LAWS 1043 (Regulatory Framework and Legal Issues in Business II)

Lesson 1: The Philippine Cooperative Code of 2008

LEARNING CONTENT:

The research conducted by the International Cooperative Research Group (RG) of the U.S. Overseas Cooperative
Development Council last July 30, 2019, showed that cooperatives in the Philippines are making a significant
economic difference in the lives of the large majority of members and are also contributing to their overall well-being. It
also showed that members are also benefiting from socially oriented activities of the cooperatives, although this
benefit is not perceived to be as great as the economic benefits.

In the Philippines, the existence and operations of a cooperative are governed by RA 9520, or the “Philippine
Cooperative Code of 2008.”

What is a Cooperative?

Article III of the Cooperative Code defines a “cooperative” as “an autonomous and duly registered association of
persons, with a common bond of interest, who have voluntarily joined together to achieve their social, economic, and
cultural needs and aspirations by making equitable contributions to the capital required, patronizing their products and
services and accepting a fair share of the risks and benefits of the undertaking in accordance with universally
accepted cooperative principles.”

A cooperative, being an “autonomous and duly registered” association, is regarded therefore as a juridical person
distinct from its members. The members are bonded together with a common end goal, usually for their common
good, in social, economic, and/or cultural aspects.

The 7 Cooperative Principles

Article IV outlines the tenets that a cooperative should always uphold in the conduct of its affairs. These, according to
the Code, are “in accordance with the Filipino Culture, good values and experience, and the universally accepted
principles of cooperation.” The list, according to the Code, is not limited, but it outlined the most basic tenets of
cooperation, as follows:

a) Voluntary and Open Membership - Cooperatives are voluntary organizations, open to all persons able to
use their services and willing to accept the responsibilities of membership, without gender, social, racial,
cultural, political, or religious discrimination.

b) Democrative Member Control - Cooperatives are democratic organizations that are controlled by their
members who actively participate in setting their policies and making decisions. Men and women serving as
elected representatives, directors or officers are accountable to the membership. In primary cooperatives,
members have equal voting rights of one-member, one-vote. Cooperatives at other levels are organized in the
same democratic manner

c) Member Economic Participation - Members contribute equitably to, and democratically control, the
capital of their cooperatives. At least part of that capital is the common property of the cooperative. They shall
receive limited compensation or limited interest, if any, on capital subscribed and paid as a condition of
membership. Members allocate surpluses for any or all of the following purposes: developing the cooperative
by setting up reserves, part of which should at least be indivisible; benefitting members in proportion to their
patronage of the cooperative's business; and, supporting other activities approved by the membership.

d) Autonomy and Independence - Cooperatives are autonomous, self-help organizations controlled by their
members. If they enter into agreements with other organizations, including government, or raise capital from
external sources, they shall do so on terms that ensure democratic control of their members and maintain their
cooperative autonomy.

e) Education, Training, and Information - Cooperatives shall provide education and training for their
members, elected and appointed representatives, managers, and employees, so that they can contribute
effectively and efficiently to the development of their cooperatives.

f) Cooperation Among Cooperatives - Cooperatives serve their members most effectively and strengthen
the cooperative movement by working together through local, national, regional and international structures.
 g) Concern for Community - Cooperatives work for the sustainable development of their communities
through policies approved by their members.

ORGANIZATION AND REGISTRATION

The Articles of Cooperation shall be filed with the Cooperative Development Authority (CDA) which shall be signed
by the organizers and acknowledged by them if natural persons, and by the chairpersons or secretaries, if juridical
persons, before a notary public.
The Articles of Cooperation contains, among others:
a) The name of the cooperative which shall include the word “cooperative,”
b) The purpose or purposes and scope of business for which the cooperative is to be registered,
c) The term of existence of the cooperative,
d) The area of operation and the postal addresses of its principal office,
e) The names, nationality, and the postal addresses of the registrants,
f) The common bond of membership,
g) The list of names of the directors who shall manage the cooperative, and,
h) The amount of its share capital, the names and residences of its contributors and a statement of whether the
cooperative is primary, secondary, or tertiary.

Economic survey
Every group of individuals or cooperatives intending to form a cooperative must submit to the CDA a general
statement describing, among others, the structure and purposes of the proposed cooperative; provided, that the
structure and actual staffing pattern of the cooperative should include a bookkeeper; provided further, that they must
not be allowed to operate without the necessary personnel and should also submit an economic survey, indicating
therein:

1. Area of operation,
2. Size of membership, and
3. Other pertinent data in a format provided by the CDA.

Organizing a primary cooperative

When organizing a primary cooperative, there should be fifteen (15) natural persons agreeing to establish a
cooperative, all of whom must satisfy the following requirements:

1. Filipino citizens,
2. Of legal age,
3. Having a common bond of interest, and,
4. Are actually residing or working in the intended area of operation.

Provided further, that a prospective member of a primary cooperative must have completed a Pre-Membership
Education Seminar (PMES).

Any newly organized primary cooperative may be registered as multi-purpose cooperative only after compliance with
the minimum requirements for multi-purpose cooperatives to be set by the CDA:

A single-purpose cooperative may transform into a multi-purpose or may create subsidiaries only
after at least 2 years of operations.
Under Article VI of CDA MC 2015-07, except for agriculture cooperatives and agrarian reform
cooperatives, only those cooperatives with a minimum paid- up capital of P100,000.00 or as
required in the feasibility study, whichever is higher, may be allowed to transform into a multi-
purpose cooperative.

Share Subscription and Payment Requirements

Minimum subscription requirement: 25% of authorized share capital

Minimum paid-up share capital: 25% of the total subscription

Under CDA MC 2011-05, this requirement shall apply to common share capital only.
Should preferred share capital be provided in the bylaws, it shall not exceed 25% of
the total authorized share capital of the cooperative. No fractional shares shall be
issued for both the common and preferred share capital.
CDA shall periodically assess the required paid-up share capital and may increase it every 5 years when necessary,
upon consultation with the cooperative sector and NEDA.

Registration: A cooperative formed and organized under The Cooperative Code acquires juridical personality from
the date the Authority issues a certificate of registration under its official seal.

Approval of applications for registration: All applications for registration shall be finally disposed of by the
Authority within a period of sixty (60) days from the filing, otherwise the application is deemed approved, unless the
cause of the delay is attributable to the applicant.

Appeal in case of denial: in case of a denial of the application for registration, an appeal can be made to the
Office of the President within ninety (90) days from receipt of notice of such denial.
Note: Failure of the Office of the President to act on the appeal within ninety (90) days from the filing thereof shall
mean approval of said application.

