SPECIAL LAWS (included in the latest CPA Licensure Examination Syllabus)

REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS

Part 1

BOUNCING CHECKS (Batas Pambansa Blg. 22)

1. Checks without insufficient funds

ELEMENTS OF OFFENSE DEFINED IN THE FIRST PARAGRAPH OF SECTION 1: BP 22

a. That a person makes or draws and issues any check.

b. That the check is made or drawn and issued to apply on account or for value.
c. That the person who makes or draws and issues the check knows at the time of issue that he
does not have sufficient funds in or credit with the drawee bank for the payment of such check
in full upon its presentment.
d. That the check is subsequently dishonored by the drawee bank for insufficiency of funds or
credit, or would have been dishonored for the same reason had not the drawee, without any
valid reason, ordered the bank to stop payment.

ELEMENTS OF THE OFFENSE DEFINED IN THE SECOND PARAGRAPH OF SECTION 1: BP 22

a. That a person has sufficient funds in or credit with the drawee bank when he makes or draws
and issues a check.
b. That he fails to keep sufficient funds or to maintain a credit to cover the full amount of the
check if presented within a period of 90 days from the date appearing thereon.
c. That the check is dishonored by the drawee bank.

2. Evidence of knowledge of insufficient funds

a. Making, drawing and issuance of check which is refused

b. Prima facie evidence of knowledge of insufficiency of funds;

Requisites:

a. Check presented within 90 days

b. Dishonored; and
c. Failure to make good the check within 5 days after receiving written notice of dishonor

Note: What the law prohibits is issuance. The purpose or conditions of issuance is
immaterial . Issuance is malum prohibitum. (Wong vs CA, 2001)

3. Duty of Drawee

a. stamp in the check the reason for dishonor

b. if bank receives stop payment order from drawer, the same shall be stated in the notice of
dishonor that there were no sufficient funds

4. Credit Construed

- an arrangement or understanding with the bank for the payment of check.

PHILIPPINE DEPOSIT INSURANCE CORPORATION (RA 6591, as amended by RA 9576 or

PDIC Law)

1. Insurable deposits :

Except for the exclusions stipulated in RA 9576, deposits of all commercial banks, savings and
mortgage banks, rural banks, private development banks, cooperative banks, savings and loan

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SPECIAL LAWS (included in the latest CPA Licensure Examination Syllabus)
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associations, as well as branches and agencies in the Philippines of foreign banks and all other
corporations authorized to perform banking functions in the Philippines, are insured with PDIC. As for
Philippine banks with branches outside the country, RA 9576 stipulates that subject to the approval of
the Board of Directors, any insured bank with branch outside the Philippines may elect to include for
insurance its deposit obligations payable at such branch.

Foreign currency deposits are also insured by PDIC pursuant to RA 6426 (“An act instituting a
foreign currency deposit system in the Philippines, and for other purposes”) and Central Bank (CB)
Circular No. 1389. Depositors may receive payment in the same currency in which the insured deposit
is denominated.

Exclusions from deposit insurance coverage as stipulated in R.A. No. 9576:

a. Investment products such as bonds, securities and trust accounts;

b. Deposit accounts which are unfunded, fictitious or fraudulent;
c. Deposit products constituting or emanating from unsafe and unsound banking practices;
d. Deposits that are determined to be proceeds of an unlawful activity as defined under the
Anti-Money Laundering Law.

2. Maximum liability

Effective June 1, 2009, the maximum deposit insurance coverage is P500,000.00 per
depositor. All deposit accounts by a depositor in a closed bank maintained in the same right and
capacity shall be added together.

3. Requirements for Claims

Depositors will be advised through the national and/or local media and posters at the premises
of the closed insured bank and other public places within the locality on the schedule of distribution
of claim forms by PDIC, receiving of claim forms by PDIC, and the
prescriptive date of filing claims by the depositors.

