Anti-Money Laundering Act

Wednesday, September 11, 2019

8:41 PM

Purpose
1. Enacted for the purpose of protecting and observing integrity and confidentiality
of bank accounts in the Philippines.
a. How can it be protected? - by ensuring that the banks are not included in
dirty money.
2. Enacted for the purpose of extending operations in the transnational investigation
and prosecution of persons involved in money bounding wherever committed.
3. Ensure that the Philippines shall not be made as laundering site for the proceeds
of any unlawful activity.

Covered transactions
1. Any transactions involving money and other monetary instruments amounting to
more than 500,000 pesos in one banking day.
 Transactions that are covered by anti-money laundering
 Negotiable instruments - check, promissory note, bill of exchange and
other more instruments regarding money like certificate of deposit,
trust certificate, bonds and other commercial papers that cost more
than 500,000 pesos in one banking day.

Covered Institutions
All banks, non-banks, quasi-banking institutions, trust, companies and such other
establishments under the supervision of regulation of BSP.
All insurance companies and other institutions under the supervision and regulation
of Insurance Commission.
All establishments dealing with securities market, money instruments, investment,
houses under the supervision and regulation of SEC
 That include trust fund companies, money changer, or exchange money market
transaction, and such other establishments under the supervision and
regulation of SEC.

Three Government Agencies identified by the law:

BSP
SEC
IC
Anti-money laundering council composed of governor of BSP, chairman of SEC, and
commissioner of IC.

Under the law, there are suspicious transactions

Suspicious transactions
 Any transactions involving fast and other instruments amounting to more than
1,000,000 million covered transaction
 Any transaction which has no legal or trade obligation, purpose of economic
justification
 Any transactions where the identification of the clients has not been accepting
 Any transaction where the amount involved is not commensurate to the financial
capabilities of the client.
 Any transaction which can be perceived as deviating from the usual and past
transaction of the client.
 Any transaction which has been structured in such a way that it will avoid inclusion
under the reportorial requirements to be filed and submitted to the AMLCouncil.
 Any transaction related to any unlawful activity about to be/has been committing.
 Any transaction analogous or similar to the aforementioned foregoing suspicious
transactions.

Important to recognize what transactions are covered!

Whether the transaction is consistent with the clients' business activities, it must be
reported by the bank ---> AML council.
When a person knew that the activity has to be reported to AML Council, and he
fails to do so, he commits the crime of money laundering.
Five days to report the council - otherwise, you are prosecuted for money laundering.

When does a transaction becomes suspicious?

Example: You are depositing a P1,000,000 in the bank and the bank is not
ascertaining who you are, the transaction is suspicious.
If the AML council discovers it, you are held liable for money laundering by
facilitating the laundering of the inclusive of an illegal activity.

Easiest way to deal with this: know what are the institutions under the supervision and
regulation of BSP, IC, and SEC.
Why? - these are the institutions that deal with money.

Discussion will focus on: Order, Policies, usurious transactions and covered institutions and monetary
instruments covered by the law, and how a person may commit violation of AML act.
3 groups of person who can only commit:
 Yung perang tina-transact sa kanila ay nagmula sa unlawful activity and they did not
present it; they transacted or attempted to transact.
Yung mga taong na alam nila na yung pera ay inclusive of illegal or unlawful activity,
and yet they did not do something or they did something which facilitated the
laundering of the money.
Yung mga taong na alam nilang dapat i-report pero hindi ni-report.

Main topic: Anti-money laundering act

Subtopics: purposes, covered institutions, transactions, suspicious transactions, how money
laundering offenses may be committed, what are the monetary instruments covered by the law

Continuation of AMLA
Thursday, September 12, 2019
10:30 AM

What is Money Laundering?

 A crime whereby the proceeds of any unlawful activity is transacted, thereby
making it appear it originated from a legitimate source.
 The law insures that no dirty money shall be laundered through anyone of the
covered institution.

Covered institutions - establishments under the supervision and regulation by the three
government agencies: BSP, IC, and SEC.
 BSP
a. Trust entities
b. Non-banks
c. Banks
d. Quasi-banks - non-banking
i.
e. Such other similar institutions, subsidiaries and affiliates - pawnshops

Why did the Congress enacted the AMLA?