Rules on Cooperative Name (Article VIII, Section 3 of CDA MC 2015-01)

The following rules on cooperative names shall apply:
1. The word “Cooperative”, “Kooperatiba”, or “Cooperativa” shall be included in the name of the cooperative,
which name shall likewise specify the type of cooperative.
2. No cooperative name shall be allowed by the CDA if the proposed name is identical or deceptively or
confusingly similar to that of any existing cooperative, contrary to public policy, morals, and existing laws.
3. The use of the words “development” and “integrated” shall be discouraged.
4. The use of “Incorporated”, “Corporation”, “Company”, “Incorporation”, “Partnership”, or other similar
connotation and abbreviation shall not be allowed.
5. The use of the “Federation” and “Union” in the name of the proposed primary cooperative is prohibited except
if it is part of the registered name of association or institution where the members of the proposed cooperative
come from.
6. Name shall not be written in all capital letters except if it is an acronym. Acronym shall be written after the full
name of cooperative.

Registration of Secondary and Tertiary Cooperatives (Section IX of CDA MC 2015-01)

The minimum number of members and minimum paid-up share capital for the Secondary Category:
Minimum number of members Minimum paid-up capital
Federation 10 primary cooperatives P500,000
Union 15 primary cooperatives Not applicable

The minimum number of members and minimum paid-up share capital for the Secondary Category:
Minimum number of members Minimum paid-up capital
Federation 10 secondary cooperatives P500,000 or Feasibility Study
Requirement (w/ever is HIGHER)
Union 15 secondary cooperatives Not applicable

Registration Fee: to be paid by the proposed federation shall be 1/10 (or 10%) of the 1% of the authorized share
capital or the amount prescribed in the CDA schedule of fees, whichever is higher.

Certificate of registration: A certificate of registration issued by the CDA under its official seal shall be conclusive
evidence that the cooperative therein mentioned is duly registered unless it is proved that the registration thereof has
been cancelled.

Amendment of articles of cooperation and by-laws: can only be made by 2/3 vote of all the members with voting
rights without prejudice to the right of the dissenting members to exercise their right to withdraw their membership
Contracts executed prior to registration: Contracts executed between private persons and cooperatives prior to the
registration of the cooperative shall remain valid and binding between the parties and upon registration of the
cooperative. A formal written contract shall be adopted and made in the cooperative’s name or on its behalf prior to its
registration.

Cooperative Characteristics
The following concepts outline the attributes of a cooperative.
In terms of liability: “A cooperative duly registered shall have limited liability.”

Separate personality: A cooperative can be likened to a corporation with a personality separate and distinct from
its owner-members. (Republic v. Asiapro, GR 172101, November 23, 2007)

Term: A cooperative can exist for a period not exceeding 50 years from the date of registration; may be extended for
periods not exceeding 50 years, but no extension can be made earlier than 5 years prior to the original or subsequent
expiry date/dates unless there are justifiable reasons

DIVISION AND MERGER

Division of cooperatives: Any registered cooperative may, by a resolution approved by a vote of three-fourths
(3/4) of all the members with voting rights, present and constituting a quorum, resolve to divide itself into the two (2) or
more cooperatives. The procedure for such division shall be prescribed in the regulations of the CDA: Provided, That
all the requirements have been complied with by the new cooperatives: Provided, further, That no division of a
cooperative in fraud of creditors shall be valid.

Merger and Consolidation:

1. Two (2) or more cooperatives may merge into a single cooperative which shall either be one of the constituent
cooperatives or the consolidated cooperative.
2. No merger or consolidation shall be valid unless approved by a three-fourths (3/4) vote of all the members
with voting rights, present and constituting a quorum of each of the constituent cooperatives at separate
general assembly meetings. The dissenting members shall have the right to exercise their right to withdraw
their membership.
3. In any case, the merger or consolidation of cooperatives. In any case, the merger or consolidation shall be
effective upon the issuance of the certificate of merger or consolidation by the CDA.

TYPES OF COOPERATIVES
1. Advocacy Cooperative is a primary cooperative which promotes and advocates cooperativism among its
members and the public through socially- oriented projects, education and training, research and
communication, and other similar activities to reach out to its intended beneficiaries.

2. Agriculture Cooperative refers to a primary cooperative which or whose members are involved/engaged in
raising/culture of plants, animals, fungi, and other living organism for productive and economic purpose and in
related activities that lead to the reduction of cost and/or value addition of outputs (Article V(a), CDA MC
2015-07),

3. Agrarian Reform Cooperative is one organized by marginal farmers majority of which are agrarian reform
beneficiaries for the purpose of developing an appropriate system of land tenure, land development, land
consolidation or land management in areas covered by agrarian reform,

4. Consumers Cooperative is one of the primary purpose of which is to procure and distribute commodities to
members and non-members.

5. Cooperative Bank is one organized for the primary purpose of providing a wide range of financial services to
cooperatives and their members.

6. Credit Cooperative is one that promotes and undertakes savings and lending services among its members. It
generates a common pool of funds in order to provide financial assistance to its members for productive and
provident purposes.

7. Dairy Cooperative is one whose members are engaged in the production of fresh milk which may be
processed and/or marketed as dairy products.
 8. Education Cooperative is one organized for the primary purpose of owning and operating licensed
educational institutions notwithstanding the provisions of Republic Act No. 9155, otherwise known as the
Governance of Basic Education Act of 2001.

9. Electric Cooperative is one organized for the primary purpose of undertaking power generations, utilizing
renewable energy sources, including hybrid systems, acquisition and operation of subtransmission or
distribution to its household members.

10. Financial Service Cooperative is one organized for the primary purpose of engaging in savings and credit
services and other financial services.

11. Fishermen Cooperative is one organized by marginalized fishermen in localities whose products are
marketed either as fresh or processed products.

12. Health Services Cooperative is one organized for the primary purpose of providing medical, dental and other
health services.

13. Housing Cooperative is one organized to assist or provide access to housing for the benefit of its regular
members who actively participate in the savings program for housing. It is co-owned and controlled by its
members.

14. Insurance Cooperative is one engaged in the business of insuring life and property of cooperatives and their
members.

15. Marketing Cooperative is one which engages in the supply of production inputs to members and markets
their products.

16. Multipurpose Cooperative is one which combines two (2) or more of the business activities of these different
types of cooperatives.

17. Producers Cooperative is one that undertakes joint production whether agricultural or industrial. It is formed
and operated by its members to undertake the production and processing of raw materials or goods produced
by its members into finished or processed products for sale by the cooperative to its members and non-
members. Any end product or its derivative arising from the raw materials produced by its members, sold in
the name and for the account of the cooperative, shall be deemed a product of the cooperative and its
members.

