The Philippine Deposit Insurance Corporation (PDIC) reported that while its operations had been hampered by the big volume of Legacy bank accounts, missing bank records and several suspected fraud cases, it has already approved payment of claims to Legacy Bank depositors amounting to almost P2.26 billion. Of this amount, PDIC has paid almost P1.43 billion to Legacy Bank depositors while the balance worth P834.3 million is currently being scheduled for release.

In a statement, PDIC President Jose C. Nograles said that seasoned PDIC examiners and external auditors painstakingly combed through about 2,000 boxes of documents to examine and process claims. Still, a total amount of P2.83 billion representing 21,819 claims were found to be document deficient. Depositors have been notified of documents they need to submit to substantiate their claims.

PDIC reported that a total of 39,020 claims amounting to P4.76 billion are in process. Once these are validated, claimants will be sent their check payments or letters notifying them of the status of their claims.

Meanwhile, the state deposit insurer has denied payment for 4,164 claims amounting to P204.07 million. Of the denied claims, 709 claims for P78.68 million represented questionable or fictitious accounts. The remainder of 3,429 claims worth P125.4 million were claims for non-existent accounts in the Legacy banks.

A total of 19,070 claims amounting to P2.55 billion were put on hold pending further verification.

Nograles expressed confidence that all valid claims will be paid soon. PDIC has completed the examination of accounts end of August 2009 which has resulted in the validation of 109,791 out of the total 134,653 accounts. The rest were accounts with incomplete documents or referred to Legal. He said that claims processing was in full swing. Claims processing is the second phase of the validation where individual claims filed together with required documents are verified prior to payout to ascertain that the right depositor is paid. In cases when the documents submitted are insufficient to validate a claim, PDIC is authorized under the law to require additional documents from the depositors to support the claim.

Nograles said that PDIC had been meticulous in the first and second phases of the validation in accordance with the standard procedures in claims processing. This is in response to the post-audit review that the Commission on Audit (COA) undertakes after payments are disbursed and sent to depositors through registered mail. PDIC has also been cautioned by legislators to be extra diligent in paying deposit insurance claims amidst earlier reports that these Legacy-affiliated banks have engaged in fraudulent transactions. PDIC has engaged the services of forensic experts from private accounting firm Punongbayan & Araullo to investigate the fraudulent schemes initially unearthed by PDIC in the course of its investigation. These schemes were utilized by Legacy banks to defraud the public and the Deposit Insurance Fund (DIF). The DIF is the funding source for payouts of valid deposit insurance claims. Initial reports indicate that fraud may have been heavily committed on the asset side of the banks’ transactions involving siphoning of funds.

Punongbayan & Araullo is affiliated with Grant Thornton, International PA. Forensic fraud audit is an investigation geared towards uncovering transactions intentionally hidden in a maze of paper trail and deleted computer files. It aims to identify and document possible fraud schemes, irregularities and anomalies that may have been perpetrated against the banks and which may be used as basis for the filing of criminal, civil and/or administrative cases. It is also expected to establish a case management system to preserve evidence gathered during the investigation. Forensic fraud investigation is being used by other countries such as the United States. The Federal Bureau of Investigation’s Racketeering Records Analysis Unit uses forensic fraud investigation in cases covered by the Racketeering Influence and Corrupt Organization (RICO Law).