Banking Laws Final Exam - Third Year Manresa

(2019-2020)

Report Summary
Name : Anna Sophia Tarhata Piang
Your Score : 82 out of 100 (82%)
Answered Correctly/Custom : 10 Question
graded questions
Incorrect Answers : 0 Question
Unanswered : 0 Question
Passing Grade (%) : 70%
Time Taken : 02 hrs
Your Result : Pass
Email : annasophiatarhatap.piang@gmail.com

Your Answers

Essay Type Points earned: 5 out of 5

Q1) On April 6, 2020, the Integrated Bar of the Philippines (IBP) and two medical
organizations appealed to coronavirus disease 2019 (COVID-19) patients and
persons under investigation (PUI) to waive their right to patient privacy to aid the
Department of Health (DOH)’s contact tracing efforts and stem the spread of the
disease. In a one-page statement, IBP national president Domingo Egon Cayosa,
along with Philippine Medical Association (PMA) president Jose Santiago Jr. and
Philippine College of Surgeons (PCS) president Jose Antonio Salud, said the
pressing demands of public health and safety have outweighed individual rights.
This was, however, rejected by the National Privacy Commission (NPC) citing the
Data Privacy Act of 2012. Is the Data Privacy Act of 2012 (DPA) a hindrance to
the COVID-19 response? Anchor your position on legal justifications. (5%)
Your answer
No, the Data Privacy Act of 2012 is not a hindrance to the COVID-19 response.

Under the said law, the personal information of the data subject can be processed and accessed
 even without their consent if the processing of such information is necessary to serve and protect
a legitimate public interest. However, the information that may be processed shall be limited only
to that which is relevant and necessary for the purpose which justifies the processing of the
same. Furthermore, the data subject shall have the right to be informed that their information has
been accessed as well as the right to rectification and damages should the information processed
and accessed is inacurrate or outdated.

In the instant case, the pressing demands of public health and safety are legitimate public
interests that will justify the processing and accessing of personal information even without prior
consent. As such, the Department of Health (DOH) may access the medical records and
information of the patients. However, the right of the DOH to do so only extends to such
information taht is releveant and necessary for its purpose of tracing contacts and stemming the
spread of the disease.

Essay Type Points earned: 3 out of 5

Q2) An employee of a large manufacturing firm earns a salary which is just a bit more
than what he needs for a comfortable living. He is thus able to still maintain a
P100,000.00 savings account, P2-0,000.00 checking account, a P300,000.00
money market placement and P400,000.00 trust fund in a medium-size
commercial bank.State which of the four accounts are deemed insured by the
Philippine Deposit Insurance Corporation. Explain briefly (5%)
Your answer
The following accounts of the employee are deemed insured by the Philippine Deposit Insurance
Commission (PDIC):

1. The P100,000 savings account

2. The P200,000 checking account
3. The P400,000 trust fund

The said accounts are insured by the PDIC becasue the are in the form of deposits. The term
'deposits', as contemplated by law and jurisprudence, pertains to money which is deposited with
a bank - thereby creating a creditor-debtor relationship between the bank and the client.
However, jurisprudence has also provided that if money which has been placed with a bank can
be used by it for its regular banking transactions of lending money to other clients, then such
deposited money is also insured by the PDIC even if it is not placed in a typical deposit account.

As such, the aforementioned accounts are deemed insured by the PDIC. The money market
placement worth P300,000 is not insured since it is not considered a 'deposit' in the bank itself.