18. Service Cooperative is one which engages in medical and dental care, hospitalization, transportation,
insurance, housing, labor, electric light and power, communication, professional and other services.

19. Transport Cooperative is one which includes land and sea transportation, limited to small vessels, as
defined or classified under the Philippine maritime laws, organized under the provisions of this Code.

20. Water Service Cooperative is one organized to own, operate and manage waters systems for the provision
and distribution of potable water for its members and their households.

21. Workers Cooperative is one organized by workers, including the self-employed, who are at same time the
members and owners of the enterprise. Its principal purpose is to provide employment and business
opportunities to its members and manage it in accordance with cooperative principle.

Note: The list is not exclusive since under Article 23(1)(u) of RA 9520, CDA may determine other types of cooperative.

CATEGORIES of Cooperatives
1. In terms of membership:
 a) Primary – The members of which are natural persons except electric cooperative, water service
cooperative and other cooperatives which the implementing rules and the Authority may allow.
b) Secondary – The members of which are primaries
c) Tertiary – The members of which are secondary cooperatives
2. In terms of territory, cooperatives shall be categorized according to areas of operations which may
or may not coincide with the political subdivisions of the country.
3. A group of cooperatives can either be a:
a. Union – which shall refer to a cooperative the members of which are registered cooperatives and/or
federations organized purposely to represent the interest and welfare of all types of cooperatives at the
provincial, city, regional and national levels.

b. Federation – which refers to a cooperative the members of which are primary cooperatives doing the
same line of business.

Functions of a Federation of Cooperatives:

1. To carry on any cooperative enterprise authorized under Article 6 that complements augments,
or supplements but does not conflict, complete with, nor supplant the business or economic
activities of its members.
2. To carry on, encourage, and assist educational and advisory work relating to its member
cooperatives
3. To render services designed to encourage simplicity, efficiency, and economy in the conduct of
the business of its member cooperatives and to facilitate the implementation of their
bookkeeping, accounting, and other systems and procedures
4. To print, publish, and circulate any newspaper or other publication in the interest of its member
cooperatives and enterprises
5. To coordinate and facilitate the activities of its member cooperatives
6. To enter into joint ventures with national or international cooperatives of other countries in the
manufacture and sale of products and/or services in the Philippines and abroad
7. To perform such other functions as may be necessary to attain its objectives.

Note: A federation of cooperatives may be registered by carrying out the formalities for registration
of a cooperative.
Registered cooperatives may organize a federation according to the type of business activity
engaged in by the cooperatives.

Cooperative Unions
Registered cooperatives and federations at the appropriate levels may organize or join cooperative unions to
represent the interest and welfare of all types of cooperatives at the provincial, city, regional, and national levels.
Cooperative unions may have the following purposes:

1. To represent its member organizations

2. To acquire, analyze, and disseminate, economic, statistical, and other information relating to its members and
to all types of cooperatives within its area of operation
3. To sponsor studies in the economic, legal, financial, social and other phases of cooperation, and publish the
results thereof
4. To promote the knowledge of cooperative principles and practices
5. To develop the cooperative movement in their respective jurisdictions
6. To advise the appropriate authorities on all questions relating to cooperatives
7. To raise funds through membership fees, dues and contributions, donations, and subsidies from local and
foreign sources whether private or government; and
8. To do and perform such other non-business activities as may be necessary to attain the foregoing objectives.

Cooperative unions may assist the national and local governments in the latter’s development activities in their
respective jurisdictions.

COOPERATIVE MEMBERSHIP
Kinds of Membership
 A regular member is one who has complied with all the membership requirements and entitled to all the rights
and privileges of membership.

 An associate member is one who has no right to vote nor be voted upon and shall be entitled only to such
rights and privileges as the by-laws may provide: Provided, that an associate who meets the minimum
requirements of regular membership, continues to patronize the cooperative for two (2) years, and signifies
his/her intention to remain a member shall be considered a regular member.

Rules on Government Officers and Employees:

1. Any officer or employee of the CDA shall be disqualified to be elected or appointed to any position in a
cooperative: Provided, That the disqualification does not extend to a cooperative organized by the officers or
employees of the CDA.
2. All elective officials of the Government shall be ineligible to become officers and directors of cooperatives:
Provided, That the disqualification does not extend to a party list representative being an officer of a
cooperative he or she represents; and
3. Any government employee or official may, in the discharge of his duties as a member in the cooperative, be
allowed by the end of office concerned to use official time for attendance at the general assembly, board and
committee meetings of cooperatives as well as cooperative seminars, conferences, workshops, technical
meetings, and training courses locally or abroad: Provided, That the operations of the office concerned are not
adversely affected.

Termination of Membership
a. Withdrawal for a valid reason and giving of a sixty (60) day notice to the board of directors.
b. Subject to the by-laws of the cooperative, the withdrawing member shall be entitled to a refund of his share
capital contribution and all other interests in the cooperative: Provided, That such fund shall not be made if
upon such payment the value of the assets of the cooperative would be less than the aggregate amount of its
debts and liabilities exclusive of his share capital contribution.
c. The death or insanity of a member in a primary cooperative and the insolvency or dissolution of a member in a
secondary or tertiary cooperative may be considered valid grounds for termination of membership: Provided,
That in case of death or insanity of an agrarian reform beneficiary- member of a cooperative, the next-of-kin
may assume the duties and responsibilities of the original member
4. Membership in the cooperative may be terminated by a vote of the majority of all the members of the board of
directors for any of the following causes:

a. When a member has not patronized any of the services of the cooperative for an unreasonable period of
time as may be previously determined by the board of directors
b. When a member has continuously failed to comply with his obligations
c. When a member has acted in violation of the by-laws and the rules of the cooperative
d. For any act or omission injurious or prejudicial to the interest or the welfare of the cooperative.

A member whose membership the board of directors may wish to terminate shall be informed of such intended action
in writing and shall be given an opportunity to be heard before the said board makes its decision. The decision of the
board shall be in writing and shall be communicated in person or by registered mail to said member and shall be
appealable within thirty (30) days from receipt thereof to the general assembly whose decision shall be final.

The general assembly may create an appeal and grievance committee whose members shall serve for a period of one
(1) year and shall decide appeals on membership termination. The committee is given thirty (30) days from receipt
thereof to decide on the appeal. Failure to decide within the prescribed period, the appeal is deemed approved in
favor of the member. Pending a decision by the general assembly, the membership remains in force.

Refund of Interest: All sums computed in accordance with the bylaws to be due from a cooperative to a former
member shall be paid to the member whose membership has been terminated either by the cooperative or by the
approved transferee, as the case may be.

