2020 BAR REVIEW COMMERCIAL LAW

BANKING AND ALLIED LAWS, ANTI-MONEY Handout No. 13

LAUNDERING ACT, TRUTH IN LENDING ACT

BANKING AND ALLIED LAWS

Petitioner Philippine National Bank's role was merely that of a lending bank. Under Republic
Act No. 7202 and its Implementing Rules and Regulations, lending banks are not obligated to
compensate sugar producers for their losses. Restitution falls under the Bangko Sentral ng
Pilipinas, upon the establishment of a sugar restitution fund.

There is no dispute that respondents are covered under Republic Act No. 7202. While this Court
recognizes the plight of the thousands of sugar producers and their right as beneficiaries, there
is, sadly, no fund from where the money should come.

Petitioner Philippine National Bank has not violated any of its obligations toward respondents
since it was never tasked by the law to refund the claim for excess payments. As a private banking
institution and as a publicly listed company, it has no jurisdiction, control, or relation to the sugar
restitution fund. Bangko Sentral ng Pilipinas and Philippine National Bank, G.R. No. 211176,
February 06, 2019

The subject BPI account is in the nature of a joint account. “[It] is one that is held jointly by two
or more natural persons, or by two or more juridical persons or entities. Under such setup, the
depositors are joint owners or co-owners of the said account, and their share in the deposits
shall be presumed equal, unless the contrary is proved.”

In an “and” joint account, as in this case, the depositors are joint creditors of the bank and the
signatures of all depositors are necessary to allow withdrawal. Thus, it is indispensable that all
the persons named as account holders give their consent before any withdrawal could be made.
In the Matter of the Intestate Estate of Miguelita Pacioles and Emmanuel C. Ching vs. Pacioles,
Jr., 883 SCRA 206, G.R. No. 214415 October 15, 2018

When Bank of the Philippine Islands (BPI) allowed Dela Peña to make unauthorized
withdrawals, it failed to comply with its obligation to secure said accounts by allowing only
those withdrawals authorized by respondent. In so doing, BPI violated the terms of its contract
of loan with respondent and should be held liable in this regard. On the other hand, Dela Peña’s
liability arises from the commission of the crime of estafa.

Thus, respondent’s action to recover actual damages against Dela Peña was deemed instituted
with the criminal action, unless waived, reserved or previously instituted. There is no indication
that such reservation had been done by respondent. As such, to hold Dela Peña solidarily liable

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for damages in this case may result in double recovery which is proscribed. In any case, it is clear
that the civil liability upon which Dela Peña was being held liable by the CA is totally distinct and
separate from the source of BPI’s liability. Thus, BPI and Dela Peña’s respective liabilities cannot
be deemed joint and solidary. Bank of the Philippine Islands vs. Land Investors and Developers
Corporation, 882 SCRA 286, G.R. No. 198237 October 8, 2018

We agree with the Court of Appeals that the action of BPI is the proximate cause of the loss
suffered by the spouses Quiaoit. Proximate cause is defined as the cause which, in natural and
continuous sequence, unbroken by any efficient intervening cause, produces injury and without
which the result would not have occurred.

Granting that Lambayong counted the two bundles of the US$ I 00 bills she received from the
bank, there was no way for her, or for the spouses Quiaoit, to determine whether the dollar bills
were genuine or counterfeit. They did not have the expertise to verify the genuineness of the
bills, and they were not informed about the "chapa" on the bills so that they could have checked
the same. BPI cannot pass the burden on the spouses Quiaoit to verify the genuineness of the
bills, even if they did not check or count the dollar bills in their possession while they were
abroad. Bank of the Philippine Islands and Ana C. Gonzales vs. Spouses Fernando v. Quiaoit and
Nora l. Quiaoit, G.R. No. 199562, January 16, 2019

BPI had the last clear chance to prove that all the dollar bills it issued to the spouses Quiaoit
were genuine and that the counterfeit bills did not come from it if only it listed down the serial
numbers of the bills.

