ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 43  May 2022 CPA Licensure Examination  Week No. 16

REGULATORY FRAMEWORK for BUSINESS TRANSACTIONS J. DOMINGO  N. SORIANO

RFBT-09: BANKING LAWS

BANK SECRECY LAW (RA 1405, AS AMENDED)
❖ Purpose: to give encouragement to the people to deposit their money in banking institutions and to
discourage private hoarding so that the same may be properly utilized by banks in authorized loans to
assist in the development of the country
❖ Prohibited Act: It shall be unlawful for any official or employee of a bank to disclose to any person or
for an independent auditor hired by a bank to conduct its regular audit to disclose to any person other
than a bank director, official or employee authorized by the bank, any information concerning said
deposits.
❖ Deposits covered:
1. Peso deposits: 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 considered absolutely confidential and may not be examined, inquired or
looked into by any person, government official, bureau or office, unless:
a. When there is a written permission of the depositor or investor
b. Impeachment cases
c. Upon the order of a competent court in cases of bribery or dereliction of duty of public officials
d. Upon the order of a competent court in cases where the money deposited or invested is the
subject of litigation
e. Upon order of the competent court or tribunal in cases involving unexplained wealth under RA
3019
f. Upon inquiry by the Commissioner of BIR for the purpose of determining the net estate of a
deceased depositor
g. Upon the order of a competent court or in proper cases by the AMLC where there is probable
cause of money laundering and in some instances even without court order
h. Disclosure to the Treasurer of the Philippines for dormant deposits for at least 10 years under
the Unclaimed Balances Act (RA 3936)
i. Report of banks to AMLC of covered and/or suspicious transactions
j. Upon order of the CA, examination by law enforcement officers in terrorism cases under the
Human Security Act of 2007 (RA 9372)
k. Examination is made in the course of a special or general examination of bank and is
specifically authorized by MB after being satisfied that there is reasonable ground to believe
that a bank fraud or serious irregularity has been or is being committed and that is necessary
to look into the deposit to establish such fraud or irregularity
l. Examination is made by an independent auditor hired by the bank to conduct its regular audit
provided that the examination is for audit purposes only and the results thereof shall be for
the exclusive use of the bank
2. Foreign currency deposits: except:
a. When there is written consent of depositor under Section 8 of the Foreign Currency Deposits
Act (RA 6426)
b. Under Section 11 of the Anti-Money Laundering Act (probable cause established that it is
related to an unlawful activity as defined or money laundering)
c. Under Section 27 and 28 of the Human Security Act (existence of probable cause in anti-
terrorism cases and those involving persons charged with or suspected of the crime of
terrorism or conspiracy to commit terrorism, judicially declared and outlawed terrorist
organization, association, or group of persons, or member of such organization, association, or
group of persons)

❖ Garnishment: Bank accounts may be garnished by the creditors of the depositor. The amount of
deposit is not actually disclosed, hence, no violation.
Exceptions:
1. Foreign currency deposits, Section 8 of RA 6426 (Note: In Salvacion v. Central Bank, GR 94723, August
21, 1997, foreign currency deposits made by a transient or a tourist is not the kind of deposit protected
by law. Hence, a dollar deposit made by a transient or a tourist may be subject to garnishment.)
2. Exempt under Rules of Court
❖ Penalties for violation: imprisonment of not more than 5 years or a fine not more than P20,000.00 or
both

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UNCLAIMED BALANCES LAW (ACT 3936, AS AMENDED BY PD 679)

❖ Unclaimed Balances: include credits or deposits of money, bullion, security, or other evidence of
indebtedness of any kind, and interest thereon with banks, buildings and loan associations, and trust
corporations, in favor of any person known to be dead or who has not made further deposits or
withdrawals during the preceding 10 years or more

It is obligatory of every bank to report, in sworn statement, to the Treasurer of the Philippines (who
will, in turn, inform the Solicitor General) of deposits that have not been touched (no deposit or
withdrawal made) for a period of 10 years or held in favor of persons known to be dead.

Under Section 1 of PD 679, all banks, building and loan associations, and trust corporations shall forward
the report to within the month of January of every odd year.

❖ Information required:
1. The names and last known place of residence or post office addresses of the persons in whose favor
such unclaimed balances stand;
2. The amount and the date of the outstanding unclaimed balance and whether the same is in money or
in security, and if the latter, the nature of the same;
3. The date when the person in whose favor the unclaimed balance stands died, if known, or the date
when he made his last deposit or withdrawal; and
4. The interest due on such unclaimed balance, if any, and the amount thereof.