LABORATORY COOPERATIVE
A cooperative organized by minors shall be considered a laboratory cooperative and must be affiliated with a
registered cooperative.

Purposes of a laboratory cooperative (Section 7 of CDA MC 2015-03):

1. To serve as a training ground for its members to prepare them for membership in regular cooperatives
2. To teach the values of thrift and saving mobilization among its members
 3. To instill cooperative values, principles, financial discipline, business skills, and leadership skills among its
members
4. To promote and advocate Filipino social and cultural values, financial education, ecological awareness and
sustainable development

Affiliation (Section 8 of CDA MC 2015-03):

1. A laboratory cooperative shall be affiliated with a duly registered cooperative, to be known as the Guardian
Cooperative
2. A laboratory cooperative primarily composed of students from a particular school may affiliate with the
school’s cooperative, if any, or select a cooperative of its choice within its area of operation.
3. If the laboratory cooperative is composed primarily of out-of-school minors, it shall be affiliated with a
cooperative of its own choice within or nearest its area of operation.

Name (Section 11 of CDA MC 2015-03): It shall include in it name the words “Laboratory Cooperative of (Name of
Guardian Cooperative)”.

Rules Applicable:
1. A certificate of registration issued to a laboratory cooperative does not bestow upon a laboratory cooperative
a juridical personality
2. The dissolution of the Guardian Cooperative shall result in the revocation of the Certificate of Recognition.
3. It is the Guardian Cooperative that shall be liable for any violations committed in the operation of the
laboratory cooperative.
4. Any member who reaches the age of majority has option to join the Guardian Cooperative by signifying
his/her intention to become a member upon compliance with all the requirements for membership.
5. A Guardian Cooperative may supervise more than one laboratory cooperative.

Causes of Termination of Membership (Section 16 of CDA MC 2015-03):

1. Upon reaching the age of majority (18 years of age); and
2. Such other causes as may be provided for in the by-laws of the Guardian Cooperative and in the Manual of
Operations for the Laboratory Cooperative

GENERAL ASSEMBLY
The General Assembly refers to the full membership of the cooperative duly assembled for the purpose of exercising
the rights and performing all the obligations pertaining to cooperatives, and is considered the highest policy-making
body of the cooperative.

Composition: all members who are entitled to vote under the articles of cooperation and by-laws.

Exclusive powers which cannot be delegated:

1. To determine and approve amendments to the articles of cooperation and bylaws;
2. To elect or appoint the members of the board of directors, and to remove them for cause. However, in the
case of the registered electric cooperatives, election of the members of the board shall be held in accordance
with its bylaws or election guidelines of such electric cooperative; and
3. To approve developmental plans of the cooperative.

Delegation of powers of the GA: only for purposes of prompt and intelligent decision-making, the general assembly
may by a three-fourths (3/4) vote of all its members with voting rights, present and constituting a quorum, delegate
some of its powers to a smaller body of the cooperative; these powers shall be enumerated under the bylaws of the
cooperative.

Meetings

Regular meeting: shall be held annually on a date fixed in the by-laws, or if so not fixed, any date within 90 days
after the close of each fiscal year.

Special meeting: whenever necessary, a special meeting of the general assembly may be called at any time by a
majority vote of the board of directors or as provided for in the by-laws. A notice in writing shall be sent one (1) week
prior to the meeting to all members who are entitled to vote.
However, a special meeting shall be called by the board of directors after compliance with the required notice within 1
month after receipt of a request in writing from at least ten per centum (10%) of the total members who are entitled to
vote to transact specific business covered by the call.

If the board fails to call a regular or a special meeting within the given period, the Authority, upon petition of ten per
centum (10%) of all the members of the cooperative who are entitled to vote, and for good cause shown, shall issue
an order to the petitioners directing them to call a meeting of the general assembly by giving proper notice as required
by the Code or in the by-laws

In the case of a newly approved cooperative, a special general assembly shall be called, as far as practicable, within
ninety (90) days from such approval;

The Authority may call a special meeting of the cooperative for the purpose of reporting to the members the result of
any examination or other investigation of the cooperative affairs;

Notice: may be done in writing, by posting or publication or through electronic means. Note, however, that notice of
any meeting may be waived, expressly or impliedly, by any member.

Quorum: consist of at least 25% of all the members entitled to vote.

Except:
 Cooperative banks: ½ plus 1
 Electric cooperatives: 5% of all members entitled to vote, unless the by-laws provides otherwise

Voting system: Each member of a primary cooperative shall have only one vote.
In case of members of secondary or tertiary cooperatives, they shall have one basic vote and as many incentive votes
as provided for in the bylaws but not to exceed 5 votes.

Delegates: the votes cast by the delegates shall be deemed as votes cast by the members thereof. Voting by proxy
may be allowed by the by-laws of a cooperative other than a primary cooperative.
 BANK SECRECY LAW RA 1405
 Purpose: to give encouragement to the people to deposit their money in banking institutions and to discourage
private hoarding so that the same may be properly utilized by banks in authorized loans to assist in the
development of the country

 Prohibited Act: It shall be unlawful for any official or employee of a bank to disclose to any person or for an
independent auditor hired by a bank to conduct its regular audit to disclose to any person other than a bank
director, official or employee authorized by the bank, any information concerning said deposits.

 Deposits covered:
1. Peso deposits: 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, are considered absolutely confidential and may not be examined, inquired or looked into by
any person, government official, bureau or office, unless
a) When there is a written permission of the depositor or investor
b) Impeachment cases
c) Upon the order of a competent court in cases of bribery or dereliction of duty of public officials
d) Upon the order of a competent court in cases where the money deposited or invested is the subject of
litigation
e) Upon order of the competent court or tribunal in cases involving unexplained wealth under RA 3019
f) Upon inquiry by the Commissioner of BIR for the purpose of determining the net estate of a deceased
depositor
g) Upon the order of a competent court or in proper cases by the AMLC where there is probable cause
of money laundering and in some instances even without court order
h) Disclosure to the Treasurer of the Philippines for dormant deposits for at least 10 years under the
Unclaimed Balances Act (RA 3936)
i) Report of banks to AMLC of covered and/or suspicious transactions
j) Upon order of the CA, examination by law enforcement officers in terrorism cases under the Human
Security Act of 2007 (RA 9372)
k) Examination is made in the course of a special or general examination of bank and is specifically
authorized by MB 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 is necessary to look into the deposit to
establish such fraud or irregularity
l) Examination is 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

2. Foreign currency deposits: except:

a. When there is written consent of depositor under Section 8 of the Foreign Currency Deposits Act (RA
6426)
b. Under Section 11 of the Anti-Money Laundering Act (probable cause established that it is related to
an unlawful activity as defined or money laundering)
c. Under Section 27 and 28 of the Human Security Act (existence of probable cause in anti-terrorism
cases and those involving persons charged with or suspected of the crime of terrorism or conspiracy
to commit terrorism, judicially declared and outlawed terrorist organization, association, or group of
persons, or member of such organization, association, or group of persons)
 Garnishment: Bank accounts may be garnished by the creditors of the depositor. The amount of deposit is
not actually disclosed, hence, no violation.

