchmoney, goods, or other property;

(37) Estafa with unfaithfulness or abuseof confidence by taking undue advantageof the signature of the offended party inblank, and by writing any document abovesuch signature in blank, to the prejudiceof the offended party or any third person;

(38) Estafa by using a fictitious name,or falsely pretending to possess power,influence, qualifications, property, credit,


APP. N-408.12.31

agency, business or imaginarytransactions, or by means of other similardeceits;



(41) Estafa by postdating a check, orissuing a check in payment of anobligation when the offender has no fundsin the bank, or his funds deposited thereinwere not sufficient to cover the amountof the check;



(44) Estafa by removing, concealingor destroying, in whole or in part, anycourt record, office files, document or anyother papers.


(45) Fraudulent importation of anyvehicle;

(46) Fraudulent exportation of anyvehicle;

(47) Assisting in any fraudulentimportation;

(48) Assisting in any fraudulentexportation;


(50) Concealing smuggled articleafter fraudulent importation;



(53) Transportation of smuggledarticle after fraudulent importation;



K.1. Hacking or cracking, which refersto:

(55) unauthorized access into orinterference in a computer system/server orinformation and communication system; or








(63) the unauthorized broadcasting, ofprotected material, electronic signature orcopyrighted works including legallyprotected sound recordings or phonogramsor information material on protected works,through the use of telecommunicationnetworks, such as, but not limited to, theinternet, in a manner that infringesintellectual property rights;



APP. N-408.12.31



(66) Sale of any adulterated ormislabeled product using electronicdocuments;

(67) Adulteration or misbranding ofany consumer product;







(74) Introduction into commerce of anymislabeled or banned hazardous substance;






(80) Violation of price tag requirements;(81) Mislabeling consumer products;(82) False, deceptive or misleading




(L) Hijacking and other violationsunder R.A. No. 6235; destructive arson

and murder, as defined under the RevisedPenal Code, as amended, including thoseperpetrated by terrorists against non-combatant persons and similar targets;







(92) Manipulation of security prices bycreating a false or misleading appearanceof active trading in any listed securitytraded in an Exchange or any other tradingmarket;

(93) Manipulation of security prices byeffecting, alone or with others, a series oftransactions in securities that raises theirprices to induce the purchase of a security,whether of the same or different class, ofthe same issuer or of a controlling,controlled or commonly controlledcompany by others;



APP. N-408.12.31

(95) Manipulation of security pricesby effecting, alone or with others, a seriesof transactions in securities that createsactive trading to induce such a purchaseor sale though manipulative devices suchas marking the close, painting the tape,squeezing the float, hype and dump, boilerroom operations and such other similardevices;

(96) Manipulation of security pricesby circulating or disseminating informationthat the price of any security listed in anExchange will or is likely to rise or fallbecause of manipulative market operationsof any one or more persons conducted forthe purpose of raising or depressing the priceof the security for the purpose of inducingthe purchase or sale of such security;

(97) Manipulation of security pricesby making false or misleading statementswith respect to any material fact, whichhe knew or had reasonable ground tobelieve was so false and misleading, forthe purpose of inducing the purchase orsale of any security listed or traded in anExchange;

(98) Manipulation of security pricesby effecting, alone or with others, anyseries of transactions for the purchase and/or sale of any security traded in anExchange for the purpose of pegging,fixing or stabilizing the price of suchsecurity, unless otherwise allowed by theSecurities Regulation Code or by the rulesof the SEC;

(99) Sale or purchase of any securityusing any manipulative deceptive deviceor contrivance;

(100) Execution of short sales or stop-loss order in connection with the purchaseor sale of any security not in accordancewith such rules and regulations as the SECmay prescribe as necessary andappropriate in the public interest or theprotection of the investors;

(101) Employment of any device,scheme or art i f ice to defraud in

connection with the purchase and sale ofany securities;








(109) Violations of marginrequirements;

(110) Violations on the restrictions onborrowings by members, brokers anddealers;




APP. N-408.12.31



(N) Felonies or offenses of a similarnature to the afore-mentioned unlawfulactivities that are punishable under thepenal laws of other countries.




(a) Any person knowing that anymonetary instrument or propertyrepresents, involves, or relates to, theproceeds of any unlawful activity, transactsor attempts to transact said monetaryinstrument or property.

(b) Any person knowing that anymonetary instrument or property involvesthe proceeds of any unlawful activity,performs or fails to perform any act as aresult of which he facilitates the offense ofmoney laundering referred to in paragraph(a) above.




PROCEDURES



(a) Suspicious transactions;(b) Covered transactions deemed

suspicious after an investigation conductedby the AMLC;


Rule 5.3. Attempts at Transactions. -Section 4 (a) and (b) of the AMLA providesthat any person who attempts to transact anymonetary instrument or propertyrepresenting, involving or relating to theproceeds of any unlawful activity shall beprosecuted for a money laundering offense.Accordingly, the reports required under Rule9.3 (a) and (b) of these Rules shall includethose pertaining to any attempt by anyperson to transact any monetary instrumentor property representing, involving orrelating to the proceeds of any unlawfulactivity.


LAUNDERING


and convicted of both the offense of money


APP. N-408.12.31

laundering and the unlawful activity asdefined under Rule 3 (i) of the AMLA.




Rule 6.4. Trial for the money launderingoffense shall proceed in accordance withthe Code of Criminal Procedure or theRules of Procedure of the Sandiganbayan,as the case may be.

Rule 6.5. Knowledge of the offender thatany monetary instrument or propertyrepresents, involves, or relates to theproceeds of an unlawful activity or that anymonetary instrument or property is requiredunder the AMLA to be disclosed and filedwith the AMLC, may be established by directevidence or inferred from the attendantcircumstances.

Rule 6.6. All the elements of every moneylaundering offense under Section 4 of theAMLA must be proved by evidencebeyond reasonable doubt, including theelement of knowledge that the monetaryinstrument or property represents, involvesor relates to the proceeds of any unlawfulactivity.

Rule 6.7. No element of the unlawfulactivity, however, including the identity ofthe perpetrators and the details of the actualcommission of the unlawful activity needbe established by proof beyond reasonabledoubt. The elements of the offense ofmoney laundering are separate and distinctfrom the elements of the felony or offenseconstituting the unlawful activity.



Rule 7.1.a. Composition. - The Anti-MoneyLaundering Council is hereby created andshall be composed of the Governor of theBSP as Chairman, the Commissioner of theInsurance Commission and the Chairmanof the SEC as members.

Rule 7.1.b. Unanimous Decision. - TheAMLC shall act unanimously in dischargingits functions as defined in the AMLA andin these Rules. However, in the case ofthe incapacity, absence or disability of anymember to discharge his functions, theofficer duly designated or authorized todischarge the functions of the Governor ofthe BSP, the Chairman of the SEC or theInsurance Commissioner, as the case maybe, shall act in his stead in the AMLC.

Rule 7.2. Functions. - The functions of theAMLC are defined hereunder:

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


APP. N-408.12.31






(7) to implement such measures asmay be inherent, necessary, implied,incidental and justified under the AMLAto counteract money laundering. Subjectto such limitations as provided for by law,the AMLC is authorized under Rule 7 (7)of the AMLA to establish an informationsharing system that will enable the AMLCto store, track and analyze moneylaundering transactions for the resoluteprevention, detection and investigation ofmoney laundering offenses. For thispurpose, the AMLC shall install acomputerized system that will be used inthe creation and maintenance of aninformation database;

(8) to receive and take action inrespect of any request from foreign statesfor assistance in their own anti-moneylaundering operations as provided in theAMLA. The AMLC is authorized underSections 7 (8) and 13 (b) and (d) of the AMLAto receive and take action in respect of anyrequest of foreign states for assistance in theirown anti-money laundering operations, inrespect of conventions, resolutions and otherdirectives of the United Nations (UN), theUN Security Council, and other internationalorganizations of which the Philippines is amember. However, the AMLC may refuseto comply with any such request, convention,resolution or directive where the actionsought therein contravenes theprovisions of the Constitution, or theexecution thereof is likely to prejudicethe national interest of the Philippines.

(9) to develop educational programson the pernicious effects of moneylaundering, the methods and techniquesused in money laundering, the viablemeans of preventing money launderingand the effective ways of prosecuting andpunishing offenders.

(10) to enlist the assistance of any branch,department, bureau, office, agency orinstrumentality of the government,including government-owned and-controlledcorporations, in undertaking any and all anti-money laundering operations, which mayinclude the use of its personnel, facilities andresources for the more resolute prevention,detection and investigation of moneylaundering offenses and prosecution ofoffenders. The AMLC may require theintelligence units of the Armed Forces of thePhilippines, the Philippine National Police,the Department of Finance, the Departmentof Justice, as well as their attached agencies,and other domestic or transnationalgovernmental or non-governmentalorganizations or groups to divulge to theAMLC all information that may, in any way,facilitate the resolute prevention,


APP. N-408.12.31

investigation and prosecution of moneylaundering offenses and other violations ofthe AMLA.




Rule 8.1. The Executive Director. - TheSecretariat shall be headed by anExecutive Director who shall be appointedby 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, must haveserved at least five (5) years either at the BSP,the SEC or the IC and of good moralcharacter, unquestionable integrity andknown probity. He shall be considered aregular employee of the BSP with the rankof Assistant Governor, and shall be entitledto such benefits and subject to such rules andregulations, as well as prohibitions, as areapplicable to officers of similar rank.

Rule 8.2. Composition. - In organizing theSecretariat, the AMLC may choose fromthose who have served, continuously orcumulatively, for at least five (5) years inthe BSP, the SEC or the IC. All membersof the Secretariat shall be consideredregular employees of the BSP and shallbe entitled to such benefits and subject tosuch rules and regulations as are applicableto BSP employees of similar rank.

Rule 8.3. Detail and Secondment. - TheAMLC is authorized under Section 7 (10)of the AMLA to enlist the assistance of theBSP, the SEC or the IC, or any other branch,

department, bureau, office, agency orinstrumentality of the government, includinggovernment-owned and controlledcorporations, in undertaking any and all anti-money laundering operations. This includesthe use of any member of their personnelwho may be detailed or seconded to theAMLC, subject to existing laws and CivilService Rules and Regulations. Detailedpersonnel shall continue to receive theirsalaries, benefits and emoluments from theirrespective mother units. Seconded personnelshall receive, in lieu of their respectivecompensation packages from their respectivemother units, the salaries, emoluments andall other benefits to which their AMLCSecretariat positions are entitled to.

