Silliman University College of Law Banking Bullets BarOps !!

" #en Via Veritas Vita

R. A. Morales page $ of $"

The avowed purpose in overhauling the General Banking Act (old law) to fashion a legal framework so that our banking system can ade uately meet currently emerging issues associated with deregulation and increasing financial globali!ation and the challenges that lie ahead of us in the "#st century$ The General Banking %aw (GB%) aims to maintain a strong& safe and sound banking system that can effectively perform its five (') basic functions( a) to mobili!e savings b) to allocate resources c) to facilitate risk amelioration d) to facilitate the e)change of goods and services between seller and buyers and e) to monitor corporate governance of the banking or financial institution$ *Banks shall refer to entities engaged in the lending of funds obtained in the form of deposits$ This definition describes what classical or core banking is& namely& the taking of deposits from the public& and lending out these funds$ +ndeed& banking is impressed with public interest$ As such& it is fiduciary (held in trust) in character and in the language of ,ection " (GB%)& this fiduciary nature of banking re uires high standards of integrity and performance$ The breach of this fiduciary duty could make the erring bank liable for& inter alia& moral damages even to a corporate client& in case the latter had a good reputation that was besmirched by such breach& resulting in its social humiliation$ +n a case& the ,upreme -ourt ruled( *the financial credit of a businessman is a pri!ed and valuable asset& it being a significant part of the foundation of his business$ Any adverse reflection thereon constitutes some material loss to him$ As cited in another case& . it can hardly be possible that a customer/s check can be wrongfully refused payment& without some impeachment of his credit& which must in fact be an actual in0ury& though he cannot& from the nature of the case& furnish independent& distinct proof thereof$/ 1oreover& the bank could be liable for e)emplary damages$ But the -ourt& in one case said( *The bank is not e)pected to be infallible but mistake of its teller despite the established procedure re uiring the papers and bank books to pass through a battery of bank personnel whose duty is to check and countercheck them for possible errors$ As the bank/s negligence caused serious an)iety& embarrassment& and humiliation to the depositors& the -ourt awarded them reasonable moral damages but 23T exemplary damages in the absence of malice and bad faith on the part of the bank$ ,ec$ "" GB% 4 The banking industry is hereby declared as indispensable to the national interest$

Silliman University College of Law Banking Bullets BarOps !!" #en Via Veritas Vita

R. A. Morales page of $"

Any strike or lockout involving banks& if unsettled after seven (5) calendar days shall be reported by the Bangko ,entral to the ,ecretary of %abor who may assume 0urisdiction over the dispute or decide it or certify the same to the 2%6- for compulsory arbitration$ 7owever& the 8resident of the 8hilippines& may at any time intervene and assume 0urisdiction over such labor dispute in order to settle or terminate the same$ 3utsourcing of inherent banking functions& defined as any contract between the bank and a service provider for the latter to supply& or any act whereby the latter supplies& the manpower to service the deposit transactions of the bank is prohibited under the GBL$ But only the front4end aspect of deposit transactions cannot be outsourced$ +n other words& the manpower (i$e$& the tellers) who will service deposits and withdrawals must come from the bank itself$ 7owever& the backroom functions (e$g$& printing of bank statements& security& 0anitorial& postal services etc$) may be outsourced$ A bank is prohibited from employing *casual or nonregular personnel or too lengthy probationary personnel but only in the *conduct of its business involving bank deposits$ 6egular employees are thought to have more loyalty and fidelity to the bank and presumably trustworthy than casual or probationary ones$ The power to supervise the operations and activities of banks is now vested solely in the Bangko Sentral$ Supervision by the Bangko ,entral& not only contemplates the promulgation of rules of conduct and standards of operations for the institutions being regulated& but also visitorial powers i$e$& the conduct of e)amination and investigation of activities of those institutions with a view to determining their compliance with those rules and standards& and enforcing prompt corrective action$ 9ltimately& the aim is to ensure the continued solvency and li uidity of the institutions concerned$ ,upervision being an active power which implies the capacity to in uire into facts and conditions in order to render the power real and effective& means overseeing to a certain that regulations are complied with& investigating to determine whether the institution is conducting its business on a sound financial basis and in uiring into the solvency and li uidity of the institutions$ 8er ,ection :& GB%& regular investigation shall 23T be oftener than once a year from the last date of e)amination to determine whether an institution is conducting its business on a safe and sound basis$