BPI's lapses in processing the transaction fall below the extraordinary diligence required of it as
a banking institution. Hence, it must bear the consequences of its action. Bank of the Philippine
Islands and Ana C. Gonzales vs. Spouses Fernando v. Quiaoit and Nora l. Quiaoit, G.R. No.
199562, January 16, 2019

BUT PLEASE SEE:

The CA and the RTC both found that the respondent had exercised the diligence required by law
in observing the standard operating procedure, in taking the necessary pre-cautions for
handling the US dollar bills in question, and in selecting and supervising its employees.

In this connection, it is significant that the BSP certified that the falsity of the US dollar notes in
question, which were “near perfect genuine notes,” could be detected only with extreme

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difficulty even with the exercise of due diligence. Ms. Nanette Malabrigo, BSP’s Senior Currency
Analyst, testified that the subject dollar notes were “highly deceptive” inasmuch as the paper
used for them were similar to that used in the printing of the genuine notes. She observed that
the security fibers and the printing were perfect except for some micro-scopic defects, and that
all lines were clear, sharp and well defined. Carbonell vs. Metropolitan Bank and Trust Company,
825 SCRA 1, G.R. No. 178467 April 26, 2017

It is standard operating procedure for banks to conduct an ocular inspection of the property
offered for mortgage and to determined the owners thereof.

Before approving a loan application, it is standard operating procedure for banks and financial
institutions to conduct an ocular inspection of the property offered for mortgage and to
determine the real owner(s) thereof. The apparent purpose of an ocular inspection is to protect
the “true owner” of the property as well as innocent third parties with a right, interest or claim
thereon from a usurper who may have acquired a fraudulent certificate of title thereto.
Philippine National Bank vs. Vila, 799 SCRA 90, G.R. No. 213241 August 1, 2016

PNB clearly failed to observe the required degree of caution in readily approving the loan and
accepting the collateral offered by the Spouses Cornista without first ascertaining the real
ownership of the property.

It should not have simply relied on the face of title but went further to physically ascertain the
actual condition of the property. That the property offered as security was in the possession of
the person other than the one applying for the loan and the taxes were declared not in their
names could have raised a suspicion. A person who deliberately ignores a significant fact that
could create suspicion in an otherwise reasonable person is not an innocent purchaser for value.
Philippine National Bank vs. Vila, 799 SCRA 90, G.R. No. 213241 August 1, 2016

The bank’s act of requesting the respondents to pre-sign the certificate of

acceptance/completion even the house to be financed was not yet constructed is irregular and
fraudulent.

As a banking institution serving as an originator under the UHLP and being the maker of the
certificate of acceptance/completion, it was fully aware that the purpose of the signed certificate
was to affirm that the house had been completely constructed according to the approved plans

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and specifications, and that respondents had thereby accepted the delivery of the complete
house. Given the purpose of the certificate, it should have desisted from presenting the
certificate to respondents for their signature without such conditions having been fulfilled. Yet,
it made respondents sign the certificate (through Estrella Capistrano, both in her personal
capacity and as the attorney-in-fact of her husband Danilo Capistrano) despite the construction
of the house not yet even starting. Comsaving Banks (now GSIS Family Bank) vs. Capistrano, 704
SCRA 72, G.R. No. 170942 August 28, 2013

Effective on July 1, 2013, under Bangko Sentral ng Pilipinas-Monetary Board (BSP-MB) Circular
No. 799, the rate of interest is now back at six percent (6%) per annum for the loan or
forbearance of any money, goods or credits and in judgments, in the absence of an express
contract as to such rate of interest.

In the case of loans or forbearances of money, the rate of legal interest used to be twelve percent
(12%) per annum pursuant to Central Circular No. 905-82, which took effect on January 1, 1983.
“The term ‘forbearance,’ within the context of usury law, has been described as a contractual
obligation of a lender or creditor to refrain, during a given period of time, from requiring the
borrower or debtor to repay the loan or debt then due and payable.”

