Bouncing Checks Law

Batas Pambansa Bilang (BP) 22

It is a law that governs the criminal liability
arising from the issuance of bounced checks.
What the law punishes is the issuance of a
bouncing check and not the purpose for which
the check was issued, nor the terms and
conditions of its issuance.
Section 1 of the Bouncing Checks Law penalizes two
distinct acts:

(1) Making or drawing and issuing any check to apply on

account or for value, knowing at the time of issue that
the drawer does not have sufficient funds in or credit with
the drawee bank.

(2) Having sufficient funds in or credit with the drawee

bank shall fail to keep sufficient funds or to maintain a
credit to cover the full amount of the check if presented
within a period of 90 days from the date appearing thereon,
for which reason it is dishonored by the drawee bank.
In the first paragraph, the drawer knows that he does not have
sufficient funds to cover the check at the time of its issuance,
while in the second paragraph, the drawer has sufficient funds at
the time of issuance but fails to keep sufficient funds or maintain
credit within ninety (90) days from the date appearing on the
check. In both instances, the offense is consummated by the
dishonor of the check for insufficiency of funds or credit.

The check involved in the first offense is worthless at the time of

issuance since the drawer had neither sufficient funds in nor credit
with the drawee bank at the time, while that involved in the second
offense is good when issued as drawer had sufficient funds in or
credit with the drawee bank when issued. Under the first offense,
the 90-day presentment period is not expressly provided, while
such period is an express element of the second offense.
The elements of the offense under Section 1 of B.P. Blg. 22
are:

(1) drawing and issuance of any check to apply on account

or for value;

(2) knowledge by the maker, drawer, or issuer that at the

time of issue he did not have sufficient funds in or credit
with the drawee bank for the payment of such check in full
upon presentment; and

(3) said check is subsequently dishonored by the drawee

bank for insufficiency of funds or credit, or would have been
dishonored for the same reason had not the drawer, without
any valid reason, ordered the bank to stop payment.
Element 1: Issuance of check

The gravamen of the offense punished by B.P.

Blg. 22 is the act of making or issuing a
worthless check or a check that is dishonored
upon its presentation for payment. The mere
act of issuing a worthless check – whether as
a deposit, as a guarantee or even as evidence
of pre-existing debt – is malum prohibitum.
Element 2: Knowledge of insufficiency of funds

It must be shown beyond reasonable doubt that the

accused knew of the insufficiency of funds at the time
the check was issued. BP 22 provides that the accused
must be notified of the dishonor, thus:

SEC. 2. Evidence of knowledge of insufficient funds. – The making,

drawing and issuance of a check payment of which is refused by the
drawee bank because of insufficient funds in or credit with such bank,
when presented within ninety (90) days from the date of the check, shall
be prima facie evidence of knowledge of such insufficiency of funds or
credit, unless such maker or drawer pays the holder thereof the amount
due thereon, or makes arrangements for payment in full by the drawee
of such check within five (5) banking days after receiving notice that
such check has not been paid by the drawee.
The prosecution must establish that the accused was actually
notified that the check was dishonored, and that he or she failed,
within five banking days from receipt of the notice, to pay the
holder of the check the amount due thereon or to make
arrangement for its payment.

The notice of dishonor of a check to the maker must be in writing. A

mere oral notice to the drawer or maker of the dishonor of his
check is not enough. It is true that Section 2 does not state that the
notice of dishonor be in writing. This, however, should be taken in
conjunction with Section 3, which provides “that where there are no
sufficient funds in or credit with such drawee bank, such fact shall
always be explicitly stated in the notice of dishonor or refusal.”

Without a written notice of dishonor of the checks, there is no way

of determining when the 5-day period prescribed in Section 2 would
start and end.
In other words, the prima facie presumption arises when a check is
issued. But the law also provides that the presumption does not arise
when the issuer pays the amount of the check or makes arrangement for
its payment "within five banking days after receiving notice that such
check has not been paid by the drawee."