Proper publication will then be made and if the depositors make no claim, escheat proceedings will result
in the unclaimed balances being deposited with the Treasurer of the Philippines to the credit of the
Republic to be used and appropriated by Congress.

Publication of list of unclaimed balances is intended to safeguard the right of depositors, their heirs and
successor to due process.

Any bank, building and loan association, or trust corporation which shall make any deposit with the
Treasurer of the Philippines in conformity with the Unclaimed Balances Law shall not thereafter be liable
to any person for the same and any action which may be brought by any person against in any bank,
building and loan association, or trust corporation for unclaimed balances so deposited shall be defended
by the Solicitor General without cost to such bank, building and loan association, or trust corporation.

PDIC ACT (RA 3591, AS AMENDED)

❖ Basic Policy: promote and safeguard the interests of the depositing public by way of providing
permanent and continuing insurance coverage on all insured deposits

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

Note: In case of a condition that threatens the monetary and financial stability of the banking system
that may have systemic consequences as determined by the MB, the maximum deposit insurance cover
may be adjusted in such amount, for such a period, and/or for such deposit products, as may be
determined by a unanimous vote of the Board of Directors in a meeting called for the purpose and
chaired by the DOF Secretary, subject to the approval of the President of the Philippines.

Under Section 22 of the PDIC Charter, a systemic risk refers to the possibility of failure of one bank to
settle net transactions with other banks will trigger a chain reaction, depriving other banks of funds
leading to a general shutdown of normal clearing and settlement activity. It also means the likelihood of
a sudden, unexpected collapse of confidence in a significant portion of the banking or financial system
with potentially large real economic effects.

❖ Coverage: The deposit liabilities of any bank or banking institution, which is engaged in the business
of receiving deposits as herein defined on the effective date of the PDIC Act, or which thereafter may
engage in the business of receiving deposits, shall be insured with the PDIC.

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❖ Commencement of liability: PDIC shall commence the determination of insured deposits due the
depositors of a closed bank upon its actual takeover of the closed bank.

❖ Deposit accounts not entitled to payment:

1. Investment products such as bonds and securities, trust accounts and other similar instruments
2. Deposit accounts or transactions which are unfunded and that are fictitious or fraudulent
3. Deposit accounts or transactions constituting and/or emanating from, unsafe and unsound banking
practice/s, as determined by PDIC, in consultation with BSP, after due notice and hearing, and
publication of a cease and desist order issued by PDIC against such deposit accounts or transactions
4. Deposits that are determined to be the proceeds of an unlawful activity as defined under RA 9160, as
amended

❖ Per Depositor, Per Capacity Rule: all deposits in the bank maintained in the same right and capacity
for his benefit either in his own name or in the name of others

❖ Joint accounts: A joint account regardless of whether the conjunction “and”, “or”, “and/or” is used
shall be insured separately from any individually-owned deposit account, provided that:
1. If the account is held jointly by two or more natural persons, or by two or more juridical persons or
entities, the maximum insured deposit shall be divided into as many equal shares as there are
individuals, juridical persons or entities, unless a different sharing is stipulated in the document of
deposit, and
2. If the account is held by a juridical person or entity jointly with one or more natural persons, the
maximum insured deposit shall be presumed to belong entirely to such juridical person or entity;

Provided, further, that the aggregate of the interest of each co-owner over several joint accounts,
whether owned by the same or different combinations of individuals, juridical persons or entities, shall
likewise be subject to the maximum insured deposit of P500,000.00.

No owner/holder of any negotiable certificate of deposit shall be recognized as a depositor entitled to

the rights in PDIC Act unless his name is registered as owner/holder thereof in the books of the issuing
bank.

PDIC shall commence the determination of insured deposits due the depositors of a closed bank upon
its actual takeover of the closed bank. PDIC shall give notice to the depositors of the closed bank of the
insured deposits due them by whatever means deemed appropriate by the Board of Directors. PDIC
shall publish the notice once a week for at least 3 consecutive weeks in a newspaper of general
circulation or, when appropriate, in a newspaper circulated in the community or communities where
the closed bank or its branches are located.

Mode of payment: made as soon as possible either:

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

Note: The PDIC, in its discretion, may require proof of claims to be filed before paying the insured
deposits, and that in any case where the PDIC is not satisfied as to the validity of a claim, it may require
final determination of a court of competent jurisdiction before paying such claim. The PDIC may
likewise withhold payment of such portion of the insured deposit for the payment of any liability of
such depositor as a stockholder of the closed bank, or of any liability of such depositor to the closed
bank or its receiver, which is not offset against a claim due from such bank, pending determination and
payment of such liability by such depositor or any other liable therefor.

