MODULE FOUR.

AELC 223  Any obligation of bank payable outside of Philippines shall not
Week 7 – 8 be a deposit under PDIC Law
 Insured bank that has branch outside the Philippines may avail
PDIC (Philippine Deposit Insurance Corporation) LAW insurance for its deposit payable only in such branch.

- RA 9576 - Statutory Liability of PDIC

- A government instrumentality created in 1963 by virtue of RA 3591. o PDIC primarily governed by special law
- Has the authority to help depositors have quicker access to their insured deposits o Liability of PDIC is statutory and rests upon existence of a deposit with an
should their bank close; resolve problem banks while still open; hasten the insured bank and not the negotiability of the certificate evidencing the
liquidation process for closed banks; and mete out stiffer sanctions and penalties deposit.
against those who engage in unsafe and unsound banking practices.
- Attached agency of Department of Finance. - Deposit must be in fact made:
- Roles: o Fact that certificates stated that they are insured by PDIC does not ipso
a. Insure the deposits of all banks which are entitled to benefits of insurance facto make the certificate insured
b. As a basic policy, promote and safeguard interest of depositing public by way o Deposit liability is determined by RA 3519
of providing insurance coverage o To claim deposit insurance, law requires that a deposit is placed in the
insured bank
- Powers as Corporate Body: o Deposit may be constituted only if money or its equivalent have been
a. Use corporate seal received by a bank
b. Have succession until dissolved o Insured deposits:
c. Make contracts
 Means the amount due to any bona fide depositor for legitimate
d. Sue and sued:
deposits in an insured bank net of any obligation of the depositor
i. All suits of civil nature is deemed to arise from Philippine Law
to the insured bank as of date of closure, but not to exceed Php
ii. No attachment or execution against PDIC before final judgment
500,000.00
iii. BOD designate agent of insured bank
 A joint account shall be insured separately from any individually
e. Appoint its Board of Directors
– owned deposit account.
f. Prescribe by-laws not inconsistent with law
 As for Philippine banks with branches outside the country, RA
g. Exercise all powers granted by law and incidental thereto
9576 stipulates that subject to the approval of the BOD, any
h. Conduct examination of bank with prior approval of MB
insured bank with branch outside the Philippines may elect to
i. No examination conducted within 12 days from last examination
include for insurance its deposit obligations payable at such
ii. To avoid overlap examinations, maximize use of reports.
branch.
i. Act as receiver
o PDIC will not pay deposit insurance for the following accounts or
j. Prescribe rules deemed necessary to implement PDIC Law
k. Establish provident fund for payment of benefits of employees transactions:
l. Compromise, condone or release any claim to PDIC a. Investment products such as bonds, securities or trust
accounts;
- Deposit Insurance Coverage b. Deposit accounts which are unfunded, fictitious or
o Deposit Liabilities fraudulent;
c. Deposit products constituting or emanating from unsafe and
 Deposit liabilities of any bank engaged in business of receiving
unsound banking practices;
deposit shall be insured with PDIC.
d. Deposits that are determined to be proceeds of an unlawful
 Deposit – unpaid balance of money received by a bank and for
activity as defined under the AMLA Law.
which it has given credit to a:
o Deposit insurance of Foreign Currency Deposits
a. Commercial
b. Checking a. Foreign currency deposits – insured with PDIC
c. Savings b. Insurance payment shall be in same currency in which
d. Time deposit is denominated
e. Thrift accounts c. PDIC Law is not applicable to Offshore Banking Units
f. Those evidenced by passbooks.
- Maximum Liability
 o Effective June 1, 2009, the maximum deposit insurance coverage is Php  Two (2) valid photo – bearing IDs with signature of the
500,000 per depositor. All deposit accounts by a depositor in a closed bank depositor/claimant.
maintained in the same right and capacity shall be added together.
o Under RA 9576, the PDIC may propose to adjust the MDIC, subject to the
approval of the President of the Philippines, in case of a condition that
threatens the monetary and financial stability of the banking system that
may have systemic consequences.

- Filing of Claims
o When to file?
 Claims are filed during the claims settlement operations period,
as announced in the Notice to Depositors published in national or
local newspapers.
 Depositors have two (2) years from PDIC’s takeover of the
closed bank to file their deposit insurance claims.

o Who are not required to file claims?

 Depositors with valid deposit accounts with balances of Php
100,000 and below are not required to file claims provided they
have no obligations with the closed bank and have complete and
updated addresses in the bank records or have updated these
through the Mailing Address Update Form (MAUF) issued by
the PDIC.

o Who are required to file claims?

a. Depositors with valid deposit accounts with balances of more than
Php 100,000/
b. Depositors who have outstanding obligations with the closed bank
regardless of amount of deposits.
c. Depositors with account balances of less than Php 100,000 who have
no updated addresses in the bank records or who have not updated
their addresses through the MAUF issued by the PDIC.
d. Depositors who maintain their accounts under the name of business
entities, regardless of type of account and account balance.
e. Depositors with accounts not eligible for early payment, regardless of
type of account and account balance per advice of PDIC.

o Who should sign the Claim Form?

a. Depositor of the account – for depositors 18 years old and above
b. Parent – if the depositor is below 18 years old
c. Agent – in the case of “By” accounts
d. Trustee – in the case of “In Trust For (ITF)” accounts
e. Each depositor – in case of joint accounts such as “Or”, “And/Or” or
“And” accounts.

