NSSLAI BSP

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MANUAL OF REGULATIONS FOR NON-BANK FINANCIAL INSTITUTIONS

S REGULATIONS(Regulations Governing Non-Stock Savings and Loan Associations)

TABLE OF CONTENTS

PART ONE - ORGANIZATION, MANAGEMENT AND ADMINISTRATION

A. SCOPE OF AUTHORITY

SECTION 4101S Scope of Authority of Non-Stock Savings and Loan Associations4101S.1 Membership4101S.2 Organizational requirements

SECTIONS 4102S - 4105S (Reserved)

B. CAPITALIZATION

SECTION 4106S Capital4106S.1 Revaluation surplus


C. (RESERVED)


D. NET WORTH-TO-RISK ASSETS RATIO

SECTION 4116S Capital-to-Risk Assets

SECTION 4117S Withdrawable Share Reserve

SECTION 4118S Surplus Reserve for Ledger Discrepancies

SECTION 4119S Reserve for Office Premises, Furniture, Fixtures and Equipment

SECTION 4120S (Reserved)

ii

E. (RESERVED)


F. NET INCOME DISTRIBUTION

SECTION 4126S Limitations on Distribution of Net Income4126S.1 Reporting and verification4126S.2 Recording of net income for distribution


G. TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS

SECTION 4141S Definition; Qualifications; Responsibilities and Duties ofTrustees4141S.1 Definition of trustees4141S.2 Qualifications of trustees4141S.3 Powers and authority of the board of trustees4141S.4 General responsibility of the board of trustees4141S.5 Duties and responsibilities of the board of

trustees

SECTION 4142S Definition and Qualifications of Officers4142S.1 Definition of officers4142S.2 Qualifications of officers

SECTION 4143S Disqualifications of Trustees and Officers4143S.1 Persons disqualified to become trustees4143S.2 Persons disqualified to become officers4143S.3 Disqualification procedures4143S.4 Effect of non-possession of qualifications or

possession of disqualifications4143S.5 (Reserved)4143S.6 Watchlisting

SECTION 4144S Compensation of Trustees, Officers and Employees4144S.1 Compensation increases4144S.2 Liability for loans contrary to law

SECTION 4145S Bonding of Officers and Employees

SECTION 4146S Agents and Representatives

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SECTION 4148S Full-Time Manager for NSSLAs


H. BRANCHES AND OTHER OFFICES

SECTION 4151S Establishment of Branches/Extension Offices4151S.1 Application4151S.2 Conditions precluding acceptance/processing of

application4151S.3 Internal control system4151S.4 Permit to operate


I. BUSINESS DAYS AND HOURS

SECTION 4156S Business Days and Hours


J. REPORTS

SECTION 4161S Records4161S.1 Uniform system of accounts4161S.2 Philippine Financial Reporting Standards/

Philippine Accounting Standards

SECTION 4162S Reports4162S.1 Categories and signatories of reports4162S.2 Manner of filing4162S.3 Sanctions and procedures for filing and payment

of fines


SECTION 4164S Internal Audit Function4164S.1 Status4164S.2 Scope4164S.3 Qualification standards of the internal auditor4164S.4 Code of Ethics and Internal Auditing Standards

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K. INTERNAL CONTROL

SECTION 4171S External Auditor

SECTION 4172S Financial Audit4172S.1 Audited financial statements of NSSLAs4172S.2 Posting of audited financial statements


SECTION 4180S Selection, Appointment and Reporting Requirements forExternal Auditors; Sanction; Effectivity

L. MISCELLANEOUS PROVISIONS

SECTION 4181S Publication Requirements

SECTION 4182S Business Name

SECTION 4183S Prohibitions


SECTION 4190S Duties and Responsibilities of NSSLAs and Their Directors/Officers in All Cases of Outsourcing of NSSLA Functions

SECTIONS 4191S (Reserved)

SECTION 4192S Prompt Corrective Action Framework

SECTION 4193S Supervision by Risks

SECTION 4194S Market Risk Management

SECTION 4195S Liquidity Risk Management

SECTION 4196S - 4198S (Reserved)

SECTION 4199S General Provision on Sanctions

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PART TWO - DEPOSIT AND BORROWING OPERATIONS

A. DEMAND DEPOSITS

SECTION 4201S Checking Accounts


B. SAVINGS DEPOSITS

SECTION 4206S Definition

SECTION 4207S Minimum Deposit

SECTION 4208S Withdrawals

SECTION 4209S Dormant Savings Deposits


C. (RESERVED)


D. TIME DEPOSITS


SECTION 4222S Minimum Term and Size of Time Deposits

SECTION 4223S Withdrawals of Time Deposits


E. - F. (RESERVED)


G. INTEREST ON DEPOSITS

SECTION 4241S Interest on Savings Deposits

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SECTION 4242S Interest on Time Deposits4242S.1 Time of payment4242S.2 Treatment of matured time deposits


H. (RESERVED)


I. SUNDRY PROVISIONS ON DEPOSIT OPERATIONS

SECTION 4261S Opening and Operation of Deposit Accounts4261S.1 Who may open deposit accounts4261S.2 Identification of member-depositors4261S.3 Number of deposit accounts4261S.4 Signature card4261S.5 Passbook and certificate of time deposit4261S.6 Deposits in checks and other cash items


J. (RESERVED)


K. OTHER BORROWINGS

SECTION 4286S Borrowings



PART THREE - LOANS AND INVESTMENTS

A. LOANS IN GENERAL

SECTION 4301S Authority; Loan Limits; Maturity of Loans

SECTION 4302S Basic Requirements in Granting Loans

SECTION 4303S Loan Proceeds

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SECTION 4304S Loan Repayment

SECTION 4305S Interest and Other Charges4305S.1 - 4305S.2 (Reserved)4305S.3 Interest in the absence of contract4305S.4 Escalation clause; when allowable4305S.5 Interest accrual on past due loans

SECTION 4306S Past Due Accounts4306S.1 Accounts considered past due4306S.2 Extension/renewal of loans4306S.3 Write-off of loans as bad debts4306S.4 Updating of information provided to credit

information bureaus

SECTION 4307S "Truth in Lending Act" Disclosure Requirements4307S.1 Definition of terms4307S.2 Information to be disclosed4307S.3 Inspection of contracts covering credit

transactions4307S.4 Posters4307S.5 Penal provisions


SECTION 4312S Grant of Loans and Other Credit Accommodations4312S.1 General Guidelines (Deleted by Circular No.

622 dated 16 September 2008)412S.2 – 4312S.3 (Reserved)4312S.4 Signatories (Deleted by Circular No. 622

dated 16 September 2008)

Secs. 4313S – 4320S (Reserved)

B. SECURED LOANS

SECTION 4321S Kinds of Security


C. – D. (RESERVED)


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E. LOANS/CREDIT ACCOMMODATIONS TO TRUSTEES, OFFICERS,STOCKHOLDERS AND THEIR RELATED INTERESTS

SECTION 4356S General Policy

SECTION 4357S Direct/Indirect Borrowings; Ceilings

SECTION 4358S Records; Reports


SECTION 4370S Sanctions

F. - I. (RESERVED)


J. OTHER OPERATIONS

SECTION 4391S Fund Investments4391S.1 - 4391S.2 (Reserved)4391S.3 Investment in debt and marketable equity securities4391S.4 - 4391S.10 (Reserved)


K. MISCELLANEOUS PROVISIONS



PART FOUR - (RESERVED)


PART FIVE - (RESERVED)


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PART SIX - MISCELLANEOUS

A. OTHER OPERATIONS

SECTION 4601S Fines and Other Charges4601S.1 Guidelines on the imposition of monetary

penalties


SECTION 4631S Revocation/Suspension of NSSLA License


B. SUNDRY PROVISIONS

SECTION 4651S Notice of Dissolution

SECTION 4652S Confidential Information

SECTION 4653S Examination by the BSP

SECTION 4654S Applicability of Other Rules

SECTION 4655S Annual Fees on Non-Stock Savings and Loan Association

SECTION 4656S Basic Law Governing Non-Stock Savings and LoanAssociation

SECTION 4657S NSSLA Premises and Other Fixed Assets4657S.1 Accounting for NSSLAs premises; Other fixed

assets4657S.2 (Reserved)4657S.3 Reclassification of real and other properties

acquired as NSSLA premises4657S.4 - 4657S.8 (Reserved)4657S.9 Batas Pambansa Blg. 344 - An Act to Enhance

the Mobility of Disabled Persons by RequiringCertain Buildings, Institutions, Establishmentsand Public Utilities to Install Facilities and OtherDevices

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SECTION 4660S Disclosure of Remittance Charges and Other RelevantInformation


SECTION 4691S Anti-Money Laundering Regulations4691S.1 - 4691S.8 (Reserved)4691S.9 Sanctions and penalties


SECTION 4695S Valid Identification (ID) Cards for Financial Transactions



List of Appendices08.12.31

LIST OF APPENDICES

No. SUBJECT MATTER

S - 1 Safeguards in Bonding of NSSLA Accountable Officers and Employees

S - 2 List of Reports Required from Non-Stock Savings and Loan AssociationsAnnex S-2-a - Reporting Guidelines on Crimes/Losses

S - 3 Guidelines on Prescribed Reports Signatories and Signatory AuthorizationAnnex S-3-a - Format of Resolution for Signatories of Category A-1

ReportsAnnex S-3-b - Format of Resolution for Signatories of Category A-2

ReportsAnnex S-3-c - Format of Resolution for Signatories of Categories A-3

and B Reports

S - 4 Format-Disclosure Statement of Loan/Credit Transaction

S - 5 Abstract of "Truth in Lending Act" (Republic Act No. 3765)

S - 6 Anti-Money Laundering RegulationsAnnex S-6-a - Certification of Compliance with Anti-Money

Laundering RegulationsAnnex S-6-b - Rules on Submission of Covered Transaction Reports

and Suspicious Transaction Reports by CoveredInstitutions

S - 7 Revised Implementing Rules and Regulations R.A. No. 9160, asamended by R.A. No. 9194

S - 8 Guidelines to Govern the Selection, Appointment and the ReportingRequirement for External Auditors of NSSLAs

Manual of Regulations for Non-Bank Financial Institutions S Regulations

§§ 4101S - 4101S.208.12.31

Manual of Regulations for Non-Bank Financial Institutions S RegulationsPart I - Page 1

A. SCOPE OF AUTHORITY

Section 4101S Scope of Authority ofNon-Stock Savings and Loan AssociationsAn NSSLA shall include any non-stock, non-profit corporation engaged in the business ofaccumulating the savings of its members andusing such accumulations for loans tomembers to service the needs of householdsby providing long-term financing for homebuilding and development and for personalfinance. An NSSLA may also engage in adeath benefit program meant exclusively forthe benefit of its members.

An NSSLA shall accept deposits fromand grant loans to its members only andshall not transact business with the generalpublic.

§ 4101S.1 Membershipa. NSSLAs shall issue a certificate of

membership to every qualified memberand shall maintain a registry of theirmembers.

b. An NSSLA shall confine itsmembership to a well-defined group ofpersons.

A well-defined group shall consist of anyof the following:

(1) Employees, officers, and trustees ofone company, including member-retirees;

(2) Government employees belongingto the same office, branch, or department,including member-retirees; and

(3) Immediate members of thefamilies up to the second degree ofconsanguinity or affinity of those fallingunder Items “(1)” and “(2)” above.

NSSLAs whose articles of incorporationand by-laws were approved and registeredprior to the effectivity of R. A. No. 8367 and

which limit and/or allow membershipcoverage broader or narrower than theforegoing definition, shall be allowed tocontinue as such.

The Monetary Board may, ascircumstances warrant, require NSSLAsmentioned in the immediately precedingparagraph to amend their by-laws to complywith the concept of a well-defined group.

c. In no case shall the total amount ofentrance fees exceed one percent (1%) ofthe amount to be contributed or otherwisepaid-in by the particular member: Provided,That for new members, the fee shall be basedon the amount of contributions computed inaccordance with the revaluation of the assetsof the NSSLA.

§ 4101S.2 Organizational requirements1

a. Articles of Incorporation; by-lawsThe articles of incorporation and by-laws of aproposed NSSLA, or any amendmentthereto, shall not be registered with the SECunless accompanied by a certificate ofapproval from the Monetary Board.

b. Application for approval. The articlesof incorporation and by-laws of a proposedNSSLA, both accomplished in the prescribedforms, shall be submitted to the MonetaryBoard through the appropriate department ofthe SES together with a covering applicationfor the approval thereof, signed by a majorityof the board of trustees and verified by oneof them. The application shall include:

(1) The proposed articles ofincorporation and by-laws together with thenames and addresses of the incorporators,trustees and officers, with a statement of theircharacter, experience,and general fitness toengage in the non-stock savings and loanbusiness;

1 See SEC Circular No. 3 dated 16 February 2006.

PART ONE

ORGANIZATION, MANAGEMENT AND ADMINISTRATION

§§ 4101S.2 - 4116S08.12.31

S Regulations Manual of Regulations for Non-Bank Financial InstitutionsPart I - Page 2

(2) An itemized statement of theestimated receipts and expenditures of theproposed NSSLA for the first year;

(3) Filing fee of P1,000; and(4) Such other information as the

Monetary Board may require.c. Grounds for disapproval of

application. The Monetary Board may denythe application to organize an NSSLA on thebasis of a finding that:

(1) The NSSLA is being organized forany purpose other than to engage in thebusiness of a legitimate NSSLA;

(2) The NSSLA’s financial program isunsound;

(3) The proposed members areadequately served by one (1) or moreexisting NSSLAs; and

(4) There exist other reasons which theMonetary Board may consider as sufficientground for such disapproval.

d. Certificate of authority to operate;revocation or suspension thereof. NSSLAs,prior to transacting business, shall procurea certificate of authority to transact businessfrom the Monetary Board. After due noticeand hearing, the Monetary Board may revokeor suspend, for such period as it determines,the certificate of authority of any NSSLA, thesolvency of which is imperiled by losses orirregularities, or of any NSSLA whichwillfully violates any provision of R. A. No.8367, these rules or any pertinent law orregulation.(As amended by CL-2008-078 dated 15 December 2008)

Secs. 4102S - 4105S (Reserved)

B. CAPITALIZATION

Sec. 4106S Capital. NSSLAs established after14 August 2001, shall have a minimumcapital contribution of at least P1.0 million.The minimum capital contributionrequirement shall also apply to all pendingapplications to establish NSSLAs receivedprior to 14 August 2001.

Members who have contributedP1,000 or more to the capital of an NSSLAmay increase their capital contribution.Partial withdrawal from the amount paidby a member as capital contribution,during his membership, may be allowedunless the by laws of the NSSLA provideotherwise, and subject to such rules andregulations as the Monetary Board mayprescribe in the matter of such withdrawalof capital contribution. However, in nocase, shall such partial withdrawaldiminish the member’s capitalcontribution to less than P1,000.

Members of NSSLAs may participatein the profits of the NSSLA on the basis oftheir respective capital contributions onthe date distribution of net income isapproved by its board of trustees.(As amended by Circular No. 573 dated 22 June 2007)

§ 4106S.1 Revaluation surplus. Incases of both retiring and new members,a revaluation surplus shall be added to theircontributions by imputing their respectiveproportionate shares in the withdrawableshare reserve and the reserve for furniture,fixtures, and furnishings.


C. (RESERVED)


D. NET WORTH-TO-RISK ASSETS RATIO

Sec. 4116S Capital-to-Risk Assets. Thecombined capital accounts of each NSSLAshall not be less than an amount equal toten percent (10%) of its risk assets which isdefined as its total assets minus thefollowing assets:

a. Cash on hand;b. Evidences of indebtedness of the

Republic of the Philippines and of the BSPand any other evidences of indebtedness/

§§ 4116S - 4118S08.12.31


obligations, the servicing and repayment ofwhich are fully guaranteed by the Republicof the Philippines;

c. Loans to the extent covered by hold-out on, or assignment of, deposits maintainedin the lending NSSLA and held in thePhilippines;

d. Office premises, depreciated;e. Furniture, fixtures and equipment,

depreciated;f. Real estate mortgage loans insured

by the Home Guarantee Corporation to theextent of the amount of the insurance; and

g. Other non-risk items as the MonetaryBoard may, from time to time, authorize tobe deducted from total assets.

The Monetary Board shall prescribe themanner of determining the total assets of suchNSSLA for the purpose of this Section, butcontingent accounts shall not be includedamong total assets.

Whenever the capital accounts of anNSSLA are deficient with respect to thepreceding paragraph, the Monetary Board,after considering the report of the appropriatedepartment of the SES on the state of solvencyof the NSSLA concerned, shall limit orprohibit the distribution of net income andshall require that part or all of net income beused to increase the capital accounts of theNSSLA until the minimum requirement hasbeen met. The Monetary Board may, afterconsidering the aforesaid report of theappropriate department of the SES, and if theamount of the deficiency justifies it, restrictor prohibit the making of new investmentsof any sort by the NSSLA with the exceptionof the purchases of evidence of indebtednessincluded under Item “b” of this Section untilthe minimum required capital ratio has beenrestored.(As amended by Circular No. 573 dated 22 June 2007)

Sec. 4117S Withdrawable Share ReserveNSSLAs shall create a withdrawable sharereserve which shall consist of two percent (2%)

of the total capital contributions of themembers.

An amount corresponding to thewithdrawable share reserve shall be set upby the NSSLA, such amount invested inbonds or evidences of indebtedness of theRepublic of the Philippines or of itssubdivisions, agencies or instrumentalities,the servicing and repayment of which arefully guaranteed by the Republic of thePhilippines, and evidences of indebtednessof the BSP.

For a uniform interpretation of theprovisions of this Section, the following shallserve as guidelines:

a. The withdrawable share reserveshall be set up from the undivided profitsof the NSSLA and shall be funded in theform of cash deposited as a separateaccount and/or an investment allowedunder this Section;

b. Should there be an increase in thecapital contribution, the reserve shall becorrespondingly adjusted at the end of eachmonth from undivided profits, if any; and

c. The reserve shall be adjusted firstbefore the NSSLA shall declare anddistribute to its members any portion of itsnet income at any time of the year.(As amended by Circular No. 573 dated 22 June 2007)

Sec. 4118S Surplus Reserve for LedgerDiscrepancies. Whenever an NSSLA has adiscrepancy between its general ledgeraccounts and their respective subsidiaryledgers, the board of trustees of the NSSLAshall set up from the undivided profits ofthe NSSLA, if any, a surplus reserve, in anamount equivalent to the amount of thediscrepancy, and this reserve shall not beavailable for distribution to members or forany other purpose unless and until thediscrepancy is accounted for. The board oftrustees shall also direct the employeeresponsible for the discrepancy to accountfor said discrepancy: Provided, That the

§§ 4118S - 4126S.108.12.31


failure of the employee to do so shall constituteas ground for his dismissal if the discrepancyis of serious or recurring nature.

NSSLAs shall report such discrepanciesto the appropriate department of the SES withinfifteen (15) days from discovery.(As amended by Circular No. 573 dated 22 June 2007)

Sec. 4119S Reserve for Office Premises,Furniture, Fixtures and Equipment. NSSLAsshall set aside five percent (5%) of their yearlynet income until it amounts to at least fivepercent (5%) of the total assets as a reservefor a building fund to cover the cost ofconstruction or acquisition of officepremises, and of the purchase of officefurniture, fixtures and equipment.

An NSSLA which, as determined by itsboard of trustees, has adequate office premises,furniture, fixtures and equipment necessary forthe conduct of its business need not set up thereserve: Provided, That this fact should becertified by its board of trustees in a resolutionto be submitted to the appropriate departmentof the SES for verification and approval:Provided, however, That in case reserves hadbeen set up, the NSSLA so exempted mayrevert the reserves to free surplus.(As amended by Circular No. 573 dated 22 June 2007)

Sec. 4120S (Reserved)

E. (RESERVED)


F. NET INCOME DISTRIBUTION

Sec. 4126S Limitations on Distribution ofNet Income

a. Basis for participation in profitsMember-depositors of an NSSLA mayparticipate in the profits of the NSSLA onthe basis of their capital contributions onthe date distribution of net income tomembers is approved by its board oftrustees/directors.

b. Level of withdrawable sharereserve. No NSSLA shall distribute any ofits net income to its members if thewithdrawable share reserve requiredunder Sec. 4117S is less than, or if by suchdistribution would be reduced below, theamount specified in said Section. Thereserve shall be adjusted first before theNSSLA shall distribute its net income atany time of the year.

c. Capital- to-risk assets ratio.NSSLAs shall not distribute any of its netincome to their members if their capital-to-risk assets ratio is below the levelrequired under Sec. 4116S.

d. Discrepancies between generalledger and subsidiary ledger accounts. Thesurplus reserves set up as required underSec. 4118S shall not be reverted to freesurplus for distribution to members unlessand until the discrepancy between thegeneral ledger accounts and their respectivesubsidiary ledgers for which the surplusreserve has been set up ceases to exist.

e. Other unbooked capitaladjustments required by BSP, whether ornot allowed to be set up on a staggeredbasis. The unbooked valuation reserves andother unbooked capital adjustmentsrequired by the BSP, whether or not allowedto be set up on a staggered basis, shall bededucted from the amount of net incomeavailable for distribution to members.

f. Interest and other income earnedbut not yet collected/received, net ofreserve for uncollected interest on loansAccrued interest and other income not yetreceived but already recorded by anNSSLA, net of allowance for uncollectedinterest on loans, shall be deducted fromthe amount of net income available fordistribution to members.(As amended by Circular No. 573 dated 22 June 2007

§ 4126S.1 Reporting and verificationDeclaration of income for distribution tomembers shall be reported by an NSSLA

§§ 4126S.1 - 4141S.308.12.31


concerned to the appropriate department ofthe SES in the prescribed form (RevisedBSP Form No. 7-26-25H).

Pending verification of above mentionedreport by the appropriate department of theSES, the NSSLA concerned shall not makeany announcement or communication on theintended distribution of net income nor shallany actual distribution be made thereon.

In any case, the declaration may beannounced and the income distributed, ifafter twenty (20) business days from thedate of the report required herein shallhave been received by the BSP, no adviceagainst such distribution has been receivedby the NSSLA concerned.(As amended by Circular No. 573 dated 22 June 2007)

§ 4126S.2 Recording of net income fordistribution. The liability for members’share in the net income distribution shallbe taken up in the books upon receipt ofBSP approval thereof, or if no suchapproval is received, after twenty (20)business days from the date the requiredReport on Distributable Net Income wasreceived by the appropriate department ofthe SES whichever comes earlier. Amemorandum entry may be made totrustees and for full disclosure purposes,the amount of income for distribution maybe disclosed in the financial statements bymeans of a footnote which should includea statement to the effect that the distributionis subject to review by the BSP.(As amended by Circular No. 573 dated 22 June 2007)


G. TRUSTEES, OFFICERS, EMPLOYEESAND AGENTS

Sec. 4141S Definition; Qualifications;Responsibilities and Duties of Trustees. Forpurposes of this Section, the following shallbe the definition, qualifications,responsibilities and duties of trustees.

§ 4141S.1 Definition of trustees. Trusteesshall include: (a) those who are named as suchin the articles of incorporation; (b) those dulyelected in subsequent meetings of theNSSLA’s members; and (c) those elected tofill vacancies in the board of trustees.

§ 4141S.2 Qualifications of trustees. Noperson shall be eligible as trustee of an NSSLAunless he is a member of good standing ofsuch NSSLA.

In addition, such person shall have thequalifications and none of the disqualificationsas provided in pertinent laws and BSP rules.

A trustee shall have the followingminimum qualifications:

a. He shall be at least twenty-five (25)years of age at the time of his election/appointment;

b. He shall be at least a college graduateor have at least five (5) years experience inbusiness, or shall have undergone any BSPtraining in NSSLA or banking operations:Provided, however, That undergraduateseligible to be elected as trustees in theNSSLA’s by-laws may be allowed as maybe approved by the Monetary Board;

c. He must have attended a specialseminar on corporate governance for boardof trustees conducted or accredited by theBSP; and

d. He must be fit and proper for theposition of a trustee of the NSSLA. In determiningwhether a person is fit and proper for the positionof a trustee, the following matters must beconsidered: integrity/probity, competence,education, diligence, and experience/training.

The foregoing qualifications for trusteesshall be in addition to those already requiredor prescribed by R.A. No. 8367, as amended,and other existing applicable laws andregulations.

§ 4141S.3 Powers and authority of theboard of trustees. The corporate powers ofan NSSLA shall be exercised, its businessconducted, and all its property shall be

controlled and held by its board of trustees.The powers of the board of trustees asconferred by law are original and cannotbe revoked by the members. The trusteeshold their office charged with the duty toact for the NSSLA in accordance with theirbest judgment.

§ 4141S.4 General responsibility of theboard of trustees. The position of an NSSLAtrustee is a position of trust. A trusteeassumes certain responsibilities to differentconstituencies or stakeholders (e.g., theNSSLA itself, its member-depositors andother creditors, its management andemployees and the public at large). Theseconstituencies or stakeholders have the rightto expect that the institution is being run ina prudent and sound manner.

The board of trustees is primarilyresponsible for the corporate governance ofthe NSSLA. To ensure good governance ofthe NSSLA, the board of trustees shouldestablish strategic objectives, policies andprocedures that will guide and direct theactivities of the NSSLA and the means toattain the same as well as the mechanismfor monitoring management’s performance.While the management of the day-to-dayaffairs of the institution is the responsibilityof the management team, the board oftrustees is, however, responsible formonitoring and overseeing managementaction.

§ 4141S.5 Duties and responsibilities ofthe board of trustees. To ensure prudent andefficient administration of NSSLAs, thefollowing guidelines shall govern theresponsibilities and duties of the board oftrustees of NSSLAs:

a. Specific duties and responsibilities ofthe board of trustees

(1) To select and appoint officers who arequalified to administer the NSSLA affairseffectively and soundly and to establishadequate selection process for all personnel.

It is the primary responsibility of the boardof trustees to appoint competentmanagement team at all times. The boardof trustees should apply fit and properstandards on key personnel. Integrity,technical expertise and experience in theinstitution’s business, either current orplanned, should be the key considerationsin the selection process. And becausemutual trust and a close workingrelationship are important, the board oftrustees’ choice should share its generaloperating philosophy and vision for theinstitution. The board of trustees shall establishan appropriate compensation package for allpersonnel which shall be consistent with theinterest of all stakeholders.

(2) To establish objectives and drawup a business strategy for achieving them.Consistent with the institution’s objectives,business plans should be established to directits on-going activities. The board of trusteesshould ensure that performance against planis regularly reviewed, with corrective actiontaken as needed.

(3) To conduct the affairs of theinstitution with high degree of integrity.Since reputation is a very valuable asset,it is in the institution’s best interest thatin dealings with its members, it observesa high standard of integrity. The board oftrustees should prescribe corporatevalues, codes of conduct and otherstandards of appropriate behavior foritself, the senior management and otheremployees. Among other matters,activities and transactions that couldresult or potentially result in conflict ofinterest, personal gain at the expense ofthe institution, or unethical conduct shallbe strictly prohibited. It shall providepolicies that will prevent the use of thefacilities of the NSSLA in furtherance ofcriminal and other illegal activities.

(4) To prescribe a clear assignment ofresponsibilities and decision-makingauthorities, incorporating a hierarchy of

§§ 4141S.3 - 4141S.508.12.31


required approvals from individuals to theboard of trustees. The board of trustees shallestablish in writing the limits of thediscretionary powers of each officer,committee, sub-committee and such othergroup for the purpose of lending, investingor committing the NSSLA to any financialundertaking or exposure to risk at any time.The board of trustees shall have a scheduleof matters and authorities reserved to it fordecision, such as major capital expenditures,equity investments and divestments.

(5) To effectively supervise theNSSLA’s affairs. The board of trustees shallestablish a system of checks and balanceswhich applies in the first instance to theboard itself. Among the members of theboard, an effective system of checks andbalances must exist. The system shall alsoprovide a mechanism for effective checkand control by the board of trustees overthe chief executive officer and keymanagers and by the latter over the lineofficers of the NSSLA.

(6) To monitor, assess and control theperformance of management. The board oftrustees shall put in place an appropriatereporting system so that it is provided withrelevant and timely information to be ableto effectively assess the performance ofmanagement. For this purpose, it mayconstitute a governance committee.

(7) To adopt and maintain adequaterisk management policy. The board oftrustees shall be responsible for theformulation and maintenance of writtenpolicies and procedures relating to themanagement of risks throughout theinstitution. The risk management policyshall include:

(a) a comprehensive risk managementapproach;

(b) a detailed structure of limits,guidelines and other parameters used togovern risk-taking;

(c) a clear delineation of lines ofresponsibilities for managing risk;

(d) an adequate system for measuringrisk; and

(e) effective internal controls and acomprehensive risk-reporting process.

The board of trustees may constitute acommittee for this purpose.

(8) To constitute the Audit Committee.The Audit Committee shall be composedof trustees, preferably with accounting andfinance experience. Said audit committeeprovides oversight of the institution’sinternal and external auditors. It shall beresponsible for the setting up of the internalaudit department and for the appointmentof the internal auditor as well as theindependent external auditor. It shallmonitor and evaluate the adequacy andeffectiveness of the internal control system.

(9) To meet regularly. To properlydischarge its function, the board of trusteesshall meet regularly. Independent views inboard meetings shall be given fullconsideration and all such meetings shall beduly minuted.

(10) To keep the individual membersof the board and the members informed. Itis the duty of the board of trustees to presentto all its members and to the stakeholdersa balanced and understandable assessmentof the NSSLA’s performance and financialcondition. It should also provide appropriateinformation that flows internally and to thepublic. All members of the board shall havereasonable access to any information aboutthe institution.

(11) To ensure that the NSSLA hasbeneficial influence on the economy. Theboard of trustees has a continuingresponsibility to provide those services andfacilities which will be supportive of thenational economy.

(12) To assess at least annually its per-formance and effectiveness as a body, aswell as its various committees, the chiefexecutive officer and the NSSLA itself. Thecomposition of the board of trustees shallalso be reviewed regularly with the end in

§ 4141S.508.12.31


view of having a balanced membership.Towards this end, a system and procedurefor evaluation shall be adopted which mayinclude, but not limited to, the setting ofbenchmark and peer group analysis.

(13) To keep their authority within thepowers of the institution as prescribed inthe articles of incorporation, by-laws andin existing laws, rules and regulations. Toconduct and maintain the affairs of theinstitution within the scope of its authorityas prescribed in its charter and in existinglaws and regulations, the board of trusteesshall appoint a compliance officer who shallbe responsible for coordinating, monitoringand facilitating compliance with existinglaws and regulations. The compliance officershall be vested with appropriate authorityand provided with appropriate support andresources. It may also constitute acompliance committee.

b. Specific duties and responsibilitiesof a trustee

(1) To conduct fair business transactionswith the NSSLA and to ensure that personalinterest does not bias board decisions.Trustees should, whenever possible, avoidsituations that would give rise to a conflictof interest. If transactions with the institutioncannot be avoided, it should be done in theregular course of business and upon termsnot less favorable to the institution than thoseoffered to others. The basic principle to beobserved is that a trustee should not usehis position to make profit or to acquirebenefit or advantage for himself and/or hisrelated interests. He should avoid situationsthat would compromise his impartiality.

(2) To act honestly and in good faith,with loyalty and in the best interest of theNSSLA, its members, regardless of theamount of their capital contributions, andcreditors, if any. A trustee must always actin good faith, with the care which anordinarily prudent man would exerciseunder similar circumstances. While a trusteeshould always strive to promote the interest

of all members, he shall also give dueregard to the rights and interests of otherstakeholders.