Rule 8.4. Confidentiality Provisions. - Themembers of the AMLC, the ExecutiveDirector, and all the members of theSecretariat, whether permanent, on detailor on secondment, shall not reveal, in anymanner, any information known to themby reason of their office. This prohibitionshall apply even after their separation fromthe AMLA. In case of violation of thisprovision, the person shall be punished inaccordance with the pertinent provisionsof the Central Bank Act.



AND RECORD KEEPING


Rule 9.1.a. Customer Identification. -Covered institutions shall establish andrecord the true identity of its clientsbased on official documents. They shallmaintain a system of verifying the trueidentity of their clients and, in case ofcorporate clients, require a system of


APP. N-408.12.31

verifying their legal existence andorganizational structure, as well as theauthority and identification of all personspurporting to act on their behalf. Coveredinstitutions shall establish appropriate systemsand methods based on internationallycompliant standards and adequate internalcontrols for verifying and recording the trueand full identity of their customers.

Rule 9.1.b. Trustee, Nominee and AgentAccounts. - When dealing with customerswho are acting as trustee, nominee,agent or in any capacity for and on behalfof another, covered institutions shallverify and record the true and full identityof the person(s) on whose behalf atransaction is being conducted. Coveredinstitutions shall also establish and recordthe true and full identity of such trustees,nominees, agents and other persons and thenature of their capacity and duties. In case acovered institution has doubts as to whethersuch persons are being used as dummies incircumvention of existing laws, it shallimmediately make the necessary inquiriesto verify the status of the business relationshipbetween the parties.

Rule 9.1.c. Minimum Information/Documents Required for IndividualCustomers. - Covered institutions shallrequire customers to produce originaldocuments of identity issued by an officialauthority, bearing a photograph of thecustomer. Examples of such documents areidentity cards and passports. The followingminimum information/documents shall beobtained 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;





Rule 9.1.d. Minimum Information/Documents Required for Corporate andJuridical Entities. - Before establishingbusiness relationships, coveredinstitutions shall endeavor to ensure thatthe customer is a corporate or juridicalentity which has not been or is not inthe process of being, dissolved, woundup or voided, or that its business oroperations has not been or is not in theprocess of being, closed, shut down,phased out, or terminated. Dealingswith shell companies and corporations,being legal entities which have nobusiness substance in their own right butthrough which financial transactionsmay be conducted, should beundertaken with extreme caution. Thefollowing minimum information/documents shall be obtained fromcustomers that are corporate or juridicalentities, including shell companies andcorporations:








APP. N-408.12.31



Rule 9.1.g. Numbered Accounts. - Pesoand foreign currency non-checkingnumbered accounts shall be allowed:Provided, That the true identity of thecustomers of all peso and foreign currencynon-checking numbered accounts aresatisfactorily established based on officialand other reliable documents and records,and that the information and documentsrequired under the provisions of theseRules are obtained and recorded by thecovered institution. No peso and foreigncurrency non-checking accounts shall beallowed without the establishment of suchidentity and in the manner herein provided.The BSP may conduct annual testing for thepurpose of determining the existence andtrue identity of the owners of such accounts.The SEC and the IC may conduct similartesting more often than once a year andcovering such other related purposes as maybe allowed under their respective charters.


Rule 9.2.a. Record Keeping: Kinds ofRecords and Period for Retention. – Allrecords of all transactions of coveredinstitutions shall be maintained and safelystored for five (5) years from the dates of

transactions. Said records and files shallcontain the full and true identity of theowners or holders of the accounts involvedin the covered transactions and all othercustomer identification documents.Covered institutions shall undertake thenecessary adequate security measures toensure the confidentiality of such file.Covered institutions shall prepare andmaintain documentation, in accordance withthe aforementioned client identificationrequirements, on their customer accounts,relationships and transactions such that anyaccount, relationship or transaction can beso reconstructed as to enable the AMLC,and/or the courts to establish an audit trailfor money laundering.


Rule 9.2.c. Closed Accounts. - With respectto closed accounts, the records on customeridentification, account files and businesscorrespondence shall be preserved andsafely stored for at least five (5) years fromthe dates when they were closed.


Rule 9.2.e. Form of Records. – Recordsshall be retained as originals in such formsas are admissible in court pursuant to


APP. N-408.12.31

existing laws and the applicable rulespromulgated by the Supreme Court.



Should a transaction be determinedto be both a covered and a suspicioustransaction, the covered institution shallreport the same as a suspicioustransaction.

The reporting of covered transactionsby covered institutions shall be deferredfor a period of sixty (60) days after theeffectivity of R.A. No. 9194, or as maybe determined by the AMLC, in order toallow the covered insti tutions toconfigure their respective computersystems; provided that, all coveredtransactions during said defermentperiod shall be submitted thereafter.



Rule 9.3.b.2. Covered TransactionReports and Suspicious TransactionReports shall be submitted in a securedmanner to the AMLC in electronic form,

either via diskettes, leased lines, orthrough internet facilities, with thecorresponding hard copy for suspicioustransactions. The f inal f low andprocedures for such reporting shall bemapped out in the manual ofoperations to be issued by the AMLC.


Rule 9.3.d. Confidentiality Provisions. –When reporting covered transactions orsuspicious transactions to the AMLC,covered institutions and their officers,employees, representatives, agents,advisors, consultants or associates areprohibited from communicating, directlyor indirectly, in any manner or by anymeans, to any person, entity, or themedia, the fact that a covered transactionreport was made, the contents thereof,or any other information in relationthereto. Neither may such reporting bepublished or aired in any manner or formby the mass media, electronic mail, orother similar devices. In case of violationhereof, the concerned officer, employee,representative, agent, advisor, consultantor associate of the covered institution,or media shall be held criminally liable.


APP. N-408.12.31

Rule 9.3.e. Safe Harbor Provisions. – Noadministrative, criminal or civil proceedings,shall lie against any person for having madea covered transaction report or a suspicioustransaction report in the regular performanceof his duties and in good faith, whether ornot such reporting results in any criminalprosecution under this Act or any otherPhilippine law.



(a) After an investigation conducted bythe AMLC and upon determination thatprobable cause exists that a monetaryinstrument or property is in any way relatedto any unlawful activity as defined underSection 3 (i), the AMLC may file an Ex-Parteapplication before the Court of Appeals forthe issuance of a freeze order on anymonetary instrument or property subjectthereof prior to the institution or in the courseof, the criminal proceedings involving theunlawful activity to which said monetaryinstrument or property is any way related.


(c) The freeze order shall be effective fortwenty (20) days unless extended by theCourt of Appeals upon application by theAMLC.

Rule 10.2. Definition of Probable Cause- Probable cause includes such facts andcircumstances which would lead areasonably discreet, prudent or cautious manto believe that an unlawful activity and/or amoney laundering offense is about to be,is being or has been committed and thatthe account or any monetary instrumentor property subject thereof sought to befrozen is in any way related to said unlawfulactivity and/or money laundering offense.









APP. N-408.12.31






Upon receipt of the freeze order issuedby the court of appeals and uponverification by the covered institution thatthe related web of accounts originated fromand/or are materially linked to themonetary instrument or property subjectof the freeze order, the covered institutionshall freeze these related web of accountswherever these funds may be found.

The return of the covered institution asrequired under rule 10.3.c shall include thefact of such freezing and an explanation asto the grounds for the identification of therelated web of accounts.

Rule 10.5. Extension of the Freeze Order.- Before the twenty (20) day period of thefreeze order issued by the court of appealsexpires, the AMLC may apply in the samecourt for an extension of said period. Uponthe timely filing of such application andpending the decision of the Court ofAppeals to extend the period, said periodshall be deemed suspended and the freezeorder shall remain effective.

However, the covered institution shallnot lift the effects of the freeze order withoutsecuring official confirmation from the AMLC.

Rule 10.6. Prohibition Against Issuanceof Freeze Orders Against Candidates foran Electoral Office During ElectionPeriod. - No assets shall be frozen to theprejudice of a candidate for an electoraloffice during an election period.


BANK DEPOSITS

Rule 11.1. Authority to Inquire into BankDeposits with Court Order. -Notwithstanding the provisions of R.A. No.1405, as amended; R.A. No. 6426, asamended; R.A. No. 8791, and other laws,the AMLC may inquire into or examineany particular deposit or investment with anybanking institution or non-bank financialinstitution and their subsidiaries and affiliatesupon order of any competent court in casesof violation of this Act, when it has beenestablished that there is probable cause thatthe deposits or investments involved arerelated to an unlawful activity as defined inSection 3 (i) hereof or a money launderingoffense under Section 4 hereof; except incases as provided under Rule 11.2.

Rule 11.2. Authority to Inquire into BankDeposits Without Court Order. - TheAMLC may inquire into or examinedeposit and investments with any bankinginstitution or non-bank financial institutionand their subsidiaries and affiliates withouta Court Order where any of the followingunlawful activities are involved:

(a) Kidnapping for ransom under Article267 of Act No. 3815, otherwise known asthe Revised Penal Code, as amended;

(b) Sections 4,5,6, 8, 9, 10, 12, 13, 14,15 and 16 of R.A. No. 9165, otherwiseknown as the Comprehensive DangerousDrugs Act of 2002;

(c) Hijacking and other violationsunder R.A. No. 6235; destructive arson andmurder, as defined under the Revised


APP. N-408.12.31

Penal Code, as amended, including thoseperpetrated by terrorists againstnoncombatant persons and similar targets.

Rule 11.2.a. Procedure For ExaminationWithout A Court Order. - Where any ofthe unlawful activities enumerated underthe immediately preceding Rule 11.2 areinvolved, and there is probable cause thatthe deposits or investments with anybanking or non-banking financialinstitution and their subsidiaries andaffiliates are in anyway related to theseunlawful activities the AMLC shall issue aresolution authorizing the inquiry into orexamination of any deposit or investmentwith such banking or non-banking financialinstitution and their subsidiaries andaffiliates concerned.

