BAM213: Negotiable Instrument and Banking Laws - Other goals (Legal Career Path)

Lesson title: Course Orientation and Overview of Note: Banking laws are part of commercial laws.
Negotiable Instruments Law
What is a negotiable instrument?
Commercial law, also known as mercantile law or trade law,
is the body of law that applies to the rights, relations, and It is a written contract for the payment of money which is
conduct of persons and business engaged in commerce, intended as a substitute for money and It passes from one
merchandising, trade, and sales. It is often considered to be a person to another as money, in such a manner as to give a
branch of civil law and deals with issues of both private law and holder in due course the right to hold the instrument free from
public law (Wikipedia). defenses available to prior parties (Sundiang Sr. & Aquino,
2011).
Many of these categories fall within Financial law, an aspect of
Commercial law pertaining specifically to financing and the What are the characteristics/features of a negotiable
financial markets. It can also be understood to regulate instrument?
corporate contracts, hiring practices, and the manufacture and
sales of consumer goods. Many countries have adopted civil 1. Negotiability – The note may pass from hand to hand
codes that contain comprehensive statements of their similar to money so as to give the holder in due course (HIDC)
commercial law. the right to hold the instrument and collect the sum payable
for himself free from any infirmity in the instrument or defect
For CPALE, Regulatory Framework for Business Transactions in the title of any of the prior parties or defenses available to
(RFBT) extends to business laws including their legal them among themselves.
implications. Candidates should know and understand the
pertinent legal provisions, general principles, concepts, and 2. Accumulation of secondary contracts– A characteristic
underlying philosophy of the laws applicable to commerce and of a negotiable instrument where additional parties become
business. involved as they are transferred from one person to another
(De Leon, 2010).
What are the laws covered in RFBT?
The Philippine Negotiable Instruments Law was enacted as Act.
Based on October 2022 CPALE Syllabus, the following laws are No. 2031 on the 3rd of February 1911. It took effect 90 days
covered in RFBT: after its publication on March 4, 1911 in the Official Gazette of
the Philippine Islands. This law is 109 years old and has not
1. Bouncing Checks Law been repealed or superseded by our Congress. Our law is
patterned with slight modifications after the Uniform
2. Financial Rehabilitation and Insolvency Act Negotiable Instruments Act of the United States of 1896. The
prevailing reason of the Act is to facilitate transactions in
3. Law on Other Business Transactions commercial paper and to promote free flow of credit.
Law on Other Business Transactions includes Secrecy of Bank Albeit not part of the CPALE Syllabus, NIL law is pertinent to
Deposits, Philippine Deposit Insurance Corporation, Truth introduce commercial papers as a medium of payment or a
Lending Act, Data Privacy Act, Anti-Money Laundering Act, conduit of a certain transaction. It specifically applies to
Electronic Commerce Act and others. negotiable instruments or to those instruments which satisfy
the requirements of negotiability laid down under Section 1 of
Banking laws, on the other hand, is the broad term for laws
the same Act. The law finds application, more often than not,
that govern how banks and other financial institutions conduct
to business or commercial industries particularly in their
business (Legal Career Path).
expedient transactions and/or operations.
What do banking laws regulate?
Section 1. Form of negotiable instruments.
Banking laws may exist in order to achieve many objectives
An instrument to be negotiable must conform to the following
and some of these objectives include:
requirements:
- Provide transparency for consumers
(a) It must be in writing and signed by the maker or drawer;
- Reduce risk for banking customers
(b) Must contain an unconditional promise or order to pay a
- Avoid misuse of banks for purposes like money laundering sum certain in money;

- Allow consumers to bank with confidentiality (c) Must be payable on demand, or at a fixed or determinable
future time;
- Prevent other crimes
(d) Must be payable to order or to bearer; and
- Prioritize bank lending according to economic and social
priorities (e) Where the instrument is addressed to a drawee, he must
be named or otherwise indicated therein with reasonable
- Provide fair banking and equal opportunities for banking certainty.

- Prevent terrorism The factors to determine the negotiability are as follows:

- Create fair debt collection practices 1. Words that appear on the Face of negotiable instrument

- Make credit card agreements fair to consumers 2. Requirements enumerated in Section 1 of NIL

- Prevent banks from making unfair loans to insiders like 3. Intention of the parties by considering the whole of the
officers and principal shareholders instrument

- Allow customers to reasonably raise disputes Rules governing the use of phrases in the Negotiable
Instruments
1. As to promissory note 5. If there is doubt whether it is a bill or note, the holder may
treat it as either at his election.
a. The word “promise” need not be used. Any expression
equivalent to a promise is sufficient. 6. When not clear in what capacity it was signed, deemed
signed as an indorser.
b. Mere acknowledgment of a debt is not a promissory note.
7. When two or more persons sign a negotiable instrument
c. Language used must indicate a written undertaking to pay. stating "promise to pay,"in case of liability, they shall be
deemed to be jointly and severally liable (Sec. 17).
2. As to bill of exchange
Other terminologies/principles to take notice:
a. It must contain an order for payment as distinguished from
a mere request. A Holder for value is one who has given a valuable
consideration for the instrument. A holder for value is deemed
b. The order is not invalidated just because it contains words as such not only as regards the party to whom the value has
of civility. Thus, insertion of polite words like “please” does not been given to by him but also in respect to all those who
alter the character of the instrument; as long as the language became parties prior to the time when value was given.
expresses the drawer’s will that the money be paid. (Sec.26)

To be considered as a Holder in due course (HIDC), the

holder must have taken the instrument:

1. That is Complete and regular upon its face;

2. Became the holder before it was Overdue, and without notice

that it has been previously

dishonored, if such was the fact;

3. Took it in good Faith and for value; and

4. At the time it was negotiated to him, he had no notice of any

Incidents in the life of a negotiable instrument Infirmity in the instrument or

1. Issue – first delivery of the instrument to the payee; defect in the title of the person negotiating it. (Sec. 52)

2. Negotiation – transfer from one person to another so as to Under the "shelter principle," the HIDC, by negotiating the
constitute the transferee a holder; instrument, to a party not an HIDC, transfers all his rights as
such holder to the latter and acquires the right to enforce the
3. Presentment for acceptance (in certain kinds of Bills of instrument as if he was an HIDC. The principle applies to a
Exchange) (Sec. 143) "sheltered" holder who is not a party to any fraud or illegality
impairing the validity of the instrument.
4. Acceptance – written assent of the drawee to the order;
An accommodation party is one who has signed the instrument
5. Dishonor by non-acceptance – refusal to accept by the as maker, acceptor, indorser or drawer, without receiving value
drawee; therefore, and for the purpose of lending his name to some
other person. Such a person is liable on the instrument to a
6. Presentment for payment – the instrument is shown to the holder for value, notwithstanding such holder, at the time of
maker or drawee/ acceptor for him taking the instrument, knew him to be only an accommodation
party. (Sec.29).
to pay;
Lesson title: Bouncing Checks Law
7. Dishonor by non-payment – refusal to pay by the maker or
drawee/ acceptor Criminal law is that branch of law, which defines crimes,
treats of their nature, and provides for their punishment. The
8. Notice of dishonor – notice to the persons secondarily liable
power to punish violators of criminal law comes within the
that the maker or the drawee/ acceptor refused to pay or to
police power of the State. It is the injury inflicted to the public
accept instrument;
which a criminal action seeks to redress, and not the injury to
9. Protest the individual.

10. Discharge A crime is the generic term used to refer to a wrongdoing

punished either under the Revised Penal Code (RPC) or under
Here are the rules of construction in case of ambiguities Special Penal Laws (SPLs).
in a Negotiable Instrument:
Batas Pambansa Blg. 22, commonly called Bouncing Checks
1. Words prevail over figures. Law, is a SPL penalizing the making or drawing and issuance
of a check without sufficient funds or credit and for other
2. If the date from which interest is to run is unspecified, purposes.
interest runs from the date of the
Bouncing check
instrument; if undated, from the issue thereof.
A check is considered a bouncing check when upon its
3. If undated, the instrument is considered dated as of the time presentment for payment, it is dishonored for insufficiency of
it was issued. funds or when the account of the drawer is already closed.

4. Written provisions prevail over printed. Note: A check is a bill of exchange drawn on a bank payable on
demand under Negotiable Instruments Law (NIL).
Elements for violation of B.P. 22 (par. 1) Lesson title: Secrecy of Bank Deposits

1. That a person makes or draws and issues any check; R.A. 1405 (Secrecy of Bank Deposits) is an act prohibiting
disclosure of or inquiry into deposits with any banking
2. The check is drawn or issued to apply on account or for a institution and providing penalty therefore.
valuable consideration;
The purposes are:
3. The person who makes or draws and issues the check knows
at the time of issue that he does not have sufficient funds in or 1. To encourage deposit in banking institutions; and
credit with the drawee bank for the payment of such check in
full upon its presentment; and 2. To discourage private hoarding so that banks may lend such
funds and assist in the economic development of the country.
4. At the time, the check was presented for payment at due
date, the same was dishonoured for insufficiency of funds or The following are the prohibited acts in R.A. 1405:
credit, or would have been dishonoured for the same reason
had not the drawer, without any valid reason, ordered the bank 1. Examination/inquiry/looking into all deposits of whatever
to stop payment. nature with banks or banking institutions in the Philippines
(including investment in bonds issued by the government) by
Note: Knowledge of insufficiency of funds is a state of mind, any person, government official or office (Sec. 2).
hence, the hardest element to prove.
2. Disclosure by any official or employee of any banking
Elements for violation of B.P. 22 (par. 2) institution to any unauthorized person ofany information (Sec.
3).
1. That a person has sufficient funds in or credit with the
drawee bank when he makes or draws and issues a check; In the case of BSP Group, Inc. v. Go, G.R. No. 168644, 2010,
the absolute confidentiality rule in R.A. 1405 actually aims at
2. That he fails to keep sufficient funds or to maintain a credit protection from unwarranted inquiry or investigation if the
to cover the full amount of the check if presented within a purpose of such inquiry or investigation is merely to determine
period of 90 days from the date appearing thereon; and the existence and nature, as well as the amount of the deposit
in any given bank account.
3. That the check is dishonored by the drawee bank.
Note: Non-bank official or employee is not covered by the
In the case of Lim Lao v. CA, G.R. No. 119178, June 20, 1997, prohibition. Neither is disclosure by a bank official or employee
knowledge of insufficiency of funds or credit in the drawee bank of information about bank deposit in favor of a co-employee in
for the payment of a check upon its presentment is an essential the course of the performance of his duties covered by the
element of the offense. There is a prima facie presumption of prohibition.
the existence of this element from the fact of drawing, issuing
or making a check, the payment of which was subsequently Deposits covered
refused for insufficiency of funds. It is important to stress,
however, that this is not a conclusive presumption that 1. All deposits of whatever nature with banks or banking
forecloses or precludes the presentation of evidence to the institutions found in the Philippines.
contrary.
2. Investments in bonds issued by the Philippine government,
its branches, and institutions (R.A. 1405, Sec. 2).

