“A DREAM DOESN’T BECOME REALITY THROUGH MAGIC; IT TAKES SWEAT,

DETERMINATION AND HARD WORK.”

- COLIN POWELL
 I. INTRODUCTION

In Multiple Choice Questions or MCQs1, the examiner has three (3) ways of crafting,
namely:

1. Measure the candidate’s knowledge of and ability to recall the laws,

doctrines, and principles that every new lawyer needs in his practice;
(RECALL)
2. Assess the candidate’s understanding of the meaning and
significance of those same laws, doctrines, and principles as they apply
to specific situations; (APPLICATION) and
3. Measure his ability to analyze legal problems, apply the correct law
or principle to such problems, and provide solutions to them.
(PROBLEM SOLVING)

While the answers to these questions come from the same pool of knowledge, each one is
used to assess a separate aspect of the thought process, thereby requiring different levels
of cognitive functions. To better appreciate the distinctions, please examine the foregoing
sample questions based on a common set of facts.

C.S. is an employee of a prominent BPO company in Quezon City at the same time he
was taking up B.S Accounting in one of the most prestigious business schools in Aurora
Blvd. His life was essentially juggling between professional and academic work. His hard
work eventually paid off as he managed to rise from the ranks, and currently leads a team
of six people. He thrives a leader for he had the right skills and he was well-liked in the
office. In fact has had several romantic relationships of varying degrees of seriousness with
co-workers. However, there was one aspect of his work that he has trouble with – lending
money to officemates. Being unmarried, he was a prime target of people whenever sweldo
de peligro was right around the corner. He has heard them all – tuition, sickness, grocery, et
cetera. He never declined, but now he was getting tired of being the office “ATM.” One
day, he decided to monetize his generosity by imposing interest on the amounts he would
lend out. The decision became very lucrative for him. So many people came to borrow
money from him that it came to a point that he had to borrow money from others to be
able sustain his lending activities. To entice people to let him borrow money, his promised
to: a) pay interest on the money borrowed while it was with him; and, b) that the money
and interest will be given back at any time the lender asks for it. He managed to obtain
funds from his friends and relatives reaching about thirty people. Business was good until
he received a cease and desist letter from the BSP.

RECALL

1. The following are the elements of a bank, EXCEPT:

a. The entity must be a stock corporation
b. The entity must be engaged in the lending of funds
c. The funds must be obtained in the form of deposits or deposit substitutes
d. The funds must be sourced from the public

APPLICATION

1 IN RE: REFORMS IN THE 2011 BAR EXAMINATIONS, Bar Matter No. 2265 s. 2011

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2. In the situation above, does the BSP have the power to order C.S. to cease and desist
from his lending activities?
a. No, because C.S. does not, by definition, qualify as a bank and therefore is beyond
the jurisdiction of BSP.
b. Yes, because C.S. is performing banking functions without the requisite license
from the BSP.
c. No, because C.S. is a sole proprietor, therefore it is the DTI which has power to
regulate his activities not the BSP.
d. Yes, because the BSP Governor is the chairman of the AMLC which has a wide
range of powers which includes issuing orders for the cessation of illegal financial
activities.

PROBLEM SOLVING

3. For this number, assume that the BSP has the power to stop the lending activities of
C.S.

Statement I: K.P., the significant other of C.S., inquired as to the amounts of money
each person has lent to C.S. in relation to his lending activities. C.S. refused and said
“I can’t disclose any information. Because the BSP has the power to stop my activities,
I am bound by RA 1405 (secrecy of bank deposits) and I don’t want to get into more
trouble.”
Statement II: C.S. decided to comply with the demand of PDIC which assessed him
for the semiannual premiums on deposit insurance. This assessment was issued on the
basis of on the same BSP cease and desist order.
a. Only Statement I is true.
b. Only Statement II is true.
c. Both statements are true.
d. None of the statements are true.