❖ Effect of payment: PDIC shall be subrogated to all rights of the depositor against the closed bank to
the extent of such payment. Such subrogation shall include the right on the part of PDIC to receive the
same dividends and payments from the proceeds of the assets of such closed bank and recoveries on
account of stockholders’ liability as would have been payable to the depositor on a claim for the insured
deposits, but such depositor shall retain his claim for any uninsured portion of his deposit.

Also, under Section 21 of the PDIC Charter, payment of an insured deposit to any person by PDIC shall
discharge the PDIC, and payment of transferred deposit to any person by the new bank or by an insured

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bank in which a transferred deposit has been made available shall discharge PDIC and such new bank or
other insured bank, to the same extent that payment to such person by the closed bank would have
discharged it from liability for the insured deposit.

❖ Uninsured Portion: The depositor shall retain his or her claim for any uninsured portion of his or her
deposit, which legal preference shall be the same as that of the subrogated claim of PDIC for its
payment of insured deposits.

❖ Preference: All payments by PDIC of insured deposits in closed banks partake of the nature of public
funds, and as such, must be considered a preferred credit similar to taxes due to the National
Government in the order of preference under Article 2244(9) of NCC, provided further, that this
preference shall be likewise effective upon liquidation proceedings already commenced and pending
as of the approval of PDIC Act, where no distribution of assets has been made.

❖ Failure to settle claim of insured depositor: Failure to settle the claim within 6 months from the
date of filing of claim for insured deposit, where such failure was due to grave abuse of discretion,
gross negligence, bad faith or malice, shall upon conviction, subject the directors, officers or employees
of PDIC responsible for the delay, to imprisonment from 6 months to one year, provided, that the
period shall not apply if the validity of the claim requires the resolution of issues of facts and/or law
by another office, body or agency.

❖ Failure of depositor to claim insured deposits: Unless otherwise waived by the PDIC, if the
depositor in the closed bank shall fail to claim his insured deposits with PDIC within 2 years from
actual takeover of the closed bank by the receiver, or does not enforce his claim filed with PDIC within
2 years after the 2-year period to file a claim, all rights of the depositor against the PDIC with respect
to the insured deposit shall be barred, however, all rights of the depositor against the closed bank and
its shareholders or the receivership estate to which PDIC may have become subrogated, shall
thereupon revert to the depositor. Thereafter, PDIC shall be discharged from any liability on the
insured deposit.

❖ PDIC’s regulatory oversight:

1. Conduct of special bank examinations
2. Determination of products eligible for deposit insurance
3. Examination of deposit accounts of ailing banks: In the event that there is a finding of unsafe and
unsound banking practice, PDIC is authorized to examine deposits, as an exemption from Bank Secrecy
Law

❖ Splitting of deposits: occurs whenever a deposit account with an outstanding balance of more than
the statutory maximum amount of insured deposit maintained under the name of natural or juridical
persons is broken down and transferred into 2 or more accounts in the name/s of natural or juridical
persons or entities who have no beneficial ownership on transferred deposits in their names within
120 days immediately preceding or during a bank declared bank holiday or immediately preceding a
closure order issued by the MB of BSP for the purpose of availing of the maximum deposit insurance
coverage; prohibited; punishable by imprisonment of not less than 6 years but not more than 12 years
or a fine not less than P50,000 but not more than P10,000,000, or both, at the discretion of the court.

❖ Injunction: No court, except the CA, shall issue any TRO, preliminary injunction or preliminary
mandatory injunction against PDIC for any action under PDIC Act. The SC may issue a restraining order
or injunction when the matter is of extreme urgency involving a constitutional issue, such that unless
a TRO is issued, grave injustice and irreparable injury will arise.

ANTI-MONEY LAUNDERING ACT (RA 9160, AS AMENDED)

❖ Policy: To protect and preserve the integrity and confidentiality of bank accounts and to ensure that
the Philippines shall not be used as a money-laundering site for the proceeds of any unlawful activity.
Consistent with its foreign policy, the State shall extend cooperation in transnational investigations
and prosecutions of persons involved in money laundering activities whenever committed.