3. Trust accounts.

Any violation of this law will subject the offender upon

conviction, to an imprisonment of not more than five years or
a fine of not more than twenty thousand pesos (Php 20,000)or
both, at the discretion of the court.

Other terminologies/principles to take notice:

Presentment for payment means using the check as a

substitute for money. It is actually converting the check into
legal tender or money. The payee either deposits it or encashes
it over the counter. Presentment can only be made on the due
date of the check.

Credit, as used in B.P. 22, shall be construed to mean an

arrangement or understanding with the bank for the payment
of such check.

A stolen check cannot give rise to a violation of B.P. 22

because the check is not drawn for a valuable consideration.
 priority of claims, and ensure equitable treatment of creditors
who are similarly situated.

4. When rehabilitation is not feasible, to facilitate a speedy and

orderly liquidation of these debtor's assets and the settlement
of their obligations (Sec. 2).

Terminologies to take notice under R.A. 10142

Administrative expenses shall refer to those reasonable and

necessary expenses:

(1) Incurred or arising from the filing of a petition under the

provisions of this Act;

(2) Arising from, or in connection with, the conduct of the

proceedings under this Act, including those incurred for the
rehabilitation or liquidation of the debtor;

(3) Incurred in the ordinary course of business of the debtor

after the commencement date;

(4) For the payment of new obligations obtained after the

commencement date to finance the rehabilitation of the debtor;
Note: Such unclaimed balances, together with the increase and
proceeds thereof, shall be deposited with the Treasurer of the (5) Incurred for the fees of the rehabilitation receiver or
Philippines to the credit of the Government of the Republic of liquidator and of the professionals engaged by them; and
the Philippines to be used as the National Assembly may direct.
(6) That are otherwise authorized or mandated under this Act
Unclaimed balances shall include credits or deposits of or such other expenses as may be allowed by the Supreme
money, bullion, security or other evidence of indebtedness of Court in its rules.
any kind, and interest thereon with banks, buildings and loan
associations, and trust corporations, as hereinafter defined, in Commencement date shall refer to the date on which the
favor of any person known to be dead or who has not made court issues the Commencement Order, which shall be
further deposits or withdrawals during the preceding ten years retroactive to the date of filing of the petition for voluntary or
or more. involuntary proceedings.

Foreign currency deposits are covered by R.A. 6426 Commencement Order shall refer to the order issued by the
otherwise known as the “Foreign Currency Deposits Act”. court under Section 16 of this Act.

General Rule: Foreign currency deposits cannot be inquired Date of liquidation shall refer to the date on which the court
or looked into. All foreign currency deposits are absolutely issues the Liquidation Order.
confidential (RA 6426, Sec. 8).
Insolvent shall refer to the financial condition of a debtor that
Exception: The depositor has given his written permission and is generally unable to pay its or his liabilities as they fall due in
others as provided by law and jurisprudence. the ordinary course of business or has liabilities that are
greater than its or his assets.
In the case of PCIB v. CA, G.R. No. 84526, January 28, 1991,
the prohibition against examination or inquiry does not Liquidation Order shall refer to the Order issued by the court
preclude its being garnished for satisfaction of judgment. The under Section 112 of this Act.
disclosure is purely incidental to the execution process and it
was not the intention of the legislature to place bank deposits Liquidator shall refer to the natural person or juridical entity
beyond the reach of the judgment creditor. appointed as such by the court and entrusted with such powers
and duties as set forth in this Act: Provided, That, if the
Lesson title: Financial Rehabilitation and Insolvency Act liquidator is a juridical entity, it must designated a natural
- Part 1 person who possesses all the qualifications and none of the
disqualifications as its representative, it being understood that
The Financial Rehabilitation and Insolvency Act, FRIA for the juridical entity and the representative are solidarity liable
short, was enacted to aid corporations, partnerships and for all obligations and responsibilities of the liquidator.
individuals who can no longer pay for maturing obligations. The
law allows them to settle their liabilities within a period of time Rehabilitation shall refer to the restoration of the debtor to a
making room for their financial recovery and economic condition of successful operation and solvency, if it is shown
stability. that its continuance of operation is economically feasible and
its creditors can recover by way of the present value of
FRIA’s Declaration of Policy payments projected in the plan, more if the debtor continues
as a going concern than if it is immediately liquidated.
1. To encourage debtors, both juridical and natural persons,
and their creditors to collectively and realistically resolve and Rehabilitation receiver shall refer to the person or persons,
adjust competing claims and property rights. natural or juridical, appointed as such by the court pursuant to
this Act and which shall be entrusted with such powers and
2. To ensure a timely, fair, transparent, effective and efficient duties as set forth herein.
rehabilitation or liquidation of debtors.
Rehabilitation Plan shall refer to a plan by which the financial
3. To ensure or maintain certainty and predictability in well-being and viability of an insolvent debtor can be restored
commercial affairs, preserve and maximize the value of the using various means including, but not limited to, debt
assets of these debtors, recognize creditor rights and respect forgiveness, debt rescheduling, reorganization or quasi-
reorganization, dacion en pago, debt-equity conversion and
sale of the business (or parts of it) as a going concern, or
setting-up of new business entity as prescribed in Section 62
hereof, or other similar arrangements as may be approved by
the court or creditors.

Note: Check more terminologies in Sec. 4 of R.A. 10142.

Who are covered persons?

1. Individual debtor – a natural person who is a resident and

citizen of the Philippines that has become insolvent

2. Debtor – unless specifically excluded by a provision of this

Act, refers to:

a. A sole proprietorship duly registered with the Department of

Trade and Industry (DTI);

b. A partnership duly registered with the Securities and

Exchange Commission (SEC);

c. A corporation duly organized and existing under Philippine

laws; or

d. An individual debtor who has become insolvent (Sec. 4)

Excluded from the term debtor:

1. Bank – refers to any duly licensed bank or quasi-bank that

is potentially or actually subject to conservatorship,
receivership or liquidation proceedings under the New Central
Bank Act (R.A. 7653) or successor legislation

2. Insurance companies - refer to those companies that are

potentially or actually subject to insolvency proceedings under
the Insurance Code (P.D. 1460) or successor legislation

3. Pre-need company - refers to any corporation

authorized/licensed to sell or offer to sell pre-need plans

4. National and local government agencies or units

Note: Government financial institutions other than banks and

government-owned or -controlled corporations are covered by
this Act, unless their specific charter provides otherwise (FRIA,
Sec. 5).

Suspension of payments is a judicial insolvency proceeding

by which an individual debtor submits, for approval by his
debtors, a proposed agreement, containing propositions
delaying or extending the time of payment of his debts.

An individual debtor who, possessing sufficient property to

cover all his debts but foreseeing the impossibility of meeting
them when they respectively fall due, may file a verified
petition that he be declared in the state of suspension of
payments by the court of the province or city in which he has
resides for six (6) months prior to the filing of his petition.

He shall attach to his petition, as a minimum:

(a) a schedule of debts and liabilities;

(b) an inventory of assess; and

(c) a proposed agreement with his creditors. (Sec. 94)

