BANKING LAW (R.A.
8791) or certify the same to the National Labor Relations
General Banking Law:
Sec. 3 of the General Banking Law provides that: "Banks" shall refer
to entities engaged in the lending of funds obtained in the form of
deposits.
Sec. 8 of the General Banking Law provides that: The Monetary
Board may authorize the organization of a bank or quasi-bank
subject to the following conditions:
8.1 That the entity is a stock corporation;
8.2 That its funds are obtained from the public, which shall mean
twenty (20) or more persons; and
8.3 That the minimum capital requirements prescribed by the
Monetary Board for each category of banks are satisfied.
No new commercial bank shall be established within three (3) years
from the effectivity of this Act. In the exercise of the authority
granted herein, the Monetary Board shall take into consideration
their capability in terms of their financial resources and technical
expertise and integrity. The bank licensing process shall incorporate
an assessment of the banks ownership structure, directors and
senior management, its operating plan and internal controls as well
as its projected financial condition and capital base.
*To be registered as bank, it must be a stock corporation.
*Banks must obtain funds from the public. Minimum number of
depositor is 20 persons.
Nature of Business:
Sec. 2 of the General Banking Law states that: The State recognizes
the vital role of banks providing an environment conducive to the
sustained development of the national economy and the fiduciary
nature of banking that requires high standards of integrity and
performance. In furtherance thereof, the State shall promote and
maintain a stable and efficient banking and financial system that is
globally competitive, dynamic and responsive to the demands of a
developing economy.
Consequences:
1. Sec. 9 of the General Banking Law provides that: The
Monetary Board may prescribe rules and regulations on
the types of stock a bank may issue, including the terms
thereof and rights appurtenant thereto to determine
compliance with laws and regulations governing capital
and equity structure of banks; Provided, That banks shall
issue par value stocks only.
2. Bank must be an open corporation
Reason: Vital to industry
3. The word bank cannot be used if such person or entity is
not engaged in banking business.
4. It is subject to heavy and close supervision and/or
regulation by the Bangko Sentral ng Pilipinas.
5. Banks must observe highest degree of diligence.
6. Sec. 22 of the General Banking Law states that: The
banking industry is hereby declared as indispensable to
the national interest and, notwithstanding the provisions
of any law to the contrary, any strike or lockout involving
banks, if unsettled after seven (7) calendar days shall be
reported by the Bangko Sentral to the Secretary of Labor
who may assume jurisdiction over the dispute or decide it
Commission for compulsory arbitration. However, the
President of the Philippines may at any time intervene and
assume jurisdiction over such labor dispute in order to
settle or terminate the same.
*In DBP v CA, the SC held that while an innocent mortgagee is
not expected to conduct an exhaustive investigation on the
history of the mortgagors title, in case of a banking institution,
it must exercise due diligence before entering into said
contract, and cannot rely upon on what is or is not annotated
on the title.
Cases: China Banking v Lagon; Citibank v Cabangongan
Authority to incorporate and operate:
Sec. 14 of the General Banking Law states that: The Securities and
Exchange Commission shall not register the articles of incorporation
of any bank, or any amendment thereto, unless accompanied by a
certificate of authority issued by the Monetary Board, under its
seal. Such certificate shall not be issued unless the Monetary Board
is satisfied from the evidence submitted to it:
14.1. That all requirements of existing laws and regulations to
engage in the business for which the applicant is proposed to be
incorporated have been complied with;
14.2. That the public interest and economic conditions, both general
and local, justify the authorization; and
14.3. That the amount of capital, the financing, organization,
direction and administration, as well as the integrity and
responsibility of the organizers and administrators reasonably assure
the safety of deposits and the public interest.
The Securities and Exchange Commission shall not register the by-
laws of any bank, or any amendment thereto, unless accompanied
by a certificate of authority from the Bangko Sentral.
*The articles of incorporation must be accompanied by the
favorable recommendation of the BSP.
Sec. 6 of the General Banking Law provides that: No person or
entity shall engage in banking operations or quasi-banking functions
without authority from the Bangko Sentral: Provided, however, That
an entity authorized by the Bangko Sentral to perform universal or
commercial banking functions shall likewise have the authority to
engage in quasi-banking functions.
The determination of whether a person or entity is performing
banking or quasi-banking functions without Bangko Sentral authority
shall be decided by the Monetary Board. To resolve such issue, the
Monetary Board may; through the appropriate supervising and
examining department of the Bangko Sentral, examine, inspect or
investigate the books and records of such person or entity. Upon
issuance of this authority, such person or entity may commence to
engage in banking operations or quasi-banking function and shall
continue to do so unless such authority is sooner surrendered,
revoked, suspended or annulled by the Bangko Sentral in
accordance with this Act or other special laws.
The department head and the examiners of the appropriate
supervising and examining department are hereby authorized to
administer oaths to any such person, employee, officer, or director
of any such entity and to compel the presentation or production of
such books, documents, papers or records that are reasonably
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necessary to ascertain the facts relative to the true functions and
operations of such person or entity. Failure or refusal to comply
with the required presentation or production of such books,
documents, papers or records within a reasonable time shall subject
the persons responsible therefore to the penal sanctions provided
under the New Central Bank Act.
Persons or entities found to be performing banking or quasi-banking
functions without authority from the Bangko Sentral shall be subject
to appropriate sanctions under the New Central Bank Act and other
applicable laws.
Classification of banks:
Sec. 3.2 of the General Banking Law provides that: Banks shall
be classified into:
(a) Universal banks;
(b) Commercial banks;
(c) Thrift banks, composed of:
(i) Savings and mortgage banks;
(ii) Stock savings and loan associations; and
(iii) Private development banks, as defined in the Republic
Act No. 7906 (hereafter the Thrift Banks Act);
(d) Rural banks, as defined in Republic Act No. 73S3 (hereafter
the "Rural Banks Act");
(e) Cooperative banks, as defined in Republic Act No 6938
(hereafter the "Cooperative Code");
(f) Islamic banks as defined in Republic Act No. 6848,
otherwise known as the Charter of Al Amanah Islamic
Investment Bank of the Philippines; and
(g) Other classifications of banks as determined by the
Monetary Board of the Bangko Sentral ng Pilipinas.
Distinctions between different kinds of banks:
a. As to Capitalization: They have different minimum
capitalization requirements.
b. As to Purpose: Some of the banks have specific purposes
and social functions.
c. As to Powers or Functions: There are functions and
powers that are not exercised by one that are exercised by
others. Some banks may exercise certain powers only
upon prior approval of the Monetary Board.
*Universal banks can engage into non-allied enterprises. It
can also act as an investment house, thus, it can enter into
underwriting commitments and do underwriting
securities.
d. As to who can be directors: Public officers can be
directors of Rural Banks while such officers are prohibited
from being directors or officers of other types of banks.
e. As to Incorporators: General Rule: Incorporators must be
natural persons. Exception: In rural banks, it can be
organized or established by cooperatives and corporations
primarily organized to hold equities in rural banks.
f. As to Foreign Equity: A rural bank must be wholly owned
by Filipinos while other banks require only 40% Filipino
ownership of their voting stocks.
*In RA 6938, majority of the shares must be owned by
cooperatives.
g. As to necessity of public offering: Public offering of shares
is necessary for domestic banks seeking authority to act as
universal bank while there is no such requirement for
other banks.
Functions of the bank:
1. Deposit Functions
2. Loan Functions
Deposit Function:
*The relationship created is one of creditor-debtor relation.
*There is passing of ownership to the bank.
*The bank can appropriate the deposits without the consent of the
depositor.
*Legal compensation can take place because they are mutually
creditor-debtor of each other.
