Reviewer.docx

CHAPTER 10 – Deposit Insurance I.

b. Qualifications: i. Good moral character ii. Unquestionable integrity and responsibility iii. Recognized competence iv. 35 years old

Roles of PDIC 1. Insure the deposits of all banks which are entitled to benefits of insurance 2. As a basic policy, promote and safeguard interest of depositing public by way of providing insurance coverage • RA 3591 – Act establishing PDIC • PDIC is entitled to free use of Philippine mail

II.

Disqualification of appointive members •

Powers of PDIC as Corporate Body 1. 2. 3. 4.

Use corporate seal Have succession until dissolved Make contracts Sue and be sued a. All suits of civil nature is deemed to arise from Philippine law b. No attachment or execution against PDIC before final judgment c. BOD designate agent of insured bank 5. Appoint its Board of Directors (BOD) 6. Prescribe by-laws not inconsistent with law 7. Exercise all powers granted by law and incidental thereto 8. Conduct examination of bank with prior approval of MB a. No examination conducted within 12 days from last examination b. To avoid overlap examinations, maximize use of reports 9. Act as receiver 10. Prescribe rules deemed necessary to implement PDIC law 11. Establish provident fund for payment of benefits of employees 12. Compromise, condone or release any claim to PDIC III.

Board of Directors •

BOD shall administer the affairs of PDIC fairly and impartially without discrimination

For duration of tenure and 1 year after, appointive members of the board are disqualified from holding office in any insured bank

Quorum • • •

3 members shall constitute a quorum Secretary of Finance and BSP Governor can designate a representative with no lower rank than U.Sec and Deputy Governor If Secretary of Finance fails to attend, President of PDIC shall be chairman

Per Diem •

Secretary of Finance shall fix per diem

Authority of the Board 1. Prepare rules and regulations for effective discharge of responsibilities 2. Direct management of PDIC 3. Establish human resource management system a. Compensation structure shall be based on job evaluation studies b. All positions shall be governed by compensation position classification system c. Compensation plan comparable with prevailing compensation d. Exempted from existing laws on compensation 4. Appoint, establish rank and fix remuneration 5. Adopt annual budget 6. Approve methodology in insurance and finance assistance IV. Officers

Composition 1. Secretary of Finance – ex-officio chairman 2. Governor of BSP – ex-officio member 3. President of PDIC – vice chairman a. appointed by the President with term of 6years 4. Two members from the private sector a. Term of 6 years without reappointment

President •

Shall be Chief Executive of PDIC

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Salary fixed by President of Philippines • Total salary shall be ceiling of all other personnel Powers and duties: 1. Prepare agenda for meeting 2. Execute and administer policies

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3. Direct and supervise operations 4. Represent PDIC 5. Authorize, with his signature and prior approval of board, contracts, notes and securities issued 6. Represent PDIC in legal action 7. Delegate power to represent 8. Exercise other powers vested in him Vice President • •

Shall assist President During absence or temporary incapacity of President, VP shall act as president pending the appointment of new President

Bank Examiners • • •

BOD shall appoint examiners to examine insured bank Each examiner has the power to make thorough examinations They have the power to: o Administer oaths o Examine and take testimony of officers o Compel presentation of books

Claim Agents •

Claim agents – power to investigate and examine all claims for insured deposits

Investigators •

V.