(3) To devote time and attentionnecessary to properly discharge theirduties and responsibilities. Trustees shalldevote sufficient time to familiarizethemselves with the institution’s business.They must be constantly aware of theinstitution’s condition and beknowledgeable enough to contributemeaningfully to the board’s work. Theymust attend and actively participate inboard and committee meetings, requestand review meeting materials, askquestions and request explanations. If aperson cannot give sufficient time andattention to the affairs of the institution, heshall neither accept his nomination nor runfor election as member of the board oftrustees.

(4) To act judiciously. Before decidingon any matter brought before the board oftrustees, every trustee should thoroughlyevaluate the issues, ask questions and seekclarifications when necessary.

(5) To exercise independent judgment.A trustee should view each problem/situation objectively. When adisagreement with others occurs, heshould carefully evaluate the situation andstate his position. He should not be afraidto take a position even though it might beunpopular. Corollarily, he should supportplans and ideas that he thinks will bebeneficial to the institution.

(6) To have a working knowledge ofthe statutory and regulatory requirementsaffecting the NSSLA, including the contentof its articles of incorporation and by-laws,the requirements of the BSP, and whereapplicable, the requirements of otherregulatory agencies.A trustee also keepshimself informed of the industrydevelopments and business trends in orderto safeguard the institution’scompetitiveness.

§ 4141S.508.12.31


(7) To observe confidentiality. Trusteesmust observe the confidentiality of non-public information acquired by reason oftheir position as trustees. They may notdisclose said information to any otherperson without the authority of the board.

Sec. 4142S Definition and Qualificationsof Officers. Officers shall include thePresident, Vice-President, GeneralManager, Corporate Secretary, Treasurerand others mentioned as officers of theNSSLA, or whose duties as such aredefined in the by-laws.

The minimum qualifications for trusteesprescribed in Sec. 4141S are also applicableto officers.

§ 4142S.1 Definition of officersOfficers shall include the president,executive vice president, senior vicepresident, vice president, generalmanager, secretary, treasurer, and othersmentioned as officers of the NSSLA, orthose whose duties as such are defined inthe by-laws, or are generally known to bethe officers of the NSSLA (or any of itsbranches and offices other than the headoffice) either through announcement,representation, publication or any kindof communication made by the NSSLA.A person holding the posit ion ofchairman, vice-chairman or any otherposition of the board who also performsfunctions of management such as thoseordinarily performed by regular officersshall also be considered an officer.

§ 4142S.2 Qualifications of officersAn officer shall have the followingminimum qualifications:

a. He shall be at least twenty-one (21)years of age;

b. He shall be at least a collegegraduate or have at least five (5) yearsexperience in NSSLA or banking operationsor related activities or in a field related to

his position and responsibilities, or haveundergone training in NSSLA or bankingoperations acceptable to the appropriatedepartment of the SES;

c. He must be fit and proper for theposition of an officer of the NSSLA. Indetermining whether a person is fit andproper for the position of an officer, thefollowing matters must be considered:integrity/probity, competence, education,diligence, and experience/training. Theforegoing qualifications for officers shall bein addition to those already required orprescribed by R.A. No. 8367, as amended,and other existing applicable laws andregulations.

Sec. 4143S Disqualification of Trustees andOfficers. The following regulations shallgovern the disqualification of NSSLAs’trustees and officers.

§ 4143S.1 Persons disqualified tobecome trustees. Without prejudice tospecific provisions of law prescribingdisqualifications for trustees, the followingare disqualified from becoming trustees:

a. Permanently disqualified. Trustees/officers/employees permanently disqualifiedby the Monetary Board from holding adirector/trustee position:

(1) Persons who have been convicted byfinal judgment of a court for offenses involvingdishonesty or breach of trust such as but notlimited to, estafa, embezzlement, extortion,forgery, malversation, swindling, theft,robbery, falsification, bribery, violation ofB.P. Blg. 22, violation of Anti- Graft andCorrupt Practices Act and prohibited actsand transactions under Section 7 ofR.A. No. 6713 (Code of Conduct and EthicalStandards for Public Officials andEmployees);

(2) Persons who have been convictedby final judgment of a court sentencingthem to serve a maximum term ofimprisonment of more than six (6) years;

§§ 4141S.5 - 4143S.108.12.31


(3) Persons who have been convictedby final judgment of the court for violationof banking/quasi-banking/NSSLA laws,rules and regulations;

(4) Persons who have been judiciallydeclared insolvent, spendthrift orincapacitated to contract;

(5) Trustees, officers or employees ofclosed banks/QBs/trust entities who werefound to be culpable for such institution’sclosure as determined by the MonetaryBoard;

(6) Trustees and officers of banks, QBsand trust entities found by the MonetaryBoard as administratively liable for violationof banking laws, rules and regulationswhere a penalty of removal from office isimposed, and which finding of the MonetaryBoard has become final and executory; or

(7) Trustees and officers of banks, QBsand trust entities or any person found bythe Monetary Board to be unfit for theposition of trustees or officers because theywere found administratively liable byanother government agency for violationof banking laws, rules and regulations orany offense/violation involving dishonestyor breach of trust, and which finding of saidgovernment agency has become final andexecutory.

b. Temporarily disqualified. Trustees/officers/employees disqualified by theMonetary Board from holding a trusteeposition for a specific/indefinite period oftime. Included are:

(1) Persons who refuse to fully disclosethe extent of their business interest or anymaterial information to the appropriatedepartment of the SES when requiredpursuant to a provision of law or of a circular,memorandum, rule or regulation of the BSP.This disqualification shall be in effect as longas the refusal persists;

(2) Trustees who have been absent orwho have not participated for whateverreasons in more than fifty percent (50%) ofall meetings, both regular and special, of

the board of trustees during theirincumbency, and trustees who failed tophysically attend for whatever reasons inat least twenty-five percent (25%) of allboard meetings in any year, except thatwhen a notarized certification executed bythe corporate secretary has been submittedattesting that said trustees were given theagenda materials prior to the meeting andthat their comments/decisions thereonwere submitted for deliberation/discussionand were taken up in the actual boardmeeting, said trustees shall be consideredpresent in the board meeting. Thisdisqualification applies only for purposesof the immediately succeeding election;

(3) Persons who are delinquent in thepayment of their obligations as definedhereunder:

(a) Delinquency in the payment ofobligations means that an obligation of aperson with an NSSLA where he/she is atrustee or officer, or at least two (2)obligations with other banks/FIs, underdifferent credit lines or loan contracts, arepast due pursuant to existing regulations;

(b) Obligations shall include allborrowings from a bank/QB/trust entity/NSSLA/other FIs obtained by:

(i) A trustee or officer for his ownaccount or as the representative or agentof others or where he/she acts as aguarantor, endorser or surety for loans fromsuch FIs;

(ii) The spouse or child under theparental authority of the trustee or officer;

(iii) Any person whose borrowings orloan proceeds were credited to the accountof, or used for the benefit of a trustee orofficer;

(iv) A partnership of which a trustee orofficer, or his/her spouse is the managingpartner or a general partner owning acontrolling interest in the partnership; and

(v) A corporation, association or firmwholly-owned or majority of the capital ofwhich is owned by any or a group of persons

§ 4143S.108.12.31


mentioned in the foregoing Items “(i)”, “(ii)”and “(iv)”;

This disqualification shall be in effectas long as the delinquency persists.

(4) Persons who have been convictedby a court for offenses involving dishonestyor breach of trust such as, but not limited to,estafa, embezzlement, extortion, forgery,malversation, swindling, theft, robbery,falsification, bribery, violation of B.P. Blg. 22,violation of Anti-Graft and Corrupt PracticesAct and prohibited acts and transactions underSection 7 of R.A. No. 6713 (Code of Conductand Ethical Standards for Public Officials andEmployees), violation of banking laws, rulesand regulations or those sentenced to servea maximum term of imprisonment of morethan six (6) years but whose conviction hasnot yet become final and executory;

(5) Trustees and officers of closed banksQBs/trust entities/NSSLAs and other FIsunder BSP supervision/regulation pendingtheir clearance by the Monetary Board;

(6) Trustees disqualified for failure toobserve/discharge their duties andresponsibilities prescribed under existingregulations. This disqualification appliesuntil the lapse of the specific period ofdisqualification or upon approval by theMonetary Board on recommendation bythe appropriate department of the SES ofsuch trustees’ election/re-election;

(7) Trustees who failed to attend thespecial seminar on corporate governancefor board of trustees required by BSP. Thisdisqualification applies until the trusteeconcerned had attended such seminar;

(8) Persons dismissed/terminatedfrom employment for cause. Thisdisqualification shall be in effect untilthey have cleared themselves ofinvolvement in the alleged irregularityor upon clearance, on their request, fromthe Monetary Board after showing goodand justifiable reasons, or after the lapseof five (5) years from the time they wereofficially advised by the appropriate

department of the SES of theirdisqualification;

(9) Those under preventive suspension;(10) Persons with derogatory records as

certified by, or on the official files of, thejudiciary, NBI, PNP, quasi-judicial bodies,other government agencies, internationalpolice, monetary authorities and similaragencies or authorities of foreign countriesfor irregularities or violations of any law,rules and regulations that would adverselyaffect the integrity of the trustee/officer orthe ability to effectively discharge hisduties. This disqualification applies untilthey have cleared themselves of thealleged irregularities/violations or after alapse of five (5) years from the time thecomplaint, which was the basis of thederogatory record, was initiated;

(11) Trustees and officers of banks,QBs and trust entities found by theMonetary Board as administratively liablefor violation of banking laws, rules andregulations where a penalty of removalfrom office is imposed, and which findingof the Monetary Board is pending appealbefore the appellate court, unlessexecution or enforcement thereof isrestrained by the court;

(12) Trustees and officers of banks, QBsand trust entities or any person found bythe Monetary Board to be unfit for theposition of trustees or officers because theywere found administratively liable byanother government agency for violationof banking laws, rules and regulations orany offense violation involving dishonestyor breach of trust, and which finding of saidgovernment agency is pending appealbefore the appellate court, unlessexecution or enforcement thereof isrestrained by the court; and

(13) Trustees and officers of banks, QBsand trust entities found by the MonetaryBoard as administratively liable for violationof banking laws, rules and regulationswhere a penalty of suspension from office

§ 4143S.108.12.31


or fine is imposed, regardless whetherthe finding of the Monetary Board is finaland executory or pending appeal beforethe appellate court, unless execution orenforcement thereof is restrained by thecourt. The disqualification shall be in effectduring the period of suspension or so longas the fine is not fully paid.(As amended by Circular Nos. 584 dated 28 September 2007 and

513 dated 10 February 2006)

§ 4143S.2 Persons disqualified tobecome officers

a. The disqualifications for trusteesmentioned in Subsec. 4143S.1 shalllikewise apply to officers, except thosestated in Items “b(2)” and “b(7)”.

b. Except as may be authorized by theMonetary Board or the Governor, thespouse or a relative within the seconddegree of consanguinity or affinity of anyperson holding the position of chairman,vice chairman, president, executive vicepresident or any position of equivalentrank, general manager, treasurer, chiefcashier or chief accountant is disqualifiedfrom holding or being elected or appointedto any of said positions in the same NSSLA;and the spouse or relative within thesecond degree of consanguinity or affinityof any person holding the position ofmanager, cashier, or accountant of a branchor office of an NSSLA is disqualified fromholding or being appointed to any of saidpositions in the same branch or office;

c. Except as may otherwise beallowed under C.A. No. 108, otherwiseknown as “The Anti-Dummy Law,” asamended, foreigners cannot be officers oremployees of NSSLAs; and

d. Any appointive or elective publicofficial, whether full time or part time,except in cases where such service isincident to financial assistance provided bythe government or GOCCs or in casesallowed under existing law.

§ 4143S.3 Disqualification proceduresa. The board of trustees and

management of every NSSLAs shall beresponsible for determining the existenceof the ground for disqualification of theNSSLA’s trustee/officer or employee andfor reporting the same to the BSP. Whilethe concerned NSSLA may conduct its owninvestigation and impose appropriatesanction/s as are allowable, this shall bewithout prejudice to the authority of theMonetary Board to disqualify a trusteeofficer/employee from being electedappointed as trustee/officer in any FI underthe supervision of the BSP. Grounds fordisqualification made known to the NSSLAshall be reported to the appropriatedepartment of the SES within seventy-two(72) hours from knowledge thereof.

b. On the basis of knowledge andevidence on the existence of any of thegrounds for disqualification mentioned inSubsecs. 4143S.1 and 4143S.2, the trusteeor officer concerned shall be notified inwriting either by personal service orthrough registered mail with registry returnreceipt card at his/her last known addressby the appropriate department of the SESof the existence of the ground for his/herdisqualification and shall be allowed tosubmit within fifteen (15) calendar daysfrom receipt of such notice an explanationon why he/she should not be disqualifiedand included in the watchlisted file,together with the evidence in support ofhis/her position. The head of saiddepartment may allow an extension onmeritorious ground.

c. Upon receipt of the reply/explanationof the trustee/officer concerned, theappropriate department of the SES shallproceed to evaluate the case. The trustee/officer concerned shall be afforded theopportunity to defend/clear himself/herself.

d. If no reply has been received fromthe trustee/officer concerned upon the

§§ 4143S.1 - 4143S.308.12.31


expiration of the period prescribed underItem “b” above, said failure to reply shall bedeemed a waiver and the appropriatedepartment of the SES shall proceed toevaluate the case based on available records/evidence.

e. If the ground for disqualification isdelinquency in the payment of obligation,the concerned trustee or officer shall be givena period of thirty (30) calendar days withinwhich to settle said obligation or, restore itto its current status or, to explain whyhe/she should not be disqualified andincluded in the watchlisted file, before theevaluation on his disqualification andwatchlisting is elevated to the MonetaryBoard.

f. For trustees/officers of closed QBs,trust entities, NSSLAs or other FIs under BSPsupervision, the concerned department ofthe SES shall make appropriaterecommendation to the Monetary Boardclearing said trustees/officers when there isno pending case/complaint or evidenceagainst them. When there is evidence that atrustees/officer has committed irregularity,the appropriate department of the SES shallmake recommendation to the MonetaryBoard that his/her case be referred to the OSIfor further investigation and that he/she beincluded in the masterlist of temporarilydisqualified persons until the final resolutionof his/her case. Trustees/officers withpending cases/complaints shall also beincluded in said masterlist of temporarilydisqualified persons upon approval by theMonetary Board until the final resolution oftheir cases. If the trustee/officer is clearedfrom involvement in any irregularity, theappropriate department of the SES shallrecommend to the Monetary Board his/herdelisting. On the other hand, if the trusteeofficer concerned is found to be responsiblefor the closure of the institution, theconcerned department of the SES shallrecommend to the Monetary Board his/herdelisting from the masterlist of temporarily

disqualified persons and his/her inclusion inthe masterlist of permanently disqualifiedpersons.

g. If the disqualification is based ondismissal from employment for cause, theappropriate department of the SES shall, asmuch as practicable, endeavor to establishthe specific acts or omissions constituting theoffense or the ultimate facts which resultedin the dismissal to be able to determine if thedisqualification of the trustee/officerconcerned is warranted or not. Theevaluation of the case shall be made for thepurpose of determining if disqualificationwould be appropriate and not for the purposeof passing judgment on the findings anddecision of the entity concerned. Theappropriate department of the SES maydecide to recommend to the Monetary Boarda penalty lower than disqualification (e.g.,reprimand, suspension, etc.) if, in itsjudgment the act committed or omitted bythe trustee/officer concerned does notwarrant disqualification.

h. All other cases of disqualification,whether permanent or temporary shall beelevated to the Monetary Board for approvaland shall be subject to the proceduresprovided in paragraphs “a”, “b”, “c” and “d”above.

i. Upon approval by the MonetaryBoard, the concerned trustee/officer shallbe informed by the appropriate departmentof the SES in writing either by personalservice or through registered mail withregistry return receipt card, at his/her lastknown address of his/her disqualificationfrom being elected/ appointed as trustee/officer in any FI under the supervision ofBSP and/or of his/her inclusion in themasterlist of watchlisted persons sodisqualified.

j. The board of trustees of theconcerned institution shall be immediatelyinformed of cases of disqualificationapproved by the Monetary Board and shallbe directed to act thereon not later than the

§ 4143S.308.12.31

Manual of Regulations for Non-Bank Financial Institutions S Regulations Part I - Page 13

following board meeting. Within seventy-two (72) hours thereafter, the corporatesecretary shall report to the Governor ofthe BSP through the appropriate departmentof the SES the action taken by the board onthe trustee/officer involved.

k. Persons who are elected orappointed as trustee or officer in any of theBSP supervised institutions for the first timebut are subject to any of the grounds fordisqualification provided for under Subsecs.4143S.1 and 4143S.2, shall be afforded theprocedural due process prescribed above.

l. Whenever a trustee/officer iscleared in the process mentioned underItem “c” above or, when the ground fordisqualification ceases to exist, he/she wouldbe eligible to become trustee or officer ofany bank, QB, trust entity or any institutionunder the supervision of the BSP only uponprior approval by the Monetary Board. Itshall be the responsibility of the appropriatedepartment of the SES to elevate to theMonetary Board the lifting of thedisqualification of the concerned trustee/officer and his/her delisting from themasterlist of watchlisted persons.(As amended by Circular No. 584 dated 28 September 2007)

§ 4143S.4 Effect of non-possession ofqualifications or possession ofdisqualifications. Trustees/officers electedor appointed without possessing thequalifications in Subsecs. 4141S.2/4142S.2or possessing any of the disqualifications asenumerated in Subsecs.4143S.1/4143S.2,shall vacate their respective positionsimmediately.

§ 4143S.5 (Reserved)

§ 4143S.6 Watchlisting. To provide theBSP with a central information file to be usedas reference in passing upon and reviewingthe qualifications of persons elected orappointed as trustee or officer of an NSSLA,the SES shall maintain a watchlist of

disqualified NSSLA trustees/ officers underthe following procedures:

a. Watchlist categories. Watchlistingshall be categorized as follows:

(1) Disqualification File “A” (Permanent)- T r u s t e e s / o f f i c e r s / e mp l o y e e spermanently disqualified by the MonetaryBoard from holding a trustee/officer positionin any institution under the supervision/regulation of BSP.

(2) Disqualification File “B” (Temporary)- T r u s t e e s / o f f i c e r s / e m p l o y e e stemporarily disqualified by the MonetaryBoard from holding a trustee/officer positionin any institution under the supervision/regulation of BSP.

b. Inclusion of trustees/officers/employees in the watchlist. Uponrecommendation by the appropriatedepartment of the SES, the inclusion oftrustees/officers/employees in watchlistdisqualification files “A” and “B” on the basisof decisions, actions or reports of the courts,banks, QBs, other NSSLAs and FIs under BSPsupervision, BSP, NBI or any otheradministrative agencies shall first be approvedby the Monetary Board.

c. Notification of trustees/officers/employees. Upon approval by the MonetaryBoard, the concerned trustee/officer/employee shall be informed throughregistered mail, with registry return receiptcard at his/her last known address of his/ herinclusion in the masterlist of watchlistedpersons disqualified to be a trustee/officer inany FI under the supervision of the BSP.

d. Confidentiality. Watchlisting shall befor internal use only and may not be accessedor queried upon by outside parties includingbanks, QBs, trust entities, NSSLAs or otherFIs under BSP supervision except with theauthority of the person concerned and withthe approval of the Deputy Governor, SES,or the Governor, or the Monetary Board.

The BSP will disclose information onits watchlist files only upon submission ofa duly accomplished and notarized

§§ 4143S.3 - 4143S.608.12.31


authorization from the concerned personand approval of such request by the DeputyGovernor, SES or the Governor or theMonetary Board. The prescribedauthorization form to be submitted to theconcerned department of the SES is inAppendix Q-45.

NSSLAs can gain access to informationin the said watchlist for the sole purpose ofscreening their applicants for hiring and/or confirming their elected trustees andappointed officers. NSSLAs must obtain thesaid authorization on an individual basis.

e. Delisting. All delistings shall beapproved by the Monetary Board uponrecommendation of the appropriatedepartment of the SES except in cases ofpersons known to be dead, where delistingshall be automatic upon proof of death andneed not be elevated to the MonetaryBoard. Delisting may be approved by theMonetary Board in the following cases:

(1) Watchlist – Disqualification File “B”(Temporary) –

(a) After the lapse of the specific periodof disqualification;

(b) When the conviction by the courtfor crimes involving dishonesty, breach oftrust and/or violation of banking lawsbecomes final and executory, in whichcase the trustee/officer/employee is relistedto Watchlist – Disqualification File “A”(Permanent);

(c) Upon favorable decision orclearance by the appropriate body, i.e.,court, NBI, bank, QB, trust entity or suchother agency/body where the concernedindividual had derogatory record. Trustees/officers/employees delisted from theWatchlist – Disqualification File “B” otherthan those upgraded to Watchlist –Disqualification File “A” shall be eligiblefor re-employment with any bank, QB,trust entity, NSSLA or other FI under BSPsupervision.(As amended by CL-2007-001 dated 04 January 2007 and

CL-2006-046 dated 21 December 2006)

Sec. 4144S Compensation of Trustees,Officers and Employees. No trustee, officeror employee of an NSSLA shall receive fromsuch NSSLA and no NSSLA shall pay to anytrustee, officer, or employee of such NSSLA,any commission, emolument, gratuity orreward based on the volume or number ofloans made, or based on the interest or feescollected thereon. Nothing in this Section,however, prohibits or limits any of thefollowing:

a. Receipt or payment of salaries oftrustees, officers and employees;

b. Receipt or payment of commissionsto agents whether or not based on thevolume or number of loans or on theinterest and fees collected thereon; or

c. Receipt or payment of bonuses oftrustees, officers or employees if suchbonuses are based on the profits and noton the volume or number of loans madeor on the interest or fees collected thereon.

§ 4144S.1 Compensation increases.Allincreases in compensation, in any form, ofall trustees and trustee-officers in excess often percent (10%) thereof per annum shallrequire the approval of the BSP.

§ 4144S.2 Liability for loans contraryto law. No NSSLA shall make or purchaseany loan or investment not authorized orpermitted under R.A. No. 8367, and anytrustee, officer or employee, who on behalfof any such NSSLA, knowingly makes orpurchases any such loan or investment orwho knowingly consents thereto shall bepersonally liable to the NSSLA for the fullamount of any such loan or investment.

Sec. 4145S Bonding of Officers andEmployees. All officers and employees ofan NSSLA who, in the regular discharge oftheir duties have access to money ornegotiable securities shall, before enteringupon such duties, furnish to the employingNSSLA a good and sufficient bond and

§§ 4143S.6 - 4145S08.12.31


providing for indemnity to the NSSLA againstthe loss of money or securities, by reason oftheir dishonesty. The bond of the cashier,assistant cashier, treasurer, and otheremployees having money accountabilityshall not be less than their average dailyaccountability. The bond must be issued bya reputable bonding company duly licensedby the Insurance Commission and approvedby the BSP. Capital contribution or a cashbond deposited with the NSSLA or with abank, may also be allowed.

To protect the funds of depositors andcreditors, the Monetary Board mayregulate/ restrict the payment by theNSSLA of compensation, allowances, fees,bonuses, and fringe benefits to its trusteesand officers in exceptional cases and whenthe circumstances warrant, such as, but notlimited to the following:

a. When the NSSLA is found by theMonetary Board to be conducting businessin an unsafe or unsound manner;

b. When the NSSLA is found by theMonetary Board to be in an unsatisfactoryfinancial condition such as, but not limitedto, the following cases:

(1) Its capital is impaired; and(2) It has suffered continuous losses

from operations for the past three (3) years.In the presence of any one (1) or more ofthe circumstances mentioned above, theMonetary Board may impose the followingrestrictions in the compensation and otherbenefits of trustees and officers:

(a) Except for the financial assistanceto meet expenses for the medical,maternity, education and other emergencyneeds of the trustees or officers or theirimmediate family, other forms of financialassistance may be suspended.

(b) When the total compensationpackage including salaries, allowances, feesand bonuses of trustees and officers aresignificantly excessive as compared withindustry averages, the Monetary Board mayorder their reduction to reasonable levels.

Sec. 4146S Agents and RepresentativesNo person shall act as an agent or salesrepresentative of an NSSLA or operate anagency without obtaining a license fromthe Monetary Board. No license is requiredfor a collector of an NSSLA but no personshall hold himself out or act as collectorunless he is authorized as a collector inwriting by such NSSLA.


Sec. 4148S Full-Time Manager for NSSLAsNSSLAs with total assets of at leastP5.0 million shall maintain a full-timemanager to take charge of the operations ofthe NSSLA. The manager shall possess all thequalifications and shall not have anydisqualification under Subsecs. 4142S.2 and4143S.2, respectively.


H. BRANCHES AND OTHER OFFICES

Sec. 4151S Establishment of Branches/Extension Offices. Prior BSP authority shallbe obtained before operating a branch orother offices.

§ 4151S.1Application.The applicationshall be prescribed by the appropriatedepartment of the SES and accompanied bythe following minimum requirements:

a. Sketch of the location of the proposedoffice which shall be within the compoundof the mother firm’s branch office;

b. Itemized statement of estimatedreceipts and expenses of the NSSLA inconnection with such branch or extensionoffice;

c. Description or enumeration ofservice facilities that will cater to the depositand credit needs of members of the NSSLA;

d. Financial statements for the yearimmediately preceding the date ofapplication;

§§ 4145S - 4151S.108.12.31


e. Certification as to the actualnumber of members that will be servicedby the branch/extension office; and

f. Undertaking that the branch/extension office will service only membersof the NSSLA.

§ 4151S.2 Conditions precludingacceptance/processing of application. Theapplication shall not be accepted/processedin any of the following cases:

a. The NSSLA’s operation during theyear immediately preceding the date offiling of application was unprofitable;

b. Total capital accounts of theNSSLA are less than P100 million as ofthe date of filing of the application;

c. Total number of members to beserved in the proposed branch/extensionoffice is less than 500; or

d. Non-compliance by the NSSLAwith any of the pertinent provisions ofbanking laws, rules, regulations andpolicies of the BSP.

§ 4151S.3 Internal control system. TheNSSLA shall submit to the appropriatedepartment of the SES a system of internalsafeguards and control measures to beadopted for compliance by the staff of theproposed branch/extension office.

§ 4151S.4 Permit to operate. Actualoperation shall commence only after apermit to operate has been issued by theBSP.


I. BUSINESS DAYS AND HOURS

Sec. 4156S Business Days and HoursNSSLAs may, with the prior approval of theappropriate department of the SES, adoptsuch business days and hours as may beconvenient for them. NSSLAs shall be openfor business during business hours and days

except when extraordinary instancescaused by unforeseen, unavoidable eventdirectly affect the NSSLA’s ability to openfor business. NSSLAs shall postconspicuously at all times in their place ofbusiness their schedule of regular businesshours and days.


J. REPORTS

Sec. 4161S Records. NSSLAs shall have atrue and accurate account, record orstatement of their daily transactions. Themaking of any false entry or the willfulomission of entries relevant to anytransaction is a ground for the MonetaryBoard for the imposition of administrativesanctions under Section 37 of R.A.No. 7653, without prejudice to the criminalliability of the director or officer responsibletherefore under Sections 35 and 36 of R.A.No. 7653 and/or the applicable provisionsof the Revised Penal Code. Records shallbe up to-date and shall contain sufficientdetail so that an audit trail is established.

§ 4161S.1 Uniform System ofAccounts. NSSLAs are required to patterntheir charts of accounts and recordingsystems after the Uniform System ofAccounts prescribed for NSSLAs includingreportorial and publication requirements.The voucher system of accounting or theticket system, or such other accountingsystem acceptable to the BSP as well asthe prescribed chart of accounts shall beadopted for use by NSSLAs.

§ 4161S.2 Philippine FinancialReporting Standards/Philippine AccountingStandards

Statement of policy. It is the policy ofthe Bangko Sentral to promote fairness,transparency and accuracy in financialreporting. It is in this light that the BSP aims

§§ 4151S.1 - 4161S.208.12.31


to adopt all PFRS and PAS issued by theASC to the greatest extent possible.

NSSLAs shall adopt the PFRS and PASwhich are in accordance with GAAP inrecording transactions and in thepreparation of financial statements andreports to BSP. However, in cases wherethere are differences between BSPregulations and PFRS/PAS as when morethan one (1) option are allowed or certainmaximum or minimum limits areprescribed by the PFRS/PAS, the option orlimit prescribed by BSP regulations shallbe adopted by all NSSLA/FIs.

For purposes hereof, the PFRS/PASshall refer to issuances of the ASC andapproved by the PRC.

Accounting treatment for prudentialreporting. For prudential reporting, FIs shalladopt in all respect the PFRS and PASexcept as follows:

a. In preparing consolidated financialstatements, only investments in financialallied subsidiaries except insurancesubsidiaries shall be consolidated on a line-by-line basis; while insurance and non-financial allied subsidiaries shall beaccounted for using the equity method.Financial/non-financial allied/non-alliedassociates shall be accounted for using theequity method in accordance with theprovisions of PAS 28 “Investments inAssociates”;

b. For purposes of preparing separatefinancial statements, financial/non-financialallied/non-allied subsidiaries/associates,including insurance subsidiaries/associates,shall also be accounted for using the equitymethod; and

c. FIs shall be required to meet theBSP recommended valuation reserves.

Government grants extended in the formof loans bearing nil or low interest rates shallbe measured upon initial recognition at itsfair value (i.e., the present value of thefuture cash flows of the financial instrumentdiscounted using the market interest rate).

The difference between the fair value andthe net proceeds of the loan shall berecorded under “Unearned Income-Others”, which shall be amortized over theterm of the loan using the effective interestmethod.

The provisions on government grantsshall be applied retroactively to alloutstanding government grants received.NSSLAs that adopted an accountingtreatment other than the foregoing shallconsider the adjustment as a change inaccounting policy, which shall beaccounted for in accordance with PAS 8.

Notwithstanding the exceptions inItems “a”, “b” and “c”, the audited annualfinancial statements required to besubmitted to the BSP in accordance withAppendix S-2 shall in all respect be PFRS/PAS compliant: Provided, That FIs shallsubmit to the BSP adjusting entriesreconciling the balances in the financialstatements for prudential reporting withthat in the audited annual financialstatements.(As amended by Circular No. 572 dated 22 June 2007)

Sec. 4162S Reports. NSSLAs shall submitto the appropriate department of the SESthe reports in prescribed form listed inAppendix S-2.

§ 4162S.1 Categories and signatoriesof reports. For purposes of designating thesignatories of reports, certain weekly,monthly, quarterly, semi-annual, and annualstatements/reports required to be submittedto the BSP are hereby grouped into CategoryA-1, A-2, A-3 and Category B, as enumeratedin Appendix S-3.

Category A-1 reports shall be signed bythe NSSLA’s chief executive officer (whomay be the president or chairman of theboard, or designated in the by-laws), or inhis absence, by the executive vice presidentor the officer duly authorized under aresolution approved by the board of

§§ 4161S.2 - 4162S.108.12.31


trustees and by the chief finance officer(i.e., controller or chief accountant, whoshall likewise be duly authorized by theNSSLA’s board of trustees in a formatprescribed in Appendix S-3a.

Category A-2 reports of the head officeof the NSSLA shall be signed by theNSSLA’s president or senior vice-president/equivalent position. Offices/units(such as branch) reports in this categoryshall be signed by their respectivemanagers/officers-in-charge. Likewise, thesigning authority in this category shall becontained in a resolution approved by theboard of trustees in the format prescribedin Appendix S-3b.

