CROSS EXAMINATION

ON POWERS OF THE BSP

1. Counsel, are you aware of the extensive regulatory power of

the BSP?

2. Are you aware that it has been expanded in the passing of RA

11211 or the New Central Bank Act?

3. Are you aware that it includes regulation of money service

businesses, credit granting businesses, and payment system

operators?

4. Counsel, are you aware that online lending encompasses not

just lending companies but also banking and non-banking

financial institution with quasi-banking functions?

5. Are you aware of the sandbox regulation of BSP?

6. Are you aware that BSP has been actively promoting different

types of Fintech such as VCE’s and other electronic money

operations?

7. Your honors, we on the affirmative have already proven that

the BSP has jurisdiction. However, we would like to emphasize

that in order for the regulation to be fruitful, it should be

harmonized with the regulatory powers of other agencies.

ON SEC EXCLUSIVE REGULATION and BSP REGULATION

1. I’m sure counsel you are familiar of the Lending Company

Regulation Act, RA 9474, correct?

2. And Section 9 thereof enumerates the authority of SEC which

pertains only to issuance of regulations pertaining to

capitalization and methods of marketing and distribution

among other things, correct?

3. And you think counsel this is the only aspect in online lending

that needs to be regulated?

a. If yes- So you are saying that after registration, flow of fund

like for example tax obligations shall no longer be

regulated?

i. That the provisions of AMLA shall then be ignored?

Because you are positing that it is only SEC that shall

regulate.

ii. Clearly, your understanding on the multi-faceted

aspects of online lending is very inadequate counsel.

b. If No- proceed to next question.

4. Now counsel, would you agree with me that online payments

and settlements are aspects of online lending?

5. Then you know for a fact that this is one of the transactions that

are now regulated by the BSP in the enactment of the New

Payment Systems Act or RA 11127.

6. Counsel, have you come across House Bill 9054 or the Act

providing for the Financial Protection of Financial Consumers

 which has been recently passed in the House?

7. How about the New Central Bank Act?

8. That these measures mandate the BSP together with SEC,

Insurance Commission and the Cooperative Development

Agency to craft appropriate mechanisms to ensure protection

of financial consumers which includes borrowers of online

lending companies.

9. Your Honor, both BSP and SEC has the same mandate of

providing financial stability in their own jurisdiction. It is our

concession that both of them should work together in

harmonizing a cross-government co-cooperation policies and

guidelines.
ON DIFFERENCE BETWEEN LENDING FROM ONLINE LENDING

MECHANISM

1. Counsel, is it your contention that the conduct of business of a

lending company is the same as that of an online lending,

correct?

2. Have you availed of lending services from any lending

company? If No – proceed to question number 4

3. Then have you also tried using any of the various online lending

apps?

4. Can you say that in the traditional lending, technological

platforms were used? Of course not. The internet was not used

as a medium in traditional lending.

5. Then there is a clear difference because in online lending,

technology is now employed as a means of sending and

receiving money.

6. How about on the speed of processing loans or credit? Would

you agree with me that there is a difference between the

traditional lending from online lending?

7. You think this aspect of sending and receiving money should

be regulated?

8. You think there should be monitoring systems in their website or

the flow of cash of these online lending companies?

9. Therefore, Counsel, you are conceding to the fact that online

lending is unique of its own kind and needs a set of regulation

suited to the needs of advancing technology.

 ON BORROWER PROTECTION and LENDER PROTECTION

1. Counsel, would you be able to say that currently there are

sufficient standards for fintech regulation?

2. If yes- so you are saying that we should leave the regulation as

it is because it is already sufficient? Clearly, that is a fallacy

counsel.

3. If no- So you would agree with me that there is no single

comprehensive law that regulates online lending, correct?

4. Having conceded to that fact, would you be able to say that

the borrowers from these online financial transactions are

adequately protected? Of course not.

5. Are there sufficient standards to ensure compliance to the

regulations set by the law?

6. Then therefore, are you saying that so long as lending

companies are in compliance with the regulations, protection is

already in place?

7. Is it not in not that in online lending, there is a quick approval

and quick release of loans?

8. Do you think it was due to new system applications?

9. Of course not.

10. Is it not, that the reason for fast approval was because of

poor ID checking?

11. Let me know if any of these crimes ring a bell: Identity

theft, Fraud and Dishonesty, Conducting Breaches?

12. All of these crimes have one thing in common. They can
 now be easily perpetrated by anyone.

13. Your honor, speed makes online lending convenient, but it

also makes it particularly subject to fraud and theft.

ON FINANCIAL CRIMES

1. Counsel, do you know the process of how online lending

works?

2. Then you are aware of the speed at which online lenders offer

loans and access to funds?

3. Would you agree with me that there is a poor ID checking

practices in online lending?

4. Undoubtedly, these contributing practices are widely

associated with fraud. Right?

5. Counsel, do you know what is money laundering? identity

theft? Tax evasion? Market abuse?

6. These many crimes can now be committed easily through the

advent of technology.

7. Your honors, with online lending and any other fintech, we are

operating in a gray area. We need to create policies in order

to mitigate risks in order to protect consumer’s welfare and

secure financial system.

8. Counsel, have you read the IRR of AMLC and BSP Circular No.

944?
9. Then you clearly know that BSP has a supervisory power and a

clear mandate to create an environment of financial stability

and free from financial crimes.

10. Clearly, your honors, BSP holds jurisdiction in regulating

online lending in a cross-government co-cooperation practice

to harmonize and set national rules and guidelines to protect

the general populace of the looming threat of financial crimes.

FINANCIAL CRIMES PART 2

1. Counsel, would you say that internet make things easier?

2. Then you would agree that the reason why people take up

online loans is because of its speedy approval, right?

3. Counsel, would you know what would happen if a competition

exist between online lenders providing lower and lower interest

rates?

4. At first, more and more people will apply for loans. More and

more money will be released. Resulting to a need of more

money to be printed.

5. Would you think that this will result to a better economy?

6. Of course not! Inflation rate, high priced commodities, low

money value: in short monetary instability.

7. Is there any other agency or instrumentality of the government

who can regulate interest rate or cash flow aside from the BSP?

8. There is none, counsel!

9. Your honor, only in BSP lays the responsibility to monitor interest

 rates and cash flow to ensure economic and financial stability

of our country. A short evaluation of the cause and effect

would clearly show that without BSP to regulate online lending,

a small change in the usual disbursement or release of money

will disrupt the country’s cash flow and would lead us all to ruin.

10. Do you know what Identity theft is?

11. Are you aware that this kind of crime can easily be done

in the guise of online lending?

12. Your honor, online lending is everywhere. It can be

availed with just one click. However, we are blind of the

danger it possess. The details we provide in the application are

enough for our whole identity to be stolen. We might end up

paying loans we never ask in the first place.

13. Counsel, do you know the definition of money

laundering?

14. Well, to enlighten you, it is the process of concealing the

origins of money obtained illegally.

15. Are you aware that due to the advent of technology,

online lending could be and will be a mode of transferring

money in money laundering can be used in the guise of

lender/borrower?

16. Now, let’s talk about financing terrorism.

17. Does money transfer occur in online lending?

18. Is there any existing regulation in place limiting the loan

that an individual can have?

19. Of course not. Your honors, these are just some of the

scenarios in how crimes can be perpetrated through online

lending. The BSP having supervisory power with AMLA and in

concurrence with other government agencies must create

rules and regulations before it’s too late. Let us not forget that

these threats are already upon us.