1. Overview

“Unauthorized loan approvals” usually involve situations where a loan is granted even though:

The approving officer did not have formal authority under internal policies;
There were policy violations (e.g., incomplete collateral, fake documents, or noncompliance with approval limits); or
There is alleged collusion between bank staff and borrowers or “fixers.”

When losses occur, lending institutions often file estafa cases (sometimes together with falsification or other offenses) against:

The borrower
The loan officer/approving officer
Other employees or intermediaries

This article explains how estafa works under Philippine law, and how to conceptually defend against estafa charges arising from unauthorized loan approvals—from both the substantive (legal elements) and procedural angles.

Important note: This is general information, not a substitute for advice from your own lawyer who can examine your specific documents and facts.

2. Legal Framework: Estafa in the Philippines

2.1. Estafa under the Revised Penal Code

Estafa is generally found in Article 315 of the Revised Penal Code (RPC). In loan-related scenarios, the most commonly invoked modes are:

Estafa with abuse of confidence (Art. 315(1)(b)) – through misappropriation or conversion of money or property received in trust, on commission, for administration, or under an obligation to return.
Estafa by means of deceit (Art. 315(2)(a)) – by using fictitious names, false pretenses, or fraudulent representations in order to obtain money or property.

Charges from unauthorized loan approvals typically rest on the theory that:

The accused deceived the lending institution (e.g., by falsifying or misrepresenting documents or circumstances to get approval); and/or
The accused abused confidence reposed in them (e.g., a bank officer misusing approval authority or allowing fake loans).

2.2. Estafa vs. Other Related Offenses

In unauthorized loan scenarios, estafa may overlap or be filed together with:

Falsification of documents (e.g., falsified income documents, titles, signatures);
Violation of banking laws or internal regulations (administrative or regulatory liability);
Anti-Graft and Corrupt Practices Act (RA 3019) if a government-owned bank or public official is involved;
BP 22 (Bouncing Checks) if checks are used as part of the transaction.

The key defense strategy is often to show that even if administrative or civil liability exists (policy violations, negligence, bad credit judgment), the specific elements of estafa are not present.

3. Elements of Estafa in Unauthorized Loan Approvals

Understanding the elements is crucial because the prosecution must prove every element beyond reasonable doubt. The defense often focuses on showing that one or more are missing.

3.1. Estafa by Deceit (Art. 315(2)(a))

Typical elements relevant in loan cases:

The accused defrauded another by abuse of confidence or deceit.
The deceit was prior to or simultaneous with the transaction (i.e., at the time the loan was granted).
As a result, the offended party suffered damage or prejudice capable of pecuniary estimation.

In unauthorized loan approvals, the prosecution usually alleges:

Falsified payslips, COEs, ITRs, business permits, or titles;
Dummy borrowers or “accommodation borrowers”;
Misrepresentation of creditworthiness, collateral, or capacity to pay;
Concealment of the absence of proper internal authority.

3.2. Estafa with Abuse of Confidence (Art. 315(1)(b))

Elements:

Money, goods, or other personal property is received in trust, or on commission, or for administration, or under obligation to return or deliver.
The accused misappropriated or converted such property or denied receipt of it.
Such misappropriation, conversion, or denial is to the prejudice of another.
There is demand by the offended party.

This mode is more typical where funds or payments are received (e.g., an officer diverts loan proceeds or repayments), but occasionally complainants try to fit unauthorized loan approvals here by arguing that the officer “converted” the bank’s lending capacity or funds in favor of unqualified borrowers.

4. Who Typically Gets Charged?

In an unauthorized loan scheme, the following are commonly implicated:

Loan/credit officers or account officers who processed or recommended the loan;
Approving officers who allegedly exceeded their authority or disregarded policies;
Branch managers or higher officials who signed off despite red flags;
Borrowers who allegedly submitted fake documents or conspired with insiders;
Co-makers or guarantors (if alleged to be dummies or participants in deceit);
External “fixers” or brokers who arranged fraudulent loans.

Defending these persons involves clarifying roles, authority, knowledge, and intent, and showing that not everyone in the process was part of any fraudulent design.

5. Substantive Defenses: Attacking the Elements

5.1. No Deceit at the Time of the Loan

Key points:

Deceit must exist before or at the time the offended party parted with money or property.
If the alleged wrongdoing is merely failure to pay a validly granted loan, that is generally a civil matter, not estafa.
For officers: approval of a loan on the basis of existing documents and procedures, even if later found mistaken, is not automatically deceit.

Possible defense angles:

Documents submitted by the borrower were not falsified, or the accused did not know they were falsified.
The loan application disclosed material facts; no deliberate concealment.
Risky lending decision ≠ deceit, especially if consistent with normal risk parameters at the time.