Rule 11.2.b. Duty of the bankinginstitution or non- banking institutionupon receipt of the AMLC Resolution. -The banking institution or the non-bankingfinancial institution and their subsidiariesand affiliates shall, immediately upon receiptof the AMLC Resolution, allow the AMLCand/or its authorized representative(s) fullaccess to all records pertaining to the depositor investment account.

Rule 11.3. - BSP Authority to Examinedeposits and investments; AdditionalException to the Bank Secrecy Act. - Toensure compliance with this act, the BSPmay inquire into or examine any particulardeposit or investment with any bankinginstitution or non-bank financial institutionand their subsidiaries and affiliates whenthe examination is made in the course of aperiodic or special examination, inaccordance with the rules of examinationof the BSP.

Rule 11.3.a. BSP Rules of Examination. -The BSP shall promulgate its rules ofexamination for ensuring compliance by

banks and non-bank financial institutionsand their subsidiaries and affiliates with theAMLA and these rules.



Rule 12.1. Authority to Institute CivilForfeiture Proceedings. – The AMLC isauthorized under Section 7 (3) of the AMLAto institute civil forfeiture proceedings andall other remedial proceedings through theOffice of the Solicitor General.

Rule 12.2. When Civil Forfeiture May beApplied. – When there is a SuspiciousTransaction Report or a CoveredTransaction Report deemed suspicious afterinvestigation by the AMLC, and the courthas, in a petition filed for the purpose,ordered the seizure of any monetaryinstrument or property, in whole or in part,directly or indirectly, related to said report,the Revised Rules of Court on civilforfeiture shall apply.

Rule 12.3. Claim on Forfeited Assets. -Where the court has issued an order offorfeiture of the monetary instrument orproperty in a criminal prosecution for anymoney laundering offense under Section4 of the AMLA, the offender or any otherperson claiming an interest therein mayapply, by verified petition, for a declarationthat the same legitimately belongs to him,and for segregation or exclusion of themonetary instrument or propertycorresponding thereto. The verified petitionshall be filed with the court which renderedthe judgment of conviction and order offorfeiture within fifteen (15) days from thedate of the order of forfeiture, in default ofwhich the said order shall become final and


APP. N-408.12.31

executory. This provision shall apply inboth civil and criminal forfeiture.

Rule 12.4. Payment in Lieu of Forfeiture.- Where the court has issued an order offorfeiture of the monetary instrument orproperty subject of a money launderingoffense under Section 4 of the AMLA, andsaid order cannot be enforced because anyparticular monetary instrument or propertycannot, with due diligence, be located, orit has been substantially altered, destroyed,diminished in value or otherwise renderedworthless by any act or omission, directlyor indirectly, attributable to the offender,or it has been concealed, removed,converted or otherwise transferred toprevent the same from being found or toavoid forfeiture thereof, or it is locatedoutside the Philippines or has been placedor brought outside the jurisdiction of thecourt, or it has been commingled withother monetary instruments or propertybelonging to either the offender himself ora third person or entity, thereby renderingthe same difficult to identify or besegregated for purposes of forfeiture, thecourt may, instead of enforcing the orderof forfeiture of the monetary instrument orproperty or part thereof or interest therein,accordingly order the convicted offenderto pay an amount equal to the value of saidmonetary instrument or property. Thisprovision shall apply in both civil andcriminal forfeiture.

RULE 13MUTUAL ASSISTANCE AMONG STATES

Rule 13.1. Request for Assistance from aForeign State. - Where a foreign statemakes a request for assistance in theinvestigation or prosecution of a moneylaundering offense, the AMLC may executethe request or refuse to execute the sameand inform the foreign state of any validreason for not executing the request or for

delaying the execution thereof. Theprinciples of mutuality and reciprocityshall, for this purpose, be at all timesrecognized.

Rule 13.2. Powers of the AMLC to Act ona Request for Assistance from a ForeignState. - The AMLC may execute a requestfor assistance from a foreign state by: (1)tracking down, freezing, restraining andseizing assets alleged to be proceeds ofany unlawful activity under the procedureslaid down in the AMLA and in these Rules;(2) giving information needed by theforeign state within the procedures laiddown in the AMLA and in these Rules; and(3) applying for an order of forfeiture of anymonetary instrument or property in thecourt: Provided, That the court shall notissue such an order unless the applicationis accompanied by an authenticated copyof the order of a court in the requestingstate ordering the forfeiture of saidmonetary instrument or property of aperson who has been convicted of amoney laundering offense in therequesting state, and a certification or anaffidavit of a competent officer of therequesting state stating that the convictionand the order of forfeiture are final and thatno further appeal lies in respect of either.

Rule 13.3. Obtaining Assistance fromForeign States. - The AMLC may make arequest to any foreign state for assistancein (1) tracking down, freezing, restrainingand seizing assets alleged to be proceedsof any unlawful activity; (2) obtaininginformation that it needs relating to anycovered transaction, money launderingoffense or any other matter directly orindirectly related thereto; (3) to the extentallowed by the law of the foreign state,applying with the proper court therein foran order to enter any premises belongingto or in the possession or control of, any orall of the persons named in said request,


APP. N-408.12.31

and/or search any or all such personsnamed therein and/or remove anydocument, material or object named in saidrequest: Provided, That the documentsaccompanying the request in support of theapplication have been duly authenticatedin accordance with the applicable law orregulation of the foreign state; and (4)applying for an order of forfeiture of anymonetary instrument or property in theproper court in the foreign state: Provided,That the request is accompanied by anauthenticated copy of the order of theRegional Trial Court ordering the forfeitureof said monetary instrument or propertyof a convicted offender and an affidavit ofthe clerk of court stating that the convictionand the order of forfeiture are final and thatno further appeal lies in respect of either.

Rule 13.4. Limitations on Requests forMutual Assistance. - The AMLC mayrefuse to comply with any request forassistance where the action sought by therequest contravenes any provision of theConstitution or the execution of a requestis likely to prejudice the national interestof the Philippines, unless there is a treatybetween the Philippines and the requestingstate relating to the provision of assistance inrelation to money laundering offenses.

Rule 13.5. Requirements for Requests forMutual Assistance from Foreign States. -A request for mutual assistance from aforeign state must (1) confirm that aninvestigation or prosecution is beingconducted in respect of a moneylaunderer named therein or that he hasbeen convicted of any money launderingoffense; (2) state the grounds on whichany person is being investigated orprosecuted for money laundering or thedetails of his conviction; (3) givesufficient particulars as to the identity ofsaid person; (4) give particulars sufficientto identify any covered institution

believed to have any information, document,material or object which may be ofassistance to the investigation orprosecution; (5) ask from the coveredinstitution concerned any information,document, material or object which maybe of assistance to the investigation orprosecution; (6) specify the manner inwhich and to whom said information,document, material or object obtainedpursuant to said request, is to be produced;(7) give all the particulars necessary for theissuance by the court in the requested stateof the writs, orders or processes neededby the requesting state; and (8) containsuch other information as may assist in theexecution of the request.

Rule 13.6. Authentication of Documents- For purposes of Section 13 (f) of the AMLAand Section 7 of the AMLA, a document isauthenticated if the same is signed orcertified by a judge, magistrate orequivalent officer in or of, the requestingstate, and authenticated by the oath oraffirmation of a witness or sealed with anofficial or public seal of a minister, secretaryof state, or officer in or of, the governmentof the requesting state, or of the personadministering the government or adepartment of the requesting territory,protectorate or colony. The certificate ofauthentication may also be made by asecretary of the embassy or legation,consul general, consul, vice consul,consular agent or any officer in the foreignservice of the Philippines stationed in theforeign state in which the record is kept,and authenticated by the seal of his office.


Rule 13.7.1. For attachment of Philippineproperties in the name of personsconvicted of any unlawful activity asdefined in Section 3 (i) of the AMLA,


APP. N-408.12.31

execution and satisfaction of finaljudgments of forfeiture, application forexamination of witnesses, procuring searchwarrants, production of bank documentsand other materials and all other actionsnot specified in the AMLA and these Rules,and assistance for any of theaforementioned actions, which is subjectof a request by a foreign state, resort maybe had to the proceedings pertinent theretounder the Revised Rules of Court.

Rule 13.7.2. Authority to Assist the UnitedNations and other InternationalOrganizations and Foreign States. – TheAMLC is authorized under Section 7 (8)and 13 (b) and (d) of the AMLA to receiveand take action in respect of any requestof foreign states for assistance in their ownanti-money laundering operations. It is alsoauthorized under Section 7 (7) of the AMLAto cooperate with the NationalGovernment and/or take appropriateaction in respect of conventions,resolutions and other directives of theUnited Nations (UN), the UN SecurityCouncil, and other internationalorganizations of which the Philippines is amember. However, the AMLC may refuseto comply with any such request,convention, resolution or directive wherethe action sought therein contravenes theprovision of the Constitution or theexecution thereof is likely to prejudice thenational interest of the Philippines.

Rule 13.8. Extradition. – The Philippinesshall negotiate for the inclusion of moneylaundering offenses as defined underSection 4 of the AMLA among theextraditable offenses in all future treaties.With respect, however, to the state partiesthat are signatories to the United NationsConvention Against TransnationalOrganized Crime that was ratified by thePhilippine Senate on 22 October 2001,money laundering is deemed to be

included as an extraditable offense in anyextradition treaty existing between saidstate parties, and the Philippines shallinclude money laundering as anextraditable offense in every extraditiontreaty that may be concluded betweenthe Philippines and any of said stateparties in the future.



Rule 14.1.a. Penalties under Section 4 (a)of the AMLA. - The penalty ofimprisonment ranging from seven (7) tofourteen (14) years and a fine of not lessthan Php3.0 Million but not more thantwice the value of the monetary instrumentor property involved in the offense, shallbe imposed upon a person convictedunder Section 4 (a) of the AMLA.


Rule 14.1.c. Penalties under Section 4 (c) ofthe AMLA. - The penalty of imprisonmentfrom six (6) months to four (4) years or a fineof not less than Php100,000.00 but not morethan Php500,000.00, or both, shall beimposed on a person convicted underSection 4(c) of the AMLA.