Together with the claim form, the following documents shall be submitted:

a. Original evidence of deposits such as savings passbook, certificate of time deposit, bank
statement, unused checks, and ATM card.
b. Original copy of TWO (2) VALID PHOTO-BEARING IDENTIFICATION DOCUMENTS
(IDs)with clear signature of depositor/claimant such as Driver’s License, SSS/ GSIS ID,
Senior Citizen’s ID, Passport, PRC ID, OWWA/ OFW ID, Seaman’s ID, Alien Certification of
Registration ID, Voter’s ID, IBP. Please ensure that the ID number is clear and legible.
c. If the depositor is below 18 years old, a photocopy of his/her birth certificate from the
National Statistics Office (NSO) or duly certified copy from the local civil registrar and
valid IDs of the parent.
d. Original copy of a notarized Special Power of Attorney (SPA) for claimants who are not
the signatories in the bank records. In the case of minor depositor, the SPA must be
executed by the parent.

SECRECY OF BANK DEPOSITS AND UNCLAIMED BALANCES LAW

A. SECRECY OF BANK DEPOSITS

1. Purposes:

a. To encourage people to deposit in banking institutions

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SPECIAL LAWS (included in the latest CPA Licensure Examination Syllabus)
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
Part 1

b. To discourage private hoarding so that banks may lend such funds and assist in the
economic development of the country.

2. Coverage: ALL DEPOSITS of whatever nature with banks or banking institutions in the
Philippines including investments in BONDS issued by the Government of the Philippines, its
political subdivisions and instrumentalities.

3. Prohibited acts:

a. Examination and inquiry or looking into all deposits of whatever nature with the banks
in the Philippines including investments in bonds issued by the Government;
b. Any disclosure by any official or employee of any banking institution to any unauthorized
person of any information concerning said deposits.

Exceptions:
a. Upon written permission of the depositor
b. In cases of impeachment
c. Upon order of a competent court in vases of bribery or dereliction of duty of public
officials;
d. Upon order of competent court in cases where the money deposited or invested is the
subject matter of the litigation;
e. Unexplained wealth under Anti-Graft Law;
f. Inquiry of CIR for estate tax purposes;
g. In cases of possible violation of AMLA;
h. Disclosure to the Treasurer of Philippines for dormant deposits for at least 10 years under
the unclaimed Balances Act;
i. Reports of banks to AMLC of covered/suspicious transactions.

B. UNCLAIMED BALANCES LAW

“Unclaimed balances” shall include credits or deposits of money, bullion, security or other
evidence of indebtedness of any kind, and interest thereon with banks, buildings and loan
associations, and trust corporations, as hereinafter defined, in favor of any person known to be
dead or who has not made further deposits or withdrawals during the preceding ten years or
more.

Elements:
1 Includes credits or deposits of money, bullion, security or other evidence of indebtedness of
any kind, and interest
2. The credit or deposit must be with a bank, building and loan association or trust corporation
3. The deposit or credit is in favor of a person who is:
a. Known to be dead or
b. Has not made further deposits or withdrawals during the preceding 10 years or more.

Legal consequence: The unclaimed balances may be subject of escheat proceedings, after
proper publication and the depositor still does not lay claim to them. Such unclaimed balances,
together with the increase and proceeds thereof, shall be deposited with the Treasurer of the
Philippines to the credit of the Government of the Republic of the Philippines to be used as the
National Assembly may direct.

GENERAL BANKING LAW

a. Definition of Banks - Entities engaged in the lending of funds obtained in the form of
deposits from the public.

b. Loans

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b.1 SBL – Single Borrowers Limit - The aggregate maximum amount that a single bank
can lend to a given borrower. It is the total amount of loans, credit accommodations and
guarantees extended by a bank to any person, partnership, corporation or other entity
shall at no time exceed 25% of the net worth of such bank.

b.2 DOSRI - ( Directors, Officers, Stockholders and Related Interests) –

Arms length Rule: Dealings of a bank with any of its Directors, Officers, Stockholders
and their Related Interests (DOSRI) should be in the regular course of business and upon
terms not less favorable to the bank than those offered to others.