II. MULTIPLE CHOICE QUESTIONS

PHILIPPINE DEPOSIT INSURANCE CORPORATION

4. The following are not insurable by the PDIC, EXCEPT

a. Unit Investment Trust Fund
b. Mutual Fund
c. Time Deposit
d. Fictitious Bank Account

5. Allen D. has the following account with his Bank:

Depositor Nature of Account Amount (Php)
Allen D. Regular Savings 30,000
Allen D. in trust for Carlo S. Time Deposit 60,000
Allen D. for the account of Regular Savings 70,000
Lloyd D.
Allen D. by Carlo S. Time Deposit 80,000
Allen D. by Jay D. Unit Investment Trust 90,000
Fund
Allen D. and Carlo S. Time Deposit 100,000

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 Allen D. and/or Lloyd D. Checking 120,000
San Miguel Corporation Regular Savings 180,000
and/or Allen D.
Allen D. or Carlo S. or Lloyd Regular Savings 300,000
D.
Allen D. or Carlo S. Mutual Fund 90,000

How much is the insured deposit of Allen D. for his non-joint accounts?
a. Php 110,000
b. Php 200,000
c. Php 240,000
d. Php 330,000

6. Under PDIC, the amount due to any bona fide depositor for legitimate deposits in an
insured bank net of any obligations of the depositor to the insured bank as of the date
of closure
a. Should not exceed Php250,000
b. Less than Php250,000
c. Should not exceed Php500,000
d. Less than Php500,000

7. Lloyd D. is a depositor with a bank insured with the PDIC. He has 3 deposit accounts
all under his name: a) Checking Acct. No. 12345; b) Savings Acct. No. 23456; and, c)
Joint Account (with Carlo S.) No. 34567. Each account has a balance of Php250,000.
One day the Bank decided to close down and begin the process for liquidation. Lloyd
D. then filed his claims with the PDIC in accordance with the procedure prescribed.
How much is his total entitlement from all accounts to be paid by PDIC?
a. Php 500,000
b. Php 625,000
c. Php 250,000
d. Php 0

8. Which of the following statements is FALSE regarding payment of insured deposit by

PDIC?
a. Payment may be made in cash or through making available to each depositor a
transferred deposit in another insured bank in an amount equal to insured deposit
of such depositor.
b. The claim for insured deposit should be settled within six (6) months from the date
of filling provided all requirements are met but the claim must be filed within
twenty four (24) months after bank takeover.
c. The six-month period shall not apply if the documents of the claimant are
incomplete or if the validity of the claim requires the resolution of issues of facts
and law by another office, body or agency, independently or in coordination with
PDIC.
d. The depositor of the closed insured bank has twelve (12) months from date of
bank takeover to file his deposit insurance claim.

SECRECY OF BANK DEPOSITS

9. Lloyd D. invested his Php5M available money in bonds issued by the Philippine
government through his bank. Subsequently, the BIR asked his bank to disclose his

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 investments. The bank refused to disclose on the basis of RA 1405 invoking the
confidential nature of the investment. Which of the following is correct under RA
1405?
a. The bank is not justified because RA 1405 covers only deposits and does not
extend to investments such as the one mentioned above.
b. The bank is justified because RA 1405 covers deposits of whatever nature including
investments in government bonds.
c. The bank is justified because the BIR does not have the power to inquire into
deposits of taxpayers except for limited and specific instances.
d. The bank is not justified because the BIR has the power to inquire into bank
deposits to determine if the correct taxes have been paid.

10. A civil case for damages was against X, a foreign tourist, for the repeated rape,
molestation and detention of a 12-yr old girl. The court decided in in favor of the
complainant, and now seeks to execute the decision by garnishing the dollar deposits
of X with China Bank. Unfortunately, China Bank invoked the FCDA which explicitly
exempts dollar accounts from garnishment. Was China Bank correct?
a. No, because X was merely a foreign transient.
b. No, because the FCDA cannot be applied to foreigners.
c. No, because it is X, the depositor, who is entitled to invoke the FCDA not the
Bank.
d. No, because our laws a meant to protect people, or otherwise offer vindication for
the wrongs they have experienced.