Rule 14.1.d. Administrative Sanctions. - (1)After due notice and hearing, the AMLC shall,at its discretion, impose fines upon anycovered institution, its officers and employees,or any person who violates any of theprovisions of R.A. No. 9160, as amended by


APP. N-408.12.31

R.A. No. 9194 and rules, regulations, ordersand resolutions issued pursuant thereto. Thefines shall be in amounts as may bedetermined by the council, taking intoconsideration all the attendant circumstances,such as the nature and gravity of the violationor irregularity, but in no case shall such finesbe less than Php100,000.00 but not toexceed Php500,000.00. The imposition ofthe administrative sanctions shall be withoutprejudice to the filing of criminal chargesagainst the persons responsible for theviolations.

Rule 14.2. Penalties for Failure to KeepRecords - The penalty of imprisonmentfrom six (6) months to one (1) year or afine of not less than Php100,000.00 but notmore than Php500,000.00, or both, shallbe imposed on a person convicted underSection 9 (b) of the AMLA.


Rule 14.4. Where Offender is a JuridicalPerson. - If the offender is a corporation,association, partnership or any juridicalperson, the penalty shall be imposed uponthe responsible officers, as the case maybe, who participated in, or allowed by theirgross negligence the commission of thecrime. If the offender is a juridical person,the court may suspend or revoke its license.If the offender is an alien, he shall, in additionto the penalties herein prescribed, be

deported without further proceedings afterserving the penalties herein prescribed. If theoffender is a public official or employee, heshall, in addition to the penalties prescribedherein, suffer perpetual or temporaryabsolute disqualification from office, as thecase may be.


Rule 14.6. Penalties for Breach ofConfidentiality. – The punishment ofimprisonment ranging from three (3) toeight (8) years and a fine of not less thanPhp500,000.00 but not more than Php1.0Million, shall be imposed on a personconvicted for a violation under Section 9(c).In case of a breach of confidentiality that ispublished or reported by media, theresponsible reporter, writer, president,publisher, manager and editor-in-chief shallbe liable under this act.


HARASSMENT

Rule 15.1. Prohibition against PoliticalPersecution. - The AMLA and these Rulesshall not be used for political persecution orharassment or as an instrument to hampercompetition in trade and commerce. No casefor money laundering may be filed to theprejudice of a candidate for an electoral officeduring an election period.

Rule 15.2. Provisional RemediesApplication; Exception. –

Rule 15.2.a. - The AMLC may apply, inthe course of the criminal proceedings,for provisional remedies to prevent the


APP. N-408.12.31

monetary instrument or property subjectthereof from being removed, concealed,converted, commingled with other propertyor otherwise to prevent its being found ortaken by the applicant or otherwise placedor taken beyond the jurisdiction of the court.However, no assets shall be attached to theprejudice of a candidate for an electoral officeduring an election period.

Rule 15.2.b. - Where there is convictionfor money laundering under Section 4 ofthe AMLA, the court shall issue a judgmentof forfeiture in favor of the Government ofthe Philippines with respect to the monetaryinstrument or property found to be proceedsof one or more unlawful activities.However, no assets shall be forfeited to theprejudice of a candidate for an electoraloffice during an election period.

RULE 16RESTITUTION



PROGRAMS


(a) Within thirty (30) days from theeffectivity of R.A. No. 9160, as amendedby R.A. No. 9194, the BSP, the InsuranceCommission and the Securities andExchange Commission shall promulgatethe Implementing Rules and Regulationsof the AMLA, which shall be submitted tothe Congressional Oversight Committeefor approval.

(b) The Supervising Authorities, theBSP, the SEC and the IC shall, under their

own respective charters and regulatoryauthority, issue their Guidelines andCirculars on anti-money laundering toeffectively implement the provisions of R.A.No. 9160, as amended by R.A. No. 9194.


Rule 17.2.a. Covered institutions shallformulate their respective moneylaundering prevention programs inaccordance with Section 9 and otherpertinent provisions of the AMLA andthese Rules, including, but not limited to,information dissemination on moneylaundering activities and their prevention,detection and reporting, and the trainingof responsible officers and personnel ofcovered institutions, subject to suchguidelines as may be prescribed by theirrespective supervising authority. Everycovered institution shall submit its ownmoney laundering program to thesupervising authority concerned within thenon-extendible period that the supervisingauthority has imposed in the exercise ofits regulatory powers under its own charter.

Rule 17.2.b. Every money launderingprogram shall establish detailed proceduresimplementing a comprehensive, institution-wide “know-your-client” policy, set-up aneffective dissemination of information onmoney laundering activities and theirprevention, detection and reporting, adoptinternal policies, procedures and controls,designate compliance officers atmanagement level, institute adequatescreening and recruitment procedures, andset-up an audit function to test the system.

Rule 17.2.c. Covered institutions shall adopt,as part of their money laundering programs,a system of flagging and monitoringtransactions that qualify as suspicioustransactions, regardless of amount or covered


APP. N-408.12.31

transactions involving amounts below thethreshold to facilitate the process ofaggregating them for purposes of futurereporting of such transactions to the AMLCwhen their aggregated amounts breach thethreshold. All covered institutions, includingbanks insofar as non-deposit and non-government bond investment transactionsare concerned, shall incorporate in theirmoney laundering programs the provisionsof these Rules and such other guidelines forreporting to the AMLC of all transactions thatengender the reasonable belief that a moneylaundering offense is about to be, is being,or has been committed.

Rule 17.3. Training of Personnel. -Covered institutions shall provide all theirresponsible officers and personnel withefficient and effective training and continuingeducation programs to enable them to fullycomply with all their obligations under theAMLA and these Rules.



COMMITTEE

Rule 18.1. Composition of CongressionalOversight Committee. - There is herebycreated a Congressional OversightCommittee composed of seven (7) membersfrom the Senate and seven (7) members fromthe House of Representatives. The membersfrom the Senate shall be appointed by theSenate President based on the proportionalrepresentation of the parties or coalitionstherein with at least two (2) Senatorsrepresenting the minority. The members

from the House of Representatives shall beappointed by the Speaker also based onproportional representation of the parties orcoalitions therein with at least two (2)members representing the minority.


RULE 19APPROPRIATIONS FOR AND

BUDGET OF THE AMLC

Rule 19.1. Budget. – The budget of Php25.0million appropriated by Congress underthe AMLA shall be used to defray the initialoperational expenses of the AMLC.Appropriations for succeeding years shallbe included in the General AppropriationsAct. The BSP shall advance the fundsnecessary to defray the capital outlay,maintenance and other operating expensesand personnel services of the AMLCsubject to reimbursement from the budgetof the AMLC as appropriated under theAMLA and subsequent appropriations.

Rule 19.2. Costs and Expenses. - The budgetshall answer for indemnification for legalcosts and expenses reasonably incurred forthe services of external counsel in connectionwith any civil, criminal or administrativeaction, suit or proceedings to whichmembers of the AMLC and the ExecutiveDirector and other members of the Secretariatmay be made a party by reason of theperformance of their functions or duties. Thecosts and expenses incurred in defending theaforementioned action, suit or proceedingmay be paid by the AMLC in advance of the


APP. N-408.12.31

final disposition of such action, suit orproceeding upon receipt of an undertakingby or on behalf of the member to repaythe amount advanced should it beultimately determined that said memberis not entitled to such indemnification.


Rule 20. Separability Clause. – If anyprovision of these Rules or the applicationthereof to any person or circumstance isheld to be invalid, the other provisions ofthese Rules, and the application of suchprovision or Rule to other persons orcircumstances, shall not be affected thereby.


Rule 21. Repealing Clause. – All laws,decrees, executive orders, rules andregulations or parts thereof, including therelevant provisions of R.A. No. 1405, asamended; R.A. No. 6426, as amended; R.A.No. 8791, as amended, and other similarlaws, as are inconsistent with the AMLA,

are hereby repealed, amended or modifiedaccordingly.


Rule 22. Effectivity. – These Rules shalltake effect after its approval by theCongressional Oversight Committee andfifteen (15) days after its completepublication in the Official Gazette or in anewspaper of general circulation.


Rule 23.1. - Transitory Provisions. -Existing freeze orders issued by the AMLCshall remain in force for a period of thirty(30) days after effectivity of this act, unlessextended by the Court of Appeals.

Rule 23.2. - Effect of R.A. No. 9194 on Casesfor Extension of Freeze Orders Resolvedby the Court of Appeals. - All existing freezeorders which the Court of Appeals hasextended shall remain effective, unlessotherwise dissolved by the same court.


APP. N-508.12.31

A. GENERAL REQUIREMENTSOnly external auditors included in the

list of BSP selected external auditors shallbe engaged by banks, QBs, trust entitiesor NSSLAs for regular audit or specialengagements. The external auditor to behired shall also be in-charge of the audit ofthe entity’s subsidiaries and affiliatesengaged in allied activities: Provided, Thatthe external auditor shall be changed orthe lead and concurring partner shall berotated every five (5) years or earlier:Provided, further, That the rotation of thelead and concurring partner shall have aninterval of at least two (2) years.