But effective on July 1, 2013, under Bangko Sentral ng Pilipinas-Monetary Board Circular No. 799,
the rate of interest is now back at six percent (6%) per annum for the loan or forbearance of any
money, goods or credits and in judgments, in the absence of an express contract as to such rate
of interest. In view of this amendment, the Court, in Nacar v. Gallery Frames, et al., 703 SCRA 439
(2013), modified the guidelines laid down in Eastern Shipping Lines, Inc. v. Court of Appeals, 234
SCRA 78 (1994). Land Bank of the Philippines vs. West Bay Colleges, Inc., 822 SCRA 649, G.R. No.
211287 April 17, 2017

An interbank call loan refers to the cost of borrowings from other resident banks and nonbank
financial institutions with quasi-banking authority that is payable on call or demand. It is
transacted primarily to correct a bank’s reserve requirements.

Under the Manual of Regulation for Banks (MORB) issued by the Bangko Sentral ng Pilipinas
(BSP), interbank borrowings, which include interbank call loans, shall be evidenced by deposit
substitute instruments containing the minimum features prescribed under Section X235.3 of the
MORB, except those that are settled through the banks’ respective demand deposit accounts
with the BSP via Philpass. Commissioner of Internal Revenue vs. Philippine National Bank, 796
SCRA 158, G.R. No. 195147 July 11, 2016

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Exceptions to the Absolute Confidentiality of Bank Deposits.

In Union Bank of the Philippines v. Court of Appeals, we held that “Section 2 of the Law on Secrecy
of Bank Deposits, as amended, declares bank deposits to be ‘absolutely confidential’ except:

1) In an examination made in the course of a special or general examination of a bank that

is specifically authorized by the Monetary Board after being satisfied that there is
reasonable ground to believe that a bank fraud or serious irregularity has been or is being
committed and that it is necessary to look into the deposit to establish such fraud or
irregularity;

2) In an examination made by an independent auditor hired by the bank to conduct its

regular audit provided that the examination is for audit purposes only and the results
thereof shall be for the exclusive use of the bank;

3) Upon written permission of the depositor;

4) In cases of impeachment;

5) Upon order of a competent court in cases of bribery or dereliction of duty of public

officials; or

6) In cases where the money deposited or invested is the subject matter of the litigation.”
Marquez vs. Desierto, 359 SCRA 772, G.R. No. 135882 June 27, 2001

We rule that before an in camera inspection may be allowed, there must be a pending case
before a court of competent jurisdiction.

Further, the account must be clearly identified, the inspection limited to the subject matter of
the pending case before the court of competent jurisdiction. The bank personnel and the account
holder must be notified to be present during the inspection, and such inspection may cover only
the account identified in the pending case. Marquez vs. Desierto, 359 SCRA 772, G.R. No. 135882
June 27, 2001

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In this case, the Joint Motion to Approve Agreement was executed by BPI and TIDCORP only.
There was no written consent given by petitioner or its representative, Epifanio Ramos, Jr., that
petitioner is waiving the confidentiality of its bank deposits.

The provision on the waiver of the confidentiality of petitioner’s bank deposits was merely
inserted in the agreement. It is clear therefore that petitioner is not bound by the said provision
since it was without the express consent of petitioner who was not a party and signatory to the
said agreement. Neither can petitioner be deemed to have given its permission by failure to
interpose its objection during the proceedings. It is an elementary rule that the existence of a
waiver must be positively demonstrated since a waiver by implication is not normally
countenanced. Doña Adela Export International, Inc. vs. Trade and Investment Development
Corporation (TIDCORP), 750 SCRA 429, G.R. No. 201931 February 11, 2015

