Regulatory Framework for

Business Transactions

Part 1

Atty. Kenneth B. Fabila, CPA

REGULATORY FRAMEWORK for BUSINESS
TRANSACTIONS
(Effective October 2017 CPA Board Exam)

1. Bouncing Checks
2. PDIC Law
3. Secrecy of Bank Deposits
4. Unclaimed Balances Law
5. General Banking Law
6. The New Central Bank Act
7. AMLA Law
8. Insolvency Law
9. Corporate Rehabilitation
10.Cooperatives
11.Intellectual Property Law
Part I
1. Bouncing Checks (BP 22)
2. PDIC Law
3. Secrecy of Bank Deposits
4. Unclaimed Balances Law
5. General Banking Law
6. New Central Bank Act
7. AMLA Law
Case:

Last January 2, 2017, Larry

borrowed P1M from Dennis to
be paid on March 31, 2017.
Due to financial hardships,
Larry was not able to settle
his debt prompting Dennis to
file a case. In case Larry
cannot pay, will he be
imprisoned?
“No one can be
imprisoned for
non-payment of
debt.”
- Bill of Rights (Sec. 20 of Art. III)
1987 Constitution
Case:

Last January 2, 2017, Larry

borrowed P1M from Dennis to
be paid on March 31, 2017. On
due date, Larry issued a check
which was later dishonored
prompting Dennis to file a
case. Can we put Larry behind
bars?
BATAS PAMBANSA BLG. 22
“ANTI-BOUNCING CHECKS LAW”

April 3, 1979
How do we make,
draw or issue a
check?
 Payee

Drawee

Drawer
BP 22 may be violated in
two ways:

1. knowing at the time

of issue that he does not
have sufficient funds
BP 22 may be violated in
two ways: (cont.)

2. having sufficient funds

at the time of issuance but
fails to keep sufficient
funds within 90 days from
date appearing thereon
Penalty:

(a) imprisonment; or

(b) fine; OR

(c) both.
Two crimes:

Violation of BP 22

and/or

Estafa under Revised

Penal Code
BP 22 is a special law

vs.

Estafa under RPC

BP 22 is a special penal law

- violated by mere doing of

the prohibited act
- good faith is not a
defense
-does not require deceit or
fraud
-damage is not an element
Estafa under RPC

- good faith may be a

defense
- intention to commit the
crime is needed
-deceit must be present
-damage is an element
Actual case:

Mr. Lee signed a check in

behalf of a Abala Corporation.
But it was later dishonored by
the bank. Who is answerable
under BP 22?

a. Abala Corporation
b. Mr. Lee
c. Abala Corp. and Mr Lee
Take Note:

Personally liable even if

the person signing the
check is acting in behalf a
corporation, company of
entity
Note: Sec. 1 of BP 22 says:

“Where the check is drawn

by a corporation, company or
entity, the person or persons
who actually signed the
check in behalf of such
drawer shall be liable under
this Act.”
Syllabus October 2017 CPA Board
Bouncing Checks

1. Checks without insufficient

funds
2. Evidence of knowledge of
insufficient funds
3. Duty of Drawee
4. Credit Construed
Syllabus October 2017 CPA Board
Bouncing Checks

1. Checks without insufficient

funds (Sec. 1 of BP 22)
- at the time of issuance,
drawer knows that there were no
funds
- there were funds at the time
of issue but fails to maintain
funds for 90 days from date of
check
Syllabus October 2017 CPA Board
Bouncing Checks

2. Evidence of knowledge of
insufficient funds (Sec. 2 of BP
22)
- presented to the bank within 90
days from date of check and the
same was refused by the bank
because of insufficient funds
Syllabus October 2017 CPA Board
Bouncing Checks

3. Duty of drawee (Sec. 3 of BP

22)
- stamp in the check the reason for
dishonor
- if bank receives stop payment
order from drawer, the same shall
be stated in the notice of dishonor
that there were no sufficient funds
Syllabus October 2017 CPA Board
Bouncing Checks

4. Credit Construed

- an arrangement or
understanding with the bank for
the payment of check.
Philippine Deposit
Insurance
Corporation

- it insures the deposits

of all banks.
PDIC topics:

1. Insurable deposits
2. Maximum liability
3. Requirements for Claims
Case:

Regine maintained a savings account

with RURAL BANK OF DULAG in the amount
of P350,000. After a year from opening the
account, said bank suffered operational
losses and had a bank run and consequently
closed. Can Regine still recover her
deposits?

a. No, because it is a rural bank.

b. No, because Regine failed to have it
insured with PDIC.
c. Yes, because it is insured by PDIC though
the bank is a rural bank.
PDIC

1. Insurable deposits

- deposits of all commercial banks,

savings and mortgage banks, rural
banks, private development banks,
cooperative banks, savings and loan
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
PDIC

1. Insurable deposits

including Foreign currency deposits

Note: Depositors may receive

payment in the same currency in
which the insured deposit is
denominated.
Exclusions from deposit insurance coverage:

1. Investment products such as bonds,

securities and trust accounts;

2. Deposit accounts which are unfunded,

fictitious or fraudulent;

3. Deposit products constituting or

emanating from unsafe and unsound
banking practices;