*Prior to incorporation, the deposits can be named to corporate
treasurer. He will held it in trust for the corporation.
Depositors:
1. Minors:
- They can open bank accounts in their own right provided
that they are at least 7 years of age; they are able to read
and write and have sufficient discretion; they are not
otherwise disqualified by any other incapacity; and it
should only be savings or time deposits.
* They cannot open checking account nor demand
deposits.
2. Married Women:
- They are allowed to open bank accounts without the
assistance of their husbands.
Reason: equality in capacity
*Bank account may be opened by one individual or two or more
persons. Whenever two or more persons open an account, the same
may be an and/or account or an and account.
General Rule: Fictitious accounts or anonymous accounts are
prohibited.
Exception: Foreign currency deposits which may be a numbered
account.
*The law requires that necessary measures are undertaken by the
bank to record and establish the true identity of the depositor.
*Joint accounts may be the subject of survivorship agreement
whereby the co-depositors agree to permit either of them to
withdraw the whole deposit during their lifetime and transferring
the balance to the survivor upon the death of one of them.
Basis: Trust and Confidence
*What is prohibited under the Family Code is donation inter vivos
and not donation mortis causa.
Secrecy of Bank Deposits:
Peso deposits:
General Rule: Sec. 2 of Republic Act No. 1405 provides that: All
deposits of whatever nature with banks or banking institutions in
the Philippines including investments in bonds issued by the
Government of the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an absolutely
confidential nature and may not be examined, inquired or looked
into by any person, governmental official, bureau or office.
Exceptions:
1. When there is written permission of the depositor or
investor;
2. Impeachment cases;
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 3. Upon the order of a competent court in cases of bribery or
dereliction of duty of public officials;
4. Upon the order of a competent court in cases where the
money deposited or invested is the subject of litigation;
5. Upon order of the competent court or tribunal in cases
involving unexplained wealth under Sec. 8 of the Anti-
Graft and Corrupt Practices Act (R.A. 3019);
6. Upon inquiry by the Commissioner of Internal Revenue for
the purpose of determining the net estate of a deceased
depositor;
*In case the taxpayer compromised his tax liability by
reason of financial incapacity.
7. General Rule: Upon the order of a competent court or in
proper cases by the Anti-Money Laundering Council where
there is probable cause of money laundering.
Exception: In some instances even without court order.
8. Disclosure of the Treasurer of the Philippines for dormant
deposits for at least 10 years under the Unclaimed
Balances Act (R.A. 3936)
*Escheat proceedings
Foreign Currency deposits:
*Subsequent to secrecy law.
Under the Foreign Currency Deposit Act, there is only one exception
and that is: When there is a written consent of depositor.
Secrecy of Deposits under the Anti-Money Laundering Law:
General Rule: The Anti-Money Laundering Council may inquire into
deposits upon order of the court when there is probable cause that
the deposits are related to the crime of unlawful activities defined in
Sec. 3(1) and Sec. 4 of R.A. 9160 as amended by R.A. 9194.
Exception: A court order is not even necessary when the offense or
unlawful activity involved is any of the following: 1. Kidnapping for
ransom under Article 267 of the Revised Penal Code; 2. Sections 4, 5,
7, 8, 9, 10, 12, 13, 14, 15, and 16 of the Comprehensive Dangerous
Drugs Act of 2002; and Hi-jacking and other violations under R.A.
6235; destructive arson and murder, as defined under the Revised
Penal Code, as amended, including those perpetrated by terrorists
against non-combatant persons and similar targets.
Garnishment:
General Rule: Bank accounts may be garnished by the creditors of
the depositor.
Reason: Not deposits for investment, thus, law on secrecy is not
applicable.
Exceptions:
1. Foreign Currency Deposits
*In Salvacion v Central Bank of the Philippines, the SC
held that foreign currency deposits of an American tourist
who was found guilty of repeatedly raping a twelve years
old child is subject to garnishment.
2. Those exempt under the Rules of Civil Procedure like
provision for the family for four months
Deposit Insurance:
*All deposits of any bank are insured with the PDIC.
*Obligation to pay the premium lies on the bank.
Risk insured against: closure of banks due to liquidity problems.
*Insured deposit under the law means the net amount due to any
depositor for deposits in an insured bank but should not exceed
P250,000. If the depositor has two or more accounts with the same
bank, the maximum coverage of P250,000 pertains to the sum of all
such accounts maintained in the same right and capacity.
*A joint account shall be insured separately from any individual-
owned account.
*A joint account held by a juridical person or entity jointly with
natural person/s shall be presumed to belong to the juridical person.
*The aggregate share in all joint accounts is subject to P250,000
threshold.
Loan Function of the Banks:
*A bank shall grant loans and other credit accommodations only in
amounts and for the periods of time essential for the effective
completion of the operations to be financed.
Single Borrowers Limit:
Sec. 35.1 of the General Banking Law provides that: Except as the
Monetary Board may otherwise prescribe for reasons of national
interest, the total amount of loans, credit accommodations and
guarantees as may be defined by the Monetary Board that may be
extended by a bank to any person, partnership, association,
corporation or other entity shall at no time exceed twenty-five
percent (25%) of the net worth of such bank. The basis for
determining compliance with single borrower limit is the total
credit commitment of the bank to the borrower.
Sec. 35.2 of the General Banking Law states that: Unless the
Monetary Board prescribes otherwise, the total amount of loans,
credit accommodations and guarantees prescribed in the preceding
paragraph may be increased by an additional ten percent (10%)
of the net worth of such bank provided the additional liabilities of
any borrower are adequately secured by trust receipts, shipping
documents, warehouse receipts or other similar documents
transferring or securing title covering readily marketable, non-
perishable goods which must be fully covered by insurance.
DOSRI ACCOUNTS:
Sec. 36 of the General Banking Law states that: No director or
officer of any bank shall, directly or indirectly, for himself or as
the representative or agent of others, borrow from such bank nor
shall he become a guarantor, endorser or surety for loans from such
bank to others, or in any manner be an obligor or incur any
contractual liability to the bank except with the written approval of
the majority of all the directors of the bank, excluding the
director concerned: Provided, That such written approval shall not
be required for loans, other credit accommodations and advances
granted to officers under a fringe benefit plan approved by the
Bangko Sentral. The required approval shall be entered upon the
records of the bank and a copy of such entry shall be
transmitted forthwith to the appropriate supervising and examining
department of the Bangko Sentral.
Dealings of a bank with any of its directors, officers or
stockholders and their related interests shall be upon terms not less
favorable to the bank than those offered to others.
After due notice to the board of directors of the bank, the office of
any bank director or officer who violates the provisions of this
Section may be declared vacant and the director or officer shall
be
subject to the penal provisions of the New Central Bank Act.
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The Monetary Board may regulate the amount of loans, credit 3. Reportorial requirement: The resolution approving the
accommodations and guarantees that may be extended, directly loan shall be entered in the records of the bank and a copy
or indirectly, by a bank to its directors, officers, stockholders of the entry shall be transmitted forthwith to the
and their related interests, as well as investments of such bank in
Supervising and Examination Sector of the BSP.
enterprises owned or controlled by said directors, officers,
stockholders and their related interests. However, the outstanding
Foreclosure of Mortgage
loans, credit accommodations and guarantees which a bank may
extend to each of its stockholders, directors, or officers and their
Sec. 47 of the General Banking Law provides that: In the event of
related interests, shall be limited to an amount equivalent to
foreclosure, whether judicially or extra-judicially, of any mortgage
their respective unencumbered deposits and book value of their
on real estate which is security for any loan or other credit
paid-in capital contribution in the bank: Provided, however, That
accommodation granted, the mortgagor or debtor whose real
loans, credit accommodations and guarantees secured by assets
property
considered as non-risk by the Monetary Board shall be excluded
has been sold for the full or partial payment of his obligation
from such limit: Provided, further, That loans, credit
shall have the right within one year after the sale of the real
accommodations and advances to officers in the form of fringe
estate, to redeem the property by paying the amount due under the
benefits granted in accordance with rules as may be prescribed
mortgage deed, with interest thereon at rate specified in the
by the Monetary Board shall not be subject to the individual
mortgage, and all the costs and expenses incurred by the bank
limit.
or institution from the sale and custody of said property less the
The Monetary Board shall define the term related interests.
income derived there from. However, the purchaser at the auction
The limit on loans, credit accommodations and guarantees
sale concerned whether in a judicial or extra-judicial foreclosure
prescribed herein shall not apply to loans, credit
shall have the right to enter upon and take possession of such
accommodations and guarantees extended by a cooperative
property immediately after the date of the confirmation of the
bank to its cooperative shareholders.
auction sale and administer the same in accordance with law.
