P900-M internal fraud rocks Metrobank this is the headline that shook the

banking world and left questions on the minds of the public. What really
happen? Who was responsible for the fraud committed? Why did it happen? How
did it happen? How was it found out? Is Metrobank still safe for banking? These
were just some of the questions that the public were curious of last July 21,
2017 at 7:08 a.m. What really happen at one of the largest banks in the
Philippine- METROBANK?

DETAILS OF THE FACTS

Metrobank, owned and controlled by George Ty, may have lost as much as P2.5
billion after a rogue officer allegedly funneled disbursed loans into fictitious
accounts created in the name of a legitimate client.

EXECUTIVE GONE ROGUE

A trusted employee of the bank for 30 years, earning a monthly salary of
P250,000, Lopez, was arrested on Monday(July 17) while trying to move the
stolen money to an unspecified personal account
NBI spokesperson, Ferdinand Lavin

The suspected rogue official has been identified as Maria Victoria Lopez, a
vice president at the corporate services unit of Metrobanks Makati City head
office. She was arrested on July 17 by the National Bureau of Investigation in a
sting operation on the banks premises.

This was very shocking news to the community of a small rural town in
Angat Town where Maria Victoria Lopez owns at least two large propertiesa
house and a large events space that the bank executive bought and developed.
They testified that She and her family are known to our community for being
very kind--neighbor, Edna Fernandez. Barangay official Antonio Cruz Jr.
further insisted that She likes to throw parties especially just before Christmas,
where she gives prizes to people who sing. When the parties end she gives out
bags of various gifts to senior citizens and Shes a good person.

I was surprised,
Lopez said when NBI arrested her in her office

Lopez, who is a year short of retirement from the bank, lives in a posh
village in Quezon City. She owns nine cars, the cheapest of which, according
to NBI officials, is a Range Rover. The officials did not say how many children
Lopez has, but some of them, according to them, are in school in the United
States.

HOW FRAUD WAS CARRIED OUT

Another banker who was familiar with the details of the scam : The suspect
engineered false loan disbursements from Metrobank to the fake Universal
Robina account in tranches of P30 million. She or they did this over a long
period for P30 million disbursements to reach a total of P2.5 billion,
How far back? Thats what theyre trying to figure out right now.

NBI Agent Norman Aguirre who is handling the case said: the bank initially
discovered the irregularity last June 30 when a letter request was made to have
a P2.25-million managers check issued to a certain payee
That in itself is a red flag because the bank cannot issue a managers check
to an individual payee, which is supposed to be for corporate clients only, The
investigator said the bank also discovered Lopez also falsified transactions to
make it appear the corporate client made P900 million and P850 million loans.

According to Inquirers source: the scam might have been ongoing since 2012
using bank accounts illegally opened by the perpetrator or perpetratorsand
controlled by themin the name of an unwitting corporate client, Universal
Robina Corp. (URC). The sources told the Inquirer that the fraudulent loan
releases were made in small tranches, often averaging around P30 million
each time to avoid suspicion since the Gokongwei-owned URC had a P25-
billion credit line from Metrobank.

P900-M theft at Metrobank isolated case

The Bankers Association of the Philippines (BAP) is confident that the

Metrobank, the second largest banking institution in the country with assets
of more than P1.9 trillion will quickly enforce the necessary remedial measures
and policies required to prevent such incidents from happening again.
They further stated that they believe that Metropolitan Bank and Trust
Company (Metrobank) will quickly resolve the recently reported theft committed
by a senior official. This appears to be an isolated incident and we are
confident the facts will arise from the ongoing investigations being carried out
by both Metrobank and the Bangko Sentral ng Pilipinas (BSP).

It was even stated in their audited financial statements (Note 4) on how they
manage credit risk:
The Parent Company manages its credit risk at various levels (i.e., strategic
level, portfolio level down to individual obligor or transaction) by adopting a
credit risk management environment that has the following components:
Formulating credit policies in consultation with business units, covering
collateral requirements, credit/financial assessment, risk grading and
reporting and compliance with regulatory requirements;
Establishment of authorization limits for the approval and renewal of
credit facilities;
Limiting concentrations of exposure to counterparties and industries (for
loans), and by issuer (for investment securities);
Utilizing the Internal Credit Risk Rating System (ICRRS) in order to
categorize exposures according to the risk profile. The risk grading system is
used for determining impairment provisions against specific credit exposures.
The current risk grading framework consists of ten grades reflecting varying
degrees of risk of default and the availability of collateral or other credit risk
mitigation; and
Monitoring compliance with approved exposure limits.