Foreign Currency Deposits

The rule on foreign currency deposits is embodied in Section 8 of Republic Act No. 6426, also
known as the Foreign Currency Deposit Act of the Philippines, which provides that: Sec. 8. Secrecy
of foreign currency deposits.—All foreign currency deposits authorized under this Act, as
amended by PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, are
hereby declared as and considered of an absolutely confidential nature and, except upon the
written permission of the depositor, in no instance shall foreign currency deposits be examined,
inquired or looked into by any person, government official, bureau or office whether judicial or
administrative or legislative, or any other entity whether public or private; Provided, however,
That said foreign currency deposits shall be exempt from attachment, garnishment, or any other
order or process of any court, legislative body, government agency or any administrative body
whatsoever. (As amended by PD No. 1035, and further amended by PD No. 1246, prom. Nov. 21,
1977)

This provision was reproduced in Section 87 of the Central Bank of the Philippines Circular No.
1318, Series of 1992.

It is apparent that in ordering the branch manager or any representative of BPI to release the
money contained in a foreign currency deposit account, the intestate court committed a violation
of the law, which expressly provides that all foreign currency deposits as defined by applicable
laws are not subject to any form of attachment, garnishment, or any other order or process of
any court, legislative body, government agency or any administrative body. In the Matter of the
Intestate Estate of Miguelita Pacioles and Emmanuel C. Ching vs. Pacioles, Jr., 883 SCRA 206,
G.R. No. 214415 October 15, 2018

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A bank retains its juridical personality even if placed under conservatorship; it is neither
replaced nor substituted by the conservator who shall only take charge of the assets, liabilities
and the management of the institution.

It being the fact that the PDIC should not be considered as a substitute or as a codefendant of
the petitioner bank but rather as a representative party or someone acting in fiduciary capacity,
the insolvent institution shall remain in the case and shall be deemed as the real party-in-interest.
Nowhere in Section 3, Rule 3 of the Revised Rules of Court is it stated or, at the very least implied,
that the representative is likewise deemed as the real party-in-interest. The said rule simply
states that, in actions which are allowed to be prosecuted or defended by a representative, the
beneficiary shall be deemed the real party-in-interest and, hence, should be included in the title
of the case. Balayan Bay Rural Bank, Inc. vs. National Livelihood Development Corporation, 771
SCRA 139, G.R. No. 194589 September 21, 2015

A closed bank under receivership can only sue or be sued through its receiver, the Philippine
Deposit Insurance Corporation.

Under Republic Act No. 7653, when the Monetary Board finds a bank insolvent, it 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. Banco Filipino Savings and Mortgage Bank vs. Bangko Sentral ng Pilipinas and the
Monetary Board, G.R. No. 200678, June 04, 2018

The relationship between the Philippine Deposit Insurance Corporation and a closed bank is
fiduciary in nature. Section 30 of Republic Act No. 7653 directs the receiver of a closed bank to
"immediately gather and take charge of all the assets and liabilities of the institution" and
"administer the same for the benefit of its creditors."

The law likewise grants the receiver "the general powers of a receiver under the Revised Rules of
Court." Under Rule 59, Section 6 of the Rules of Court, "a receiver shall have the power to bring
and defend, in such capacity, actions in his [or her] own name." Thus, Republic Act No. 7653
provides that the receiver shall also "in the name of the institution, and with the assistance of
counsel as [it] may retain, institute such actions as may be necessary to collect and recover
accounts and assets of, or defend any action against, the institution." Considering that the
receiver has the power to take charge of all the assets of the closed bank and to institute for or
defend any action against it, only the receiver, in its fiduciary capacity, may sue and be sued on

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behalf of the closed bank. Banco Filipino Savings and Mortgage Bank vs. Bangko Sentral ng
Pilipinas and the Monetary Board, G.R. No. 200678, June 04, 2018

Philippine Deposit Insurance Corporation also safeguards the interests of the depositors in all
legal proceedings. Most bank depositors are ordinary people who have entrusted their money
to banks in the hopes of growing their savings.