Silliman University College of Law Banking Bullets BarOps !!" #en Via Veritas Vita

R. A. Morales page " of $"

But under ,ection "; of the 2ew -entral Bank Act& the 1onetary Board by an affirmative vote of five (') members& may order special e)amination of a bank$ <hen e)amining a bank& the Bangko ,entral has the authority to e)amine as well an enterprise that is wholly or ma0ority owned or controlled by such bank$ 7owever& under ,ection 5& GB%& the B,8 can e)amine a subsidiary 32%= when e)amining a bank$ +n addition to the powers of a commercial bank& a universal bank can e)ercise the powers of an investment house as well as +2>?,T in 2324 allied enterprises$ ?)amples of non4allied enterprises a) engaged in physically productive activities in agriculture& mining and uarrying& manufacturing& public utilities& construction& wholesale trade& and community and social services b) industrial park pro0ects or industrial estate developments and c) financial and commercial comple) pro0ects$ All the foregoing e uity investments must have the prior approval of the 1onetary Board& and must be within the following prescribed limits namely( the total investments in e uities of allied and non4allied enterprises must not e)ceed '@A of the net worth of the universal bank& while the e uity investment in any one enterprise (allied or non4allied) must not be more than "'A of net worth of the bank$ Apart from its general powers as a stock corporation& a commercial bank (universal bank) can +2>?,T in e uities of A%%+?B enterprises$ Allied financial enterprises a) leasing companies b) banks c) investment houses d) financing companies e) credit card companies f) financial institutions catering small and medium scale enterprises& including venture capital corporations g) companies engaged in stock brokerage or securities dealerships h) companies engaged in foreign e)change dealership or brokerage i) insurance companies 0) holding companies investing in allied or non4allied enterprises$ 2on4financial allied enterprises a) warehousing companies b) storage companies c) safe deposit bo) companies d) companies primarily engaged in the management of mutual funds but not in mutual funds themselves e) management corporations engaged in an activity similar to the management of mutual fundsamong others$ A non4listed (in the ,tock ?)change) universal bank can own up to #@@A of the e uity in a thrift bank or rural bank$ But a publicly listed universal bank can own up to #@@A of the voting stock of only one other universal or commercial bank$ This is to encourage listing$ -ourts are prohibited from issuing a restraining order or in0unction en0oining the Bangko ,entral from e)amining any institution sub0ect to its supervision or e)amination& unless there is a convincing proof that the action of the B,8 is plainly arbitrary and in bad faith and the petitioner files the re uisite bond with the court$

Silliman University College of Law Banking Bullets BarOps !!" #en Via Veritas Vita

R. A. Morales page % of $"

3nly a stock corporation can be licensed as a bank or ,anctions are imposed on the unlicensed$

uasi4bank$

8ursuant to ,ection CC& GB%& the ,olicitor General can institute uo warranto proceeding (with ,-) for the dissolution of a corporation conducting banking or uasi4banking operations without the re uisite license or authority from the Bangko ,entral$ The ,ecurities and ?)change -ommission shall 23T register the articles of incorporation of any bank or any amendment thereto& unless accompanied by a certificate of authority issued by the Monetary Board under its seal$ The ,?- shall 23T also register the by4laws of any bank or any amendment thereto& unless accompanied by a certificate of authority from the Bangko Sentral. The certificate of authority shall 23T be issued by the 1onetary Board unless it is satisfied that #) all re uirements of e)isting laws and regulations to engage in business for which the applicant is proposed to be incorporated have been complied with ") public interest and economic conditions& both general and local& warrant the authori!ation D) the amount of capital& the financing organi!ation& direction and administration& as well as the integrity and administrators reasonably assure the safety of deposits and public interest$ The banks shall issue par value stocks only$ At present& 23 bank is allowed to purchase or ac uire shares of its capital stock or accept its own shares (treasury stock) as security for a loan& e)cept when authori!ed by the 1onetary Board$ 8rovided& that in every case the stock so purchased or ac uired shall& within si) (C) months from the time of its purchase or ac uisition& be sold or disposed of at a public or private sale$ +n connection with the merger of Far East Bank and BP & the uestion arose whether a payment by Ear ?ast of the fair value of its shares to stockholders voting against the merger (pursuant to ,ection !" and !# of the -orporation -ode) might violate the restriction against ,ection ": of the General Banking Act (now ,ec$ #@ of GB%)& the General -ounsel of Bangko ,entral opined that there would be no such violation& provided that the shares ac uired from dissenting stockholders were disposed by the bank within si) months from its ac uisition$ The same conclusion would hold true under ,ection #@& GB%$ Eoreign individuals and non4bank corporations may own or control up to forty percent (:@A) of the voting stock of a domestic bank$ This rule applies to Eilipinos and domestic non4bank corporations$ (,ec$ ##& GB%) The percentage of foreign4owned voting stocks in a bank shall be determined by the citi!enship of the individual stockholders& in that bank$ The citi!enship of the corporation which is a stockholder in a bank shall