Banks, QBs, trust entities or NSSLAswhich have engaged their respectiveexternal auditors for a consecutive periodof five (5) years or more as of 26November 2003 (effectivity of Circular No.410) shall have a one (1) year period fromsaid date within which to either changetheir external auditors or rotate the leadand/or concurring partner. The followingare the selection requirements for externalauditors:

1. No external auditor may beengaged by a bank, QB, trust entity orNSSLA if he or any member of hisimmediate family has or has committedto acquire any direct or indirect financialinterest in the bank, QB, trust entity orNSSLA, its subsidiaries and affiliates, or ifhis independence is considered impairedunder the circumstances specified in theCode of Professional Ethics for CPAs. Inthe case of a partnership, this limitation shallapply to the partners, associates and theauditor-in-charge of the engagement andmembers of their immediate family;

2. The external auditor and themembers of the audit team do not have/shall

not have outstanding loans or any creditaccommodations (except credit cardobligations which are normally availableto other credit card holders and fullysecured auto loans and housing loanswhich are not past due) with the bank, QB,trust entity or NSSLA, its subsidiaries andaffiliates at the time of signing theengagement and during the engagement.In the case of partnership, this prohibitionshall apply to the partners and theauditor-in-charge of the engagement;

3. The external auditor must not becurrently engaged nor was engaged duringthe preceding year in providing thefollowing services to the bank,QB, trustentity or NSSLA its subsidiaries andaffiliates:

a. Internal audit functions; b. Information systems design,implementation and assessment; and

c. Such other services which couldaffect his independence as may bedetermined by the Monetary Board;

4. The external auditor, auditor-in-charge and members of the audit teammust adhere to the highest standards ofprofessional conduct and shall carry outservices in accordance with relevantethical and technical standards, such as theGAAS and the Code of Professional Ethicsfor CPAs;

5. The external auditor should havethe following track record in conductingexternal audits:

a. The external auditor for a UB or KBmust have at least twenty (20) existingcorporate clients with resources of at leastP50.0 million each and at least one (1)existing client UB or KB in the regular auditor in lieu thereof, the external auditor orthe auditor-in-charge of the engagement

GUIDELINES TO GOVERN THE SELECTION, APPOINTMENT AND THEREPORTING REQUIREMENT FOR EXTERNAL AUDITORS OF NON-BANK

FINANCIAL INSTITUTIONS(Appendix to Sec. 4180N)


APP. N-508.12.31

must have at least five (5) years experiencein the regular audit of UBs or KBs;

b. The external auditor for a TB, QB,trust entity and national Coop Bank musthave at least ten (10) existing corporateclients with resources of at least P25.0million each and at least one (1) existingclient TB, QB, trust entity or nationalCoop Bank in the regular audit or in lieuthereof, the external auditor or theauditor-in-charge of the engagementmust have at least f ive (5) yearsexperience in the regular audit of TBs,QBs, trust entities or national CoopBanks: Provided, That an external auditorwho has been selected by the BSP to audita UB or KB is automatically qualified toaudit a TB, QB, trust entity or nationalCoop Bank; and

c. The external auditor for an RB orlocal Coop Bank must have at least three(3) years track record in conductingexternal audit: Provided, That an externalauditor who has been selected by the BSPto audit a UB, KB, TB, QB, trust entity andnational Coop Bank is automaticallyqualified to audit an RB, local Coop Bankand NSSLA;

6. A bank, QB, trust entity or NSSLAshall not engage the services of anexternal auditor whose partner or auditor-in-charge of audit engagement during thepreceding year had been hired oremployed by the bank, QB, trust entity,NSSLA, its subsidiaries and affiliates aschief executive officer, chief financialofficer, controller, chief accounting officeror any position of equivalent rank; and

7. The external auditor mustundertake to keep for at least five (5) yearsall audit or review working papers insufficient detail to support the conclusionsin the audit report which shall be madeavailable to the BSP upon request.Working papers shall include, but shall notbe limited to, pre-audit analysis, auditscope and detailed work program.

B. APPLICATION AND PRE-QUALIFICATION REQUIREMENTSThe application for BSP selection shall

be signed by the external auditor or themanaging partner, in case of partnershipand shall be submitted to theappropriate department of the SEStogether with the following documents/information:

1. An undertaking:a. That the external auditor, partners,

associates, auditor-in-charge of theengagement and the members of theirimmediate family shall not acquire anydirect or indirect financial interest with abank, QB, trust entity, NSSLA, itssubsidiaries and affiliates. Neither shallthe external auditor, partners, associatesand auditor-in-charge accept an auditengagement with a bank, QB, trust entity,NSSLA, its subsidiaries and affiliateswhere they or any member of theirimmediate family have any direct orindirect financial interest and that theirindependence is not considered impairedunder the circumstances specified in theCode of Professional Ethics for CPAs;

b. That the external auditor, partners,associates, auditor-in-charge andmembers of the audit team do not havenor shall apply for loans or any creditaccommodations (except normal creditcard obligations and fully secured autoloans and housing loans) nor shall acceptan audit engagement with a bank, QB,trust entity, NSSLA, its subsidiaries andaffiliates where they have outstandingloans or any credit accommodations(except normal credit card obligations andfully secured auto loans and housing loanswhich are not past due);

c. That the external auditor shall notaccept an audit engagement with a bank,QB, trust entity, NSSLA, its subsidiariesand affiliates where he was engagedduring the preceding year in providing thefollowing services:


APP. N-508.12.31

1. Internal audit functions;2. Information systems design,

implementation and assessment; and3. Such other services, which could

affect his independence as may bedetermined by the Monetary Board fromtime to time.

This requirement shall not, however,affect audit engagement existing as of 26November 2003 (effectivity of CircularNo. 410).

d. That the external auditor andmembers of the audit team shall adhere tothe highest standards of professionalconduct and shall carry out their servicesin accordance with relevant ethical andtechnical standards of the accountingprofession;

e. That the lead or concurring partnerand auditor-in-charge shall not acceptemployment with the bank, QB, trustentity, NSSLA, its subsidiaries and affiliatesbeing audited during the engagementperiod and within a period of one (1) yearafter the audit engagement;

f. That the external auditor shall notaccept an audit engagement with a bank,QB, trust entity, NSSLA, its subsidiariesand affiliates where an officer (i.e., chiefexecutive officer, chief financial officer,controller, chief accounting officer orother senior officer of equivalent rank) hadbeen a partner of the external auditor orhad worked for the audit firm and hadbeen the auditor-in-charge of the auditengagement of said entities during theyear immedia te ly preceding theengagement;

g. That the external auditor shall keepall audit or review working papers for atleast five (5) years in sufficient detail tosupport the conclusions in the audit report;and

h. That the audit work shall includeassessment of the audited institution’scompliance with BSP rules and regulations,such as, but not limited to the following:


and classification.2. Other documents/information:a. List of existing corporate clients

with resources of at least P50.0 millioneach for external auditor of a UB or KB;for a TB, QB, trust entity, NSSLA, andnational Coop Bank, list of existingcorporate clients with resources of at leastP25.0 million each; and list of existingclients and/or details of three (3) years trackrecord in external audit for external auditorsof an RB, NSSLA and a local Coop Bank;

b. If the external auditor for a UB orKB has no existing UB or KB client, andthe external auditor for a TB, QB, trustentity and national Coop Bank, has noexisting client TB or national Coop Bank,a notarized certification that the externalauditor or the auditor-in-charge of theengagement has at least five (5) yearsexperience in the regular audit of banksof appropriate category mentioning thebanks they have audited;

c. Updated PRC license (forindividual auditors) and business licensefor the partnership;

d. Copy of the proposed engagementcontract between the bank, QB, trust entityor NSSLA and the external auditor whereapplicable; and

e. Certification from PRC that theexternal auditor, lead partner, concurringpartner, auditor-in-charge and members ofthe audit team have no derogatoryinformation, previous conviction or anypending investigation. However, in theevent that the certification cannot beobtained because of the pendency of a case,the BSP may dispense with this requirementupon determination by the Monetary Boardthat the case involves purely legal question,or does not, in any way, negate theauditor’s adherence to the highest standardsof professional conduct nor degrade hisintegrity and objectivity.


APP. N-508.12.31

C. REQUIRED REPORTS1. To enable the BSP to take timely

and appropriate remedial action, theexternal auditor must report to the BSPwithin thirty (30) calendar days afterdiscovery, the following cases:

a. Any material finding involvingfraud or dishonesty (including cases thatwere resolved during the period of audit);and

b. Any potential losses the aggregateof which amounts to at least one percent(1%) of the capital.

2. The external auditor shall reportdirectly to the BSP within fifteen (15)calendar days the occurrence of thefollowing:

a. Termination or resignation asexternal auditor and stating the reasontherefor;

b. Discovery of a material breach oflaws or BSP rules and regulations such as,but not limited to:


and classification.c. Findings on matters of corporate

governance that may require urgent actionby the BSP.

3. In case there are no matters toreport (e.g., fraud, dishonesty, breach oflaws, etc.) the external auditor shall submitdirectly to the BSP within fifteen (15)calendar days after the closing of the auditengagement a notarized certification thatthere is none to report.

The management of the bank, QB,trust entity, NSSLA, its subsidiaries andaffiliates shall be informed of the adversefindings and the external auditor’s reportto the BSP shall include its explanation and/or corrective action.

The management of the bank, QB,trust entity, NSSLA, its subsidiaries andaffiliates shall be given the opportunity tobe present in the discussions between theBSP and the external auditor regarding the

audit findings, except in circumstanceswhere the external auditor believes thatthe entity’s management is involved infraudulent conduct.

It is, however, understood that theaccountability of an external auditor isbased on matters within the normalcoverage of an audit conducted inaccordance with GAAS.

D. DEFINITION OF TERMSFor purposes of these guidelines, the

following terms shall be defined asfollows:

1. Subsidiary. A corporation or firmmore than fifty percent (50%) of theoutstanding voting stock of which isdirectly or indirectly owned, controlled orheld with power to vote by a bank, QB,trust entity or NSSLA.

2. Affiliate. A corporation, not morethan fifty percent (50%) but not less thanten percent (10%) of the outstanding votingstock of which is directly or indirectlyowned, controlled or held with power tovote by a bank, QB, trust entity, NSSLAand a juridical person that is undercommon control with the bank, QB, trustentity or NSSLA.

3. Control. Exists when the parentowns directly or indirectly more than onehalf of the voting power of an enterpriseunless, in exceptional circumstance, it canbe clearly demonstrated that suchownership does not constitute control.Control may also exist even whenownership is one half or less of the votingpower of an enterprise when there is:

a. Power over more than one-half ofthe voting rights by virtue of an agreementwith other stockholders;

b. Power to govern the financial andoperating policies of the enterprise undera statute or an agreement;

c. Power to appoint or remove themajority of the members of the board ofdirectors or equivalent governing body;


APP. N-508.12.31

d. Power to cast the majority votes atmeetings of the board of directors orequivalent governing body; or

e. Any other arrangement similar toany of the above.

4. Associate. Any director, officer,manager or any person occupying a similarstatus or performing similar functions in theaudit firm including employees performingsupervisory role in the auditing process.

5. Partner. All partners includingthose not performing audit engagements.

6. Lead Partner. Also referred to asthe engagement partner/partner-in-charge/managing partner who is responsible forsigning the audit report on theconsolidated financial statements of theaudit client, and where relevant, theindividual audit report of any entity whosefinancial statements form part of theconsolidated financial statements.