Under our constitution, International Committee shall form part of the law and we
renounced. Therefore we embraced and adapt the rule of amity with other sovereign
states. Consistent with foreign policies of the Philippines, the State shall extend its
operation in any transnational investigation.
Transnational - investigation of money laundering activities beyond the Philippine
territorial jurisdiction.
 e.g. RCBC - branch manager was convicted; the money laundering activity
originated in Bangladesh, others - wanted to plead the dirty money in
Philippine soil.

Three Groups of Persons who can commit the offense of

Money Laundering:

Composition of AMLA: Governor of BSP, chairman of SEC, and commissioner of IC.

Their decision must be unanimous, not majority.

Banks - pinapautang nila yung pera nila.

Lending company - pinapautang nila yung puhunan nila.

Mayroon bang trust entities na hindi banko?

Universal bank - can perform both banking and non-banking

Commercial - perform only banking.

Trust entities - taking care of the trust

 Pension funds - you keep them in trust
 Funds are exclusively preserved for the payment of retirees - pension benefit,
lump-sum benefit.

26mins and 45secs.

Four Monetary Instruments that are Negotiable as per Atty. Padilla:

1. Coins or currency
2. Drafts, checks, and notes
3. Securities or negotiable instruments
4. Other similar instruments
See more about RULE III (N) Monetary Instrument

Read more sa AMLA focusing on: freeze order, policies and purposes of AMLA, functions of AMLA,
suspicious transactions, unlawful activities, four instruments that are negotiable, how and who are
the groups of person who can commit suspicious transactions, supervising authorities (BSP, IC, SEC
and its examples), penalties of violating AMLA.
AMLA and NCBA
Thursday, September 26, 2019
6:01 PM

FREEZE ORDER
What is the reason why the Court of Appeals will issue the freeze order?
 When there is a probable cause.
 Probable cause refers to situations where any ordinary, reasonable and
prudent person who have a thinking or belief that the offense of money
laundering has been committed.
o Only a probability.
o Not yet a full proof of commission.

Freezing - has no movement; can no longer be transferred, can no longer be spent,

can no longer be withdrawn.
Freezing - a covered institution who has been ordered by the court to
freeze the monetary instrument will keep the instrument as is where is.
 No movement like withdrawal or transfer.
 This is a remedial proceeding.

 To initiate filing of complain.

 To cause the investigation of any suspicious transaction.

Value of investigation when after you established that money laundering is

deemed committed when money is no longer there. - provisional remedy

How many days will it become effective for it cannot be frozen forever - period
of 20 days unless the court extends it any further.
Within this period of 20 days, the law envisions that the investigations
would have been thoroughly conducted and the offense has no doubt indeed
has been committed.

Can the AMLA inquire two bank deposits of persons involved in the money
laundering activities?
 As a rule, AMLA cannot inquire in two bank deposits.
 As a rule, before AMLC can inquire in the details of a bank deposit -
supposedly owned by a person involved in the proceeds of an unlawful
 activity. AMLA must first secure from a competent court - RTC or Court of
Appeals (court order)
 There are situations however where the law empowers the AMLA to
inquire into the details of the deposits without a court order.
 Violation of Comprehensive Dangerous Drugs Act of 2002
 Violation of Anti-graft and corrupt
See more Rule XI – Bank Inquiry sa AMLA (B. Bank Inquiry without Court Order)

Who will impose the penalty of 7 years minimum and 14 years maximum of
imprisonment and a minimum fine of 3,000,000 but not exceeding double the
amount of money laundered?
Those persons who in spite of their knowledge, the monetary instrument is
connected, involved or related to the proceeds of unlawful activity;
transacted or attempted to transact the monetary instrument.

A person who is in spite of his knowledge that the proceeds of an unlawful activity
is the source of monetary instrument or property, what is the penalty
enforceable?
4 years to 7 years and a fine

Enforceable upon any person who has knowledge that the monetary instrument
or property is in any way involved in the proceeds of an unlawful activity either
(a) performs an act or
(b) fails to perform an act as a result of which it facilitates the omission of
the offense.

Penalties of 6 months minimum and 4 years maximum

Those persons who knows that the transaction is covered by reportorial
requirements or covered in the suspicious transactions which must be
reported and filed with AMLA did not consult.

Those persons who failed to keep records

Penalties: 6 months to 1 year or a fine not less than 100,000 but not more
than 500,000.

NEW CENTRAL BANK ACT

Why was NCBA enacted?
 To have a central monetary unit to take care everything about money,
banking and credit with independent central monetary body.

How does the law assure the independence of the BSP?

