KPMG Manabat Sanagustin, the independent audit firm engaged by the Philippine Deposit Insurance Corporation (PDIC) to help speed up the pre-settlement examination of deposit accounts in the 12 Legacy-affiliated banks placed under PDIC receivership in December 2008, confirmed that bulk of the P6.05 billion doubtful accounts in said banks had incomplete documentation due to missing bank records and discrepancies in recording done by accountable officers.

"Documentation of bank transactions is the responsibility of the bank officers. It is incumbent upon bank officers to comply with the regulations on deposit-taking", PDIC President Jose C. Nograles said.

In its report to PDIC, KPMG Manabat Sanagustin said that some bank records required in the validation of deposit accounts such as teller’s blotters, proofsheets, bank copies of certificates of time deposit, among others, were found to be missing as of takeover dates. These documents are needed to show evidence of funds inflow to the banks.

"Under the PDIC Charter, PDIC is mandated not only to determine the legitimate depositors on record but also to validate that the deposit account had actual funds inflow," Nograles added.

PDIC had earlier reported that of the P6.05 billion classified as doubtful, the examination of P5.42 billion worth of deposit accounts is being hampered by incomplete documentation. Nograles said that the verification process for these accounts have significantly slowed down because of incomplete bank records.

He clarified that bank records turned over by accountable bank officers to PDIC when these banks were placed under receivership in December 2008 were insufficient to enable PDIC to determine the validity of the bulk of the deposits. The bank records turned over to PDIC were inventoried as part of standard receivership procedures. The PDIC had issued demand letters to Legacy bank officers to turn over documents still in their possession. The PDIC President also appealed to former officers and employees of the Legacy banks to turn over bank documents still in their possession to either the PDIC or the Senate committee on trade and commerce which is conducting an investigation on the failure of the banks.

Nograles said that under Section 21(f) of the PDIC Charter, PDIC can file charges against the accountable officers and employees of the Legacy Banks for non-compliance with bank regulations and their refusal to turn over bank records. In the past, PDIC has successfully prosecuted officers for violating this provision.

The PDIC President explained that Legacy depositors whose accounts cannot be validated due to incomplete documentation may run after agents or solicitors whom they entrusted their money. "The depositors and the PDIC are both victims here. PDIC will be remiss in its mandate of paying only valid deposit insurance claims if it pays without the bases set by law", Nograles added.