Lesson title: Financial Rehabilitation and Insolvency Act

- Part 2
III. OUT-OF-COURT OR INFORMAL RESTRUCTURING
As defined by FRIA, Rehabilitation shall refer to the AGREEMENTS OR REHABILITATION PLANS
restoration of the debtor to a condition of successful operation
and solvency, if it is shown that its continuance of operation is Minimum Requirements:
economically feasible and its creditors can recover by way of
a. The debtor must agree to the out-of-court or informal
the present value of payments projected in the plan, more if
the debtor continues as a going concern than if it is restructuring/workout agreement or Rehabilitation Plan;
immediately liquidated.
b. It must be approved by creditors representing at least sixty- What is the role of the management committee?
seven percent (67%) of the secured obligations of the debtor;
When appointed, the management committee shall take the
c. It must be approved by creditors representing at least place of the management and the governing body of the debtor
seventy-five percent (75%) of the unsecured obligations of the and assume their rights and responsibilities (Sec. 37).
debtor; and
Members of the management committee are considered also
d. It must be approved by creditors holding at least eighty-five as officers of the court.
percent (85%) of the total liabilities, secured and unsecured,
of the debtor. (Sec. 84) Note: No person may be appointed as a rehabilitation receiver,
member of a management committee, or be employed by the
A standstill period that may be agreed upon by the parties rehabilitation receiver or the management committee if he has
pending negotiation and finalization of the out-of-court or a conflict of interest.
informal restructuring/workout agreement or Rehabilitation
Plan contemplated herein shall be effective and enforceable not Effects of confirmation of rehabilitation plan
only against the contracting parties but also against the other
creditors. a. The Rehabilitation Plan and its provisions shall be binding
upon the debtor and all persons who may be affected by it,
What is a Commencement Order? including the creditors, whether or not such persons have
participated in the proceedings or opposed the Rehabilitation
Commencement Order is the order issued by the court which Plan or whether or not their claims have been scheduled;
signifies the beginning of the rehabilitation proceedings which
shall retroact to the date of the filing of the petition. It is issued b. The debtor shall comply with the provisions of the
by the court if it finds the petition for rehabilitation to be Rehabilitation Plan and shall take all actions necessary to carry
sufficient in form and substance within five (5) working days out the Plan;
from the filing of the petition. (Sec. 15)
c. Payments shall be made to the creditors in accordance with
The rehabilitation proceedings shall commence upon the the provisions of the Rehabilitation Plan;
issuance of the Commencement Order which shall
include a Stay or Suspension Order. d. Contracts and other arrangements between the debtor and
its creditors shall be interpreted as continuing to apply to the
The Stay or suspension order shall: extent that they do not conflict with the provisions of the
Rehabilitation Plan;
1. Suspend all actions or proceedings, in court or otherwise, for
the enforcement of claims against the debtor; e. Any compromises on amounts or rescheduling of timing of
payments by the debtor shall be binding on creditors regardless
2. Suspend all actions to enforce any judgment, attachment or of whether or not the Plan is successfully implemented; and f.
other provisional remedies against the debtor; Claims arising after approval of the Plan that are otherwise not
treated by the Plan are not subject to any Suspension Order
3. Prohibit the debtor from selling, encumbering, transferring (Sec. 69).
or disposing in any manner any of its properties except in the
ordinary course of business; and In the case of Bank of the Philippine Islands vs. Sarabia Manor
Hotel Corporation, G.R. No. 175844, 29 July 2013, the cram-
4. Prohibit the debtor from making any payment of its liabilities down effect refers to the power of the rehabilitation court to
outstanding as of the commencement date except as may be approve and implement a rehabilitation plan notwithstanding
provided herein (Sec. 16). the objection of the majority of creditors.

One of the effects of the Commencement Order is it vests Note: A restructuring/workout agreement or Rehabilitation
the rehabilitation receiver with all the powers and Plan that is approved pursuant to an informal workout
functions provided for in the Act, such as the right to review framework (out of court or informal restructuring agreements)
and obtain all records to which the debtor's management and shall have the same legal effect as confirmation of a Plan under
directors have access, including bank accounts of whatever Section 69 of FRIA. The notice of the Rehabilitation Plan or
nature of the debtor, subject to the approval by the court of restructuring agreement or Plan shall be published once a week
the performance bond filed by the rehabilitation receiver. for at least three (3) consecutive weeks in a newspaper of
general circulation in the Philippines. The Rehabilitation Plan or
The minimum qualifications are: restructuring agreement shall take effect upon the lapse of
fifteen (15) days from the date of the last publication of the
a. A citizen of the Philippines or a resident of the Philippines in
notice thereof (Sec. 86).
the six (6) months immediately preceding his nomination;
Lesson title: Financial Rehabilitation and Insolvency Act
b. Of good moral character and with acknowledged integrity,
- Part 3
impartiality and independence;
In the case of Viva Shipping Lines, Inc. v. Keppel Philippines
c. Has the requisite knowledge of insolvency and other relevant
Marine, Inc., G.R. No. 177382, February 17, 2016, when
commercial laws, rules and procedures, as well as the relevant
rehabilitation will not result in a better present value recovery
training and/or experience that may be necessary to enable
for the creditors, the more appropriate remedy is liquidation.
him to properly discharge the duties and obligations of a
Liquidation allows corporations to wind up their affairs and
rehabilitation receiver; and
equitably distribute its assets among its creditors. In
d. Has no conflict of interest: Provided, that such conflict of liquidation, corporations preserve their assets in order to sell
interest may be waived, expressly or impliedly, by a party who them. The proceeds of the sale are distributed equitably among
may be prejudiced thereby (Sec. 29). creditors, and the surplus is divided or losses are re-allocated.
Who is qualified to be a liquidator? Note: The following shall be considered acts of insolvency, and
the petition for liquidation shall set forth or allege at least one
A natural person or juridical entity may be appointed as such of such acts:
by the court and entrusted with such powers and duties as set
forth in FRIA. a. That such person is about to depart or has departed from
the Republic of the Philippines, with intent to defraud his
Kinds of debtors in R.A. 10142 creditors;

1. Juridical debtors b. That being absent from the Republic of the Philippines, with
intent to defraud his creditors, he remains absent;
2. Individual debtors
c. That he conceals himself to avoid the service of legal process
for the purpose of hindering or delaying the liquidation or of
defrauding his creditors;

d. That he conceals, or is removing, any of his property to avoid

it being attached or taken on legal process;

e. That he has suffered his property to remain under

attachment or legal process for three (3) days for the purpose
of hindering or delaying the liquidation or of defrauding his
creditors;

f. That he has confessed or offered to allow judgment in favor

of any creditor or claimant for the purpose of hindering or
delaying the liquidation or of defrauding any creditor or
claimant;

g. That he has willfully suffered judgment to be taken against

him by default for the purpose of hindering or delaying the
liquidation or of defrauding his creditors;

h. That he has suffered or procured his property to be taken on

legal process with the intent to give a preference to one or
more of his creditors and thereby hinder or delay the liquidation
or defraud any one of his creditors;

i. That he has made any assignment, gift, sale, conveyance or

transfer of his estate, property, rights or credits with intent to
hinder or delay the liquidation or defraud his creditors;

j. That he has, in contemplation of insolvency, made any

payment, gift, grant, sale, conveyance or transfer of his estate,
property, rights or credits;

k. That being a merchant or tradesman, he has generally

defaulted in the payment of his current obligations for a period
of thirty (30) days;

l. That for a period of thirty (30) days, he has failed, after

demand, to pay any money deposited with him or received by
him in a fiduciary capacity; and

m. That an execution having been issued against him on final

judgment for money, he shall have been found to be without
sufficient property subject to execution to satisfy the judgment.

What is a liquidation proceeding?

The liquidation process refers to the proceeding where claims

are filed and the assets of the insolvent debtor are disposed
and the proceeds are divided among the creditors.

During the pendency of court-supervised or pre-negotiated

rehabilitation proceedings, the court may order the conversion
of rehabilitation proceedings to liquidation proceedings:

a. Upon a finding that:

1. The debtor is insolvent; and

2. There is no substantial likelihood for the debtor to be

successfully rehabilitated as determined in accordance with the
rules to be promulgated by the supreme court (Sec. 25(c));

b. If there is no rehabilitation plan is confirmed within

one year from filing a petition to
confirm a rehabilitation plan (Sec. 72); contained in R.A. 10846 signed into law on May 23, 2016. R.A.
10846 empowered PDIC with stronger authorities to protect
c. If the termination of proceedings is due to failure of the depositing public and promote financial stability. The new
rehabilitation or dismissal of the petition for reasons law also includes important provisions to ensure that the PDIC
other than technical grounds (Sec. 75); remains financially and institutionally strong to fulfill its
mandate under its Charter.
d. In voluntary liquidation of juridical debtors (Sec. 90);
or The PDIC now has the authority to:
e. At any other time upon the recommendation of the 1. Help depositors have quicker access to their insured deposits
rehabilitation receiver that the rehabilitation of the should their bank close;
debtor is not feasible (Sec. 92).
2. Resolve problem banks while still open; hasten the
Note: Upon the issuance of the liquidation order the juridical liquidation process for closed banks; and
debtor shall be deemed dissolved and its corporate or juridical
existence terminated. 3. Mete out stiffer sanctions and penalties against those who
engage in unsafe and unsound banking practices.
To emphasize, revisit the following terminologies:
Note: The PDIC is an attached agency of the Department of
Liquidation Order shall refer to the Order issued by the court Finance.
under Section 112 of this Act.
What is an insured deposit?
Liquidator shall refer to the natural person or juridical entity
appointed as such by the court and entrusted with such powers The term ‘insured deposit’ means the amount due to any
and duties as set forth in this Act: Provided, That, if the bonafide depositor for legitimate deposits in an insured bank
liquidator is a juridical entity, it must designate a natural net of any obligation of the depositor to the insured bank as of
person who possesses all the qualifications and none of the the date of closure, but not to exceed P500,000.00.
disqualifications as its representative, it is understood that the
juridical entity and the representative are solidarity liable for A joint account shall be insured separately from any
all obligations and responsibilities of the liquidator. individually-owned deposit account.

Secured creditor refers to a creditor with a secured claim. What are the kinds of deposit insurance?