Exceptions:
1. Foreign currency deposits, Section 8 of RA 6426 (Note: In Salvacion v. Central Bank, GR 94723, August 21, 1997,
foreign currency deposits made by a transient or a tourist is not the kind of deposit protected by law. Hence, a dollar
deposit made by a transient or a tourist may be subject to garnishment.)
2. Exempt under Rules of Court

 Penalties for violation: imprisonment of not more than 5 years or a fine not more than P20,000.00 or bot
 UNCLAIMED BALANCES LAW (ACT 3936, AS AMENDED BY PD 679)
 Unclaimed Balances: 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, in favor of
any person known to be dead or who has not made further deposits or withdrawals during the preceding 10 years
or more

It is obligatory of every bank to report, in sworn statement, to the Treasurer of the Philippines (who will, in turn, inform
the Solicitor General) of deposits that have not been touched (no deposit or withdrawal made) for a period of 10 years
or held in favor of persons known to be dead.

Under Section 1 of PD 679, all banks, building and loan associations, and trust corporations shall forward the report to
within the month of January of every odd year.

 Information required:

1. The names and last known place of residence or post office addresses of the persons in whose favor such
unclaimed balances stand;
2. The amount and the date of the outstanding unclaimed balance and whether the same is in money or in security,
and if the latter, the nature of the same;
3. The date when the person in whose favor the unclaimed balance stands died, if known, or the date when he made
his last deposit or withdrawal; and
4. The interest due on such unclaimed balance, if any, and the amount thereof

Proper publication will then be made and if the depositors make no claim, escheat proceedings will result in the
unclaimed balances being deposited with the Treasurer of the Philippines to the credit of the Republic to be used and
appropriated by Congress.

Publication of list of unclaimed balances is intended to safeguard the right of depositors, their heirs and successor to
due process
Any bank, building and loan association, or trust corporation which shall make any deposit with the Treasurer of the
Philippines in conformity with the Unclaimed Balances Law shall not thereafter be liable to any person for the same
and any action which may be brought by any person against in any bank, building and loan association, or trust
corporation for unclaimed balances so deposited shall be defended by the Solicitor General without cost to such bank,
building and loan association, or trust corporation.

PDIC ACT (RA 3591, AS AMENDED)

PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC):
Primary Functions: to act as
1. D eposit Insurer – the PDIC shall promote and safeguard the interests of the depositing public by way of
providing permanent and continuing insurance coverage on all insured deposits.
2. Co-regulator of banks – as a bank regulator, the PDIC is empowered to examine and investigate banks.
3. Receiver and liquidator of closed banks – the PDIC as receiver shall control, manage and administer the
affairs of the bank.

INSURED DEPOSITS: Amount due to any bona fide depositor for legitimate deposits in an insured bank net of any
obligation of the depositor to the insured bank as of the date of closure, but not to exceed P500,000.

Adjustment of maximum deposit insurance: the amount of coverage may be adjusted in such amount, for such a period,
and/or for such deposit products, provided:

1. The Monetary Board has determined that there is a condition that threatens the monetary
and financial stability of the banking system that may have systematic consequences as
defined under RA No. 3591;
2. Approval by a unanimous vote of the Board of Directors of the PDIC in a meeting called
for the purpose and chaired by the DOF Secretary;
3. Approval of the President of the Philippines.

Under Section 22 of the PDIC Charter, a systemic risk refers to the possibility of failure of one bank to settle net
transactions with other banks will trigger a chain reaction, depriving other banks of funds leading to a general
shutdown of normal clearing and settlement activity. It also means the likelihood of a sudden, unexpected collapse
 of confidence in a significant portion of the banking or financial system with potentially large real economic effects.

Coverage: The deposit liabilities of any bank or banking institution, which is engaged in the business of receiving
deposits as herein defined on the effective date of the PDIC Act, or which thereafter may engage in the business of
receiving deposits, shall be insured with the PDIC.
Deposit accounts not entitled to payment:
1. Investment products such as bonds and securities, trust accounts and other similar instruments
2. Deposit accounts or transactions which are unfunded and that are fictitious or fraudulent
3. Deposit accounts or transactions constituting and/or emanating from, unsafe and unsound banking
practice/s, as determined by PDIC, in consultation with BSP, after due notice and hearing, and publication
of a cease and desist order issued by PDIC against such deposit accounts or transactions
4. Deposits that are determined to be the proceeds of an unlawful activity as defined under RA 9160 or the
Anti-Money Laundering Act, as amended
5. Deposits payable in a place outside the Philippines (like those in foreign branches)
6. Money placements by the head office of a foreign bank in its branch in the Philippines because there is
only one entity.
7. Deposit products that resulted from splitting of deposit.

Splitting of Deposit – occurs whenever a deposit account with an outstanding balance more than P500,000 under
the name of persons is broken down and transferred to two or more accounts in the name of persons or entities who
have no beneficial ownership in the transferred deposits in their names within 120 days immediately preceding or
during a bank-declared bank holiday or immediately preceding a closure order issued by the Monetary Board for the
purpose of availing the maximum deposit insurance coverage. This is considered a criminal act punishable by
imprisonment of not less than 6 years but not more than 12 years or a fine not less than P50,000 but not more than
P10,000,000, or both, at the discretion of the court.

Determination of the amount due

Per Depositor, Per Capacity Rule: all deposits in the bank maintained in the same right and capacity for his benefit
either in his own name or in the name of others shall be added together in determining the insured amount.

Accounts “By”, “In Trust For (ITF)” or “For the Account of (FAO)” another person:
1. In a “By” account (Juan by Pedro) – Juan is the depositor.
2. In an “ITF” account (Juan ITF Pedro) – Pedro is the depositor.
3. In a “FAO” account (Juan FAO Pedro) – Pedro is the depositor.