When banks become insolvent, depositors are secure in the knowledge that they can still recoup
some part of their savings through Philippine Deposit Insurance Corporation. Thus, Philippine
Deposit Insurance Corporation's participation in all suits involving the insolvent bank is necessary
and imbued with the public interest. Banco Filipino Savings and Mortgage Bank vs. Bangko
Sentral ng Pilipinas and the Monetary Board, G.R. No. 200678, June 04, 2018

Excluded from PDIC insurance coverage

1) Investment products such as bonds and securities, trust accounts, and other similar
instruments;
2) Deposit accounts or transactions which are unfunded, or that are fictitious or fraudulent;
3) Deposit accounts or transactions constituting, and/or emanating from, unsafe and
unsound banking practice/s, as determined by the Corporation, in consultation with the
BSP, after due notice and hearing, and publication of a cease and desist order issued by
the Corporation against such deposit accounts or transactions;
4) Deposits that are determined to be the proceeds of an unlawful activity as defined under
Republic Act No. 9160, as amended. (RA 3591, as amended by RA9576)
5) Cases involving splitting of deposits

On June 22, 1963, PDIC was created under RA 3591 as an insurer of deposits in all banks entitled
to the benefits of insurance under the said Act to promote and safeguard the interests of the
depositing public. As such, PDIC has the duty and authority to determine the validity of and
grant or deny deposit insurance claims.

Section 16(a) of its Charter, as amended, provides that PDIC shall commence the determination
of insured deposits due the depositors of a closed bank upon its actual take over of the closed
bank. Also, Section 1 of PDIC's Regulatory Issuance No. 2011-03, provides that as it is tasked to
promote and safeguard the interests of the depositing public by way of providing permanent and

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continuing insurance coverage on all insured deposits, and in helping develop a sound and stable
banking system at all times, PDIC shall pay all legitimate deposits held by bona fide depositors
and provide a mechanism by which depositors may seek reconsideration from its decision,
denying a deposit insurance claim. Peter L. So vs. Philippine Deposit Insurance Commission, G.R.
No. 230020, March 19, 2018

It bears stressing that as stated in Section 4(f) of its Charter, as amended, PDIC's action, such
as denying a deposit insurance claim, is considered as final and executory and may be reviewed
by the court only through a petition for certiorari on the ground of grave abuse of discretion.

Thus, the legislative intent in creating PDIC as a quasi-judicial agency is clearly manifest. Indeed,
PDIC exercises judicial discretion and judgment in determining whether a claimant is entitled to
a deposit insurance claim, which determination results from its investigation of facts and
weighing of evidence presented before it. Noteworthy also is the fact that the law considers
PDIC's action as final and executory and may be reviewed only on the ground of grave abuse of
discretion. Peter L. So vs. Philippine Deposit Insurance Commission, G.R. No. 230020, March 19,
2018

Dragnet Clause

A dragnet clause is a mortgage provision which states that the mortgage is not limited to the
fixed amount but also covers other credit accommodations in excess thereof. Such stipulation is
valid and binding between the parties and is specifically phrased to subsume all debts of past and
future origin. Ajax Marketing & Dev. Corp. vs. CA, 248 SCRA 222; China Banking Corp. vs. CA,
265 SCRA 327; Quintanilla vs. CA 279 SCRA 397; cited in Hector S. De Leon, Comments and Cases
on Credit Transactions, 2002 ed.