Investigators – power to conduct investigations on fraud, irregularities and anomalies committed in banks Deposit Insurance Coverage

Deposit Liabilities • Deposit liabilities of any bank engaged in business of receiving deposit shall be insured with PDIC •

Factors considered by BOD 1. Financial history and condition of bank 2. Adequacy of capital structure 3. Future earnings prospects 4. General character of management 5. Convenience and needs of community

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Deposit – unpaid balance of money received by a bank and for which it has given credit to a: 1. Commercial 2. Checking 3. Savings 4. Time 5. Thrift accounts 6. Those evidenced by passbooks

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Any obligation of a bank payable outside of Philippines shall not be a deposit under PDIC Law

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Insured bank that has branch outside the Philippines may avail insurance for its deposit payable only in such branch

Statutory Liability of PDIC • •

PDIC primarily governed by special law Liability of PDIC is statutory and rests upon existence of a deposit with an insured bank and not the negotiability of the certificate evidencing the deposit

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Fourth National Bank of Wichita vs. Wilson: negotiability of instrument has no dependence of existence of guaranty or insurance

Deposit must be in fact made •

Fact that certificates stated that they are insured by PDIC does not ipso facto make the certificate insured

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Deposit liability is determined by RA 3519 To claim deposit insurance, law requires that a deposit is placed in the insured bank Deposit may be constituted only if money or its equivalent have been received by a bank

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Holder in due course not applicable •

Even if depositor is HDC, it does not mean that he already has a claim against the insurance fund

• The fund protects deposits only Liability under negotiable instrument vs. Guarantee fund •

Liability of the make is different from liability of the guarantee fund. The latter is purely statutory

Deposit insurance of Foreign Currency Deposits •

Foreign currency deposits – insured with PDIC

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Insurance payment shall be in same currency in which deposit is denominated

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PDIC shall not terminate insured status of any bank which continues to receive deposits

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PDIC Law is not applicable to Offshore Banking Units

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Should insured bank fails to pay assessment dues required, PDIC may file collection case and administrative charges against bank officials

Duty to indicate insurance on Deposit Trust Fund •

VI.

All banks must indicate that it is under the PDIC and maximum insurance Assessment

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Trust fund – funds held by insured bank in fiduciary capacity

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Trust fund shall be insured in an amount not to exceed 10k for each trust estate

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Such insurance shall be separate from other deposits of owners of trust funds When fiduciary bank deposits any trust fund with other insured bank, such amount shall not be considered as a deposit liability

Assessment Rule 1. Assessment rate – not exceed 1/5 of 1% per annum 2. Semi-annual assessment rate – ½ of assessment rate. Not less than P250 3. Assessment base – amount of liability of bank for deposits 4. Semi-assessment base for semi-annual period – average of assessment base in close of business

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Payment of Dividends and/or Interests •

No insured bank shall pay dividends on capital stock or interest or distribute capital assets while it remains in default in payment of assessment dues

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If default in payment is due to dispute between bank and PDIC over amount of assessment, this rule shall not apply

Certified Statement of Assessment Base and Assessment Due 1. On or before July 31, each bank shall file in PDIC certified statement showing amount of assessment based and semi-annual assessment due. On such date, the bank shall pay the semi-annual assessment due 2. On or before January 31, each bank shall file similar statement as above 3. If insured bank assumed liabilities for deposits of another bank, it shall be included in assessment base 4. Certified statements required shall be in such form as BOD shall prescribe 5. Any insured bank that fails to file certified statement shall be compelled to file by mandatory injunction Refund and Credit • PDIC may: o Refund to an insured bank any payment of assessment that is excess of amount due o Credit such expense toward payment of assessment of next following period Termination

Civil Penalities •

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VII.

Any assessment payable by insured bank shall be subject to payment of interest computed at legal rate for loan There shall be an added penalty equivalent to twice the amount of interest payable for each day Penalty shall not be applicable if there is dispute over amount of assessment Deposit Insurance Fund

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Permanent insurance fund – P3B Deposit insurance fund shall be capital account of PDIC and shall consist of: 1. Permanent insurance fund 2. Assessment collections 3. Reserves for insurance 4. Retained earnings

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Reserves for insurance shall be maintained at a reasonable level to ensure capital adequacy

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PDIC may, within 2 years from passage, conduct study to adjust amount of Permanent Insurance Fund