Silliman University College of Law Banking Bullets BarOps !!" #en Via Veritas Vita

R. A. Morales page & of $"

follow the citi!enship of the controlling stockholders of the corporation& irrespective of the place of incorporation$ The :@A ceiling in ,ection ## is an aggregate limit for foreign individuals and non-bank corporations controlled by foreigners$ Eor Eilipinos and non4bank corporations controlled by Eilipinos& the :@A ceiling is an individual (not an aggregate limit)$ This means& for instance& that two Eilipinos can each own :@A (or a total of ;@A) of the voting stock in a domestic bank$ 7owever& as will be noted from ,ection 5D& GB%& it is possible for a foreign bank to ac uire up to #@@A of the voting stock of only one already e)isting bank& within seven years from Fune #D& "@@@$ 9nder the General Banking %aw& a bank shall have a board of directors with ' to #' members& reserving at least two (") for independent directors$ +n case of a bank merger or consolidation& the number of directors shall 23T e)ceed twenty4one ("#)$ An independent director must 23T be an officer or employee of the bank or its subsidiaries& affiliates or related interests$ An independent director is supposed to take care of the interest of the depositors and other creditors of the bank$ 2on4Eilipino citi!ens may become members of the B3B of a bank to the e)tent of the foreign participation in the e uity of said bank$ 9nder ,ection #'& GB%& teleconferencing and video$conferencing are e)pressly allowed& hence& the directors of the bank need not be all physically present in one room in order to hold a valid meeting& provided that such meeting are properly recorded and the appropriate tapes and discs properly stored for safekeeping$ 8er -orporation -ode& every director must own at least one share of the capital stock of the corporation of which he is a director (,ec$ "D)$ 1oreover& he will not ualify as a director or an officer of the corporation& if he was convicted by final 0udgment of an offense punishable for a period of e)ceeding si) years or a violation of the -orporation -ode committed within five years prior to the date of his election or appointment$ (,ec$ "5) ,ec$#C GB%& authori!es the 1onetary Board to prescribe and review special ualifications and dis ualifications of bank directors and officers& taking into account the person/s integrity& e)perience& education& training and competence$ The ob0ective is to keep only those fit and proper to serve the bank in particular& and the depositors and the public in general$ (fit and proper rule% A bank director must be at least "' years old (per 1B)(per 1anual "# yrs$ old) at the time of his election& and he must be at least a college graduate or have at least five year/s e)perience in business or have undergone banking training satisfactory to the Bangko ,entral$

Silliman University College of Law Banking Bullets BarOps !!" #en Via Veritas Vita