By giving the Bangko Sentral autonomy fiscal and administrative.

No other government agency can interfere with the activities of the Bangko
Sentral to the Monetary Board.
Fiscal - money
Administrative - management
Even if the President is not in agreement with the policy directions said fore
by the Monetary Board, the President cannot do anything because the
Monetary Board - BSP enjoys autonomy.

Objectives of BSP:
To maintain price stability conducive to a balanced and sustainable growth
of the economy and employment.
It shall also promote and maintain monetary stability and the convertibility
of the peso.

Responsibility of BSP:
It is the only agency of the government who has the power to set policy
directions in the areas involving money, banking, and credit.
o Money - medium of exchange
o Banking - bank is a financial institution to receive deposits. Only banks
can receive deposits.

Policy which controls the supply of money, activities of banks and rules and
regulations regulating credit transaction - Monetary Policy

Difference of monetary policy and fiscal policy:

How do you know if the country is experiencing economic growth?

 If the GDP shows improvement on a year-to-year basis
 The best test of economic growth is real GDP, not nominal GDP.
o Real GDP - based on output production
o Nominal GDP - based on revenue - prices
New Central Bank
GNP - base your analysis on revenue - the money paid for goods and services
GDP - real; nominal
e.g. computing GDP - compute all foreign investors in the country
GNP - output of all the Filipinos in the country and outside the country.
GDP - within the country only but includes foreigners.

GDP - best case of economic growth. Why?

e.g. Philippines has total production of 100.
2019 - 100
2020 - 110
There is a 10% GDP growth.
Make the price stable.
Connection of stable prices to economic drought.
Inflation is normal and is present year after year.
Another objective of BSP. To control prices, to set policies in the area
of money.
When do you think inflation will happen?
 if there is too much money.
How can BSP control the supply of money?

The law says that BSP can use its power of raising or changing the legal reserve
of requirements.
Legal reserve requirements - refers to the ratio of deposits and reserves
referred to that part of the deposit in all banks which banks must deposit
to BSP.
e.g. PNB - deposit of 1M. 10% of that will be given to BSP - that would
be non-interest bearing.
How can BSP control it? - raise bank reserve to contract money supply.
If there is deflation, or liquidity problem - through a discount rate through
a monetary instrument - maaaring luwagan ang supply of money.

OBJECTIVE NO. 2
Monetary stability - refers to the purchasing power of the currency.
Purchasing power - refers to the quantity or volume of goods or services
which the currency can purchase/buy.
Stable currency - has monetary stability.
 It would result to low interest rate.
  Manageable inflation.

Convertibility of the currency

Philippine currency is strong in ASEAN countries.

Only government agency that can control money circulation.

Functions:
 Bank of banks.
 To avoid panic withdrawal, when the BSP determines that a bank can no
longer meet its liabilities as its matures in the usual course of business,
it can be placed under receivership except if the reason behind a
bank's failure to meet its liabilities can be attributed to panic
withdrawal by the depositing party.
 Bank reserves avoid panic withdrawal.
 When a bank experiences liquidity problems, they can approach BSP for
loans.
 Where will the loans come from? - bank reserves.

Bill of rights, Article 3 - no law shall be passed which will impair contractual
rights and obligations.

Severe unemployment
Recession - economy is experiencing reduction of total output. Unemployment
begins to set.
Its opposite is recovery.

Sustainable economic growth - you will not go down.

1hr,12mins

New Central Bank Act 1

Tuesday, October 01, 2019
9:04 PM
Five Functions imposed by Central Bank Act:
1. Beneficial depository of government.
a. It is where the money of the government is held in form of deposits.
 b. In its open market as a monetary policy tool, it can buy and sell
government securities

2. Official representative of government to the IMF.

a. Bangko Sentral governor acts as official representative to IMF.
b. Function of IMF - established by member parties to assist member
countries with its balance of payment deficiency.
i. Balance of payment - summary of all financial transactions of a
country with another country; when Philippines experiencing a
deficit, our international reserve is falling below the standard.
1. Should be pro rata to GDP.

3. Banks of banks.
a. The lender of banks. If the Philippines goes to IMF to seek financial
assistance when banks and other similar institutions start suffering
from liquidity, they go to Bangko Sentral.
i. It is a mandated function of BSP to assist banks to prevent
liquidity problems.