❖ Money Laundering: a crime whereby the proceeds of an unlawful activity are transacted, thereby
making them appear to have originated from legitimate sources

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❖ How committed:
1. Any person knowing that any monetary instrument or property represents, involves or relates to, the
proceeds of any unlawful activity:
a. Transacts said money 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 (a), (b) or (c);
e. Aids, abets, assists in or counsels the commission of the money laundering offenses referred to
in (a), (b) or (c); and
f. performs or fails to perform any act as a result of which he facilitates the offense of money
laundering referred to in (a), (b) or (c).
2. Any person knowing thata covered or suspicious is required to be reported to the AMLC, fails to do so

❖ Prosecution: Any person may be charged with and convicted of both the offense of money laundering
and the unlawful activity. The prosecution of any offense under AMLA shall proceed independently of
any proceeding relating to the unlawful activity.

❖ Covered Transaction: a transaction in cash or other equivalent monetary instrument involving a total
amount in excess of P500,000.00 within one banking day; for covered persons like casinos, a single
casino cash transaction (involving the receipt of cash by a casino paid by or behalf of a customer or
payout of cash by a casino to a customer or to any person in his/her behalf) involving an amount in
excess of P5,000,000 or its equivalent in any other currency

❖ Covered Persons: (natural or juridical)

1. Banks, non-banks, quasi-banks, trust entities, foreign exchange dealers, pawnshops, money changers,
remittance and transfer companies and other similar entities and other similar entities and all other
persons and their subsidiaries and affiliates supervised or regulated by the BSP;
2. Insurance companies, pre-need companies and other persons supervised or regulated by the
Insurance Commission;
3. (i) Securities dealers, brokers, salesmen, investment houses and other similar persons managing
securities or rendering services as investment agent, advisor, or consultant, (ii) mutual funds, close-
end investment companies, common trust funds, and other similar persons, and (iii) other entities
administering or otherwise dealing in currency, commodities or financial derivatives based thereon,
valuable objects, cash substitutes and other similar monetary instruments or property supervised and
regulated by SEC;
4. Jewelry dealers in precious stones, who, as a business, trade in precious stones, for transactions in
excess of P1,000,000;
5. Jewelry dealers in precious metals, who, as a business, trade in precious metals, for transactions in
excess of P1,000,000;
6. Company service provides which, as a business, provide any of the following services to third parties:
(i) acting as a formation agent of juridical persons; (ii) acting as (or arranging for another person to
act as ) a director or corporate secretary of a company, a partner of a partnership, or a similar position
in relation to other juridical persons; (iii) providing a registered office, business address or
accommodation, correspondence or administrative address for a company, a partnership or any other
legal person or arrangement; and (iv) acting as (or arranging for another person to act as) a nominee
shareholder for another person;
7. Persons who provide any of the following services:
a. Managing of client money, securities or other assets;
b. Management of bank, savings or security accounts;
c. Organization of contributions for the creation, operation or management of companies; and
d. Creation, operation or management of juridical persons or arrangements, and buying and
selling business entities.
8. Casinos, including internet and ship-based casinos, with respect to their casino cash transactions
related to their gaming operations

❖ Excluded Persons: lawyers and accountants acting as independent legal professionals in relation to
information concerning their clients or where disclosure of information would compromise client
confidences or the attorney-client relationship

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❖ Obligations of covered institutions:

1. Customer identification: Covered persons shall establish and record the true identity of its clients
based on official documents.
2. Record keeping: All records of all transactions of covered institutions shall be maintained and safely
stored for 5 years from the date of transactions.
3. Reporting of covered and suspicious transactions: Covered persons shall report to the AMLC all
covered transactions and suspicious transactions within 5 working days from occurrence thereof,
unless the AMLC concerned prescribes a different period not exceeding 15 working days.
4. Should a transaction be determined to be both a covered and a suspicious transaction, it shall be
reported as a suspicious transaction.
5. When reporting, it shall not be considered a violation of bank secrecy laws and similar laws. It shall be
prohibited from communicating, directly or indirectly, in any manner or by any means, to any person
the fact that a covered or suspicious transaction report was made, the content thereof, or any other
information in relation thereto.
6. Safe Harbor: No administrative, criminal, or civil proceedings, shall lie against any person for having
made a transaction report in the regular performance of his duties and in good faith, whether or not
such results in any criminal prosecution under Philippine laws.