Joint accounts: A joint account regardless of whether the conjunction “and”, “or”, “and/or” is used shall be insured
separately from any individually-owned deposit account, provided that:
1. If the account is held jointly by two or more natural persons, or by two or more juridical persons or entities,
the maximum insured deposit shall be divided into as many equal shares as there are individuals, juridical
persons or entities, unless a different sharing is stipulated in the document of deposit, and
2. If the account is held by a juridical person or entity jointly with one or more natural persons, the maximum
insured deposit shall be presumed to belong entirely to such juridical person or entity;

Provided, further, that the aggregate of the interest of each co-owner over several joint accounts, whether owned by
the same or different combinations of individuals, juridical persons or entities, shall likewise be subject to the
maximum insured deposit of P500,000.00.

Certificate of Deposit: No owner/holder of any negotiable certificate of deposit shall be recognized as a depositor
entitled to the rights in PDIC Act unless his name is registered as owner/holder thereof in the books of the issuing
bank.

Procedure for the PDIC:

1. PDIC shall commence the determination of insured deposits due the depositors of a closed bank upon its
actual takeover of the closed bank.
2. PDIC shall give notice to the depositors of the closed bank of the insured deposits due them by whatever
means deemed appropriate by the Board of Directors.
3. PDIC shall publish the notice once a week for at least 3 consecutive weeks in a newspaper of general
circulation or, when appropriate, in a newspaper circulated in the community or communities where the
closed bank or its branches are located.

Mode of payment: made as soon as possible either:

1. By cash
2. By making available to each depositor a transferred deposit in another insured bank in an amount equal to
insured deposit of such depositor
Proof of claim: The PDIC, in its discretion, may require proof of claims to be filed before paying the insured
deposits, and that in any case where the PDIC is not satisfied as to the validity of a claim, it may require final
determination of a court of competent jurisdiction before paying such claim.

Withholding of payment: The PDIC may withhold payment of such portion of the insured deposit for the payment
of any liability of such depositor as a stockholder of the closed bank, or of any liability of such depositor to the closed
bank or its receiver, which is not offset against a claim due from such bank, pending determination and payment of
such liability by such depositor or any other liable therefor.

Effect of payment: PDIC shall be subrogated to all rights of the depositor against the closed bank to the extent of
such payment. Such subrogation shall include the right on the part of PDIC to receive the same dividends and
payments from the proceeds of the assets of such closed bank and recoveries on account of stockholders’ liability as
would have been payable to the depositor on a claim for the insured deposits, but such depositor shall retain his claim
for any uninsured portion of his deposit.

Under Section 21 of the PDIC Charter, payment of an insured deposit to any person by PDIC shall discharge
the PDIC, and payment of transferred deposit to any person by the new bank or by an insured bank in which a
transferred deposit has been made available shall discharge PDIC and such new bank or other insured bank, to the
same extent that payment to such person by the closed bank would have discharged it from liability for the insured
deposit.

Preference: All payments by PDIC of insured deposits in closed banks partake of the nature of public funds, and as
such, must be considered a preferred credit similar to taxes due to the National Government in the order of preference
under Article 2244(9) of NCC, provided further, that this preference shall be likewise effective upon liquidation
proceedings already commenced and pending as of the approval of PDIC Act, where no distribution of assets has
been made.

Failure to settle claim of insured depositor: Failure to settle the claim within 6 months from the date of filing of
claim for insured deposit, where such failure was due to grave abuse of discretion, gross negligence, bad faith or
malice, shall upon conviction, subject the directors, officers or employees of PDIC responsible for the delay, to
imprisonment from 6 months to one year, provided, that the period shall not apply if the validity of the claim requires
the resolution of issues of facts and/or law by another office, body or agency.

Failure of depositor to claim insured deposits: Unless otherwise waived by the PDIC, if the depositor in the
closed bank shall fail to claim his insured deposits with PDIC within 2 years from actual takeover of the closed bank by
the receiver, or does not enforce his claim filed with PDIC within 2 years after the 2-year period to file a claim, all rights
of the depositor against the PDIC with respect to the insured deposit shall be barred, however, all rights of the
depositor against the closed bank and its shareholders or the receivership estate to which PDIC may have become
subrogated, shall thereupon revert to the depositor. Thereafter, PDIC shall be discharged from any liability on the
insured deposit.

ANTI-MONEY LAUNDERING ACT (RA 9160, AS AMENDED BY RA

9194)
MONEY LAUNDERING: a crime committed by any person knowing that any monetary instrument or property
represents, involves or relates to, the proceeds of any unlawful activity:

1. Transacts or attempts to transact said monetary instrument or property

2. Converts, transfers, disposes of, moves, acquires, possesses or uses said monetary instrument or
property;
3. Conceals or disguises the true nature, source, location, disposition, movement or ownership of or rights
with respect to said monetary instrument or property
4. Attempts or conspires to commit money laundering offenses referred to above;
5. Aids, abets, assists in or counsels the commission of the money laundering offenses refereed to above (1
to 3)
6. Performs or fails to perform any act as a result of which he facilitates the offense of money laundering
referred to above (1 to 3);
7. Those committed by failure to report to the Anti-Money Laundering Council (AMLC) by any covered
person knowing that a covered or suspicious transaction is required under the Anti-Money Laundering
Law to be reported thereto.

COVERED TRANSACTION: a transaction in cash or other equivalent monetary instrument involving a total amount
in excess of P500,000 within one banking day.
For casinos, a single casino cash transaction in excess of five million pesos (P5,000,000) or its equivalent in any other
currency. (as amended by RA No. 10927)

SUSPICIOUS TRANSACTION: a transaction with covered institutions, regardless of the amount involved, where
any of the following circumstances exist:

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

2. The client is not properly identified
3. The amount involved is not commensurate with the business or financial capacity of the client
4. Taking into account all known circumstances, it may be perceived that the client’s transaction is structured
in order to avoid being the subject of reporting requirements under the Act
5. Any circumstances relating to the transaction which is observed to deviate from the profile of the client
and/or the client’s past transactions with the
6. covered institution
7. The transaction is in any way related to an unlawful activity or offense under this Act that is about to be, is
being or has been committed
8. Any transaction that is similar or analogous to any of the foregoing

UNLAWFUL ACTIVITIES: Any act or omission or series or combination thereof involving or having relation to the
following:
1. Kidnapping for ransom under Article 267 of RPC
2. Sections 4, 5, 7, 8, 9, 10, 12, 13, 14, 15 and 16 of Comprehensive Dangerous Drugs Act (RA 9165)

a) Importation of prohibited drugs

b) Sale of prohibited drugs
c) Administration of prohibited drugs
d) Distribution of prohibited drugs
e) Transportation of prohibited drugs
f) Maintenance of a den, dive, or resort for prohibited users
g) Manufacture of prohibited drugs
h) Possession of prohibited drugs
i) Use of prohibited drugs
j) Cultivation of plants which are sources of prohibited drugs
k) Culture of plants which are sources of prohibited drugs