Verily, BP 22 gives the accused an opportunity to satisfy the amount

indicated in the check and thus avert prosecution. The absence of a
notice of dishonor necessarily deprives an accused an opportunity to
preclude a criminal prosecution. Procedural due process clearly enjoins
that a notice of dishonor be actually sent to and received by the
accused. The accused has a right to demand – and the basic postulates
of fairness require – that the notice of dishonor be actually sent to and
received by the same to afford him/her the opportunity to avert
prosecution under B.P. 22.
Element 3: Dishonor of check

Under Section 3 of BP 22, "the introduction in evidence of

any unpaid and dishonored check, having the drawee’s
refusal to pay stamped or written thereon, or attached
thereto, with the reason therefor as aforesaid, shall
be prima facie evidence of the making or issuance of said
check, and the due presentment to the drawee for
payment and the dishonor thereof, and that the same was
properly dishonored for the reason written, stamped, or
attached by the drawee on such dishonored check."
Anti-Money Laundering Act of 2001
Republic Act (R.A.) No. 9160, as amended by R.A. No. 9194
What is money laundering?

Money laundering is an act or series or combination of acts

whereby proceeds of an unlawful activity, whether in cash,
property or other assets, are converted, concealed or disguised
to make them appear to have originated from legitimate
sources. One way of laundering money is through the financial
system.

Republic Act No. 9160, otherwise known as the Anti-Money

Laundering Act of 2001 (AMLA), as amended, defined money
laundering as a scheme whereby proceeds of an unlawful
activity are transacted or attempted to be transacted, thereby
making them appear to have originated from legitimate sources.
What has the Philippine government done to
curb money laundering?

The government enacted Republic Act (R.A.) No. 9160 (The

Anti-Money Laundering Act of 2001), which took effect on 17
October 2001. Certain provisions of AMLA were amended by
R.A. No. 9194 (An Act Amending R.A. 9160) effective 23 March
2003. It has also issued the Revised Implementing Rules and
Regulations (RIRR) implementing R.A. No. 9160, as amended.
What are considered unlawful activities under the AMLA, as
amended?
 
There are 14 unlawful activities or predicate crimes covered by the AMLA.
– Kidnapping for ransom
– Drug offenses
– Graft and corrupt practices
– Plunder
– Robbery and extortion
– Jueteng and masiao
– Piracy on the high seas
– Qualified theft
– Swindling
– Smuggling
– Electronic Commerce crimes
– Hijacking, destructive arson and murder, including those perpetrated against
non- combatant persons (terrorist acts)
– Securities fraud
– Felonies or offenses of a similar nature punishable under penal laws of other
countries
How is money laundered through the financial system?
 
Placement – involves initial placement or introduction of the illegal
funds into the financial system. Financial institutions are usually used
at this point.

Layering – involves a series of financial transactions during which the

dirty money is passed through a series of procedures, putting layer
upon layer of persons and financial activities into the laundering
process. Ex. wire transfers, use of shell corporations, etc.

Integration – the money is once again made available to the criminal

with the occupational and geographic origin obscured or concealed.
The laundered funds are now integrated back into the legitimate
economy through the purchase of properties, businesses and other
investments.
Why is Money Laundering a problem?
 
Money laundering allows criminals to preserve and enjoy
the proceeds of their crimes, thus providing them with the
incentives and the means to continue their illegal activities.
At the same time, it provides them the opportunity to appear
in public like legitimate entrepreneurs. Organized crime,
through money laundering, is known to have the capacity to
destabilize governments and undermine their financial
systems. It is thus a threat to national security.
What is the Anti-Money Laundering
Council (AMLC)?

The AMLC is the Philippines’ financial intelligence unit,

which is tasked to implement the AMLA. It is composed
of the Governor of the Bangko Sentral ng Pilipinas
(BSP) as Chairman & the Commissioner of the
Insurance Commission (IC) and the Chairman of the
Securities and Exchange Commission (SEC) as
members.
What are the covered institutions?
 