Purpose: To protect the general public from the abuse of the
Any petition in court to enjoin or restrain the conduct of
directors, officers, stockholders and related interests of the bank.
foreclosure proceedings instituted pursuant to this provision
Requisites:
shall be given due course only upon the filing by the petitioner
1. The borrower is a director, officer or any stockholder of a
of a bond in an amount fixed by the court conditioned that he will
bank;
pay all the damages which the bank may suffer by the
2. He contract a loan or any form of financial
enjoining or the restraint of the foreclosure proceeding.
accommodation;
Notwithstanding Act 3135,juridical persons whose property is
3. The loan or financial accommodation is from: a. his bank,
being sold pursuant to an extra judicial foreclosure, shall have
or b. a bank that is a subsidiary of a bank holding company
the right to redeem the property in accordance with this
of which both his bank and lending bank are subsidiaries,
provision until, but not after, the registration of the certificate of
c. a bank in which a controlling proportion of the shares is
foreclosure sale with the applicable Register of Deeds which in no
owned by the same interest that owns a controlling
case shall be more than three (3) months after foreclosure,
proportion of the shares of his bank; and
whichever is earlier. Owners of property that has been sold in a
4. The loan or financial accommodation of the director,
foreclosure sale prior to the effectivity of this Act shall retain their
officer or stockholder, singly or with that of his related
redemption rights until their expiration.
interest, is in excess of 5% of the capital and surplus of the
lending bank or in the maximum amount permitted by
Prohibited acts of Borrowers:
law, whichever is lower.
Examples:
Sec. 55.2 of the General Banking Law states that: No borrower of a
1. If there is interlocking directors subject to DOSRI
bank shall -
restrictions
(a) Fraudulently overvalue property offered as security for a loan
2. General partner is either a director, officer, stockholder or
or other credit accommodation from the bank;
related interest of a lending bank subject to DOSRI
(b) Furnish false or make misrepresentation or suppression of
restrictions
material facts for the purpose of obtaining, renewing, or increasing a
3. Stranger applied for a loan and a property was collateral:
loan or other credit accommodation or extending the period
a. if the property is owned by stranger alone not subject
thereof;
to DOSRI restrictions; b. if the property is co-owned by a
(c) Attempt to defraud the said bank in the event of a court action
director, officer, stockholder or related interest of the
to recover a loan or other credit accommodation; or
bank subject to DOSRI restrictions
(d) Offer any director, officer, employee or agent of a bank any
4. A director, officer, stockholder, or related interests owned
gift, fee, commission, or any other form of compensation in order to
more than 20% share in a corporation (borrower) subject
influence such persons into approving a loan or other credit
to DOSRI restriction.
accommodation application.
Restrictions:
1. Procedural requirement: The account should be upon Ownership of Banks:
written approval of all the director of the lending bank
excluding the director concerned. Sec. 11 of the General Banking Law provides that: Foreign
2. Arms Length Rule: The account should be upon terms not individuals and non-bank corporations may own or control up to
less favorable to the bank than those offered to others. forty percent (40%) of the voting stock of a domestic bank. This rule
shall apply to Filipinos and domestic non-bank corporations.

4
The percentage of foreign-owned voting stocks in a bank shall be
determined by the citizenship of the individual stockholders in that
bank. The citizenship of the corporation which is a stockholder in a
bank shall follow the citizenship of the controlling stockholders of
the corporation, irrespective of the place of incorporation.
General Rule: Banks are partly nationalized
*The 60% minimum threshold must be satisfied by the bank.
*Filipino ownership voting stocks owned by Filipinos
Examples:
X bank has 1M voting stocks: 600,000 owned by Filipinos and
400,000 owned by foreigners. The bank complied with the 60%
requirement.
X bank has 1M voting shares: 400,000 owned by Filipinos; 400,000
owned by foreigners and 200,000 owned by Y Corporation.
Q: Does the 60% requirement satisfied?
A: IT DEPENDS. Depending on the citizenship of Y Corporation. If the
majority controlling stockholders are Filipino thus Y Corporation is a
Filipino citizen hence the 60% is complied with. If Y corporation is
controlled by a foreigners there is non-compliance of the 60%
requirement.
*The 40% requirement is applicable not only to foreigners but also
to individual Filipino shareholders and domestic non-bank
corporation.
*If the corporation acquiring is a bank the 40% threshold is not
applicable.
Examples:
600,000 owned by Filipinos; 400,000 owned by foreigners
A owned 500,000 shares
*A single Filipino stockholders can only own upto 40% of the voting
stock of the bank.
A Corporation which is not a banking institution 500,000 shares
*A domestic non-bank corporation can only own upto 40% of the
voting stock of the bank.
800,000 owned by Filipinos; 200,000 owned by foreigners
In the 800,000 owned by Filipinos; 400,000 of which is owned by A
and the 200,000 is owned by A Corporation
In A Corporation, A is a stockholder owning 50% of the controlling
stock of A Corporation.
Q: Is this allowed?
A: NO. 50% of 200,000 is indirectly owned by a Filipino individual,
the 40% threshold is violated.
*The 40% threshold includes both direct and indirect ownership of
shares of the bank.
Act Liberalizing Entry of Foreign Banks:
Sec. 2 of Republic Act No. 7721 provides that: The Monetary Board
may authorize foreign banks to operate in the Philippine banking
system through any of the following modes of entry: (i) by acquiring,
purchasing or owning up to sixty percent (60%) of the voting stock of
an existing bank; (ii) by investing in up to sixty percent (60%) of the
voting stock of a new banking subsidiary incorporated under the
laws of the Philippines; or (iii) by establishing branches with full
banking authority: Provided, That a foreign bank may avail itself of
only one (1) mode of entry: Provided, further, That a foreign bank or
a Philippine corporation may own up to a sixty percent (60%) of the
voting stock of only one (1) domestic bank or new banking
subsidiary.
Sec. 3 of Republic Act No. 7721 states that: In approving entry
applications of foreign banks, the Monetary Board shall: (i) ensure
geographic representation and complementation; (ii) consider
strategic trade and investment relationships between the
Philippines and the country of incorporation of the foreign bank; (iii)
study the demonstrated capacity, global reputation for financial
innovations and stability in a competitive environment of the
applicant; (iv) see to it that reciprocity rights are enjoyed by
Philippine banks in the applicant's country; and (v) consider
willingness to fully share their technology.
Only those among the top one hundred fifty (150) foreign banks in
the world or the top five (5) banks in their country of origin as of the
date of application shall be allowed entry in accordance with Section
2 (ii) and (iii) hereof.