❖ Suspicious Transaction: transactions with covered institutions, regardless of the amount 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 circumstances 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
7. Any transaction that is similar or analogous to any of the foregoing

❖ Unlawful activities: Any act or omission or series or combination thereof involving or having relation
to the following:
1. Kidnapping for ransom under Article 267 of RPC
2. Sections 4, 5, 7, 8, 9, 10, 12, 13, 14, 15 and 16 of Comprehensive Dangerous Drugs Act (RA 9165)
a. Importation of prohibited drugs
b. Sale of prohibited drugs
c. Administration of prohibited drugs
d. Distribution of prohibited drugs
e. Transportation of prohibited drugs
f. Maintenance of a den, dive, or resort for prohibited users
g. Manufacture of prohibited drugs
h. Possession of prohibited drugs
i. Use of prohibited drugs
j. Cultivation of plants which are sources of prohibited drugs
k. Culture of plants which are sources of prohibited drugs
3. Section 3, paragraphs B, C E, G, H and I of RA 3019
a. Directly or indirectly requesting or receiving any gift, present, share, percentage, or benefit for
himself or for any other person in connection with contract or transaction between the
Government and any party, wherein the public officer in his official capacity has to intervene
under the law
b. 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
c. 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

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d. 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
e. 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
f. 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, group
4. Plunder under RA 7080
5. Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of RPC
a. Robbery with violence or intimidation of persons
b. Robbery with physical injuries, committed in an uninhabited place and by a band, or with use
of firearms on a street, road, or alley
c. Robbery in an uninhabited house or public building or edifice devoted to worship
6. Jueteng and masiao under PD 1602
7. Piracy on the high seas under RPC and PD 532
a. Piracy on the high seas
b. Piracy in inland Philippine waters
c. Aiding and abetting pirates and brigands
8. Qualified theft under Article 310 of RPC
9. Swindling under Article 315 of RPC
10. Smuggling under RA 455 and RA 1937
11. Violations of Electronic Commerce Act (RA 8792)
12. Hijacking and other violations under RA 6235
13. Destructive arson and murder as defined under RPC
14. Terrorism and conspiracy to commit terrorism under Sections 3 and 4 of RA 9372
15. Financing terrorism under Section 4 and offenses punishable under Sections 5, 6, 7, and 8 of RA 10168
16. Bribery under Articles 210, 211 and 211-A of RPC and corruption of public officers under Article 212
of RPC
17. Frauds and illegal exactions and transactions under Articles 213, 214, 215 and 216 of RPC
18. Malversation of public funds and property under Articles 217 and 222 of RPC
19. Forgeries and counterfeiting under Articles 163, 166, 167, 168, 169 and 176 of RPC
20. Violations of Sections 4, 5 and 6 of RA 9208 (Anti-Trafficking in Persons Act)
21. Violations of Sections 86 to 106 of Chapter VI of RA 8550 (Philippine Fisheries Code)
22. Violations of Sections 101 to 107 and 110 of RA 7942 (Philippine Mining Act)
23. Violations of Section 27(c), (e), (f), (g) and (i) of RA 9147 (Wildlife Resources Conservation and
Protection Act)
24. Violation of Section 7(b) of RA 9072 (National Caves and Cave Resources Management Protection Act)
25. Violation of RA 6539 (Anti-Carnapping Act)
26. Violations of Section 1, 3 and 5 of PD 1866 (Illegal/Unlawful Possession of Firearms and Explosives)
27. Violation of PD 1612 (Anti-Fencing Law)
28. Violation of Section 6 of RA 8042 (Migrant Workers Act)
29. Violation of RA 8293 (Intellectual Property Code)
30. Violation of Section 4 of RA 9995 (Anti-Photo and Video Voyeurism Act)
31. Violation of Section 4 of RA 9775 (Anti-Child Pornography Act)
32. Violations of Sections 5, 6, 7, 8, 9, 10(c), (d) & 11, 12 and 14 of RA 7610 (Special Protection of Children)
33. Fraudulent practices and other violations under RA 8799 (Securities Regulation Code)
34. Felonies or offenses of a similar nature that are punishable under the penal laws of other countries
❖ Jurisdiction:
1. Regional Trial Court: all cases on money laundering
2. Sandiganbayan: if committed by public officers and private persons who are in conspiracy with such
public officers
❖ AMLC: composed of:
1. Chairman: BSP Governor
2. Members:
a. Commissioner of Insurance Commission
b. Chairman of SEC
Note: It shall act unanimously in discharging its functions.