11. Chief Justice Crown was impeached by the House of Representatives and is now being
held on trial by the Senate. The Impeachment Court subpoenaed PS Bank for the
details on the dollar deposits of Crown. The bank refused. Can the bank validly do
this?
a. Yes, because written consent of the depositor was not obtained.
b. No, because an Impeachment Court has the inherent power to compel the
testimony or presentation of relevant records.
c. Yes, because expediency is not an excuse for Constitutional shortcuts.
d. No, because impeachment is based on betrayal of public trust and our law should
not be used as a shield for wrong doing.

12. A criminal case for Plunder was filed against Estrada with the Sandiganbayan. The
prosecution requested for a subpoena directed to a Bank requiring is to disclose deposit
records of the accused and the related accounts. JV, whose account was included but
was not one of the accused, protested because Plunder was not one of the exceptions
in RA 1405. The prosecution countered that his (JV’s) accounts are “trust accounts”
and are not “deposits” by legal definition, thus are not covered by RA 1405.

Statement I: Exceptions are construed strictly, therefore the crime of plunder, not
being part of the enumerated exceptions, should not be used as basis for the subpoena.
Statement II: RA 1405 covers deposits “of whatever nature” and must be understood
to be broad enough to cover trust accounts.
a. Only Statement I is true.
b. Only Statement II is true.
c. Both statements are true.
d. None of the statements are true.

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UNCLAIMED BALANCES ACT

13. Under the Unclaimed Balances law, before filing a sworn statement, banks and other
similar institutions are under obligation to communicate with owners of dormant
accounts. The purpose of this initial notice is for a bank to determine whether an
inactive account has indeed been unclaimed. Hence, under BSP Circular No. 928 series
of 2016, for unclaimed dormant deposit accounts considered for escheat, the depositor
of such account shall be notified
a. At least 15 days prior to the filing by the bank of the sworn statement to the
Treasurer.
b. At least 30 days prior to the filing by the bank of the sworn statement to the
Treasurer.
c. At least 60 days prior to the filing by the bank of the sworn statement to the
Treasurer.
d. At least 90 days prior to the filing by the bank of the sworn statement to the
Treasurer.

14. Unclaimed balances include credits or deposits of money, bullion, security or other
evidence of indebtedness of any kind, and interest thereon with banks et cetera in favor
of:
a. Any person known to be dead
b. Any person who has not made further deposits or withdrawals during the
preceding 10 years or more
c. Both A and B
d. Neither A or B

15. Under the Unclaimed Balances Law, the Solicitor General, upon notification by the
Treasurer of the Philippines shall commence an action for
a. Quo Warranto
b. Civil Forfeiture
c. Escheat
d. Certiorari

16. X has a deposit in BDO. For more than 10 years he had not made any transactions
involving such. He moved residences during that period without informing the bank.
One day he decided to go to the bank and close the said account. He was informed
that all pre-requisite actions were complied with, and the money had already been
transferred to the national treasury by virtue of a final court order in Escheat
Proceedings No. 12345. X claimed to be denied due process because he was not even
informed of any of the events that happened, not even of the Escheat. He sued the
bank for the amount of his deposit with damages. Is the bank liable?
a. Yes, because the law requires, that notice be sent be given to the depositor prior
to sending the Sworn Statement to the treasurer of the Philippines.
b. No, because he was deemed notified when the required documents were published.
c. Yes, because a bank deposit is essentially a loan wherein the creditor is the deposit
and the debtor is the bank. Payment to the wrong person, does not extinguish the
obligation.
d. No, because the person liable is the one who is in wrongful possession of the
money.