7. Concurring Partner. The partnerwho is responsible for reviewing the auditreport.

8. Auditor-in-charge. Refers to theteam leader of the audit engagement.

E. INCLUSION IN BSP LISTIn case of partnership, inclusion in the

list of BSP selected external auditors shallapply to the audit firm only and not to theindividual signing partners or auditorsunder its employment. The BSP willcircularize to all banks, QBs, trust entitiesand NSSLAs the list of selected externalauditors once a year. The BSP, however,shall not be liable for any damage or lossthat may arise from its selection of theexternal auditors to be engaged by banks,QBs, trust entities, or NSSLAs, for regularaudit or special engagements.

F. SPECIFIC REVIEWWhen warranted by supervisory

concern, the Monetary Board may, at theexpense of the bank, QB, trust entity,NSSLA, its subsidiaries and affiliates

require the external auditor to undertake aspecific review of a particular aspect of theoperations of these institutions. The reportshall be submitted to the BSP and theaudited institution simultaneously, withinthirty (30) calendar days after theconclusion of said review.

G. AUDIT ENGAGEMENT CONTRACTBanks, QBs, trust entities, and

NSSLAs, shall submit the auditengagement contract between them,their subsidiaries and affiliates and theexternal auditor to the appropriatedepartment of the SES within fifteen (15)calendar days from signing thereof. Saidcontract shall include the followingprovisions:

1. That the bank, QB, trust entity, orNSSLA shall be responsible for keepingthe auditor fully informed of existing andsubsequent changes to prudential,regulatory and statutory requirements ofthe BSP and that both parties shall complywith said requirements;

2. That disclosure of information bythe external auditor to the BSP as requiredunder Items "C" and "F" hereof, shall beallowed; and

3. That both parties shall comply withall of the requirements under theseguidelines.

H. DELISTING OF EXTERNALAUDITORS1. Grounds for delistingExternal auditors may be delisted from

the list of BSP selected external auditorfor the bank, QB, trust entity or NSSLAfor violation of, or non-compliance withany provision of these guidelines or incase of dissolution of the audit firmexcept when said dissolution was solelyfor the purpose of admitting new partner/sand the new partner/s have compliedwith the requirements of theseguidelines.


APP. N-508.12.31

2. Procedure for delistingAn external auditor shall only be

delisted upon prior notice to him and aftergiving him the opportunity to be heard anddefend himself by presenting witnesses/evidence in his favor. Delisted externalauditor may re-apply for BSP selection afterthe period prescribed by the MonetaryBoard.

I. AUDIT BY THE BOARD OFDIRECTORSPursuant to Section 58 of R.A. No.

8791, otherwise known as “The General

Banking Law of 2000” the Monetary Boardmay also direct the board of directors of abank, QB, trust entity, NSSLA or theindividual members thereof, to conduct,either personally or by a committeecreated by the board, an annual balancesheet audit of the bank, QB, trust entity orNSSLA to review the internal audit and theinternal control system of the concernedentity and to submit a report of such auditto the Monetary Board within thirty (30)calendar days after the conclusionthereof.(As amended by Circular No. 529 dated 11 May 2006)


APP. N-608.12.31

QUALIFICATION REQUIREMENTSFOR A BANK/NON-BANK FINANCIAL INSTITUTION APPLYING FOR

ACCREDITATION TO ACT AS TRUSTEE ON ANY MORTGAGE OR BONDISSUED BY ANY MUNICIPALITY, GOVERNMENT-OWNED OR

CONTROLLED CORPORATION, OR ANY BODY POLITIC(Appendix to Subsec. 4109N.16)

A bank/NBFI applying for accreditationto act as trustee on any mortgage or bondissued by any municipality, government-owned or controlled corporation, or anybody politic must comply with thefollowing requirements:

a. It must be a bank or NBFI underBSP supervision;

b. It must have a license to engage intrust and other fiduciary business;

c. It must have complied with theminimum capital accounts requiredunder existing regulations, as follows:

UBs and KBs The amount requiredunder existing regulationsor such amount as may berequired by the MonetaryBoard in the future

Branches of The amount required underForeign Banks existing regulations

Thrift Banks P650.0 million or suchamounts as may berequired by the MonetaryBoard in the future

NBFIs Adjusted capital of at leastP300.0 million or suchamount as may be requiredby the Monetary Board inthe future.

d. Its risk-based capital adequacy ratiois not lower than twelve percent (12%) atthe time of filing the application;

e. The articles of incorporation orgoverning charter of the institution shall

include among its powers or purposes,acting as trustee or administering any trustor holding property in trust or on depositfor the use, or in behalf of others;

f. The by-laws of the institution shallinclude among others, provisions on thefollowing:

(1) The organization plan or structureof the department, office or unit which shallconduct the trust and other fiduciarybusiness of the institution;

(2) The creation of a trust committee,the appointment of a trust officer andsubordinate officers of the trust department;and

(3) A clear definition of the duties andresponsibilities as well as the line and stafffunctional relationships of the various units,officers and staff within the organization.

g. The bank’s operation during thepreceding calendar year and for the periodimmediately preceding the date ofapplication has been profitable;

h. It has not incurred net weeklyreserve deficiencies during the eight (8)weeks period immediately preceding thedate of application;

i. It has generally complied withbanking laws, rules and regulations, ordersor instructions of the Monetary Board and/or BSP Management in the last twopreceding examinations prior to the dateof application, particularly on the following:

(1) election of at least two (2)independent directors;

(2) attendance by every member of theboard of directors in a special seminar forboard of directors conducted or accreditedby the BSP;


APP. N-608.12.31

(3) the ceilings on creditaccommodations to DOSRI;

(4) liquidity floor requirements forgovernment deposits;

(5) single borrower’s loan limit; and(6) investment in bank premises and

other fixed assets.j. It maintains adequate provisions

for probable losses commensurate to thequality of its assets portfolio but not lowerthan the required valuation reserves asdetermined by the BSP;

k. It does not have float itemsoutstanding for more than sixty (60)calendar days in the “Due From/To HeadOffice/Branches/Other Offices” accountsand the “Due from Bangko Sentral”account exceeding one percent (1%) of thetotal resources as of date of application;

l. It has established a risk managementsystem appropriate to its operationscharacterized by clear delineation ofresponsibility for risk management, adequaterisk measurement systems, appropriatelystructured risk limits, effective internalcontrols and complete, timely and efficientrisk reporting system;

m. It has a CAMELS Composite Rating ofat least "3" in the last regular examination withmanagement rating of not lower than "3"; and

n. It is a member of the PDIC in goodstanding (for banks only).

Compliance with the foregoing as well aswith other requirements under existing regulationsshall be maintained up to the time the trust licenseis granted. A bank that fails in this respect shallbe required to show compliance for another testperiod of the same duration.


APP. N-708.12.31

FORMAT CERTIFICATION(Appendix to Subsec. 4211N.12)

______________________________Name of Bank

CERTIFICATION

Pursuant to the requirements of Subsec 4211N.12, I hereby certify that on all bankingdays of the semester ended _____ that the ____________________ (NBFI) did not enter intoany repurchase agreement covering government securities, commercial papers and othernegotiable and non-negotiable securities or instruments that are not documented inaccordance with existing BSP regulations and that it has strictly complied with the pertinentrules of the SEC and the BSP on the proper sale of securities to the public and performed thenecessary representations and disclosures on the securities particularly the following:

1. Informed and explained to the client all the basic features of the security being sold ona without recourse basis, such as, but not limited to:

a. Issuer and its financial condition;b. Term and maturity date;c. Applicable interest rate and its computation;d. Tax features (whether taxable, tax paid or tax-exempt);e. Risk factors and investment considerations;f. Liquidity feature of the instrument:

f.1. Procedures for selling the security in the secondary market (e.g., OTC orexchange);

f.2. Authorized selling agents; andf.3. Minimum selling lots.

g. Disposition of the security

g.1. Registry (address and contact numbers)g.2. Functions of the registryg.3. Pertinent registry rules and procedures

h. Collecting and Paying Agent of the principal and interesti. Other pertinent terms and conditions of the security and if possible, a copy of the

prospectus or information sheet of the security.

2. Informed the client that pursuant to BSP Circular No. 392 dated 23 July 2003 –• Securities sold under repurchase agreements shall be physically delivered, ifcertificated, to a BSP-accredited custodian that is mutually acceptable to the client and theNBFI, or by means of book-entry transfer to the appropriate securities account of the BSP-accredited custodian in a registry for said securities, if immobilized or dematerialized, and


APP. N-708.12.31

• Securities sold on a without recourse basis are required to be delivered physicallyto the purchaser, or to his designated custodian duly accredited by the BSP, if certificated,or by means of book-entry transfer to the appropriate securities account of the purchaseror his designated custodian in a registry for said securities if immobilized or dematerialized

3. Clearly stated to the client that:

a. The NBFI does not guarantee the payment of the security sold on a “without recoursebasis” and in the event of default by the issuer, the sole credit risk shall be borne by theclient; and

b. The NBFI is not performing any advisory or fiduciary function.

_______________ Name of Officer

Position

Date _____________

SUBSCRIBED AND SWORN to before me, this _____ day of _____, affiant exhibitinghis Community Tax Certificate No.(s) as indicated below:

Name Community Tax Date/Place Cert. No. Issued

Notary Public


APP. N-708.12.31


______________________________Name of NBFI

CERTIFICATION

Pursuant to the requirements of Subsec. 4211N.12, I hereby certify that as of 31January 2005, the ____________________ (name of NBFI) does not have any outstandingrepurchase agreements covering government securities, commercial papers and othernegotiable and non-negotiable securities or instruments that are not documented inaccordance with existing BSP regulations.

____________________

Name of Officer

Position

SUBSCRIBED AND SWORN to before me, this _____ day of _____, affiantexhibiting his Community Tax Certificate as indicated below:

Name Community Tax Date/Place

Cert. No. Issued

Notary Public

Annex N-7-a

FORMAT CERTIFICATION


APP. N-808.12.31

A. Application for Registration

Name of Applicant

Address

Telephone No./Fax No.

Date

Bangko Sentral ng PilipinasA. Mabini St., Malate, Manila

Gentlemen:

We hereby apply for authority to act as (foreign exchange dealer/money changer orremittance agent). We are currently engaged in this business since _____ (if applicable).