Category A-3 and B reports are thoserequired to be submitted to the BSP and arenot included in Categories A-1 and A-2. Theyshall be signed by officers or their alternates,who shall be duly designated by the board oftrustees. A copy of the board resolution withformat as prescribed in Appendix S-3c,covering the initial designation and subsequentchanges in signatories and alternates, shall besubmitted to the appropriate department ofthe SES within three (3) days from the date ofresolution.

If a report is submitted to the BSP underthe signature of an officer who is not listedor included in any of the resolutionsmentioned above, the appropriatedepartment of the SES shall refuse toacknowledge the report as valid or considerthe report as not having been submitted atall. If such a report is not resubmitted by theNSSLA under the signature of a dulyauthorized signing officer, administrativesanctions/penalties shall be imposed on theerring NSSLA for the late reporting or failureto submit the required report, as the casemay be.

§ 4162S.2 Manner of filing. Thesubmission of the reports shall be effectedby filing them personally with theappropriate department of the SES or with

the BSP Regional Offices or by sendingthem registered mail or special delivery,unless otherwise specified in the circularor memorandum of the Monetary Board orthe BSP.

§ 4162S.3 Sanctions and procedures forfiling and payment of fines. Failure to submitthe above reports on or before the specifieddates shall subject the person responsibleor entity concerned to the penalties providedby law.

For willful delay in the submission ofreports, the following rules shall apply:

a. Definition of Terms. The followingdefinitions shall apply:

(1) Report shall refer to all writtenreports/statements required of an NSSLAto be submitted to the BSP periodically orwithin a specified period.

(2) Willful delay in the submission ofreports shall refer to the failure of anyNSSLA to submit on time the report definedin Item “(1)” above. Failure to submit areport on time due to fortuitous events, suchas fire and other natural calamities andpublic disorders, shall not be considered aswillful delay.

(3) Examination shall include, but need notbe limited to, the verification, review, audit,investigation and inspection of the books andrecords, business affairs, administration andfinancial condition of any NSSLA including thereproduction of the records as well as thetaking possession of the books and records andkeeping them under BSP custody after givingproper receipts therefore. It shall also includethe interview of the directors and personnelof any NSSLA.

(4) Refusal to permit examination shallmean any act or omission which impedes,delays or obstructs the duly authorized BSPofficer/examiner/employee from conductingan examination, including the act of refusingto honor a letter of authority to examinepresented by any officer/examiner/employee of the BSP.

§§ 4162S.1 - 4162S.308.12.31


b. Fines for willful delay insubmission of reports. NSSLAs incurringwillful delay in the submission of requiredreports shall pay a fine in accordance withthe following schedule:

(1) For Categories A-1, A-2 and A-3 reportsPer day of defaultuntil the report is filed P180

(2) For Category B reportsPer day of defaultuntil the report is filed 60

Delay or default shall start to run on theday following the last day required for thesubmission of reports. However, should thelast day of filing fall on a non-working dayin the locality where the reporting NSSLAis situated, delay or default shall start to runon the day following the next working day.The due date/deadline for submission ofreports to BSP as prescribed under Sec.4162S governing the frequency anddeadlines indicated in Appendix S-2 shallbe automatically moved to the nextbusiness day whenever a half-daysuspension of business operations ingovernment offices is declared due to anemergency such as typhoon, floods, etc.

For the purpose of establishing delay ordefault, the date of acknowledgment by theappropriate department of the SES or the BSPRegional Offices/Units appearing on thecopies of such reports filed or submitted orthe date of mailing postmarked on theenvelope/the date of registry or specialdelivery receipt, as the case may be, shallbe considered as the date of filing.

Delayed schedules/attachments andamendments shall be considered latereporting subject to above penalties.

c. Sanctions for willful refusal to permitexamination/making of false statement

(1) Any NSSLA which shall willfullyrefuse to permit examination shall pay a fineof P3,000 daily from the day of refusal andfor as long as such refusal lasts.

The provisions of Section 34 of R. A.No. 7653 shall apply to any agent,manager, or other officer-in-charge of anyNSSLA who willfully refuses any lawfulexamination into the affairs of such NSSLA.

The willful making of a false statementor misleading statement on a material factto department of the BSP charged with theregulation of NSSLAs or to his examinershall be punished in accordance withSection 36 of R. A. No. 7653.

(2) Procedures in imposing the fine(a) The BSP officer/examiner/employee

shall report the refusal of the NSSLA topermit examination to the head of theappropriate department of BSP, who shallforthwith make a written demand upon theNSSLA concerned for such examination.If the NSSLA continues to refuse saidexamination without any satisfactoryexplanation therefor, the BSP officer/examiner/employee concerned shallsubmit a report to that effect to theappropriate department head.

(b) The fine shall be imposed startingon the day following the receipt by theappropriate department of the writtenreport submitted by the BSP officer/examiner/employee concerned regardingthe continued refusal of the NSSLA topermit the desired examination.

d. Manner of payment or collectionof fines. The regulations embodied in Sec.4601S shall be observed in the collection ofthe fines from NSSLAs.

e. Appeal to the Monetary Board.NSSLAs may appeal to the Monetary Boarda ruling of the appropriate departmentimposing a fine.

f. Other penalties. The foregoingpenalties shall not preclude the applicationof, or shall be without prejudice to, otheradministrative sanctions as well as to thefiling of criminal case as provided for inthe other provisions of the law, as may bewarranted by the nature of the offense.(As amended by Circular No. 585 dated 15 October 2007)

§ 4162S.308.12.31



Sec. 4164S Internal Audit FunctionInternal audit is an independent, objectiveassurance and consulting function establishedto examine, evaluate and improve theeffectiveness of risk management, internalcontrol, and governance processes of anorganization.

§ 4164S.1 Status. The internal auditfunction must be independent of theactivities audited and from day-to-dayinternal control process. It must be free toreport audit results, findings, opinions,appraisals and other information to theappropriate level of management. It shallhave authority to directly access andcommunicate with any officer or employee,to examine any activity or entity of theinstitution, as well as to access any records,files or data whenever relevant to theexercise of its assignment. The AuditCommittee or senior management shouldtake all necessary measures to provide theappropriate resources and staffing thatwould enable internal audit to achieve itsobjectives.

§ 4164S.2 Scope. The scope of internalaudit shall include:

a. Examination and evaluation of theadequacy and effectiveness of the internalcontrol systems;

b. Review of the application andeffectiveness of risk managementprocedures and risk assessmentmethodologies;

c Review of the management andfinancial information systems, including theelectronic information system and electronicbanking services;

d. Assessment of the accuracy andreliability of the accounting system and ofthe resulting financial reports;

e. Review of the systems andprocedures of safeguarding assets;

f. Review of the system of assessingcapital in relation to the estimate oforganizational risk;

g. Transaction testing and assessmentof specific internal control procedures; and

h. Review of the compliance systemand the implementation of establishedpolicies and procedures.

§ 4164S.3 Qualification standards ofthe internal auditor. The internal auditorof a UB or a KB must be a CPA and musthave at least five (5) years experience inthe regular audit (internal or external) of aUB or KB as auditor-in-charge, seniorauditor or audit manager. He must possessthe knowledge, skills, and othercompetencies to examine all areas inwhich the institution operates. Professionalcompetence as well as continuing trainingand education shall be required to face-upto the increasing complexity and diversityof the institution’s operations.

The internal auditor of a TB, QB, trustentity or national Coop Bank must be a CPAwith at least five (5) years experience inthe regular audit (internal or external) of aTB, QB, trust entity or national Coop Bankas auditor-in-charge, senior auditor or auditmanager or, in lieu thereof, at least three (3)years experience in the regular audit (internalor external) of a UB or KB as auditor-incharge, senior auditor or audit manager.

The internal auditor of an RB, NSSLA orlocal Coop Bank must be at least anAccounting graduate with two (2) yearsexperience in external audit or in the regularaudit of an RB, NSSLA or local Coop Bankor, in lieu thereof, at least one (1) yearexperience in the regular audit (internal orexternal) of a UB, KB, TB, QB, trust entityor national Coop Bank as auditor-in-charge,senior auditor or audit manager.

A qualified internal auditor of a UB or aKB shall be qualified to audit TBs, QBs, trustentities, national cooperative banks, RBs,NSSLAs, local cooperative banks,

§§ 4163S - 4164S.308.12.31


subsidiaries and affiliates engaged in alliedactivities, and other FIs under BSPsupervision.

A qualified internal auditor of a TB ornational cooperative bank shall likewise bequalified to audit QBs, trust entities, RBs,NSSLAs, local cooperative banks,subsidiaries and affiliates engaged in alliedactivities, and other financial institutionsunder BSP supervision.

§ 4164S.4 Code of Ethics and InternalAuditing Standards. The internal auditorshould conform with the Code ofProfessional Ethics for CPAs and ensurecompliance with sound internal auditingstandards, such as the Institute of InternalAuditors’ International Standards for theProfessional Practice of Internal Auditing(e-mail: [email protected]; Web: http://www.theiia.org.) and other supplementalstandards issued by regulatory authorities/government agencies. The Standards addressindependence and objectivity, professionalproficiency, scope of work, performance ofaudit work, management of internal audit,quality assurance reviews, communicationand monitoring of results.


K. INTERNAL CONTROL

Sec. 4171S External Auditor. NSSLAs exceptthose with total resources of P10.0 millionor less, shall engage the services of anindependent Certified Public Accountant toaudit their books of accounts at least once ayear, or as often as necessary.

Sec. 4172S Financial Audit. NSSLAs shallcause an annual financial audit by anexternal auditor acceptable to the BSP notlater than thirty (30) calendar days after theclose of the calendar year or the fiscal yearadopted by the NSSLA. Report of such auditshall be submitted to the board of directors

and the appropriate department of the SESnot later than 120 calendar days after theclose of the calendar year or the fiscal yearadopted by the NSSLA. The report to theBSP shall be accompanied by the:(1) certification by the external auditor onthe: (a) dates of start and termination ofaudit; (b) date of submission of the financialaudit report and certification under oathstating that no material weakness or breachin the internal control and riskmanagement systems was noted in thecourse of the audit of the NSSLA to theboard of directors; and (c) the absence ofany direct or indirect financial interest andother circumstances that may impair theindependence of the external auditor; (2)reconciliation statement between the AFSand the balance sheet and incomestatement for NSSLA submitted to the BSPincluding copies of adjusting entries on thereconciling items; and (3) other informationthat may be required by the BSP.

In addition, the external auditor shallbe required by the NSSLA to submit to theboard of directors, a LOC indicating anymaterial weakness or breach in theinstitution’s internal control and riskmanagement systems within thirty (30)calendar days after submission of thefinancial audit report. If no materialweakness or breach is noted to warrant theissuance of an LOC, a Certification underoath stating that no material weakness orbreach in the internal control and riskmanagement systems was noted in thecourse of the audit of the NSSLA shall besubmitted in its stead, together with thefinancial audit report.

Material weakness shall be defined as asignificant control deficiency, orcombination of deficiencies, that results inmore than a remote likelihood that a materialmisstatement of the financial statements willnot be detected or prevented by the entity’sinternal control. A material weakness doesnot mean that a material misstatement has

§§ 4164S.3 - 4172S08.12.31


occurred or will occur, but that it couldoccur. A control deficiency exists when thedesign or operation of a control does notallow management or employees, in thenormal course of performing their assignedfunctions, to prevent or detect misstatementson a timely basis. A significant deficiency isa control deficiency, or combination ofcontrol deficiencies, that adversely affects theentity’s ability to initiate, authorize, record,process, or report financial data reliably inaccordance with GAAP. The term more thanremote likelihood shall mean that futureevents are likely to occur or are reasonablypossible to occur.

The board of directors, in a regular orspecial meeting, shall consider and act onthe financial audit report and thecertification under oath submitted in lieuof the LOC and shall submit, within thirty(30) banking days after receipt of thereports, a copy of its resolution to theappropriate department of the SES. Theresolution shall show, among other things,the actions(s) taken on the reports and thenames of the directors present and absent.

The board shall likewise consider andact on the LOC and shall submit, within thirty(30) banking days after receipt thereof, acopy of its resolution together with said LOCto the appropriate department of the SES. Theresolution shall show the action(s) taken onthe findings and recommendations and, thenames of the directors present and absent,among other things.

The LOC shall be accompanied by thecertification of the external auditor of the dateof its submission to the board of directors.

NSSLAs under BSP supervision whichare under the concurrent jurisdiction of theCOA shall be exempt from theaforementioned annual financial audit by anacceptable external auditor: Provided, Thatwhen warranted by supervisory concernsuch as material weakness/breach ininternal control and/or risk managementsystems, the Monetary Board may, upon

recommendation of the appropriatedepartment of the SES, require the financialaudit to be conducted by an external auditoracceptable to the BSP, at the expense ofthe institution concerned: Provided further,That when circumstances such as, but notlimited to, loans from multilateral financialinstitutions, privatization, or public listingwarrant, the financial audit of the concernedinstitution by an acceptable external auditormay also be allowed.

NSSLAs under the concurrentjurisdiction of the BSP and COA shall,however, submit a copy of the AAR of theCOA to the appropriate department of theSES within thirty (30) banking days afterreceipt of the report by the board ofdirectors. The AAR shall be accompaniedby the: (1) certification by the institutionconcerned on the date of receipt of the AARby the board of directors; (2) reconciliationstatement between the AFS in the AAR andthe balance sheet and income statementof the NSSLA submitted to the BSP,including copies of adjusting entries on thereconciling items; and (3) other informationthat may be required by the BSP.

The board of directors of said institutions,in a regular or special meeting, shall considerand act on the AAR, as well as on thecomments and observations and shall submit,within thirty (30) banking days after receiptof the report, a copy of its resolution to theappropriate department of the SES. Theresolution shall show the action(s) taken onthe report, including the comments andobservations and the names of the directorspresent and absent, among other things.

NSSLAs as well as external auditors shallstrictly observe the requirements in thesubmission of the financial audit report andreports required to be submitted underAppendix Q-33.

The audited annual financial statementsrequired to be submitted shall in all respectbe PFRS/PAS compliant: Provided, ThatNSSLAs shall submit to the BSP adjusting

§ 4172S08.12.31


entries reconciling the balances in thefinancial statements for prudential reportingwith that in the audited annual financialstatements.

The reports and certifications ofinstitutions concerned, schedules andattachments required under this Subsectionshall be considered Category B reports,delayed submission of which shall be subjectto the penalties under Subsec. 4162S.3(As amended by Circular Nos. 554 dated 22 December 2006 and

540 dated 09 August 2006)

§ 4172S.1 Audited Financial Statementsof NSSLAs. The following rules shall governthe utilization and submission of AFS ofNSSLAs.

For purposes of this Section, AFS shallinclude the balance sheets, incomestatements, statements of changes in equity,statements of cash flows and notes to financialstatements which shall include among otherinformation, disclosure of the volume of pastdue loans as well as loan-loss provisions. Onthe other hand, financial audit report shallrefer to the AFS and the opinion of the auditor.The AFS of NSSLAs with subsidiaries shallbe presented side by side on a solo basis(parent) and on a consolidated basis (parentand subsidiaries).(Circular No. 540 dated 09 August 2006)

§ 4172S.2 Posting of audited financialstatements. NSSLAs shall post inconspicuous places in their head offices, alltheir branches and other offices, as well as intheir respective websites, their latest financialaudit report.(Circular No. 540 dated 09 August 2006)


Sec. 4180S Selection, Appointment andReporting Requirements for External Auditors;Sanction; Effectivity. Under Section 58, R.A.No. 8791, the Monetary Board may requirean NSSLA to engage the services of an

independent auditor to be chosen by theNSSLA concerned from a list of certifiedpublic accountants acceptable to theMonetary Board.

It is the policy of the BSP to promotehigh ethical and professional standards inpublic accounting practice and toencourage coordination and sharing ofinformation between external auditors andregulatory authorities of banks, QBs,NSSLAs, and/or trust entities to ensureeffective audit and supervision of theseinstitutions and to avoid unnecessaryduplication of efforts. In furtherance of thispolicy and to ensure that reliance byregulatory authorities and the public on theopinion of external auditors is well-placed,the BSP hereby prescribes the rules andregulations that shall govern the selection,appointment, reporting requirements anddelisting for external auditors of banks, QBs,NSSLAs, and/ or trust entities, theirsubsidiaries and affiliates engaged in alliedactivities and other FIs which under speciallaws are subject to BSP supervision.

The selection of external auditors shallbe valid for a period of three (3) years. BSPselected external auditors shall apply forthe renewal of their selection every threeyears.The provisions of Items “A” and “B”of Appendix S-8 shall likewise apply foreach application for renewal.

The SES shall make an annualassessment of the performance of externalauditors and will recommend deletion fromthe list even prior to the three (3) -yearrenewal period, if based on assessment,the external auditors’ report did not complywith BSP requirements.

External auditors who meet therequirements specified in this Section shallbe included in the list of BSP selectedexternal auditors. In case of partnership,inclusion in the list of BSP selected externalauditors shall apply to the audit firm onlyand not to the individual signing partnersor auditors under its employment.

§§ 4172S - 4180S08.12.31


The BSP will circularize to all banks,QBs, trust entities and NSSLAs the list ofselected external auditors once a year. TheBSP, however, shall not be liable for anydamage or loss that may arise from itsselection of the external auditors to beengaged by banks, QBs, trust entities orNSSLAs for regular audit or specialengagements.

a. Rules and regulations. The rules andregulations to govern the selection anddelisting by the BSP of external auditors ofNSSLAs and their subsidiaries and affiliatesengaged in allied activities are shown inAppendix S-8.

b. Sanctions. The applicable sanctions/penalties prescribed under Sections 36 and37 of R. A. No. 7653 to the extent applicableshall be imposed on the NSSLA, its auditcommittee and the directors approving thehiring of external auditors who are not inthe BSP list of selected auditors for banks,QBs, NSSLAs, and trust entities or forhiring, and/or retaining the services of theexternal auditor in violation of any of theprovisions of this Section and for non-compliance with the Monetary Boarddirective under Item “I” in Appendix S-8.Erring external auditors may also bereported by the BSP to the PRC forappropriate disciplinary action.(As amended by Circular No. 529 dated 11 May 2006)

L. MISCELLANEOUS PROVISIONS

Sec. 4181S Publication RequirementsNSSLAs shall, within 120 calendar daysafter the close of the calendar year or theirfiscal year, as the case may be, furnishthe Monetary Board and post in any ofthe NSSLAs’ bulletin boards or in anyother conspicuous place a copy of theirfinancial statements showing, in suchform and detail as the Monetary Boardshall require, the amount and characterof the assets and liabilities of the NSSLAsat the end of the preceding fiscal year.

The Monetary Board may, in addition tothe foregoing, require the disclosure ofsuch other information as it shall deemnecessary for the protection of themembers of the NSSLA.

The consolidated statements ofcondition of an NSSLA and its subsidiariesand associates shall conform with theguidelines of PAS 27 “Consolidated andSeparate Financial Statements”, except thatfor purposes of consolidated financialstatements, only investments in financialallied subsidiaries except insurancesubsidiaries shall be consolidated on aline-by-line basis; while insurance andnon-financial allied subsidiaries shall beaccounted for using the equity method.Financial/non-financial allied/non-alliedassociates shall be accounted for using theequity method in accordance with theprovisions of PAS 28 “Investments inAssociates”. For purposes of separatefinancial statements, investments infinancial/non-financial allied/non-alliedsubsidiaries/associates, including insurancesubsidiaries/associates, shall be accountedfor using the equity method.(As amended by Circular No. 494 dated 20 September 2005)

Sec. 4182S Business Name1. NSSLAsorganized or operating under R.A. No.8367 and licensed by the BSP shall includein their names the words “Savings and LoanAssociation”. Such NSSLAs shall display ina conspicuous place at their business officesa sign including, among other things, thefollowing words: “Authorized by the BangkoSentral ng Pilipinas”.(As amended by CL Nos. 2008-053 dated 21 August 2008 and

2008-007 dated 05 February 2008)

Sec. 4183S Prohibitionsa. No person, association, partnership

or corporation shall do business as anNSSLA, or shall use the terms “Savings andLoan Association” or any other title orname tending to give the public impression

§§ 4180S - 4183S08.12.31


1 See SEC Circular Nos. 5 dated 17 July 2008 and 14 dated 24 October 2000

that it is engaged in the operations andactivities of an NSSLA unless so authorizedunder R.A. No. 8367 and these regulations.

b. The use by an NSSLA of any othername or title or combination of names andtitles or any other deviation from therequirements of this Section shall not beauthorized except upon prior approval of theMonetary Board.

c. NSSLAs shall not issue, publish orcause or permit to be issued or published,any advertisement that it is doing orpermitted to do business which is prohibitedby law to an NSSLA.

d. No NSSLA shall advertise orrepresent itself to its members or to the publicas a bank, or as a trust company.


Sec. 4190S Duties and Responsibilitiesof NSSLAs and their Directors/Officersin All Cases of Outsourcing of NSSLAFunctions. The rules on outsourcing ofbanking functions as shown in AppendixQ-37 shall be adopted in so far as theyare applicable to NSSLAs.(As amended by Circular Nos. 610 dated 26 May 2008,

596 dated 11 January 2008, 548 dated 25 September

2006 and 543 dated 08 September 2006)


Sec. 4192S Prompt Corrective ActionFramework. The framework for theenforcement of PCA on banks which is inAppendix Q-40 shall govern the PCA takenon NSSLAs to the extent applicable, or byanalogy.(Circular No. 523 dated 31 March 2006)

Sec. 4193S Supervision by Risks. Theguidelines on supervision by risk inAppendix Q-42 which prov ideguidance on how QBs should identify,measure, monitor and control risks

shall govern the supervision by risks ofNSSLAs to the extent applicable.

The guidelines set forth theexpectations of the BSP with respect tothe management of risks and are intendedto provide more consistency in how therisk-focused supervision function isapplied to these risks. The BSP will reviewthe risks to ensure that an NSSLA’sinternal risk management processes areintegrated and comprehensive. AllNSSLAs should follow the guidance in riskmanagement efforts.(Circular No. 510 dated 03 February 2006)

Sec. 4194S Market Risk ManagementThe guidelines on market r iskmanagement for QBs as shown inAppendix Q-43 shall govern the marketrisk management of NSSLAs to the extentapplicable.

The guidelines set forth theexpectations of the BSP with respect tothe management of market risk and areintended to provide more consistency inhow the risk-focused supervision isapplied to this risk. NSSLAs are expectedto have an integrated approach to riskmanagement to identify, measure,monitor and control risks. Market riskshould be reviewed together with otherrisks to determine overall risk profile.

The BSP is aware of the increasingdiversity of financial products and thatindustry techniques for measuring andmanaging market risk are continuouslyevolving. As such, the guidelines areintended for general application; specificapplication will depend to some extent onthe size, complexity and range of activitiesundertaken by NSSLAs.(Circular No. 544 dated 15 September 2006)

Sec. 4195S Liquidity Risk Management.The guidelines on liquidity riskmanagement for QBs as shown in

§§ 4183S - 4195S08.12.31


Appendix Q-44 shall govern the liquidityrisk management of NSSLAs to theextent applicable.

The guidelines set forth theexpectations of the BSP with respect tothe management of liquidity risk and areintended to provide more consistency inhow the risk-focused supervisionfunction is applied to this risk. NSSLAsare expected to have an integratedapproach to risk management to identify,measure, monitor and control risks.Liquidity risk should be reviewedtogether with other risks to determineoverall risk profile.

These guidelines are intended forgeneral application; specific applicationwill depend on the size and sophisticationof a particular NSSLA and the nature andcomplexity of its activities.(Circular No. 545 dated 15 September 2006)


Sec. 4199S General Provision onSanctions. Unless otherwise provided, anyviolation of the provisions of this Part shallbe subject to the sanctions provided inSections 34, 35, 36 and 37 of R.A. No. 7653,whenever applicable.

§§ 4195S - 4199S 08.12.31


Manual of Regulations for Non-Bank Financial Institutions S RegulationsPart II - Page 1

08.12.31

A. DEMAND DEPOSITS

Section 4201S Checking Accounts. NoNSSLA shall have or carry upon its booksfor any person any demand, commercialor checking account, or any credit to bewithdrawn upon the presentation of anynegotiable check or draft.


B. SAVINGS DEPOSITS

Sec. 4206S Definition. Savings depositsare deposits evidenced by a passbookconsisting of funds deposited to the creditof one (1) or more individuals with respectto which the depositor may withdrawanytime, unless prior notice in writing ofan intended withdrawal is required by theNSSLA.

Sec. 4207S Minimum Deposit. Savingsdeposits with NSSLAs may be openedwith a minimum deposit of P100.

Sec. 4208S Withdrawals. Withdrawalfrom a savings deposit shall be madethrough the presentation to the NSSLA ofa duly accomplished withdrawal sliptogether with the depositor’s passbook.

NSSLAs shall reserve the right torequire the depositor to give prior writtennotice of withdrawal of not more than thirty(30) days.

NSSLAs may limit the number ofwithdrawals that a depositor may make:Provided, That the number of thewithdrawals allowed shall not be less thanthree (3) times a month. A service chargeto be determined by the board of trusteesof the NSSLA and approved by the BSP,

§§ 4201S - 4240S

may be charged by the NSSLA for everywithdrawal made in excess of the maximumnumber allowed in any one (1) month.

Sec. 4209S Dormant Savings DepositsNSSLAs may charge a fee, the amount ofwhich shall be approved by the BSP forthe maintenance of dormant savingsdeposits. Savings deposit shall be classifiedas dormant if no deposit or withdrawal hasbeen made for the last two (2) years.


C. (RESERVED)


D. TIME DEPOSITS


Sec. 4222S Minimum Term and Size ofTime Deposits

a. Term - No time deposit shall beaccepted for a term of less than thirty (30)days.

b. Minimum Size - NSSLAs shall notrequire a minimum amount of timedeposit greater than P1,000.

Sec. 4223S Withdrawals of TimeDeposits. The withdrawal of a timedeposit can be made only by presentationof the certificate of time deposit on theday of or after its maturity.


E. - F. (RESERVED)


PART TWO

DEPOSIT AND BORROWING OPERATIONS

Manual of Regulations for Non-Bank Financial InstitutionsS RegulationsPart II - Page 2

08.12.31§§ 4241S - 4261S.5

G. INTEREST ON DEPOSITS

Sec. 4241S Interest on Savings DepositsSavings deposits of NSSLAs shall not besubject to any interest rate ceiling.

Sec. 4242S Interest on Time DepositsInterest on time deposits shall not be subjectto any interest rate ceiling.

§ 4242S.1 Time of payment. Intereston time deposits may be paid at maturityor upon withdrawal or in advance:Provided, however, That interest paid inadvance shall not exceed the interest forone (1) year.

§ 4242S.2 Treatment of maturedtime deposits. A time deposit notwithdrawn or renewed on its due date shallbe treated as a savings deposit and shallearn an interest from maturity to the dateof actual withdrawal or renewal at a rateapplicable to savings deposits.

Secs.4243S - 4250S (Reserved)

H. (RESERVED)


I. SUNDRY PROVISIONS ON DEPOSIT OPERATIONS

Sec. 4261S Opening and Operation ofDeposit Accounts. The following are basicprovisions on the opening and operation ofdeposit accounts of NSSLAs.

§ 4261S.1 Who may open depositaccounts. Only members who havecontributed P1,000 or more to the capitalof the NSSLA may open deposit accountswith NSSLAs. A natural person, althoughlacking capacity to contract, maynevertheless open a savings or time

deposit account for himself, provided hehas sufficient discretion. However, hecannot withdraw therefrom, exceptthrough, or with the assistance of a guardianauthorized to act for him. Parents maydeposit for their minor children, andguardians for their wards.

Notwithstanding the provisions of thepreceding paragraph, the cashier,bookkeeper and their assistants, and otheremployees of an NSSLA whose duties entailthe handling of cash or checks are prohibitedfrom opening savings deposit accounts withthe head office or branch of the NSSLA inwhich they are assigned as such.

§ 4261S.2 Identification of member-depositors. NSSLAs shall be responsiblefor the proper identification of theirmember-depositors.

§ 4361S.3 Number of deposit accountsA member-depositor may open and havemore than one (1) savings deposit in hisown name in the same capacity, and hemay open and have various deposits indifferent capacities such as guardian, agent,or trustee for others.

§ 4261S.4 Signature card. A signaturecard bearing at least three (3) specimensignatures of each member-depositor shallbe required upon opening of a depositaccount.

§ 4261S.5 Passbook and certificateof time deposit. A savings depositpassbook, signed by the receiving teller andan authorized officer, shall be issued to amember-depositor showing, among otherthings, his name and address, accountnumber, date, amount of deposit, interestcredits and balance. NSSLAs shall pre-number their savings deposit passbooks. Inthe case of a time deposit, a certificate oftime deposit signed by two (2) authorizedofficers, shall be issued to the member-

Manual of Regulations for Non-Bank Financial Institutions S RegulationsPart II - Page 3

08.12.31§§ 4261S.5 - 4299S

depositor containing, among other things,his name, amount of deposit, date whenthe deposit was made, its due date andinterest rate.

§ 4261S.6 Deposits in checks andother cash items. Checks and other cashitems may be accepted for deposit byNSSLAs: Provided, That withdrawalsfrom such deposits shall not be made untilthe check or other cash item is collected.


J. (RESERVED)


K. OTHER BORROWINGS

Sec. 4286S Borrowings. An NSSLA mayborrow money or incur such obligation upto not more than twenty percent (20%) ofthe total assets of the NSSLA, from any

public lending institution, and from privatebanking institutions, and such privatelending institutions as may be approvedby the Monetary Board: Provided, Thatthe proceeds of such loan shall be usedexclusively to meet the normal creditrequirements of its members. TheMonetary Board may, in meritoriouscases, raise the ceiling on the borrowingcapacity of an NSSLA to not more thanthirty percent (30%) of its total assets.NSSLAs organized by employees of anentity or a corporation may borrow fundsfrom said entity or corporation, but notvice-versa.


Sec. 4299S General Provision onSanctions. Unless otherwise provided,any violation of the provisions of this Partshall be subject to the sanctions providedin Sections 34, 35, 36 and 37 of R.A. No.7653, whenever applicable.

Manual of Regulations for Non-Bank Financial Institutions S RegulationsPart III - Page 1

A. LOANS IN GENERAL

Section 4301S Authority; Loan Limits;Maturity of Loans. The board of trusteesof NSSLAs shall prescribe their own rulesand regulations governing creditoperations of the NSSLAs within theframework of the terms and conditionsembodied in this Section.

a. Loan limit to a single borrower. AnNSSLA may grant loans not exceeding theamount deposited and/or contributed by themember-borrower plus his twelve (12)months salary or retirement pension fromhis employment, or up to seventy percent(70%) of the fair market value of any propertyacceptable as collateral on first mortgage thathe may put up by way of security: Provided,That direct indebtedness to an NSSLA of anymember-borrower for money borrowedwith the exception of money borrowedagainst obligations of the BSP or of thePhilippine Government, or borrowed withthe full guarantee of the PhilippineGovernment in the payment of principaland interest, shall not exceed fifteenpercent (15%) of the unimpaired capitaland surplus of the NSSLA.

