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Protecting what remains of bank secrecy

(Article published in the Apr 2, 2008 issue of Manila Standard Today)  

She was not, while as student Agnes Torres taking tax under me at the Ateneo Law School, prone to exaggeration nor, like one or two of her contemporaries, quick to tears.  It was thus a surprise to read Solicitor General Agnes Devanadera overstate her case against the Supreme Court’s ruling in the case of Republic of the Philippines, represented by the Anti-Money Laundering Council v. Hon. Antonio M. Eugenio, G.R. No. 174629 promulgated 14 February 2008.

 Devanadera warns of our country being placed by Financial Action Task Force (FATF) once again its list of non-cooperative countries and territories (which list presently has no entries), or, even if not, nevertheless subjected to severe counter-measures by member countries, such as the imposition of limits on Filipino migration, subjection to inconvenient requirements in the processing of Filipino cross-border financial transactions, and even to suspension of membership in the elite Egmont Group.

 All because the Supreme Court ruled in Republic v. Eugenio that the Anti-Money Laundering Council (AMLC), in the exercise of its authority under Section 11 of R.A. No. 9160 as amended by R.A. 9194 (AMLA), may not, without the depositors knowledge, ask for court authority to examine bank accounts?  The lady doth protest too much, methinks.

 In fairness, the Government’s position on bank inquiry has sound logical underpinnings.  As explained by the government, “Bank inquiry, being an asset discovery tool, must be ex parte as it is actually the preparatory step to freeze and eventual civil forfeiture of the criminal funds which are basically ex parte at the initial stage.”  Logic certainly supports the view of the AMLC on the function of an inquiry into bank accounts in the fight against money laundering.


 Unfortunately, as Oliver Wendell Holmes, Jr. says, “The life of the law has not been logic; it has been experience.” And it was the country’s experience with the secrecy of bank accounts that swayed the mind of the court--experience of strict construction against any and all attempts to pry into a depositor’s private affairs by looking into his bank transactions. 

 “The Court’s construction of Secion 11 of the AMLA,” the Supreme Court admits, “is undoubtedly influenced by right to privacy considerations.  If sustained, petitioner’s arguments that a bank account may be inspected by the government following an ex parte proceeding about which the depositor would know nothing about would have significant implication on the right to privacy, a right innately cherished by all notwithstanding the legally recognized exceptions thereto.  The notion that the government could be so empowered is cause for concern of an individual who values the right to privacy which, after all, embodies even the right to be ‘let alone,’ the most comprehensive of rights and the right most valued by civilized people.”

 With respect to bank accounts, the right to privacy is protected, if not by the Constitution itself, by R.A. No. 1405, known as the Bank Secrecy Law.  Like any other law, R.A. No. 1405 admits of exceptions and, in fact, even the AMLA provides additional exceptions of its own.

 But, the Court quickly says, “just because the AMLA establishes additional exceptions…does not mean that the…law has dispensed with the general principle…that ‘all deposits of whatever nature with banks or banking institutions…are considered as of an absolutely confidential nature’”.  Hence, “there is disfavor towards construing these exceptions in such a manner that would authorize unlimited discretion on the part of the government or any party seeking to enforce those exceptions…Such stance would persist unless Congress passes a law reversing the general state policy of preserving the absolutely confidential nature of Philippine bank accounts.”

 Understandably, the Solicitor General is not too receptive of the implied suggestion to go to Congress for relief and has thus filed a motion for reconsideration. With the case still, sub judice, I must presently refrain from commenting on the pending issues; however, what may be done in the meantime by the authorities, in order, to avoid the dire consequences that the Solicitor General is warning us about, is permissible area of fair comment.  Here are some suggestions.

 Republic v. Eugenio points out that, unlike the power to seek court authority to freeze bank accounts which under Section 10 of the AMLA can be secured ex parte from the Court of Appeals, the AMLA’s power under Section 11 to seek court authority for bank inquiry is not qualified by the phrase “ex parte.”  Therefore, based on rules of statutory construction, it was held by the Court that the legislative intent was to require notice to affected parties in cases involving bank inquiry but not in cases of account freezes. 

 But since nothing in the AMLA requires inquiry before freezing, and since furthermore, the authority to ex parte seek a freeze order will be rendered useless, if conditioned on the prior conduct of bank inquiry, which can be authorized only with notice to parties, then, what the AMLC could do, with the justification from the same rules of statutory construction, is to seek a freeze of the suspect deposits and ask, as an ancillary measure, for the preservation of all the bank records pertaining to the account to be frozen. 

 The freeze order is good for at least 20 days, sufficient time for the AMLC to go to court and ask, with notice to parties, for bank inquiry.  With the records frozen together with the account contents, notifying the parties of the AMLA’s intent to look into them would not in any major way impair the AMLC’s ability to determine further the account’s involvement in money laundering.

 I further suggest that the Bangko Sentral ng Pilipinas (BSP) issue a circular to all banks and financial institutions under its supervision to automatically preserve the status quo of all records pertaining to or relevant to the account frozen, immediately upon receipt of a freeze order from the Court of Appeals, regardless of whether or not the court order grants the AMLA’s ancillary prayer.  Compliance with this item should, just to add a good measure of holy fear, be included as one of the things to be looked into, as a matter of routine, in BSP’s periodic or special examination of said institutions.

 Being blacklisted by the FATF is admittedly a consummation for the country not to be wished.  But the FATF is a reasonable and flexible international organization, aware of the sensitivities of various peoples and structural difficulties that its objectives encounter in different states, particularly in our region.  Raising the FATF, which is facing more serious cases of defiance elsewhere, as a bugaboo in order to get the Supreme Court to reconsider its opinion is, I submit, not be best course of action for the government.