THE EXTERNAL AUDITORS

Leadership qualities must be backed by high ethical and moral standards,

humility, fairness, and a willingness to learn and to change.
~Washington Sycip

Established in 1946 as W. SyCip & Co., the Firm changed its name twice:
first in 1947, to SyCip Velayo Jose & Co., and again in 1953, to SyCip Gorres
Velayo & Co. (SGV & Co.). SGV & Co. is the Philippines largest
multidisciplinary professional services firm with eight offices across the
country. We provide integrated solutions that draw on diverse and deep
competencies in assurance, tax, transaction and advisory services. We uphold
the highest standards of quality. In fact, the assurance service line of SGV
& Co. has been ISO 9001-certified since 1996. SGV & Co.s track record has
remained unmatched in the region. We have accumulated invaluable resources
in our 70 years of operations highly qualified and competent staff, state-
of-the-art facilities and an enviable international network. We envision
not only to give value-added services to our clients but, more importantly, to
become a partner in their and the regions development. We develop
outstanding leaders who team to deliver on our promises to all of our
stakeholders. In so doing, we play a critical role in building a better working
world for our people, for our clients and for our communities. SGV & CO

Based on the audited financial statements of Metrobank, their external

auditor is from one of the biggest auditing firm in the Philippines- SGV & CO.
signed by the names of Janeth Nuez- Javier and Aris Malantic for the year
2014-2016 and 2010-2013 respectively. Since the extent of when the fraud
started is not yet known, I decided to put these two. These two individuals had
presented on their auditors report that the financial statements of Metrobank
was presented fairly from the year 2010-2016. On their report, they stressed
out that it was based on the Philippine Auditing Standards and their fulfillment
of the responsibilities described in the Auditors Responsibilities for the Audit
of the Consolidated and Parent Company Financial Statements. Also, they
enlisted some of their key audit matters in their report. The full extents of their
audits were reported in the Audited Financial Statements of Metrobank.
STEP ASSESSMENT
o Are the external auditors liable?
While auditors actively support fraud-detection research, they do not
guarantee in their audited statements that they will uncover it. It is even
explicitly stated in the auditors report that auditors can only provide
reasonable assurance of the financial statements and that management
is responsible for its fair presentation. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in
accordance with PSAs will always detect a material misstatement when it
exists.
o What are the responsibilities of an external auditor?
The auditors report includes its responsibilities and limitations in
auditing the financial statements. This is to obtain reasonable
assurance about whether the consolidated and parent company financial
statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditors report that includes our
opinion.
Morever is also states the managements big responsibilities on its
financial statements. Management is responsible for the preparation
and fair presentation of the consolidated financial statements in
accordance with the Philippine GAAP for banks and the parent company
financial statements in accordance with PFRS, and for such internal
control as management determines is necessary to enable the
preparation of consolidated and parent company financial statements
that are free from material misstatement, whether due to fraud or error.

o How could the fraud be prevented?

No system is perfect but banks are expected to be resilient to these things.
We will have to look into the adequacy of those controls if in fact (there is
a) significant crime.
What is a really clear lesson to draw here is that deposit secrecy laws
should go if we want better surveillance,
~BSP Governor Nestor Espenilla Jr.

This fraudulent act may have been prevented by implementing strictly

the internal control of the company and developing internal control that
have a high chance of detecting fraud, not just for small-time employees
but also for executives. Though BAP said the incident was quite
unfortunate but remarked that banks have established internal controls
and systems and instituted separation of functions to help prevent
crimes. The NBI and BAP believe that this is just an isolated case and
Metrobank can handle the situation. The Metrobank stated that
depositors will not be affected in this incident. Also, URC released a
statement that they will keep its business deals with Metrobank despite
the case, after bank president Fabian S. Dee assured that the
conglomerates accounts would not be affected.
SOURCES
Philippine Daily Inquirer
http://business.inquirer.net/233589/p900-m-internal-
fraud-rocks-metrobank
http://business.inquirer.net/233691/exec-metrobank-
fraud-charged
http://newsinfo.inquirer.net/915898/nbi-files-raps-vs-
metrobank-exec-for-internal-bank-fraud
http://business.inquirer.net/233605/bap-issues-statement-
metrobank-incident
http://business.inquirer.net/233763/amlc-set-probe-
metrobank-fraud
Interaksyon.com
http://www.interaksyon.com/quiet-village-where-
metrobank-exec-in-p900-m-fraud-hails-from-is-shocked-by-
scandal/
Metrobank Financial Reports (2010-2016)
https://www.metrobank.com.ph/annualreports.asp
Business World Online
http://www.bworldonline.com/content.php?section=TopStor
y&title=bsp-looking-into-metrobank-internal-
fraud&id=148628
Manila Bulletin
http://news.mb.com.ph/2017/07/22/metrobank-no-client-
lost-money-in-internal-fraud/