For purposes of this Section, regularincome of persons who are self-employedshall be their average monthly incomeduring the twelve (12)-month periodimmediately preceding the date of loanapplication.

b. Limitations on lending authority.NSSLAs shall not commit to make anyloan for amounts in excess of the total ofthe following amounts:

(1) Amount of cash available for loanpurposes;

(2) Amount of cash which can bereadily realized upon the sale or

§§ 4301S - 4302S08.12.31

PART THREE

LOANS AND INVESTMENTS

redemption of permissible investmentsmade by NSSLAs; and

(3) Amount of credit available for loanpurposes from government or private FIs.

c. Maximum loan maturity. No loangranted by NSSLAs shall have a maturitydate of more than five (5) years except loanson the security of unencumbered real estatefor the purpose of home building and homedevelopment which may be granted withmaturities not exceeding twenty-five (25)years and medium or long-term loans tofinance agricultural projects.

Sec. 4302S Basic Requirements inGranting Loans

a. Application. A member-borrowerapplying for a loan must submit an applicationstating the purpose of the loan and such otherinformation as may be required by theNSSLA. The loan application and otherrequired documents shall form part of creditinformation file of the member-borrower inthe NSSLA.

b. Credit investigation. No loan shallbe approved unless prior investigation hasbeen made to determine the credit standingof the applicant and/or the fair market valueof the property offered as security and thereport thereon shall be made part of the loanapplication: Provided, however, That thisrequirement may be waived by an NSSLAin the case of permanent employee or wageearner who is borrowing an amount notexceeding his deposit plus his twelve (12)months regular salary or retirement pension.

c. Credit information file/collateralfile. An NSSLA shall maintain as far aspracticable, a credit information file whichmust contain, among other things, themember-borrower’s application and financialrecord. Other information relative to the

Manual of Regulations for Non-Bank Financial InstitutionsS RegulationsPart III - Page 2

§§ 4302S - 4305S.508.12.31

member-borrower, where applicable, shallalso be maintained which must containamong other things, the collateral and otherdocuments pertinent to the loan.

d. Loan approvals. Loans shall beapproved by the NSSLA’s board of trusteesor if approved by a body or officer/s dulyauthorized by the board, such loan mustbe confirmed by the board of trustees.

e. Loan agreements. For each loangranted by an NSSLA, a promissory notemust be executed by the member-borrowerin favor of the NSSLA expressing suchparticulars as the amount of the loan, dategranted, due date, interest rate and othersimilar information.

f. Inscription of lien. In case ofmortgage loans, no release against anapproved loan shall be made before theinscription of the mortgage.

Sec. 4303S Loan Proceeds. NSSLAs shallin no case require member-borrowers todeposit a portion of the loan proceeds,whether in the form of savings or timedeposits. Where, subsequent to the releaseof the loan proceeds, member-borrowersopen deposit accounts or make additionaldeposits to their existing accounts, no partof such new deposits shall be covered by astipulation prohibiting or limiting withdrawalwhile new portion of their loans areoutstanding: Provided, however, That thisprohibition shall not apply in cases of loanssecured by a hold-out on deposits to theextent of the unencumbered amount of thedeposit existing at the time of the filing ofthe above-mentioned loan application.

Sec. 4304S Loan Repayment. The treasurer,cashier or paymaster of the firmemploying a member-borrower shall berequired, pursuant to R.A. No. 8367, tomake deductions from the salary, wage,income or retirement pension of themember-borrower in accordance with theterms of his loan, and all other deductionsauthorized by the member-borrower, to

remit such deductions to the NSSLAconcerned and to collect such reasonable feefor his services as may be authorized byrules promulgated by the Monetary Board.

Sec. 4305S Interest and Other Charges.The following rules shall govern the ratesof interest and other charges on loansgranted by NSSLAs.

§§ 4305S.1 - 4305S.2 (Reserved)

§ 4305S.3 Interest in the absence ofcontract. In the absence of expresscontract, the rate of interest for the loan orforbearance of any money, goods or creditand the rate allowed in judgment shall betwelve percent (12%) per annum.

§ 4305S.4 Escalation clause; whenallowable. Parties to an agreementpertaining to a loan or forbearance ofmoney, goods or credits may stipulatethat the rate of interest agreed upon maybe increased in the event that theapplicable maximum rate of interest isincreased by the Monetary Board:Provided, That such stipulations are validonly if there is also a stipulation in theagreement that the rate of interest agreedupon shall be reduced in the event thatthe applicable maximum rate of interestis reduced by law or by the MonetaryBoard: Provided, further, That theadjustment in the rate of interest agreedupon shall take effect on or after theeffectivity of the increase or decrease inthe maximum rate of interest.

§ 4305S.5 Interest accrual on pastdue loans. NSSLAs shall not accrueinterest income on loans which are alreadypast due or on loan installments which arein arrears, regardless of whether the loansare secured or unsecured. Interest on pastdue loans or loans installments in arrearsshall be taken up as income only whenactual payments thereon are received.


§§ 4305S.5 - 4306S.308.12.31

Interest income on past due loan arisingfrom discount amortization (and not fromthe contractual interest of the account) shallbe accrued as provided in PAS 39.(As amended by Circular No. 494 dated 20 September 2005)

Sec. 4306S Past Due Accounts. Past dueaccounts of an NSSLA shall, as a generalrule, refer to all accounts which are not paidat maturity.

§ 4306S.1 Accounts considered pastdue. The following shall be considered aspast due:

a. A loan or receivable payable ondemand not paid upon written demand asrequired herein or within one (1) year fromdate of grant or renewal, whichever comesearlier.

NSSLAs shall, in case of non-paymentof a demand loan, make a written demandwithin six (6) months following the grantof such loan. The demand shall indicate aperiod of payment which shall not be laterthan six (6) months from date of saiddemand.

b. The total outstanding balance of a loanor receivable payable in installments, inaccordance with the following schedules: Mode of Payment Installments in Arrears

Monthly 6 or more Quarterly 2 or more Semestral 1 or more Annual 1 or more

Provided, however, That when the totalamount of arrearages reaches twentypercent (20%) of the total outstandingbalance of the loan, the entire totaloutstanding balance of the loan shall beconsidered as past due, irrespective of thenumber of installments in arrears: Provided,further, That the modes of payment otherthan those listed above (e.g., daily, weeklyor semi-monthly), the entire outstandingbalance of the loan/receivable shall beconsidered as past due when the totalamount of arrearages reaches ten percent(10%) of the total loan/receivable balance;

c. Any due and unpaid loaninstallment or portion hereof, from the timethe obligor defaults for the purpose ofobligations as defined in Sec. 4143S(d); and

d. All items in litigation as defined inthe Manual of Accounts for NSSLAs.

§ 4306S.2 Extension/renewal of loansExtension of the period of payment of loansmay be allowed under the followingcircumstances:

a. For production loans, the extensionshall not exceed one-half (1/2) of the originalperiod: Provided, That thirty percent (30%)of the loan shall have been paid. A secondextension shall not exceed one-half (1/2) ofthe period of the first extension; and

b. For consumer loans, the extensionshall not exceed one-half (1/2) of theoriginal period: Provided, That thirty percent(30%) of the loan shall have been paid.

Loans payable in periodic installmentsmay be renewed for the full amount ofloans: Provided, That at least thirty percent(30%) of the loan shall have been paid.

§ 4306S.3 Write-off of loans as baddebts. To maximize the protection ofmembers of NSSLAs against misfeasanceand malfeasance of the trustees and officersthereof, the Monetary Board adopted thefollowing regulations on writing-off of loansby NSSLAs.

a. The term loan shall include all typesof credit accommodations granted to, andadvances made by the NSSLA for theaccount of the borrowers/debtors, includingthe interest thereon recorded in the books.

b. Writing-off of loans by an NSSLAshall be made not more than twice a yearby its board of trustees; and

c. Notice/application for write-off ofloans shall be submitted, in the prescribedform to the appropriate department of theSES at least thirty (30) days prior to theintended date of write-off: Provided, Thatno such loans with an aggregate outstandingamount of P15,000 or more, as certified in


said notice/application, shall be written-offwithout the prior approval of:

(1) The Monetary Board, in case ofloans to trustees and officers of the NSSLA,direct or indirect; or

(2) The head of the appropriatedepartment of the SES, subject toconfirmation by the Monetary Board, incase of loans other than those mentionedin Item “(1)” above.

§ 4306S.4 Updating of informationprovided to credit information bureausNSSLAs which have provided adverseinformation, such as the past due orlitigation status of loan accounts, to creditinformation bureaus, or any organizationperforming similar functions, shall submitmonthly reports to these bureaus ororganizations on the full payment orsettlement of the previously reportedaccounts within five (5) business days fromthe end of the month when such fullpayment was received. For this purpose,it shall be the responsibility of thereporting NSSLAs to ensure that theirdisclosure of any information about theirborrowers/clients is with the consent ofborrowers concerned.(Circular No. 589 dated 18 December 2007)

Sec. 4307S “Truth in Lending Act”Disclosure Requirements. NSSLAs arerequired to strictly adhere to the provisionsof R. A. No. 3765, otherwise known asthe “Truth in Lending Act,” and shall makethe true and effective cost of borrowing anintegral part of every loan contract.

a. Transactions covered(1) Any loan, mortgage, deed of trust,

advance and discount;(2) Any conditional sales contract, any

contract to sell, or sale or contract of saleof property or services, either for presentor future delivery, under which, part or allof the price is payable subsequent to themaking of such sale or contract;

(3) Any option, demand, lien, pledge,or other claim against, or for delivery of,property or money;

(4) Any purchase, or other acquisitionof, or any credit upon the security of anyobligation or claim arising out of any ofthe foregoing; and

(5) Any transaction or series oftransactions having a similar purpose oreffect.

b. Transactions not coveredConsidering that the specific purpose

of the law is the full disclosure of the truecost of credit, the following categories ofcredit transactions are outside the scopeof the above regulations:

(1) Credit transactions which do notinvolve the payment of any finance chargeby the debtor; and

(2) Credit transactions in which thedebtor is the one specifying a definite andfixed set of credit terms such as bank deposits,insurance contracts, sale of bonds, etc.

§ 4307S.1 Definition of termsa. Creditor (who shall furnish the

information) means any person engagedin a finance charge.

The term creditor shall include, but shallnot be limited to, banks and bankinginstitutions, insurance and bondingcompanies, savings and loan associations,credit unions, financing companies,installment houses, real estate dealers,lending investors, pawnshops, and anyother person or entity engaged in thebusiness of extending credit who requiresas an incident to the extension of credit,the payment of a finance charge.

b. Person means any individual,corporation, partnership, NSSLA, or otherorganized group of persons, or the legalsuccessor or representative of the foregoing,and includes the Philippine Government orany agency thereof, or any othergovernment, or any of its politicalsubdivisions, or any agency of the foregoing.

§§ 4306S.3 - 4307S.108.12.31


c. Cash price or delivered price (incase of trade transactions) is the amount ofmoney which would constitute fullpayment upon delivery of the property(except money) or service purchased at thecreditor’s place of business. In the case offinancial transactions, cash price representsthe amount of money received by thedebtor upon consummation of the credittransaction, net of finance chargescollected at the time the credit isextended(if any).

d. Down payment represents the amountpaid by the debtor at the time of thetransaction in partial payment for theproperty or service purchased.

e. Trade-in represents the value of anasset, agreed upon by the creditor anddebtor, given at the time of the transactionin partial payment for the property orservice purchased.

f. Non-finance charges correspond tothe amounts advanced by the creditor foritems normally associated with theownership of the property or of theavailment of the service purchased whichare not incident to the extension of credit.For example, in the case of the purchaseof an automobile on credit, the creditormay advance the insurance premium aswell as the registration fee for the accountof the debtor.

g. Amount to be financed consists ofthe cash price plus non-finance charges lessthe amount of the down payment and valueof the trade-in.

h. Finance charge represents theamount to be paid by the debtor incidentto the extension of credit such as interestor discounts, collection fees, creditinvestigation fees, attorney’s fees, andother service charges. The total financecharge represents the difference between(i) the aggregate consideration (downpayment plus installments) on the part of

the debtor, and (ii) the sum of the cash priceand non-finance charges.

i. Simple annual rate is the uniformpercentage which represents the ratio, onan annual basis, between the financecharges and the amount to be financed.

In the case of single payment uponmaturity, the simple annual rate (R) inpercent is determined by the followingmethod:

finance charge 12R = amount to x maturity period x 100

be financed in months

In the case of the normal installmenttype of credit of at least one (1) year induration, where installment payments ofequal amount are made in regular timeperiods spaced not more than one (1) yearapart, R in percent is computed by thefollowing method: No. of payments

finance charge in a yearR = 2 x amount to x total number x 100

be financed of payments plus one

In cases where the credit matures in lessthan one (1) year [e.g., installment paymentsare required every month for six (6) months],the same formula will apply except that thenumber of payments in a year would referto the number of installment periods, asdefined in the credit contract, as if the creditmatures in one (1) year. For example, thenumber of payments in a year would betwelve (12) for this purpose in cases wheresix (6) monthly installment payments arecalled for in the credit transaction1.

In cases where credit terms provide forpremium or penalty charges depending on,say, the timelines of the debtor’s payments,the annual rate to be disclosed in writing shallbe the rate for regular payments, i.e., thepremium and penalty need not be taken intoaccount in the determination of the annual

§ 4307S.108.12.31

1 This can be determined by dividing twelve (12), the number of months in a year, by the number or fraction of monthsbetween installment payments.


rate. Such premium or penalty charges shall,however, be indicated in the credit contract.

§ 4307S.2 Information to be disclosedNSSLAs shall furnish to each person towhom credit is extended, prior to theconsummation of the transaction, a clearstatement in writing setting forth thefollowing information to be disclosed.

a. The cash price or delivered priceof the property or service to be acquired;

b. The amounts, if any, to be creditedas down payment and/or trade-in;

c. The difference between theamounts set forth under Items “a” and “b”;

d. The charges, individually itemized,which are paid or to be paid by such personin connection with the transaction but whichare not incident to the extension of credit;

e. The total amount to be financed;f. The finance charges expressed in

terms of pesos and centavos; andg. The percentage that the finance charge

bears to the total amount to be financedexpressed as a simple annual rate on theoutstanding unpaid balance of the obligation.

The contract covering the credittransaction, or any other document to beacknowledged and signed by the debtor,shall indicate the above seven (7) items ofinformation. In addition, the contract ordocument shall specify additional charges,if any, which will be collected in casecertain stipulations in the contract are notmet by the debtor.

In case the seven (7) items ofinformation mentioned in this Subsectionare not disclosed in the contract coveringthe credit transaction, said items to theextent applicable, shall be disclosed inanother document in the form (AppendixS-4) prescribed by the Monetary Board, tobe signed by the debtor and appended tothe main contract. A copy of the disclosurestatement shall be furnished the borrower.

§ 4307S.3 Inspection of contractscovering credit transactions. NSSLAs shallkeep in their office or place of business copiesof contracts covering all credit transactionsentered into by them which involve theextension of credit to another and thepayment of finance charges therefor. Suchcopies shall be available for inspection orexamination by the appropriatedepartment of the SES.

§ 4307S.4 Posters. An abstract ofR.A. No. 3765 (Appendix S-5) shall bereproduced in a format which is sixty (60)cm. wide and seventy-five (75) cm. long,and posted on a conspicuous place in theNSSLAs’ place(s) of business.

§ 4307S.5 Penal provisionsa. NSSLAs which in connection with

any credit transaction fail to disclose to anyperson any information in violation of thisSection or any regulation issued hereaftershall be liable to such person in the amountof P100 or in an amount equal to twice thefinance charge required by such NSSLAsin connection with such transactions,whichever is the greater, except that suchliability shall not exceed P2,000 on anycredit transaction. Action to recover suchpenalty may be brought by such personwithin one (1) year from the date of theoccurrence of the violation, in any court ofcompetent jurisdiction. In any action underthis Subsection in which any person isentitled to a recovery, the NSSLAs shallbe liable for reasonable attorney’s fees andcourt costs as determined by the court.

b. Except as specified in Item “a”above, nothing contained in this rule shallaffect the validity or enforceability of anycontract or transaction.

c. Any person who willfully violatesany provision of this Section or regulationissued hereafter shall be fined by not less

§§ 4307S.1 - 4307S.508.12.31


than P1,000 nor more than P5,000 orimprisonment for not less than six (6) months,nor more than one (1) year or both.

d. No punishment or penaltyprovided by this Section shall apply to thePhilippine Government or any agency orany political subdivision thereof.


Sec. 4312S Grant of Loans and OtherCredit Accomodations. (Deleted by Circular

No. 622 dated 16 September 2008)

§ 4312S.1 General guidelines. (Deleted

by Circular No. 622 dated 16 September 2008)

§§ 4312S.2 - 4312S.3 (Reserved)

§ 4312S.4 Signatories. (Deleted by

Circular No. 622 dated 16 September 2008)


B. SECURED LOANS

Sec. 4321S Kinds of Security. Loans byan NSSLA may be secured by any or all ofthe following:

a. Mortgages on registered real estate;b. Chattel mortgages on harvested or

stored crops of non-perishable character;c. Chattel mortgages on livestock,

tools, equipment or machinery, suppliesor materials, merchandise and otherpersonal properties;

d. Assignment of quedans whichgives the right of disposal of readilymarketable products;

e. Time and/or savings deposits and/orcapital contribution;

f. Pledge of bonds, stock and othersecurities of the GOCC and other bonds,stocks or securities which are non-speculativein nature;

g. Land transfer certificates issued bythe government to tenant farmers, underthe agrarian reform program to the extent

of sixty percent (60%) of the value of thefarm holdings: Provided, That acertification shall be first secured from theoffice of the Registry of Deeds to the effectthat the Land Transfer Certificate beingpresented is valid; and

h. Other securities as may beapproved by the Monetary Board.


C. - D. (RESERVED)


E. LOANS/CREDITACCOMMODATIONS TO TRUSTEES,

OFFICERS, STOCKHOLDERS ANDTHEIR RELATED INTERESTS

Sec. 4356S General Policy. The transactionsof all trustees or officers with the NSSLAshall not be under terms more favorablethan those transacted with other members.

Sec. 4357S Direct/Indirect Borrowings;Ceilings. No NSSLA shall directly orindirectly make any loan to any trustee orofficer of such NSSLA, either for himself oras agent or as partner of another, except withthe written approval of the majority of thetrustees of the NSSLA, excluding the trusteeconcerned: Provided, That the aggregateloans to such trustees and officers shall notexceed twenty percent (20%) of the totalcapital contributions of the NSSLA.

Sec. 4358S Records; Reports. In all casesof accommodations granted to trustees andofficers under Sec. 4357S, the writtenapproval of the majority of the trustees ofthe NSSLA, excluding the trusteeconcerned, shall be entered upon therecords of the NSSLA and a copy of suchentry shall be transmitted forthwith to theappropriate department of the SES withintwenty (20) business days from the date ofapproval.

§§ 4307S.5 - 4358S08.12.31



Sec. 4370S Sanctions. The office of any trusteeor officer of an NSSLA who violates theprovisions of these rules on accommodationsgranted to trustee and officers shallimmediately become vacant and said trusteesor officer shall be punished by imprisonmentof not more than one (1) year nor more thanten (10) years and by a fine of not less thanP5,000 nor more than P50,000 pursuant toSection 15 of R.A. No. 8367.

F. - I. (RESERVED)


J. OTHER OPERATIONS

Sec. 4391S Fund Investments. An NSSLAmay invest its funds in any or all of thefollowing:

a. In bonds and securities in anaggregate amount not exceeding ten percent(10%) of its total assets; any investment inexcess of ten percent (10%) shall require theprior approval of the BSP: Provided, ThatNSSLAs may invest available funds in excessof ten percent (10%) of total assets in soundnon-speculative enterprise, particularly inreadily marketable and high gradecommercial papers, bonds and securitiesissued by the Government of the Philippinesor any of its political subsidiaries,instrumentalities or corporations includingGOCCs, subject to the following conditions:

(1) The credit needs of the membersshall be served/satisfied first;

(2) The investment in any one (1)corporation (excluding the Government ofthe Philippines, any of its politicalsubdivisions, instrumentalities, orcorporations including GOCCs), shall notexceed twenty-five percent (25%) of theNSSLA’s combined capital accounts; and

(3) The additional investment may be upto another ten percent (10%) of the NSSLA’stotal assets;

b. In real property, in an aggregateamount not exceeding at any one time fivepercent (5%) of the total assets of suchNSSLA; and

c. In furniture, fixtures, furnishings andequipment, and leasehold improvements forits offices, in amount not exceeding at anyone time ten percent (10%), of its total capitalcontribution.

§§ 4391S.1 - 4391S.2 (Reserved)

§ 4391S.3 Investments in debt andmarketable equity securities. Theclassification, accounting procedures,valuation, sales and transfers ofinvestments in debt securities andmarketable equity securities shall be inaccordance with the guidelines inAppendices Q-20 and Q-20-a.

Penalties and sanctions. Thefollowing penalties and sanctions shallbe imposed on FIs and concernedofficers found to violate the provisionsof these regulations:

a. Fines of P2,000/banking day to beimposed on NSSLAs for each violation,reckoned from the date the violation wascommitted up to the date i t wascorrected; and

b. Sanctions to be imposed onconcerned officers:

(1) First offense – reprimand theofficers responsible for the violation; and

(2) Subsequent offenses–suspension-of ninety (90) days without pay for officersresponsible for the violation.(Circular No. 476 dated 16 February 2005 as amended by

Circular Nos. 628 dated 31 October 2008 and 626 dated

23 October 2008)

§§ 4391S.4 - 4391S.10 (Reserved)


K. MISCELLANEOUS PROVISIONS


§§ 4359S - 4398S08.12.31


Sec. 4399S General Provision onSanctions. Unless otherwise provided,any violation of the provisions of this

Part shall be subject to the sanctionsprovided in Sections 34, 35, 36 and 37of R.A. No. 7653, whenever applicable.

§ 4399S 08.12.31

Manual of Regulations for Non-Bank Financial Institutions

08.12.31

S RegulationsPart IV - Page 1

§§ 4401S - 4499S

PART FOUR

Sections 4401S - 4499S (Reserved)


08.12.31

S RegulationsPart V - Page 1

PART FIVE

Sections 4501S - 4599S (Reserved)

§§ 4501S - 4599S

Manual of Regulations for Non-Bank Financial Institutions S RegulationsPart VI - Page 1

§§ 4601S - 4601S.108.12.31

PART SIX

MISCELLANEOUS

A. OTHER OPERATIONS

Sec. 4601S Fines and Other Charges. Thefollowing regulations shall governimposition of monetary penalties onNSSLAs, their trustees and/or officers andpayment of such penalties or fines andother charges by NSSLAs.(As amended by Circualr No. 585 dated 15 October 2007)

§ 4601S.1 Guidelines on theimposition of monetary penalties;Payment of penalties or fines. Thefollowing are the guidelines on theimposition of monetary penalties onNSSLAs, their trustees and/or officers andthe payment of such penalties or fines andother charges by NSSLAs:

a. Definition of terms. For purposesof the imposition of monetary penalties,the following definitions are adopted:

(1) Continuing offenses/violations areacts, ommisions or transactions enteredinto, in violation of laws, BSP rules andregulations, Monetary Board directives,and orders of the Governor which persistfrom the time the particular acts werecommitted or omitted or the transactionswere entered into until the same werecorrected/rectified by subsequent acts ortransactions. They shall be penalized on aper calendar day basis from the time theacts were committed/omitted or thetransactions were effected up to the timethey were corrected/rectified.

(2) Transactional offenses/violationsare acts, omissions or transactions enteredinto in violation of laws, BSP rules andregulations, Monetary Board directives,and orders of the Governor which cannotbe corrected/rectified by subsuquent actsor transactions. They shall be meted with

one (1)-time monetary penalty on a pertransaction basis.

(3) Continuing penalty refers to themonetary penalty imposed on continuingoffenses/violations on a per calendar daybasis reckoned from the time the offense/violation occurred or was committed untilthe same was corrected/rectified.

(4) Transactional penalty refers to aone (1)-time penalty imposed on atransactional offense/violation.

b. Basis for the computation of theperiod or duration of penalty. Thecomputation of the period or duration ofall penalties shall be based on calendardays.

For this purpose the terms “per bankingday”, “per business day”, “per day” and/or “a day” as used in this Manual, and otherBSP rules and regulations shall mean “percalendar day” and/or “calendar day” as thecase may be.

c. Additional charge for late paymentof monetary penalty. Late payment ofmonetary penalty shall be subject to anadditional charge of six percent (6%) perannum to be computed from the time saidpenalty becomes due and payable up tothe time of actual payment.

d. Appeal or request forreconsideration. A one (1)-time appeal orrequest for reconsideration on themonetary penalty approved by theGovernor/Monetary Board to be imposedon the NSSLA, its directors and/or officersshall be allowed: Provided, That the sameis filed with the appropriate department ofthe SES within fifteen (15) calendar daysfrom receipt of the Statement of Account/billing letter. The appropriate departmentof the SES shall evaluate the appeal orrequest for reconsideration of the NSSLA/

Manual of Regulations for Non-Bank Financial InstitutionsS RegulationsPart VI - Page 2

§§ 4601S.1 - 4631S08.12.31

individual and make recommendationsthereon within thirty (30) calendar daysfrom receipt thereof. The appeal or requestfor reconsideration on the monetarypenalty approved by the Governor/Monetary Board shall be elevated to theMonetary Board for resolution/decision.The running of the penalty period in caseof continuing penalty and/or the period forcomputing additonal charge shall beinterrupted from the time the appeal orrequest for reconsideration was receivedby the appropriate department of the SESup to the time that the notice of theMonetary Board decision was received bythe NSSLA/individual concerned.

e. Due date; payment of penalty orfines by NSSLAs. The penalty approved bythe Governor/MB to be imposed on theNSSLA, its directors and/or officers shallbecome due and payable fifteen (15)calendar days from receipt of the Statementof Account from the BSP. For NSSLAswhich maintain DDA with the BSP,penalties which remain unpaid after thelapse of the fifteen-day period shall beautomatically debited against theircorresponding DDA on the followingbusiness day without additional charge. Ifthe balance of the concerned NSSLA’sDDA is insufficient to cover the amount ofthe penalty, said penalty shall already besubject to an additional charge of sixpercent (6%) per annum to be reckonedfrom the business day immediatelyfollowing the end of said fifteen (15)-dayperiod up to the day of actual payment.

Failure to settle the full amount of thefines within the period or on the dayprescribed herein shall, in addition to theadditonal penalty as provided in item “c”above, make an NSSLA, its trustees andofficers liable to the sanctions imposedunder Sec. 4199S.(As amended by Circular No. 585 dated 15 October 2007)


Sec. 4631S Revocation/Suspension ofNSSLA License. In reference to Section22 of R.A. No. 8367 or the “RevisedNon-Stock Savings and Loan AssociationAct of 1997”, the Monetary Board, upondue notice and hearing, has the authorityto either revoke or suspend the license ofany NSSLA for such period as it deemsnecessary, based on any of the followinggrounds:

a. Suspension of license:(1) Repeated violations (uncorrected

similar examination findings for the lasttwo examinations, regular or special) ofany of the provisions of R.A. No. 8367,and/or any rules or regulationspromulgated to implement said law, orBSP directives and/or instructions; and

(2) Paid-up capital is impaired bycontinuing losses for the last two (2) fiscalyears.

Lifting of the suspension of license shallbe approved by the Monetary Board uponrecommendation of the appropriate BSPsupervising department.

b. Revocation of license:(1) When the solvency of the NSSLA

is imperiled by losses and irregularities;(2) When the NSSLA willfully violates

any provision of R.A. No. 8367, any ruleor regulation promulgated to implementsaid law and BSP directives and/orinstructions;

(3) When the NSSLA is conductingbusiness in an unsafe and unsound manner;

(4) When it is unable to pay itsliabilities as they become due in theordinary course of business;

(5) When it has insufficient realizableassets, as determined by the BSP, to meetits liabilities.

(6) When it cannot continue inbusiness without involving probable lossesto its members or creditors; and

(7) When it has willfully violated acease and desist order of the MonetaryBoard involving acts or transactions which


§§ 4631S - 4654S08.12.31

amount to fraud or a dissipation of assetsof the institution.

As to the effects of the revocation/suspension of license of the NSSLA, theNSSLA is prohibited from engaging in thebusiness of accumulating the savings of itsmembers and using such accumulationsfor loans to its members, subject toapplicable sanctions and penaltiesprovided by law in case of violation thereof.After the cessation of its operations due torevocation of its license, the NSSLA shouldproceed with its dissolution, inacccordance with the provisions under theCorporation Code. The dissolution of acorporation involves the termination of itscorporate existence, at least, as far as theright to go on doing ordinary business isconcerned, and the winding up its affairs,the payments of its debts and distributionof its assets among the members orstakeholders or other persons involved.The board of trustees of the corporation alsohas the option of adopting a plan for thedistribution of its assets, as stated underSection 95 of the Corporation Code.

After the revocation/suspension of itslicense, the Monetary Board may direct theboard of trustees of the NSSLA to proceedwith the voluntary dissolution of thecorporation. In the event that the board oftrustees refuses to effectuate suchdissolution, the Monetary Board may referthe matter to the Solicitor General for thefiling of a quo warranto case against thecorporation in accordance with theprovision under the Corporation Code.


B. SUNDRY PROVISIONS

Sec. 4651S Notice of Dissolution. NSSLAscontemplating to dissolve shall give writtennotice thereof to the Monetary Boardthrough the appropriate department of theSES at least thirty (30) days before takingsteps to effect dissolution.

Sec. 4652S Confidential Information. Notrustee, officer or employee of NSSLAs orof the BSP shall disclose any informationrelating to member-borrowers and theirapplications or to the operations of theNSSLAs unless permitted by the MonetaryBoard of the BSP: Provided, however, Thatin the case of NSSLAs under examination,the head of the appropriate department ofthe SES may furnish findings of examinationto the office or firm where such NSSLAsdo business.

All deposits of whatever nature withNSSLAs are considered absolutelyconfidential in nature, and may not beexamined, inquired or looked into by anyperson, government official, bureau oroffice, except upon written permission ofthe depositor, or in cases of impeachment,or upon order of competent court in casesof bribery or dereliction of duty of publicofficials or in cases where the moneydeposited or invested is the subject matterof litigation.

No official or employee of NSSLAsshall disclose to any person any informationconcerning said deposits, except in casesmentioned in the preceding paragraph.Any official or employee of NSSLAs whoviolates this Section shall be punishedunder R.A. No. 1405, as amended.

Sec. 4653S Examination by the BSP. Thehead of the appropriate department of theSES, personally or by deputy, shall makeat least once a year and at such other timesas he or the Monetary Board may deemnecessary and expedient, an examination,inspection or investigation of the books andrecords, business affairs, administration andfinancial condition of NSSLAs.

Sec. 4654S Applicability of Other RulesOther rules and regulations applicableto the examination of thrift banks,insofar as they are applicable and notinconsistent with these rules shall applyto NSSLAs.


§§ 4655S - 4657S.908.12.31

Sec. 4655S Annual Fees on Non-StockSavings and Loan Association. Forpurposes of computing the annual feeschargeable against NSSLAs, the term TotalAssessable Assets shall be the amountreferred to as the total assets under Section28 of R.A. No. 7653 (end-of-quarter totalassets per balance sheet, after deductingcash on hand and amounts due from banks,including the BSP and banks abroad).

Average Assessable Assets (AAAs)shall be the summation of end-of-quartertotal assessable assets divided by thenumber of quarters in operation during theparticular assessment period.

The prescribed rate of annual fees forNSSLAs, assessable only when actualexamination is conducted for the year, shallbe one-fortieth of one percent (1/40 of 1%)of AAAs for 2002 or P100,000 whicheveris lower, payable within thirty (30) daysfrom receipt of the bill. Failure to pay thebill within the prescribed period shallsubject the NSSLAs to administrativesanctions.