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Assessment collections and incomes shall be added to Deposit Insurance Fund after deduction from expenses and charges. Such expenses and charges consists of: 1. Operating costs 2. Additions to reserve 3. Net insurance and financial assistance losses PDIC may recover from any insured bank any unpaid assessment

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No action shall be brought to recover assessment unless such action shall have been brought within 5 years after right accrued

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If insured bank filed a false certified statement with intent to evade, such claim is not deemed to accrue until PDIC discovers

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PDIC shall have access to reports made to the BSP to the insured bank and BSP shall also have access to reports of BSP

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Each insured bank shall keep true and accurate record of its daily deposit transactions. Compliance with such shall be duly certified by bank president

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Refusal to issue such shall be a violation

X.

Prohibitions on PDIC Personnel 1. Being an officer, director, consultant, employee or stockholder directly or indirectly of any bank 2. Receiving gifts from any officer, director or employee of any bank 3. Revealing in any manner, information relating to business of any bank except when required by Congress or the President

XI.

Legal Assistance

Unsound Practice

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Upon examination by PDIC, it shall be disclosed whether insured bank is committing unsound practices

PDIC shall advance litigation costs to its directors, officers or employees in connection with any criminal, civil or administrative case where such person acted within the performance of his duty

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The BOD in such a case shall: 1. Submit report of examination to MB 2. If no corrective action by MB, BOD shall motu proprio institute such BOD can issue cease and desist order to the bank 3. If violation cause insolvency or dissipation of assetsm the period to take corrective action shall be done within 15 days and impose fines Actions and proceedings may be undertaken by PDIC if insured bank have violated: 1. Any provision of PDIC Law 2. Any order or rule of PDIC 3. Any written condition imposed by PDIC Reports by Insured Bank

Even if they resign, they shall still receive legal assistance in connection with the act done during tenure The amount advance shall be repaid by the officer if it is determined by the board that such officer need not be indemnified

VIII.

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IX. • •

Each insured bank shall make reports to PDIC of conditions required If bank fails to make such report within given time, BOD may provide 100php penalty for each day of violation

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XII. •

Dealings by PDIC Personnel with Banks Members of Board and personnel of PDIC may become directors or officers of any bank if the position is in connection with the financial assistance extended by the PDIC

Borrowing from Banks • Borrowing from banks by examiners or other personnel shall be prohibited with respect to particular bank to which they are assigned •

XIII.

Borrowing by personnel from any bank not included in the prohibition shall be secured and disclosed to the BOD Receivership

Appointment

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MB shall appoint the PDIC as receiver Receiver – includes receiver, commission or other agency charged by law with the duty to take charge of assets and liabilities of a bank prohibited from doing business It has the duty to gather preserve and administer assets and liabilities of such banks for the benefit of its depositors

XIV. Payment of Insured Deposits Manner of Payment •

Payment of insured deposits shall be made in: 1. Cash 2. By making available a transferred deposit in another insured bank

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Transfer deposit – deposit in an insured bank made available to a depositor as payment of insured deposit from closed bank assumed by another insured bank

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Insured deposit – amount due to any deposit for deposits in an insured bank 1. In PDIC Law, 250k. Now it’s 500k

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Joint account shall be insured separately from any individually-owned deposit account If account s held jointly, maximum insured deposit shall be divided into as many equal shares as to individuals

Effect of receivership 1. PDIC shall control, manage and administer affairs of closed bank 2. Powers, functions and duties of directors, officers and stockholders are suspended 3. Assets of closed bank is in custodia legis 4. Assets of closed bank shall not be subject to attachment, execution or levy

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Powers of PDIC in receivership 1. Bring suit to enforce liabilities of bank 2. Appoint persons to perform functions of PDIC as receiver or liquidator 3. Suspend or terminate employees of closed bank a. Payment of separation pay shall be made after closed bank is in liquidation 4. Pay accrued utilities, rentals and salaries of closed bank 5. Collect loans and other claims 6. Hire private counsels if necessary 7. Borrow loan when necessary to preserve assets of closed bank to minimize loss 8. If stipulated interest on deposits is unusually high, reduce interest rate 9. Exercise other powers inherent in receiver Suits Filed by PDIC • Actions filed by PDIC as receiver, payment of all docket and court fees shall be suspended until action is terminated •