Those who are covered:

1. Directors - Directors of the lending bank
2. Officers – either identified by the by-laws or are generally known as such
3. Stockholders - those whose stockholdings, individually and/or together with any of
the following persons, amount to 2% or more of the total subscribed capital stock of
the bank:
4. Related interests:
a. Spouse or relative within the 1st degree of affinity or consanguinity, or by
adoption, partnership wherein the foregoing is a general partner
b. Co-owner, with the stockholder or the stockholders spouse or relative mentioned
above of property/right or interest mortgaged, assigned or pledged to secure the
loan or credit accommodation except when it covers only the said co-owners
divided interest
c. Spouse or relative within the first degree of consanguinity or affinity, or relative
by legal adoption, of a director, officer or stockholder of the bank;
d. Partnership of which a director, officer, or stockholder of a bank or his spouse or
relative within the first degree of consanguinity or affinity, or relative by legal
adoption, is a general partner;
e. Co-owner with the director, officer, stockholder or his spouse or relative within
the first degree of consanguinity or affinity, or relative by legal adoption, of the
property or interest or right mortgaged, pledged or assigned to secure the loans or
other credit accommodations, except when the mortgage, pledge or assignment
covers only said co-owner's undivided interest;
f. Corporation, association, or firm of which a director or officer of the bank, or his
spouse is also a director or officer of such corporation, association or firm, except
(a) where the securities of such corporation, association or firm are listed and
traded in the big board or commercial and industrial board of domestic stock
exchanges and less than fifty percent (50%) of the voting stock thereof is owned
by any one person or by persons related to each other within the first degree of
consanguinity or affinity; or (b) where the director, officer or stockholder of the
bank sits as a representative of the bank in the board of directors of such
corporation: Provided, That the bank representative shall not have any equity
interest in the borrower corporation except for the minimum shares required by
law, rules and regulations, or by the by-laws of the corporation: Provided, further,
that the borrowing corporation is not among those mentioned in items e(5), e(6),
e(7) and e(8) of this Section;
g. Corporation, association or firm of which any or a group of directors, officers,
stockholders of the lending bank and/or their spouses or relatives within the first
degree of consanguinity or affinity, or relative by legal adoption, hold or own at
least twenty percent (20%) of the subscribed capital of such corporation, or of the
equity of such association or firm;
h. Corporation, association or firm wholly or majority-owned or controlled by any
related entity or a group of related entities mentioned in Items e(2), e(4) and e(5)
of this Section.
i. Corporation, association or firm which owns or controls directly or indirectly
whether singly or as part of a group of related interest at least twenty percent

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SPECIAL LAWS (included in the latest CPA Licensure Examination Syllabus)
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
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(20%) of the subscribed capital of a substantial stockholder of the lending bank or

which controls majority interest of the bank pursuant to Subsection X303.1 of the
MOR.
j. Corporation, association or firm in which the lending bank and/or its
parent/subsidiary holds or owns at least twenty percent (20%) of the subscribed
capital of such corporation, or in the equity of such association or firm, or has an
existing management contract or any similar arrangement with the lending bank
or its parent/subsidiary.

Individual Ceiling: The total outstanding loans, other credit accommodations and
guarantees to each of the bank’s directors, officers, stockholders and their related
interests shall be limited to an amount equivalent to their respective unencumbered
deposits and book value of their paid-in capital contribution in the bank: Provided,
however, that unsecured loans, other credit accommodations and guarantees to each
of the bank's directors, officers, stockholders and their related interests shall not
exceed thirty percent (30%) of their respective total loans, other credit
accommodations and guarantees.
Rules on amount of secured loans:

a. those secured by real estate shall not exceed 75% of the appraised value of the
real estate, plus 60% of the appraised value of the insured improvements
b. Those secured by chattels and intangible properties (such as patent, trademarks,
tradenames and copyrights) shall not exceed 75% of the appraised value of the
security.