Sec. 4656S Basic Law Governing Non-Stock Savings and Loan AssociationsR.A. No. 8367, as amended, known as the"Revised Non-Stock Savings and LoanAssociation Act of 1997", regulates theorganization and operation of NSSLAs.

Sec. 4657S NSSLA Premises and OtherFixed Assets. The following rules shallgovern the premises and other fixed assetsof NSSLAs.

§ 4657S.1 Accounting for NSSLAspremises; Other fixed assets. NSSLApremises, furniture, fixture and equipmentshall be accounted for using the cost modelunder PAS 16 "Property, Plant andEquipment"(Circular No. 494 dated 20 September 2005)

§4657S.2 (Reserved)

§ 4657S.3 Reclassification of real andother properties acquired as NSSLApremises. ROPA reclassified either as RealProperty-Land or Real Property-Buildingshall be booked at their ROPA balance, netof any valuation reserves: Provided, Thatonly such acquired asset or a portionthereof that will be immediately used orearmarked for future use may bereclassified and booked as Real Property-Land/Building.

NSSLAs, prior to the reclassification oftheir ROPA accounts to Real Property-Land/Building, shall first secure prior BSPapproval before effecting thereclassification and shall submit, in case offuture use, justification and plans forexpansion/use.

§§ 4657S.4 - 4657S.8 (Reserved)

§ 4657S.9 Batas Pambansa Blg. 344 -An Act to Enhance the Mobility ofDisabled Persons by Requiring CertainBuildings, Institutions, Establishments andPublic Utilities to Install Facilities andOther Devices. In order to promote therealization of the rights of disabled personsto participate fully in the social life and thedevelopment of the societies in which theylive and the enjoyment of the opportunitiesavailable to other citizens, no license orpermit for the construction, repair orrenovation of public and private buildingsfor public use, educational institutions,airports, sports and recreation centers andcomplexes, shopping centers orestablishments, public parking places,workplaces, public utilities, shall be grantedor issued unless the owner or operatorthereof shall install and incorporate in suchbuilding, establishment or public utility,such architectural facilities or structuralfeatures as shall reasonably enhance themobility of disabled persons such assidewalks, ramps, railings, and the like. Iffeasible, all such existing buildings,


§§ 4657S.9 - 4691S.908.12.31

institutions, establishments, or publicutilities may be renovated or altered toenable the disabled persons to have accessto them.

Secs. 4658S - 4659 (Reserved)

Sec. 4660S Disclosure of RemittanceCharges and Other Relevant InformationIt is the policy of the BSP to promote theefficient delivery of competitively-pricedremittance services by banks and otherremittance service providers by promotingcompetition and the use of innovativepayment systems, strengthening thefinancial infrastructure, enhancing access toformal remittance channels in the sourceand destination countries, deepening thefinancial literacy of consumers, andimproving transparency in remittancetransactions, consistent with soundpractices.

Towards this end, NBFIs under BSPsupervision, including FXDs/MCs and RAs,providing overseas remittance servicesshall disclose to the remittance sender andto the recipient/beneficiary, the followingminimum items of information regardingremittance transactions, as defined herein:

a. Transfer/remittance fee - charge forprocessing/sending the remittance from thecountry of origin to the country ofdestination and/or charge for receiving theremittance at the country of destination;

b. Exchange rate - rate of conversionfrom foreign currency to local currency,e.g., peso-dollar rate;

c. Exchange rate differential/spread -foreign exchange mark-up or thedifference between the prevailing BSPreference/guiding rate and the exchange/conversion rate;

d. Other currency conversion charges- commisions or service fees, if any;

e. Other related charges - e.g.,surcharges, postage, text message ortelegram;

f. Amount/currency paid out in therecipient country - exact amount of moneythe recipient should receive in local currencyor foreign currency; and

g. Delivery time to recipients/beneficiaries - delivery period of remittanceto beneficiary stated in number of days,hours or minutes.

Non-bank remittance serviceproviders shall l ikewise post saidinformation in their respective websitesand display them prominently inconspicuous places within their premisesand/or remittance/service centers.(Circular No. 534 dated 26 June 2006)


Sec. 4691S Anti-Money LaunderingRegulations. Banks, OBUs, QBs, trustentities, NSSLAs, pawnshops, and all otherinstitutions, including their subsidiaries andaffiliates supervised and/or regulated by theBSP, otherwise known as "coveredinstitutions" shall comply with theprovisions of R.A. No. 9160, as amended,otherwise known as the "Anti-MoneyLaundering Act of 2001" and its RevisedIRRs in Appendix S-7 and those inAppendix S-6.(As amended by Circular No. 612 dated 13 June 2008)

§§ 4691S.1 - 4691S.8 (Reserved)

§ 4691S.9 Sanctions and penaltiesa. Whenever a covered institution

violates the provisions of Section 9 of R.A.No. 9160, as amended, or of this Section,the officer(s) or other persons responsiblefor such violation shall be punished by afine of not less than P50,000 nor morethan P200,000 or by imprisonment of notless than two (2) years nor more than ten(10) years, or both, at the discretion of thecourt pursuant to Section 36 of R.A. No.7653, otherwise known as "The NewCentral Bank Act".


§§ 4691S.9 - 4695S08.12.31

b. Without prejudice to the criminalsanctions prescribed above against theculpable persons, the Monetary Boardmay, at its discretion, impose upon anycovered institution, its directors and/orofficers for any violation of Section 9 ofR.A. No. 9160, as amended, theadministrative sanctions provided underSection 37 of R.A. No. 7653.


Sec. 4695S Valid Identification Cards forFinancial Transactions. The followingguidelines govern the acceptance of validID cards for all types of financialtransactions by NSSLAs, including financialtransactions involving OFWs, in order topromote access of Filipinos to servicesoffered by formal FIs, particularly thoseresiding in the remote areas, as well as toencourage and facilitate remittances ofOFWs through the banking system:

a. Clients who engage in a financialtransaction with covered institutions for thefirst time shall be required to present theoriginal and submit a clear copy of at leastone (1) valid photo-bearing ID documentissued by an official authority.

For this purpose, the term officialauthority shall refer to any of the following:

(1) Government of the Republic of thePhilippines;

(2) Its political subdivisions andinstrumentalities;

(3) GOCCs; and(4) Private entities or institutions

registered with or supervised or regulatedeither by the BSP or SEC or IC.

Valid IDs include the following:(a) Passport(b) Driver's license(c) PRC ID(d) NBI clearance(e) Police clearance(f) Postal ID

(g) Voter's ID(h) Barangay certification(i) GSIS e-card(j) SSS card(k) Senior Citizen card(l) OWWA ID(m) OFW ID(n) Seaman's Book(o) Alien Certification of Registration/

Immigrant Certificate of Registration(p) Government office and GOCC ID

(e.g., AFP, HDMF IDs)(q) Certification from the NCWDP(r) DSWD certification(s) IBP ID; and(t) Company IDs issued by private

entities or institutions registered with orsupervised or regulated either by the BSP,SEC, or IC.

b. Students who are beneficiaries ofremittances/fund transfers who are not yetof voting age may be allowed to presentthe original and submit a clear copy of one(1) valid photo-bearing school ID dulysigned by the principal or head of theschool.

c. NSSLAs shall require their clients tosubmit a clear copy of one (1) valid ID on aone-time basis only, or at thecommencement of a business relationship.They shall require their clients to submit anupdated photo and other relevant informationwhenever the need for it arises.

The foregoing shall be in addition tothe customer identification requirementsunder Rule 9.1.c of the Revised IRRs ofR.A. No. 9160, as amended (Appendix S-7)

For purposes of this Section, financialtransactions may include remittances,among others, as fal l ing under thedefinition of transaction. Under theAnti-Money Laundering Act of 2001, asamended, a financial transaction is any actestablishing any right or obligation orgiving rise to any contractual or legalrelationship between the parties thereto.


§§ 4695S - 4699S08.12.31

It also includes any movement of funds byany means with a covered institution.(Circular No. 564 dated 03 April 2007 as amended by Circular

No. 608 dated 20 May 2008)


Sec. 4699S General Provision onSanctions Unless otherwise provided, anyviolation of the provisions of this Part shallbe subject to the sanctions provided inSections 34, 35, 36 and 37 of R. A. No.7653, whenever applicable.

Manual of Regulations for Non-Bank Financial Institutions S RegulationsAppendix S-I - Page 1

APP. S-108.12.31

SAFEGUARDS IN BONDING OF NSSLA ACCOUNTABLEOFFICERS AND EMPLOYEES

(Appendix to Sec. 4145S)

1. The Teller. He should not beallowed to accumulate more than a specificmaximum amount to be determined by theassociation but in no case to exceedP10,000 in cash at any given time while inthe performance of his duties. Theprocedures in this regard are as follows:

a. Cash. All cash in excess of themaximum amount determined by theassociation shall be turned over to thecashier. When deposits received by a tellerwill increase his cash in excess of themaximum limit, the teller shallimmediately make a cash turn-over of, atleast, the excess. Thus, although histransactions during the day may total morethan the maximum limit, the amount ofmoney directly in his custody at any giventime will never exceed the limit.

b. Checks and Other Cash Items(COCIs). All COCIs received by a tellershould be stamped as “non-negotiable.”The stamping should be made diagonallyon the face of the check. Thus, all checksthat are received by the tellers lose theirfurther negotiability. There should,however, be an agreement with theassociation’s depository banks wherebythey will accept for deposit only to theaccount of the association the COCIpreviously stamped by the tellers as “non-negotiable.” Therefore, only the associationand nobody else can further negotiate thesechecks, and only the association’s

depository bank will accept them andsolely for deposit to its account. Thus, evenin the remote possibility that someonepresents a COCI stolen from the associationto one of its depository banks, it will not beaccepted for encashment.

2. The COCIs Clerk. In view of thefact that all COCIs received by the tellersare stamped “non-negotiable” as detailedabove, the COCIs clerk who records andprocesses these checks carries noaccountabilities whatsoever. From themoment that a check is received up to themoment that it is deposited to the accountof the association with one of its depositorybanks, that check is just a piece of paper tobe processed and recorded. It will onlyreassume its negotiability upon its receiptby the association’s depository bank. Incases, however, where checks arereceived by mail, the COCIs clerk shall becharged with the duty of stamping thechecks as “non-negotiable.”

3. As an added precautionarymeasure, the manager/accountant/loanofficer should check from time to timewhether all COCIs received are stamped“non-negotiable.” In the event that a COCIis not so stamped and it results in financialloss on the part of the association, theemployee charged with the duty to stampand who failed to do so, shall be heldpersonally responsible, together with themanager/accountant/loan officer, for the loss.

Manual of R

egulations for Non-B

ank Financial Institutions

APP. S-2

08.12.31

LIST OF REPORTS REQUIRED FROM NON-STOCK SAVINGS AND LOAN ASSOCIATIONS(Appendix to Sec. 4162S)

A-2 BSP 7-26-02H 4162S (As

amended by M-029 dated 09.24.07)

A-2 Unnumbered 4691S (Rev. May

2002 as amended by Cir. No. 612 dated 06.03.08)

A-2 Unnumbered 4691S

A-3 BSP 7-26-03H 4162S (As amended

by M-2007-

029 dated 09.24.07)

A-3 BSP 7-26-18.1H 4358S

Consolidated Statement of Condition

Report on Suspicious Transactions

Report on Covered Transactions

Consolidated Statement of Income and Expenses

Copy of entry in NSSLA records of written approval ofmajority of directors on credit accommodation todirectors and officers with accompanying Certificationon Loans Granted to Directors/Officers

on or before the end ofthe immediate followingmonth

10th business day fromdate of transaction/knowledge

-do-

on or before the end ofthe immediate followingmonth

20th business day fromdate of approval

Quarterly

Astransaction

occurs

-do-

Quarterly

Asapproved

Original to SDC

Original and duplicate -Anti-Money LaunderingCouncil (AMLC)

-do-

Original to SDC

Original - ISD I

Submission SubmissionCategory Form No. MOR Ref. Report Title Frequency Deadline Procedure

S Regulations

Appendix S-2 - Page 1

APP. S-2

08.12.31

S Regulations


Manual of R



A-3 Unnumbered 4162S (CL-050

dated 10.04.07 and CL-059 dated 11.28.07)

B 4172S

B BSP 7-26-01H 4162S

4162SSES IIForm 15(NP08-TB) As

amendedbyM-024dated

07.31.08

B BSP 7-26-20H 4162S

B BSP 7-26-25H 4126S

Report on Borrowings of BSP Personnel

Audited/Unaudited Financial Statements required inSec. 4181S accompanied by annual report1 (tomembers, if any)

Information Sheet

Biographical Data of Directors/Officers- If submitted in diskette form - Notarized first page ofeach of the directors'/officers' bio-data saved indiskette and control prooflist- If sent by electronic mail - Notarized first page ofBiographical Data or Notarized list of names ofDirectors/Officers whose Biographical Data weresubmitted thru electronic mail to be faxed to SDC (CLdated 01.09.01)

Report on Crimes/Losses

Dividends Declaration

Quarterly

Annually

Annually2

After2

election orappointment

and aschangesoccur

As crime/incidentoccurs

As declared

15th banking days afterend of reference quarter

120th/60th day afterend of fiscal year asrequired in Sec. 4181S

30th day after calendaryear-end

7th baking day from thedate of the meeting ofthe board of directors inwhich the directors/officers are elected orappointed

See Annex S-2-a forguidelines on reportingcrimes and losses

10th business day afterdate of declaration

Original to SDC

Original - ISD I

-do-

Electronic mail or disketteform to SDC or if hard copyoriginal to appropriatedepartment of the SES,duplicate to SDC

-do-

-do-


1 Required of NSSLAs with total resources of P 10 million or more2 Not required where no change occurs

Manual of R



APP. S-2

08.12.31

B - 4126S

B - 4306S.3

B - 4162S.1

B Unnumbered 4691S

Unnumbered 4691S(no prescribed form)

4162S

B

Report of Discrepancies of Accounts

Notice/Application for Write-Off of Loans

Board Resolution on NSSLA's signatories to reportssubmitted to Bangko Sentral

Plan of action to comply with Anti-Money Launder-ing requirements

Certification of compliance with existing anti-moneylaundering regulations

Audit Engagement Contract

General Information Sheet

Everytime adiscrepancy

occurs1

As write-offoccurs

Asauthorized

-

Annually

As contractis signed

Annually

15th day from discoveryof discrepancy

30th day prior to theintended date of write-off

3rd day from date ofresolution

30th business day from31 July 2000 or fromopening of theinstitution

20th business day afterend of reference year

15th calendar day fromdate of signing of contract

30th day from date ofannual stockholders'meeting

-do-

-do-

-do-

-do-

-do-

-do-

Drop Box - SEC CentralReceiving SectionOriginal - SECDuplicate - BSP


1 Not required where the discrepancies do not exceed 1% of NSSLA's net worth or P100,000, whichever is lower

S Regulations


S RegulationsAppendix S-2 - Page 4


APP. S-208.12.31

Annex S-2-a

REPORTING GUIDELINES ON CRIMES/LOSSES

1. NSSLAs shall report on thefollowing matters through theappropriate supervising and examiningdepartment:

a. Crimes whether consummated,frustrated or attempted against property/facil i t ies (such as robbery, theft ,swindling or estafa, forgery and otherdeceits) and other crimes involving loss/destruction of property of the NSSLAwhen the amount involved in each crimeis P20,000 or more.

Crimes involving NSSLA personnel,regardless of whether or not such crimesinvolve the loss/destruction of propertyof the NSSLA, even if the amountinvolved is less than those abovespecified, shall likewise be reported tothe BSP.

b. Incidents involving material loss,destruction or damage to the institution’sproperty/facilities, other than arising from

a crime, when the amount involved perincident is P20,000 or more.

2. The following guidelines shall beobserved in the preparation andsubmission of the report.

a. The report shall be prepared intwo (2) copies and shall be submittedwithin f ive (5) business days fromknowledge of the crime or incident, theoriginal to the appropriate supervisingdepartment and the duplicate to the BSPSecurity Coordinator, thru the Director,Security Investigation and TransportDepartment.

b. Where a thorough investigationand evaluation of facts is necessary tocomplete the report, an initial reportsubmitted within the five (5)-business daydeadline may be accepted: Provided,That a complete report is submitted notlater than fifteen (15) business days fromtermination of investigation.


APP. S-308.12.31

S Regulations Appendix S-3 - Page 1

GUIDELINES ON PRESCRIBED REPORTS SIGNATORIES AND SIGNATORY AUTHORIZATION

(Appendix to Subsec. 4162S.1)

Category A-1 reports shall be signedby the chief executive officer, or in hisabsence, by the executive vice-president,and by the comptroller, or in his absence,by the chief accountant, or by officersholding equivalent positions. Thedesignated signatories in this category,including their specimen signatures, shallbe contained in a resolution approved bythe board of directors in the formatprescribed in Annex S-3-a.

Category A-2 reports of head officesshall be signed by the president, executivevice-presidents, vice-presidents or officersholding equivalent positions. Such reportsof other offices/units (such as branches)shall be signed by their respective

managers/officers in-charge. Likewise, thesigning authority in this category shall becontained in a resolution approved by theboard of directors in the format prescribedin Annex S-3-b.

Categories A-3 and B reports shall besigned by officers or their alternates, whoshall be duly designated by the board ofdirectors. A copy of the board resolution,with format as prescribed in Annex S-3-c.

Copies of the board resolutions on thereport signatory designations shall besubmitted to the appropriate supervisingand examining department of the BSPwithin three (3) business days from the dateof resolution.


APP. S-308.12.31


Annex S-3-a

FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORY A-1 REPORTS

Resolution No. _____

Whereas, it is required under Subsec. 4162S.1 that Category A-1 reports be signed by theChief Executive Officer, or in his absence, by the Executive Vice-President, and by theComptroller, or in his absence, by the Chief Accountant, or by officers holding equivalent positions.

Whereas, it is also required that aforesaid officers of the institution be authorized undera resolution duly approved by the institution's Board of Directors;

Whereas, we, the members of the Board of Directors of (Name of Institution) ,are conscious that, in designating the officials who would sign said Category A-1 reports,we are actually empowering and authorizing said officers to represent and act for or in behalfof the Board of Directors in particular and (Name of Institution) in general;

Whereas, this Board has full faith and confidence in the institution's Chief ExecutiveOfficer, Executive Vice-President, Comptroller and Chief Accountant, as the case may be,and, therefore, assumes responsibility for all the acts which may be performed by aforesaidofficers under their delegated authority;

Now, therefore, we, the members of the Board of Directors, resolve, as it is herebyresolved that:

1. Mr.____________ President _________________Specimen Signature

or Executive

2. Mr.____________ Vice-President _________________Specimen Signature

and3. Mr.____________ Comptroller _________________

Specimen Signature or Chief

4. Mr.____________ Accountant _________________Specimen Signature

are hereby authorized to sign Category A-1 reports of (Name of Institution) .

Done in the City of ________________ Philippines, this ____day of , 20____.

CHAIRMAN OF THE BOARD

DIRECTOR DIRECTOR

DIRECTOR DIRECTOR

DIRECTOR DIRECTOR

ATTESTED BY: ______________________

CORPORATE SECRETARY


APP. S-308.12.31


Whereas, it is required under Subsec. 4162S.1 that Category A-2 reports of head officesbe signed by the President, Executive Vice-Presidents, Vice-Presidents or officers holdingequivalent positions, and that such reports of other offices be signed by the respectivemanagers/officers-in-charge;


Whereas, we, the members of the Board of Directors of (Name of Institution) , areconscious that, in designating the officials who would sign said Category A-2 reports, we areactually empowering and authorizing said officers to represent and act for or in behalf of theBoard of Directors in particular and (Name of Institution) in general;

Whereas, this Board has full faith and confidence in the institution's President (and/orthe Executive Vice-President, etc., as the case may be) and, therefore, assumes responsibilityfor all the acts which may be performed by aforesaid officers under their delegated authority;


Name of Officer Specimen Signature Position Title Report No. _____________ ________________ __________ _________

are hereby authorized to sign the Category A-2 reports of (Name of Institution) .

Done in the City of ________________ Philippines, this ____day of ____, 20____.

_________________________CHAIRMAN OF THE BOARD

DIRECTOR DIRECTOR

DIRECTOR DIRECTOR

DIRECTOR DIRECTOR

ATTESTED BY:

CORPORATE SECRETARY

Annex S-3-b

FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORY A-2 REPORTS



APP. S-308.12.31


Annex S-3-c

FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORIESA-3 AND B REPORTS


Whereas, it is required under Subsec. 4162S.1 that Categories A-3 and B reports besigned by officers or their alternates;


Whereas, we the members of the Board of Directors of (Name of Institution) , areconscious that, in designating the officials who would sign said Categories A-3 and B reports,we are actually empowering and authorizing said officers to represent and act for or inbehalf of the Board of Directors in particular and (Name of Institution) in general;

Whereas, this Board has full faith and confidence in the institution's authorized signatoriesand, therefore, assumes responsibility for all the acts which may be performed by aforesaidofficers under their delegated authority;


Name of Authorized Signatory/Alternate Specimen Signature Position Title Report

1. Authorized(Alternate)

2. Authorized(Alternate)

etc.

are hereby authorized to sign the Category A-2 reports of (Name of Institution) .

Done in the City of ________________ Philippines, this ____day of ____, 20____.

_________________________CHAIRMAN OF THE BOARD

DIRECTOR DIRECTOR

DIRECTOR DIRECTOR

DIRECTOR DIRECTOR

ATTESTED BY:

CORPORATE SECRETARY

APP S-408.12.31

Manual of Regulations for Non-Bank Financial Institutions S Regulations Appendix S-4 - Page 1

FORMAT-DISCLOSURE STATEMENT OF LOAN/CREDIT TRANSACTION(Appendix to Subsec. 4307S.2)

(Business Name of Creditor)

DISCLOSURE STATEMENT OF LOAN/CREDIT TRANSACTION (SINGLE PAYMENTOR INSTALLMENT PLAN)

(As required under R.A. 3765, Truth in Lending Act)

Name of Borrower

Address

1. Cash/Purchase Price ________________or Net Proceeds of Loan (Item Purchased)

2. LESS: Downpayment and/or Trade-in Value (Not applicable for loan transaction)3. Unpaid Balance of Cash/Purchase Price or Net Proceeds of Loan

4. Non-Finance Charges [Advanced by Seller/Creditor]:a. Insurance Premium Pb. Taxesc. Registration Feesd. Documentary/Science Stampse. Notarial Feesf. Others:

Total Non-Finance Charges

5. Amount to be Financed (Items 3 + 4)

P

P

APP. S-408.12.31



P

P

6. Finance Charges1

a. Interest _______% p.a.from ________ to ________

[ ] Simple [ ] Monthly[ ] Compound [ ] Quarterly

[ ] Semi-Annual[ ] Annual

b. Discountsc. Service/Handling Chargesd. Collection Chargese. Credit Investigation Feesf. Appraisal Feesg. Attorney’s/Legal Feesh. Other charges incidental to the

extension of credit (specify): _______________ _______________ _______________

Total Non-Finance Charges

7. Percentage of Finance Charges to Total Amount Financed(Computed in accordance with Subsec. 4307S.1) _______________%

8. Effective Interest Rate _______________%(Method of computation attached)

9. Paymenta. Single Payment due ____________________

(Date) b. Total Installment Payments

(Payable in __________ weeks/months @ P__________) P

P

1 Time price differential should be disclosed as a finance charge. If an itemization cannot be made, a lump-sum figure may

be reported under Other charges incidental to the extension of credit in Item 6h.

APP S-408.12.31


10. Additional charges in case certain stipulations in the contract are not met by thedebtor:

Nature Rate Amount

CERTIFIED CORRECT:

_______________________ (Signature of Creditor/

Authorized Representative Over Printed Name)

_________________________ Position

I ACKNOWLEDGE RECEIPT OF A COPY OF THIS STATEMENT PRIOR TO THECONSUMMATION OF THE CREDIT TRANSACTION AND THAT I UNDERSTAND ANDFULLY AGREE TO THE TERMS AND CONDITIONS THEREOF.

(Signature of Buyer/Borrower Over Printed Name)

DATE ____________________

NOTICE TO BUYER/BORROWER: YOU ARE ENTITLED TO A COPY OF THIS PAPER WHICH YOU SHALL SIGN.


APP. S-508.12.31

ABSTRACT OF “TRUTH IN LENDING ACT” (Republic Act No. 3765)(Appendix to Subsec. 4307S.4)

Section 1. This Act shall be known as the“Truth in Lending Act.”

Sec. 2. Declaration of Policy. It is herebydeclared to be the policy of the State to protectits citizens from a lack of awareness of thetrue cost of credit to the user by assuring afull disclosure of such cost with a view ofpreventing the uninformed use of credit tothe detriment of the national economy.

xxx xxx xxx

Sec. 3. As used in this Act, the term -

xxx xxx xxx

(3) “Finance charge” includes interest, fees,service charges, discounts, and such othercharges incident to the extension of creditas the Board may by regulation prescribe.

xxx xxx xxx

Sec. 4. Any creditor shall furnish to eachperson to whom credit is extended, priorto the consummation of the transaction aclear statement in writing setting forth, tothe extent applicable and in accordancewith rules and regulations prescribed bythe Board, the following information:

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

(2) the amounts, if any, to be creditedas down payment and/or trade-in;

(3) the difference between theamounts set forth under clauses (1) and (2);

(4) the charges, individually itemized,which are paid or to be paid by such personin connection with the transaction but whichare not incident to the extension of credit;

(5) the total amount to be financed;(6) the finance charge expressed in

terms of pesos and centavos; and

(7) the percentage that the financecharge bears to the total amount to befinanced expressed as a simple annual rateon the outstanding unpaid balance of theobligation.

xxx xxx xxx

Sec. 6. (a) Any creditor who in connectionwith any credit transaction fails to disclose toany person any information in violation ofthis Act or any regulation issued thereundershall be liable to such person in the amountof P100 or in an amount equal to twice thefinance charge required by such creditor inconnection with such transaction, whicheveris the greater, except that such liability shallnot exceed P2,000 on any credit transaction.

xxx xxx xxx

(c) Any person who willfully violatesany provision of this Act or any regulationissued thereunder shall be fined by not lessthan P1,000 nor more than P5,000 orimprisonment for not less than 6 monthsnor more than one year or both.

xxx xxx xxx

(d) Any final judgment hereafterrendered in any criminal proceeding underthis Act to the effect that a defendant haswillfully violated this Act shall be primafacie evidence against such defendant inan action or proceeding brought by anyother party against such defendant underthis Act as to all matters respecting whichsaid judgment would be an estoppel asbetween the parties thereto.

Sec. 7. This Act shall become effectiveupon approval.

Approved, 22 June 1963.



APP. S-608.12.31

Banks, QBs, trust entities and all otherinstitutions, and their subsidiaries andaffiliates supervised or regulated by the BSP(covered institutions) shall strictly complywith the provisions of Section 9 of R.A.No. 9160 and the following rules andregulations on anti-money laundering.

1. Customer identification. Coveredinstitutions shall establish and record thetrue identity of its clients based on officialdocuments. They shall maintain a systemof verifying the true identity of theirclients and, in case of corporate clients,require a system of verifying their legalexistence and organizational structure, aswell as the authority and identification ofall persons purporting to act on theirbehalf.

When establishing business relationsor conducting transactions (particularlyopening of deposit accounts, acceptingdeposit substitutes, entering into trust andother fiduciary transactions, renting ofsafety deposit boxes, performingremittances and other large cashtransactions) covered institutions shouldtake reasonable measures to establish andrecord the true identity of their clients.Said client identification may be based onofficial or other reliable documents andrecords.

a. In cases of corporate and otherlegal entities, the following measuresshould be taken, when necessary:

(1) Verification of the legal existenceand structure of the client from theappropriate agency or from the client itselfor both, proof of incorporation, includinginformation concerning the customer’sname, legal form, address, directors,principal officers and provisions regulatingthe power behind the entity.

(2) Verification of the authority andidentification of the person purporting toact on behalf of the client.

b. In case of doubt as to whethertheir purported clients or customers areacting for themselves or for another,reasonable measures should be taken toobtain the true identity of the persons onwhose behalf an account is opened or atransaction conducted.

c. The provisions of existing laws tothe contrary notwithstanding, anonymousaccounts, accounts under fictitious names,and all other similar accounts shall beabsolutely prohibited. In case wherenumbered accounts is allowed (i.e., pesoand foreign currency non-checkingnumbered accounts), covered institutionsshould ensure that the client is identifiedin an official or other identifyingdocuments.

The BSP may conduct annual testingsolely limited to the determination of theexistence and the identity of the ownersof such accounts.

Covered institutions shall phase outwithin a period of one (1) year from 2 April2001 or upon their maturity, whichever isearlier, anonymous accounts or accountsunder fictitious names as well asnumbered accounts being kept ormanaged by them, which are notexpressly allowed under existing law.

d. The identity of existing clients orbeneficial owners of deposits and otherfunds held or being managed by thecovered institutions should be renewed/updated at least every other year.

e. All records of all transactions ofcovered institutions shall be maintainedand safely stored for five (5) years fromthe dates of transactions. With respect toclosed accounts, the records on customer

ANTI-MONEY LAUNDERING REGULATIONS(Appendix to Section 4691S)

Manual of Regulations for Non-Bank Financial InstitutionsS RegulationsAppendix S-6 - Page 2

APP. S-608.12.31

identification, account files and businesscorrespondence, shall be preserved andsafely stored for at least five (5) years fromthe dates when they were closed.

Such records must be sufficient to permitreconstruction of individual transactions soas to provide, if necessary, evidence forprosecution of criminal behaviour.

f. Special attention should be givento all complex, unusual large transactions,and all unusual patterns of transactions,which have no apparent or visible lawfulpurpose. The background and purpose ofsuch transactions should, as far as possible,be examined, the findings established inwriting, and be available to helpsupervisors, auditors and law enforcementagencies.

g. Covered institutions should not, orshould at least avoid, transacting businesswith criminals. Reasonable measuresshould be adopted to prevent the use oftheir facilities for laundering of proceedsof crimes and other illegal activities.

2. Programs against moneylaundering. Programs against moneylaundering should be developed. Theseprograms, should include, as a minimum:

a. The development of internalpolicies, procedures and controls,including the designation of complianceofficers at management level, andadequate screening procedures to ensurehigh standards when hiring employees;

b. An ongoing employee trainingprogram; and

c. An audit function to test the system.

3. Submission of plans of actionCovered institutions shall submit a plan ofaction on how to comply with therequirements of App. S-6 nos. 1, 2 and 4within thirty (30) business days from 31July 2000 or from opening of theinstitution.

4. Required reporting of certaintransactions. If there is reasonable groundto believe that the funds are proceeds ofan unlawful activity as defined under R.A.No. 9160 and/or its IRRs, the transactionsinvolving such funds or attempts to transactthe same, should be reported to the Anti-Money Laundering Council (AMLC) inaccordance with Rules 5.2 and 5.3 of theAMLA IRRs.

a. Report on suspicious transactions.1

Banks shall report covered transactions andsuspicious transactions, as defined in Rules5.2 and 5.3 of the AMLA IRRs, to the AMLCusing the forms prescribed by the AMLC.Reportable transactions shall include thefollowing:

(1) Outward remittances withoutvisible lawful purpose;

(2) Inward remittances without visiblelawful purpose or without underlying tradetransactions;

(3) Unusual purchases of foreignexchange without visible lawful purpose;

(4) Unusual sales of foreign exchangewhose sources are not satisfactorilyestablished;

(5) Complex, unusual largetransactions, and all unusual patterns oftransactions, which have no apparent orvisible lawful purpose;

(6) Funds being managed or held asdeposit substitutes if there is reasonableground to believe that the same are proceedsof criminal and other illegal activities; and

(7) Suspicious Transaction Indicatorsor “Red Flags” as a Guide in theSubmission to the AMLC of Reports ofSuspicious Transactions Relating ToPotential or Actual Financing of Terrorism.

