Banking Laws ( AMLA | Secrecy of Bank | BP 22 )

Quiz 4

What is the primary purpose of the Secrecy of Bank Deposits Law (RA No. 1405 as amended)?

The purposes are to encourage people to deposit their money in banking institutions and to discourage private hoarding, so that the money may be properly utilized by banks in authorized loans to assist in the economic development of the country.

What types of deposits and investments are covered and considered absolutely confidential under RA No. 1405?

All deposits of whatever nature with banks or banking institutions in the Philippines, including savings, time deposits, checking accounts, etc., and investments in bonds issued by the Government of the Philippines or its instrumentalities. Trust accounts are also covered.

What are the general prohibitions against inquiry into deposits under RA 1405?

Said deposits may not be examined, inquired or looked into by any person, government official, bureau or office. Furthermore, it is unlawful for any official or employee of a banking institution to disclose to any person any information concerning said deposits.

What are the four main exceptions that allow inquiry into Peso Deposits under RA 1405?

Inquiry is allowed:

(1) Upon written permission of the depositor;

(2) In cases of impeachment;

(3) Upon order of a competent court in cases of bribery or dereliction of duty of public officials; and

(4) Upon the order of a competent court in cases where the money deposited or invested is the subject of litigation.

When can the Commissioner of Internal Revenue (BIR) inquire into bank deposits?

The Commissioner of BIR may inquire for the purpose of determining the net estate of a deceased depositor, or if there is an offer of compromise tax liability by reason of financial inability.

Does the garnishment of a bank deposit violate the Bank Secrecy Law (RA 1405)?

No. Garnishment is not a violation of the law because the disclosure is only incidental to the execution process, and it was not the intention of Congress to place Philippine currency bank deposits beyond the reach of creditors.

What is the penalty for violating RA 1405?

Imprisonment of not more than five years or a fine of not more than twenty thousand pesos or both, in the discretion of the court.

When is disclosure allowed concerning dormant deposits?

Disclosure is made to the Treasurer of the Philippines for dormant deposits for at least 10 years under the Unclaimed Balances Act (RA 3936).

What are the exceptions to the Secrecy of Foreign Currency Deposits (RA No. 6426)?

(1) When there is written consent of the depositor;

(2) Upon the order of a competent court, the AMLC may inquire where there is probable cause related to a money laundering offense; and

(3) Inquiry by the AMLC, without a court order, into property or funds related to the financing of terrorism.

What is the definition of money laundering?

Money laundering is a process of making illegally obtained funds from unlawful activities appear as clean money or coming from legal sources, committed by any person who, knowing that any monetary instrument or property relates to the proceeds of any unlawful activity, transacts, converts, transfers, possesses, or uses said instrument or property.

What are the three stages of money laundering?

(1) Placement, where the dirty money is inserted into a legitimate financial institution (the riskiest part);

(2) Layering, where money is sent through various financial transactions to change its form; and

(3) Integration, where the money re-enters the mainstream economy appearing to be legitimate.

What is the threshold for a standard Covered Transaction under AMLA?

A transaction in cash or other equivalent monetary instrument involving a total amount in excess of Five hundred thousand pesos (P500,000) within one banking day.

What is the threshold for a Covered Transaction involving casinos?

A single casino cash transaction involving an amount in excess of P5,000,000 or its equivalent in other currency.

Name two circumstances that qualify a transaction as a Suspicious Transaction regardless of the amount involved.

(1) There is no underlying legal or trade obligation, purpose or economic justification;

(2) The amount involved is not commensurate with the business or financial capacity of the client; or

(3) The client’s transaction is structured in order to avoid being the subject of reporting requirements.

What are the three core obligations of covered persons under AMLA?

(1) Customer identification (including establishing true identity based on official documents);

(2) Record keeping (for 5 years from transaction date or account closure); and

(3) Reporting of covered and suspicious transactions to the AMLC.

What is the rule regarding bank secrecy when a covered person files a transaction report?

When reporting, the action shall not be considered a violation of bank secrecy laws and similar laws, which is protected by the Safe Harbor provision.

Who are the members of the Anti-Money Laundering Council (AMLC)?

The Governor of the Bangko Sentral ng Pilipinas (as Chairman), the Commissioner of the Insurance Commission (as Member), and the Chairman of the SEC (as Member)

When may the AMLC inquire into deposits with a court order?

The AMLC may inquire into deposits upon order of the Court of Appeals, upon ex parte application, when it has been established that there is probable cause that the deposit is related to anti-money laundering or unlawful activity.

When may the AMLC inquire into deposits without a court order, bypassing RA 1405 and RA 6426?

When the offense or unlawful activity involved is: Kidnapping for ransom, Comprehensive Dangerous Drugs Act violations, Hijacking, destructive arson and murder, similar offenses punishable under penal laws of other countries, Terrorism and conspiracy to commit terrorism, and Financing of terrorism.

Who issues the Freeze Order on monetary instruments or property related to unlawful activity, and what is its maximum duration?

The Court of Appeals issues the freeze order upon verified ex parte petition by the AMLC. The total period of the freeze order shall not exceed six (6) months.

Are lawyers and accountants considered covered persons under AMLA?

They are excluded if they are acting as independent legal professionals in relation to information concerning their clients or where disclosure would compromise client confidences or the attorney-client/CPA-client relationship.

Is a prior criminal charge or conviction necessary before the AMLC can commence civil forfeiture proceedings?

No. No prior criminal charge, pendency of or conviction for an unlawful activity or money laundering offense is necessary for the commencement or the resolution of a petition for civil forfeiture.

What is the central criminal liability defined under BP 22?

Liability arises when a person makes or issues a check for value, knowing at the time of issue that he does not have sufficient funds or credit for the payment of such check upon presentment, and the check is subsequently dishonored.

What are the two punishable instances of insufficient funds under BP 22?

(1) Knowing the funds are insufficient at the time of issue; or

(2) Having sufficient funds at the time of issue, but failing to maintain sufficient funds to cover the check if presented within 90 days from the date appearing thereon.

How is "credit" construed under BP 22?

"Credit" means an arrangement or understanding with the bank for the payment of such check.

When a check drawn by a corporation is dishonored, who is liable under BP 22?

The person or persons who actually signed the check in behalf of such drawer shall be liable under the Act.

When does the dishonor of a check create prima facie evidence of knowledge of insufficient funds?

When the check is refused payment by the drawee and is presented within ninety (90) days from the date of the check.

How can the maker or drawer avoid liability/the prima facie presumption of knowledge after receiving notice of dishonor?

The maker or drawer must pay the holder the amount due, or make arrangements for payment in full, within five (5) banking days after receiving notice that the check has not been paid.

What must the drawee bank do upon refusing to pay a check due to insufficient funds?

It shall cause the reason for the dishonor or refusal to pay to be written, printed, or stamped in plain language thereon or attached thereto. If funds are insufficient, this fact must always be explicitly stated.

What is the penalty for violating BP 22?

Imprisonment of not less than thirty days but not more than one (1) year, or a fine of not less than but not more than double the amount of the check (but the fine shall in no case exceed Two Hundred Thousand Pesos), or both.