Amor, Melanie P.

5BSA
Arabia, Duchess Saudia T.

Title: ₱995-million internal fraud of Metropolitan Bank and Trust Company (Metrobank).

Overview/Narrative

The banking industry is vital to the economy and community, they have the leading role in
planning and implementing financial policy. In the Philippines, several banks have been recently
hit by various scandals. From the unidentified system hacking of the Bangladesh Bank that carried
out an amount of $81M and involved Rizal Commercial Banking Corporation last 2016, to Bank
of the Philippine Islands and Banco de Oro’s system glitch that caused the public to panic, and
now to Metropolitan Bank & Trust Company’s (Metrobank) internal fraud that amounted to at
least ₱1B.

Metropolitan Bank & Trust Company (Metrobank), the country's second largest bank with
assets of ₱1.6 trillion, has been the headline of several news article last July 2017 when their
corporate service unit’s vice president Ma. Victoria Lopez was arrested and detained at the NBI
headquarters for allegedly defrauding the bank of nearly ₱1B. Ms. Lopez has been working in
Metrobank for 30 years and earns a monthly salary of ₱250,000.

In the complaint-affidavit issued by Metrobank, it called on the Department of Justice to

prosecute Ma. Victoria Lopez and two alleged conspirators on two charges of qualified theft
through falsification of commercial documents. Qualified theft is an offense under the Revised
Penal Code, and falsification of commercial documents is a violation of the General Banking Law
of 2000. The two conspirators were named as Hubert Co and Sue Sai. Co was named the payee of
the cashier's checks, while Sai's name was written at the back of the cashier's checks and identified
as the person who facilitated the deposit of the checks and the transfer of funds into a bank account.

Ms. Lopez used the account of one of the bank's biggest clients, Universal Robina Corp.,
and forged documents to enable her to issue four cashier's checks and a promissory note amounting
to a total of ₱995,875.000. The first of four checks was issued to Hubert Co on September 21,
2013 in the amount of ₱20.2 million. Subsequent cashier's checks were also made out to Hubert
Co in the following amounts and dates: ₱10.025 million on January 26, 2015; ₱35.35 million on
June 21, 2017, and ₱30.3 million on June 30, 2017. The biggest amount was for a ₱900-million
promissory note on June 16, 2017, made in favor of Metrobank to cover a loan under a credit line
extended by the bank. Metrobank said it uncovered the fraud on July 13, 2017 when its Corporate
Banking Group "discovered dubious letters" allegedly from the client directing the bank to debit
its account for the two separate checks issued in June 2017 in favor of an individual payee. The
way the letter was presented, the lack of protocol observed by Lopez in vetting the signatures on
the letter, raised red flags. Also, the employees became suspicious because a manager’s check
cannot be issued to an individual payee when the credit line owner is a corporate account. After
double-checking with the bank's client to ensure that such debits were authorized, the client denied
the existence of the letters or of any requests to issue cashier's checks. Furthermore, to cover her
tracks through the years, Lopez would pay the interest on the loan. She was supposed to pay ₱2.250
million interest on the day she was arrested.

Since the day the case was made known to the public, Metrobank suffered nearly ₱15.2B
paper loss. Metrobank’s shares closed at 5.03% lower to ₱86.90, its parent company GT Capital
Holdings fell 2.85% to ₱1,195, and Universal Robina Corp. closed 0.62% down to ₱161.
Nevertheless, Metrobank’s president Fabian Dee assured that Universal Robina Corp. would not
suffer any financial loss and they would continually conduct regular, business-as-usual
transactions with one another. BSP Governor Nestor A. Espenilla assured that this is an isolated
case and would not have an adverse impact with the bank’s operation considering its stable
financial profile. Apart from the investigation that Metrobank and National Bureau of Investigation
conduct, separate probe would also done by the Anti-Money Laundering Council and Banko
Sentral ng Pilipinas. Furthermore, calls for legislative inquiry are being backed by senate leaders
regarding the internal controls placed in banks.

Meanwhile, lawyer of Hubert Co and Sue Sai claims that his clients are innocent and were
also victim of Ma. Victoria Lopez. The two said they were taken advantage of by Lopez and that
they had no knowledge of "her elaborate scheme." They had lent money to Lopez and were
unaware that they were being repaid through someone else's account. As to date, only Lopez was
arrested.