In the exercise of this authority, the Monetary Board shall adopt
such measures as may be necessary to: (i) ensure that at all times
the control of seventy percent (70%) of the resources or assets of
the entire banking system is held by domestic banks which are at
least majority-owned by Filipinos; (ii) prevent a dominant market
position by one bank or the concentration of economic power in one
or more financial institutions, or in corporations, participations,
partnerships, groups or individuals with related interests; and (iii)
secure the listing in the Philippine Stock Exchange of the shares of
stocks of banking corporations established under Section 2(i) and (ii)
of this Act: Provided, That said banking corporations shall establish
stock option plans for their officers and employees as the resources
or assets of these corporations may allow in the best business
judgment of their respective boards of directors, pursuant to the
Corporation Code of the Philippines.
To qualify to establish a branch or a subsidiary, the foreign bank
applicant must be widely-owned and publicly-listed in its country of
origin, unless the foreign bank applicant is owned by the
government of its country of origin.
General Rule: Foreigners must own only upto 40% of the voting
shares of a bank.
Exception: Foreign bank can own upto 60% of the voting shares of a
bank.
Directors and Officers:
Composition:
Sec. 15 of the General Banking Law states that: The provisions of
the Corporation Code to the contrary notwithstanding, there shall
be at least five (5), and a maximum of fifteen (15) members of the
board or directors of a bank, two (2) of whom shall be independent
directors. An "independent director" shall mean a person other
than an officer or employee of the bank, its subsidiaries or affiliates
or related interests.
Non-Filipino citizens may become members of the board of
directors of a bank to the extent of the foreign participation in
the equity of said bank.
The meetings of the board of directors may be conducted through
modern technologies such as, but not limited to, teleconferencing
and video-conferencing.
Sec. 19 of the General Banking Law states that: Except as
otherwise provided in the Rural Banks Act, no appointive or
elective public official whether full-time or part-time shall at the
same time serve as officer of any private bank, save in cases
where such service is incident to financial assistance provided
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by the government or a government owned or controlled
corporation to the bank or unless otherwise provided under
existing laws.
General Rule: The Board of Directors is composed of 5 to 15
members only.
Exception: In case of merger
Sec. 16 of the General Banking Law provides that: To maintain the
quality of bank management and afford better protection to
depositors and the public in general the Monetary Board shall
prescribe, pass upon and review the qualifications and
disqualifications of individuals elected or appointed bank directors
or officers and disqualify those found unfit.
After due notice to the board of directors of the bank, the
Monetary Board may disqualify, suspend or remove any bank
director or officer who commits or omits an act which render him
unfit for the position.
In determining whether an individual is fit and proper to hold the
position of a director or officer of a bank, regard shall be given to his
integrity, experience, education, training, and competence.
Justification: Police power
Reason: Banking institution is imbued with public interest.
Regulations to maintain liquidity and security:
1. Sec. 34 of the General Banking Law provides that: The
Monetary Board shall prescribe the minimum ratio which
the net worth of a bank must bear to its total risk assets
which may include contingent accounts.
For purposes of this Section, the Monetary Board may
require such ratio be determined on the basis of the net
worth and risk assets of a bank and its subsidiaries,
financial or otherwise, as well as prescribe the
composition and the manner of determining the net
worth and total risk assets of banks and their subsidiaries:
Provided, That in the exercise of this authority, the
Monetary Board shall, to the extent feasible conform to
internationally accepted standards, including those of
the Bank for International Settlements (BIS), relating to
risk-based capital requirements: Provided further, That
it may alter or suspend compliance with such ratio
whenever necessary for a maximum period of one (1)
year: Provided, finally, That such ratio shall be applied
uniformly to banks of the same category. In case a bank
does not comply with the prescribed minimum ratio, the
Monetary Board may limit or prohibit the distribution of
net profits by such bank and may require that part or all of
the net profits be used to increase the capital accounts
of the bank until the minimum requirement has been
met The Monetary Board may, furthermore, restrict or
prohibit the acquisition of major assets and the making of
new investments by the bank, with the exception of
purchases of readily marketable evidences of
indebtedness of the Republic of the Philippines and of the
Bangko Sentral and any other evidences of indebtedness
or obligations the servicing and repayment of which
are fully guaranteed by the Republic of the Philippines,
until the minimum required capital ratio has been
restored. In case of a bank merger or consolidation, or
when a bank is under rehabilitation under a program
approved by the Bangko Sentral, Monetary Board may
temporarily relieve the surviving bank, consolidated bank,
or constituent bank or corporations under rehabilitation
from full compliance with the required capital ratio under
such conditions as it may prescribe. Before the effectivity
of rules which the Monetary Board is authorized to
prescribe under this provision, Section 22 of the
General Banking Act, as amended, Section 9 of the Thrift
Banks Act, and all pertinent rules issued pursuant thereto,
shall continue to be in force.
2. The law imposes limits on loans, credit accommodations
and guarantees that may be extended by banks.
3. Sec. 36 of the General Banking Law states that: No
director or officer of any bank shall, directly or
indirectly, for himself or as the representative or agent
of others, borrow from such bank nor shall he become a
guarantor, endorser or surety for loans from such bank to
others, or in any manner be an obligor or incur any
contractual liability to the bank except with the written
approval of the majority of all the directors of the bank,
excluding the director concerned: Provided, That such
written approval shall not be required for loans, other
credit accommodations and advances granted to
officers under a fringe benefit plan approved by the
Bangko Sentral. The required approval shall be entered
upon the records of the bank and a copy of such
entry shall be transmitted forthwith to the appropriate
supervising and examining department of the Bangko
Sentral.
Dealings of a bank with any of its directors, officers
or stockholders and their related interests shall be upon
terms not less favorable to the bank than those offered to
others.
After due notice to the board of directors of the bank, the
office of any bank director or officer who violates the
provisions of this Section may be declared vacant and
the director or officer shall be subject to the penal
provisions of the New Central Bank Act.
The Monetary Board may regulate the amount of loans,
credit accommodations and guarantees that may be
extended, directly or indirectly, by a bank to its
directors, officers, stockholders and their related
interests, as well as investments of such bank in
enterprises owned or controlled by said directors, officers,
stockholders and their related interests. However, the
outstanding loans, credit accommodations and guarantees
which a bank may extend to each of its stockholders,
directors, or officers and their related interests, shall be
limited to an amount equivalent to their respective
unencumbered deposits and book value of their paid-
in capital contribution in the bank: Provided, however,
That loans, credit accommodations and guarantees
secured by assets considered as non-risk by the
Monetary Board shall be excluded from such limit:
Provided, further, That loans, credit accommodations and
advances to officers in the form of fringe benefits
granted in accordance with rules as may be prescribed
by the Monetary Board shall not be subject to the
individual limit.
The Monetary Board shall define the term related
interests.
The limit on loans, credit accommodations and
guarantees prescribed herein shall not apply to loans,
credit accommodations and guarantees extended by a
cooperative bank to its cooperative shareholders.
4. The law imposes restrictions on the value of collaterals on
loans.
6
5. Sec. 41 of the General Banking Law provides that: The
Monetary Board is hereby authorized to issue such
regulations as it may deem necessary with respect to
unsecured loans or other credit accommodations that may
be granted by banks.
6. Sec. 43 of the General Banking Law provides that: The
Monetary Board, may, similarly in accordance with the
authority granted to it in Section 106 of the New Central
Bank Act, and taking into account the requirements of
the economy for the effective utilization of long-term
funds, prescribe the maturities, as well as related
terms and conditions for various types of bank loans
and other credit accommodations. Any change by the
Board in the maximum maturities, as well as related
terms and conditions for various types of bank loans and
other credit accommodations. Any change by the
Board in the maximum maturities shall apply only to loans
and other credit accommodations made after the date of
such action. The Monetary Board shall regulate the
interest imposed on micro finance borrowers by lending
investors and similar lenders such as, but not limited to,
the unconscionable rates of interest collected on salary
loans and similar credit accommodations.