Note: Within twenty (20) days from his assumption into office, a. By deposit type
the liquidator shall prepare a preliminary registry of claims of
secured and unsecured creditors. Secured creditors who have 1. Savings
waived their security or lien, or have fixed the value of the
2. Special Savings
property subject of their security or lien by agreement with the
liquidator and is admitted as a creditor for the balance, shall 3. Demand/Checking
be considered as unsecured creditors.
4. Negotiable Order of withdrawal
What is a liquidation plan?
5. Time Deposits
Within three (3) months from his assumption into office, the
Liquidator shall submit a Liquidation Plan to the court. The b. By deposit account
Liquidation Plan shall, as a minimum, enumerate all the assets
of the debtor, all the claims against the debtor, and a schedule 1. Single
of liquidation of the assets and payment of the claims. (Sec.
129) 2. Joint

Sales of assets in liquidation 3. In Trust For

The liquidator may sell the unencumbered assets of the debtor c. By currency
and convert the same into money.
1. Philippine Peso
The sale shall be made at a public auction. However, a private
2. Foreign currencies considered as part of BSP’s International
sale may be allowed with the approval of the court if:
reserves
a. The goods to be sold are of a perishable nature, or are liable
R.A. 9576 stipulates that PDIC will not pay deposit insurance
to quickly deteriorate in value, or are disproportionately
for the following accounts or transactions:
expensive to keep or maintain; or
1. Investment products such as bonds, securities and trust
b. The private sale is for the best interest of the debtor and his
creditors. With the approval of the court, the unencumbered accounts
property of the debtor may also be conveyed to a creditor in 2. Deposit accounts which are unfunded, fictitious or fraudulent
satisfaction of his claim or part thereof (Sec. 131).
3. Deposit products constituting or emanating from unsafe and
With the court’s approval, the unencumbered property of the unsound banking practices
debtor may also be conveyed to a creditor in satisfaction of his
claim or part thereof. 4. Deposits that are determined to be proceeds of an unlawful
activity as defined under the Anti-Money Laundering Law
Lesson title: Philippine Deposit Insurance Corporation
Effective June 1, 2009, the maximum deposit insurance
Philippine Deposit Insurance Corporation is a government coverage (MDIC) is P500,000 per depositor. All deposit
instrumentality created in 1963 by virtue of Republic Act 3591 accounts by a depositor in a closed bank maintained in
to insure the deposits of all banks which are entitled to the the same right and capacity shall be added together (per
benefits of insurance. The latest amendments to R.A. 3591 are depositor, per capacity rule).
When are claims filed? information to promote innovation and growth. The State
recognizes the vital role of information and communications
Claims are filed during the claims settlement operations period, technology in nation-building and its inherent obligation to
as announced in the Notice to Depositors published in national ensure that personal information in information and
or local newspapers. communications systems in the government and in the private
sector are secured and protected.
Depositors have two (2) years from PDIC’s takeover of the
closed bank to file their deposit insurance claims. Functions of the National Privacy Commission (NPC)

Who are required to file claims? To administer and implement the provisions of this Act, and to
monitor and ensure compliance of the country with
1. Depositors with valid deposit accounts with balances of more international standards set for data protection, there is hereby
than Php100,000 created an independent body to be known as the NPC. (Sec. 7)
2. Depositors who have outstanding obligations with the closed The Commission shall ensure at all times the confidentiality of
bank regardless of amount of deposits any personal information that comes to its knowledge and
possession. (Sec. 8)
3. Depositors with account balances of less than Php100,000
who have no updated addresses in the bank records or who Terminologies to take notice under R.A. 10173
have not updated their addresses through the Mailing Address
Update Form (MAUF) issued by the PDIC Consent of the data subject refers to any freely given,
specific, informed indication of will, whereby the data subject
4. Depositors who maintain their accounts under the name of agrees to the collection and processing of personal information
business entities, regardless of type of account and account about and/or relating to him or her. Consent shall be evidenced
balance by written, electronic or recorded means. It may also be given
on behalf of the data subject by an agent specifically authorized
5. Depositors with accounts not eligible for early payment,
by the data subject to do so.
regardless of type of account and account balance per advice
of PDIC Data subject refers to an individual whose personal
information is processed.
Who are not required to file claims?
Information and Communications System refers to a
Depositors with valid deposit accounts with balances of
system for generating, sending, receiving, storing or otherwise
Php100,000 and below are not required to file claims provided
processing electronic data messages or electronic documents
they have no obligations with the closed bank and have
and includes the computer system or other similar device by or
complete and updated addresses in the bank records or have
which data is recorded, transmitted or stored and any
updated these through the Mailing Address Update Form
procedure related to the recording, transmission or storage of
(MAUF) issued by the PDIC.
electronic data, electronic message, or electronic document.
Required documentation:
Personal information refers to any information whether
a. Original evidence of deposits such as savings passbook, recorded in a material form or not, from which the identity of
certificate of time deposit, bank statement, unused checks, and an individual is apparent or can be reasonably and directly
ATM card ascertained by the entity holding the information, or when put
together with other information would directly and certainly
b. Two (2) valid photo-bearing IDs with signature of the identify an individual.
depositor/claimant
Personal information controller refers to a person or
Note: organization who controls the collection, holding, processing or
use of personal information, including a person or organization
- Claims should be filed within the two-year prescriptive period who instructs another person or organization to collect, hold,
after PDIC’s takeover of the closed bank. process, use, transfer or disclose personal information on his
or her behalf. The term excludes:
- The PDIC will not accept claims that are incomplete or lacking
in requirements. (1) A person or organization who performs such functions as
instructed by another person or organization; and
- The PDIC may also require additional documents in the course
of claims processing. (2) An individual who collects, holds, processes or uses
personal information in connection with the individual’s
- The PDIC, as Receiver, has the authority to adjust the interest personal, family or household affairs.
rate on unpaid interests on deposits if such rate is deemed
unreasonably higher compared to market rates. Personal information processor refers to any natural or
juridical person qualified to act as such under this Act to whom
- The standard procedures for claims settlement may not apply a personal information controller may outsource the processing
if the closed bank fails to properly turn over to the PDIC the of personal data pertaining to a data subject.
closed bank’s complete records. Without the complete records,
the PDIC will not be able to conduct the validation process for Processing refers to any operation or any set of operations
bank deposits, a requirement before deposit insurance claims performed upon personal information including, but not limited
are paid. to, the collection, recording, organization, storage, updating or
modification, retrieval, consultation, use, consolidation,
Lesson title: Data Privacy Act - Part 1 blocking, erasure or destruction of data.
According to Section 2 of Data Privacy Act, Declaration Privileged information refers to any and all forms of data
of Policy: which under the Rides of Court and other pertinent laws
constitute privileged communication.
It is the policy of the State to protect the fundamental human
right of privacy, of communication while ensuring free flow of
Sensitive personal information refers to personal the independent, central monetary authority or Bangko Sentral
information: ng Pilipinas to comply with Republic Act No. 9510, and Republic
Act No. 9160, as amended, otherwise known as the Anti-Money
(1) About an individual’s race, ethnic origin, marital status, Laundering Act and other applicable laws; and
age, color, and religious, philosophical or political affiliations;
(g) Personal information originally collected from residents of
(2) About an individual’s health, education, genetic or sexual foreign jurisdictions in accordance with the laws of those
life of a person, or to any proceeding for any offense committed foreign jurisdictions, including any applicable data privacy
or alleged to have been committed by such person, the disposal laws, which is being processed in the Philippines.
of such proceedings, or the sentence of any court in such
proceedings; Data Privacy Principle (Sec. 11)

(3) Issued by government agencies peculiar to an individual The processing of personal information shall be allowed,
which includes, but not limited to, social security numbers, subject to compliance with the requirements of this Act and
previous or cm-rent health records, licenses or its denials, other laws allowing disclosure of information to the public and
suspension or revocation, and tax returns; and adherence to the principles of transparency, legitimate purpose
and proportionality.
(4) Specifically established by an executive order or an act of
Congress to be kept classified. Personal information must be:

Scope of Application (Sec. 4) (a) Collected for specified and legitimate purposes determined
and declared before, or as soon as reasonably practicable after
This Act applies to the processing of all types of personal collection, and later processed in a way compatible with such
information and to any natural and juridical person involved in declared, specified and legitimate purposes only;
personal information processing including those personal
information controllers and processors who, although not found (b) Processed fairly and lawfully;
or established in the Philippines, use equipment that are
located in the Philippines, or those who maintain an office, (c) Accurate, relevant and, where necessary for purposes for
branch or agency in the Philippines subject to the immediately which it is to be used the processing of personal information,
succeeding paragraph. kept up to date; inaccurate or incomplete data must be
rectified, supplemented, destroyed or their further processing
This Act does not apply to the following: restricted;

(a) Information about any individual who is or was an officer (d) Adequate and not excessive in relation to the purposes for
or employee of a government institution that relates to the which they are collected and processed;
position or functions of the individual, including:
(e) Retained only for as long as necessary for the fulfillment of
(1) The fact that the individual is or was an officer or employee the purposes for which the data was obtained or for the
of the government institution; establishment, exercise or defense of legal claims, or for
legitimate business purposes, or as provided by law; and
(2) The title, business address and office telephone number of
the individual; (f) Kept in a form which permits identification of data subjects
for no longer than is necessary for the purposes for which the
(3) The classification, salary range and responsibilities of the data were collected and processed: Provided, That personal
position held by the individual; and information collected for other purposes may lie processed for
historical, statistical or scientific purposes, and in cases laid
(4) The name of the individual on a document prepared by the down in law may be stored for longer periods: Provided,
individual in the course of employment with the government; further, that adequate safeguards are guaranteed by said laws
authorizing their processing.
(b) Information about an individual who is or was performing
service under contract for a government institution that relates The personal information controller must ensure
to the services performed, including the terms of the contract, implementation of personal information processing principles
and the name of the individual given in the course of the set out herein.
performance of those services;
Lawful Processing of Personal Information. – The
(c) Information relating to any discretionary benefit of a processing of personal information shall be permitted only if
financial nature such as the granting of a license or permit not otherwise prohibited by law, and when at least one of the
given by the government to an individual, including the name following conditions exists:
of the individual and the exact nature of the benefit;
(a) The data subject has given his or her consent;
(d) Personal information processed for journalistic, artistic,
literary or research purposes; (b) The processing of personal information is necessary and is
related to the fulfillment of a contract with the data subject or
(e) Information necessary in order to carry out the functions of in order to take steps at the request of the data subject prior
public authority which includes the processing of personal data to entering into a contract;
for the performance by the independent, central monetary
authority and law enforcement and regulatory agencies of their (c) The processing is necessary for compliance with a legal
constitutionally and statutorily mandated functions. Nothing in obligation to which the personal information controller is
this Act shall be construed as to have amended or repealed subject;
Republic Act No. 1405, otherwise known as the Secrecy of Bank
Deposits Act; Republic Act No. 6426, otherwise known as the (d) The processing is necessary to protect vitally important
Foreign Currency Deposit Act; and Republic Act No. 9510, interests of the data subject, including life and health;
otherwise known as the Credit Information System Act (CISA);
(e) The processing is necessary in order to respond to national
(f) Information necessary for banks and other financial emergency, to comply with the requirements of public order
institutions under the jurisdiction of and safety, or to fulfill functions of public authority which
necessarily includes the processing of personal data for the (5) Methods utilized for automated access, if the same
fulfillment of its mandate; or is allowed by the data subject, and the extent to which
such access is authorized;
(f) The processing is necessary for the purposes of the
legitimate interests pursued by the personal information (6) The identity and contact details of the personal
controller or by a third party or parties to whom the data is information controller or its representative;
disclosed, except where such interests are overridden by
fundamental rights and freedoms of the data subject which (7) The period for which the information will be
require protection under the Philippine Constitution. stored; and