Essay Type Points earned: 7 out of 10

Q3) Sometime on May 23, 2013, the Monetary Board (MB) of the Bangko Sentral ng
Pilipinas (BSP) ordered the closure of the Cooperative Rural Bank of Baganga
Inc. (CRBBI) and placed it under PDIC's receivership. PDIC took over CRBBI's
assets and affairs and examined its records in order to determine the insured
deposits. Mr. X filed a claim for payment of deposit insurance for his Special
Incentive Savings Account 0101 which had a balance of P400,000.00 at the time
 of CRBBI's closure. Upon investigation, PDIC found that Mr. X’s account
originated from the account of "Ethel Gabison or Ethel Booba" (source account)
with an opening balance of P1,531,993.42. On December 13, 2012, the source
account was closed and its balance of P1,544,081.48 was transferred and
distributed to four (4) accounts. PDIC then discovered that Mr. X is not a relative
of Ethel Gabison or Ethel Booba. Consequently, pursuant to the provisions of
PDIC Regulatory Issuance. PDIC consolidated Mr. X account with the other
legitimate deposits of Ethel Gabison or Ethel Booba for purposes of computing the
insurable deposit. PDIC considered the source account holder Ethel Gabison or
Ethel Booba as the real owner of the four resulting accounts. Thus, they were only
entitled to the maximum deposit insurance of P500,000.00. Mr X. argued that the
transfer of funds to his account is not deposit splitting because the transfer took
place more than 120 days prior to the closure of the bank; that as stated in PDIC
Regulatory Issuance No. 2009-03, splitting of deposits occurs whenever an
account is broken down and transferred into two or more accounts in the name/s
of natural or juridical person/s or entity/entities who have no beneficial ownership
on transferred deposits in their names within 120 days immediately preceding or
during bank-declared bank holiday, or immediately preceding a closure order
issued by the MB of the BSP.A. What is deposit splitting (5%) B. Is Mr. X correct?
Explain (5%)
Your answer
A. Deposit splitting is the act of breaking down the deposit contents of a bank account and
transferring them into two or more or more accounts which are in the name/s of two or more
natural or juridical persons who have no beneficial ownership over the transferred funds in their
names. Such an act usually occurs within 120 days immediately preceding or during bank-
declared bank holiday, or immediately preceding a closure order issued by the Monetary Board of
the Bangko Sentral ng Pilipinas.

B. Yes. Mr. X is correct. The transfer clearly occured more than 120 days before the closure of
the bank. Therefore, based on this premise, there is no deposit splitting in his case.

Essay Type Points earned: 9 out of 10

Q4) Provide at least 5 distinctions between a Rural Bank and a Thrift Bank. (10%)
Your answer
The following are some distinctions between a Rural Bank and a Thrift Bank:

1. As to purpose/role, a Rural Bank is aimed at providing services to clients such as farmers,

fishermen, and other constituents who come from rural areas. Conversely, a Thrift bank serves
small and medium enterpises and business owners.

2. In case there is insufficient subscription to its capital, a rural bank's capital may be subscribed
to by any governement financing institution including the LandBank and the Development Bank.
No such provision is applicable to Thrift Banks.

3. As to prohibitions on government officials siiting on the BOD, the provision on that was
removed from the Rural Banks Act, as such, it can be assumed that it is allowed. Conversely, in
 the case of thrift banks, such prohibtion is still applicable as a general rule.

4. As to the number of independent directors, only one (1) is needed for a rural bank. Conversely,
at least two (2) or 20% of the total number of directors is need for thrift banks.

5. As to the ability to open cehcking accounts, a rural bank may only do so if it has a capital
requirement of at least 5 million. For thrift banks, the requirement is at least 20 million.