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If account is held by juridical person, maximum insured deposit shall be presumed to belong entirely to such entity

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Aggregate interests of each co-owner over several joint accounts shall be subject also to maximum insured deposit

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No owner of an negotiable certificate of deposit shall be recognized as depositor unless his name is registered as owner in issuing bank

Proof of Claims • •

Final determination if person is entitled to insurance is the court Settlement Period and Penalties in case of failure to settle •

Failure to settle claim within 6 months from date of filing claim, where such failure by the officer was due to GAOD, iffucer shall be imprisoned from 6 months – 1 year

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Period shall not apply if validity of claim is under resolution

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Upon payment to any depositor, PDIC shall be subrogated to all the rights of the depositor against the closed bank

Such fees shall constitute first lien on judgment

Distribution of Assets • •

Before distribution of assets, PDIC shall charge against the bank the receivership expenses After payment of all liabilities, PDIC shall pay surplus dividends to creditors and claimants of bank

PDIC may required proof of claims before paying insured deposit

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Subrogation shall include right to receive same dividends from proceeds of assets Depositor shall retain claim for any uninsured portion of his deposit

Notice

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PDIC shall commence determination of insured deposit upon actual takeover of closed bank

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PDIC shall public a notice once a week for 3 consecutive weeks in newspaper of general circulation such closing of the bank

Payment of insured deposit shall discharge

Recognition of Owner Neither PDIC or insured bank shall be required to recognize owner of a deposit appearing on the records under a name other than claimant

Withholding of Payment •

PDIC may withhold payment of insured deposit if payment of liability by such depositor as stockholder of closed bank not yet offset is pending determination

Prescription •

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XV. •

Banking and checking accounts of PDIC shall be kept in BSP, PNB or fiscal agent

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When insured bank is determined as in danger of closing, in order to prevent such, PDIC is authorize to: 1. Make loans to such bank 2. Purchase assets of such bank 3. Assume liabilities of such bank 4. Make deposits in insured bank

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The grant shall be made if bank is essential in community and for financial stability Such authority to extend financial assistance may also be exercised if PDIC finds that the resumption of operations of the closed bank is vital to community

Discharge

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waive

XVI. Extension of Loans

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Insurance commissioner may requirement of approval in above

All rights of depositor shall be bared if: o Depositor in closed bank fail to claim insured deposit within 2 years from actual take over o Depositor does not enforce his claim within 2 years after th2 year period to file a claim All right of depositor against closed bank which PDIC may have been subrogated shall revert to depositor again Investment by PDIC Money of PDIC not employed shall be invested in obligation of the Republic of the Philippines or guaranteed obligations o Not sell or purchase such obligations for its owner account in excess of 100k

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Reopening of such close bank is subject to prior approval of MB

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PDIC may provide any corporation acquiring assets of insured bank in danger of closing with financial assistance

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Prior to exercise of these above powers, PDIC shall determine whether actual payoff will be more expensive than exercise of such

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When MB has determined systematic consequence of closure of bank, PDIC may grant financial assistance in amount necessary to prevent its failure

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Systematic risk – possibility that failure of one bank to settle the transactions with other banks will trigger chain reaction and general shutdown of clearing activity

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Systematic risk also means the likelihood of a sudden unexpected collapse in confidence with the banking system

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PDIC may not use such powers to purchase stocks of insured bank

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Financial assistance may take form of equity or quasi-entity

XVII. Borrowings •

PDIC is authorized to borrow from BSP

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Any loan granted by BSP shall be consistent with monetary policy and interest rate shall not exceed treasury bill rate

