Liability of Bank/Financial Institution Officers Who Knowingly Extend Loans to Taxpayers Keeping Multiple Books of Accounts

May 9, 2011 DOF OPINION The Monetary Board Bangko Sentral ng Pilipinas A. Mabini corner P. Ocampo Street Metro Manila, Philippines Attention: Hon. Amando M. Tetangco, Jr. Chairman Dear Mr. Tetangco : We write in connection with Department of Justice ("DOJ") Opinion No. 41, Series of 2010, issued in response to the query of the Department of Finance ("DOF"), on whether responsible officers of banks and other lending or financial institutions who knowingly extend loans to taxpayers that are keeping multiple books of accounts may also be held liable as principals for a violation of Section 257 (B) (5) of the National Internal Revenue Code. The legal provision in question reads, to wit: "Section 257. Penal liability for making false entries, record or reports or using falsified or fake accountable forms . xxx xxx xxx (B) Any person who: xxx xxx xxx (5) Keeps two (2) or more sets of such records or books of accounts; xxx xxx xxx shall, upon conviction for each act or omission, be punished by a fine of not less than Fifty Thousand Pesos (P50,000) but not more than One Hundred Thousand (P100,000) and suffer imprisonment of not less than two (2) years but not more than six (6) years." While the DOJ has declined to render the requested opinion, it has nevertheless commented and observed, for the DOF's information and guidance, that responsible officers of banks and lending or financial institutions who grant loans to persons maintaining multiple records or books of accounts in violation of Section 257 of the NIRC, are equally guilty of the crime committed by the loan grantee for having aided or abetted the commission of the crime penalized thereunder. ISHaCD It has come to our attention that several banks and lending or financial institutions, in seeming disregard of Section 257 of the NIRC, have been extending loans to and/or accommodating taxpayers who keep multiple books of accounts, which practice has the effect of undermining our earnest efforts in improving the country's revenue collection. In this connection, we request that the Monetary Board promptly issue a Resolution to be circulated to all the banks and lending or financial institutions warning them against extending credit accommodations to taxpayers maintaining multiple books of accounts and directing them to rely on audited financial statements stamped received by the Bureau of Internal Revenue in evaluating loan applications. We look forward to your favorable action on this matter. Thank you. Sincerely, (SGD.) CESAR V. PURISIMA Secretary