ANTI-MONEY LAUNDERING ACT

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TAKE NOTE:

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

(b-1) ‘Suspicious transaction’ are transactions with covered institutions, regardless

of the amounts involved, where any of the following circumstances exist:
“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 client’s
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 client’s past transactions with the covered institution;
“6. the transaction is in any way related to an unlawful activity or offense under this Act
that is about to be, is being or has been committed; or
“7. any transaction that is similar or analogous to any of the foregoing.”

xxx

(i) ‘Unlawful activity’ refers to any act or omission or series or combination thereof
involving or having direct relation to the following:
(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the
Revised Penal Code, as amended;
(2) Sections 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of Republic Act No. 9165, otherwise
known as the Comprehensive Dangerous Drugs Act of 2002;
(3) 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;
(4) Plunder under Republic Act No. 7080, as amended;
(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the
Revised Penal Code, as amended;
(6) Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602;
(7) Piracy on the high seas under the Revised Penal Code, as amended and Presidential
Decree No. 532;
(8) Qualified theft under Article 310 of the Revised Penal Code, as amended;
(9) Swindling under Article 315 and Other Forms of Swindling under Article 316 of the
Revised Penal Code, as amended;
(10) Smuggling under Republic Act Nos. 455 and 1937;
(11) Violations of Republic Act No. 8792, otherwise known as the Electronic Commerce
Act of 2000;
(12) Hijacking and other violations under Republic Act No. 6235; destructive arson and
murder, as defined under the Revised Penal Code, as amended;
(13) Terrorism and conspiracy to commit terrorism as defined and penalized under
Sections 3 and 4 of Republic Act No. 9372;
(14) Financing of terrorism under Section 4 and offenses punishable under Sections 5, 6,
7 and 8 of Republic Act No. 10168, otherwise known as the Terrorism Financing
Prevention and Suppression Act of 2012:
(15) Bribery under Articles 210, 211 and 211-A of the Revised Penal Code, as amended,

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and Corruption of Public Officers under Article 212 of the Revised Penal Code, as
amended;
(16) Frauds and Illegal Exactions and Transactions under Articles 213, 214, 215 and 216
of the Revised Penal Code, as amended;
(17) Malversation of Public Funds and Property under Articles 217 and 222 of the Revised
Penal Code, as amended;
(18) Forgeries and Counterfeiting under Articles 163, 166, 167, 168, 169 and 176 of the
Revised Penal Code, as amended;
(19) Violations of Sections 4 to 6 of Republic Act No. 9208, otherwise known as the Anti-
Trafficking in Persons Act of 2003;
(20) Violations of Sections 78 to 79 of Chapter IV, of Presidential Decree No. 705,
otherwise known as the Revised Forestry Code of the Philippines, as amended;
(21) Violations of Sections 86 to 106 of Chapter VI, of Republic Act No. 8550, otherwise
known as the Philippine Fisheries Code of 1998;
(22) Violations of Sections 101 to 107, and 110 of Republic Act No. 7942, otherwise
known as the Philippine Mining Act of 1995;
(23) Violations of Section 27(c), (e), (f), (g) and (i), of Republic Act No. 9147, otherwise
known as the Wildlife Resources Conservation and Protection Act;
(24) Violation of Section 7(b) of Republic Act No. 9072, otherwise known as the National
Caves and Cave Resources Management Protection Act;
(25) Violation of Republic Act No. 6539, otherwise known as the Anti-Carnapping Act of
2002, as amended;
(26) Violations of Sections 1, 3 and 5 of Presidential Decree No. 1866, as amended,
otherwise known as the decree Codifying the Laws on Illegal/Unlawful Possession,
Manufacture, Dealing In, Acquisition or Disposition of Firearms, Ammunition or
Explosives;
(27) Violation of Presidential Decree No. 1612, otherwise known as the Anti-Fencing
Law;
(28) Violation of Section 6 of Republic Act No. 8042, otherwise known as the Migrant
Workers and Overseas Filipinos Act of 1995, as amended by Republic Act No. 10022;
(29) Violation of Republic Act No. 8293, otherwise known as the Intellectual Property
Code of the Philippines;
(30) Violation of Section 4 of Republic Act No. 9995, otherwise known as the Anti-Photo
and Video Voyeurism Act of 2009;
(31) Violation of Section 4 of Republic Act No. 9775, otherwise known as the Anti-Child
Pornography Act of 2009;
(32) Violations of Sections 5, 7, 8, 9, 10(c), (d) and (e), 11, 12 and 14 of Republic Act No.
7610, otherwise known as the Special Protection of Children Against Abuse, Exploitation
and Discrimination;
(33) Fraudulent practices and other violations under Republic Act No. 8799, otherwise
known as the Securities Regulation Code of 2000; and
(34) Felonies or offenses of a similar nature that are punishable under the penal laws of
other countries.”