In support of this application, we submit the following documents:

o Incorporation papers duly authenticated by the Securities and Exchange Commission(for corporation or partnership);o Copy of the Certificate of Registration with the Department of Trade and Industry (forsingle proprietorship);o Copy of business license/permit from the city or municipality having territorial jurisdictionover the place of establishment and operation;o List of stockholders/partners/proprietor/directors/principal officers as the case maybe;o Notarized Deed of Undertaking to strictly comply with the requirements of all relevantlaws, rules and regulations, signed by the owner, partner, president or officer of equivalentrank.

Very truly yours,

___________________________________________(Signature of authorized officer over printed name)

_________________________ Designation

REGISTRATION AND OPERATIONS OF FOREIGN EXCHANGE DEALERS/MONEY CHANGERS AND REMITTANCE AGENTS

(Appendix to Sec. 4511N)


APP. N-808.12.31

B. Deed of Undertaking

Name of Applicant

Address

Telephone No./Fax No.

DEED OF UNDERTAKING

I, (name and designation), of legal age and under oath, declare the following:

1. That I have been duly authorized by (name of institution) and its Board of Directors/Partners/Owners to bind (name of institution) to strictly comply with all the requirements,rules and regulations of the Bangko Sentral ng Pilipinas regarding the registration andoperations of foreign exchange dealers/money changers/remittance agents as well as theprovisions of the Anti-Money Laundering Act of 2001 (R.A. No. 9160, as amended by R.A.No. 9194) and its implementing rules and regulations.

2. That I certify that (name of institution) undertakes to strictly comply with all therequirements, rules and regulations of the Bangko Sentral ng Pilipinas regarding the licensingand operations of foreign exchange dealers/money changers/remittance agents as well aswith all the provisions of the Anti-Money Laundering Act of 2001 (R.A. No. 9160) and itsimplementing rules and regulations.

3. That I certify that (name of institution), through and with full knowledge and agreementof its Board of Directors/Partners/Owners. Understands and accepts that in case of violationsof any of the aforementioned laws, rules and regulations, (name of institution) and its Boardof Directors/Partners/Owners/Stockholders/Officers/employees responsible for suchviolation/s shall be subject to the administrative sanctions prescribed under Section 36 ofR.A. No. 7653, otherwise known as the “New Central Bank Act” and other applicablelaws, rules and regulations.

(Signature over printed name)

_________________________ Designation

Subscribed and sworn to before me this _____ of __________, 20____, affiant exhibitingto me his/her Community Tax Certificate No. ___________________ issued at_______________ on _______.

NOTARY PUBLIC


APP. N-808.12.31

C. Application to Sell/Purchase Foreign Currency

___________________________________________________________Name of Foreign Exchange Dealer/Money Changer/Remittance Agent

________________________________Address

APPLICATION TO SELL/PURCHASE FOREIGN CURRENCY

1. Date :_________________________

2. Printed Name of Customer :_________________________

3. Signature :_________________________

4. Present Address :_________________________

5. Date and Place of Birth :_________________________

6. Telephone Number :_________________________

7. Nationality :_________________________

8. Currency Sold/Purchased : US Dollar _____ Others (specify)

9. Amount Sold/Purchased : In figures _________________ In words _________________

10. Source of Foreign Currency :_________________________

__________ OFW/Balikbayan/Returning Resident__________ Tourist__________ Expatriate based in the Philippines__________ Foreign Currency Deposit Account

Holder__________ Domestic Resident – Excess Travel

Funds__________ Others (please specify)

11. Purpose of Purchase :__________________________


APP. N-808.12.31

Documents Required

Presentation of applicant’s passport, and/orpassenger ticket, copies of which shall beretained.

For travel funds over US$5,000, thefollowing shall be additionally required:

a. Copy of applicant’s/Sponsor'sIncome Tax Return (ITR) duly stampedby the BIR; or

b. Travel authority from the applicant’scompany/office/agency if he is beingsponsored by said company/office/agency; and

c. Invitation from foreign sponsoringinstitution, if applicable.

1. Statement of enrollment or acceptanceby the school abroad;

2. School bills/statements of accountcovering tuition and other school fees;and/or

3. Applicant’s notarized certification thathe is not under scholarship, or if underscholarship, a notarized certificationthat the amount applied for is to coverhis expenses, not being covered by thescholarship.

1. Proof of admission or enrollment incorrespondence school; and/or

2. Billings from the school abroad whichshall include assessment of fees andother charges related to the course.

D. Minimum Documentary Requirements For the Sale of Foreign Currencies

Purpose

1. Travel Funds (only for permanentresidents of the Philippines)

2. Educational Expenses/Student Maintenance

3. Correspondence StudiesAABs/NBBSEs/Forex Corp. may sellforeign exchange to cover tuition feesfor correspondence studies, which shallbe directly remitted to thecorrespondence school. Issuane of draftmay be payable to the correspondenceschool.

A. Sale of foreign exchange for non-trade purposes under Section 2 of Circular No. 1389s. 1993, as amended


APP. N-808.12.31

4. Medical Expenses

5. Support of Dependents AbroadAABs may sell foreign exchangecovering the monthly living allowanceabroad of a child not more than 21 yearsof age, spouse or parent of a Philippineresident.

6. Emigrants' Assets

1. Travel documents of patient; and/or2. Certification issued by hospital abroad

on the treatment to be administered tothe patient including cost estimate; orstatement of account with the hospital/bills of expenses from hospital/treatmentcenter abroad, whichever is applicable.

1. Consular certificate or its equivalentdocuments to prove that the dependentis residing abroad dated not earlier thanone year from FX application date; and

2. Certified true copy of birth certificate,marriage contract, adoption papers,whichever is applicable, to prove thatdependent is the wife, husband, childor parent of the remitter applicant;

1. Proof of residence of emigrantbeneficiary abroad;

2. Proof of ownership of the asset(s) byemigrant/beneficiary abroad;

3. In case of income from real properties,a statement of rentals/income earned;

4. In case of transfer of proceeds of capitalassets, copy of deed of sale;

5. In case of capital transfer of testate andintestate inheritance and legacies:

i. Copy of court order approvingthe partition and distribution ofestate;

ii. Copy of the extra-judicialsettlement and partition dulyregistered with Register ofDeeds.

6. For transfer of proceeds of life insurancebenefits, proof of receipt of the proceedsof the policy;

7. For remittance of proceeds of sales ofpersonal property, copy of deed of sale;

8. In case of transfer of proceeds of sale ofshares of stock, deed of sales or broker’ssales invoice; and

9. In case of retirement benefits, evidenceof receipt of retirement benefits.


APP. N-808.12.31

7. Salary/bonus/divident/other benefits offoreign expatriates (including peso savings)

8. Producers' Share in Movie Revenue/TVFilm Rentals

9. Commssions on Exports due ForeignAgents

10. Freight Charges on Exports/Imports

11. Foreign Advertising Costs

12. Subscriptions to foreign magazines orperiodicals

13. Charters and Leases of Vessels/Aircraftsand other type of leases.

14. Membership dues and registration feesto associations abroad

1. Employment contract/Certification ofemployer on the amount ofcompensation paid to the foreignnational during the validity of thecontract stating whether the same hadbeen paid in foreign exchange;

2. Photocopy of the ACR and DOLE AlienEmployment Permit of the foreignnational; and

3. If amount to be remitted comes fromsources other than salaries, informationregarding the sources supported byappropriate documents should besubmitted.

1. Statement of remittance share rental;and

2. Copy of distributorship contract.

1. Agency agreement; and2. Agent’s Statement of Account/

Computation of commission inaccordance with agency agreement.

1. Bills/Statements of account on freightcharges; and

2. Copy of Bill of Lading

1. Copy of advertising agreement; and2. Original statement of accounts or bills

or invoices.

Billing/Statement of Account.

1. Charter or Lease of Vessels/Aircrafts orlease agreement; and

2. Billing/Statement of Account

1. Proof of membership in the foreign orinternational association; and

2. Billings for membership dues/registration fees.


APP. N-808.12.31

15. Port disbursements abroad of aircraftand vessels of Philippine registry orchartered/leased by domestic operators

16. Mail fees/International settlement ofaccounts for telegraph, telegram, radio,satellite and other communication facilities.

17. Salvage fees

18. Income taxes due to ForeignGovernments from foreign nationals

19. Services/Consultancy/Management/Distributorship Fees with foreign firmsor individuals

20. Retainers' FeesForeign exchange payments byresidents to foreign professionals actingas liaison, counsel, agent orrepresentative abroad

21. Insurance/Reinsurance Premium

22. Claims for losses and other paymentsof insurance companies/brokers abroad

23. Net Peso Revenues of Foreign Airlines/Shipping Companies

24. Royalty/Copyright/Franchise/Patent/Licensing Fees

1. Copy of contract or agreement; and2. Statement of accounts/bills/invoices.

1. Copy of contract or agreement; and2. Statement of account/bills/invoices.

1. Copy of contract for salvage services;and

2. Statement of accounts/bills/invoices.

1. Copy of DOLE-approved contract ofemployment; and

2. Copy of income tax return covering theincome tax payment sought to beremitted.

1. Copy of the pertinent agreement; and2. Statement/Computation of fees due.

1. Copy of the agreement/contract; and2. Billings/invoices from the beneficiary.

Billings/Invoices from foreign insurer/reinsurer

Billings/Invoices of insurance companies/brokers abroad.

1. Copy of the General Sales Agency orcertified copy of the Bilateral AirAgreements; and

2. Statement of Net Peso Revenues (PesoReceipts less Disbursements) for theperiod covered by the remittance.

1. Copy of Contract/agreement; and2. Statement/Computation of the Royalty/

Copyright/Patent/Licensing Fee


APP. N-808.12.31

25. Remittance of Net Peso Revenuecollected by embassies of foreign countries

26. Payment of FX obligations byPhilippine credit card companies tointernational credit card companies (e.g.Visa International and MastercardInternational) including peso collectionfrom local credit card holders as paymentof bills received from non-residentmerchants and other fees/charges.

Foreign Currency Loan Payments

1. Medium/Long-term Foreigncurrency Loans (with originalmaturities of over 1 year)

Certification from the Ambassador/Embassyauthorized officer that the Peso amountapplied for conversion to foreign currencyis net of local expenses.