Sensitive Personal Information and Privileged (8) The existence of their rights, i.e., to access,
Information. – The processing of sensitive personal correction, as well as the right to lodge a complaint
information and privileged information shall be prohibited, before the Commission.
except in the following cases:
Any information supplied or declaration made to the data
(a) The data subject has given his or her consent, specific to subject on these matters shall not be amended without prior
the purpose prior to the processing, or in the case of privileged notification of data subject: Provided, That the notification
information, all parties to the exchange have given their under subsection (b) shall not apply should the personal
consent prior to processing; information be needed pursuant to a subpoena or when the
collection and processing are for obvious purposes, including
(b) The processing of the same is provided for by existing laws when it is necessary for the performance of or in relation to a
and regulations: Provided, That such regulatory enactments contract or service or when necessary or desirable in the
guarantee the protection of the sensitive personal information context of an employer-employee relationship, between the
and the privileged information: Provided, further, That the collector and the data subject, or when the information is being
consent of the data subjects are not required by law or collected and processed as a result of legal obligation;
regulation permitting the processing of the sensitive personal
information or the privileged information; (c) Reasonable access to, upon demand, the following:

(c) The processing is necessary to protect the life and health of (1) Contents of his or her personal information that
the data subject or another person, and the data subject is not were processed;
legally or physically able to express his or her consent prior to
the processing; (2) Sources from which personal information were
obtained;
(d) The processing is necessary to achieve the lawful and
noncommercial objectives of public organizations and their (3) Names and addresses of recipients of the personal
associations: Provided, That such processing is only confined information;
and related to the bona fide members of these organizations or
(4) Manner by which such data were processed;
their associations: Provided, further, That the sensitive
personal information are not transferred to third parties: (5) Reasons for the disclosure of the personal
Provided, finally, That consent of the data subject was obtained information to recipients;
prior to processing;
(6) Information on automated processes where the
(e) The processing is necessary for purposes of medical data will or likely to be made as the sole
treatment, is carried out by a medical practitioner or a medical
treatment institution, and an adequate level of protection of basis for any decision significantly affecting or will
personal information is ensured; or affect the data subject;

(f) The processing concerns such personal information as is (7) Date when his or her personal information
necessary for the protection of lawful rights and interests of concerning the data subject were last
natural or legal persons in court proceedings, or the
establishment, exercise or defense of legal claims, or when accessed and modified; and
provided to government or public authority.
(8) The designation, or name or identity and address
RIGHTS OF THE DATA SUBJECT of the personal information controller;

Rights of the Data Subject. – The data subject is entitled to: (d) Dispute the inaccuracy or error in the personal information
and have the personal information controller correct it
(a) Be informed whether personal information pertaining to him immediately and accordingly, unless the request is vexatious
or her shall be, are being or have been processed; or otherwise unreasonable. If the personal information have
been corrected, the personal information controller shall
(b) Be furnished the information indicated hereunder before ensure the accessibility of both the new and the retracted
the entry of his or her personal information into the processing information and the simultaneous receipt of the new and the
system of the personal information controller, or at the next retracted information by recipients thereof: Provided,
practical opportunity:
That the third parties who have previously received such
(1) Description of the personal information to be processed personal information shall he informed of its
entered into the system; inaccuracy and its rectification upon reasonable request of the
data subject;
(2) Purposes for which they are being or are to be
processed; (e) Suspend, withdraw or order the blocking, removal or
destruction of his or her personal information from the personal
(3) Scope and method of the personal information
information controller’s filing system upon discovery and
processing;
substantial proof that the personal information are incomplete,
(4) The recipients or classes of recipients to whom outdated, false, unlawfully obtained, used for unauthorized
they are or may be disclosed; purposes or are no longer necessary for the purposes for which
they were collected. In this case, the personal information covered by the notification requirements. In the case of
controller may notify third parties who have previously personal data breaches, a report shall include the facts
received such processed personal information; and surrounding an incident, the effects of such incident, and the
remedial actions taken by the personal information controller.
(f) Be indemnified for any damages sustained due to such In other security incidents not involving personal data, a report
inaccurate, incomplete, outdated, false, unlawfully obtained or containing aggregated data shall constitute sufficient
unauthorized use of personal information. documentation. These reports shall be made available when
requested by the Commission. A general summary of the
Lesson title: Data Privacy Act - Part 2 reports shall be submitted to the Commission annually.
PERSONAL DATA BREACH Subcontract of Personal Information
The notification shall include, but not be limited to: A personal information controller may subcontract the
processing of personal information: Provided, That the
1. Nature of the breach
personal information controller shall be responsible for
2. Personal data possibly involved ensuring that proper safeguards are in place to ensure the
confidentiality of the personal information processed, prevent
3. Measures taken to address the breach its use for unauthorized purposes, and generally, comply with
the requirements of this Act and other laws for processing of
The Commission reserves the right to require additional personal information. The personal information processor shall
information, if necessary. comply with all the requirements of this Act and other
applicable laws. (SEC. 14)
Data Breach Notification.
ACCOUNTABILITY FOR TRANSFER OF PERSONAL
a. The Commission and affected data subjects shall be notified INFORMATION
by the personal information controller within seventy-two (72)
hours upon knowledge of, or when there is reasonable belief Principle of Accountability. Each personal information
by the personal information controller or personal information controller is responsible for personal information under its
processor that, a personal data breach requiring notification control or custody, including information that have been
has occurred. transferred to a third party for processing, whether
domestically or internationally, subject to cross-border
b. Notification of personal data breach shall be required when arrangement and cooperation.
sensitive personal information or any other information that
may, under the circumstances, be used to enable identity fraud (a) The personal information controller is accountable for
are reasonably believed to have been acquired by an complying with the requirements of this Act and shall use
unauthorized person, and the personal information controller contractual or other reasonable means to provide a comparable
or the Commission believes that such unauthorized acquisition level of protection while the information are being processed
is likely to give rise to a real risk of serious harm to any affected by a third party.
data subject.
(b) The personal information controller shall designate an
c. Depending on the nature of the incident, or if there is delay individual or individuals who are accountable for the
or failure to notify, the Commission may investigate the organization’s compliance with this Act. The identity of the
circumstances surrounding the personal data breach. individual(s) so designated shall be made known to any data
Investigations may include on-site examination of systems and subject upon request.
procedures.
Registration of Personal Data Processing Systems. The
Delay of Notification. Notification may be delayed only to the personal information controller or personal information
extent necessary to determine the scope of the breach, to processor that employs fewer than two hundred fifty (250)
prevent further disclosures, or to restore reasonable integrity persons shall not be required to register unless the processing
to the information and communications system. it carries out is likely to pose a risk to the rights and freedoms
of data subjects, the processing is not occasional, or the
a. In evaluating if notification is unwarranted, the Commission processing includes sensitive personal information of at least
may take into account compliance by the personal information one thousand (1,000) individuals.
controller with this section and existence of good faith in the
acquisition of personal data. a. The contents of registration shall include:

b. The Commission may exempt a personal information 1. The name and address of the personal information controller
controller from notification where, in its reasonable judgment, or personal information processor, and of its representative, if
such notification would not be in the public interest, or in the any, including their contact details;
interest of the affected data subjects.
2. The purpose or purposes of the processing, and whether
c. The Commission may authorize postponement of notification processing is being done under an outsourcing or
where it may hinder the progress of a criminal investigation subcontracting agreement;
related to a serious breach.
3. A description of the category or categories of data subjects,
Breach Report. and of the data or categories of data relating to them;

a. The personal information controller shall notify the 4. The recipients or categories of recipients to whom the data
Commission by submitting a report, whether written or might be disclosed;
electronic, containing the required contents of notification. The
report shall also include the name of a designated 5. Proposed transfers of personal data outside the Philippines;
representative of the personal information controller, and his
or her contact details. 6. A general description of privacy and security measures for
data protection;
b. All security incidents and personal data breaches shall be
documented through written reports, including those not 7. Brief description of the data processing system;
8. Copy of all policies relating to data governance, data privacy, f. Any reported violation of the rights and freedoms of data
and information security; subjects;