5.2. No Intent to Defraud / Existence of Good Faith

Good faith can negate criminal intent. Examples:

The officer relied on supporting reports (credit investigation, appraisals, background checks) performed by others.
The accused followed existing policies and practices as he honestly understood them.
Any breach was at most negligence or poor judgment, not deliberate fraud.

For borrowers:

They genuinely believed in their ability to pay and did not fabricate documents.
They complied with the requirements given by the bank and had no insider arrangement.

5.3. Lack of Actual Damage or Prejudice

Estafa requires damage or at least prejudice capable of pecuniary estimation (e.g., exposure to risk of loss).

Possible defense arguments:

The loan remained current (being regularly paid) when the complaint was filed; there was no actual loss.
The bank has adequate security or collateral that still covers the exposure.
Any loss was due to external events (economic downturn, business failure) rather than deceit.

Courts don’t always demand full actual loss, but showing minimal or absent prejudice can cast doubt on criminal intent and may influence both conviction and penalty.

5.4. Internal Policy Breach vs. Crime

Banks and lending institutions have:

Approval matrices and limits;
Credit manuals;
Internal guidelines.

Exceeding one’s credit approval limit or deviating from procedures is often treated administratively. The defense can argue:

Violation of internal policy ≠ estafa, unless it is accompanied by criminal elements like deceit, falsification, or misappropriation.
If the alleged wrongdoing is merely failure to comply with internal documentation or layering, that is an issue of corporate governance, not criminal law.

5.5. No Misappropriation or Conversion

For estafa by abuse of confidence, the defense can argue:

The accused never received money or property in a capacity that fits Article 315(1)(b) (e.g., they didn’t personally receive loan proceeds).
Even if funds passed through them (e.g., cashier, disbursement), the funds were properly disbursed to the borrower as instructed.
No evidence of personal benefit, secret commissions, or diversion.

5.6. Absence of Conspiracy

In loan fraud cases, prosecutors often allege conspiracy among borrowers and bank employees. The defense can highlight:

Conspiracy cannot be presumed; there must be clear, positive evidence of agreement and participation.
Each accused must be judged according to his or her specific acts, not just their position in the chain of approval.
The mere fact that an officer signed a document does not mean he is in on a scheme.

5.7. Prescription (Time-Bar)

Estafa has a prescriptive period depending on the penalty involved. In some cases, especially older loans, the defense may raise prescription if:

A long period has elapsed from the commission or discovery of the offense to the filing of the complaint;
The law on prescription makes the filing time-barred.

This is a technical but potentially decisive defense.

6. Procedural Defenses and Strategies

6.1. At the Complaint / Investigation Stage

Most estafa cases begin with:

A sworn complaint filed with the prosecutor’s office or during an inquest (if there was an arrest).

Possible defense actions:

Counter-affidavit: Carefully deny material allegations, explain your role, and attach documentary evidence (policies, approvals, repayment records, etc.).
Argue lack of probable cause: show that essential elements (deceit, damage, misappropriation) are not supported by evidence.
Highlight that issues are primarily civil/administrative, not criminal.

If the case is weak, the prosecutor may dismiss or limit the charges.

6.2. During Inquest (Warrantless Arrest Situations)

If the accused is arrested without a warrant:

He may undergo inquest or opt for a regular preliminary investigation by posting bail.
Defense at this stage focuses on illegal arrest, lack of inquest basis, and immediate bail to regain liberty while the case proceeds.

6.3. Bail Considerations

Estafa is generally bailable, depending on the amount involved and the corresponding penalty.

Defense objectives:

Secure reasonable bail;
Show that the accused is not a flight risk;
Emphasize that the accused has roots, employment, and family in the community.

6.4. Arraignment, Pre-Trial, and Trial

Key phases where the defense can act:

Arraignment: ensure the accused understands the charge; verify if any defects in the information can be challenged.
Pre-trial: explore stipulations, admissions, or possible settlement; narrow issues.
Trial: the prosecution presents evidence first. After they rest, the defense may file a Demurrer to Evidence (with or without leave of court), arguing that the prosecution’s evidence is insufficient as a matter of law.

If a demurrer is granted, the accused is acquitted.

6.5. Motions, Appeals, and Post-Judgment Remedies

Defense can further avail of:

Motion for reconsideration of the prosecutor’s resolution (if probable cause is found);
Petition for review to higher DOJ authorities;
Appeals or petitions to higher courts if convicted.