(a) Wire transfers between accounts,without visible economic or businesspurpose, especially if the wire transfers areeffected through countries which areidentified or connected with terroristactivities.

1Amended by AMLC Resolution No. 292 dated 11.20.03 (Annex S-6-b)



APP. S-608.12.31

(b) Sources and/or beneficiaries of wiretransfers are citizens of countries which areidentified or connected with terroristactivities.

(c) Repetitive deposits or withdrawalsthat cannot be explained or do not makesense.

(d) Value of the transaction is over andabove what the client is capable of earning.

(e) Client is conducting a transactionthat is out of the ordinary for his knownbusiness interest.

(f) Deposits being made byindividuals who have no knownconnection or relation with the accountholder.

(g) An individual receiving remittances,but has no family members working in thecountry from which the remittance ismade.

(h) Client was reported and/ormentioned in the news to be involved interrorist activities.

(i) Client is under investigation by lawenforcement agencies for possibleinvolvement in terrorist activities.

(j) Transactions of individuals,companies or non-governmentalorganizations (NGOs) that are affiliated orrelated to people suspected of beingconnected to a terrorist group or a groupthat advocates violent overthrow of agovernment.

(k) Transactions of individuals,companies or NGOs that are suspected asbeing used to pay or receive funds fromrevolutionary taxes.

(l) The NGO does not appear to haveexpenses normally related to relief orhumanitarian effort.

(m) The absence of contributions fromdonors located within the country of originof the NGO.

(n) A mismatch between the patternand size of financial transactions on the onehand and the stated purpose and activityof the NGO on the other.

(o) Incongruities between apparentsources and amount of funds raised ormoved by the NGO.

(p) Any other transaction that is similar,identical or analogous to any of theforegoing.

(8) All other suspicious transactions/activities which can be reported withoutviolating any law.

The report on suspicious transactionsshall provide the following minimuminformation:

(a) Name or names of the partiesinvolved.

(b) A brief description of thetransaction or transactions.

(c) Date or date the transaction(s)occurred.

(d) Amount(s) involved in everytransaction.

(e) Such other relevant informationwhich can be of help to the authoritiesshould there be an investigation.

b. Exemption from Bank SecrecyLaw. When reporting covered transactionsto the AMLC, covered institutions and theirofficers, employees, representatives,agents, advisors, consultants or associatesshall not be deemed to have violated R.A.No. 1405, as amended; R.A. No. 6426, asamended; R.A. No. 8791 and other similarlaws, but are prohibited fromcommunicating, directly or indirectly, inany manner or by any means, to any personthe fact that a covered transaction reportwas made, the contents thereof, or anyother information in relation thereto. Incase of violation thereof, the concernedofficer, employee, representative, agent,advisor, consultant or associate of thecovered institution, shall be criminallyliable. However, no administrative,criminal or civil proceedings, shall lieagainst any person for having made acovered transaction report in the regularperformance of his duties and in good faith,whether or not such reporting results in any


APP. S-608.12.31

criminal prosecution under R.A. No. 9160or any other Philippine law.

c. Prohibition from disclosure of thecovered transaction report. Whenreporting covered transactions to theAMLC, covered institutions and theirofficers, employees, representatives,agents, advisors, consultants or associatesare prohibited from communicating,directly or indirectly, in any manner or byany means, to any person, entity, themedia, the fact that a covered transactionreport was made, the contents thereof, orany other information in relation thereto.Neither may such reporting be publishedor aired in any manner or form by the massmedia, electronic mail, or other similardevices. In case of violation thereof, the

concerned officer, employee, representative,agent, advisor, consultant or associate of thecovered institution, or media shall be heldcriminally liable.

5. Certification of compliance withanti-money laundering regulations.Covered institution shall submit annuallyto the BSP thru the appropriate supervisingand examining department a certification(Annex S-6-a) signed by the President orofficer of equivalent rank and by theirCompliance Officer to the effect that theyhave monitored compliance with existinganti-money laundering regulations.

The certification shall be submitted inaccordance with Appendix S-2 and shallbe considered a Category A-2 report.

Manual of Regulations for Non-Bank Financial Institutions S RegulationsAppendix S-6 - Page 5

APP. S-6 08.12.31

Pursuant to the provisions of Section 2 of BSP Circular No. 279 dated 2 April 2001, wehereby certify:

1. That we have monitored (Name of NSSLA)’s compliance with R.A. No. 9160(Anti-Money Laundering Act of 2001) as well as with BSP Circular Nos. 251, 253,259 and 302;

2. That the NSSLA is complying with the required customer identification, documentationof all new clients, and continued monitoring of customer’s activities;

3. That the NSSLA is also complying with the requirement to record all transactionsand to maintain such records including the record of customer identification for atleast five (5) years;

4. That the NSSLA does not maintain anonymous or fictitious accounts; and

5. That we conduct regular anti-money laundering training sessions for all NSSLAofficers and selected staff members holding sensitive positions.

(Name of President or officer (Name of Compliance Officer) of equivalent rank)

SUBSCRIBED AND SWORN to before me, _____ this ____ day of ____________,affiant/s exhibiting to me their Residence Certificates as follows:

Community Date/PlaceName Tax Cert. No Issued

Doc. No. _________; Notary PublicPage No. _________;Book No. _________;Series of 20___

Annex S-6-a

CERTIFICATION OF COMPLIANCEWITH ANTI-MONEY LAUNDERING REGULATIONS

C E R T I F I C A T I O N


APP. S-608.12.31


1. All covered institutions are requiredto file Suspicious Transaction Reports (STRs)on transactions involving all kinds ofmonetary instruments or property.

2. Banks shall file covered transactionreports (CTRs) on transactions involving allkinds of monetary instruments or property,i.e., in cash or non-cash, whether indomestic or foreign currency.

3. Covered institutions, other thanbanks, shall file CTRs on transactions incash or foreign currency or other monetaryinstruments (other than checks) orproperties. Due to the nature of thetransactions in the stock exchange, only thebrokers-dealers shall be required to fileCTRs and STRs. The PSE, PCD, SCCP andtransfer agents are exempt from filing CTRs.They, are however, required to file STRswhen the transactions that pass throughthem are deemed to be suspicious.

4. Where the covered institutionengages in bulk transactions with a bank,i.e., deposits of premium payments in bulkor settlements of trade, and the bulktransactions do not distinguish clients and

Annex S-6-b

AMLC Resolution No. 292

RULES ON SUBMISSION OF COVERED TRANSACTION REPORTS ANDSUSPICIOUS TRANSACTION REPORTS BY COVERED INSTITUTIONS1

(Annex to Appendix S-6)

their respective transaction amounts, saidcovered institutions shall be required to fileCTRs on its clients whose transactionsexceed P500,000 and are included in thebulk transactions.

5. With respect to insurancecompanies, when the total amount of thepremiums for the entire year, regardlessof the mode of payment (monthly,quarterly, semi-annually or annually),exceeds P500,000, such amount shall bereported as a covered transaction, even ifthe amounts of the amortizations are lessthan the threshold amount. The CTR shallbe filed upon payment of the first premiumamount, regardless of the mode ofpayment. Under this rule, the insurancecompany shall file the CTR only once everyyear until the policy matures or rescinded,whichever comes first.

6. The submission of CTRs is deferreduntil the AMLC directs otherwise.Submission of STRs, however, are notdeferred and covered institutions aremandated to submit such STRs when thecircumstances so require.

1a. The Anti-Money Laundering Council (AMLC), in the exercise of its authority under Sections 7(1) and 9 of Republic ActNo. 9160, otherwise known as the “Anti-Money Laundering Act of 2001”, as amended, and its Revised Implementing Rules andRegulations, resolved to:

(1) Defer reporting by covered institutions to AMLC of the following “non-cash, no/low risk covered transactions:· Transactions between banks and the BSP;· Transactions between banks operating in the Philippines;· Internal operating expenses of the banks;· Transactions between banks and government agencies;· Transactions involving transfer of funds from one deposit account to another deposit account of the same person within

the same bank;· Roll-overs of placements of time deposits; and· Loan interest/principal payment debited against borrower’s deposit account maintained with the lending bank.(2) Request the BSP-supervised institutions, through the Association of Bank Compliance Officers (ABCOMP), to determine

and report to AMLC the specific transactions falling within the purview of the aforesaid BSP-identified categories on “non-cash,no/low risk” covered transactions.

b. All covered institutions should:(1) Submit corresponding electronic copy versions, in the required format, of those STRs previously submitted in hard copy

or the hard copy version of those submitted only in electronic form, as the case may be, retroactive to 05 January 2004; and(2) Re-submit in required electronic form, those CTRs that have been submitted previously in hard copy or in diskette not

in the required format, retroactive to 23 March 2003.


APP. S-708.12.31

RULE 1TITLE

Rule 1.a. Title. - These Rules shall beknown and cited as the “Revised Rulesand Regulations ImplementingR.A. No. 9160”, ( the Anti-MoneyLaundering Act of 2001 [AMLA]), asamended by R.A. No. 9194.

Rule 1.b. Purpose. - These Rules arepromulgated to prescribe the proceduresand guidelines for the implementation ofthe AMLA, as amended by R.A. No. 9194.

RULE 2DECLARATION OF POLICY

Rule 2. Declaration of Policy. - It ishereby declared the policy of the Stateto protect the integrity and confidentialityof bank accounts and to ensure that thePhilippines shall not be used as a money-laundering site for the proceeds of anyunlawful activity. Consistent with itsforeign policy, the Philippines shallextend cooperation in transnationalinvestigations and prosecutions ofpersons involved in money launderingactivities wherever committed.

RULE 3DEFINITIONS

Rule 3. Definitions. – For purposes of thisAct, the following terms are hereby definedas follows:

Rule 3.a. Covered Institution refers to:

Rule 3.a.1. Banks, offshore bankingunits, quasi-banks, trust entities, non-stock

REVISED IMPLEMENTING RULES AND REGULATIONSR.A. NO. 9160, AS AMENDED BY R.A. NO. 9194

(Appendix to Sec. 4691S)

savings and loan associations, pawnshops,and all other institutions, including theirsubsidiaries and affiliates supervised and/or regulated by the Bangko Sentral ngPilipinas (BSP).

(a) A subsidiary means an entity morethan fifty percent (50%) of the outstandingvoting stock of which is owned by a bank,quasi-bank, trust entity or any otherinstitution supervised or regulated by theBSP.

(b) An affiliate means an entity atleast twenty percent (20%) but notexceeding fifty percent (50%) of thevoting stock of which is owned by abank, quasi-bank, trust entity, or anyother insti tution supervised and/orregulated by the BSP.

Rule 3.a.2. Insurance companies,insurance agents, insurance brokers,professional reinsurers, reinsurancebrokers, holding companies, holdingcompany systems and all other personsand entities supervised and/or regulated bythe Insurance Commission (IC).

(a) An insurance company includesthose entities authorized to transactinsurance business in the Philippines,whether life or non-life and whetherdomestic, domestically incorporated orbranch of a foreign entity. A contract ofinsurance is an agreement whereby oneundertakes for a consideration toindemnify another against loss, damageor liability arising from an unknown orcontingent event. Transacting insurancebusiness includes making or proposingto make, as insurer, any insurancecontract, or as surety, any contract ofsuretyship as a vocation and not asmerely incidental to any other legitimate


APP. S-708.12.31

business or activity of the surety, doingany kind of business specif icallyrecognized as constituting the doing ofan insurance business within themeaning of Presidential Decree (P.D.)No. 612, as amended, including areinsurance business and doing orproposing to do any business insubstance equivalent to any of theforegoing in a manner designed to evadethe provisions of P.D. No. 612, asamended.

(b) An insurance agent includesany person who solicits or obtainsinsurance on behalf of any insurancecompany or transmits for a personother than himself an application for apolicy or contract of insurance to orf rom such company or o f fe r s o rassumes to act in the negotiation ofsuch insurance.

(c) An insurance broker includes anyperson who acts or aids in any manner insoliciting, negotiating or procuring themaking of any insurance contract or inplacing risk or taking out insurance, onbehalf of an insured other than himself.

(d) A professional reinsurer includesany person, partnership, association orcorporation that transacts solely andexclusively reinsurance business in thePhilippines, whether domestic,domestically incorporated or a branch ofa foreign entity. A contract of reinsuranceis one by which an insurer procures athird person to insure him against loss orliability by reason of such originalinsurance.

(e) A reinsurance broker includesany person who, not being a dulyauthorized agent, employee or officer ofan insurer in which any reinsurance iseffected, acts or aids in any manner innegotiating contracts of reinsurance orplacing risks of effecting reinsurance, forany insurance company authorized to dobusiness in the Philippines.

(f) A holding company includes anyperson who directly or indirectly controlsany authorized insurer. A holding companysystem includes a holding companytogether with its controlled insurers andcontrolled persons.

Rule 3.a.3. (i) Securities dealers,brokers, salesmen, associated persons ofbrokers or dealers, investment houses,investment agents and consultants, tradingadvisors, and other entities managingsecurities or rendering similar services, (ii)mutual funds or open-end investmentcompanies, close-end investmentcompanies, common trust funds, pre-needcompanies or issuers and other similarentities; (iii) foreign exchange corporations,money changers, money payment,remittance, and transfer companies andother similar entities, and (iv) other entitiesadministering or otherwise dealing incurrency, commodities or financialderivatives based thereon, valuableobjects, cash substitutes and other similarmonetary instruments or propertysupervised and/or regulated by theSecurities and Exchange Commission(SEC).

(a) A securities broker includes aperson engaged in the business of buyingand selling securities for the account ofothers.

(b) A securities dealer includes anyperson who buys and sells securities forhis/her account in the ordinary course ofbusiness.

(c) A securities salesman includes anatural person, employed as such or as anagent, by a dealer, issuer or broker to buyand sell securities.

(d) An associated person of a brokeror dealer includes an employee thereofwho directly exercises control orsupervisory authority, but does not includea salesman, or an agent or a person whosefunctions are solely clerical or ministerial.


APP. S-708.12.31

(e) An investment house includes anenterprise which engages or purports toengage, whether regularly or on anisolated basis, in the underwriting ofsecurities of another person or enterprise,including securities of the Government andits instrumentalities.

(f) A mutual fund or an open-endinvestment company includes aninvestment company which is offeringfor sale or has outstanding, anyredeemable security of which it is theissuer.

(g) A closed-end investment companyincludes an investment company otherthan open-end investment company.

(h) A common trust fund includes afund maintained by an entity authorizedto perform trust functions under a writtenand formally established plan,exclusively for the collective investmentand reinvestment of certain moneyrepresenting participation in the planreceived by it in its capacity as trustee,for the purpose of administration, holdingor management of such funds and/orproperties for the use, benefit oradvantage of the trustor or of othersknown as beneficiaries.

(i) A pre-need company or issuerincludes any corporation supervised and/or regulated by the SEC and is authorizedor licensed to sell or offer for sale pre-needplans. Pre-need plans are contracts whichprovide for the performance of futureservice(s) or payment of future monetaryconsideration at the time of actual need,payable either in cash or installment bythe planholder at prices stated in thecontract with or without interest orinsurance coverage and includes life,pension, education, internment and otherplans, which the Commission may, fromtime to time, approve.

(j) A foreign exchange corporationincludes any enterprise which engagesor purports to engage, whether regularly

or on an isolated basis, in the sale andpurchase of foreign currency notes and suchother foreign-currency denominatednon-bank deposit transactions as may beauthorized under its articles ofincorporation.

(k) Investment Advisor/Agent/Consultant shall refer to any person:

(1) who for an advisory fee isengaged in the business of advisingothers, either directly or throughcirculars, reports, publications orwritings, as to the value of any securityand as to the advisability of trading in anysecurity; or

(2) who for compensation and as partof a regular business, issues orpromulgates, analyzes reports concerningthe capital market, except:

(a) any bank or trust company;(b) any journalist, reporter, columnist,

editor, lawyer, accountant,teacher;

(c) the publisher of any bonafidenewspaper, news, business orfinancial publication of generaland regular circulation, includingtheir employees;

(d) any contract market;(e) such other person not within the

intent of this definition, providedthat the furnishing of such serviceby the foregoing persons is solelyincidental to the conduct of theirbusiness or profession.

(3) any person who undertakes themanagement of portfolio securities ofinvestment companies, including thearrangement of purchases, sales orexchanges of securities.

(l) A moneychanger includes anyperson in the business of buying or sellingforeign currency notes.

(m) A money payment, remittance andtransfer company includes any person offeringto pay, remit or transfer or transmit moneyon behalf of any person to another person.


APP. S-708.12.31

(n) “Customer” refers to any person orentity that keeps an account, or otherwisetransacts business, with a coveredinstitution and any person or entity onwhose behalf an account is maintained ora transaction is conducted, as well as thebeneficiary of said transactions. Acustomer also includes the beneficiary ofa trust, an investment fund, a pension fundor a company or person whose assets aremanaged by an asset manager, or a grantorof a trust. It includes any insurance policyholder, whether actual or prospective.

(o) “Property” includes any thing oritem of value, real or personal, tangible orintangible, or any interest therein or anybenefit, privilege, claim or right with respectthereto.

Rule 3.b. Covered Transaction is atransaction in cash or other equivalentmonetary instrument involving a totalamount in excess of Php500,000.00 withinone (1) banking day.

Rule 3.b.1.Suspicious transactions aretransactions, regardless of amount, where anyof the following circumstances exists:

(1) There is no underlying legal ortrade obligation, purpose or economicjustification;

(2) The client is not properly identified;(3) The amount involved is not

commensurate with the business orfinancial capacity of the client;

(4) Taking into account all knowncircumstances, it may be perceived thatthe client’s transaction is structured inorder to avoid being the subject ofreporting requirements under the act;

(5) Any circumstance relating to thetransaction which is observed to deviatefrom the profile of the client and/or theclient’s past transactions with the coveredinstitution;

(6) The transaction is in any way relatedto an unlawful activity or any money

laundering activity or offense under this actthat is about to be, is being or has beencommitted; or

(7) Any transaction that is similar,analogous or identical to any of theforegoing.

Rule 3.c. Monetary Instrument refers to:(1) Coins or currency of legal tender

of the Philippines, or of any other country;(2) Drafts, checks and notes;(3) Securit ies or negotiable

instruments, bonds, commercial papers,deposit certificates, trust certificates,custodial receipts or deposit substituteinstruments, trading orders, transactiontickets and confirmations of sale orinvestments and money marketinstruments;

(4) Contracts or policies ofinsurance, life or non-life, and contractsof suretyship; and

(5) Other similar instruments whereti t le thereto passes to another byendorsement, assignment or delivery.

Rule 3.d. Offender refers to any personwho commits a money launderingoffense.

Rule 3.e. Person refers to any natural orjuridical person.

Rule 3.f. Proceeds refers to an amountderived or realized from an unlawfulactivity. It includes:

(1) All material results, profits, effectsand any amount realized from anyunlawful activity;

(2) All monetary, financial oreconomic means, devices, documents,papers or things used in or having anyrelation to any unlawful activity; and

(3) All moneys, expenditures,payments, disbursements, costs, outlays,charges, accounts, refunds and othersimilar i tems for the f inancing,


APP. S-708.12.31

operations, and maintenance of anyunlawful activity.

Rule 3.g. Supervising Authority refers tothe BSP, the SEC and the IC. Where theBSP, SEC or IC supervision applies only tothe registration of the covered institution,the BSP, the SEC or the IC, within the limitsof the AMLA, shall have the authority torequire and ask assistance from thegovernment agency having regulatorypower and/or licensing authority over saidcovered institution for the implementationand enforcement of the AMLA and theseRules.

Rule 3.h. Transaction refers to any actestablishing any right or obligation or givingrise to any contractual or legal relationshipbetween the parties thereto. It also includesany movement of funds by any means witha covered institution.

Rule 3.i. Unlawful activity refers to any actor omission or series or combination thereofinvolving or having relation, to the following:

(A) Kidnapping for ransom under Article267 of Act No. 3815, otherwise known asthe Revised Penal Code, as amended;

(1) Kidnapping for ransom

(B) Sections 4, 5, 6, 8, 9, 10, 12, 13,14, 15 and 16 of R.A. No. 9165, otherwiseknown as the Comprehensive DangerousDrugs Act of 2002;

(2) Importation of prohibited drugs;(3) Sale of prohibited drugs;(4) Administration of prohibited drugs;(5) Delivery of prohibited drugs(6) Distribution of prohibited drugs(7) Transportation of prohibited drugs(8) Maintenance of a Den, Dive or

Resort for prohibited users(9) Manufacture of prohibited drugs(10)Possession of prohibited drugs(11)Use of prohibited drugs

(12)Cultivation of plants which aresources of prohibited drugs

(13)Culture of plants which are sourcesof prohibited drugs

(C) Section 3 paragraphs b, c, e, g, hand i of R.A. No. 3019, as amended,otherwise known as the Anti-Graft andCorrupt Practices Act;

(14)Directly or indirectly requesting orreceiving any gift, present, share,percentage or benefit for himself or for anyother person in connection with anycontract or transaction between theGovernment and any party, wherein thepublic officer in his official capacity has tointervene under the law;

(15) Directly or indirectly requestingor receiving any gift, present or otherpecuniary or material benefit, for himselfor for another, from any person for whomthe public officer, in any manner orcapacity, has secured or obtained, or willsecure or obtain, any government permitor license, in consideration for the helpgiven or to be given, without prejudice toSection 13 of R.A. No. 3019;

(16) Causing any undue injury to anyparty, including the government, or givingany private party any unwarranted benefits,advantage or preference in the dischargeof his official, administrative or judicialfunctions through manifest partiality,evident bad faith or gross inexcusablenegligence;

(17) Entering, on behalf of thegovernment, into any contract or transactionmanifestly and grossly disadvantageous tothe same, whether or not the public officerprofited or will profit thereby;

(18) Directly or indirectly havingfinancial or pecuniary interest in anybusiness contract or transaction inconnection with which he intervenes ortakes part in his official capacity, or inwhich he is prohibited by the Constitutionor by any law from having any interest;


APP. S-708.12.31

(19) Directly or indirectly becominginterested, for personal gain, or havingmaterial interest in any transaction or actrequiring the approval of a board, panel orgroup of which he is a member, and whichexercise of discretion in such approval,even if he votes against the same or hedoes not participate in the action of theboard, committee, panel or group.

(D) Plunder under R.A. No. 7080, asamended;

(20) Plunder through misappropriation,conversion, misuse or malversation ofpublic funds or raids upon the publictreasury;

(21) Plunder by receiving, directly orindirectly, any commission, gift, share,percentage, kickbacks or any other form ofpecuniary benefit from any person and/orentity in connection with any governmentcontract or project or by reason of the officeor position of the public officer concerned;

(22) Plunder by the illegal or fraudulentconveyance or disposition of assetsbelonging to the National Government orany of its subdivisions, agencies,instrumentalities or government-owned orcontrolled corporations or their subsidiaries;

(23) Plunder by obtaining, receiving oraccepting, directly or indirectly, any sharesof stock, equity or any other form of interestor participation including the promise offuture employment in any businessenterprise or undertaking;

(24) Plunder by establishing agricultural,industrial or commercial monopolies or othercombinations and/or implementation ofdecrees and orders intended to benefitparticular persons or special interests;

(25) Plunder by taking undueadvantage of official position, authority,relationship, connection or influence tounjustly enrich himself or themselves at theexpense and to the damage and prejudiceof the Filipino people and the republic ofthe Philippines.

(E) Robbery and extortion underArticles 294, 295, 296, 299, 300, 301 and302 of the Revised Penal Code, asamended;

(26) Robbery with violence orintimidation of persons;

(27) Robbery with physical injuries,committed in an uninhabited place and bya band, or with use of firearms on a street,road or alley;

(28) Robbery in an uninhabited houseor public building or edifice devoted toworship.

(F) Jueteng and Masiao punished asillegal gambling under P.D. No. 1602;

(29) Jueteng;(30) Masiao.

(G) Piracy on the high seas under theRevised Penal Code, as amended and P.D.No. 532;

(31) Piracy on the high seas;(32) Piracy in inland Philippine waters;(33) Aiding and abetting pirates and

brigands.

(H) Qualified theft under Article 310of the Revised Penal Code, as amended;

(34) Qualified theft.

(I) Swindling under Article 315 of theRevised Penal Code, as amended;

(35) Estafa with unfaithfulness or abuseof confidence by altering the substance,quality or quantity of anything of valuewhich the offender shall deliver by virtueof an obligation to do so, even though suchobligation be based on an immoral or illegalconsideration;

(36) Estafa with unfaithfulness or abuseof confidence by misappropriating orconverting, to the prejudice of another,money, goods or any other personalproperty received by the offender in trust oron commission, or for administration, orunder any other obligation involving the


APP. S-708.12.31

duty to make delivery or to return the same,even though such obligation be totally orpartially guaranteed by a bond; or bydenying having received such money,goods, or other property;

(37) Estafa with unfaithfulness orabuse of confidence by taking undueadvantage of the signature of the offendedparty in blank, and by writing anydocument above such signature in blank,to the prejudice of the offended party orany third person;

(38) Estafa by using a fictitious name,or falsely pretending to possess power,influence, qualifications, property, credit,agency, business or imaginarytransactions, or by means of other similardeceits;

(39) Estafa by altering the quality,fineness or weight of anything pertainingto his art or business;

(40) Estafa by pretending to havebribed any government employee;

(41) Estafa by postdating a check, orissuing a check in payment of an obligationwhen the offender has no funds in the bank,or his funds deposited therein were notsufficient to cover the amount of the check;

(42) Estafa by inducing another, bymeans of deceit, to sign any document;

(43) Estafa by resorting to somefraudulent practice to ensure success in agambling game;

(44) Estafa by removing, concealing ordestroying, in whole or in part, any courtrecord, office files, document or any otherpapers.

(J) Smuggling under R.A. Nos. 455and 1937;

(45) Fraudulent importation of any vehicle;(46) Fraudulent exportation of any

vehicle;(47) Assisting in any fraudulent

importation;(48) Assisting in any fraudulent

exportation;

(49) Receiving smuggled article afterfraudulent importation;

(50) Concealing smuggled article afterfraudulent importation;

(51) Buying smuggled article afterfraudulent importation;

(52) Selling smuggled article afterfraudulent importation;

(53) Transportation of smuggled articleafter fraudulent importation;

(54) Fraudulent practices againstcustoms revenue.

(K) Violations under R.A. No. 8792,otherwise known as the ElectronicCommerce Act of 2000;

K.1. Hacking or cracking, which refers to:(55) unauthorized access into or

interference in a computer system/server orinformation and communication system; or

(56) any access in order to corrupt, alter,steal, or destroy using a computer or othersimilar information and communicationdevices, without the knowledge and consentof the owner of the computer or informationand communications system, including

(57) the introduction of computerviruses and the like, resulting in thecorruption, destruction, alteration, theft orloss of electronic data messages orelectronic document;

K.2. Piracy, which refers to:(58) the unauthorized copying,

reproduction,(59) the unauthorized dissemination,

distribution,(60) the unauthorized importation,(61) the unauthorized use, removal,

alteration, substitution, modification,(62) the unauthorized storage,

uploading, downloading, communication,making available to the public, or

(63) the unauthorized broadcasting, ofprotected material, electronic signature orcopyrighted works including legallyprotected sound recordings or phonograms


APP. S-708.12.31

or information material on protected works,through the use of telecommunicationnetworks, such as, but not limited to, theinternet, in a manner that infringesintellectual property rights;

K.3. Violations of the Consumer Act orR.A. No. 7394 and other relevant orpertinent laws through transactionscovered by or using electronic datamessages or electronic documents:

(64) Sale of any consumer product thatis not in conformity with standards underthe Consumer Act;

(65) Sale of any product that has beenbanned by a rule under the Consumer Act;

(66) Sale of any adulterated or mislabeledproduct using electronic documents;

(67) Adulteration or misbranding of anyconsumer product;

(68) Forging, counterfeiting orsimulating any mark, stamp, tag, label orother identification device;

(69) Revealing trade secrets;(70) Alteration or removal of the

labeling of any drug or device held for sale;(71) Sale of any drug or device not

registered in accordance with theprovisions of the E-Commerce Act;

(72) Sale of any drug or device by anyperson not licensed in accordance with theprovisions of the E-Commerce Act;

(73) Sale of any drug or device beyondits expiration date;

(74) Introduction into commerce ofany mislabeled or banned hazardoussubstance;

(75) Alteration or removal of thelabeling of a hazardous substance;

(76) Deceptive sales acts and practices;(77) Unfair or unconscionable sales

acts and practices;(78) Fraudulent practices relative to

weights and measures;(79) False representations in

advertisements as the existence of awarranty or guarantee;

(80) Violation of price tagrequirements;

(81) Mislabeling consumer products;(82) False, deceptive or misleading

advertisements;(83) Violation of required disclosures

on consumer loans;(84) Other violations of the provisions

of the E-Commerce Act;

(L) Hijacking and other violationsunder R.A. No. 6235; destructive arsonand murder, as defined under the RevisedPenal Code, as amended, including thoseperpetrated by terrorists against non-combatant persons and similar targets;

(85) Hijacking;(86) Destructive arson;(87) Murder;(88) Hijacking, destructive arson or

murder perpetrated by terrorists againstnon-combatant persons and similar targets;

(M) Fraudulent practices and otherviolations under R.A. No. 8799, otherwiseknown as the Securities Regulation Codeof 2000;

(89) Sale, offer or distribution ofsecurities within the Philippines without aregistration statement duly filed with andapproved by the SEC;

(90) Sale or offer to the public of anypre-need plan not in accordance with therules and regulations which the SEC shallprescribe;

(91) Violation of reportorialrequirements imposed upon issuers ofsecurities;

(92) Manipulation of security prices bycreating a false or misleading appearance ofactive trading in any listed security traded inan Exchange or any other trading market;

(93) Manipulation of security prices byeffecting, alone or with others, a series oftransactions in securities that raises theirprices to induce the purchase of a security,whether of the same or different class, of


APP. S-708.12.31

the same issuer or of a controlling, controlledor commonly controlled company byothers;

(94) Manipulation of security prices byeffecting, alone or with others, a series oftransactions in securities that depressestheir price to induce the sale of a security,whether of the same or different class, ofthe same issuer or of a controlling,controlled or commonly controlledcompany by others;

(95) Manipulation of security prices byeffecting, alone or with others, a series oftransactions in securities that creates activetrading to induce such a purchase or salethough manipulative devices such as markingthe close, painting the tape, squeezing thefloat, hype and dump, boiler roomoperations and such other similar devices;

(96) Manipulation of security prices bycirculating or disseminating information thatthe price of any security listed in anExchange will or is likely to rise or fallbecause of manipulative market operationsof any one or more persons conducted forthe purpose of raising or depressing theprice of the security for the purpose ofinducing the purchase or sale of suchsecurity;

(97) Manipulation of security prices bymaking false or misleading statements withrespect to any material fact, which he knewor had reasonable ground to believe wasso false and misleading, for the purpose ofinducing the purchase or sale of any securitylisted or traded in an Exchange;

(98) Manipulation of security prices byeffecting, alone or with others, any seriesof transactions for the purchase and/or saleof any security traded in an Exchange forthe purpose of pegging, fixing or stabilizingthe price of such security, unless otherwiseallowed by the Securities Regulation Codeor by the rules of the SEC;

(99) Sale or purchase of any securityusing any manipulative deceptive device orcontrivance;

(100) Execution of short sales or stop-loss order in connection with the purchaseor sale of any security not in accordancewith such rules and regulations as the SECmay prescribe as necessary and appropriatein the public interest or the protection ofthe investors;

(101) Employment of any device,scheme or art i f ice to defraud inconnection with the purchase and sale ofany securities;

(102) Obtaining money or property inconnection with the purchase and sale ofany security by means of any untruestatement of a material fact or any omissionto state a material fact necessary in orderto make the statements made, in the lightof the circumstances under which theywere made, not misleading;

(103) Engaging in any act, transaction,practice or course of action in the sale andpurchase of any security which operatesor would operate as a fraud or deceit uponany person;

(104) Insider trading;(105) Engaging in the business of buying

and selling securities in the Philippines as abroker or dealer, or acting as a salesman, oran associated person of any broker or dealerwithout any registration from theCommission;

(106) Employment by a broker ordealer of any salesman or associatedperson or by an issuer of any salesman,not registered with the SEC;

(107) Effecting any transaction in anysecurity, or reporting such transaction, inan Exchange or using the facility of anExchange which is not registered with theSEC;

(108) Making use of the facility of aclearing agency which is not registeredwith the SEC;

(109) Violations of margin requirements;(110) Violations on the restrictions on

borrowings by members, brokers anddealers;


APP. S-708.12.31

(111) Aiding and Abetting in anyviolations of the Securities RegulationCode;

(112) Hindering, obstructing ordelaying the filing of any documentrequired under the Securities RegulationCode or the rules and regulations of theSEC;

(113) Violations of any of the provisionsof the implementing rules and regulationsof the SEC;

(114) Any other violations of any of theprovisions of the Securities Regulation Code.