3. Section 3, paragraphs B, C E, G, H and I of RA 3019

a) Directly or indirectly requesting or receiving any gift, present, share, percentage, or benefit for himself or for
any other person in connection with contract or transaction between the Government and any party, wherein
the public officer in his official capacity has to intervene under the law
b) Directly or indirectly requesting or receiving any gift, present, or other pecuniary or material benefit, for himself
or for another, from any person for whom the public officer, in any manner or capacity, has secured or
obtained, or will secure or obtain, any government permit or license, in consideration for the help given or to
be given
c) Causing any undue injury to any party, including the government, or giving any private party any unwarranted
benefits, advantage, or preference in the discharge of his official, administrative, or judicial functions through
manifest partiality, evident bad faith, or gross inexcusable negligence
d) Entering, on behalf of the government, into any contract or transaction manifestly and grossly
disadvantageous to the same, whether or not the public officer profited or will profit thereby
e) Directly or indirectly having financial or pecuniary interest in any business contract or transaction in
connection with which he intervenes or takes part in his official capacity, or in which he is prohibited by the
Constitution or by any law from having any interest
f) Directly or indirectly becoming interested, for personal gain, or having material interest in any transaction or
act requiring the approval of a board, panel, or group of which he is a member, and which exercise of
discretion in such approval, even if he votes against the same or he does not participate in the action of the
board, committee, panel, group
4. Plunder under RA 7080
5. Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of RPC
a) Robbery with violence or intimidation of persons
b) Robbery with physical injuries, committed in an uninhabited place and by a band, or with use of firearms on a
street, road, or alley
c) Robbery in an uninhabited house or public building or edifice devoted to worship
6. Jueteng and masiao under PD 1602
7. Piracy on the high seas under RPC and PD 532
a) Piracy on the high seas
b) Piracy in inland Philippine waters
 c) Aiding and abetting pirates and brigands
8. Qualified theft under Article 310 of RPC
9. Swindling under Article 315 of RPC
10. Smuggling under RA 455 and RA 1937
11. Violations of Electronic Commerce Act (RA 8792)
12. Hijacking and other violations under RA 6235
13. Destructive arson and murder as defined under RPC
14. Terrorism and conspiracy to commit terrorism as defined and penalized under Sections 3 and 4 of Republic Act
No. 9372
15. Financing of terrorism under Section 4 and offenses punishable under Sections 5, 6, 7 and 8 of Republic Act No.
10168, otherwise known as the Terrorism Financing Prevention and Suppression Act of 2012
16. Bribery under Articles 210, 211 and 211-A of the Revised Penal Code, as amended, and Corruption of Public
Officers under Article 212 of the Revised Penal Code, as amended
17. Frauds and Illegal Exactions and Transactions under Articles 213, 214, 215 and 216 of the Revised Penal Code,
as amended
18. Malversation of Public Funds and Property under Articles 217 and 222 of the Revised Penal Code, as amended
19. Forgeries and Counterfeiting under Articles 163, 166, 167, 168, 169 and 176 of the Revised Penal Code, as
amended
20. Violations of Sections 4 to 6 of Republic Act No. 9208, otherwise known as the Anti-Trafficking in Persons Act of
2003
21. Violations of Sections 78 to 79 of Chapter IV, of Presidential Decree No. 705, otherwise known as the Revised
Forestry Code of the Philippines, as amended
22. Violations of Sections 86 to 106 of Chapter VI, of Republic Act No. 8550, otherwise known as the Philippine
Fisheries Code of 1998
23. Violations of Sections 101 to 107, and 110 of Republic Act No. 7942, otherwise known as the Philippine Mining
Act of 1995
24. Violations of Section 27(c), (e), (f), (g) and (i), of Republic Act No. 9147, otherwise known as the Wildlife
Resources Conservation and Protection Act
25. Violation of Section 7(b) of Republic Act No. 9072, otherwise known as the National Caves and Cave Resources
Management Protection Act
26. Violation of Republic Act No. 6539, otherwise known as the Anti-Carnapping Act of 2002, as amended
27. Violations of Sections 1, 3 and 5 of Presidential Decree No. 1866, as amended, otherwise known
as the decree Codifying the Laws on Illegal/Unlawful Possession, Manufacture, Dealing In, Acquisition or
Disposition of Firearms, Ammunition or Explosives
28. Violation of Presidential Decree No. 1612, otherwise known as the Anti-Fencing Law
29. Violation of Section 6 of Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos
Act of 1995, as amended by Republic Act No. 10022
30. Violation of Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines
31. Violation of Section 4 of Republic Act No. 9995, otherwise known as the Anti-Photo and Video Voyeurism Act of
2009
32. Violation of Section 4 of Republic Act No. 9775, otherwise known as the Anti-Child Pornography Act of 2009
33. Violations of Sections 5, 7, 8, 9, 10(c), (d) and (e), 11, 12 and 14 of Republic Act No. 7610, otherwise known as
the Special Protection of Children Against Abuse, Exploitation and Discrimination
34. Fraudulent practices and other violations under Republic Act No. 8799, otherwise known as the Securities
Regulation Code of 2000; and
35. Felonies or offenses of a similar nature that are punishable under the penal laws of other countries. (as amended by
RA No. 10365)

COVERED ENTITIES:
1. Banks, offshore banking units, quasi-banks, trust entities, non-stock savings and loan associations,
pawnshops, and all other institutions and their subsidiaries and affiliates supervised and/or regulated by the
BSP
2. Insurance companies, insurance agents, insurance brokers, professional reinsurers, reinsurance brokers,
holding companies, holding company systems, and all other persons and entities supervised and/or
regulation by the Insurance Commission
3. Securities dealers, brokers, salesmen, associated persons of brokers or dealers, investment houses,
investment agents and consultants, trading advisors, and other entities managing securities or rendering
similar services
4. Jewelry dealers in precious metals/stones, who as, a business, trade in precious metals/stones, for
transactions in excess of P1M
5. Mutual funds or open-end investment companies or issuers and other similar entities
6. Foreign exchange corporations, money changers, money payment, remittance, and transfer companies and
other similar entities
7. Other entities administering or otherwise dealing in currency, commodities, or financial derivatives based
thereon, valuable objects, cash substitutes, and other similar monetary instruments or property supervised
and/or regulated by the SEC
 8. Casinos, including internet and ship-based casinos with respect to their casino cash transactions related to
their gaming operations. (as amended by RA No. 10927)

Lawyers and accountants: acting as independent legal professionals are NOT covered with respect to privileged
information covered by confidentiality and attorney-client relationship.