R. A. Morales page ' of $"

Sec. #&& GB%& commercial banking includes a) accepting drafts& b) issuing letters of credit& c) discounting and negotiating promissory notes& drafts& bills of e)change& and other evidence of debt& d) accepting or creating demand deposits& e) receiving other types of deposits& as well as deposit substitutes& f) buying and selling foreign e)change& as well as gold or silver bullion& g) ac uiring marketable bonds and other debt securities& and h) e)tending credit$ The ,upreme -ourt in a long line of cases has taken 0udicial notice of the fact that what enables a bank to pay interest on money deposited with it is precisely such bank/s own income generating activities$ -onse uently& according to the ,-& a *banking institution which has been declared insolvent and subse uently ordered closed by the -entral Bank cannot be held liable to pay interest on bank deposits which accrued during the period when the bank is actually closed and non4operational$ By issuing a letter of credit& a bank performs its basic function to *facilitate the e)change of goods and services between sellers and buyers$ The bank lends its own credit to an importer or a buyer& so that his e)porter or seller (now secure in the knowledge that payment is forthcoming under the %-) can be persuaded to conclude or consummate the contract of sale$ A letter of credit is a composite of at least three (D) distinct but intertwined relationships& each relationship being concreti!ed in a contract$ 3ne contract links the party applying for the %- and the party for whose the benefit the %- is issued$ A second contract relationship is between the account party and the issuing bank$ The third contract relationship is established between the issuing bank and the beneficiary& in order to support the contract& under the first contract& of the account party and the beneficiary& to inter alia& pay certain monies to the latter$ A violation of the Trust 6eceipts %aw is punished as a malum prohibitum and& as such& malice or intent is of 23 moment$ The mere failure to deliver the proceeds of the sale (of the goods) constitutes estafa$ 1oreover& the penal provision of the Trust 6eceipts %aw applies even if the goods covered by the trust receipt do not form part of a finished product that is ultimately sold but instead are utili!ed in the operation of the e uipment or machineries of the entrustee$ The relationship between a depositor and his bank is that of creditor and debtor$ The ,- once held that& *As a general rule& a bank has a right of set off of the deposits in its hands for the payment of any indebtedness to it on the part of a depositor$ -onversely& the depositor has every right to apply his deposit in a bank against his loan from such bank$ Eoreign currency deposit unit (E-B9) deposits are exempt from attachment& garnishment& or any other order or process of any court& legislative body& or other government agency$

Silliman University College of Law Banking Bullets BarOps !!" #en Via Veritas Vita

R. A. Morales page ( of $"

+n any case& the forfeiture provisions of the Anti41oney %aundering Act of "@@# extend to all deposits (including those in E-B9/s) that form part of laundered *monetary instruments$ +n one case though& the ,- allowed garnishment of the E-B9 deposit of a foreign transient& who had raped a #"4year old Eilipina ten times G to satisfy an award of damages against such transient$ Garnishment was allowed there because of the case/s peculiar circumstances& to prevent an in0ustice$ +n contrast& peso deposits may be garnished without violating the Bank ,ecrecy %aw$ +f a bank has knowledge of the death of a person& who had a deposit account with it alone& or 0ointly with another& it must 23T allow any withdrawal from the said account& unless the -ommissioner of +nternal 6evenue has certified that the estate ta) thereon has been paid$ +f at all& the -ommissioner may authori!e the withdrawal of an amount not e)ceeding 8"@&@@@ without such certification& upon the re uest of the administrator of the estate or any of the heirs of the decedent$ That said& ,ec$ H5 2+6-& will 23T apply& if there is a survivorship agreement between the 0oint depositors& permitting either of them to withdraw the whole deposit during their lifetime and transferring the balance to the survivor upon the death of one of them$ This is so because the entire deposit becomes the sole property of the survivor& and nothing passes to the decedent/s estate& which may be sub0ect to estate ta)$ The ,- has ruled that survivorship agreements are valid aleatory contracts$ The single borrower limit 'SB(% is a damage4control mechanism$ +t is a devise for *risk amelioration$ This is a basic effective banking supervision principle which re uires prudential limits to restrict bank e)posures to single borrowers or groups of related borrowers$ The main purpose of the ,B% is to prevent the bank from making e)cessive loans and other credit accommodations to a single borrower or corporate group& including guarantees for the account of such borrower or group$ The total amount of loans& credit accommodations& and guarantees that may be e)tended by a bank on any borrower must 23T e)ceed "@A of the net worth of such bank$ The "@A ,B% may be modified by the 1onetary Board for reasons of national interest$ )*S+ stands for *B G directorsI *3 G officersI *, G stockholdersI *6+ G related interest$ The general policy behind the B3,6+ rules is to level the lending field between the *insiders and the *outsiders$ Toward this end& loans and other credit accommodations by a bank to its B3,6+ are to be made (i) in

Silliman University College of Law Banking Bullets BarOps !!" #en Via Veritas Vita