Single Borrower’s Limit (SBL) Rule

The total amount of loans, credit accommodations and guarantees that may be extended by a
bank to any person, partnership, association, corporation or other entity shall at no time exceed
25% of the net worth of such bank. The basis for determining compliance with the single
borrower’s limit is the total credit commitment of the bank to or on behalf of the borrower. GBL,
Sec. 34(1)

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Close Now, Hear Later Rule

Under the law, the sanction of closure could be imposed upon a bank by the Bangko Sentral ng
Pilipinas (BSP) even without notice and hearing — this “close now, hear later” scheme is
grounded on practical and legal considerations to prevent unwarranted dissipation of the bank’s
assets and as a valid exercise of police power to protect the depositors, creditors, stockholders,
and the general public. Bangko Sentral ng Pilipinas Monetary Board vs. Antonio-Valenzuela,
G.R. No. 184778, October 2, 2009

Proceedings in receivership and liquidation

Section 30 of RA 7653 provides for the proceedings in the receivership and liquidation of banks
and quasi-banks, the pertinent portions of which read: Section 30. Proceedings in Receivership
and Liquidation.—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;
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. x x x x The receiver shall immediately
gather and take charge of all the assets and liabilities of the institution, administer the same for
the benefit of its creditors, and exercise the general powers of a receiver under the Revised Rules
of Court x x x[.] If the receiver determines that the institution cannot be rehabilitated or
permitted to resume business in accordance with the next preceding paragraph, the Monetary
Board shall notify in writing the board of directors of its findings and direct the receiver to
proceed with the liquidation of the institution. The receiver shall: x x x x The actions of the
Monetary Board taken under this section or under Section 29 of this Act shall be final and
executory, and may not be restrained or set aside by the court except on petition for certiorari
on the ground that the action taken was in excess of jurisdiction or with such grave abuse of

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discretion as to amount to lack or excess of jurisdiction. The petition for certiorari may only be
filed by the stockholders of record representing the majority of the capital stock within ten (10)
days from receipt by the board of directors of the institution of the order directing receivership,
liquidation or conservatorship. The designation of a conservator under Section 29 of this Act or
the appointment of a receiver under this section shall be vested exclusively with the Monetary
Board. Furthermore, the designation of a conservator is not a precondition to the designation of
a receiver. Apex Bancrights Holdings, Inc. vs. Bangko Sentral ng Pilipinas, 841 SCRA 436, G.R.
No. 214866 October 2, 2017

It is settled that “[t]he power and authority of the Monetary Board to close banks and liquidate
them thereafter when public interest so requires is an exercise of the police power of the State.”

Police power, however, is subject to judicial inquiry. It may not be exercised arbitrarily or
unreasonably and could be set aside if it is either capricious, discriminatory, whimsical, arbitrary,
unjust, or is tantamount to a denial of due process and equal protection clauses of the
Constitution.” Otherwise stated and as culled from the above provision, the actions of the
Monetary Board shall be final and executory and may not be restrained or set aside by the court
except on petition for certiorari on the ground that the action taken was in excess of jurisdiction
or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. “There is
grave abuse of discretion when there is an evasion of a positive duty or a virtual refusal to
perform a duty enjoined by law or to act in contemplation of law as when the judgment rendered
is not based on law and evidence but on caprice, whim and despotism.” Apex Bancrights
Holdings, Inc. vs. Bangko Sentral ng Pilipinas, 841 SCRA 436, G.R. No. 214866 October 2, 2017

ANTI-MONEY LAUNDERING ACT

Ex parte application and inquiry by the AMLC

As presently worded, Section 11 of the Anti-Money Laundering Act (AMLA) has three (3)
elements: (1) ex parte application by the Anti-Money Laundering Council (AMLC); (2)
determination of probable cause by the Court of Appeals (CA); and (3) exception of court order
in cases involving unlawful activities defined in Section 3(i)(1), (2), and (12). Subido Pagente
Certeza Mendoza and Binay Law Offices vs. Court of Appeals, G.R. No. 216914, December 6,
2016

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Section 11 of the Anti-Money Laundering Act (AMLA) providing for ex parte application and
inquiry by the Anti-Money Laundering Council (AMLC) into certain bank deposits and
investments does not violate substantive due process, there being no physical seizure of
property involved at that stage.