1. Settlement report from internationalcredit card companies identifying thenature of various obligations;

2. Schedule showing summary of theforeign currency billings received frominternational credit card companiesabroad and the corresponding pesocollection thereof; and

3. Letter of undertaking or sworncertification stating that local credit cardcompany has not purchased foreignexchange in excess of the amount oftheir foreign currency requirement.

Documents should all be originals unlessotherwise indicated. FXDs/MCs shallindicate sale of FX on the prescribeddocuments

1.a BSP registration letter and accompanying“Schedule of Principal and InterestPayments on BSP-registered ForeignCredits" (Schedule RA-2); and whereapplicable, “Schedule of Payment forFees & Other Charges on BSP-RegisteredForeign Loan” (Schedule RA-2.1). The FXselling FXDs/MCs shall duly fill up theoriginals of the appropriate schedules torecord the FX sale; and

1.b Copy of billing statement from creditor.Amounts that may be purchased shallbe limited to maturing amounts onschedules due dates indicated in theregistration letter. Remittance of FXpurchased shall coincide with the duedates of the obligations to be serviced,unless otherwise approved by the BSP.

B. Sale of Foreign Exchange for payment of foreign currency loans covered by Sections 22to 31 of Circular 1389 s. 1993, as amended


APP. N-808.12.31

1. Short-term Foreign Currency Loans(with original maturity of up to 1 year)

a. Loans from offshore creditors (banksand non-banks)

OR:2.a BSP letter-authority for the borrower to

purchase FX to service specific loanaccount/s and where applicable, the“Schedule of Foreign ExchangePurchases from the Banking System”.The FX selling FXDs/MCs shall recordthe date/s and amount/s of FX sold onthe original BSP letter-authority orwhere there is an accompanyingschedule for FX purchases, on theoriginal of such schedule; and

2.b Copy of billing statement from creditor.Amounts that may be purchased shallbe limited to the unutilized balance ofthe letter-authority. Remittance of FXpurchased shall coincide with the duedates of the obligations to be serviced,unless otherwise approved by the BSP.

1.a BSP approval or registration lettershowing loan terms and borrower’sreceiving copy of its report on the short-term loans submitted to BSP’sInternational Department (ID). The FXselling FXDs/MCs shall stamp “FXSOLD”, the date’s of sale and theamount/s involved on the original BSPapproval/registration letter; and

1.b Copy of billing statements from creditor.Amounts that may be purchased shallbe limited to: (a) amounts/ratesindicated in the BSP approval orregistration letter; or (b) the outstandingbalance of the loan indicated in thereport, whichever is lower. Remittanceof FX purchased shall coincide with thedue dates of the obligations to beserviced, unless otherwise approved bythe BSP.


APP. N-808.12.31

b. Loans from FCDUs/OBUs1.a BSP approval or registration letter

showing loan terms or certificationfrom the lending bank on the amountoutstanding. The FX selling FXDs/MCsshall stamp “FX SOLD”, the date/s ofsale and the amount/s involved on theoriginal BSP approval/registration letteror bank certification; and

1.b. Copy of billing statement from creditor.Amounts that may be purchased shallbe limited to: (a) amounts/ratesindicated in the BSP approval orregistration letter; or (b) the outstandingof the loan indicated in the bankcertification, whichever is lower.Remittance of FX purchased shallcoincide with the due dates of theobligations to be serviced, unlessotherwise approved by the BSP.

OR:

2.a For loans not requiring BSP approval/registration, promissory note (PN)certified as true copy by the Head ofthe lending bank’s loans departmentand certification from the lending bank:

i. on the principal amount stilloutstanding;

ii. that the loan is eligible forservicing with FX purchasedfrom the banking system in linewith existing regulations;

iii. that loan was used to finance tradetransactions (as well as pre-exportcosts in the case of FCDU loans ofexporters) of the borrower; and

iv. the date when the loan account hasbeen reported to the appropriateBSP department/office under theprescribed forms. This may bedispensed for new loans whichmay not have been reported yet toBSPas of date of application topurchase FX.


APP. N-808.12.31

1. Capital Repatriation of:a. Investment in PSE-Listed securities

The FX selling FXDs/MCs shallstamp “FX SOLD”, the date of saleand the amount/s involved on theoriginal certification from thelending bank; and

2.b Copy of billing statement from creditor.Amounts that may be purchased shallbe limited to amounts/rates indicatedin the bank certification or PN,whichever is lower. Remittance of FXpurchased shall coincide with the duedates of the obligations to be serviced,unless otherwise approved by the BSP.

Note:For unregistered foreign currency loans/obligations to non-resident financialinstitutions and FCDU loans not eligible tobe serviced with FX purchased from thebanking the system outstanding as of 27October 2000 but which may be servicedby FXDs/MCs, copies of the followingdocuments shall be required:

i. Loan agreement/promissorynotes; and

ii. Billing statements from creditor.

1. If directly registered with BSP or if theselling/remitting bank is the registeringcustodian bank:a. Broker’s sales invoice; andb. Original Bangko Sentral Registration

Document (BSRD).2. If the selling/remitting bank is not the

registering custodian bank:a. Broker’s sales invoice; andb. Original BSRD.

3. If the selling/remitting FXD/MC is notthe registering custodian bank:a. Broker’s sales invoice; andb. Original BSRD Letter-Advice from

the registering custodian bank.

C. Sale of FX for capital repatriation/remittance of dividend/profits earnings and outwardinvestments under Sections 32 to 44 of Circular 1389 s. 1993, as amended


APP. N-808.12.31

b. Direct Foreign Equity Investments

c. Investments in Peso GovernmentSecurities, Money MarketInstruments or 90-day TimeDeposits

2. Remittance of Dividends/Profits/Earnings

1. Original BSRD;2. Proof of sale or relevant documents

showing the amount to be repatriated;in case of dissolution/capital reduction,proof of distribution of funds/assets suchas statement of net assets for liquidation;

3. Clearance from appropriate departmentof the BSP-Supervision and ExaminationSector (SES) for banks, or from theInsurance Commission for insurancecompanies, or from the Department ofEnergy for oil companies;

4. Detailed computation of the amountapplied for in the attached formatprepared by authorized officer ofinvestee firm (Attachment 2); and

5. Pertinent audited financial statements.

1. Original BSRD; and2. Confirmation of Purchase (COP),

Confirmation of Sale (COS) or Deed of Sale,Matured Contract for Money MarketInstruments or Matured Certificate of TimeDeposit.

1. Original BSRD or BSRD Letter-Advicefrom Registering Custodian Bank (ifremitting/selling bank is not the registeringcustodian bank for PSE-listed shares);

2. Schedule showing name/address ofinvestor, BSRD No., gross amount ofcash dividend, tax withheld and netamount (for PSE-listed shares);

3. Board Resolution covering the dividenddeclaration (evidenced by CorporateSecretary’s Sworn Certification, for directequity investments or Dividend Notice, forPSE-listed shares);

4. Audited/Interim Financial Statementscovering the dividend declaration period(for direct foreign equity investments); and

5. For direct foreign equity investments,clearance from BSP-SES (for banks),Insurance Commission (for insurancecompanies), or Department of Energyor the National Power Corporation (foroil/natural gas/geothermal companies).


APP. N-808.12.31

3. Outward Investment

6. Detailed computation of the amountapplied for in the attached format(Attachment 2).

1. A project feasibility study, investmentproposal/subscription agreement,bond/stock offering circular and suchother documents showing the natureand place of the investment;

2. A written undertaking to inwardly remitand sell for pesos thru AABs thedividends/earnings or divestmentproceeds from outward investmentsfunded by FX purchased from AAB asrequired therein;

3. BSP approval and registration (foroutward investment exceeding anaggregate of US$6.0 million perinvestor per year funded by FXpurchased from AAB(s);

4. Regardless of amount, submission ofclearance: (a) from the appropriatedepartment of the BSP- SES forinvestments of banks; and (b) from theInsurance Commission for investmentsof insurance companies; and

5. Copy of investor’s latest ITR dulystamped by the BIR.


Manual of Regulations for Non-Banks Financial Institutions

APP. N-808.12.31

Annex N-8-a

Certificate of Registration of Foreign Exchange Dealers (FXDs)/Money Changers (MCs) and Remittance Agents (RAs).

Banks are enjoined to require their clients FXDs/MCs and RAs to submit a copy oftheir certificate of registration issued by the BSP. This requirement shall be considered aspart of “Know Your Customer” compliance procedures.

The certificates can be confirmed or verified with the BSP Supervision and ExaminationDepartment V. The registration of FXDs/MCs and RAs with BSP is provided for underSec. 4511N.


APP. N-8 08.12.31

Attachment 2

COMPUTATION SHEET

Name of FX Selling Bank: ________ _________ Date of FX Sale: ________

TYPE OF FOREIGN INVESTMENT TRANSACTION

Remittance of Cash Dividends/Profits

Repatriation of Capital

Name of Investee Firm: _ _______________________ ______________________

Name of Investor: _ _______________________ ______________________

REMITTANCE OF CASH DIVIDENDS/ PROFITS

Record Date: __________________Payment Date: __________________Amount of Dividends/Share or Rate of Profits: __________________

Base Shares Dividends/Profits Total BSRD No. Registered per share Amount (Php)________ _ ___ __________ ____ ___________ ____ ____ ____ ________________ ____ _________ ______ ____________ ____ _____ __________

A. Gross Peso Amount Remittable _______________B. Less: Taxes/Charges _______________C. Net Peso Amount Remittable _______________D. Foreign Exchange Applied for Remittance (C/FX rate*) _______________

REPATRIATION OF CAPITAL

Total Amount/ Outstanding Balance Amount/No. Shares No. of Shares Before this Applied

BSRD No. Registered Repatriation for Repatriation__ ___ __ ___ ________ _______ ________________ _______ _ _______

A. Total No. of Shares/Amount AppliedFor Repatriation _______________

B. Selling Price/Share (if applicable) _______________C. Gross Peso Amount Repatriable (A x B) _______________D. Taxes/Charges _______________E. Net Peso Amount Repatriable (C – D) _______________F. Foreign Exchange Applied for

Repatriation (E/FX rate *) _______________

Prepared by:

______ _ _ Signature over Printed Name Company Affiliation of of Authorized Representative Investor’s Representative of Applicant

________________ Date

* To be supplied by FX Selling Bank