R. A. Morales page ) of $"

the regular course of business and (ii) upon terms not less favorable to the bank than those offered to those outside the B3,6+ circle$ The ob0ective is to prevent the bank from becoming a *captive source of finance for the B3,6+$ 2ot all stockholders of the bank are meant to be sub0ect to the B3,6+ rules$ The threshold stockholding of "A is observed on the combined stockholding of a stockholder& together with his spouse or relative within the first degree of consanguinity or affinity or by legal adoption$ A real estate mortgage may be foreclosed 0udicially pursuant to 6ule C; of the 6ules of -ivil 8rocedure (6-8)& or e)tra0udicially pursuant to Act 2o$ D#D'$ +f the mortgagee is a bank& however& the said rule or law is supplemented and ualified by ,ec$ :5 GB%$ As a rule& in a 0udicial foreclosure& there is no right of redemption but 32%= an e uity of redemption$ The right of redemption is granted 32%= in case of e)tra0udicial foreclosure$ B9T if the mortgagee is a BA2J& there e)ists always a right of redemption whether foreclosure is 0udicial or e)tra0udicial$ +n 6ule C; of 6-8& right of mortgagor to e)tinguish the mortgage and retain ownership of the property by paying the mortgage debt ( e,uity of redemption) in 0udicial foreclosure shall be within a period of H@ days nor more than #"@ days from entry of final and e)ecutory 0udgment$ ,ec$ D of 6ule C; 6-8 recogni!es *such rights of redemption as may be allowed by law$ ,ec$ :5 GB% is one that allows a *right of redemption in lieu of the said *e uity of redemption$ 9nder ,ec$ :5 GB%& the mortgagor has the right to redeem the real property within one year after its sale on foreclosure& by paying the amount due under the mortgage deed together with the stipulated interest and all costs and e)penses incurred by the bank for the sale and custody of the property less any income derived by the bank therefrom$ The one4year period is actually counted from the date of registration of the certificate of sale in the 6egistry of 8roperty$ The GB%& however& shortens this period in case the mortgagor is a -uridical person$ +n fine& the mortgagor/s right to redeem terminates upon the registration of the certificate of foreclosure sale with the pertinent 6egister of Beeds$ ,ince that registration is re uired to be made 23T later than three months after foreclosure& the redemption period is effectively limited to not more than three months from e)tra0udicial foreclosure (by a 0uridical person)$ 9ntil the mortgagor redeems the foreclosed property& however& the purchaser& immediately after the date of confirmation of the auction sale&

Silliman University College of Law Banking Bullets BarOps !!" #en Via Veritas Vita

R. A. Morales page * of $"

has the right to enter upon and take possession of such property& and administer the same in accordance with law$ (when the mortgagee is a bank) ,ec$ :5 GB%& now re uires the filing of a bond before a petition to en0oin or restrain foreclosure proceedings may be given due course by the court$ The bond will answer for all damages the bank may suffer as a result of the en0oining or restraining the foreclosure$ A bank is generally permitted to ac uire only the real estate and improvements thereon (including bank e uipment) for its own use in the conduct of its business$ This real property include among others& bank premises& real properties& e uipment or other chattels purchased by the bank in its name for the benefit of its officers and employees$ (,ec$ '#& GB%)$ But under ,ec$ '"& GB%& bank may ac uire real property by way of satisfaction of claims$ +t restates the authority of a bank to ac uire& in foreclosure sale& real property mortgaged to it& in good faith& as security for its loan to its borrower$ 8rovided& that the bank will dispose of these sub0ect property within ' years$ After the five4year period& a bank will be permitted to hold to the undisposed real property& only if such property is usable by the bank in the conduct of its business A2B such bank has e)erted its best efforts to dispose of such property in good faith but failed$ +f the mortgagee bank is a foreign national& then it cannot purchase the land at foreclosure& but is entitled to receive only the proceeds from the sale$ ,ec$ "H GB% (above) speaks of core commercial banking activities$ ,ec$ 'D GB%& deals with *other banking services$ These two sections are imperative for a banking practitioner$ These sections embody most of the powers of a bank$ ,ec$ 'D GB%& authori!es a bank to a) receive in custody funds& documents and valuable ob0ectsI b) act as financial agent and buy and sell& by order of and for the account of their customers& shares& evidences of indebtedness and all types of securitiesI c) make collections and payments for the account of others and perform such other type of services for their customers as are not incompatible with banking businessI d) upon approval by 1B& act as managing agent& adviser& consultant or administrator of investment managementKadvisoryKconsultancy accounts and e) rent out safety deposit bo)es$ A bank shall 23T directly engage in insurance business as the insurer$ (,ec$ ': GB%) Although banks are not prohibited from distributing the products of insurance companies$ Banks are 23T allowed to directly engage in the insurance business as the insurers$