(eee) “Monetary Instrument” refers, but is not limited, to the following: (1) Coins
or currency of legal tender of the Philippines, or of any other country; (2) Credit
instruments, including bank deposits, financial interest, royalties, commissions, and other
intangible property; (3) Drafts, checks, and notes; (4) Stocks or shares, participation or
interest in a corporation or in a commercial enterprise or profit-making venture and
evidenced by a certificate, contract, instrument, whether written or electronic in character,
including those enumerated in Section 3 of the Securities Regulation Code; (5) A

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participation or interest in any non-stock, non-profit corporation; (6) Securities or
negotiable instruments, bonds, commercial papers, deposit certificates, trust certificates,
custodial receipts, or deposit substitute instruments, trading orders, transaction tickets, and
confirmations of sale or investments and money market instruments; (7) Contracts or
policies of insurance, life or non-life, contracts of suretyship, preneed plans, and member
certificates issued by mutual benefit association; and (8) Other similar instruments where
title thereto passes to another by endorsement, assignment, or delivery.

(cccc) “Property” refers to any thing or item of value, real or personal, tangible or
intangible, or any interest therein, or any benefit, privilege, claim, or right with respect
thereto, including: (1) Personal property, including proceeds derived therefrom, or
traceable to any unlawful activity, as herein defined, such as, but not limited to: (a) Cash;
(b) Jewelry, precious metals and stones, and other similar items; (c) Works of art, such as
paintings, sculptures, antiques, treasures, and other similar precious objects; (d) Perishable
goods; and (e) Vehicles, vessels, aircraft, or any other similar conveyance. (2) Personal
property, used as instrumentalities in the commission of any unlawful activity, as herein
defined, such as: (a) Computers, servers, and other electronic information and
communication systems; and (b) Any conveyance, including any vehicle, vessel, and aircraft.
(3) Real estate, improvements constructed or crops growing thereon, or any interest therein,
standing upon the record of the registry of deeds or local government unit in the name of
the party against whom the freeze order or asset preservation order is issued, or not
appearing at all upon such records, or not belonging to the party against whom the freeze
order or asset preservation order is issued and held by any other person, or standing on
the records of the registry of deeds or local government unit in the name of any other
person, but are: (a) derived from, or traceable to, any unlawful activity; or (b) used as an
instrumentality in the commission of any unlawful activity, as herein defined.

SEC. 4. Money Laundering Offense. – Money laundering is committed by any person

who, knowing that any monetary instrument or property represents, involves, or relates to
the proceeds of any unlawful activity:
“(a) transacts said monetary instrument or property;
“(b) converts, transfers, disposes of, moves, acquires, possesses or uses said monetary
instrument or property;
“(c) conceals or disguises the true nature, source, location, disposition, movement or
ownership of or rights with respect to said monetary instrument or property;
“(d) attempts or conspires to commit money laundering offenses referred to in paragraphs
(a), (b) or (c);
“(e) aids, abets, assists in or counsels the commission of the money laundering offenses
referred to in paragraphs (a), (b) or (c) above; and
“(f) performs or fails to perform any act as a result of which he facilitates the offense of
money laundering referred to in paragraphs (a), (b) or (c) above.