(N) Felonies or offenses of a similarnature to the afore-mentioned unlawfulactivities that are punishable under the penallaws of other countries.

In determining whether or not a felonyor offense punishable under the penal lawsof other countries, is “of a similar nature”,as to constitute the same as an unlawfulactivity under the AMLA, the nomenclatureof said felony or offense need not beidentical to any of the predicate crimeslisted under Rule 3.i.

RULE 4 MONEY LAUNDERING OFFENSE

Rule 4.1. Money Laundering Offense. -Money laundering is a crime whereby theproceeds of an unlawful activity as hereindefined are transacted, thereby makingthem appear to have originated fromlegitimate sources. It is committed by thefollowing:

(a) Any person knowing that anymonetary instrument or property represents,involves, or relates to, the proceeds of anyunlawful activity, transacts or attempts totransact said monetary instrument orproperty.

(b) Any person knowing that anymonetary instrument or property involvesthe proceeds of any unlawful activity,performs or fails to perform any act as aresult of which he facilitates the offense of

money laundering referred to in paragraph(a) above.

(c) Any person knowing that anymonetary instrument or property isrequired under this Act to be disclosed andfiled with the Anti-Money LaunderingCouncil (AMLC), fails to do so.

RULE 5JURISDICTION OF MONEY

LAUNDERING CASES AND MONEYLAUNDERING INVESTIGATION

PROCEDURES

Rule 5.1. Jurisdiction of MoneyLaundering Cases. - The Regional TrialCourts shall have the jurisdiction to try allcases on money laundering. Thosecommitted by public officers and privatepersons who are in conspiracy with suchpublic officers shall be under thejurisdiction of the Sandiganbayan.

Rule 5.2. Investigation of MoneyLaundering Offenses. - The AMLC shallinvestigate:

(a) Suspicious transactions;(b) Covered transactions deemed sus-

picious after an investigation conductedby the AMLC;

(c) Money laundering activities; and(d) Other violations of this act.

Rule 5.3. Attempts at Transactions. -Section 4 (a) and (b) of the AMLA providesthat any person who attempts to transact anymonetary instrument or propertyrepresenting, involving or relating to theproceeds of any unlawful activity shall beprosecuted for a money laundering offense.Accordingly, the reports required underRule 9.3 (a) and (b) of these Rules shallinclude those pertaining to any attempt byany person to transact any monetaryinstrument or property representing,involving or relating to the proceeds of anyunlawful activity.


APP. S-708.12.31

RULE 6PROSECUTION OF MONEY

LAUNDERING

Rule 6.1. Prosecution of Money Laundering(a) Any person may be charged with

and convicted of both the offense of moneylaundering and the unlawful activity asdefined under Rule 3 (i) of the AMLA.

(b) Any proceeding relating to theunlawful activity shall be given precedenceover the prosecution of any offense orviolation under the AMLA without prejudiceto the application Ex-Parte by the AMLCto the Court of Appeals for a Freeze Orderwith respect to the monetary instrumentor property involved therein and resort to otherremedies provided under the AMLA, the rulesof court and other pertinent laws and rules.

Rule 6.2. When the AMLC finds, afterinvestigation, that there is probable causeto charge any person with a moneylaundering offense under Section 4 of theAMLA, it shall cause a complaint to befiled, pursuant to Section 7 (4) of the AMLA,before the Department of Justice or theOmbudsman, which shall then conductthe preliminary investigation of the case.

Rule 6.3. After due notice and hearing inthe preliminary investigation proceedingsbefore the Department of Justice, or theOmbudsman, as the case may be, and thelatter should find probable cause of amoney laundering offense, it shall file thenecessary information before the RegionalTrial Courts or the Sandiganbayan.

Rule 6.4. Trial for the money launderingoffense shall proceed in accordance withthe Code of Criminal Procedure or the Rulesof Procedure of the Sandiganbayan, as thecase may be.

Rule 6.5. Knowledge of the offender thatany monetary instrument or property

represents, involves, or relates to theproceeds of an unlawful activity or that anymonetary instrument or property is requiredunder the AMLA to be disclosed and filedwith the AMLC, may be established by directevidence or inferred from the attendantcircumstances.

Rule 6.6. All the elements of every moneylaundering offense under Section 4 of theAMLA must be proved by evidencebeyond reasonable doubt, including theelement of knowledge that the monetaryinstrument or property represents, involvesor relates to the proceeds of any unlawfulactivity.

Rule 6.7. No element of the unlawfulactivity, however, including the identityof the perpetrators and the details of theactual commission of the unlawfulactivity need be established by proofbeyond reasonable doubt. The elementsof the offense of money laundering areseparate and distinct from the elementsof the felony or offense constituting theunlawful activity.

RULE 7CREATION OF ANTI-MONEY

LAUNDERING COUNCIL (AMLC)

Rule 7.1.a. Composition. - The Anti-Money Laundering Council is herebycreated and shall be composed of theGovernor of the BSP as Chairman, theCommissioner of the InsuranceCommission and the Chairman of theSEC as members.

Rule 7.1.b. Unanimous Decision. - TheAMLC shall act unanimously in dischargingits functions as defined in the AMLA and inthese Rules. However, in the case of theincapacity, absence or disability of anymember to discharge his functions, theofficer duly designated or authorized to


APP. S-708.12.31

discharge the functions of the Governor ofthe BSP, the Chairman of the SEC or theInsurance Commissioner, as the case maybe, shall act in his stead in the AMLC.

Rule 7.2. Functions. - The functions ofthe AMLC are defined hereunder:

(1) to require and receive covered orsuspicious transaction reports fromcovered institutions;

(2) to issue orders addressed to theappropriate Supervising Authority or thecovered institution to determine the trueidentity of the owner of any monetaryinstrument or property subject of a coveredor suspicious transaction report, or requestfor assistance from a foreign State, orbelieved by the Council, on the basis ofsubstantial evidence, to be, in whole or inpart, wherever located, representing,involving, or related to, directly orindirectly, in any manner or by any means,the proceeds of an unlawful activity;

(3) to institute civil forfeitureproceedings and all other remedialproceedings through the Office of theSolicitor General;

(4) to cause the filing of complaintswith the Department of Justice or theOmbudsman for the prosecution ofmoney laundering offenses;

(5) to investigate suspicioustransactions and covered transactionsdeemed suspicious after an investigationby the AMLC, money laundering activitiesand other violations of this Act;

(6) to apply before the Court ofAppeals, Ex-Parte, for the freezing of anymonetary instrument or property allegedto be proceeds of any unlawful activity asdefined under Section 3(i) hereof;

(7) to implement such measures asmay be inherent, necessary, implied,incidental and justified under the AMLA tocounteract money laundering. Subject tosuch limitations as provided for by law, theAMLC is authorized under Rule 7 (7) of the

AMLA to establish an information sharingsystem that will enable the AMLC to store,track and analyze money launderingtransactions for the resolute prevention,detection and investigation of moneylaundering offenses. For this purpose,the AMLC shall install a computerizedsystem that will be used in the creationand maintenance of an informationdatabase;

(8) to receive and take action in respectof any request from foreign states forassistance in their own anti-moneylaundering operations as provided in theAMLA. The AMLC is authorized underSections 7 (8) and 13 (b) and (d) of the AMLAto receive and take action in respect ofany request of foreign states for assistancein their own anti-money launderingoperations, in respect of conventions,resolutions and other directives of theUnited Nations (UN), the UN SecurityCouncil, and other internationalorganizations of which the Philippines isa member. However, the AMLC mayrefuse to comply with any such request,convention, resolution or directive wherethe action sought therein contravenes theprovisions of the Constitution, or theexecution thereof is likely to prejudice thenational interest of the Philippines.

(9) to develop educational programson the pernicious effects of moneylaundering, the methods and techniquesused in money laundering, the viable meansof preventing money laundering and theeffective ways of prosecuting and punishingoffenders.

(10) to enlist the assistance of anybranch, department, bureau, office,agency or instrumentali ty of thegovernment, including government-owned and -controlled corporations, inundertaking any and all anti-moneylaundering operations, which may includethe use of its personnel, facilities andresources for the more resolute


APP. S-708.12.31

prevention, detection and investigation ofmoney laundering offenses andprosecution of offenders. The AMLC mayrequire the intelligence units of theArmed Forces of the Philippines, thePhi l ipp ine Nat iona l Po l ice , theDepartment of Finance, the Departmentof Justice, as well as their attachedagencies , and o ther domes t ic ortransnational governmental or non-governmental organizations or groupsto divulge to the AMLC all informationthat may, in any way, facilitate theresolute prevention, investigation andprosecut ion of money launder ingoffenses and other violations of theAMLA.

(11) To impose administrativesanctions for the violation of laws, rules,regulations and orders and resolutionsissued pursuant thereto.

Rule 7.3. Meetings. - The AMLC shallmeet every first Monday of the month, oras often as may be necessary at the call ofthe Chairman.

RULE 8CREATION OF A SECRETARIAT

Rule 8.1. The Executive Director. - TheSecretariat shall be headed by anExecutive Director who shall be appointedby the AMLC for a term of five (5) years.He must be a member of the PhilippineBar, at least thirty-five (35) years of age,must have served at least five (5) yearseither at the BSP, the SEC or the IC and ofgood moral character, unquestionableintegrity and known probity. He shall beconsidered a regular employee of the BSPwith the rank of Assistant Governor, andshall be entitled to such benefits andsubject to such rules and regulations, aswell as prohibitions, as are applicable toofficers of similar rank.

Rule 8.2. Composition. - In organizing theSecretariat, the AMLC may choose fromthose who have served, continuously orcumulatively, for at least five (5) years inthe BSP, the SEC or the IC. All membersof the Secretariat shall be consideredregular employees of the BSP and shallbe entitled to such benefits and subject tosuch rules and regulations as areapplicable to BSP employees of similarrank.

Rule 8.3. Detail and Secondment. - TheAMLC is authorized under Section 7 (10) ofthe AMLA to enlist the assistance of the BSP,the SEC or the IC, or any other branch,department, bureau, office, agency orinstrumentality of the government, includinggovernment-owned and controlledcorporations, in undertaking any and all anti-money laundering operations. This includesthe use of any member of their personnelwho may be detailed or seconded to theAMLC, subject to existing laws and CivilService Rules and Regulations. Detailedpersonnel shall continue to receive theirsalaries, benefits and emoluments from theirrespective mother units. Seconded personnelshall receive, in lieu of their respectivecompensation packages from their respectivemother units, the salaries, emoluments andall other benefits to which their AMLCSecretariat positions are entitled to.

Rule 8.4. Confidentiality Provisions. - Themembers of the AMLC, the ExecutiveDirector, and all the members of theSecretariat, whether permanent, on detail oron secondment, shall not reveal, in anymanner, any information known to them byreason of their office. This prohibition shallapply even after their separation from theAMLA. In case of violation of this provision,the person shall be punished in accordancewith the pertinent provisions of the CentralBank Act.


APP. S-708.12.31

RULE 9PREVENTION OF MONEY

LAUNDERING; CUSTOMERIDENTIFICATION REQUIREMENTS

AND RECORD KEEPING

Rule 9.1. Customer IdentificationRequirements

Rule 9.1.a. Customer Identification. -Covered institutions shall establish andrecord the true identity of its clientsbased on official documents. They shallmaintain a system of verifying the trueidentity of their clients and, in case ofcorporate clients, require a system ofverifying their legal existence andorganizational structure, as well as theauthority and identification of all personspurporting to act on their behalf. Coveredinstitutions shall establish appropriatesystems and methods based oninternationally compliant standards andadequate internal controls for verifyingand recording the true and full identityof their customers.

Rule 9.1.b. Trustee, Nominee andAgent Accounts. - When dealing withcustomers who are acting as trustee,nominee, agent or in any capacity for andon behalf of another, covered institutionsshall verify and record the true and fullidentity of the person(s) on whose behalfa transaction is being conducted.Covered institutions shall also establishand record the true and full identity ofsuch trustees, nominees, agents andother persons and the nature of theircapacity and duties. In case a coveredinstitution has doubts as to whether suchpersons are being used as dummies incircumvention of existing laws, it shallimmediately make the necessaryinquiries to verify the status of thebusiness relationship between theparties.

Rule 9.1.c. Minimum Information/Documents Required for IndividualCustomers. - Covered institutions shallrequire customers to produce originaldocuments of identity issued by an officialauthority, bearing a photograph of thecustomer. Examples of such documentsare identity cards and passports. Thefollowing minimum information/documents shall be obtained fromindividual customers:

(1) Name; (2) Present address; (3) Permanent address; (4) Date and place of birth; (5) Nationality; (6) Nature of work and name of

employer or nature of self-employment/business;

(7) Contact numbers; (8) Tax identification number, Social

Security System number or GovernmentService and Insurance System number;

(9) Specimen signature;(10) Source of fund(s); and(11) Names of beneficiaries in case of

insurance contracts and wheneverapplicable.

Rule 9.1.d. Minimum Information/Documents Required for Corporate andJuridical Entities. - Before establishingbusiness relationships, coveredinstitutions shall endeavor to ensure thatthe customer is a corporate or juridicalentity which has not been or is not inthe process of being, dissolved, woundup or voided, or that its business oroperations has not been or is not in theprocess of being, closed, shut down,phased out, or terminated. Dealingswith shell companies and corporations,being legal entities which have nobusiness substance in their own right butthrough which financial transactionsmay be conducted, should beundertaken with extreme caution. The


APP. S-708.12.31

following minimum information/documents shall be obtained fromcustomers that are corporate or juridicalentities, including shell companies andcorporations:

(1) Articles of Incorporation/Partnership;

(2) By-laws;(3) Official address or principal

business address;(4) List of directors/partners;(5) List of principal stockholders

owning at least two percent (2%) of thecapital stock;

(6) Contact numbers;(7) Beneficial owners, if any; and(8) Verification of the authority and

identification of the person purporting toact on behalf of the client.

Rule 9.1.e. Prohibition Against CertainAccounts. Covered institutions shallmaintain accounts only in the true and fullname of the account owner or holder. Theprovisions of existing laws to the contrarynotwithstanding, anonymous accounts,accounts under fictitious names, and allother similar accounts shall be absolutelyprohibited.

Rule 9.1.f. Prohibition Against Openingof Accounts Without Face-to-faceContact. - No new accounts shall beopened and created without face-to-facecontact and full compliance with therequirements under Rule 9.1.c of these Rules.

Rule 9.1.g. Numbered Accounts. - Pesoand foreign currency non-checkingnumbered accounts shall be allowed:Provided, That the true identity of thecustomers of all peso and foreign currencynon-checking numbered accounts aresatisfactorily established based on officialand other reliable documents and records,and that the information and documentsrequired under the provisions of these

Rules are obtained and recorded by thecovered institution. No peso and foreigncurrency non-checking accounts shall beallowed without the establishment of suchidentity and in the manner herein provided.The BSP may conduct annual testing forthe purpose of determining the existenceand true identity of the owners of suchaccounts. The SEC and the IC may conductsimilar testing more often than once a yearand covering such other related purposesas may be allowed under their respectivecharters.

Rule 9.2. Record Keeping Requirements

Rule 9.2.a. Record Keeping: Kinds ofRecords and Period for Retention. – Allrecords of all transactions of coveredinstitutions shall be maintained and safelystored for five (5) years from the dates oftransactions. Said records and files shallcontain the full and true identity of theowners or holders of the accounts involvedin the covered transactions and all othercustomer identification documents.Covered institutions shall undertake thenecessary adequate security measures toensure the confidentiality of such file.Covered institutions shall prepare andmaintain documentation, in accordancewith the aforementioned clientidentification requirements, on theircustomer accounts, relationships andtransactions such that any account,relationship or transaction can be soreconstructed as to enable the AMLC, and/or the courts to establish an audit trail formoney laundering.

Rule 9.2.b. Existing and New Accountsand New Transactions. - All records ofexisting and new accounts and of newtransactions shall be maintained and safelystored for five (5) years from 17 October2001 or from the dates of the accounts ortransactions, whichever is later.


APP. S-708.12.31

Rule 9.2.c. Closed Accounts.- With respectto closed accounts, the records on customeridentification, account files and businesscorrespondence shall be preserved andsafely stored for at least five (5) years fromthe dates when they were closed.

Rule 9.2.d. Retention of Records in Casea Money Laundering Case has been Filedin Court. – If a money laundering casebased on any record kept by the coveredinstitution concerned has been filed incourt, said file must be retained beyond theperiod stipulated in the three (3) immediatelypreceding sub-Rules, as the case may be,until it is confirmed that the case has beenfinally resolved or terminated by the court.

Rule 9.2.e. Form of Records. – Recordsshall be retained as originals in such formsas are admissible in court pursuant toexisting laws and the applicable rulespromulgated by the Supreme Court.

Rule 9.3. Reporting of CoveredTransactions. -

Rule 9.3.a. Period of Reporting CoveredTransactions and SuspiciousTransactions.- Covered institutions shall report to theAMLC all covered transactions andsuspicious transactions within five (5)working days from occurrence thereof,unless the supervising authority concernedprescribes a longer period not exceedingten (10) working days.

Should a transaction be determined tobe both a covered and a suspicioustransaction, the covered institution shallreport the same as a suspicioustransaction.

The reporting of covered transactionsby covered institutions shall be deferredfor a period of sixty (60) days after theeffectivity of R.A. No. 9194, or as may bedetermined by the AMLC, in order toallow the covered insti tutions to

configure their respective computersystems; provided that, all coveredtransactions during said defermentperiod shall be submitted thereafter.

Rule 9.3.b. Covered and SuspiciousTransaction Report Forms. - The CoveredTransaction Report (CTR) and theSuspicious Transaction Report (STR) shallbe in the forms prescribed by the AMLC.

Rule 9.3.b.1. Covered institutions shalluse the existing forms for CoveredTransaction Reports and SuspiciousTransaction Reports, until such time asthe AMLC has issued new sets of forms.

Rule 9.3.b.2. Covered TransactionReports and Suspicious TransactionReports shall be submitted in a securedmanner to the AMLC in electronic form,either via diskettes, leased lines, orthrough internet facilities, with thecorresponding hard copy for suspicioustransactions. The f inal f low andprocedures for such reporting shall bemapped out in the manual of operationsto be issued by the AMLC.

Rule 9.3.c. Exemption from BankSecrecy Laws. – When reportingcovered or suspicious transactions to theAMLC, covered institutions and theirofficers and employees, shall not bedeemed to have violated R.A. No. 1405,as amended, R.A. No. 6426, asamended, R.A. No. 8791 and othersimilar laws, but are prohibited fromcommunicating, directly or indirectly, inany manner or by any means, to anyperson the fact that a covered orsuspicious transaction report was made,the contents thereof, or any otherinformation in relation thereto. In caseof violation thereof, the concernedofficer and employee of the coveredinstitution, shall be criminally liable.


APP. S-708.12.31

Rule 9.3.d. Confidentiality Provisions. –When reporting covered transactions orsuspicious transactions to the AMLC,covered institutions and their officers,employees, representatives, agents,advisors, consultants or associates areprohibited from communicating, directlyor indirectly, in any manner or by anymeans, to any person, entity, or the media,the fact that a covered transaction reportwas made, the contents thereof, or anyother information in relation thereto.Neither may such reporting be publishedor aired in any manner or form by the massmedia, electronic mail, or other similardevices. In case of violation hereof, theconcerned officer, employee,representative, agent, advisor, consultantor associate of the covered institution, ormedia shall be held criminally liable.

Rule 9.3.e. Safe Harbor Provisions. – Noadministrative, criminal or civilproceedings, shall lie against any personfor having made a covered transactionreport or a suspicious transaction report inthe regular performance of his duties andin good faith, whether or not suchreporting results in any criminalprosecution under this Act or any otherPhilippine law.

RULE 10APPLICATION FOR FREEZE ORDERS

Rule 10.1. When the AMLC May Applyfor the Freezing of Any MonetaryInstrument or Property. -

(a) After an investigation conducted bythe AMLC and upon determination thatprobable cause exists that a monetaryinstrument or property is in any way relatedto any unlawful activity as defined underSection 3 (i), the AMLC may file an Ex-Parteapplication before the Court of Appeals forthe issuance of a freeze order on anymonetary instrument or property subject

thereof prior to the institution or in the courseof, the criminal proceedings involving theunlawful activity to which said monetaryinstrument or property is any way related.

(b) Considering the intricate anddiverse web of related and interlockingaccounts pertaining to the monetaryinstrument(s) or property(ies) that anyperson may create in the different coveredinstitutions, their branches and/or otherunits, the AMLC may apply to the Court ofAppeals for the freezing, not only of themonetary instruments or properties in thenames of the reported owner(s)/holder(s),and monetary instruments or propertiesnamed in the application of the AMLC butalso all other related web of accountspertaining to other monetary instrumentsand properties, the funds and sources ofwhich originated from or are related to themonetary instrument(s) or property(ies)subject of the freeze order(s).

(c) The freeze order shall be effectivefor twenty (20) days unless extended bythe Court of Appeals upon application bythe AMLC.

Rule 10.2. Definition of Probable Cause- Probable cause includes such facts andcircumstances which would lead areasonably discreet, prudent or cautiousman to believe that an unlawful activityand/or a money laundering offense is aboutto be, is being or has been committed andthat the account or any monetary instrumentor property subject thereof sought to befrozen is in any way related to said unlawfulactivity and/or money laundering offense.

Rule 10.3. Duty of Covered InstitutionUpon Receipt Thereof. –

Rule 10.3.a. Upon receipt of the notice ofthe freeze order, the covered institutionconcerned shall immediately freeze themonetary instrument or property andrelated web of accounts subject thereof.


APP. S-708.12.31

Rule 10.3.b. The covered institution shalllikewise immediately furnish a copy of thenotice of the freeze order upon the owneror holder of the monetary instrument orproperty or related web of accounts subjectthereof.

Rule 10.3.c. Within twenty-four (24) hoursfrom receipt of the freeze order, the coveredinstitution concerned shall submit to theCourt of Appeals and the AMLC, by personaldelivery, a detailed written return on thefreeze order, specifying all the pertinent andrelevant information which shall include thefollowing:

1. The account number(s);2. The name(s) of the account owner(s)

or holder(s);3. The amount of the monetary

instrument, property or related web ofaccounts as of the time they were frozen;

4. All relevant information as to thenature of the monetary instrument orproperty;

5. Any information on the related webof accounts pertaining to the monetaryinstrument or property subject of the freezeorder; and

6. The time when the freeze thereontook effect.

Rule 10.4. Definition of Related Web ofAccounts. -

Related Web of Accounts pertaining tothe money instrument or property subject ofthe freeze order is defined as those accounts,the funds and sources of which originatedfrom and/or are materially linked to themonetary instrument(s) or property(ies)subject of the freeze order(s).

Upon receipt of the freeze order issuedby the court of appeals and uponverification by the covered institution thatthe related web of accounts originated fromand/or are materially linked to themonetary instrument or property subjectof the freeze order, the covered institution

shall freeze these related web of accountswherever these funds may be found.

The return of the covered institutionas required under rule 10.3.c shall includethe fact of such freezing and an explanationas to the grounds for the identification ofthe related web of accounts.

Rule 10.5. Extension of the Freeze Order. -Before the twenty (20) day period of thefreeze order issued by the court of appealsexpires, the AMLC may apply in the samecourt for an extension of said period. Uponthe timely filing of such application andpending the decision of the Court ofAppeals to extend the period, said periodshall be deemed suspended and the freezeorder shall remain effective.

However, the covered institution shallnot lift the effects of the freeze order withoutsecuring official confirmation from theAMLC.

Rule 10.6. Prohibition Against Issuanceof Freeze Orders Against Candidates foran Electoral Office During ElectionPeriod. - No assets shall be frozen to theprejudice of a candidate for an electoraloffice during an election period.

RULE 11AUTHORITY TO INQUIRE INTO

BANK DEPOSITS

Rule 11.1. Authority to Inquire into BankDeposits with Court Order. -Notwithstanding the provisions of R.A. No.1405, as amended; R.A. No. 6426, asamended; R.A. No. 8791, and other laws,the AMLC may inquire into or examineany particular deposit or investment with anybanking institution or non-bank financialinstitution and their subsidiaries and affiliatesupon order of any competent court in casesof violation of this Act, when it has beenestablished that there is probable cause thatthe deposits or investments involved are


APP. S-708.12.31

related to an unlawful activity as definedin Section 3 (i) hereof or a moneylaundering offense under Section 4hereof; except in cases as providedunder Rule 11.2.

Rule 11.2. Authority to Inquire intoBank Deposits Without Court Order.- The AMLC may inqui re in to orexamine deposit and investments withany banking institution or non-bankf inanc ia l ins t i tu t ion and the i rsubsidiaries and affiliates without aCour t Order where any o f thefo l lowing unlawfu l ac t iv i t ies a reinvolved:

(a) Kidnapping for ransom underArticle 267 of Act No. 3815, otherwiseknown as the Revised Penal Code, asamended;

(b) Sections 4,5,6, 8, 9, 10. 12, 13, 14,15 and 16 of R.A. No. 9165, otherwiseknown as the Comprehensive DangerousDrugs Act of 2002;

(c) Hijacking and other violationsunder R.A. No. 6235; destructive arsonand murder, as defined under theRevised Penal Code, as amended,including those perpetrated by terroristsagainst non-combatant persons andsimilar targets.

Rule 11.2.a. Procedure For ExaminationWithout A Court Order. - Where any ofthe unlawful activities enumerated underthe immediately preceding Rule 11.2 areinvolved, and there is probable causethat the deposits or investments with anybanking or non-banking f inancialinstitution and their subsidiaries andaffiliates are in anyway related to theseunlawful activities the AMLC shall issuea resolution authorizing the inquiry intoor examination of any deposit orinvestment with such banking or non-banking financial institution and theirsubsidiaries and affiliates concerned.

Rule 11.2.b. Duty of the banking institutionor non- banking institution upon receipt ofthe AMLC Resolution. - The bankinginstitution or the non-banking financialinstitution and their subsidiaries andaffiliates shall, immediately upon receipt ofthe AMLC Resolution, allow the AMLC and/or its authorized representative(s) full accessto all records pertaining to the deposit orinvestment account.

Rule 11.3. - BSP Authority to Examinedeposits and investments; AdditionalException to the Bank Secrecy Act. -To ensure compliance with this act, theBSP may inquire into or examine anyparticular deposit or investment withany banking institution or non-bankf inanc ia l ins t i tu t ion and the i rsubsidiaries and affiliates when theexamination is made in the course ofa periodic or special examination, inaccordance wi th the ru les o fexamination of the BSP.

Rule 11.3.a. BSP Rules of Examination- The BSP shall promulgate its rules ofexamination for ensuring complianceby banks and non-bank f inanc ia linstitutions and their subsidiaries andaffiliates with the AMLA and theserules.

Any findings of the BSP which mayconstitute a violation of any provision ofthis act shall be transmitted to the AMLCfor appropriate action.

RULE 12FORFEITURE PROVISIONS

Rule 12.1. Authority to Institute CivilForfeiture Proceedings. – The AMLC isauthorized under Section 7 (3) of theAMLA to insti tute civil forfeitureproceedings and all other remedialproceedings through the Office of theSolicitor General.


APP. S-708.12.31

Rule 12.2. When Civil Forfeiture May beApplied. – When there is a SuspiciousTransaction Report or a CoveredTransaction Report deemed suspicious afterinvestigation by the AMLC, and the courthas, in a petition filed for the purpose,ordered the seizure of any monetaryinstrument or property, in whole or in part,directly or indirectly, related to said report,the Revised Rules of Court on civil forfeitureshall apply.

Rule 12.3. Claim on Forfeited Assets. -Where the court has issued an order offorfeiture of the monetary instrument orproperty in a criminal prosecution for anymoney laundering offense under Section 4of the AMLA, the offender or any otherperson claiming an interest therein mayapply, by verified petition, for a declarationthat the same legitimately belongs to him,and for segregation or exclusion of themonetary instrument or propertycorresponding thereto. The verified petitionshall be filed with the court which renderedthe judgment of conviction and order offorfeiture within fifteen (15) days from thedate of the order of forfeiture, in default ofwhich the said order shall become final andexecutory. This provision shall apply in bothcivil and criminal forfeiture.

Rule 12.4. Payment in Lieu of Forfeiture- Where the court has issued an order offorfeiture of the monetary instrument orproperty subject of a money launderingoffense under Section 4 of the AMLA, andsaid order cannot be enforced because anyparticular monetary instrument or propertycannot, with due diligence, be located, orit has been substantially altered, destroyed,diminished in value or otherwise renderedworthless by any act or omission, directlyor indirectly, attributable to the offender,or it has been concealed, removed,converted or otherwise transferred toprevent the same from being found or to

avoid forfeiture thereof, or it is locatedoutside the Philippines or has been placedor brought outside the jurisdiction of thecourt, or it has been commingled withother monetary instruments or propertybelonging to either the offender himselfor a third person or entity, therebyrendering the same difficult to identify orbe segregated for purposes of forfeiture,the court may, instead of enforcing theorder of forfeiture of the monetaryinstrument or property or part thereof orinterest therein, accordingly order theconvicted offender to pay an amount equalto the value of said monetary instrumentor property. This provision shall apply inboth civil and criminal forfeiture.

RULE 13MUTUAL ASSISTANCE AMONG

STATES

Rule 13.1. Request for Assistance from aForeign State. - Where a foreign statemakes a request for assistance in theinvestigation or prosecution of a moneylaundering offense, the AMLC mayexecute the request or refuse to executethe same and inform the foreign state ofany valid reason for not executing therequest or for delaying the executionthereof. The principles of mutuality andreciprocity shall, for this purpose, be at alltimes recognized.