Essay Type Points earned: 6 out of 10

Q5) On September 21, 1993, ABC Bank filed a complaint for violation of Section 31, in
relation to Section 144 of the then Corporation Code against two (2) of its officers,
Sam Morales and Bilko Argana. Allegedly, the two (2) officers have been actively
engaged in business endeavors that were in conflict with the business of the bank.
It was found that with the use of two (2) companies in which they have personal
financial interest, namely Torrance Development Corporation and Global Pacific
Corporation, they managed or caused existing bank clients/depositors to divert
their money from ABC Bank., such as those placed in peso and dollar deposits
and money placements, to products offered by other companies that were
commanding higher rate of yields. This was done by first transferring bank clients'
monies to Torrance and Global which in turn placed the monies of the bank clients
in securities, shares of stock and other certificates of third parties. It also appeared
that out of these transactions, the two derived substantial financial gains. These
allegations were made in an affidavit executed on September of 1993 by Mr. Y,
the vice president of ABC Bank. As evidence, Mr. Y annexed bank records
purporting to establish the deception practiced by Sam Morales and Bilko Argana.
Some of the documents pertained to the dollar deposits of a certain Jzan. In turn,
Joy Valmonte., the vice-president/business manager of the Global Consumer
Banking Group of ABC Bank, admits to having authorized Mr. Y to state the
names of the clients involved and to attach the pertinent bank records, including
those of Jzan upon the advice of their counsel. Jzan eventually filed a motion for
the exclusion and physical withdrawal of her bank records that were attached to
Mr. Y's affidavit, alleging violation of Republic Act No. 1405, otherwise known as
the Bank Secrecy Law. Mr. Y filed a comment alleging that this circumstance fall
within the exception of the aforementioned Bank Secrecy Law, particularly the
fourth exception "in cases where the money deposited or invested is the subject
matter of the litigation".Was there a violation of Republic Act No. 1405? Explain
(10%)
Your answer
Yes. There was a violation of the Bank Secrecy Law.

Jurisprudence provides that, within the contect of the Bank Secrecy Law, in order to determine if
the money deposited or invested is the subject matter of litigation, it is important to consider the
allegations of the complaint. If the money deposited or invested is crucial to the cause of action
against the defendants or oppositors, then the such money can be considered as the subject
matter of the litigation.
 In the instant case, the cause of action against Bilko and Sam stems from a violation of the then
Corporation Code - they were accused of engaging in activities which were prejudicial to the
interests of ABC Bank. It is not necessary to examine Jzan's bank records to determine or money
to litigate the case against them. While it is true that they committed the violation by transferring
and moving the monies of clients, the monies themselves are not the main subject matter since
there is not even a prayer or request that they be returned to the ABC Bank.

Therefore, there was a violation of the Bank Secrecy Law.

Essay Type Points earned: 3 out of 5

Q6) A. Is Mr. A, a barangay captain of Barangay Pa-Woke, a politically exposed

person in relation to the Anti-Money Laundering Law? Explain. (5%) B. Can the
Anti-Money Laundering Council (AMLC) file a case for Money Laundering against
Mr. A during the campaign period for Barangay elections? Explain (5%)
Your answer
A. Yes, Mr. A, as a barangay capatain, is a politically exposed person. The Anti-Money
Laundering Law provides that a politically exposed is someone who has been entrusted with a
public position which grants them authority and power over policy. In relation to this, the position
of barangay captain grants him a certain degree of power over policy within the jurisdiction of his
barangay.

B. Yes, the AMLC can file a case for money laundering against Mr. A during the campaign period
for Barangay elections. What the AMLA prohibits is the enforcement and implementation of a
freeze order of the assets of candidates during election periods. There is no prohibition on
prosecuting money laundering cases during suhc period.

Essay Type Points earned: 8 out of 10

Q7) A. Can a Pre-Need Company declare dividends? Explain (5%) B. Can the trust
fund of a Pre-Need Company be utilized for the purpose of satisfying the claims of
creditors (other than plan holders)? Explain (5%)
Your answer
A. Yes, a Pre-Need Company can declare dividends. Such a company is a stock corporations,
and therefore is allowed to declare dividens in favor of its stockholders. However, before such
declaration, the following must be unimpaired: a. 100% of its stock capital; b. Available cash on
hand; and c. An amount that is sufficent to answer for credits.

B. No, the Trust Fund of a Pre-Need Company cannot be utilized to satisfy the claims of
creditors. The Pre-Need Code and corresponding jurisprudence both provide that the Trust Fund
is disitinct and separate from the company's assets and that the planholders are its sole
beneficiaries. The claims of creditors may only be satisified with the actual assets of the
company.