Analysis

Pressure, rationalization and opportunity are the components needed to enable a person
perpetrate fraud. In this case, Ma. Victoria Lopez took advantage of the weaknesses in
Metrobank’s banking system and used as an opportunity. She took advantage of the power that her
position gives her and use it to commit fraud.

The Metrobank fraud highlighted the importance of internal control and proper check and
balances in an entity. The fact that one executive of the bank was able to single-handedly
orchestrate such massive scale of fraud, which lasted from 2013 to 2017, raises questions on the
integrity of Metrobank’s banking system, and on whether or not proper check and balances are in
place. The fraud might be caused by several factors. For instance, it could have been the result of
collusion among employees since loan transactions undergoes a process that would require several
verification and approval of various positions before it goes to the vice president, or it may simply
be caused by dereliction of duties of some of its employees as it appears that the bank officials did
not bother to question the transactions since it belonged to a valued client. If the positions tasked
in approving loans were cautious and made the necessary effort to verify to Universal Robina
Corp. the very first check issued to an individual payee, then they would have been able to detect
the fraud as early as 2013 and not reach an amount of almost ₱1B. The case implies that internal
controls implemented by the bank are not effective since despite all the strict rules and processes
that they have, the fraud was still not prevented nor detected on the early onset. It shows that
exposures exist in the bank’s banking system and internal controls, and drastic improvements must
be made. The biggest loss on this is the integrity of the banking system.
 In addition, the recent scandals that involved various large banks raise questions on the
effectiveness of Banko Sentral ng Pilipinas’ monitoring system. The banking industry is highly
regulated by them and protecting the public interest is their paramount concern. Hence, similar to
Metrobank, the Banko Sentral ng Pilipinas should also assess the effectiveness of their current
monitoring system and make some improvements to prevent cases like this, maintain the public
trust in their industry and ensure good governance.

As for the two conspirators, Hubert Co and Sue Sai, their argument that they were not
aware that the checks issued to them by Ma. Victoria Lopez came from Universal Robina Corp.
seem implausible. The mere fact that the signature in the checks does not belong to Ms. Lopez is
enough for them to question her.

Reflection:

The recent bank scandals showed that white collar crimes, when committed by a high
ranking official, has greater adverse effect on the entity and its stakeholder. The banking industry’s
image is greatly affected that the public ask themselves if they could really trust them in handling
and safeguarding their monetary assets. The internal fraud that Metrobank experienced
emphasized the need of proper monitoring and continuous improvement of internal control and
banking systems here in our country. It showed us that job performance and tenure in the office
cannot solely be the basis in assessing one’s integrity. As in the case of Ms. Lopez, she has been a
trusted employee of Metrobank for almost 3 decades and yet she stole money from them when the
saw an opportunity because she was not satisfied with her 6-digit salary. This issue shows us that
the world is full of temptations and it is very important that we uphold to the values that we believe
in, to our Benedictine hallmarks.

Sources:

 Parparan, (2017). Metrobank files criminal complaint vs employee, two others in ₱995-
million fraud. Retrieved from http://cnnphilippines.com/news/2017/08/02/metrobank-
maria-victoria-lopez-fraud-doj-nbi.html
 Rappler, (2017). Senate to discuss fraud case with Metrobank, AMLC, BSP. Retrieved
from https://www.rappler.com/business/176681-senate-discuss-fraud-case-metrobank-
amlc-bsp
 ABS-CBN News, (2017). Universal Robina says unaffected by Metrobank fraud.
Retrieved from http://news.abs-cbn.com/business/07/21/17/universal-robina-says-
unaffected-by-metrobank-fraud
 Fernandez, (2017). Senate to probe series of bank woes after Metrobank fraud. Retrieved
from http://www.businessmirror.com.ph/senate-to-probe-series-of-bank-woes-after-
metrobank-fraud/
 Lucas, (2017). P900-M internal fraud rocks Metrobank. Retrieved from
http://business.inquirer.net/233589/p900-m-internal-fraud-rocks-metrobank/amp
 Lucas, (2017). AMLC set to probe Metrobank fraud. Retrieved from
http://business.inquirer.net/233763/amlc-set-probe-metrobank-fraud/amp