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❖ Functions of AMLC:
1. To require and receive covered transaction reports from covered institutions
2. To issue orders addressed to the appropriate Supervising Authority or the covered institution to
determine the true identity of any monetary instrument or property subject of a covered 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, whenever located, representing, involving or related to,
directly or indirectly, in any manner or by any means, the proceeds of an unlawful activity
3. To institute civil forfeiture proceedings and all other remedial proceedings through the OSG
4. To cause the filing of complaints with the DOJ or Ombudsman for the prosecution of money laundering
offenses
5. To initiate investigations of covered transactions, money laundering activities and other violations of
RA 9160
6. To freeze any monetary instrument or property alleged to be proceeds of any unlawful activity
7. To implement such measures as may be necessary and justified under RA 9160 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 RA 9160
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 GOCCs, 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.
11. To impose administrative sanctions for the violation of laws, rules, regulations, orders, and resolutions
issued pursuant to law
❖ Freezing: The CA, upon application ex parte by AMLC and after determination that probable cause
exists that any monetary instrument or property is in any way related to an unlawful activity, may
issue a freeze order which shall be effective immediately (for a period of 20 days unless extended by
the court upon application by the AMLC; total period shall not exceed 6 months).
Note: Considering the intricate and diverse web of related and interlocking accounts pertaining to the
monetary instruments or properties that any person may create in the different covered institutions,
their branches and/or other units, AMLC may apply to freeze monetary instruments or properties in
the names of the reported owners/holders, and monetary instruments or properties named in the
application of the AMLC, including all other related web of accounts pertaining to other monetary
instruments and properties, the funds and sources of which originated from or are related to the
monetary instruments or properties subject of the freeze orders.
❖ Related Web of Accounts: those accounts, the funds and sources of which originated from and/or are
materially linked to the monetary instruments or properties subject of the freeze orders.
❖ Authority to inquire into bank deposits: The AMLC may inquire into deposits upon order of the
court when there is probable cause that the deposits are related to the crime or unlawful activities.
However, 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 RPC
2. Sections 4, 5, 7, 8, 9, 10, 12, 13, 14, 15 and 16 of Comprehensive Dangerous Drugs Act (RA 9165)
3. Hijacking and other violations under RA 6235
4. Destructive arson and murder as defined under RPC
5. Felonies or offenses of a nature similar to (1), (2), (3) and (4) which are punishable under the penal
laws of other countries
6. Terrorism and conspiracy to commit terrorism under RA 9372
7. Financing terrorism under Section 4 and offenses punishable under Sections 5, 6, 7, and 8 of RA 10168
Inquiry into deposits may be availed of even in the absence of a pre-existing criminal case under the same
law. However, the order authorizing bank inquiry cannot be issued ex parte.
❖ Authority to institute civil forfeiture proceedings: The AMLC is authorized to institute civil
forfeiture proceedings and all other remedial proceedings through the Office of the Solicitor General,
upon determination that probable cause exists that any monetary instrument or property is in any way
related to an unlawful activity or a money laundering offense.

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Week 16: BANKING LAWS

PDIC LAW

1. All deposits of any bank are insured with the:

A. BSP C. PDIC
B. Insurance Commission D. Monetary Board

2. Insured deposit means the net amount due to any depositor for deposits in an insured bank
but should not exceed:
A. P1,000,000 C. P250,000
B. P500,000 D. P300,000

3. Under the PDIC Law, a joint account held by a juridical person or entity jointly with a natural
person shall be presumed to belong to the:
A. Juridical person C. Both the juridical and natural persons
B. Natural person D. One who first files the claim

4. The proceeds of the insurance shall be paid by the PDIC to the depositor whenever:
A. The depositor files the claim with supporting documents
B. The insured bank submits the list of qualified depositors
C. The insured bank is closed on account of insolvency
D. The order from the BSP to pay is issued

5. The claim must be filed within how many years from the actual takeover by the receiver?
A. 5 B. 3 C. 2 C. 1

BANK SECRECY

6. 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 considered __ and may not be examined, inquired
or looked into by any person, government official, bureau or office.
A. Totally confidential C. Definitely confidential
B. Generally confidential D. Absolutely confidential

7. In order for a depositor or investor to waive the secrecy of his deposits and/or investments,
his waiver must be:
A. In writing
B. Made orally or in writing
C. Communicated as soon as possible to the bank manager
D. Made orally only

8. The secrecy of foreign currency deposits are not applicable (1) when there is written consent
of depositor, (2) under Section 11 of the Anti-Money Laundering Act, and (3) under Sections
27 and 28 of the Human Security Act.
A. 1 and 2 only C. All of three
B. 1 and 3 only D. All of three

9. There is no secrecy of bank deposits when the banks report to the Anti-Money Laundering
Council the following transaction/s:
A. Covered only
B. Suspicious only
C. Covered and/or suspicious
D. None can be reported without violating the secrecy of bank deposits