Essay Type Points earned: 7 out of 10

Q8) Section 7(10) of Republic Act No. 9160, as amended by R.A. No. 9194, authorizes
the AMLC "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." On the other hand, Section 11 of the
AMLA, as amended, gives the AMLC the authority to inquire into or examine any
particular deposit or investment with any banking institution or non-bank financial
institution upon order of any competent court in cases of violation of the AMLA,
when it has been established that there is probable cause that the deposits or
investments are related to an unlawful activity as defined in Section 3(i) of the
AMLA or a money laundering offense under Section 4 thereof. However, no court
order shall be required in cases involving unlawful activities defined in Sections
3(i)(1), (2) and (12) of the AMLA.Is it correct to say that the act of deputizing
another government agency to inquire into bank accounts is encompassed by the
authority of the AMLC to enlist the assistance of any branch, department, bureau,
office, agency or instrumentality of the government, including government-owned
and -controlled corporations, as provided under Section 7(10) of the AMLA.?
Explain (10%)
Your answer
Yes, it would be correct to say that deputizing another agency to inquire onto bank accunts is
encompassed by the authority granted to the AMLC by Section 7 (10) of the AMLC.

The said section clearly provides the purpose of enlisting such assistance: "the more resolute
prevention, detection and investigation of money laundering offenses and prosecution of
offenders." With regard to this, various agencies have the means, technical knowledge and skill,
and resources to detect any anomalies that could lead to the discovery of money laundering
practices. As such, to deputize another agency which is capable of doing such things would only
further the purpose of the AMLA. Furthermore, such deputized agency would be acting under the
supervision and directive of the AMLC. This, and the fact that the agency must report to it -
makes the process smoother and more efficient.

Essay Type Points earned: 4 out of 5

Q9) CAN is a banking corporation duly organized and existing under the laws of the
Thailand and duly licensed to do business in the Philippines, with office in Makati
City. In 1977, Philippine Deposit Insurance Corporation (PDIC) conducted an
examination of the books of account of CAN. It discovered that CAN, in the course
of its banking business, from September 30, 1974 to June 30, 1977, received from
its head office and other foreign branches a total of P11,923,163,908.00 in dollars,
covered by Certificates of Dollar Time Deposit that were interest-bearing with
corresponding maturity dates. These funds, which were lodged in the books of
CAN under the account "Their Account-Head Office/Branches-Foreign Currency,"
were not reported to PDIC as deposit liabilities that were subject to assessment
for insurance. As such, in a letter dated March 16, 1978, PDIC assessed CAN for
 deficiency in the sum of P1,595,081.96. Believing that litigation would inevitably
arise from this dispute, CAN went to you for advice on whether or not the money
placements it received from its head office and other foreign branches were not
deposits and did not give rise to insurable deposit liabilities under Sections 3 and
4 of R.A. No. 3591 (the PDIC Charter) and, as a consequence, the deficiency
assessments made by PDIC were improper and erroneous.What is your advice?
Explain (5%)
Your answer
I would advise CAN that the money placements it received from its head office and other foreign
branches are not covered by the PDIC law. To be considered a deposit, the bank must be able to
use the same in its regular transactions which involve lending the same to toher clients. In this
case, the money placements cannot be used for such transaction since they are meant to be
placed there to accrue interest.

Essay Type Points earned: 8 out of 10

Q10) V. Sotto, a marketing personnel of JOY PARA SA BAYAN Inc., a duly organized
and existing corporation engaged in the business of selling packaged grocery
items, plans to engaged in making cold calls and emails to potential customers. A
potential customers’ contact information (name and contact details) is commonly
obtained from publicly available sources, such as calling cards from events,
exhibits and expos and the internet. Another method of acquiring contact
information is through a speculation of email addresses based on established
patterns. V Sotto, before making the intended cold calls and emails, wants to
know the legality of these marketing practices. A. Are the abovementioned
marketing practices considered direct marketing under the Data Privacy Act of
2012 (DPA)? (5%) B. What are the responsibilities of a Personal Information
Controller (PIC)? (5%)
Your answer
A. Such marketing practices are considered as direct marketing practices under the DPA. This is
because V. Sotto obtains publicly available information in order to directly contact potential
customers.