4. Deposits that are determined to be

proceeds of an unlawful activity as defined
under the Anti-Money Laundering Law.
What is PDIC’s maximum deposit
insurance coverage?
CASE:

X bank closed by the Monetary

Board on account of insolvency.
At the time it was closed, A has
three accounts with X Bank and
each account has an
outstanding balance of
P250,000 or a total amount of
P750,000. How much can A
recover from the PDIC?
PDIC

2. Maximum Liability

P500,000 per depositor

If I have deposits in several
different insured banks, will my
deposits be added together for
insurance purposes?
Computation of Insured and Uninsured Amount:
Computation of Insured and Uninsured Amount:
If the deposit account in a
closed bank is more than
P500,000.00, what happens
to the excess of the maximum
amount of insured deposit?
Answer:

The excess of the P500,000

coverage can still be claimed
upon the final liquidation of
the remaining assets of the
closed bank.
Submit the CLAIM FORM
together with the following
documents:

1. Original evidence of deposits

such as savings passbook,
certificate of time deposit, bank
statement, unused checks, and
ATM card.
Submit the CLAIM FORM
together with the following
documents:

2. IDs

(refer to your notes for the other

requirements)
WHEN ARE CLAIMS
FILED?

Depositors have
two (2) years from
PDIC’s takeover of the
closed bank to file their
deposit insurance claims.
Depositors with valid deposit
accounts with balances of
Php100,000 and below
are not required to file
claims

- no obligations
- complete and updated
addresses in the bank records
REPUBLIC ACT NO.1405

AN ACT PROHIBITING
DISCLOSURE OF OR
INQUIRY INTO, DEPOSITS
WITH ANY BANKING
INSTITUTION
AND PROVIDING PENALTY
THEREFOR
Covered:

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 its
instrumentalities
Prohibited act:

“It shall be unlawful for any official

or employee of a banking institution
to disclose to any person.”

Penalty:

Prison term: Not more than five years or

Fine: not more than P 20K

or both, in the discretion of the court.

Deposits are:

- absolutely confidential

- may not be examined,

inquired or looked into
EXCEPT:

1. upon written permission

2. in cases of impeachment

3. upon order of a competent

court in cases of bribery or
dereliction of duty of public
officials, or
EXCEPT:

4. in cases where the money

deposited or invested is the
subject matter of the litigation.

5. Unexplained wealth under

Anti-Graft Law

6. Inquiry of CIR for estate tax

purposes
EXCEPT:

7. in cases of possible violation

of AMLA

8. Disclosure to the Treasurer of

Philippines for dormant deposits
for at least 10 years under the
unclaimed Balances Act.

9. Reports of banks to AMLC of

covered/suspicious transactions
 UNCLAIMED BALANCES LAW
Act 3936 as amended by PD 679
Unclaimed balances:

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
After due notice and publication,
and still no claimant:

The balance shall be deposited

with the Treasurer of the
Philippines to the credit of the
Government of the Republic of the
Philippines.

We call this process

“___________________”.
GENERAL BANKING LAW
2000

RA 8791
SBL – Single Borrowers Limit

What is the maximum amount

that a person can borrow from
a bank?

a. 20% of bank’s net worth

b. 120% of deposits
c. 25% of bank’s net worth
d. 125% of deposits
DOSRI?

Directors,
Officers,
Stockholders and
their
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
Individual Ceiling:

DOSRI Loans = unencumbered

deposits and book value of their
paid-in capital contribution in the
bank:
Individual Ceiling:

DOSRI unsecured loans

MUST NOT EXCEED
30% of their respective total loans
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.
Case:

Atty. Acebedo would like to

apply for a loan with BDO. He
offered his lot worth P10M and
house worth P10M, and car
worth P1M as collateral. What is
the maximum amount that BDO
can extend to Atty. Acebedo?
THE NEW CENTRAL BANK ACT
1993

RA 7653
Conservator

- bank or a quasi-bank is in a state

of continuing inability or
unwillingness to maintain a
condition of liquidity deemed
adequate to protect the interest of
depositors and creditors

- and exercise all powers necessary

to restore its viability.
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.
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. Deposit or place funds of the institution in

non-speculative investments

4. Whether the bank can undergo

rehabilitation or liquidation.
Liquidation/Closure/Stoppage of
Business

Grounds:

1. insolvency

2. the bank cannot be rehabilitated.

How to choose a bank?
AMLA of 2001
RA 9160
 1. Money
Laundering
Offense.
proceeds of
unlawful
activity
Unlawful activities:
(34)

KFR
Robbery
Prohibited Drugs
etc.
(refer to RA 10365 for the
full list)
 2. Covered
transactions
P500k
3. Suspicious
transactions
no underlying
legal or trade
obligation,
purpose or
economic
justification
 observed to
deviate from the
profile and/or
client’s past
transactions
Amount involved
is not
commensurate
with the business
4. Reportorial
Requirement
 within five (5)
working days
from occurrence
Who would
report?
 Who would
report?

COVERED
INSTITUTIONS
 Who would report?

banks,
pawnshops,
money changer,
remittance companies
 Who would report?

insurance companies,
securities dealers,
jewelry dealers,
etc.

(refer to RA 10365 for full list)

2016 Bangladesh
Bank heist
$81 M
 Not included:
casinos, including
Internet casinos
 - end -

Thank you!