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If funds of PDIC are not sufficient, it can borrow money from any bank designated as fiscal agent of RP

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Such loans shall be short-term durations

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XXI. Criminal Penalties •

Prison mayor or fine 50k-2M o Willful refusal to submit report o Refusal to permit examination o Making false statement o Submission of false materials o Refusal to allow PDIC to takeover o Refusal to turn-over records o Fraudulent disposal of assets o Violation of exemption from garnishment o Willful failure to comply with PDIC and conducting unsound business o Splitting deposits

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Splitting deposits - deposit account with outstanding balance of more than maximum insured amount is broken down to two or more accounts within 30 days preceding closure of bank for purposes of availing maximum deposit

XVIII. Issuance of Bonds •

With approval of President of Philippines, PDIC is authorized to issue bonds, debentured and other obligations to settle insured deposits in closed banks

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The BOD shall determine interest rate PDIC shall provide reserves for redemption

Reports and Audit •

PDIC shall annual make report of its operations in Congress

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Its financial transactions shall be audited by COA COA shall have access to all books, accounts, records and reports

XX.

Miscellaneous

XXII. Fines •

Signs • •

Every insured bank shall display at each place of business signs that deposits are insured by PDIC Those which do not relate to deposits or are impractical shall be exempted from this requirement

Merger or Consolidations of Insured Bank •

Without prior written consent from PDIC, no insured bank shall: 1. Merge and consolidate with non-insured bank or convert into non- insured bank 2. Assume liabilities of deposits by any noninsured bank 3. Transfer assets to non-insured bank

Protection against losses

If insured bank refused to comply with such requirement, PDIC may contract such protection for them payable to such bank

BOD is authorized to impose administrative fines but no more than 3 times amount of damages caused

XXIII. TRO and Injunction •

Only CA can issue TRO, Preliminary Injunction against PDIC. Prohibition shall apply to all cases

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SC can issue restraining order if of extreme urgency Restraining order in violation of this shall be void and judge who issued is suspended

Reorganization •

PDIC may be reorganized in new staffing pattern. No preferential right shall be enjoyed

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Reorganization must be completed within 6 months from effectivity of PDIC law

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BOD shall provide separation incentives

PDIC vs. CA •

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PDIC may require insured bank to provide protection against burglary, defalcation and losses from discharge of duties BOD shall determine bonding requirement as to its directors, officer and employers

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Even if the bank has knowledge that it shall be under receivership, it does not ipso facto mean that the depositors also has knowledge of such

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Thus, they can still engage in business transactions in course of business as long as they acted in GF and did not know such closure

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Thus, such deposits made in the period shall be covered by deposit insurance

CHAPTER 11 – Anti-Money Laundering •

I.

RA 9160 – Act defining Crime of Money Laundering and Providing Penalties and AMLL Concepts

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Money laundering – any act to conceal or disguise the indemnity of illegally obtained proceeds so that they appear to have originated from legitimate sources

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Even before AMLA, BSP issued various circulars to avoid money laundering

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Under AMLA, money laundering is a crime whereby the proceeds of an unlawful activity are transacted and making them appear to have originated from legitimate sources

Three steps in Money Laundering (ML) 1. Placement – launderer inserts dirty money into a legitimate financial institution a. Often in bank deposits b. Most riskiest stage as there is large amounts and banks are required to report high-value transactions 2. Layering – sending money through various financial transactions to change its form and make it difficult to follow a. Consists of bank-to-bank transfers b. Change form of money c. Most complex step as it makes dirty money hard to trace 3. Integration – money re-enters in mainstream economy in legitimate looking form a. It appears to come from legal transaction b. Involve final bank transfer into the account of the launderer Policies 1. Protect and preserve integrity and confidentiality of bank accounts 2. Ensure that Philippines is not used as ML site 3. Consistent with foreign policy, extend cooperation in transnational investigations involving ML Covered Institutions 1. Banks, non-banks, quasi-banks, trust entities and subsidiaries and those regulated by BSP