B. A Personal Information Controller is responsible for controlling how personal information is

processed, handled, and accessed. Such a person or entity is also responsible for ensuring that
there are safeguards which ensure the protection and privacy of such personal data.

Essay Type Points earned: 9 out of 10

Q11) Same facts as the previous question. Replicated below for easy reference: V.
Sotto, a marketing personnel of JOY PARA SA BAYAN Inc., a duly organized and
existing corporation engaged in the business of selling packaged grocery items,
plans to engaged in making cold calls and emails to potential customers. A
potential customers’ contact information (name and contact details) is commonly
obtained from publicly available sources, such as calling cards from events,
 exhibits and expos and the internet. Another method of acquiring contact
information is through a speculation of email addresses based on established
patterns. V Sotto, before making the intended cold calls and emails, wants to
know the legality of these marketing practices. C. Can V. Sotto use the potential
customers’ contact information for making cold calls and emails? If Yes, draft a
“script” for V. Sotto with at least 3 questions. Briefly explain why this should be the
line of questioning. If No, what should V. Sotto do to be able to use the potential
customers’ contact information. (5%) D. Assuming that V. Sotto can legally make
cold calls, can the recipient object at the initial contact? If Yes, what should the
Personal Information Controller do after the objection. If No, what should the
recipient do to protect his/her interests? (5%)
Your answer
C. Yes, V. Sotto can use the potential customers's contact information. This is becasue the same
are available from public sources.

Script:

"Good day. Would you be interested in availing of our delivery services?"

"We have a membership promo, would you like to be a member?"
"Would you prefer to pick-up your items personally? Because we also offer that service."

This line of questioning is acceptable since it serves his purpose of using such information which
is to market the business to potential clients.

D. The recepient cannot object the initial contact. This is because the information was obtained
through public sources. To protect their interest, the recepient must utilize their right to object to
the use of such information. The DPA provides that a data subject can withdraw consent
previously given, and if there is no legal or commercial obligation, the Personal Information
Controller can no longer use such information.

Essay Type Points earned: 8 out of 10

Q12) Several public officials were charged before the Sandiganbayan for violation of the
Anti-Graft and Corrupt Practices Act involving the anomalous award of a multi-
billion contract to Corporation Z. The Information alleged that each of the accused
received kickbacks from Corporation Z in exchange for the dispensation of certain
bidding requirements, and that the said kickbacks were deposited to the accused's
respective bank accounts in the Philippines. Upon request of the Office of the
Ombudsman, the Compliance and Investigation Staff of the Anti-Money
Laundering Council (AMLC) conducted an intelligence database search. The
search revealed that there were remittances to the bank accounts of the accused
with six (6) different banks. A. May the AMLC examine the bank accounts of the
accused-public officials even without seeking a prior court order? Explain.(5%) B.
May a court order be issued ex parte for the freezing of the bank accounts of the
accused-public officials upon application of the AMLC? If so, in what instance may
this be done and which court can issue such order? Explain. (5%)
Your answer
 A. No, the AMLC cannot examine the accounts wothout seeking a prior court order. The AMLA
provides for only six instances wherein no court order is needed: 1. Kidnapping for ransom; 2.
Violation of the Dangerous Drugs Act; 3. Terrorism or conspiracy to commit the same; 4.
Financing terrorism; 5. Arson; and 6. Murder. As can be clearly seen, violations of the Anti Graft
and Corrput Practices Act do not belong to the list of exceptions.

B. Yes, an ex-parte court order for the freezing of the bank accounts may be issued. The Court of
Appeals has jurisdiction to issue such an order. It is to be noted that such order may only be
issued if there is probable cause to believe that the money involved is related to any of the
predicate crimes listed under the AMLA.

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