10. There is no secrecy of bank deposits if ordered by the __, the examination by law enforcement
officers in terrorism cases.
A. Regional Trial Court C. Municipal Trial Court
B. Court of Appeals D. Supreme Court

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11. Who may inquire into the bank deposits and investment for the purpose of determining the
net estate of a deceased depositor and investor?
A. Commissioner of Internal Revenue
B. Assistant Commissioner of Internal Revenue
C. BIR Regional Director
D. BIR Examiner

12. Which court can order the disclosure of bank deposits in cases where the money deposited or
invested is the subject of litigation?
A. Court of Appeals C. Supreme Court
B. Regional Trial Court D. Any competent court

UNCLAIMED BALANCES ACT

13. Deposits that have become dormant for a period of __ years may be escheated in favor of the
government.
A. 5 B. 10 C. 15 C. 20

14. Banks with dormant deposits are required to report to the __ of the Philippines the existence
of such deposits.
A. Treasurer C. President
B. Solicitor General D. DBM Secretary

15. The official who initiates the proper escheat proceedings in court is the:
A. Treasurer C. President
B. Solicitor General D. DBM Secretary

16. Once the unclaimed balances are deposited to the credit of the Government of the Republic of
the Philippines, who directs how said balances may be used?
A. President C. Senate
B. Supreme Court D. Congress

NEW CENTRAL BANK ACT

17. A conservator may be appointed whenever a bank or a quasi-bank is in:

A. A state of continuing inability to maintain a condition of liquidity deemed adequate to
protect the interest the interest of depositors and creditors
B. A state of continuing ability to maintain a condition of liquidity deemed inadequate to
protect the interest the interest of depositors and creditors
C. Unwillingness to maintain a condition of liquidity deemed inadequate to protect the
interest the interest of depositors and creditors
D. Willingness to maintain a condition of liquidity deemed inadequate to protect the
interest the interest of depositors and creditors

18. The Monetary Board may appoint a conservator to take charge of the assets, liabilities, and
the management of a bank or quasi-bank for a period not exceeding:
A. Two years C. 6 months
B. One year D. 3 months

19. Under conservatorship, the Monetary Board may:

First Statement: Reorganize the Management.
Second Statement: Collect all monies and debts due the said bank.
A. Only first statement is true.
B. Only second statement is true.
C. Both statements are true.
D. None of the statements is true.

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Week 16: BANKING LAWS

20. The Monetary Board may summarily and without need for prior hearing, forbid the
institution from doing business in the Philippines, and designate the PDIC as receiver of the
banking institution when a bank or quasi-bank is found:
A. Unable to pay its liabilities as they become due in the ordinary course of business
B. Has sufficient realizable assets to meet its liabilities
C. Can continue in business without involving probable losses to its depositors or
creditors
D. Has negligently violated a cease and desist order that has become final, involving acts
or transactions which amount to fraud, or a dissipation of the assets of the institution

21. It means all Philippine notes and coins issued for circulating.
A. Peso C. Notes and coins
B. Currency D. Legal tender

22. First Statement: BSP’s holding of its own notes and coins shall not be considered as part of its
currency issue.
Second Statement: BSP’s holding of its own notes and coins shall not form part of its assets
and liabilities.
A. Only first statement is true.
B. Only second statement is true.
C. Both statements are true.
D. None of the statements is true.

23. All notes and coins issued by BSP are fully guaranteed by the:
A. Republic of the Philippines C. BSP
B. National Treasury D. Monetary Board

24. All notes and coins issued by BSP shall be the legal tender in the Philippines of which kind/s
of debts?
A. Public only C. Both public and private
B. Private only D. Foreign only

25. BSP may call in for replacement, notes of any series or denomination which are more than __
years old, and coins which are more than __ years old.
A. Notes: 5, Coins: 5 C. Notes: 10, Coins: 5
B. Notes: 5, Coins: 10 D. Notes: 10, Coins: 10

26. Notes and coins called in for replacement shall remain legal tender for a period of how many
years from the date of call?
A. 1 B. 2 C. 3 C. 5

27. 5Notes and coins that ceased to be legal tender but during the following year, or for such
longer period as the Monetary Board may determine, they may be exchanged:
A. At par and without charge
B. At par and with charge
C. At market value and without charge
D. At market value and with charge

28. Pursuant to Section 52 of RA7653 and BSP Circular No. 537, Series of 2006, the maximum
amount of coins to be considered as legal tender for 1-peso, 5-peso and 10-peso is:
A. P500 B. P1,000 C. P5,000 C. P10,000

29. It means all those liabilities of BSP and of other banks, which are denominated in Philippine
currency, and are subject to payment in legal tender, upon demand by the presentation of
checks.
A. Demand deposits C. Currency
B. Certified checks D. Treasury bills

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Week 16: BANKING LAWS

30. First Statement: Checks representing demand deposits do not have legal tender power.
Second Statement: Their acceptance in the payment of debts; both public and private, is at the
option of the creditor.
A. Only first statement is true. C. Both statements are true.
B. Only second statement is true. D. None of the statements is true.