Silliman University College of Law Banking Bullets BarOps !!" #en Via Veritas Vita

R. A. Morales page $! of $"

7owever& a universal bank can indirectly do what is directly prohibited by ,ec$ ':& considering that it can have an insurance company (a financial allied enterprise) as a subsidiary$ Any information relating to the funds or properties of clients of a bank are to be kept confidential by such bank and its directors& officers& employees or agents$ ,uch information cannot be disclosed to any unauthori!ed person without a court order$ <ith regard to bank deposits in pesos (as well as investments in bonds issued by the 8hilippine Government or its political subdivision and instrumentalities)& the ,ecrecy of Bank Beposits law applies$ 9nder this law& those deposits and investments may 23T be e)amined& in uired& or looked into by any person& government official& bureau& or office ?L-?8T( (i) upon written permission of the depositor or investor& (ii) in cases of impeachment 36 (iii) upon order of a competent court a) in cases of bribery or dereliction of duty of public officials& or b) in cases where the money deposited or invested is the sub0ect of the litigation$ The following cases are additional e)ceptions to the ,ecrecy of Bank Beposits %aw( (#) 8rosecution for une)plained wealth under 6A D@#H (Anti4Graft and -orrupt 8ractices Act) (") 9pon order of a competent court in cases of violation of the Anti4 1oney %aundering Act of "@@# when it has been established that there is probable cause that the deposits or investments involved are in any way related to a money laundering offense$ (D) +n uiry by the -+6 into the deposits of a decedent for the purpose of determining the gross estate of such decedent$ (:) Bisclosure of certain information about bank deposits& which have been dormant for at least ten years& to the Treasurer of the 8hilippines in a sworn statement& a copy of which is posted in the bank premises$ (9nclaimed Balances %aw)$ +t used to be believed too that the ,ecrecy of Bank Beposits %aw did not apply to the 3mbudsman& on account of his authority& under ,ec$ #'(;) of the 3mbudsman Act *to e)amine and have access to bank accounts and records$ 7owever& the ,- in Marquez vs. Desierto, June 2 , 2!!", restricted the 3mbudsman/s power in ruling that before an in camera inspection may be allowed& there must be a pending case before a court of competent 0urisdiction$ Eurther& the account must be clearly identified& the inspection limited to the sub0ect matter of the pending case before the court of competent 0urisdiction$ The bank personnel and the account holder must be notified to be present during the inspection& and such inspection may cover only the account identified in the pending case$

Silliman University College of Law Banking Bullets BarOps !!" #en Via Veritas Vita

R. A. Morales page $$ of $"

<ith regard to E-B9 deposits& there are two clear instances under the law& when they may be e)amined& namely( a) upon the written permission of the depositor and b) upon order of a competent court in cases of violation of the Anti41oney %aundering Act& when it has been established that there is probable cause the deposits involved are in any way related to money laundering offense$ The 9nclaimed Balances %aw applies to E-B9 dormant deposits$

M,?-$ :$ Mone# Laundering $%%ense$ G Money laundering is a crime whereby the proceeds of an unlawful activity as herein defined are transacted& thereby making them appear to have originated from legitimate sources$ +t is committed by the following( M(a) Any person knowing that any monetary instrument or property represents& involves& or relates to& the proceeds of any unlawful activity& transacts or attempts to transact said monetary instrument or property$ M(b) Any person knowing that any monetary instrument or property involves the proceeds of any unlawful activity& performs or fails to perform any act as a result of which he facilitates the offense of money laundering referred to in paragraph (a) above$ M(c) Any person knowing that any monetary instrument or property is re uired under this Act to be disclosed and filed with the Anti41oney %aundering -ouncil (A1%-)& fails to do so$M

9nder the amended Anti41oney %aundering %aw (effective 1arch "@@D)& ./overed transaction. is a transaction in cash or other e uivalent monetary instrument involving a total amount in e)cess of Eive hundred thousand pesos (8'@@&@@@$@@) within one (#) banking day$M

Eurthermore& .Suspicious transaction. are transactions with covered institutions& regardless of the amounts involved& where any of the following circumstances e)ist( M#$ there is no underlying legal or trade obligation& purpose or economic 0ustificationI M"$ the client is not properly identifiedI MD$ the amount involved is not commensurate with the business or financial capacity of the clientI M:$ taking into account all known circumstances& it may be perceived that the client/s transaction is structured in order to avoid being the sub0ect of reporting re uirements under the ActI