9. Attestation to all certifications attained that are related to g. Other matters necessary to ensure the effective
information and communications processing; and implementation and administration of the Act, these Rules, and
other issuances of the Commission.
10. Name and contact details of the compliance or data
protection officer, which shall immediately be updated in case Lesson title: Truth in Lending Act
of changes.
What is the purpose of the law?
b. The procedure for registration shall be in accordance
with these Rules and other issuances of the Commission. According to Sec. 2 of R.A. 3765, it is hereby declared to be
the policy of the State to protect its citizens from a lack of
Notification of Automated Processing Operations. The personal awareness of the true cost of credit to the user by assuring a
information controller carrying out any wholly or partly full disclosure of such cost with a view of preventing the
automated processing operations or set of such operations uninformed use of credit to the detriment of the national
intended to serve a single purpose or several related purposes economy.
shall notify the Commission when the automated processing
becomes the sole basis for making decisions about a data The covered transactions in TILA:
subject, and when the decision would significantly affect the
data subject. 1. Loan

a. The notification shall include the following 2. Mortgage

information:
3. Deed of trust advance, or discount
1. Purpose of processing;
4. Conditional sales contract
2. Categories of personal data to undergo processing;
5. Contract to sell
3. Category or categories of data subject;
6. Contract of sale
4. Consent forms or manner of obtaining consent;
7. Contract of sale of property or services, either for present or
5. The recipients or categories of recipients to whom the data future delivery, under which part or all of the price is payable
are to be disclosed; subsequent to the making of such sale or contract

6. The length of time the data are to be stored; 8. Rental-purchase contract

7. Methods and logic utilized for automated processing; 9. Contract or arrangement for the hire, bailment, or leasing of
property
8. Decisions relating to the data subject that would be made
on the basis of processed data 10. Option, demand, lien, pledge, or other claim against, or for
the delivery of, property or money;
or that would significantly affect the rights and freedoms of
data subject; and 11. Any purchase, or other acquisition of, or any credit upon
the security of, any obligation of claim arising out of any of the
9. Names and contact details of the compliance or data foregoing
protection officer.
12. Any transaction or series of transactions having a similar
b. No decision with legal effects concerning a data purpose or effect
subject shall be made solely on the basis of automated
processing without the consent of the data subject. Note: Those not included in the list above are not within the
scope of TILA.
Review by the Commission.
Creditor means any person engaged in the business of
The following are subject to the review of the extending credit (including any person who as a regular
Commission, upon its own initiative or upon the filing of business practice make loans or sells or rents property or
a complaint by a data subject: services on a time, credit, or installment basis, either as
principal or as agent) who requires as an incident to the
a. Compliance by a personal information controller or personal extension of credit, the payment of a finance charge.
information processor with the Act, these Rules, and other
issuances of the Commission; What are the obligations of the creditors to the person
to whom credit is extended?
b. Compliance by a personal information controller or personal
information processor with the requirement of establishing Any creditor shall furnish to each person to whom credit is
adequate safeguards for data privacy and security; extended, prior to the consummation of the transaction, a clear
statement in writing setting forth, to the extent applicable and
c. Any data sharing agreement, outsourcing contract, and in accordance with rules and regulations prescribed by the
similar contracts involving the processing of personal data, and Board, the following information:
its implementation;
(1) the cash price or delivered price of the property or service
d. Any off-site or online access to sensitive personal data in to be acquired;
government allowed by a head of agency;
(2) the amounts, if any, to be credited as down payment and/or
e. Processing of personal data for research purposes, public trade-in;
functions, or commercial activities;
(3) the difference between the amounts set forth under clauses
(1) and (2);
(4) the charges, individually itemized, which are paid or to be Who are covered persons?
paid by such person in connection with the transaction but
which are not incident to the extension of credit; 1. Banks, non-banks, quasi-banks, trust entities, foreign
exchange dealers, pawnshops, money changers, remittance
(5) the total amount to be financed; and transfer companies and other similar entities and all other
persons and their subsidiaries and affiliates supervised or
(6) the finance charge expressed in terms of pesos and regulated by the Bangko Sentral ng Pilipinas (BSP)
centavos; and
2. Insurance companies, pre-need companies and all other
(7) the percentage that the finance bears to the total amount persons supervised or regulated by the Insurance Commission
to be financed expressed as a simple annual rate on the (IC)
outstanding unpaid balance of the obligation.
3. (i) Securities dealers, brokers, salesmen, investment houses
What is the consequence if a creditor violated the Truth and other similar persons managing securities or rendering
in Lending Act? services as investment agent, advisor, or consultant, (ii)
Mutual funds, close-end investment companies, common trust
Any creditor who in connection with any credit transaction fails funds, and other similar persons, and (iii) Other entities
to disclose to any person any information in violation of this Act administering or otherwise dealing in currency, commodities or
or any regulation issued thereunder shall be liable to such financial derivatives based thereon, valuable objects, cash
person in the amount of P100 or in an amount equal to twice substitutes and other similar monetary instruments or property
the finance charged required by such creditor in connection supervised or regulated by the Securities and Exchange
with such transaction, whichever is the greater, except that Commission (SEC);
such liability shall not exceed P2,000 on any credit transaction.
Action to recover such penalty may be brought by such person 4. Jewelry dealers in precious metals, who, as a business, trade
within one year from the date of the occurrence of the violation, in precious metals, for transactions in excess of One million
in any court of competent jurisdiction. In any action under this pesos (P1,000,000.00)
subsection in which any person is entitled to a recovery, the
creditor shall be liable for reasonable attorney's fees and court 5. Jewelry dealers in precious stones, who, as a business, trade
costs as determined by the court. in precious stones, for transactions in excess of One million
pesos (P1,000,000.00)
1. Except as specified in the paragraph above, nothing
contained in this Act or any regulation contained in this Act or 6. Company service providers which, as a business, provide
any regulation thereunder shall affect the validity or any of the following services to third parties: a) Acting as a
enforceability of any contract or transactions. formation agent of juridical persons; b) Acting as (or arranging
for another person to act as) a director or corporate secretary
2. Any person who willfully violates any provision of this Act or of a company, a partner of a partnership, or a similar position
any regulation issued thereunder shall be fined by not less than in relation to other juridical persons; c) Providing a registered
P1,000 or more than P5,000 or imprisonment for not less than office, business address or accommodation, correspondence or
6 months, nor more than one year or both. administrative address for a company, a partnership or any
other legal person or arrangement; and d) Acting as (or
No punishment or penalty provided by this Act shall apply to arranging for another person to act as) a nominee shareholder
the Philippine Government or any agency or any political for another person
subdivision thereof.
7. Persons who provide any of the following services: i.
3. A final judgment hereafter rendered in any criminal Managing of client money, securities or other assets; ii.
proceeding under this Act to the effect that a defendant has Management of bank, savings or securities accounts; iii.
willfully violated this Act shall be prima facie evidence against Organization of contributions for the creation, operation or
such defendant in an action or proceeding brought by any other management of companies; and iv. Creation, operation or
party against such defendant under this Act as to all matters management of juridical persons or arrangements, and buying
respecting which said judgment would be an estoppel as and selling business entities.
between the parties thereto.
Note: Covered “Institutions” was changed to Covered
Other terminologies/principles to take notice: “Persons” under RA 10365.
Person means any individual, corporation, partnership, Obligations of Covered Persons:
association, or other organized group of persons, or the legal
successor or representative of the foregoing, and includes the 1. Customer Identification
Philippine Government or any agency thereof, or any other
government, or of any of its political subdivisions, or any 2. Record Keeping
agency of the foregoing.
3. Reporting of Covered and Suspicious Transactions
Lesson title: Anti-Money Laundering Act - Part 1
Covered transaction vs. Suspicious transaction
Section 1 of R.A. 9160, as amended, states the policy of the
law Covered transaction is a transaction in cash or other
equivalent monetary instrument involving a total amount in
(1) to protect and preserve the integrity and confidentiality of excess of Five hundred thousand pesos (PhP 500,000.00)
bank accounts and to ensure that the Philippines shall not be within one (1) banking day.
used as a money laundering site for the proceeds of any
unlawful activity and Suspicious transaction, on the other hand, is a transaction
with covered institutions, regardless of the amounts involved,
(2) to pursue the State’s foreign policy to extend cooperation where any of the following circumstances exist:
in transnational investigation and prosecutions of persons
involved in money laundering activities wherever committed. 1. There is no underlying legal or trade obligation, purpose or
economic justification
2. The client is not properly identified 3. The amount involved What is an unlawful activity as defined in AMLA?
is not commensurate with the business or financial capacity of
the client Unlawful activity refers to any act or omission or series or
combination thereof involving or having direct relation to the
4. Taking into account all known circumstances, it may be following:
perceived that the client's transaction is structured in order to
avoid being the subject of reporting requirements under the 1. Kidnapping for ransom under Article 267 of Act No. 3815,
Act otherwise known as the Revised Penal Code, as amended;

5. Any circumstances relating to the transaction which is 2. Sections 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of
observed to deviate from the profile of the client and/or the Republic Act No. 9165, otherwise known as the Comprehensive
client's past transactions with the covered institution; 6. The Dangerous Drugs Act of 2002;
transactions is in a way related to an unlawful activity or
offense under this Act that is about to be, is being or has been 3. Section 3 paragraphs B, C, E, G, H and I of Republic Act No.
committed 3019, as amended, otherwise known as the Anti-Graft and
Corrupt Practices Act;
7. Any transactions that is similar or analogous to any of the
foregoing 4. Plunder under Republic Act No. 7080, as amended; 5.
Robbery and extortion under Articles 294, 295, 296, 299, 300,
Note: When reporting covered or suspicious transactions to the 301 and 302 of the Revised Penal Code, as amended;
AMLC, covered institutions and their officers and employees
shall not be deemed to have violated: 6. Jueteng and Masiao punished as illegal gambling under
Presidential Decree No. 1602;
1. The Law on Secrecy of Bank Deposits or Ra 1405, as
amended 7. Piracy on the high seas under the Revised Penal Code, as
amended and Presidential Decree No. 532;
2. Foreign Currency Deposit Act or RA No. 6426, as amended
8. Qualified theft under Article 310 of the Revised Penal Code,
3. General Banking Laws or RA 8791 as amended;