o Required documents:
 Original evidence of deposits such as savings passbook,
certificate of time deposit, bank statement, unused checks and
ATM Card.
ANTI – MONEY LAUNDERING LAW – AMLA LAW (RA 9160) 3. Securities dealers, brokers, salesmen and investment houses
4. Mutual funds, closed-end-investment companies
- Concepts 5. Foreign exchange corporations, money chargers
6. Other entities dealing in currency, commodities or financial derivatives
o Money laundering – any act to conceal or disguise the indemnity of
illegally obtained proceeds so that they appear to have originated from - Covered and Suspicious Transactions
legitimate sources 1. Covered transactions: Any transaction in cash or other monetary instrument
o Even before AMLA, BSP issued various circulars to avoid money involving amount of 500k within 1 banking day
laundering 2. Suspicious transactions:
o Under AMLA, money laundering is a crime whereby the proceeds of an a. No underlying legal or trade obligation or economic justification
unlawful activity are transacted and making them appear to have originated b. Client not properly identified
from legitimate sources c. Amount involved not commensurate to financial capacity of client
d. Client’s transaction is structured to avoid reporting requirements in AMLA
- Three Steps in Money Laundering (ML) e. Circumstances relating to transaction deviate from profile of client
f. Transaction is relate to any unlawful activity
1. Placement – launderer inserts dirty money into a legitimate financial institution
i. Kidnapping for ransom
ii. RA 3019
a. Often in bank deposits
iii. Plunder
b. Riskiest stage as there is large amounts and banks are required to report
iv. Robbery and Extortion
high value transactions
v. Jueteng and masio
vi. Piracy in the high seas
2. Layering – sending money through various financial transactions to change its
vii. Qualified theft
form and make it difficult to follow
viii. Swindling/Estafa
ix. Smuggling
a. Consists of bank-to-bank transfers
x. Violation of Electronic Commerce
b. Change form of money
xi. High – Jacking and destructive arson perpetrated by terrorists
c. Most complex step as it makes dirty money hard to trace
xii. Fraudulent practice of Securities Regulation Code
xiii. Felonies of similar nature in other countries.
3. Integration – money re-enters in mainstream economy in legitimate looking
g. Transaction is analogous to above
form
- How is ML committed?
a. It appears to come from legal transaction
o Any person knowing any monetary instrument involve proceeds of
b. Involve final bank transfer into the account of the launderer
unlawful activity and attempts or actually transacts such instrument
o Any person knowing that monetary instrument involves proceeds of
unlawful activity and performs or fails to perform any act as a result of
- Policies: which he facilitates ML
o Any person knowing monetary instrument is required to be disclosed and
1. Protect and preserve integrity and confidentiality of bank accounts filed with AMLC but fails to do so.
2. Ensure that Philippines is not used as ML site
3. Consistent with foreign policy, extend cooperation in transnational - Prevention of Money Laundering
investigations involving ML a. Customer Identification
i. Covered institutions shall establish true identity of clients
- Covered institutions: based on official documents
1. Banks, non-banks, quasi-banks, trust entities and subsidiaries and those ii. Maintain a system of verifying true identity of clients
regulated by BSP
2. Insurance companies
 iii. Anonymous accounts, those under fictitious names and o Freeze order shall be effective for a period of 20 days unless extended by
similar accounts are prohibited court
iv. Peso and foreign currency non-checking numbered accounts o In all instances of unlawful activity, there can be an ex parte freeze order
are allowed. BSP may conduct annual testing of such o There is no need for full-blown trial
accounts to determine identity
- Authority to Inquire into Bank Deposits
b. Record Keeping o To complete legal measure to prevent ML, AMLC may examine deposits
i. All records of all transactions of covered institution must be in any banking institution upon order of court
safely stored for 5 years from date o It must be established that there is probable cause that deposits relate to:
ii. In closed accounts, records on customer identification and 1. Unlawful activity or
correspondence shall be preserved for 5 years from date of 2. Money laundering offense
closing o No court order shall be required in unlawful activities of:
1. Kidnapping with ransom
c. Reporting Covered and Suspicious Transactions
2. Violation of CDDA
i. Covered institutions shall report to AMLC all covered and
3. High-jacking (RA 6235)
suspicious transactions within 5 days from occurrence
4. Destructive arson in connection with terrorism
therefore
o BSP may make emanation of deposits when examination is made n course
a. There can be extension but not exceed 10 working
of period or special examinations
days
ii. Transaction be determined to be both covered and
- Rules and Regulations for Banks
suspicious, report such as suspicious
1. When establishing business relations in opening deposits accounts, banks should
iii. When reporting, covered institution is deemed not to have
take reasonable measure to establish identity of client. In corporate entities,
violated:
following shall be made:
a. RA 1405 – Act Prohibiting Disclosure of Deposits,
a. Verification of legal existence of client
b. RA 6426 - Foreign Currency Deposits,
b. Verification of authority of person purporting to act on behalf of client
c. RA 8791 – GBL
2. In case of doubt as whether purported clients are acting for themselves,
iv. In case of violation, officer shall be criminally liable except
reasonable measures shall be taken
if in GF
3. Anonymous or accounts under fictitious names are not allowed. In case such is
v. When reporting covered or suspicious transactions covered
allowed, banks must still ensure identity of client in some other document
institution is prohibited from communicating to any person
4. Identity of existing clients should be renewed at least every other year
or media such fact
5. All necessary records should be maintained for at least 5 years
vi. There can be no publication or airing of such report by mass
6. Special attention shall be given to complex, unusual large and all unusual
media, e-mail or other device
patterned transactions with no lawful purpose
a. In violation, covered institution and media shall be
7. Other suspicious transactions not involving deposits should still be reported to
criminally liable
proper authorities
8. Banks should not or avoid transact with criminals
- Freezing Monetary Instrument
9. Programs against ML should be developed:
o One way to prevent ML
a. Development of internal policies and hiring high standard employees
o CA can issue freeze order which shall be effective immediately b. Ongoing employee training
o Requisites of freeze order: c. Audit function to test system
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