7. Sec. 57 of the General Banking Law states that: No bank
or quasi-bank shall declare dividends, if at the time of
declaration:
57.1 Its clearing account with the Bangko Sentral is
overdrawn; or
57.2 It is deficient in the required liquidity floor for
government deposits for five (5) or more consecutive days,
or
57.3 It does not comply with the liquidity standards/ratios
prescribed by the Bangko Sentral for purposes of
determining funds available for dividend declaration; or
57.4 It has committed a major violation as may be
determined by the Bangko Sentral.
Other functions of the Bangko Sentral:
A. Emergency Loan
Sec. 84 of the New Central Bank Act states that: In
periods of national and/or local emergency or of
imminent financial panic which directly threaten
monetary and banking stability, the Monetary Board
may, by a vote of at least five (5) of its members,
authorize the Bangko Sentral to grant extraordinary
loans or advances to banking institutions secured by
assets as defined hereunder: Provided, That while
such loans or advances are outstanding, the debtor
institution shall not, except upon prior authorization
by the Monetary Board, expand the total volume of
its loans or investments.
The Monetary Board may, at its discretion, likewise
authorize the Bangko Sentral to grant emergency
loans or advances to banking institutions, even during
normal periods, for the purpose of assisting a bank in
a precarious financial condition or under serious
financial pressures brought by unforeseen events, or
events which, though foreseeable, could not be
prevented by the bank concerned: Provided, however,
That the Monetary Board has ascertained that the
bank is not insolvent and has the assets defined
hereunder to secure the advances: Provided, further,
That a concurrent vote of at least five (5) members of
the Monetary Board is obtained.
The amount of any emergency loan or advance shall
not exceed the sum of fifty percent (50%) of total
deposits and deposit substitutes of the banking
institution and shall be disbursed in two (2) or more
tranches. The amount of the first tranche shall be
limited to twenty-five percent (25%) of the total
deposit and deposit substitutes of the institution and
shall be secured by government securities to the
extent of their applicable loan values and other
unencumbered first class collaterals which the
Monetary Board may approve: Provided, That if as
determined by the Monetary Board, the
circumstances surrounding the emergency warrant a
loan or advance greater than the amount provided
hereinabove, the amount of the first tranche may
exceed twenty-five percent (25%) of the bank's total
deposit and deposit substitutes if the same is
adequately secured by applicable loan values of
government securities and unencumbered first class
collaterals approved by the Monetary Board, and the
principal stockholders of the institution furnish an
acceptable undertaking to indemnify and hold
harmless from suit a conservator whose appointment
the Monetary Board may find necessary at any time.
Prior to the release of the first tranche, the banking
institution shall submit to the Bangko Sentral a
resolution of its board of directors authorizing the
Bangko Sentral to evaluate other assets of the
banking institution certified by its external auditor to
be good and available for collateral purposes should
the release of the subsequent tranche be thereafter
applied for.
The Monetary Board may, by a vote of at least five (5)
of its members, authorize the release of a subsequent
tranche on condition that the principal stockholders
of the institution:
(a) furnish an acceptable undertaking to indemnify
and hold harmless from suit a conservator whose
appointment the Monetary Board may find necessary
at any time; and
(b) provide acceptable security which, in the
judgment of the Monetary Board, would be adequate
to supplement, where necessary, the assets tendered
by the banking institution to collateralize the
subsequent tranche.
In connection with the exercise of these powers, the
prohibitions in Section 128 of this Act shall not apply
insofar as it refers to acceptance as collateral of
shares and their acquisition as a result of foreclosure
proceedings, including the exercise of voting rights
pertaining to said shares: Provided, however, That
should the Bangko Sentral acquire any of the shares it
has accepted as collateral as a result of foreclosure
proceedings, the Bangko Sentral shall dispose of said
shares by public bidding within one (1) year from the
date of consolidation of title by the Bangko Sentral.
Whenever a financial institution incurs an overdraft in
its account with the Bangko Sentral, the same shall be
eliminated within the period prescribed in Section
102 of this Act.
B. Appointment of Conservator
7
 Sec. 29 of the New Central Bank Act states that:
Whenever, on the basis of a report submitted by the
appropriate supervising or examining department,
the Monetary Board finds that a bank or a quasi-bank
is in a state of continuing inability or unwillingness to
maintain a condition of liquidity deemed adequate to
protect the interest of depositors and creditors, the
Monetary Board may appoint a conservator with such
powers as the Monetary Board shall deem necessary
to take charge of the assets, liabilities, and the
management thereof, reorganize the management,
collect all monies and debts due said institution, and
exercise all powers necessary to restore its viability.
The conservator shall report and be responsible to
the Monetary Board and shall have the power to
overrule or revoke the actions of the previous
management and board of directors of the bank or
quasi-bank.
The conservator should be competent and
knowledgeable in bank operations and management.
The conservatorship shall not exceed one (1) year.
The conservator shall receive remuneration to be
fixed by the Monetary Board in an amount not to
exceed two-thirds (2/3) of the salary of the president
of the institution in one (1) year, payable in twelve
(12) equal monthly payments: Provided, That, if at
any time within one-year period, the conservatorship
is terminated on the ground that the institution can
operate on its own, the conservator shall receive the
balance of the remuneration which he would have
received up to the end of the year; but if the
conservatorship is terminated on other grounds, the
conservator shall not be entitled to such remaining
balance. The Monetary Board may appoint a
conservator connected with the Bangko Sentral, in
which case he shall not be entitled to receive any
remuneration or emolument from the Bangko Sentral
during the conservatorship. The expenses attendant
to the conservatorship shall be borne by the bank or
quasi-bank concerned.
The Monetary Board shall terminate the
conservatorship when it is satisfied that the
institution can continue to operate on its own and the
conservatorship is no longer necessary. The
conservatorship shall likewise be terminated should
the Monetary Board, on the basis of the report of the
conservator or of its own findings, determine that the
continuance in business of the institution would
involve probable loss to its depositors or creditors, in
which case the provisions of Section 30 shall apply.
*Experiencing liquidity problems only.
Powers of Conservator:
1. To take charge of the assets, liabilities, and the
management thereof;
2. To reorganize the management of the subject
bank;
3. To collect all monies and debts due said
institutions; and
4. To exercise all powers necessary to restore its
viability
Except: Those already perfected
C. Appointment of Receiver
Sec. 30 of the New Central Bank Act provides that:
Whenever, upon report of the head of the
supervising or examining department, the Monetary
Board finds that a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due
in the ordinary course of business: Provided, That this
shall not include inability to pay caused by
extraordinary demands induced by financial panic in
the banking community;
(b) has insufficient realizable assets, as determined
by the Bangko Sentral, to meet its liabilities; or
(c) cannot continue in business without involving
probable losses to its depositors or creditors; or
(d) has willfully violated a cease and desist order
under Section 37 that has become final, involving acts
or transactions which amount to fraud or a
dissipation of the assets of the institution; in which
cases, the Monetary Board may summarily and
without need for prior hearing forbid the institution
from doing business in the Philippines and designate
the Philippine Deposit Insurance Corporation as
receiver of the banking institution.
For a quasi-bank, any person of recognized
competence in banking or finance may be designed as
receiver.
The receiver shall immediately gather and take
charge of all the assets and liabilities of the
institution, administer the same for the benefit of its
creditors, and exercise the general powers of a
receiver under the Revised Rules of Court but shall
not, with the exception of administrative
expenditures, pay or commit any act that will involve
the transfer or disposition of any asset of the
institution: Provided, That the receiver may deposit or
place the funds of the institution in non-speculative
investments. The receiver shall determine as soon as
possible, but not later than ninety (90) days from
takeover, whether the institution may be
rehabilitated or otherwise placed in such a condition
so that it may be permitted to resume business with
safety to its depositors and creditors and the general
public: Provided, That any determination for the
resumption of business of the institution shall be
subject to prior approval of the Monetary Board.