4. Acts as a clearing house.

a. They receive payment in checks called as demand deposits.
i. Why is it in demand deposits? - all checks become the liability
of the issuing party through a banking institution. You cannot
have check unless you have checking account.
1. To preserve the reliability of checking as a matter of
payment.
ii. How does BSP protect the integrity of demand deposits?
1. By making the checks cleared within 24 hours. (used to be
72 hours but it has been abused).
2. All banks observe cut-off time.
a. Cut off time is 11AM and deposited it past 11AM, that
would already be considered as a deposit for
tomorrow, and it will be cleared on evening.
b. If it bounces, the drawer of the check has minimum
period of 5 days within which he redeems the check.
 5. Acts as financial advisor of the Philippine government.
a. Through the Monetary Board and Bangko Sentral governor who acts
as CEO, it provides financial advice to the NEDA, Congress and
Executive everything about monetary and fiscal policy.

Another function of bank by BSP:

To make and print notes and coins. (along East Avenue near SSS)
Printing facilities: It is not disclosed.

Monetary policy deals with areas of banking, money and credit - this is a
responsibility.

Three monetary policies/tools/instruments:

Principal objective: for the BSP to maintain price stability conducive to a
balanced and sustainable economic growth; promote and maintain monetary
stability and convertibility of the Philippine currency.
1. Money market operations
How does the BSP used money market operations to achieve the objective
of BSP in stabilizing price?
 Open market operations involved operations in the Philippines.
 Government securities - treasury bills
 When you are a payer in money market, you can give instructions to
your securities dealer/banker to use your money in buying treasury
bills provided the interest is so much.
 The BSP will fail in its purpose of achieving enough money to be debt
in the BSP so that the volume of money will contract.
 When you buy securities, what will be the result?
 The volume of money will expand. You buy to expand, you sell
to contract. (this is an effective tool used by BSP to control
money)
Discount rate
 Goal: Regulate interest rate
 What do you need to regulate this?
 To ensure that the inflation rate is within normal level.
Inflation rate goes high if money supply is high.
  How does it regulate the interest rate?
 Domino effect.
 Banks lend money to public out of their deposits.
 Discount rate - BSP imposed upon the banks and similar
institutions borrowing from the bank reserve.

Reserve ratio requirements - "legal reserve" or "bank reserve"

 Ratio refers to a certain proportion.
 When do you determine that proportion of that average or daily
deposit balance?
 All banks are different in its legal reserve.
 Universal bank - BIG ONES
 Commercial banks - MEDIUM ONES
 Savings and rural banks - SMALL ONES
 Prevailing legal reserve requirements:
 Big banks - 15%
 Medium banks - 5%
 Small banks - 3%
e.g. 100 - 15% of it deposited to BSP. You only have the 85%.
A good banker will know the profile of the clients on the way it does
it business.
It is safer to keep money in bank than in your vault. Why? By leaving
it in bank, you earn interest based on discount rate.
How much can you borrow from the bank reserve?

When these three monetary instruments have been used by the BSP, what
is the immediate result?
 You want to control the volume of money supply.
 Regulate the interest rate.
 Change the reserve requirements.
 If you have these three, it will lead the economy to normal and
improving activities. (recovery)
 When you are in the stage of recovery, the ultimate destination is peak
or prosperity.
 Philippines have not yet reached that stage; it is still in recovery,
improving its employment rate for money is now easily available,
interest rate is affordable and the banks are safe.
  Money should circulate in the society to improve Philippine economy.
The more you spend, the more you contribute to the economy.
 In the discipline of social and economic:
Social - government
Economic - money

Member of Monetary board:

CEO - President
BSP - governor
Under the New Central Bank Act, who can be appointed as governor
of BSP?
 Must be a head in a department. (e.g. DOTr, DEPEd, etc…)
 Usually appointed is the Head of Finance and NEDA
 Benjamin Diokno - Secretary of Dept. of Budget and Management
 Jaime C. Laya - appointed by Pres. Marcos before who came from
DEPed.