2. Insurance companies 3. Securities dealers, brokers, salesmen and investment houses 4. Mutual funds, closed-end-investment companies 5. Foreign exchange corporations, money chargers 6. Other entities dealing in currency, commodities or financial derivatives Covered and Suspicious transaction 1. Covered transactions: Any transaction in cash or other monetary instrument involving amount of 500k within 1 banking day 2. Suspicious transactions: a. No underlying legal or trade obligation or economic justification b. Client not properly indentified c. Amount involved not commensurate to financial capacity of client d. Client’s transaction is structured to avoid reporting requirements in AMLA e. Circumstances relating to transaction deviate from profile of client f. Transaction is relate to any unlawful activity g. Transaction is analogous to above Monetary Instrument 1. Coins or currency of legal tender whether in Philippines or other country 2. Drafts, checks, notes 3. Securities or NI, bonds, commercial papers or substitute instruments 4. Other similar instrument where title passes through indorsement, assignment or delivery Unlawful Activity 1. 2. 3. 4. 5. 7. 8. 9. 10. 11.

Kidnapping for ransom CDDA RA 3019 Plunder Robbery and extortion 6. Jueteng and masio Piracy in the high seas Qualified theft Swindling/estafa Smuggling Violation of Electronic Commerce

12. High-jacking and destructive arson perpetrated by terrorists 13. Fraudulent practise of Securities Regulation Code 14. Felonies of similar nature in other countries How is ML committed 1. Any person knowing any monetary instrument involves proceeds of unlawful activity and attempts or actually transacts such instrument 2. Any person knowing that monetary instrument involves proceeds of unlawful activity and performs or fails to perform any act as a result of which he facilitates ML 3. Any person knowing monetary instrument is required to be disclosed and filed with AMLC but fails to do so II.

IV. Prevention of Money Laundering Customer Identification • •

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RTC shall have jurisdiction of all ML Those committed by public officers are under jurisdiction of SB

Prosecution of ML •

Any person can be convicted with both offense of ML and the unlawful activity

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Any proceeding relating to unlawful activity is given precedence without prejudice to freeze order Anti-Money laundering Council (AMLC)

Composition 1. Governor of BSP 2. Commissioner of Insurance Commission 3. Chairman of Securities and Exchange Commission Functions 1. Must act unanimously in discharge of function 2. Require and received covered and suspicious transactions 3. Issue orders to determine true indemnity of owner 4. Institute civil forfeiture proceedings 5. Cause filing of complaint in DOJ or OMB 6. Investigate suspicious and covered transactions 7. Apply freeze order in CA ex parte

Covered institutions shall establish true indemnity of clients based on official documents Maintain a system of verifying true identity of clients

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Anonymous accounts, those under fictitious names and similar accounts are prohibited

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Peso and foreign currency non-checking numbered accounts are allowed o BSP may conduct annual testing of such accounts to determine identity

Jurisdiction and Prosecution

Jurisdiction of ML Cases

III.

8. Implement measures necessary to counteract ML 9. Receive and request from foreign states assistance in AML operations 10. Develop education programs against ML 11. Enlist assistance of any branch of government to promote AML operations 12. Impose administrative sanctions 13. Establish secretariat head for term of 5 years

Record Keeping •

Another way of preventing ML is this: 1. All records of all transactions of covered institution must be safely stored for 5 years from date 2. In closed accounts, records on customer identification and correspondence shall be preserved for 5 years from date of closing

Reporting Covered and Suspicious Transactions 1. Covered institutions shall report to AMLC all covered and suspicious transactions within 5 days from occurrence therefore a. There can be extension but not exceed 10 working days 2. Transaction be determined to be both covered and suspicious, report such as suspicious 3. When reporting, covered institution is deemed not to have violated: a. RA 1405 – Act Prohibiting Disclosure of Deposits, b. RA 6426 - Foreign Currency Deposits, c. RA 8791 – GBL