If the receiver determines that the institution cannot
be rehabilitated or permitted to resume business in
accordance with the next preceding paragraph, the
Monetary Board shall notify in writing the board of
directors of its findings and direct the receiver to
proceed with the liquidation of the institution. The
receiver shall:
(1) file ex parte with the proper regional trial court,
and without requirement of prior notice or any other
action, a petition for assistance in the liquidation of
the institution pursuant to a liquidation plan adopted
by the Philippine Deposit Insurance Corporation for
general application to all closed banks. In case of
quasi-banks, the liquidation plan shall be adopted by
the Monetary Board. Upon acquiring jurisdiction, the
court shall, upon motion by the receiver after due
notice, adjudicate disputed claims against the
institution, assist the enforcement of individual
liabilities of the stockholders, directors and officers,
8
 and decide on other issues as may be material to
implement the liquidation plan adopted. The receiver
shall pay the cost of the proceedings from the assets
of the institution.
(2) convert the assets of the institutions to money,
dispose of the same to creditors and other parties, for
the purpose of paying the debts of such institution in
accordance with the rules on concurrence and
preference of credit under the Civil Code of the
Philippines and he may, in the name of the
institution, and with the assistance of counsel as he
may retain, institute such actions as may be
necessary to collect and recover accounts and assets
of, or defend any action against, the institution. The
assets of an institution under receivership or
liquidation shall be deemed in custodia legis in the
hands of the receiver and shall, from the moment the
institution was placed under such receivership or
liquidation, be exempt from any order of
garnishment, levy, attachment, or execution.
The actions of the Monetary Board taken under this
section or under Section 29 of this Act shall be final
and executory, and may not be restrained or set aside
by the court except on petition for certiorari on the
ground that the action taken was in excess of
jurisdiction or with such grave abuse of discretion as
to amount to lack or excess of jurisdiction. The
petition for certiorari may only be filed by the
stockholders of record representing the majority of
the capital stock within ten (10) days from receipt by
the board of directors of the institution of the order
directing receivership, liquidation or conservatorship.
The designation of a conservator under Section 29 of
this Act or the appointment of a receiver under this
section shall be vested exclusively with the Monetary
Board. Furthermore, the designation of a conservator
is not a precondition to the designation of a receiver.
*There is a bank closure.
Close Now, Hear Later Scheme:
Sec. 29 of the New Central Bank Act states that: Whenever, on the
basis of a report submitted by the appropriate supervising or
examining department, the Monetary Board finds that a bank or a
quasi-bank is in a state of continuing inability or unwillingness to
maintain a condition of liquidity deemed adequate to protect the
interest of depositors and creditors, the Monetary Board may
appoint a conservator with such powers as the Monetary Board shall
deem necessary to take charge of the assets, liabilities, and the
management thereof, reorganize the management, collect all
monies and debts due said institution, and exercise all powers
necessary to restore its viability. The conservator shall report and be
responsible to the Monetary Board and shall have the power to
overrule or revoke the actions of the previous management and
board of directors of the bank or quasi-bank.
The conservator should be competent and knowledgeable in bank
operations and management. The conservatorship shall not exceed
one (1) year.
The conservator shall receive remuneration to be fixed by the
Monetary Board in an amount not to exceed two-thirds (2/3) of the
salary of the president of the institution in one (1) year, payable in
twelve (12) equal monthly payments: Provided, That, if at any time
within one-year period, the conservatorship is terminated on the
ground that the institution can operate on its own, the conservator
shall receive the balance of the remuneration which he would have
received up to the end of the year; but if the conservatorship is
terminated on other grounds, the conservator shall not be entitled
to such remaining balance. The Monetary Board may appoint a
conservator connected with the Bangko Sentral, in which case he
shall not be entitled to receive any remuneration or emolument
from the Bangko Sentral during the conservatorship. The expenses
attendant to the conservatorship shall be borne by the bank or
quasi-bank concerned.
The Monetary Board shall terminate the conservatorship when it is
satisfied that the institution can continue to operate on its own and
the conservatorship is no longer necessary. The conservatorship
shall likewise be terminated should the Monetary Board, on the
basis of the report of the conservator or of its own findings,
determine that the continuance in business of the institution would
involve probable loss to its depositors or creditors, in which case the
provisions of Section 30 shall apply.
*No prior hearing is necessary in appointing a receiver and in closing
the bank. It is enough that subsequent judicial review is provided
for. Indeed, to require such previous hearing would not only be
impractical but would tend to defeat the very purpose of the law
when it invested the Monetary Board with such authority.
Purpose: To avoid creation of panic from the depositors or public.
Reason: The government has responsibility to see to it that the
person dealing with the bank is protected.
Effects of receivership and liquidation:
1. Suspension of operation
2. The assets under receivership or liquidation shall be
deemed in custodia legis in the hands of the receiver and
shall be exempt from garnishment, levy, attachment or
execution
3. Bank is not liable to pay interest on deposits during the
period of suspension of operation
Reason: There is no source of income
4. Banks under liquidation retain their legal personality
*The bank can sue and be sued but any case should be
initiated and prosecuted through the liquidator.
5. There will be no preference even if the claimant-depositor
obtained a writ of preliminary attachment.
Supervision of Banks:
Sec. 4 of the General Banking Law states that: The operations and
activities of banks shall be subject to supervision of the Bangko
Sentral. Supervision shall include the following:
4.1. The issuance of rules of, conduct or the establishment
standards of operation for uniform application to all institutions or
functions covered, taking into consideration the distinctive character
of the operations of institutions and the substantive similarities
of specific functions to which such rules, modes or standards are to
be applied;
4.2 The conduct of examination to determine compliance with
laws and regulations if the circumstances so warrant as determined
by the
Monetary Board;
4.3 Overseeing to ascertain that laws and regulations are complied
with;
4.4 Regular investigation which shall not be oftener than once a
year from the last date of examination to determine whether
an institution is conducting its business on a safe or sound
9
basis: Provided, That the deficiencies/irregularities found by or
discovered by an audit shall be immediately addressed;
4.5 Inquiring into the solvency and liquidity of the institution; or
4.6 Enforcing prompt corrective action.
The Bangko Sentral shall also have supervision over the operations
of and exercise regulatory powers over quasi-banks, trust entities
and other financial institutions which under special laws are
subject to Bangko Sentral supervision.
For the purposes of this Act, quasi-banks shall refer to
entities engaged in the borrowing of funds through the
issuance, endorsement or assignment with recourse or acceptance
of deposit substitutes as defined in Section 95 of Republic Act
No. 7653 (hereafter the New Central Bank Act) for purposes of re-
lending or purchasing of receivables and other obligations.
Money Function:
Sec. 50 of the New Central Bank Act states that: The Bangko
Sentral shall have the sole power and authority to issue currency,
within the territory of the Philippines. No other person or entity,
public or private, may put into circulation notes, coins or any other
object or document which, in the opinion of the Monetary Board,
might circulate as currency, nor reproduce or imitate the facsimiles
of Bangko Sentral notes without prior authority from the Bangko
Sentral.
The Monetary Board may issue such regulations as it may deem
advisable in order to prevent the circulation of foreign currency or of
currency substitutes as well as to prevent the reproduction of
facsimiles of Bangko Sentral notes.
The Bangko Sentral shall have the authority to investigate, make
arrests, conduct searches and seizures in accordance with law, for
the purpose of maintaining the integrity of the currency.