REMEMBER:
The following are the monetary instruments availed by BSP for purpose
of regulating the flow of money:
1,2,3 (4&5 ay pampagulo)

Monetary Board - is the policy-making body of BSP

 Has seven (7) members.
 The governor of the BSP who is the Chairman of the Monetary Board.
Whenever the Governor is unable to attend the meeting, he shall
designate a Deputy Governor to act as his alternate: Provided, that
in such event, the Monetary Board shall designate one of its members
as acting Chairman.
 A member of the Cabinet to be designated by the President of the
Philippines. If unable to attend, designate an Undersecretary in his
department.
 And five (5) members who shall came from private sector that shall
serve full-time. Provided, that the members first appointed under
the provisions of the subsection,
 Three (3) shall have a term of 6 years; and the other two, 3
years.
 It needs appointment from Commission of Appointment.
  No member of the Monetary Board may be reappointed more than
once. (hindi pwede)

Mayroon bang mga pagkakataon na isang Member na Monetary Board ay

maaaring manilbihan bilang Head ng Department ng BSP?
 Bawal.
 Full-time dapat sa Monetary Board.

SEC. 29 Appointment of Conservatorship

When a bank is in a state of continuing inability or unwillingness to maintain a
condition of liquidity deemed to protect the interest of depositors and
creditors, the Monetary Board may appoint a conservator.
He will not receive any remuneration because he is paid by the BSP.
The monetary board usually designates one from private sector who has
proven competence in the field of banking and finance. - one of the
requirements.

Responsibilities of conservator:
 Take charge in the assets and liabilities of the bank.
 Power to reorganize the management (e.g. reshuffling employees)

How is a conservator compensated?

 The Monetary Board may assign a certain amount in the form of salary,
but not to exceed 2/3 of the salary of the President of the institution.
e.g. P1,000,000 plus bonuses and other incentives - P18,000,000 a
year. You only get 2/3 of it. - this is the remuneration of the
conservator in 12 equal payments.
Supposing after 3 months gave a report to Monetary Board that the
bank can continue its operation, what will happen to the conservator?
- Yung natitirang 9 months na sweldo, ibibigay pa rin sa kanya.

Kapag nilagay ang bangko under conservatorship, it prevents probable losses to

the depositors and creditors. The bank can still continue to operate pero iba
lang ang magma-manage. Conservatorship shall not exceed for 1 year.

If after a month (e.g.) na wala nang pag-asa ang bangko, you can placed the
bank under receivership. Once placed under receivership, hindi na
papahintulutan na mag-continue ang banking activities.
 Receiver ay itatalaga ng Monetary Board. Ang receiver ay madalas galing
sa PDIC. Because PDIC is the one who pays the insured deposits for a
maximum of P500,000 for each account.
A receiver shall inform the Monetary Board not later than 90 days if
the bank can no longer continue its operation. If this happened, the bank
is placed under liquidation.

Reasons why a bank is placed under receivership:

 The bank can no longer its liabilities as they mature in the normal
course of business.
 Has insufficient realizable assets.
 It cannot continue operate without involving probable losses to its
depositors or creditors.
 Guilty of violation of cease and desist order issued by the Monetary
Board.
 Cease and desist order - inutusan ka na huminto pero ipinagpatuloy
mo pa rin; if ginawa mo ito, pwede i-place under receivership.

New Central Bank Act 2

Thursday, October 03, 2019
3:04 PM

What is the purpose of conservatorship?

 When a conservator is designated by the Monetary Board to take over
the daily operations of the bank become continuous operating.

Why would a conservator be assigned by the Monetary Board in a

bank? When can it happen?
 When there is continuing inability and unwillingness to maintain a
condition of liquidity.

What is the purpose of receivership?

 Find out whether the bank can still be rehabilitated or not.
 If a bank is placed under receivership, it temporarily stops doing its daily
business. -> decision must not later than 90 days.

Conservator must be a person with proven knowledge, experience, expertise

in the field of banking and finance.
When a bank is placed under receivership, it is no longer authorized to do its
daily business. The receiver will be there for the purpose of determining
whether the bank could be rehabilitated or not.
If rehabilitated, then the conservator may be assigned.
You can be under receivership without going through conservatorship.
Because the designation of the conservator is not a pre-requisite before
a receiver can be designated.
He could be a receiver right away when receivership of a bank takes place, that
is not a good sign.
When the examining team sent by the BSP finds out that a particular bank is
experiencing an unwillingness… -> assign a person with an experience of banking
and finance.

When will a conservator will not be entitled for remuneration?

 The conservator is terminated on other grounds.
Other grounds:
 If the conservator is an officer of BSP.

Four (4) specific grounds why a bank may be placed under a

receivership?
 Caused by panic withdrawal or bank run.
Panic withdrawal - all depositors suddenly withdraw their deposits.

25mins. 7 secs.

Read NCBA Sec. 52 to 57