Rule 13.2. Powers of the AMLC to Act ona Request for Assistance from a ForeignState. - The AMLC may execute a requestfor assistance from a foreign state by: (1)tracking down, freezing, restraining andseizing assets alleged to be proceeds ofany unlawful activity under the procedureslaid down in the AMLA and in these Rules;(2) giving information needed by theforeign state within the procedures laiddown in the AMLA and in these Rules; and(3) applying for an order of forfeiture of any


APP. S-708.12.31

monetary instrument or property in thecourt: Provided, That the court shall notissue such an order unless the applicationis accompanied by an authenticated copyof the order of a court in the requesting stateordering the forfeiture of said monetaryinstrument or property of a person who hasbeen convicted of a money launderingoffense in the requesting state, and acertification or an affidavit of a competentofficer of the requesting state stating thatthe conviction and the order of forfeitureare final and that no further appeal lies inrespect of either.

Rule 13.3. Obtaining Assistance fromForeign States. - The AMLC may make arequest to any foreign state for assistancein (1) tracking down, freezing, restrainingand seizing assets alleged to be proceedsof any unlawful activity; (2) obtaininginformation that it needs relating to anycovered transaction, money launderingoffense or any other matter directly orindirectly related thereto; (3) to the extentallowed by the law of the foreign state,applying with the proper court therein foran order to enter any premises belongingto or in the possession or control of, any orall of the persons named in said request,and/or search any or all such persons namedtherein and/or remove any document,material or object named in said request:Provided, That the documentsaccompanying the request in support of theapplication have been duly authenticatedin accordance with the applicable law orregulation of the foreign state; and (4)applying for an order of forfeiture of anymonetary instrument or property in theproper court in the foreign state: Provided,That the request is accompanied by anauthenticated copy of the order of theRegional Trial Court ordering the forfeitureof said monetary instrument or propertyof a convicted offender and an affidavit ofthe clerk of court stating that the conviction

and the order of forfeiture are final and thatno further appeal lies in respect of either.

Rule 13.4. Limitations on Requests forMutual Assistance. - The AMLC may refuseto comply with any request for assistancewhere the action sought by the requestcontravenes any provision of the Constitutionor the execution of a request is likely toprejudice the national interest of thePhilippines, unless there is a treaty betweenthe Philippines and the requesting staterelating to the provision of assistance inrelation to money laundering offenses.

Rule 13.5. Requirements for Requests forMutual Assistance from Foreign States. -A request for mutual assistance from aforeign state must (1) confirm that aninvestigation or prosecution is beingconducted in respect of a moneylaunderer named therein or that he hasbeen convicted of any money launderingoffense; (2) state the grounds on whichany person is being investigated orprosecuted for money laundering or thedetails of his conviction; (3) givesufficient particulars as to the identity ofsaid person; (4) give particulars sufficientto identify any covered insti tutionbelieved to have any information,document, material or object which maybe of assistance to the investigation orprosecution; (5) ask from the coveredinstitution concerned any information,document, material or object which maybe of assistance to the investigation orprosecution; (6) specify the manner inwhich and to whom said information,document, material or object obtainedpursuant to said request, is to beproduced; (7) give all the particularsnecessary for the issuance by the court inthe requested state of the writs, orders orprocesses needed by the requesting state;and (8) contain such other information asmay assist in the execution of the request.


APP. S-708.12.31

Rule 13.6. Authentication of Documents -For purposes of Section 13 (f) of the AMLAand Section 7 of the AMLA, a document isauthenticated if the same is signed orcertified by a judge, magistrate or equivalentofficer in or of, the requesting state, andauthenticated by the oath or affirmation ofa witness or sealed with an official or publicseal of a minister, secretary of state, orofficer in or of, the government of therequesting state, or of the personadministering the government or adepartment of the requesting territory,protectorate or colony. The certificate ofauthentication may also be made by asecretary of the embassy or legation,consul general, consul, vice consul,consular agent or any officer in the foreignservice of the Philippines stationed in theforeign state in which the record is kept,and authenticated by the seal of his office.

Rule 13.7. Suppletory Application of theRevised Rules of Court. –

Rule 13.7.1. For attachment of Philippineproperties in the name of personsconvicted of any unlawful activity asdefined in Section 3 (i) of the AMLA,execution and satisfaction of final judgmentsof forfeiture, application for examination ofwitnesses, procuring search warrants,production of bank documents and othermaterials and all other actions not specifiedin the AMLA and these Rules, and assistancefor any of the aforementioned actions, whichis subject of a request by a foreign state,resort may be had to the proceedingspertinent thereto under the Revised Rulesof Court.

Rule 13.7.2. Authority to Assist the UnitedNations and other InternationalOrganizations and Foreign States. – TheAMLC is authorized under Section 7 (8)and 13 (b) and (d) of the AMLA to receiveand take action in respect of any request

of foreign states for assistance in their ownanti-money laundering operations. It is alsoauthorized under Section 7 (7) of the AMLAto cooperate with the NationalGovernment and/or take appropriateaction in respect of conventions,resolutions and other directives of theUnited Nations (UN), the UN SecurityCouncil, and other internationalorganizations of which the Philippines is amember. However, the AMLC may refuseto comply with any such request,convention, resolution or directive wherethe action sought therein contravenes theprovision of the Constitution or theexecution thereof is likely to prejudice thenational interest of the Philippines.

Rule 13.8. Extradition. – The Philippines shallnegotiate for the inclusion of moneylaundering offenses as defined under Section4 of the AMLA among the extraditableoffenses in all future treaties. With respect,however, to the state parties that aresignatories to the United Nations ConventionAgainst Transnational Organized Crime thatwas ratified by the Philippine Senate on 22October 2001, money laundering is deemedto be included as an extraditable offense inany extradition treaty existing between saidstate parties, and the Philippines shall includemoney laundering as an extraditable offensein every extradition treaty that may beconcluded between the Philippines and anyof said state parties in the future.

RULE 14PENAL PROVISIONS

Rule 14.1. Penalties for the Crime ofMoney Laundering.

Rule 14.1.a. Penalties under Section 4 (a)of the AMLA. - The penalty of imprisonmentranging from seven (7) to fourteen (14) yearsand a fine of not less than Php3.0 Millionbut not more than twice the value of the


APP. S-708.12.31

monetary instrument or property involvedin the offense, shall be imposed upon aperson convicted under Section 4 (a) of theAMLA.

Rule 14.1.b. Penalties under Section 4 (b)of the AMLA. - The penalty ofimprisonment from four (4) to seven (7)years and a fine of not less than Php1.5Million but not more than Php3.0 Million,shall be imposed upon a person convictedunder Section 4 (b) of the AMLA.

Rule 14.1.c. Penalties under Section 4 (c)of the AMLA. - The penalty ofimprisonment from six (6) months to four(4) years or a fine of not less thanPhp100,000.00 but not more thanPhp500,000.00, or both, shall be imposedon a person convicted under Section 4(c)of the AMLA.

Rule 14.1.d. Administrative Sanctions. - (1)After due notice and hearing, the AMLC shall,at its discretion, impose fines upon anycovered institution, its officers and employees,or any person who violates any of theprovisions of R.A. No. 9160, as amended byR.A. No. 9194 and rules, regulations, ordersand resolutions issued pursuant thereto. Thefines shall be in amounts as may bedetermined by the council, taking intoconsideration all the attendant circumstances,such as the nature and gravity of the violationor irregularity, but in no case shall such finesbe less than Php100,000.00 but not to exceedPhp500,000.00. The imposition of theadministrative sanctions shall be withoutprejudice to the filing of criminal chargesagainst the persons responsible for theviolations.

Rule 14.2. Penalties for Failure to KeepRecords - The penalty of imprisonmentfrom six (6) months to one (1) year or afine of not less than Php100,000.00 but notmore than Php500,000.00, or both, shall

be imposed on a person convicted underSection 9 (b) of the AMLA.

Rule 14.3. Penalties for MaliciousReporting. - Any person who, with malice,or in bad faith, reports or files a completelyunwarranted or false information relativeto money laundering transaction againstany person shall be subject to a penalty ofsix (6) months to four (4) yearsimprisonment and a fine of not less thanPhp100,000.00 but not more thanPhp500,000.00, at the discretion of thecourt: Provided, That the offender is notentitled to avail the benefits of theProbation Law.

Rule 14.4. Where Offender is a JuridicalPerson. - If the offender is a corporation,association, partnership or any juridicalperson, the penalty shall be imposed uponthe responsible officers, as the case maybe, who participated in, or allowed by theirgross negligence the commission of thecrime. If the offender is a juridical person,the court may suspend or revoke its license.If the offender is an alien, he shall, in additionto the penalties herein prescribed, bedeported without further proceedings afterserving the penalties herein prescribed. If theoffender is a public official or employee, heshall, in addition to the penalties prescribedherein, suffer perpetual or temporaryabsolute disqualification from office, as thecase may be.

Rule 14.5. Refusal by a Public Official orEmployee to Testify. - Any public officialor employee who is called upon to testifyand refuses to do the same or purposelyfails to testify shall suffer the same penaltiesprescribed herein.

Rule 14.6. Penalties for Breach ofConfidentiality. – The punishment ofimprisonment ranging from three (3) toeight (8) years and a fine of not less than


APP. S-708.12.31

Php500,000.00 but not more than Php1.0Million, shall be imposed on a personconvicted for a violation under Section 9(c).In case of a breach of confidentiality that ispublished or reported by media, theresponsible reporter, writer, president,publisher, manager and editor-in-chief shallbe liable under this act.

RULE 15PROHIBITIONS AGAINST POLITICAL

HARASSMENT

Rule 15.1. Prohibition against PoliticalPersecution. - The AMLA and these Rulesshall not be used for political persecution orharassment or as an instrument to hampercompetition in trade and commerce. No casefor money laundering may be filed to theprejudice of a candidate for an electoral officeduring an election period.

Rule 15.2. Provisional RemediesApplication; Exception. –

Rule 15.2.a. - The AMLC may apply, in thecourse of the criminal proceedings, forprovisional remedies to prevent themonetary instrument or property subjectthereof from being removed, concealed,converted, commingled with otherproperty or otherwise to prevent its beingfound or taken by the applicant orotherwise placed or taken beyond thejurisdiction of the court. However, noassets shall be attached to the prejudice ofa candidate for an electoral office duringan election period.

Rule 15.2.b. - Where there is convictionfor money laundering under Section 4 ofthe AMLA, the court shall issue ajudgment of forfeiture in favor of theGovernment of the Philippines withrespect to the monetary instrument orproperty found to be proceeds of one ormore unlawful activities. However, no

assets shall be forfeited to the prejudiceof a candidate for an electoral office duringan election period.

RULE 16RESTITUTION

Rule 16. Restitution. - Restitution for anyaggrieved party shall be governed by theprovisions of the New Civil Code.

RULE 17IMPLEMENTING RULES ANDREGULATIONS AND MONEYLAUNDERING PREVENTION

PROGRAMS

Rule 17.1. Implementing Rules andRegulations. –

(a) Within thirty (30) days from theeffectivity of R.A. No. 9160, as amendedby R.A. No. 9194, the BSP, the InsuranceCommission and the Securities andExchange Commission shall promulgatethe Implementing Rules and Regulationsof the AMLA, which shall be submitted tothe Congressional Oversight Committeefor approval.

(b) The Supervising Authorities, theBSP, the SEC and the IC shall, under theirown respective charters and regulatoryauthority, issue their Guidelines andCirculars on anti-money laundering toeffectively implement the provisions of R.A.No. 9160, as amended by R.A. No. 9194.

Rule 17.2. Money Laundering PreventionPrograms. –

Rule 17.2.a. Covered institutions shallformulate their respective moneylaundering prevention programs inaccordance with Section 9 and otherpertinent provisions of the AMLA and theseRules, including, but not limited to,information dissemination on moneylaundering activities and their prevention,


APP. S-708.12.31

detection and reporting, and the training ofresponsible officers and personnel ofcovered institutions, subject to suchguidelines as may be prescribed by theirrespective supervising authority. Everycovered institution shall submit its ownmoney laundering program to thesupervising authority concerned within thenon-extendible period that the supervisingauthority has imposed in the exercise ofits regulatory powers under its owncharter.

Rule 17.2.b. Every money launderingprogram shall establish detailedprocedures implementing acomprehensive, institution-wide “know-your-client” policy, set-up an effectivedissemination of information on moneylaundering activities and their prevention,detection and reporting, adopt internalpolicies, procedures and controls,designate compliance officers atmanagement level, institute adequatescreening and recruitment procedures, andset-up an audit function to test the system.

Rule 17.2.c. Covered institutions shall adopt,as part of their money laundering programs,a system of flagging and monitoringtransactions that qualify as suspicioustransactions, regardless of amount or coveredtransactions involving amounts below thethreshold to facilitate the process ofaggregating them for purposes of futurereporting of such transactions to the AMLCwhen their aggregated amounts breach thethreshold. All covered institutions, includingbanks insofar as non-deposit and non-government bond investment transactionsare concerned, shall incorporate in theirmoney laundering programs the provisionsof these Rules and such other guidelines forreporting to the AMLC of all transactions thatengender the reasonable belief that a moneylaundering offense is about to be, is being,or has been committed.

Rule 17.3. Training of Personnel. - Coveredinstitutions shall provide all their responsibleofficers and personnel with efficient andeffective training and continuing educationprograms to enable them to fully comply withall their obligations under the AMLA andthese Rules.

Rule 17.4. Amendments. - These Rules orany portion thereof may be amended byunanimous vote of the members of theAMLC and submitted to the CongressionalOversight Committee as provided forunder Section 19 of R.A. No. 9160, asamended by R.A. No. 9194.

RULE 18CONGRESSIONAL OVERSIGHT

COMMITTEE

Rule 18.1. Composition of CongressionalOversight Committee. - There is herebycreated a Congressional OversightCommittee composed of seven (7)members from the Senate and seven (7)members from the House ofRepresentatives. The members from theSenate shall be appointed by the SenatePresident based on the proportionalrepresentation of the parties or coalitionstherein with at least two (2) Senatorsrepresenting the minority. The membersfrom the House of Representatives shall beappointed by the Speaker also based onproportional representation of the parties orcoalitions therein with at least two (2)members representing the minority.

Rule 18.2. Powers of the CongressionalOversight Committee. - The OversightCommittee shall have the power topromulgate its own rules, to oversee theimplementation of this Act, and to reviewor revise the implementing rules issued bythe Anti-Money Laundering Council withinthirty (30) days from the promulgation ofthe said rules.


APP. S-708.12.31

RULE 19APPROPRIATIONS FOR AND BUDGET

OF THE AMLC

Rule 19.1. Budget. – The budget of 25Million Pesos appropriated by Congressunder the AMLA shall be used to defray theinitial operational expenses of the AMLC.Appropriations for succeeding years shallbe included in the General AppropriationsAct. The BSP shall advance the fundsnecessary to defray the capital outlay,maintenance and other operating expensesand personnel services of the AMLC subjectto reimbursement from the budget of theAMLC as appropriated under the AMLA andsubsequent appropriations.

Rule 19.2. Costs and Expenses. - The budgetshall answer for indemnification for legalcosts and expenses reasonably incurred forthe services of external counsel inconnection with any civil, criminal oradministrative action, suit or proceedings towhich members of the AMLC and theExecutive Director and other members ofthe Secretariat may be made a party byreason of the performance of their functionsor duties. The costs and expenses incurredin defending the aforementioned action, suitor proceeding may be paid by the AMLC inadvance of the final disposition of suchaction, suit or proceeding upon receipt ofan undertaking by or on behalf of themember to repay the amount advancedshould it be ultimately determined that saidmember is not entitled to suchindemnification.

RULE 20SEPARABILITY CLAUSE

Rule 20. Separability Clause. – If anyprovision of these Rules or the applicationthereof to any person or circumstance is

held to be invalid, the other provisions ofthese Rules, and the application of suchprovision or Rule to other persons orcircumstances, shall not be affectedthereby.

RULE 21REPEALING CLAUSE

Rule 21. Repealing Clause. – All laws,decrees, executive orders, rules andregulations or parts thereof, including therelevant provisions of R.A. No. 1405, asamended; R.A. No. 6426, as amended;R.A. No. 8791, as amended, and othersimilar laws, as are inconsistent with theAMLA, are hereby repealed, amended ormodified accordingly.

RULE 22EFFECTIVITY OF THE RULES

Rule 22. Effectivity. – These Rules shall takeeffect after its approval by the CongressionalOversight Committee and fifteen (15) daysafter its complete publication in the OfficialGazette or in a newspaper of generalcirculation.

RULE 23TRANSITORY PROVISIONS

Rule 23.1. - Transitory Provisions. - Existingfreeze orders issued by the AMLC shallremain in force for a period of thirty (30)days after effectivity of this act, unlessextended by the Court of Appeals.

Rule 23.2. - Effect of R.A. No. 9194 onCases for Extension of Freeze OrdersResolved by the Court of Appeals. - Allexisting freeze orders which the Court ofAppeals has extended shall remaineffective, unless otherwise dissolved bythe same court.


APP. S-808.12.31

A. GENERAL REQUIREMENTSOnly external auditors included in the

list of BSP selected external auditors shall beengaged by banks, QBs, trust entities orNSSLAs for regular audit or specialengagements. The external auditor to behired shall also be in-charge of the audit ofthe entity’s subsidiaries and affiliates engagedin allied activities: Provided, That the externalauditor shall be changed or the lead andconcurring partner shall be rotated every five(5) years or earlier: Provided, further, Thatthe rotation of the lead and concurring partnershall have an interval of at least two (2) years.

Banks, QBs, trust entities or NSSLAswhich have engaged their respectiveexternal auditors for a consecutive period offive (5) years or more as of 26 November2003 (effectivity of Circular No. 410) shallhave a one (1) year period from said datewithin which to either change their externalauditors or rotate the lead and/or concurringpartner. The following are the selectionrequirements for external auditors:

1. No external auditor may beengaged by a bank, QB, trust entity orNSSLA if he or any member of hisimmediate family has or has committedto acquire any direct or indirect financialinterest in the bank, QB, trust entity orNSSLA, its subsidiaries and affiliates, or ifhis independence is considered impairedunder the circumstances specified in theCode of Professional Ethics for CPAs. Inthe case of a partnership, this limitation shallapply to the partners, associates and theauditor-in-charge of the engagement andmembers of their immediate family;

2. The external auditor and themembers of the audit team do not have/shall not have outstanding loans or anycredit accommodations (except credit card

obligations which are normally available toother credit card holders and fully securedauto loans and housing loans which are notpast due) with the bank, QB, trust entity orNSSLA, its subsidiaries and affiliates at thetime of signing the engagement and duringthe engagement. In the case of partnership,this prohibition shall apply to the partnersand the auditor-in-charge of the engagement;

3. The external auditor must not becurrently engaged nor was engaged duringthe preceding year in providing the followingservices to the bank, QB, trust entity orNSSLA its subsidiaries and affiliates:

a. Internal audit functions;b. Information systems design,

implementation and assessment; andc. Such other services which could

affect his independence as may bedetermined by the Monetary Board;

4. The external auditor, auditor-in-charge and members of the audit team mustadhere to the highest standards ofprofessional conduct and shall carry outservices in accordance with relevant ethicaland technical standards, such as the GAASand the Code of Professional Ethics forCPAs;

5. The external auditor should havethe following track record in conductingexternal audits:

a. The external auditor for a UB or KBmust have at least twenty (20) existingcorporate clients with resources of at leastP50.0 million each and at least one (1)existing client UB or KB in the regular auditor in lieu thereof, the external auditor orthe auditor-in-charge of the engagementmust have at least five (5) years experiencein the regular audit of UBs or KBs;

b. The external auditor for a TB, QB,bank, trust entity and national Coop Bank

GUIDELINES TO GOVERN THE SELECTION, APPOINTMENT AND THEREPORTING REQUIREMENT FOR EXTERNAL AUDITORS OF

NON-STOCK SAVINGS AND LOAN ASSOCIATIONS(Appendix to Sec. 4180S)


APP. S-808.12.31

must have at least ten (10) existing corporateclients with resources of at least P25.0 millioneach and at least one (1) existing client TB,QB, trust entity or national Coop Bank in theregular audit or in lieu thereof, the externalauditor or the auditor-in-charge of theengagement must have at least five (5) yearsexperience in the regular audit of TBs, QBs,trust entities or national Coop Banks:Provided, That an external auditor who hasbeen selected by the BSP to audit a UB orKB is automatically qualified to audit a TB,QB, trust entity or national Coop Bank; and

c. The external auditor for an RB orlocal Coop Bank must have at least three(3) years track record in conducting externalaudit: Provided, That an external auditorwho has been selected by the BSP to audita UB, KB, TB, QB, trust entity and nationalCoop bank is automatically qualified toaudit an RB, local Coop Bank and NSSLA;

6. A bank, QB, trust entity or NSSLAshall not engage the services of an externalauditor whose partner or auditor-in-chargeof audit engagement during the precedingyear had been hired or employed by thebank, QB, trust entity, NSSLA, itssubsidiaries and affiliates as chief executiveofficer, chief financial officer, controller, chiefaccounting officer or any position ofequivalent rank; and

7. The external auditor mustundertake to keep for at least five (5) yearsall audit or review working papers insufficient detail to support the conclusionsin the audit report which shall be madeavailable to the BSP upon request. Workingpapers shall include, but shall not be limitedto, pre-audit analysis, audit scope anddetailed work program.

B. APPLICATION AND PRE-QUALIFICATION REQUIREMENTS

The application for BSP selection shallbe signed by the external auditor or themanaging partner, in case of partnership andshall be submitted to the appropriate

department of the SES together with thefollowing documents/information:

1. An undertaking:a. That the external auditor, partners,

associates, auditor-in-charge of theengagement and the members of theirimmediate family shall not acquire anydirect or indirect financial interest with abank, QB, trust enti ty, NSSLA, i tssubsidiaries and affiliates. Neither shallthe external auditor, partners, associatesand auditor-in-charge accept an auditengagement with a bank, QB, trust entity,NSSLA, its subsidiaries and affiliateswhere they or any member of theirimmediate family have any direct orindirect financial interest and that theirindependence is not considered impairedunder the circumstances specified in theCode of Professional Ethics for CPAs;

b. That the external auditor, partners,associates, auditor- in-charge andmembers of the audit team do not havenor shall apply for loans or any creditaccommodations (except normal creditcard obligations and fully secured autoloans and housing loans) nor shall acceptan audit engagement with a bank, QB,trust entity, NSSLA, its subsidiaries andaffiliates where they have outstandingloans or any credit accommodations(except normal credit card obligations andfully secured auto loans and housing loanswhich are not past due);

c. That the external auditor shall notaccept an audit engagement with a bank,QB, trust entity, NSSLA, its subsidiaries andaffiliates where he was engaged during thepreceding year in providing the followingservices:

1. Internal audit functions;2. Information systems design,

implementation and assessment; and3. Such other services, which could

affect his independence as may bedetermined by the Monetary Board fromtime to time.


APP. S-808.12.31

This requirement shall not, however,affect audit engagement existing as of26 November 2003 (effectivity of CircularNo. 410).

d. That the external auditor andmembers of the audit team shall adhere tothe highest standards of professionalconduct and shall carry out their servicesin accordance with relevant ethical andtechnical standards of the accountingprofession;

e. That the lead or concurring partnerand auditor-in-charge shall not acceptemployment with the bank,QB, trust entity,NSSLA, its subsidiaries and affiliates beingaudited during the engagement period andwithin a period of one (1) year after theaudit engagement;

f. That the external auditor shall notaccept an audit engagement with a bank, QB,trust entity, NSSLA, its subsidiaries andaffiliates where an officer (i.e., chiefexecutive officer, chief financial officer,controller, chief accounting officer or othersenior officer of equivalent rank) had been apartner of the external auditor or had workedfor the audit firm and had been the auditor-in-charge of the audit engagement of saidentities during the year immediatelypreceding the engagement;

g. That the external auditor shall keepall audit or review working papers for at leastfive (5) years in sufficient detail to supportthe conclusions in the audit report; and

h. That the audit work shall includeassessment of the audited institution’scompliance with BSP rules and regulations,such as, but not limited to the following:

1. CAR; and2. Loans and other risk assets review

and classification.2. Other documents/information:a. List of existing corporate clients

with resources of at least P50.0 millioneach for external auditor of a UB or KB; fora TB, QB, trust entity, NSSLA, and nationalCoop Bank, list of existing corporate clients

with resources of at least P25.0 millioneach; and list of existing clients and/ordetails of three (3) years track record inexternal audit for external auditors of an RB,NSSLA and a local Coop Bank;

b. If the external auditor for a UB or KBhas no existing UB or KB client, and theexternal auditor for a TB, QB, trust entity andnational Coop Bank, has no existing client TBor national Coop Bank, a notarizedcertification that the external auditor or theauditor-in-charge of the engagement has atleast five (5) years experience in the regularaudit of banks of appropriate categorymentioning the banks they have audited;

c. Updated PRC license (for individualauditors) and business license for thepartnership;

d. Copy of the proposed engagementcontract between the bank, QB, trust entityor NSSLA and the external auditor whereapplicable; and

e. Certification from PRC that theexternal auditor, lead partner, concurringpartner, auditor-in-charge and members ofthe audit team have no derogatoryinformation, previous conviction or anypending investigation. However, in theevent that the certification cannot beobtained because of the pendency of a case,the BSP may dispense with thisrequirement upon determination by theMonetary Board that the case involvespurely legal question, or does not, in anyway, negate the auditor’s adherence to thehighest standards of professional conductnor degrade his integrity and objectivity.

C. REQUIRED REPORTS1. To enable the BSP to take timely

and appropriate remedial action, theexternal auditor must report to the BSPwithin thirty (30) calendar days afterdiscovery, the following cases:

a. Any material finding involving fraudor dishonesty (including cases that wereresolved during the period of audit); and


APP. S-808.12.31

b. Any potential losses the aggregateof which amounts to at least one percent(1%) of the capital.

2. The external auditor shall reportdirectly to the BSP within fifteen (15) calendardays the occurrence of the following:

a. Termination or resignation as externalauditor and stating the reason therefor;

b. Discovery of a material breach oflaws or BSP rules and regulations such as,but not limited to:

1. CAR; and2. Loans and other risk assets review

and classification.c. Findings on matters of corporate

governance that may require urgent actionby the BSP;

3. In case there are no matters toreport (e.g., fraud, dishonesty, breach oflaws, etc.) the external auditor shall submitdirectly to the BSP within fifteen (15)calendar days after the closing of the auditengagement a notarized certification thatthere is none to report.

The management of the bank, QB,trust entity, NSSLA, its subsidiaries andaffiliates shall be informed of the adversefindings and the external auditor’s reportto the BSP shall include its explanation and/or corrective action.

The management of the bank, QB,trust entity, NSSLA, its subsidiaries andaffiliates shall be given the opportunity tobe present in the discussions between theBSP and the external auditor regarding theaudit findings, except in circumstanceswhere the external auditor believes thatthe entity’s management is involved infraudulent conduct.

It is, however, understood that theaccountability of an external auditor is basedon matters within the normal coverage of anaudit conducted in accordance with GAAS.

D. DEFINITION OF TERMSFor purposes of these guidelines, the

following terms shall be defined as follows:

1. Subsidiary. A corporation or firmmore than fifty percent (50%) of theoutstanding voting stock of which isdirectly or indirectly owned, controlled orheld with power to vote by a bank, QB,trust entity or NSSLA.

2. Affiliate. A corporation, not morethan fifty percent (50%) but not less thanten percent (10%) of the outstanding votingstock of which is directly or indirectlyowned, controlled or held with power tovote by a bank, QB, trust entity, NSSLAand a juridical person that is undercommon control with the bank, QB, trustentity or NSSLA.

3. Control. Exists when the parentowns directly or indirectly more than onehalf of the voting power of an enterpriseunless, in exceptional circumstance, it canbe clearly demonstrated that suchownership does not constitute control.Control may also exist even whenownership is one half or less of the votingpower of an enterprise when there is:

a. Power over more than one-half ofthe voting rights by virtue of an agreementwith other stockholders;

b. Power to govern the financial andoperating policies of the enterprise undera statute or an agreement;

c. Power to appoint or remove themajority of the members of the board ofdirectors or equivalent governing body;

d. Power to cast the majority votes atmeetings of the board of directors orequivalent governing body; or

e. Any other arrangement similar toany of the above.

4. Associate. Any director, officer,manager or any person occupying a similarstatus or performing similar functions in theaudit firm including employees performingsupervisory role in the auditing process.

5. Partner. All partners includingthose not performing audit engagements.

6. Lead Partner. Also referred to asthe engagement partner/partner-in-charge/


APP. S-808.12.31

managing partner who is responsible forsigning the audit report on the consolidatedfinancial statements of the audit client, andwhere relevant, the individual audit reportof any entity whose financial statementsform part of the consolidated financialstatements.

7. Concurring Partner. The partnerwho is responsible for reviewing the auditreport.

8. Auditor-in-charge. Refers to theteam leader of the audit engagement.

E. INCLUSION IN BSP LISTIn case of partnership, inclusion in the

list of BSP-selected external auditors shallapply to the audit firm only and not to theindividual signing partners or auditorsunder its employment. The BSP willcircularize to all banks, QBs, trust entitiesand NSSLAs the list of selected externalauditors once a year. The BSP, however,shall not be liable for any damage or lossthat may arise from its selection of theexternal auditors to be engaged by banks,QBs, trust entities, or NSSLAs, for regularaudit or special engagements.

F. SPECIFIC REVIEWWhen warranted by supervisory

concern, the Monetary Board may, at theexpense of the bank, QB, trust entity,NSSLA, its subsidiaries and affiliates requirethe external auditor to undertake a specificreview of a particular aspect of theoperations of these institutions. The reportshall be submitted to the BSP and the auditedinstitution simultaneously, within thirty (30)calendar days after the conclusion of saidreview.

G. AUDIT ENGAGEMENT CONTRACTBanks, QBs, trust entities, and NSSLAs,

shall submit the audit engagement contractbetween them, their subsidiaries andaffiliates and the external auditor to theappropriate department of the SES within

fifteen (15) calendar days from signingthereof. Said contract shall include thefollowing provisions:

1. That the bank, QB, trust entity, orNSSLA shall be responsible for keepingthe auditor fully informed of existing andsubsequent changes to prudential,regulatory and statutory requirements ofthe BSP and that both parties shall complywith said requirements;

2. That disclosure of information bythe external auditor to the BSP as requiredunder Items "C" and "F" hereof, shall beallowed; and

3. That both parties shall comply withall of the requirements under theseguidelines.

H. DELISTING OF EXTERNALAUDITORS

1. Grounds for delistingExternal auditors may be delisted from

the list of BSP-selected external auditor forthe bank, QB, trust entity or NSSLA forviolation of, or non-compliance with anyprovision of these guidelines or in case ofdissolution of the audit firm except whensaid dissolution was solely for the purposeof admitting new partner/s and the newpartner/s have complied with therequirements of these guidelines.

2. Procedure for delistingAn external auditor shall only be delisted

upon prior notice to him and after giving himthe opportunity to be heard and defend himselfby presenting witnesses/evidence in his favor.Delisted external auditor may re-apply for BSPselection after the period prescribed by theMonetary Board.

I. AUDIT BY THE BOARD OFDIRECTORSPursuant to Section 58 of R.A. No.

8791, otherwise known as “The GeneralBanking Law of 2000” the Monetary Boardmay also direct the board of directors of abank, QB, trust entity, NSSLA or the


APP. S-808.12.31

individual members thereof, to conduct,either personally or by a committee createdby the board, an annual balance sheet auditof the bank, QB, trust entity or NSSLA toreview the internal audit and the internal

control system of the concerned entity andto submit a report of such audit to theMonetary Board within thirty (30) calendardays after the conclusion thereof.(As amended by Circular No. 529 dated 11 May 2006)

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