Violation of this provision or any regulation issued by the Bangko
Sentral pursuant thereto shall constitute an offense punishable by
imprisonment of not less than five (5) years but not more than ten
(10) years. In case the Revised Penal Code provides for a greater
penalty, then that penalty shall be imposed.
Anti-Money Laundering Act:
Sec. 4.1 of Republic Act 9160 states that: Money laundering is a
crime whereby the proceeds of an unlawful activity AS HEREIN
DEFINED are transacted, thereby making them appear to have
originated from legitimate sources. It is committed by the following:
a) Any person knowing that any monetary instrument or property
represents, involves, or relates to, the proceeds of any unlawful
activity, transacts or attempts to transact said monetary instrument
or property.
b) Any person knowing that any monetary instrument or property
involves the proceeds of any unlawful activity, performs or fails to
perform any act as a result of which he facilitates the offense of
money laundering referred to in paragraph (a) above.
c) Any person knowing that any monetary instrument or property is
required under this Act to be disclosed and filed with the Anti-
Money Laundering
Council (AMLC), fails to do so.
Definitions:
Covered Transaction is a transaction in cash or other equivalent
monetary instrument involving total amount in excess of P500,000
within one banking day.
*P500,000 is the threshold/controlling
Suspicious Transaction are transactions, regardless of amount,
where any of the following circumstances exists:
1. There is no underlying legal or trade obligation, purpose or
economic justification;
2. The client is not properly identified;
3. The amount involved is not commensurate with the
business or financial capacity of the client;
4. Taking into account all known circumstances, it may be
perceived that the clients transaction is structured in
order to avoid being the subject of reporting requirements
under the ACT;
5. Any circumstance relating to the transaction which is
observed to deviate from the profile of the client and/or
the clients past transactions with the covered institution;
6. The transaction is in any way related to an unlawful
activity or any money laundering activity or offense under
this ACT that is about to be, is being or has been
committed; or
7. Any transaction that is similar, analogous or identical to
any of the foregoing.
Sec. 3.i. of Republic Act 9160 states that: Unlawful activity" refers
to any act or omission or series or combination thereof involving or
having relation, to the following:
(A) Kidnapping for ransom under Article 267 of Act No. 3815,
otherwise known as the Revised Penal Code, as amended; (14)
Kidnapping for ransom
(B) Sections 4, 5, 6, 8, 9, 10, 12,13, 14, 15 and 16 of Republic Act
No.9165, otherwise known as the COMPREHENSIVE Dangerous
Drugs Act of 2002;
(14) Importation of prohibited drugs;
(15) Sale of prohibited drugs;
(16) Administration of prohibited drugs;
(17) Delivery of prohibited drugs
(18) Distribution of prohibited drugs
(19) Transportation of prohibited drugs
(20) Maintenance of a Den, Dive or Resort for prohibited users
(21) Manufacture of prohibited drugs
(22) Possession of prohibited drugs
(23) Use of prohibited drugs
(24) Cultivation of plants which are sources of prohibited drugs
(25) Culture of plants which are sources of prohibited drugs
(C) Section 3 paragraphs b, c, e, g, h and i of Republic Act No. 3019,
as amended, otherwise known as the Anti-Graft and Corrupt
Practices Act;
(14) Directly or indirectly requesting or receiving any gift, present,
share, percentage or benefit for himself or for any other person in
connection with any contract or transaction between the
Government and any party, wherein the public officer in his official
capacity has to intervene under the law;
(15) Directly or indirectly requesting or receiving any gift, present or
other pecuniary or material benefit, for himself or for another, from
any person for whom the public officer, in any manner or capacity,
has secured or obtained, or will secure or obtain, any government
permit or license, in consideration for the help given or to be given,
without prejudice to Section 13 of R.A. 3019;
(16) Causing any undue injury to any party, including the
government, or giving any private party any unwarranted benefits,
advantage or preference in the discharge of his official,
administrative or judicial functions through manifest partiality,
evident bad faith or gross inexcusable negligence;
10
(17) Entering, on behalf of the government, into any contract or
transaction manifestly and grossly disadvantageous to the same,
whether or not the public officer profited or will profit thereby;
(18) Directly or indirectly having financial or pecuniary interest in
any business contract or transaction in connection with which he
intervenes or takes part in his official capacity, or in which he is
prohibited by the Constitution or by any law from having any
interest;
(19) Directly or indirectly becoming interested, for personal gain, or
having material interest in any transaction or act requiring the
approval of a board, panel or group of which he is a member, and
which exercise of discretion in such approval, even if he votes
against the same or he does not participate in the action of the
board, committee, panel or group.
(D) Plunder under Republic Act No. 7080, as amended;
(20) Plunder through misappropriation, conversion, misuse or
malversation of public funds or raids upon the public treasury;
(21) Plunder by receiving, directly or indirectly, any commission, gift,
share, percentage, kickbacks or any other form of pecuniary benefit
from any person and/or entity in connection with any government
contract or project or by reason of the office or position of the
public officer concerned;
(22) Plunder by the illegal or fraudulent conveyance or disposition of
assets belonging to the National Government or any of its
subdivisions, agencies, instrumentalities or government-owned or
controlled corporations or their subsidiaries;
(23) Plunder by obtaining, receiving or accepting, directly or
indirectly, any shares of stock, equity or any other form of interest
or participation including the promise of future employment in any
business enterprise or undertaking;
(24) Plunder by establishing agricultural, industrial or commercial
monopolies or other combinations and/or implementation of
decrees and orders intended to benefit particular persons or special
interests;
(25) Plunder by taking undue advantage of official position,
authority, relationship, connection or influence to unjustly enrich
himself or themselves at the expense and to the damage and
prejudice of the Filipino people and the Republic of the Philippines
(E) Robbery and extortion under Articles 294, 295, 296, 299, 300,
301 and 302 of the Revised Penal Code, as amended;
(26) Robbery with violence or intimidation of persons;
(27) Robbery with physical injuries, committed in an uninhabited
place and by a band, or with use of firearms on a street, road or
alley;
(28) Robbery in an uninhabited house or public building or edifice
devoted to worship.
(F) Jueteng and Masiao punished as illegal gambling under
Presidential Decree No. 1602;
(29) Jueteng;
(30) Masiao.
(G) Piracy on the high seas under the Revised Penal Code, as
amended and Presidential Decree 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 310 of the Revised Penal Code, as
amended;
(34) Qualified theft.
(I) Swindling 'under Article 315 of the Revised Penal Code, as
amended;
(35) Estafa with unfaithfulness or abuse of confidence by altering
the substance, quality or quantity of anything of value which the
offender shall deliver by virtue of an obligation to do so, even
though such obligation be based on an immoral or illegal
consideration;
(36) Estafa with unfaithfulness or abuse of confidence by
misappropriating or converting, to the prejudice of another, money,
goods or any other personal property received by the offender in
trust or on commission, or for administration, or under any other
obligation involving the duty to make delivery or to return the same,
even though such obligation be totally or partially guaranteed by a
bond; or by denying having received such money, goods, or other
property;
(37) Estafa with unfaithfulness or abuse of confidence by taking
undue advantage of the signature of the offended party in blank,
and by writing any document above such signature in blank, to the
prejudice of the offended party or any third person;
(38) Estafa by using a fictitious name, or falsely pretending to
possess power, influence, qualifications, property, credit, agency,
business or imaginary transactions, or by means of other similar
deceits;
(39) Estafa by altering the quality, fineness or weight of anything
pertaining to his art or business;
(40) Estafa by pretending to have bribed any government employee;
(41) Estafa by postdating a check, or issuing a check in payment of
an obligation when the offender has no funds in the bank, or his
funds deposited therein were not sufficient to cover the amount of
the check;
(42) Estafa by inducing another, by means of deceit, to sign any
document;
(43) Estafa by resorting to some fraudulent practice to ensure
success in a gambling game;
(44) Estafa by removing, concealing or destroying, in whole or in
part, any court record, office files, document or any other papers.