Obligations of covered institutions:

1. Customer identification: Covered institutions shall establish and record the true identity of its clients based on
official documents.
2. Record keeping: All records of all transactions of covered institutions shall be maintained and safely stored for
5 years from the date of transactions.
3. Should a transaction be determined to be both a covered and a suspicious transaction, it shall be reported as
a suspicious transaction.
4. When reporting, it shall not be considered a violation of bank secrecy laws and similar laws. It shall be
prohibited from communicating, directly or indirectly, in any manner or by any means, to any person the fact
that a covered or suspicious transaction report was made, the content thereof, or any other information in
relation thereto.
5. Safe Harbor: No administrative, criminal, or civil proceedings, shall lie against any person for having made a
transaction report in the regular performance of his duties and in good faith, whether or not such results in any
criminal prosecution under Philippine laws.

REPORTORIAL REQUIREMENTS: covered institutions shall report to the AMLC all covered or suspicious
transactions within 5 working days from occurrence thereof, unless the AMLC prescribes a longer period not
exceeding 15 working days. Conviction of the unlawful activity is not necessary before a report is made.

ANTI-MONEY LAUNDERING COUNCIL: composed of:

1. Chairman: BSP Governor
2. Members:
a. Commissioner of Insurance Commission
b. Chairman of SEC

Functions of AMLC:
1. To require and receive covered transaction reports from covered institutions
2. To issue orders addressed to the appropriate Supervising Authority or the covered institution to determine the
true identity of any monetary instrument or property subject of a covered transaction report or request for
assistance from a foreign State, or believed by the Council, on the basis of substantial evidence to be in whole
or in part, whenever located, representing, involving or related to, directly or indirectly, in any manner or by
any means, the proceeds of an unlawful activity
3. To institute civil forfeiture proceedings and all other remedial proceedings through the OSG
4. To cause the filing of complaints with the DOJ or Ombudsman for the prosecution of money laundering
offenses
5. To initiate investigations of covered transactions, money laundering activities and other violations of RA 9160
6. To freeze any monetary instrument or property alleged to be proceeds of any unlawful activity
7. To implement such measures as may be necessary and justified under RA 9160 to counteract money
laundering
8. To receive and take action in respect of, any request from foreign states for assistance in their own anti-
money laundering operations provided in RA 9160
9. To develop educational programs on the pernicious effects of money laundering, the methods and techniques
used in money laundering, the viable means of preventing money laundering and the effective ways of
prosecuting and punishing offenders
10. To enlist the assistance of any branch, department, bureau, office, agency or instrumentality of the
government, including GOCCs, in undertaking any and all anti-money laundering operations, which may
include the use of its personnel, facilities and resources for the more resolute prevention, detection and
investigation of money laundering offenses and prosecution of offenders.
11. To impose administrative sanctions for the violation of laws, rules, regulations, orders, and resolutions issued
pursuant to law

Freezing of Monetary Instrument or Property: The Court of Appeals, upon application ex parte by AMLC and
after determination that probable cause exists that any monetary instrument or property is in any way related to an
unlawful activity, may issue a freeze order which shall be effective immediately (for a period of 20 days unless
extended by the court upon application by the AMLC).

Considering the intricate and diverse web of related and interlocking accounts pertaining to the monetary instruments
or properties that any person may create in the different covered institutions, their branches and/or other units, AMLC
may apply to freeze monetary instruments or properties in the names of the reported owners/holders, and monetary
instruments or properties named in the application of the AMLC, including all other related web of accounts pertaining
to other monetary instruments and properties, the funds and sources of which originated from or are related to the
monetary instruments or properties subject of the freeze orders.

Related Web of Accounts are those accounts, the funds and sources of which originated from and/or are materially
linked to the monetary instruments or properties subject of the freeze orders.

Authority to inquire into bank deposits: The AMLC may inquire into deposits upon order of the court when
there is probable cause that the deposits are related to the crime or unlawful activities.

However, a court order is not necessary when the offense or unlawful activity involved is any of the following:
1. Kidnapping for ransom
2. Sections 4, 5, 7, 8, 9, 10, 12, 13, 14, 15 and 16 of Comprehensive Dangerous Drugs Act (RA 9165)
3. Hijacking and other violations under RA 6235, destructive arson and murder, including those perpetrated by
terrorists against non-combatant persons and similar targets
4. Terrorism and conspiracy to commit terrorism as defined under the Human Security Act.

Inquiry into deposits may be availed of even in the absence of a pre-existing criminal case under the same law.
However, the order authorizing bank inquiry cannot be issued ex parte.

PHILIPPINE DEPOSIT INSURANCE CORPORATION or PDIC LAW (RA 10846)

PDIC – agency of Department of Finance; membership of banks is mandatory; 5 members; covers only risk of bank
closure ordered by Monetary Board
o Deposit insurer
o Co-regulator of banks
o Receiver/liquidator of closed banks

Insured deposit – net of obligation of depositor

INSURABLE DEPOSITS
 Savings Deposit
 Special Savings
 Demand/Checking Account
 Negotiable Order of Withdrawal
 Certificate of Time Deposits
 Foreign Currency Deposit

NOT COVERED BY PDIC INSURANCE

× Investment product (bonds/security/trust)
× Unfunded/fictitious/fraudulent accounts
× From unsafe/unsound banking practices
× From unlawful activities
× Bank deposits in foreign bank or in foreign branch of a domestic bank operating outside Philippines

MAXIMUM INSURANCE COVERAGE

- P500,000 per depositor of closed bank
- P1M for those with single & joint account

REQUISITES FOR CLAIM OF INSURED DEPOSIT

WHEN: 2 yrs from PDIC’s takeover to file claims
WHEN PAID: 6 months from date of filing
WHO ARE REQUIRED TO FILE CLAIMS:
 Those with more than P100k balances
 Those with outstanding obligations with the closed bank regardless of balances
 Those with no updated addresses
 Those under name of business entities
 Those not eligible for early payment

NOTES
>> Whether ‘and’, ‘or’, ‘and/or’ is used: joint account be insured separately from single accounts
>> Divided equally unless diff sharing is stipulated
>> Joint account, of natural and juridical person, shall be presumed belong solely to juridical entity
>> ‘Ana by Ben’ – Ana is the depositor
>> ‘Ana in trust for Ben’ – Ben is the depositor
>> ‘Ana for the account of Ben’ – Ben is depositor
>> Different banks: P500k per bank
>> Different branches: considered 1 bank
>> PDIC shall be legally subrogated to all rights of depositor against closed bank to extent of payment