SEC. 7. Creation of Anti-Money Laundering Council (AMLC). — The Anti-Money

Laundering Council is hereby created and shall be composed of the Governor of the
Bangko Sentral ng Pilipinas as chairman, the Commissioner of the Insurance Commission
and the Chairman of the Securities and Exchange Commission as members. The AMLC
shall act unanimously in the discharge of its functions as defined hereunder:

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

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“(2) to issue orders addressed to the appropriate Supervising Authority or the covered
institution to determine the true identity of the owner of any monetary instrument or
property subject of a covered transaction or suspicious transaction report or request for
assistance from a foreign State, or believed by the Council, on the basis of substantial
evidence, to be, in whole or in part, wherever located, representing, involving, or related
to, directly or indirectly, in any manner or by any means, the proceeds of an unlawful
activity.
“(3) to institute civil forfeiture proceedings and all other remedial proceedings through the
Office of the Solicitor General;
“(4) to cause the filing of complaints with the Department of Justice or the Ombudsman
for the prosecution of money laundering offenses;
“(5) to investigate suspicious transactions and covered transactions deemed suspicious
after an investigation by AMLC, money laundering activities, and other violations of this
Act;
“(6) to apply before the Court of Appeals, ex parte, for the freezing of any monetary
instrument or property alleged to be the proceeds of any unlawful activity as defined in
Section 3(i) hereof;
“(7) to implement such measures as may be necessary and justified under this Act to
counteract money laundering;
“(8) to receive and take action in respect of, any request from foreign states for assistance
in their own anti-money laundering operations provided in this Act;
“(9) to develop educational programs on the pernicious effects of money laundering, the
methods and techniques used in money laundering, the viable means of preventing money
laundering and the effective ways of prosecuting and punishing offenders;
“(10) to enlist the assistance of any branch, department, bureau, office, agency or
instrumentality of the government, including government-owned and -controlled
corporations, in undertaking any and all anti-money laundering operations, which may
include the use of its personnel, facilities and resources for the more resolute prevention,
detection and investigation of money laundering offenses and prosecution of offenders;
and
“(11) to impose administrative sanctions for the violation of laws, rules, regulations and
orders and resolutions issued pursuant thereto.”

17. Under the AMLA, all records of transactions of covered persons shall be maintained
and safely stored for:
a. 2 years from the date of the transactions.
b. 5 years from the date of the transactions.
c. 10 years from the date of the transactions.
d. 15 years from the date of the transactions.

18. Which Court has original jurisdiction for violations of the AMLA?
a. Municipal Trial Court
b. Regional Trial Court
c. Court of Appeals
d. Supreme Court

19. The following are powers of the AMLC, EXCEPT:

a. To require and receive covered of suspicious transaction reports from covered
persons
b. To institute civil forfeiture proceedings and all other remedial proceedings through

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 the OSG
c. To cause the filing of complaints with the DOJ or the Ombudsman for the
prosecution of money laundering offenses.
d. To issue freeze orders upon determination of probable case that any deposit or
similar account is in any way related to an unlawful activity.

20. Carlo S. is jobless but is known to be a jueteng operator. He has never been charged or
convicted of any crime. He maintains several bank accounts and has purchased several
houses and lots for each of his five friends who were all girls. The properties were sold
by Lloyd D Realty Corporation for Php5M each. Upon registration and issuance of
the respective Titles to the property, the Land Registration Authority promptly
reported to the AMLC. This prompted the AMLC to obtain a Court Order for the
disclosure of the pertinent records Carlo S. which revealed that he had over Php100M
in deposits. A case for violation of the AMLA was filed in the proper court.

For his defense, Carlo S. maintains that he was never before charged nor convicted of
any of the predicate crimes of money laundering, thus the charge against him had no
basis in fact and in law.

Statement I. The realty corporation should have reported the transaction as “suspicious”
to the AMLC.
Statement II. In order for a Money Laundering charge to prosper, there must be proof
beyond reasonable doubt as to the commission of the corresponding predicate crime
or unlawful activity.
a. Only Statement I is true.
b. Only Statement II is true.
c. Both Statements are true.
d. None of the Statements are true.

21. Unless increased by the Anti-Money Laundering Council (AMLC), what is the
maximum period for --------- transactions and suspicious transactions by covered
persons to AMLC?

a. Within 5 working days from the occurrence of the transaction

b. Within 5 calendar days from the occurrence of the transaction
c. Within 15 working days from the occurrence of the transaction
d. Within 15 calendar days from the occurrence of the transaction

-END-

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