(J) Smuggling under Republic Act Nos. 455 and 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 after fraudulent importation;
(50) Concealing smuggled article after fraudulent importation;
(51) Buying smuggled article after fraudulent importation;
(52) Selling smuggled article after fraudulent importation;
(53) Transportation of smuggled article after fraudulent importation;
(54) Fraudulent practices against customs revenue.
(K) Violations under Republic Act No. 8792, otherwise known as the
Electronic Commerce Act of 2000;
K.1. Hacking or cracking, which refers to:
(55) unauthorized access into or interference in a computer
system/server or information and communication system; or
(56) any access in order to corrupt, alter, steal, or destroy using a
computer or other similar information and communication devices,
without the knowledge and consent of the owner of the computer
or information and communications system, including
(57) the introduction of computer viruses and the like, resulting in
the corruption, destruction, alteration, theft or loss of electronic
data messages or electronic 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
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(63) the unauthorized broadcasting, of protected material,
electronic signature or copyrighted works including legally protected
sound recordings or phonograms or information material on
protected works, through the use of telecommunication networks,
such but not limited to, the internet, in a manner that infringes
intellectual property rights;
K.3. Violations of the Consumer Act or Republic Act No. 7394 and
other relevant or pertinent laws through transactions covered by or
using electronic data messages or electronic documents:
(64) Sale of any consumer product that is not in conformity with
standards under the Consumer Act;
(65) Sale of any product that has been banned by a rule under the
Consumer Act; ,
(66) Sale of any adulterated or mislabeled product using electronic
documents;
(67) Adulteration or misbranding of any consumer product;
(68) Forging, counterfeiting or simulating any mark, stamp, tag, label
or other 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 the
provisions of the E-Commerce Act;
(72) Sale of any drug or device by any person not licensed in
accordance with the provisions of the E-Commerce Act;
(73) Sale of any drug or device beyond its expiration date;
(74) Introduction into commerce of any mislabeled or banned
hazardous substance;
(75) Alteration or removal of the labeling 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 a
warranty or guarantee;
(80) Violation of price tag requirements;
(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 violations under Republic Act No. 6235;
destructive arson and murder, as defined under the Revised Penal
Code, as amended, including those perpetrated 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
against non-combatant persons and similar targets;
(M) Fraudulent practices and other violations under Republic Act No.
8799, otherwise known as the Securities Regulation Code of 2000;
(89) Sale, offer or distribution of securities within the Philippines
without a registration statement duly filed with and approved by the
SEC;
(90) Sale or offer to the public of any pre-need plan not in
accordance with the rules and regulations which the SEC shall
prescribe;
(91) Violation of reportorial requirements imposed upon issuers of
securities;
(92) Manipulation of security prices by creating a false or misleading
appearance of active trading in any listed security traded in an
Exchange or any other trading market;
(93) Manipulation of security prices by effecting, alone or with
others, a series of transactions in securities that raises their prices to
induce the purchase of a security, whether of the same or different
class, of the same issuer or of a controlling, controlled or commonly
controlled company by others;
(94) Manipulation of security prices by effecting, alone or with
others, series of transactions in securities that depresses their price
to induce the sale of a security, whether of the same or different
class, of the same issuer or of a controlling, controlled or commonly
controlled company by others;
(95) Manipulation of security prices by effecting, alone or with
others, a series of transactions in securities that creates active
trading to induce such a purchase or sale though manipulative
devices such as marking the close, painting the tape, squeezing the
float, hype and dump, boiler room operations and such other similar
devices;
(96) Manipulation of security prices by circulating or disseminating'
information that the price of any security listed in an Exchange will
or is likely to rise or fall because of manipulative market operations
of anyone or more persons conducted for the purpose of raising or
depressing the price of the security for the purpose of inducing the
purchase or sale of such security;
(97) Manipulation of security prices by making false or misleading
statements with respect to any material fact; which he knew or had
reasonable ground to believe was so false and misleading, for the
purpose of inducing the purchase or sale of any security listed or
traded in an Exchange;
(98) Manipulation of security prices by effecting, alone or with
others, any series of transactions for the purchase and/or sale of any
security traded in an Exchange for the purpose of pegging, fixing or
stabilizing the price of such security, unless otherwise allowed by the
Securities Regulation Code or by the rules of the SEC;
(99) Sale or purchase of any security using any manipulative
deceptive device or contrivance;
(100) Execution of short sales or stop-loss order in connection with
the purchase or sale of any security not in accordance with such
rules and regulations as the SEC may prescribe as necessary and
appropriate in the public interest or the protection of the investors;
(101) Employment of any device, scheme or artifice to defraud in
connection with the purchase and sale of any securities;
(102) Obtaining money or property in connection with the purchase
and sale of any security by means of any untrue statement of a
material fact or any omission to state a material fact necessary in
order to make the statements made, in the light of the
circumstances under which they were made, not misleading;
(103) Engaging in any act, transaction, practice or course of action in
the sale and purchase of any security which operates or would
operate as a fraud or deceit upon any person;
(104) Insider trading;
(105) Engaging in the business of buying and selling securities in the
Philippines as a broker or dealer, or acting as a salesman, or an
associated person of any broker or dealer without any registration
from the Commission;
(106) Employment by a broker or dealer of any salesman or
associated person or by an issuer of any salesman, not registered
with the SEC; ,
(107) Effecting any transaction in any security, or reporting such
transaction, in an Exchange or using the facility of an Exchange
which is not registered with the SEC;
(108) Making use of the facility of a clearing agency which is not
registered with the SEC;
(109) Violations of margin requirements;
(110) Violations on the restrictions on borrowings by members,
brokers and dealers;
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(111) Aiding and Abetting in any violations of the Securities
Regulation Code;
(112) Hindering, obstructing or delaying the filing of any document
required under the Securities Regulation Code or the rules and
regulations of the SEC;
(113) Violations of any of the provisions of the implementing rules
and regulations of the SEC;
(114) Any other violations of any of the provisions of the Securities
Regulation Code.
(N) Felonies or offenses of a similar nature to the afore-mentioned
unlawful activities that are punishable under the penal laws of other
countries.
In determining whether or not a felony or offense punishable under
the penal laws of other countries, is "of a similar nature", as to
constitute the same as an unlawful activity under the AMLA, the
nomenclature of said felony or offense need not be identical to any
of the predicate crimes listed under Rule 3.i.

Safe Harbor Provisions:

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

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

Truth in Lending Act:

Sec. 4 of Republic Act No. 3765 states that: Any creditor shall
furnish to each person to whom credit is extended, prior to the
consummation of the transaction, a clear statement in writing
setting forth, to the extent applicable and in accordance with rules
and regulations prescribed by the Board, the following information:
(1) the cash price or delivered price of the property or service to be
acquired;
(2) the amounts, if any, to be credited as down payment and/or
trade-in;
(3) the difference between the amounts set forth under clauses (1)
and (2);
(4) the charges, individually itemized, which are paid or to be paid by
such person in connection with the transaction but which are not
incident to the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos and centavos;
and
(7) the percentage that the finance bears to the total amount to be
financed expressed as a simple annual rate on the outstanding
unpaid balance of the obligation.
*Failure to comply with the Truth in Lending Act, the contract of
loan is still valid however, the bank cannot recover finance charges.
Purpose: To avoid hidden charges; to know the actual amount
borrowed.

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