THE NEW CENTRAL BANK ACT

The New Central Bank Act

a. Legal tender power over coins and note - The Bangko Sentral shall have the sole power
and authority to issue currency, within the territory of the Philippines. No other person or
entity, public or private, may put into circulation notes, coins or any other object or document
which, in the opinion of the Monetary Board, might circulate as currency, nor reproduce or
imitate the facsimiles of Bangko Sentral notes without prior authority from the Bangko
Sentral. All notes and coins issued by the Bangko Sentral shall be fully guaranteed by the
Government of the Republic of the Philippines and shall be legal tender in the Philippines for all
debts, both public and private: Provided, however, That, unless otherwise fixed by the
Monetary Board, coins shall be legal tender in amounts not exceeding Fifty pesos (P50.00) for
denominations of Twenty-five centavos and above, and in amounts not exceeding Twenty
pesos (P20.00) for denominations of Ten centavos or less.

b. Conservatorship - a Process by which the Monetary Board appoints a conservator with the
power to take charge of the assets, liabilities, and the management thereof, reorganize the
management, collect all monies and debts due said institution, and exercise all powers
necessary to restore its viability. The conservator shall report and be responsible to the
Monetary Board and shall have the power to overrule or revoke the actions of the previous
management and board of directors of the bank or quasi-bank.
The conservator should be competent and knowledgeable in bank operations and
management. The conservatorship shall not exceed one (1) year

Ground: Whenever on the basis of a report submitted by the appropriate supervising or

examining department, the Monetary Board finds that a bank or quasi-bank is:
1. In a state of continuing inability or
2. Unwillingness to maintain a condition of liquidity deemed adequate to protect the
interests of the depositors and creditors.

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c. Receivership and Closures – It is equivalent to an injunction to restrain the bank in any

way. Thus, the appointment of a receiver operates to suspend the authority of the bank and of
its directors and officers over its property and effects.

Grounds: Whenever, upon report of the head of the supervising or examining department,
the Monetary Board finds that a bank or quasi-bank:

(a) is unable to pay its liabilities as they become due in the ordinary course of business:
Provided, That this shall not include inability to pay caused by extraordinary demands
induced by financial panic in the banking community;
(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its
liabilities; or
(c) cannot continue in business without involving probable losses to its depositors or
creditors; or
(d) has willfully violated a cease and desist order under Section 37 that has become final,
involving acts or transactions which amount to fraud or a dissipation of the assets of the
institution; in which cases, the Monetary Board may summarily and without need for prior
hearing forbid the institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the banking institution.

Duties of the receiver:

1. Immediate gathering and taking charge of all the assets and liabilities of the institution
and administering them for the benefit of creditors
2. Exercise general powers of a receiver
3. Deposit or place funds of the institution in non-speculative investments
4. Determination immediately but not later than 90 days from takeover whether the
institution should undergo rehabilitation or otherwise placed in such a condition so that
it may be permitted to resume business with safety to its depositors and creditors and
the general public or liquidation.

Liquidation/Closure/Stoppage of Business
Grounds:

1. The condition of the bank is one of insolvency or that its continuance would involve
probable loss to its depositors and creditors
2. A determination by the Monetary Board that the bank cannot be rehabilitated.

ANTI-MONEY LAUNDERING ACT OF 2001 (AMLA)

1. Money Laundering Offense. – Money laundering is a crime whereby the proceeds of an

unlawful activity are transacted, thereby making them appear to have originated from
legitimate sources. It is committed by the following:

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.
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.
c. Any person knowing that any monetary instrument or property is required under this Act to
be disclosed and filed with the Anti-Money Laundering Council (AMLC), fails to do so.

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2. Covered transactions – Transaction in cash or other equivalent monetary instrument

involving a total amount in excess of P500,000.00 within one banking day

3. Suspicious transactions –Transactions with covered institutions regardless of amount

involved where any of the following circumstances exists:

a. There is no underlying legal or trade obligation, purpose or economic justification.

b. Client is not properly identified
c. Any circumstance relating to the transaction which is observed to deviate from the profile
and/or client’s past transactions with the covered institution
d. Amount involved is not commensurate with the business or financial capacity of the client
e. Transactions in any way related to an unlawful activity or offense that is about to be, is
being or has been committed
f. Analogous or similar transactions

4. Reportorial Requirement- Covered institutions shall report to the AMLC all covered
transactions within five (5) working days from occurrence thereof, unless the Supervising
Authority concerned prescribes a longer period not exceeding ten (10) working days.

Compiled by:

Atty. Rafael M. Acebedo

Atty. Kenneth B. Fabila, CPA

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