Silliman University College of Law Banking Bullets BarOps !!" #en Via Veritas Vita

R. A. Morales page $ of $"

M'$ any circumstance relating to the transaction which is observed to deviate from the profile of the client andKor the client/s past transactions with the covered institutionI MC$ 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 committedI or M5$ any transaction that is similar or analogous to any of the foregoing$M <hile& .0nlawful activity. refers to any act or omission or series or combination thereof involving or having direct relation to the following( M(#) Jidnapping for ransom under Article "C5 of Act 2o$ D;#'& otherwise known as the 6evised 8enal -ode& as amendedI

M(") ,ections :& '& C& ;& H& #@& #"& #D& #:& #'& and #C of 6epublic Act 2o$ H#C'& otherwise known as the -omprehensive Bangerous Brugs Act of "@@"I M(D) ,ection D paragraphs B& -& ?& G& 7 and + of 6epublic Act 2o$ D@#H& as amended& otherwise known as the Anti4Graft and -orrupt 8ractices ActI 8lunder under 6epublic Act 2o$ 5@;@& as amendedI

M(:)

M(') 6obbery and e)tortion under Articles "H:& "H'& "HC& "HH& D@@& D@# and D@" of the 6evised 8enal -ode& as amendedI M(C) Fueteng and 1asiao punished as illegal gambling under 8residential Becree 2o$ #C@"I M(5) 8iracy on the high seas under the 6evised 8enal -ode& as amended and 8residential Becree 2o$ 'D"I M(;) Nualified theft under Article D#@ of the 6evised 8enal -ode& as amendedI M(H) ,windling under Article D#' of the 6evised 8enal -ode& as amendedI M(#@) ,muggling under 6epublic Act 2os$ :'' and #HD5I

M(##) >iolations under 6epublic Act 2o$ ;5H"& otherwise known as the ?lectronic -ommerce Act of "@@@I M(#") 7i0acking and other violations under 6epublic Act 2o$ C"D'I destructive arson and murder& as defined under the 6evised 8enal -ode& as amended& including those perpetrated by terrorists against non4combatant persons and similar targetsI M(#D) Eraudulent practices and other violations under 6epublic Act 2o$ ;5HH& otherwise known as the ,ecurities 6egulation -ode of "@@@I

Silliman University College of Law Banking Bullets BarOps !!" #en Via Veritas Vita

R. A. Morales page $" of $"

M(#:) Eelonies or offenses of a similar nature that are punishable under the penal laws of other countries$M M(c) Malicious +eporting$ Any person who& with malice& or in bad faith& reports or files a completely unwarranted or false information relative to money laundering transaction against any person shall be sub0ect to a penalty of si) (C) months to four (:) years imprisonment and a fine of not less than 3ne hundred thousand 8hilippine pesos (8hp #@@&@@@$@@) but not more than Eive hundred thousand 8hilippine pesos (8hp '@@&@@@$@@)& at the discretion of the court( &rovided& That the offender is not entitled to avail the benefits of the 8robation %aw$

M+f the offender is a corporation& association& partnership or any 0uridical person& the penalty shall be imposed upon the responsible officers& as the case may be& who participated in& or allowed by their gross negligence& the commission of the crime$ +f the offender is a 0uridical person& the court may suspend or revoke its license$

+f the offender is an alien& he shall& in addition to the penalties herein prescribed& be deported without further proceedings after serving the penalties herein prescribed$ +f the offender is a public official or employee& he shall& in addition to the penalties prescribed herein& suffer perpetual or temporary absolute dis ualification from office& as the case may be$

MAny public official or employee who is called upon to testify and refuses to do the same or purposely fails to testify shall suffer the same penalties prescribed herein$

M(d) Breach of /onfidentiality$ The punishment of imprisonment ranging from three (D) to eight (;) years and a fine of not less than Eive hundred thousand 8hilippine pesos (8hp '@@&@@@$@@) but not more than 3ne million 8hilippine pesos (8hp #&@@@&@@@$@@) shall be imposed on a person convicted for a violation under ,ection H(c)$ +n the case of a breach of confidentiality that is published or reported by media& the responsible reporter& writer& president& publisher& manager and editor4in4chief shall be liable under this Act$M

Good luck!!!!