It is the preliminary and actual seizure of the bank deposits or investments in question which
brings these within reach of the judicial process, specifically a determination that the seizure
violated due process. In fact, Republic v. Eugenio, Jr., 545 SCRA 384 (2008), delineates a bank
inquiry order under Section 11 from a freeze order under Section 10 on both remedies’ effect on
the direct objects, i.e., the bank deposits and investments. Subido Pagente Certeza Mendoza
and Binay Law Offices vs. Court of Appeals, G.R. No. 216914, December 6, 2016

That the Anti-Money Laundering Council (AMLC) does not exercise quasi-judicial powers and is
simply an investigatory body finds support in the Supreme Court’s (SC’s) ruling in Shu v. Dee,
723 SCRA 512 (2014)

In that case, petitioner Shu had filed a complaint before the NBI charging respondents therein
with falsification of two (2) deeds of real estate mortgage submitted to the Metropolitan Bank
and Trust Company (Metrobank). After its investigation, the NBI came up with a Questioned
Documents Report No. 746-1098 finding that the signatures of petitioner therein which appear
on the questioned deeds are not the same as the standard sample signatures he submitted to
the NBI. Ruling on the specific issue raised by respondent therein that they had been denied due
process during the NBI investigation, we stressed that the functions of this agency are merely
investigatory and informational in nature. Subido Pagente Certeza Mendoza and Binay Law
Offices vs. Court of Appeals, G.R. No. 216914, December 6, 2016

There is nothing in Section 11 nor the implementing rules and regulations (IRR) of the Anti-
Money Laundering Act (AMLA) which prohibits the owner of the bank account to ascertain from
the Court of Appeals (CA), post issuance of the bank inquiry order ex parte, if his account is
indeed the subject of an examination.

Emphasized by our discussion of the safeguards under Section 11 preceding the issuance of such
an order, we find that there is nothing therein which precludes the owner of the account from
challenging the basis for the issuance thereof. Subido Pagente Certeza Mendoza and Binay Law
Offices vs. Court of Appeals, G.R. No. 216914, December 6, 2016

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LAUNDERING ACT, TRUTH IN LENDING ACT

Cases where the AMLC can inquire into bank deposits even without court order.

1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised
Penal Code, as amended;
2) Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, and 16 of Republic Act No. 9165, otherwise known
as the Comprehensive Dangerous Act of 2002;
3) Hijacking and other violations under Republic Act No. 6235 (An Act Prohibiting Certain
Acts Inimical to Civil Aviation);
4) Destructive arson, and
5) Murder, as defined under the Revised Penal Code, as amended, including those
perpetrated by terrorists against non-combatant persons and similar targets.

The court receiving the application for inquiry order cannot simply take the AMLC’s word that
probable cause exists that the deposits or investments are related to an unlawful activity. It
will have to exercise its own determinative function in order to be convinced of such fact.

The account holder would be certainly capable of contesting such probable cause if given the
opportunity to be apprised of the pending application to inquire into his account; hence a notice
requirement would not be an empty spectacle. It may be so that the process of obtaining the
inquiry order may become more cumbersome or prolonged because of the notice requirement,
yet we fail to see any unreasonable burden cast by such circumstance. After all, as earlier stated,
requiring notice to the account holder should not, in any way, compromise the integrity of the
bank records subject of the inquiry which remain in the possession and control of the bank.
Republic vs. Eugenio, Jr., 545 SCRA 384, G.R. No. 174629 February 14, 2008

A criminal conviction for an unlawful activity is not a prerequisite for the institution of a civil
forfeiture proceeding—a finding of guilt for an unlawful activity is not an essential element of
civil forfeiture.