4. In case of violation, officer shall be criminally liable except if in GF 5. When reporting covered or suspicious transactions, covered institution is prohibited from communicating to any person or media such fact 6. There can be no publication or airing of such report by mass media, e-mail or other device a. In violation, covered institution and media shall be criminally liable

1. Whether or not the phrase “in cases of” requires that there must be a pending trial in another court for an unlawful activity 2. Whether or not the power to inquire in the bank deposit can be done ex parte First Issue •

No. The court ruled that there is no need that there must be a pending trial for an unlawful activity in another court before there can be a petition to inquire to bank deposits

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Otherwise, it would render it a limited too in aid of litigation and wholly inutile

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In such situation, it will not anymore as a discovery tool

Freezing Monetary Instrument • •

One way to prevent ML CA can issue freeze order which shall be effective immediately

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Requisites of freeze order: 1. Filed in CA 2. Upon application ex parte by AMLC 3. After determination that probable cause exists where money instrument is related to unlawful activity

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Freeze order shall be effective for a period of 20 days unless extended by court

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In all instances of unlawful activity, there can be an ex parte freeze order

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There is no need for full-blown trial

Second Issue • •

Authority to Inquire into Bank Deposits •

To complete legal measure to prevent ML, AMLC may examine deposits in any banking institution upon order of court

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It must be established that there is probable cause that deposits relate to: 1. Unlawful activity or 2. Money laundering offense

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No court order shall be required in unlawful activities of: 1. Kidnapping with ransom 2. Violation of CDDA 3. High-jacking (RA 6235) 4. Destructive arson in connection with terrorism

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Silence of the law does not automatically construe it to have such ex parte

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Also, in IRR of AMLA, there is no ex parte bank inquiry order

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However, bank inquiry order does not necessitate any physical seizure

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The reason of court is that, even if the accused is notified that there will be inquiry due to the fullblown trial, the accused cannot hide his fraudulent records as it is maintained in the bank and cannot be erased

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Thus, in such interpretation, bank inquiry order have no ex parte orders, it does not weaken the law

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Also Bank Inquiry Order (BIO) not analogous to search warrant Moreover, the right to privacy must be upheld under Bank Deposit Secrecy Act

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BSP may make emanation of deposits when examination is made n course of period or special examinations Republic vs. Eugenio

No. As a general rule, ex parte bank inquiry order is not allowed The proviso does not have the same word “ex parte” unlike in the freeze order

V. •

Thus, there shall be no ex parte orders. But if the exceptional unlawful activity is present, there can be BIO without need of court order Ex Post Facto Clause Under AMLA no person can be prosecuted under AMLA for acts committed prior to October 17, 2001

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Also, BIO prior to October 17, 2001 is prohibited as it is an ex post facto o It deprives a persons of some lawful protection to which he has become entitled

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However, those accounts created prior to October 17, 2001 are still under the coverage of AMLA

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Otherwise, the offenders can mere circumvent by laundering into an account created prior to October 17, 2001

VI. Forfeiture Civil Forfeiture •

Where there is a covered transaction report made and court ordered seizure or monetary instrument, rules of civil forfeiture applies

Powers of AMLC to act on request of foreign state 1. AMLC may execute request for assistance by: a. Tracking down, freezing proceeds of unlawful activity b. Giving information c. Apply order of forfeiture 2. Court will issue such order only if application is accompanied by: a. Authenticated copy of order of court of requesting state b. Certification by competent court of requesting state that conviction or order is final Obtaining assistance from foreign states •

Claim on Forfeiture Assets 1. When court issued order of forfeiture, offender may apply for a declaration that the same legitimately belongs to him 2. Verified petition filed in court which rendered judgment of conviction within 15 days from order Payment in Lieu of Forfeiture •