ANTI-MONEY LAUNDERING

31. Suspicious transactions refer to transactions with covered institutions, regardless of the
amount involved, where any of the following circumstances exist:
A. No underlying legal or trade obligation, purpose or economic justification
B. Client is properly identified
C. Amount involved commensurate with client’s business or financial capacity
D. Based on all known circumstances, it may be perceived that client’s transaction is not
structured in order to avoid being subject of reporting requirements

32. Jewelry dealer is a covered institution if it deals in precious metals, who as a business or
trade in excess of:
A. P10,000,000 C. P1,000,000
B. P5,000,000 D. P500,000

33. A covered person is obligated to keep records for how many years?
A. 5 B. 4 C. 3 C. 2

34. A covered person is obligated to report covered and/or suspicious transactions to AMLC
within how many days from occurrence?
A. 5 working days C. 7 working days
B. 5 calendar days D. 7 calendar days

35. The AMLC can prescribe a different period for reporting covered and/or suspicious
transactions to AMLC as long as it does not exceed:
A. 10 working days C. 15 working days
B. 10 calendar days D. 15 calendar days

36. Which professionals are not required to report covered and/or suspicious transactions if the
relevant information was obtained in circumstances where they are subject to professional
secrecy or legal professional privilege?
A. Lawyers and accountants C. Accountants only
B. Lawyers only D. All professionals are required

37. Should a transaction be determined to be both a covered transaction and a suspicious

transaction, the covered institution shall be required to report the same as a:
A. Covered transaction
B. Suspicious transaction
C. Both a suspicious and covered transaction
D. At the election of the covered institution

38. All cases on money laundering shall be within the jurisdiction of:
A. Regional Trial Courts (RTC) C. Sandiganbayan (SB)
B. Court of Appeals (CA) D. Court of Tax Appeals (CTA)

39. Acts of money laundering committed by public officers, and private persons in conspiracy
with such public officers shall be within the jurisdiction of:
A. Regional Trial Courts (RTC) C. Court of Appeals (CA)
B. Sandiganbayan (SB) D. Court of Tax Appeals (CTA)

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Week 16: BANKING LAWS

40. It is an extraordinary and interim relief issued to prevent the dissipation, removal, or
disposal of properties that are suspected to be the proceeds of, or related to, unlawful
activities as defined in RA9160:
A. Status quo ante order C. Writ of injunction
B. Temporary restraining order D. Freeze order

41. The power to freeze accounts is vested unto:

A. AMLC C. Court of Tax Appeals (CTA)
B. Court of Appeals (CA) D. Supreme Court (SC)

42. What are the requisites for issuance of freeze order?

A. Application ex parte by AMLC only
B. Determination of probable cause by CA only
C. Application ex parte by AMLC and determination of probable cause by CA
D. Application ex parte by AMLC and determination of probable cause by AMLC

43. The Court should act on the petition to freeze within how many hours from filing thereof?
A. 24 B. 36 C. 48 C. 72

44. A freeze order shall be effective immediately for a period not to exceed:
A. 6 months B. 3 months C. 1 month C. 20 days

45. A freeze order may be extended for a period not exceeding:

A. 6 months B. 3 months C. 1 month C. 1 year

46. Who serves as Chairman of the AMLC?

A. SEC Chairman C. Insurance Commission Chairman
B. BSP Governor D. DOF Secretary

47. AMLC may conduct an examination of bank accounts without a court order in cases involving:
A. Kidnapping for ransom C. Plunder
B. Drug possession D. Robbery and extortion

ANSWER KEY:
1. C 11. A 21. B 31. A 41. B
2. B 12. D 22. C 32. C 42. C
3. A 13. B 23. A 33. A 43. A
4. C 14. A 24. C 34. A 44. D
5. C 15. B 25. B 35. C 45. A
6. D 16. D 26. A 36. A 46. B
7. A 17. A 27. A 37. B 47. A
8 C 18. B 28. B 38. A
9. C 19. C 29. A 39. B
10. B 20. A 30. C 40. D

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