Banks, offshore banking units, quasi-banks, trust entities, non-
stock savings and loan associations, pawnshops, and all other
institutions, including their subsidiaries and affiliates supervised
and/or regulated by the Bangko Sentral ng Pilipinas (BSP)

Insurance companies, holding companies and all other institutions

supervised or regulated by the Insurance Commission (IC)

Securities dealers, brokers, pre-need companies, foreign exchange

corporations, investment houses, trading advisers, as well as other
entities supervised or regulated by the Securities and Exchange
Commission (SEC)
What are the Customer Identification Requirements –
KYC (Know Your Customer Rule)?
 
Covered institutions shall:
 
– Establish and record the true identity of their clients based on official
documents.
 
– In case of individual clients, maintain a system of verifying the true
identity of their clients.
 
– In case of corporate clients, require a system verifying their legal
existence and organizational structure, as well as the authority and
identification of all persons purporting to act in their behalf.
 
– Establish appropriate systems and methods based on internationally
compliant standards and adequate internal controls for verifying and
recording the true and full identify of their customers.
What are covered transactions?
 
Transaction in cash or other equivalent monetary
instruments involving a total amount in excess of
Php 500,000.00 within one (1) business day.
What are suspicious transactions?
Transactions, regardless of the amount involved, where the following circumstances
exist:

• there is no underlying legal or trade obligation, purpose or economic justification;

• the client is not properly identified;

• the amount involved is not commensurate with the business or financial capacity of
the client;

• taking into account all known circumstances, it may be perceived that the client’s
transaction is structured in order to avoid being the subject of reporting
requirements under the Act;

• any circumstance relating to the transaction which is observed to deviate from the
profile of the client and/or the client’s past transactions with the covered institution;

• the transaction is in any way related to an unlawful activity or offense under this Act
that is about to be, is being or has been committed; or

• any transaction that is similar or analogous to the foregoing.

What are the reporting requirements?

Covered institutions shall report to the AMLC all covered

transactions and suspicious transactions within five working days
from occurrence thereof, unless the Supervision Authority (the
Bangko Sentral ng Pilipinas, the Securities and Exchange
Commission, or the Insurance Commission) prescribes a longer
period not exceeding ten (10) working days.

Should a transaction be determined to be both a covered transaction

and a suspicious transaction, it shall be reported as suspicious
transaction.
Truth in Lending Act
Republic Act No. 3765
It is an act requiring the disclosure of finance
charges in connection with the extension of credit.

The declared policy behind the law is to protect the

people from lack of awareness of the true cost of
credit by assuring full disclosure of such cost, with
a view of preventing the uninformed use of credit
to the detriment of the national economy.
Who are covered under the Truth in
Lending Act?

The law covers any creditor, which is defined as any

person engaged in the business of extending credit
(including any person who as a regular business
practice make loans or sells or rents property or
services on a time, credit, or installment basis, either as
principal or as agent) who requires as an incident to the
extension of credit, the payment of a finance charge.
What is meant by “credit”?

It means any loan, mortgage, deed of trust, advance, or discount;

any conditional sales contract; any contract to sell, or sale or
contract of sale of property or services, either for present or future
delivery, under which part or all of the price is payable subsequent
to the making of such sale or contract; any rental-purchase
contract; any contract or arrangement for the hire, bailment, or
leasing of property; any option, demand, lien, pledge, or other
claim against, or for the delivery of, property or money; any
purchase, or other acquisition of, or any credit upon the security
of, any obligation of claim arising out of any of the foregoing; and
any transaction or series of transactions having a similar purpose
or effect.
What is meant by a “finance charge”?

A finance charge includes interest, fees, service

charges, discounts, and such other charges incident to
the extension of credit as may be prescribed by the
Monetary Board of the Bangko Sentral ng Pilipinas
through regulations.
What are the information required to be furnished to the
debtor or borrower?
(1) the cash price or delivered price of the property or service to be acquired;

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

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

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

(5) the total amount to be financed;

(6) the finance charge expressed in terms of pesos and centavos; and

(7) the percentage that the finance bears to the total amount to be financed
expressed as a simple annual rate on the outstanding unpaid balance of the
obligation.
When and how should these information be
furnished to the debtor or borrower?

The information enumerated above must be disclosed

to the debtor or borrower prior to the consummation of
the transaction. The information must be clearly stated
in writing.