4. Other similar laws. 9. Swindling under Article 315 and Other Forms of Swindling
under Article 316 of the Revised Penal Code, as amended;
Lawyers and accountants acting as independent legal
professionals in relation to information concerning their clients 10. Smuggling under Republic Act Nos. 455 and 1937;
or where disclosure of information would compromise client
confidences or the attorney-client relationship. Hence, they are 11. Violations of Republic Act No. 8792, otherwise known as
not required to report covered and suspicious transactions if the Electronic Commerce Act of 2000;
the relevant information was obtained in circumstances where
12. Hijacking and other violations under Republic Act No. 6235;
they are subject to professional secrecy or legal professional
destructive arson and murder, as defined under the Revised
privilege.
Penal Code, as amended;
What is money laundering?
13. Terrorism and conspiracy to commit terrorism as defined
Money laundering is committed by any person who, knowing and penalized under Sections 3 and 4 of Republic Act No. 9372;
that any monetary instrument or property represents, involves,
14. Financing of terrorism under Section 4 and offenses
or relates to the proceeds of any unlawful activity:
punishable under Sections 5, 6, 7 and 8 of Republic Act No.
a. Transacts said monetary instrument or property; 10168, otherwise known as the Terrorism Financing Prevention
and Suppression Act of 2012;
b. Converts, transfers, disposes of, moves, acquires, possesses
or uses said monetary instrument or property; 15. Bribery under Articles 210, 211 and 211-A of the Revised
Penal Code, as amended, and Corruption of Public Officers
c. Conceals or disguises the true nature, source, location, under Article 212 of the Revised Penal Code, as amended;
disposition, movement or ownership of or rights with respect
to said monetary instrument or property; 16. Frauds and Illegal Exactions and Transactions under
Articles 213, 214, 215 and 216 of the Revised Penal Code, as
d. Attempts or conspires to commit money laundering offenses amended;
referred to in paragraphs (a), (b) or (c);
17. Malversation of Public Funds and Property under Articles
e. Aids, abets, assists in or counsels the commission of the 217 and 222 of the Revised Penal Code, as amended;
money laundering offenses referred to in paragraphs (a), (b)
or (c) above; and 18. Forgeries and Counterfeiting under Articles 163, 166, 167,
168, 169 and 176 of the Revised Penal Code, as amended;
f. Performs or fails to perform any act as a result of which he
facilitates the offense of money laundering referred to in 19. Violations of Sections 4 to 6 of Republic Act No. 9208,
paragraphs (a), (b) or (c) above. otherwise known as the Anti-Trafficking in Persons Act of 2003;

Money laundering is also committed by any covered person 20. Violations of Sections 78 to 79 of Chapter IV, of Presidential
who, knowing that a covered or suspicious transaction is Decree No. 705, otherwise known as the Revised Forestry Code
required under this Act to be reported to the Anti-Money of the Philippines, as amended;
Laundering Council (AMLC), fails to do so (Sec. 4, RA 10365,
21. Violations of Sections 86 to 106 of Chapter VI, of Republic
amending Sec. 4, RA 9160).
Act No. 8550, otherwise known as the Philippine Fisheries Code
of 1998;
22. Violations of Sections 101 to 107, and 110 of Republic Act Probable cause under AMLA
No. 7942, otherwise known as the Philippine Mining Act of
1995; It includes such facts and circumstances which would lead a
reasonably discreet, prudent or cautious man to believe that
23. Violations of Section 27(c), (e), (f), (g) and (i), of Republic an unlawful activity and/or a money laundering offense is about
Act No. 9147, otherwise known as the Wildlife Resources to be, is being or has been committed and that the account or
Conservation and Protection Act; any monetary instrument or property subject thereof sought to
be frozen is in any way related to said unlawful activity and/or
24. Violation of Section 7(b) of Republic Act No. 9072, money laundering offense.
otherwise known as the National Caves and Cave Resources
Management Protection Act; Nature of a freeze order

25. Violation of Republic Act No. 6539, otherwise known as the A freeze order is an extraordinary and interim relief issued by
Anti-Carnapping Act of 2002, as amended; the Court of Appeals to prevent the dissipation, removal, or
disposal of properties that are suspected to be the proceeds of,
26. Violations of Sections 1, 3 and 5 of Presidential Decree No. or related to unlawful activities as defined in Sec. 3(i) of R.A.
1866, as amended, otherwise known as the decree Codifying 9160, as amended. The primary objective of a freeze order is
the Laws on Illegal/Unlawful Possession, Manufacture, Dealing to temporarily preserve monetary instruments or property that
In, Acquisition or Disposition of Firearms, Ammunition or are in any way related to an unlawful activity or money
Explosives; laundering, by preventing the owner from utilizing them during
the duration of the freeze order.
27. Violation of Presidential Decree No. 1612, otherwise known
as the Anti-Fencing Law; As a rule, the effectivity of a freeze order may be extended by
the Court of Appeals for a period not exceeding six (6) months.
28. (Violation of Section 6 of Republic Act No. 8042, otherwise However, should it become completely necessary for the
known as the Migrant Workers and Overseas Republic to further extend the duration of the freeze order, it
should file the necessary motion before the expiration of the
Filipinos Act of 1995, as amended by Republic Act No. 10022;
six month period and explain the reason or reasons for its
29. Violation of Republic Act No. 8293, otherwise known as the failure to file an appropriate case and justify the period of
Intellectual Property Code of the Philippines; extension sought.

30. Violation of Section 4 of Republic Act No. 9995, otherwise While Sec. 10 of AMLA uses specific language to authorize an
known as the Anti-Photo and Video Voyeurism Act of 2009; ex parte application for the provisional relief for a freeze order,
nothing in Sec. 11 similarly authorizes an ex parte application
31. Violation of Section 4 of Republic Act No. 9775, otherwise for the issuance of an order to examine bank accounts.
known as the Anti-Child Pornography Act of 2009; Consequently, courts receiving the application for inquiry order
cannot simply take AMLC’s word that probable cause exists that
32. Violations of Sections 5, 7, 8, 9, 10(c), (d) and (e), 11, 12 the deposits or investments are related to an unlawful activity.
and 14 of Republic Act No. 7610, otherwise known as the
Special Protection of Children Against Abuse, Exploitation and AMLA and its IRR had laid down two (2) conditions when
Discrimination; applying for civil forfeiture:

33. Fraudulent practices and other violations under Republic (a) When there is a suspicious transaction report or a
Act No. 8799, otherwise known as the Securities Regulation covered transaction report deemed suspicious after
Code of 2000; and investigation by the AMLC; and

34. Felonies or offenses of a similar nature that are punishable (b) The court has, in a petition filed for the purpose,
under the penal laws of other countries. ordered the seizure of any monetary instrument or
property, in whole or in part, directly or indirectly
Lesson title: Anti-Money Laundering Act - Part 2 related to said report.

Going back, the Anti-Money Laundering Council (AMLC) How may AMLC inquire bank deposits?
shall be composed of:
The AMLC may inquire into or examine any particular deposit
1. The Governor of the Bangko Sentral ng Pilipinas (BSP) as or investment, including related
Chairman
accounts, with any banking institution or non-bank financial
2. The Commissioner of the Insurance Commission as member institution provided:

3. The Chairman of the Securities and Exchange Commission 1. It is upon order of any competent court
(SEC) as member
2. Based on an ex parte application; and 3. In cases of
When may a freeze order be issued? violations of this Act, when it has been established that there
is probable cause that the deposits or investments, including
1. The AMLC, through the OSG, shall file a verified ex parte related accounts involved, are related to an unlawful activity as
petition before the Court of Appeals. defined in Section 3(i) hereof or a money laundering offense
under Section 4 hereof.
2. The CA should determine if probable cause exists that any
monetary instrument or property is in any way related to an Note: The inquiry conducted by the AMLC is not violative of the
unlawful activity as defined in Section 3(i) hereof. Law on Secrecy of Bank Deposits or R.A. 1405, as amended;
Foreign Currency Deposit Act or R.A. 6426, as amended;
Note: It is solely the CA which has the authority to issue a
General Banking Laws or R.A. 8791; and other similar laws.
freeze order. It also has the exclusive jurisdiction to extend
existing freeze orders previously issued by the AMLC vis-à-vis
accounts and deposits related to money-laundering activities.
Distinctions between a Bank inquiry order and a Freezer 2. Record Keeping - All records of all transactions of covered
order (Sec. 10 vs. Sec. 11) institutions shall be maintained and safely stored for five (5)
years from the date of transactions.
The AMLA does not contemplate ex parte proceedings in
applications for bank inquiry orders is confirmed by the present Note: With respect to closed accounts, the records shall be
implementing rules and regulations of the AMLA, promulgated preserved and safely stored for at least five (5) years from the
upon the passage of R.A. 9194. With respect to freeze orders dates when they were closed.
under Section 10, the implementing rules do expressly provide
that the applications for freeze orders be filed ex parte, but no 3. Reporting of Covered and Suspicious Transactions
similar clearance is granted in the case of inquiry orders under
Section 11. General Rule: Covered persons shall report to the AMLC all
covered transactions and suspicious transactions within five (5)
The sense in allowing ex parte proceedings under Section 10 working days from occurrence thereof.
and in proscribing the same under Section 11. A freeze order
under Section 10 on the one hand is aimed at preserving Exception: The AMLC prescribes a different period not
monetary instruments or property in any way deemed related exceeding fifteen (15) working days.
to unlawful activities as defined in Section 3(i) of the AMLA.
Note: Should a transaction be determined to be both a covered
The owner of such monetary instruments or property would
transaction and a suspicious transaction, the covered
thus be inhibited from utilizing the same for the duration of the
institution shall be required to report the same as a suspicious
freeze order. To make such freeze order anteceded by a judicial
transaction.
proceeding with notice to the account holder would allow for or
lead to the dissipation of such funds even before the order No liability in reporting covered and suspicious
could be issued. Quite apparent from the foregoing is that transactions
absent a specific wording in the AMLA allowing for ex-parte
proceedings in orders authorizing inquiry and examination by When reporting covered or suspicious transactions to the
the AMLC into certain bank deposits or investments, notice to AMLC, covered institutions and their officers and employees
the affected party is required. (Subido vs. CA G.R. No. 216914. shall not be deemed to have violated:
December 6, 2016)
1. The Law on Secrecy of Bank Deposits or Ra 1405, as
Cases where no court order shall be required in order for amended
the AMLC to inquire into deposit, investment or related
accounts: 2. Foreign Currency Deposit Act or RA No. 6426, as amended

1. Kidnapping 3. General Banking Laws or RA 8791; and 4. Other similar laws

2. Hijacking Prohibited communications Officers and employees of

covered persons shall not:
3. Drugs- violation of Dangerous Drugs Act
1. Communicating, directly or indirectly, in any manner or by
4. Arson an means, to any person, the fact that a covered or suspicious
transaction report was made, the contents thereof, or any
5. Murder other information in relation thereto.
Lesson title: Anti-Money Laundering Act - Part 3 Note: If the reporting is done by any person in the regular
performance of his duties in good faith, no administrative,
The obligations of covered persons are as follows:
criminal or civil proceedings shall lie against said person,
1. Customer Identification whether or not such reporting results in any criminal
prosecution under this Act of any other law (Safe harbor
2. Record Keeping provision).