Instead of order of forfeiture, court may order offender to pay amount equal to value of monetary instrument when said order cannot be imposed because: 1. Monetary instrument cannot be located with due diligence 2. It was substantially altered or destroyed 3. It has been concealed, removed or converted from being found 4. Located outside the Philippines or outside jurisdiction of court 5. It has been commingled with other monetary instruments

VII. Mutual Assistance among States Request from Foreign State • When foreign state makes a request for investigation or prosecution of ML, the AMLC may accept or refuse the same for valid reasons •

Principles of mutuality and reciprocity shall at all times recognized

AMLC may request assistance in: a. Tracking down, freezing, proceeds of unlawful activity b. Obtain information c. Apply with proper foreign court an order to enter premises or seize documents and objects in request d. Applying for order of forfeiture of any monetary instrument Must be accompanied by authenticated copy of forfeiture by RTC and affidavit of clerk of court

Limitation on Request for Mutual Assistance •

AMLC may refuse to comply with request for assistance if it contravenes the Constitution or execution of require prejudicial to national interest unless there is a treaty specifically provided

Requirement for Request for Mutual Assistance from Foreign state 1. Confirm investigation or prosecution being conducted 2. State grounds which person is investigated 3. Give sufficient particulars to identity of person and covered institution 4. Ask from covered institution any information necessary 5. Specify manner and to whom information is to be produced

6. Give all particulars necessary for issuance by the court of requesting State certain order 7. Contain other information that may assist execution of request

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BSP, Insurance Commission and SEC shall promulgate IRR of AMLA subject to approval of Congressional Oversight Committee

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Covered institutions shall formulate their respective ML prevention programs

Authentication of Documents •

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A document is authenticated if: a. Signed or certified by judge of requesting state b. Authenticated by oath of witness or sealed with official seal of state Certificate of authentication may also be made by secretary of embassy

Extradition •

Philippines shall negotiate inclusion of ML offenses among extradutable offenses in future treaties

VIII. Penalties 1. In ML: 7 - 14 years imprisonment and 3M 2. In Failure to Keep Records: 6 months – 1 year imprisonment and 100k-500k 3. In Malicious reporting: 6 months - 4 years imprisonment and 100k-500k a. If juridical person, officers shall be punished and revoke such license b. If an alien, deported after service c. In public official, shall have PAD or TAD d. If such public officials refuse to testify, same penalties Breach of Confidentiality •

For breach under AMLA, penalty is 3-8 years with fine of 500k-1M

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Responsible reporter, writer, president or publisher shall be liable

IX. Prohibition against Political Harassment 1. AMLA shall not be used for political persecution or to hamper competition in trade 2. No case of ML may be filed against any candidate during election period X.

Implementing Rules and Regulations (IRR)

XI. Congressional Oversight Committee (COC) Composition • •

7 members from Senate and 7 members from HR Members of Senate shall be appointed by Senate president in proportional representation

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This shall also be done in HR

Powers of COC •

COC shall have power to promulgate own rules, to oversee implementation of AMLA and review IRR

XII. Rules and Regulations for Banks 1. When establishing business relations in opening deposits accounts, banks should take reasonable measure to establish identity of client. In corporate entities, following shall be made: a. Verification of legal existence of client b. Verification of authority of person purporting to act on behalf of client 2. In case of doubt as whether purported clients are acting for themselves, reasonable measures shall be taken 3. Anonymous or accounts under fictitious names are not allowed. In case such is allowed, banks must still ensure identity of client in some other document 4. Identity of existing clients should be renewed at least every other year 5. All necessary records should be maintained for at least 5 years 6. Special attention shall be given to complex, unusual large and all unusual patterned transactions with no lawful purpose 7. Other suspicious transactions not involving deposits should still be reported to proper authorities 8. Banks should not or avoid transact with criminals 9. Programs against ML should be developed: a. Development of internal policies and hiring high standard employees b. Ongoing employee training

c. Audit function to test system