Whether or not there is truth in the allegation that account no. CA-005-10-000121-5 contains the
proceeds of unlawful activities is an evidentiary matter that may be proven during trial. The
complaint, however, did not even have to show or allege that Glasgow had been implicated in a
conviction for, or the commission of, the unlawful activities of estafa and violation of the
Securities Regulation Code. A criminal conviction for an unlawful activity is not a prerequisite for
the institution of a civil forfeiture proceeding. Stated otherwise, a finding of guilt for an unlawful
activity is not an essential element of civil forfeiture. Republic vs. Glasgow Credit and Collection
Services, Inc., 542 SCRA 95, G.R. No. 170281 January 18, 2008

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BANKING AND ALLIED LAWS, ANTI-MONEY Handout No. 13
LAUNDERING ACT, TRUTH IN LENDING ACT

TRUTH IN LENDING ACT

Banks and non-bank financial intermediaries authorized to engage in quasi-banking functions

are required to strictly adhere to the provisions of the “Truth in Lending Act”; Where the
promissory notes signed by the borrowers do not contain any stipulation on the payment of
handling charges, the bank cannot collect the same.

As to handling charges, banks are authorized under Central Bank Circular No. 504 to collect such
charges on loans over P500,000.00 with a maturity of 730 days or less at the rate of 2% per
annum, on the principal or the outstanding balance thereof, whichever is lower; 1.75% on loans
over P500,000.00 but not over P1,000,000.00; 1.50% on loans over P1,000,000.00 but not over
P2,000,000.00, etc. Section 7 of the same Circular, however, provides that all banks and non-
bank financial intermediaries authorized to engage in quasi-banking functions are required to
strictly adhere to the provisions of Republic Act No. 3765 otherwise known as the “Truth in
Lending Act” and shall make the true and effective cost of borrowing an integral part of every
loan contract. The promissory notes signed by private respondents do not contain any stipulation
on the payment of handling charges. Petitioner bank cannot, therefore, charge private
respondents such handling charges. Consolidated Bank and Trust Corporation (Solidbank) vs.
Court of Appeals, 246 SCRA 193, G.R. No. 91494 July 14, 1995

The interest rate provisions in the case at bar are illegal not only because of the provisions of
the Civil Code on mutuality of contracts, but also, as shall be discussed later, because they
violate the Truth in Lending Act.

Not disclosing the true finance charges in connection with the extensions of credit is,
furthermore, a form of deception which we cannot countenance. It is against the policy of the
State as stated in the Truth in Lending Act: Sec. 2. Declaration of Policy.—It is hereby declared to
be the policy of the State to protect its citizens from a lack of awareness of the true cost of credit
to the user by assuring a full disclosure of such cost with a view of preventing the uninformed
use of credit to the detriment of the national economy. United Coconut Planters Bank vs. Beluso,
530 SCRA 567, G.R. No. 159912 August 17, 2007

Information required to be disclosed

Section 1 of R.A. No. 3765 provides that prior to the consummation of a loan transaction, the
bank, as creditor, is obliged to furnish a client with a clear statement, in writing, setting forth, to

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BANKING AND ALLIED LAWS, ANTI-MONEY Handout No. 13
LAUNDERING ACT, TRUTH IN LENDING ACT

the extent applicable and in accordance with the rules and regulations prescribed by the
Monetary Board of the Central Bank of the Philippines, the following information:

1) the cash price or delivered price of the property or service to be acquired;

2) the amounts, if any, to be credited as down payment and/or trade-in;
3) the difference between the amounts set forth under clauses (1) and (2);
4) the charges, individually itemized, which are paid or to be paid by such person in
connection with the transaction but which are not incident to the extension of credit;
5) the total amount to be financed;
6) the finance charges expressed in terms of pesos and centavos; and
7) the percentage that the finance charge bears to the total amount to be financed
expressed as a simple annual rate on the outstanding unpaid balance of the obligation.

If the borrower is not duly informed of the data required by the law prior to the consummation
of the availment or drawdown, the lender will have no right to collect such charge or increases
thereof even if stipulated in the promissory note.

However, such failure shall not affect the validity or enforceability of any contract or transaction.
Development Bank of the Philippines vs. Arcilla, Jr., 462 SCRA 599, G.R. No. 161397, G.R. No.
161426 June 30, 2005

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