3. Reporting of Covered and Suspicious Transactions 2. Communicating, directly or indirectly, in any manner or by
any means, to any person or entity, the media, the fact that a
1. Customer Identification - Covered institutions shall: covered or suspicious transaction has been reported or is about
to be reported, the contents of the report, or any other
a) Establish and record the true identity of its clients based on information in relation thereto.
official documents
3. Publishing or airing in any manner or form by the mass
b) Maintain a system of verifying the true identity of their media, electronic mail, or other similar devices.
clients
In case of violation of these prohibitions, the concerned officer
c) In case of corporate clients, require a system of verifying and employee of the covered person and media shall be held
their legal existence and organizational structure, as well as criminally liable (Sec. 7, RA 10365 amending Sec. 9, RA 9160).
the authority and identification of all persons purporting to act
on their behalf. Lesson title: Electronic Commerce Act

Note: The BSP may conduct annual testing solely limited to the Introduction
determination of the existence and
R.A. 8792 is known as the Electronic Commerce Act
true identity of the owners of such accounts. which was made effective on the 24th of June 2000 and
has the Declaration of Policy stated thereunder:
Anonymous accounts, accounts under fictitious names, and all
other similar accounts shall be absolutely prohibited. Peso and The State recognizes the vital role of information and
foreign currency non-checking numbered accounts shall be communications technology (ICT) in nation-building; the need
allowed. to create an information-friendly environment which supports
and ensures the availability, diversity and affordability of ICT
products and services; the primary responsibility of the private
sector in contributing investments and services in grounds that it is in the data message purporting to give rise
telecommunications and information technology; the need to to such legal effect, or that it is merely referred to in that
develop, with appropriate training programs and institutional electronic data message.
policy changes, human resources for the information
technology age, a labor force skilled in the use of ICT and a Electronic document
population capable of operating and utilizing electronic
appliances and computers; its obligation to facilitate the This refers to information or the representation of information,
transfer and promotion of technology; to ensure network data, figures, symbols or other modes of written expression,
security, connectivity and neutrality of technology for the described or however represented, by which a right is
national benefit; and the need to marshal, organize and deploy established or an obligation extinguished, or by which a fact
national information infrastructures, comprising in both may be prove and affirmed, which is received, recorded,
telecommunications network and strategic information transmitted, stored, processed, retrieved or produced
services, including their interconnection to the global electronically.
information networks, with the necessary and appropriate
It includes digitally signed documents and any print-out or
legal, financial, diplomatic and technical framework, systems
output, readable by sight or other means, which accurately
and facilities.
reflects the electronic data message or electronic document.
This Act aims to facilitate domestic and international dealings,
Note: For purposes of the Rules on Electronic Evidence, the
transactions, arrangements agreements, contracts and
term "electronic document" may be used interchangeably with
exchanges and storage of information through the utilization of
"electronic data message."
electronic, optical and similar medium, mode, instrumentality
and technology to recognize the authenticity and reliability of General Rule: The elements required under existing laws
electronic documents related to such activities and to promote for the formation of contracts, i.e. offer and acceptance,
the universal use of electronic transaction in the government may be expressed in, demonstrated and proved by
and general public. means of electronic data messages or electronic
documents.
Electronic Commerce Act aims to:
NOTE: No contract shall be denied validity or enforceability on
1. Facilitate domestic and international dealings, transactions,
the sole ground that it is in the form of an electronic data
arrangements agreements, contracts and exchanges and
message or electronic document, or that any or all of the
storage of information through the utilization of electronic,
elements required under existing laws for the formation of
optical and similar medium, mode, instrumentality and
contracts is expressed, demonstrated and proved by means of
technology to recognize the authenticity and reliability of
electronic data messages or electronic documents.
electronic documents related to such activities; and
Exception: When the parties otherwise agree.
2. Promote the universal use of electronic transactions in the
government and general public (Sec. 3, R.A. 8792). Electronic transactions made through networking among
banks, or linkages thereof with other entities or networks, and
The law is a recognition of the State of:
vice versa, shall be deemed consummated upon the actual
1. The vital role of information and communications technology dispensing of cash or the debit of one account and the
(ICT) in nation-building; corresponding credit to another.

2. The need to create an information-friendly environment NOTE: The obligation of one bank, entity, or person similarly
which supports and ensures the availability, diversity and situated to another arising therefrom shall be considered
affordability of ICT products and services; absolute and shall not be subjected to the process of
preference of credits.
3. The primary responsibility of the private sector in
contributing investments and services in telecommunications Choice of security methods
and information technology;
The parties to any electronic transaction shall be free to
4. The need to develop, with appropriate training programs and determine the type of level of electronic data message and
institutional policy changes, human resources for the electronic document security needed, and to select and use or
information technology age, a labor force skilled in the use of implement appropriate technological methods that will suit
ICT and a population capable of operating and utilizing their need.
electronic appliances and computers;
Electronic Commerce in Carriage of Goods
5. Its obligation to facilitate the transfer and promotion of
This applies to any action in connection with, or in pursuance
technology and to ensure network security, connectivity and
of, a contract of carriage of goods, including but not limited to:
neutrality of technology for the national benefit; and
(a) (i) Furnishing the marks, number, quantity or weight of
6. The need to marshal, organize and deploy national
goods; (ii) stating or declaring the
information infrastructures, comprising both
telecommunications network and strategic information nature or value of goods; (iii) issuing a receipt for goods; (iv)
services, including their interconnection to the global confirming that goods have been loaded;
information networks.
(b) (i) Notifying a person of terms and conditions of the
Note: The Act applies to any kind of data message and contract; (ii) giving instructions to a carrier;
electronic document used in the context of commercial and
non-commercial activities. (c) (i) Claiming delivery of goods; (ii) authorizing release of
goods; (iii) giving notice of loss of, or damage to goods;
Electronic data message
(d) Giving any other notice or statement in connection with the
This refers to information generated, sent, received or stored performance of the contract;
by electronic, optical or similar means. Information shall not be
denied legal effect, validity or enforceability solely on the
(e) Undertaking to deliver goods to a named person or a person Obligation of confidentiality
authorized to claim delivery;
Except for the purposes authorized under this Act, any person
(f) Granting, acquiring, renouncing, surrendering, transferring who obtained access to any electronic key, electronic data
or negotiating rights in goods; and message or electronic document, book, register,
correspondence, information, or other material pursuant to any
(g) Acquiring or transferring rights and obligations under the powers conferred under this Act, shall not convey to or share
contract (Sec. 25, R.A. 8792). the same with any other person.
Note: Where one or more data messages are used to effect any
action in subparagraphs (f) and

(g), no paper document used to effect any such action is valid

unless the use of electronic data message or electronic
document has been terminated and replaced by the use of
paper documents. The replacement shall not affect the rights
or obligations of the parties involved.

Electronic Transaction in Government

All departments, bureaus, offices and agencies of the

government, as well as all government-owned and -controlled
corporations, that (1) require or accept the filing of documents,
(2) require that documents be created, or retained and/or
submitted, (3) issue permits, licenses or certificates of
registration or approval, or (4) provide for the method and
manner of payment or settlement of fees and other obligations
to the government, shall:

1. Accept the creation, filing or retention of such documents in

the form of electronic data messages or electronic documents;

2. Issue permits, licenses, or approval in the form of electronic

data messages or electronic documents;

3. Require and/or accept payments, and issue receipts

acknowledging such payments, through systems using
electronic data messages or electronic documents; or

4. Transact the government business and/or perform

governmental functions using electronic data messages or
electronic documents, and for the purpose, are authorized to
adopt and promulgate the appropriate rules, regulations, or
guidelines (Sec. 27, R.A. 8792).

What is a service provider?

This refers to a provider of:

1. On-line services or network access or the operator of

facilities therefore, including entities offering the transmission,
routing, or providing of connections for online communications,
digital or otherwise, between or among points specified by a
user, of electronic documents of the user's choosing; or

2. The necessary technical means by which electronic

documents of an originator may be stored and made accessible
to designated or undesignated third party.

Extent of liability

No person or party shall be subject to any civil or criminal

liability in respect of the electronic data message or electronic
document for which the person or party acting as a service
provider merely provides access if such liability is founded on:

1. The obligations and liabilities of the parties under the

electronic data message or electronic document; or

2. The making, publication, dissemination or distribution of

such material or any statement made in such material,
including possible infringement of any right subsisting in or in
relation to such material.