Philippine anti-money laundering law weakened?

In his recent column in the Philippine Daily Inquirer, retired Philippine Chief Justice Artemio Panganiban expressed his concern about the apparent weakening of the anti-money laundering law of the Philippines and the fact that a recent ruling of the Philippine Supreme Court seemed to have abetted such weakening.

He stated that the Supreme Court (Second Division) in Republic vs. Eugenio (Feb. 14, 2008), speaking through Justice Dante O. Tinga (now retired), held that that Section 11 of the law “allows AMLC to inquire into bank accounts without having to obtain a judicial order in cases where there is probable cause that the deposits or investments are related to kidnapping for ransom, certain violations of the Comprehensive Dangerous Drugs Act of 2002, hijacking and other violations under RA 6235, destructive arson and murder.”

He added that the Court held that for other criminal activities including graft, it held that Section 11 does not allow a bank inquiry order to be issued ex parte even by courts. Although Section 10 explicitly authorizes an ex parte application for and issuance of freeze orders good for 20 days, Section 11 omits any reference to ex parte applications for and grant of bank inquiry orders.

The Court noted that the Revised Implementing Rules and Regulations for the amended Amla, jointly crafted by the Bangko Sentral ng Pilipinas, the Insurance Commission and the Securities & Exchange Commission, likewise do not speak of ex parte applications for bank inquiries.

He added that the Court had ruled that courts must first notify the account holders and conduct a hearing on the application, during which the latter may interpose their objections. It conceded that the inquiry orders may have become harder to obtain due to the mandated notice and hearing, but opined that there would be no adverse effect on the integrity of the bank records, which will remain in the bank’s possession and control. With due respect, I think the Court defanged the bank inquiry tool because the depositor, once alerted, will not only resist the government’s inquiry, but will surely empty the account too.

Read his column below.


With Due Respect
Restore Amla’s fangs
By Artemio V. Panganiban

Philippine Daily Inquirer
First Posted 21:39:00 07/10/2010

MANILA, Philippines—One sure way of catching big-time grafters is by tracing their loot, and then inquiring into and/or freezing their ill-gotten bank deposits. To achieve this goal, Congress approved the Anti-Money Laundering Act (Amla).

Unfortunately, the Supreme Court recently defanged the law partially by requiring that, before issuing bank inquiry orders, courts must first notify the depositors.

This is equivalent to telling a thief to hide his loot lest the police discover and seize it.

A little background. Enacted in 2001 as Republic Act 9160 and amended in 2003 by RA 9194, Amla defines money laundering as “a crime whereby the proceeds of an unlawful activity (as defined in the law) are transacted, thereby making them appear to have originated from legitimate sources.” To laypersons, this simply means that ill-gotten cash is deposited and transacted in the banks.

Money laundering is punished in many countries. A few days ago, a Paris court convicted former Panamanian dictator Manuel Noriega of this crime for using French banks to deposit and deal with “kickbacks from drug traffickers.”

To enable the government to discover and effectively halt money laundering, RA 9160, as amended, provides certain provisional remedies; namely, “freeze orders” and “bank inquiry orders” on bank deposits and investments of suspects.

The Amla came into play after the Supreme Court, in Agan vs. Piatco (May 5, 2003), nullified the concession agreement awarded to the Philippine International Airport Terminal Corp. (Piatco) for the construction of Terminal 3 of the Ninoy Aquino International Airport.

To trace and confiscate alleged bribes given to government officials who entered into the nullified transaction, the Anti-Money Laundering Council (AMLC) utilized the aforesaid bank inquiry tool. Specifically, the lower courts granted AMLC’s ex parte application for authority to examine several bank accounts of four individuals, including a former Cabinet member.

Soon enough, one of the four and the wife of another (whose joint conjugal account was being looked into) discovered the bank inquiries and questioned the lower courts’ order, arguing that courts must give prior notice to the account holder who must be given the opportunity to oppose the application. Specifically, the wife argued that ex parte grants violated her constitutional rights to privacy and due process.

High court defangs Amla. The case reached the Supreme Court (Second Division) in Republic vs Eugenio (Feb. 14, 2008). The high court, speaking through Justice Dante O. Tinga (now retired), conceded that Section 11 of Amla “allows AMLC to inquire into bank accounts without having to obtain a judicial order in cases where there is probable cause that the deposits or investments are related to kidnapping for ransom, certain violations of the Comprehensive Dangerous Drugs Act of 2002, hijacking and other violations under RA 6235, destructive arson and murder.”

But for other criminal activities including graft, it held that Section 11 does not allow a bank inquiry order to be issued ex parte even by courts. Although Section 10 explicitly authorizes an ex parte application for and issuance of freeze orders good for 20 days, Section 11 omits any reference to ex parte applications for and grant of bank inquiry orders.

The Supreme Court noted that the Revised Implementing Rules and Regulations for the amended Amla, jointly crafted by the Bangko Sentral ng Pilipinas, the Insurance Commission and the Securities & Exchange Commission, likewise do not speak of ex parte applications for bank inquiries.

Thus, the Court ruled that courts must first notify the account holders and conduct a hearing on the application, during which the latter may interpose their objections. It conceded that the inquiry orders may have become harder to obtain due to the mandated notice and hearing, but opined that there would be no adverse effect on the integrity of the bank records, which will remain in the bank’s possession and control. With due respect, I think the Court defanged the bank inquiry tool because the depositor, once alerted, will not only resist the government’s inquiry, but will surely empty the account too.

Strengthen Amla further. It further held that Section 11 impels right-to-privacy considerations specifically applicable to bank accounts, which considerations have statutory basis, namely, RA 1405 (the Bank Secrecy Act of 1955). The Court stressed that, notwithstanding that Amla has added exceptions to the Bank Secrecy Act, the absolute confidentiality of bank deposits remains a basic state policy in this country.

Thus, the Court frowned on inquiries into bank deposits, unless Congress enacts a law to change the state policy. The depositors’ right to privacy prompted the Court to grant the wife’s petition to bar inquiries into the joint accounts she held with her husband. So, in order to frustrate bank inquiry orders, one needs only to utilize a joint account. Hmmm.

To succeed in its vaunted anti-corruption campaign, the Aquino administration must move quickly to restore the fangs of Amla, first by petitioning the Supreme Court, via a proper case, to allow ex parte bank inquiries or, at the very least, to reverse its ruling exempting joint conjugal accounts from Amla’s coverage; and second, by asking Congress to amend Amla further by expressly allowing ex parte inquiries in the same way that it authorized freeze orders to be so obtained, and to modify the state bank secrecy policy vis-à-vis ill-gotten wealth.

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Comments are welcome at chiefjusticepanganiban@hotmail.com


See:
http://opinion.inquirer.net/inquireropinion/columns/view/20100710-280326/Restore-Amlas-fangs