7. Evidence Commonly Used in Defense

7.1. For Bank / Lending Officers

Bank policies, manuals, and approval matrices: to show that actions were within permitted discretion, or at least in good faith.
Board resolutions or delegations of authority: proving that the officer had actual or apparent authority.
Loan documents: applications, credit investigation reports, appraisals, approvals, loan agreements, collateral documents, and payment history.
Internal and external audit reports: to show that the loans were regularly monitored or that the alleged irregularities were systemic, not personal schemes.
Communications (emails, memos, chat messages) demonstrating that higher management was aware of or even directed the transaction.
Expert testimony on banking practices or credit risk to contextualize decisions.

7.2. For Borrowers and Co-Makers

Income and business documents: tax returns, sales records, bank statements, contracts, showing actual repayment capacity.
Evidence that documents were genuine (or believed to be genuine): e.g., employer certificates, notarized documents.
Proof of payments: receipts, deposit slips, bank transfers; evidence of voluntary efforts to pay or restructure.
Communications showing no collusion with insiders and that they dealt with the bank at arm’s length.

8. Civil Liability, Restitution, and Settlement

Even if acquitted, an accused may face civil liability. Conversely, even if criminal liability is pursued, complainants often want to secure recovery of unpaid loans.

Key points:

Payment or restitution does not automatically erase criminal liability for estafa, but it can:
- Be considered a mitigating circumstance;
- Encourage prosecutors or complainants to downgrade, settle, or withdraw complaints;
- Affect the court’s view of intent (e.g., consistent attempts to pay may help show lack of original deceit).
Compromise agreements or restructuring may resolve the civil aspect but do not automatically dismiss the criminal case—though in practice, complainants sometimes stop actively pursuing the case once paid.

Defense strategy often includes parallel civil negotiation while still vigorously disputing criminal liability.

9. Corporate vs. Individual Criminal Liability

In unauthorized loan approvals, it is common for a corporate entity (bank, cooperative, lending corporation) to suffer the loss. Points to remember:

Criminal liability is personal; corporations cannot be imprisoned (though some special laws can impose fines).
Individuals are liable only for their own acts of participation and intent, not merely because they hold a position.
A corporate officer is not criminally liable just because he is president or manager; evidence must link him to the alleged deceit or misappropriation.

Defense can emphasize the principle of separate juridical personality: wrongdoing by one employee does not automatically attach to all.

10. Special Situations

10.1. Government-Owned Banks and RA 3019

If the lender is a government bank or GOCC, or if public officials are involved, they may also face:

Anti-Graft charges for giving unwarranted benefits or causing undue injury to the government.

Defense must then simultaneously address:

Elements unique to graft (e.g., the existence of a public officer, unwarranted benefit, manifest partiality or gross negligence, undue injury);
Estafa elements.

10.2. Digital / Online Lending

With online loans:

Approvals may be automated, and identity verification may rely on digital documents.
Defense can argue systemic risk and limitations of verification, distinguishing system design issues from intentional deceit or fraud by specific individuals.

11. Practical Guidance for Someone Accused

While specific actions depend on your lawyer and your case, some general principles:

Do not ignore subpoenas or notices. Failing to file a counter-affidavit can lead to a finding of probable cause based only on the complainant’s version.
Consult a lawyer early. Early involvement can shape the narrative, ensure correct framing of facts, and prevent damaging admissions.
Preserve all documents and communications. Don’t destroy or alter records; that can lead to further liability.
Be careful with statements. Spontaneous or poorly worded explanations (especially during internal investigations) may later be used against you.
Coordinate a consistent theory of the case. Borrower, co-maker, and officer defenses should not contradict each other without explanation.
Consider parallel settlement, but understand its limits on criminal cases and negotiate carefully and in writing.

12. Preventive Measures (For Future Loan Transactions)

For institutions and individuals wishing to avoid future estafa exposure:

Strengthen KYC (Know Your Customer) and verification procedures;
Implement clear approval matrices and document adherence;
Require periodic training on anti-fraud measures and legal consequences;
For officers: avoid “shortcuts” even under pressure to meet targets;
For borrowers: ensure all documents are genuine and accurate, and keep proof of submissions and payments.

13. Final Thoughts

Defending against estafa charges arising from unauthorized loan approvals in the Philippines revolves around a careful demonstration that:

The alleged acts are administrative or civil, not criminal;
The elements of estafa—especially deceit, abuse of confidence, misappropriation, and actual or potential damage—are not fully or clearly established; and
The accused acted in good faith, within or reasonably believing they were within their authority, without intent to defraud.

Because each case turns on specific documents, internal policies, and factual circumstances, anyone facing such charges should work closely with competent counsel to tailor these general principles to their own situation.