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RA No. 10167’s amendments to the AMLA

(Article published in the June 27,2012 issue of Manila Standard Today)   

Although the Philippines had come up, in response to the Financial Action Task Force’s critical review, with only two laws relating to money laundering and terrorist financing, the international watch dog, last Saturday (Manila time) expressed satisfaction—for the moment—with our efforts not by merely maintaining our previous rating of “dark gray”, but by even upgrading it to “gray”.

The FATF obviously was aware that the new statutes  were enacted despite the Senate’s being in the midst of trying the impeachment charges against former Chief Justice Renato Corona.  The FATF knew that those months were indeed amongst the country’s  “best of times” and “worst of times.”

The first of the two saviour laws is R.A. No. 10167.  That law amended two crucial sections of the Anti-Money Laundering law which was R.A No. 9160, as amended by R.A. No. 9194.  The two amended sections were  Sections 10 and 11. 

Section 10 was on the matter of bank account freeze. The original law gave the Anti-Money Laundering Council authority to freeze bank accounts for not more than 15 days.  If needed, the freeze period “may be extended upon order of the court.” Strangely, the law did not say what court is authorized to extend the freeze.
 










     

The amendment introduced by R.A. No. 9194 removed the motu propio power to freeze from the AMLC.  If the AMLC wanted to freeze a bank account, it was instead required to file a petition for that purpose, albeit ex parte, with the Court of Appeals. The initial freeze order was lengthened to “a period of twenty (20) days.”

The latest law, R.A. No. 10167, made the process a bit more stringent. It required the petition to be verified, i.e. to sworn to by the filer based on his or her personal knowledge.  This matter of form was not specific in the old law.

But, by way of compensation for this additional formality, R.A. No. 10167 forces the Court of Appeals, stressing the urgency of the matter, to act “within twenty four (24) hours from the filing”. 

“This proposed measure,” said Senator T.L. Guingona III in his sponsorship speech, “particularly addresses a situation where the account holder or property owner acquires knowledge or information about the investigation being conducted against him by the AMLC or about the fact that an application for freeze has been filed against him or his bank account and/or properties.”

Co-sponsor Franklin Drilon adds, “The purpose of these proposed revisions is to make the freezing process more efficient to ensure that criminal proceeds will not be disposed of pending investigation by the AMLC.”

The affected depositor is not without his remedies.  He may contest the freeze by filing a motion to lift.  The Court of Appeals is required to resolve the motion within the twenty (20) day freeze period.

The end result, by the squeeze of the freeze, is the approximate restoration of the ability of the AMLC to act as quickly as was envisioned in the original law; but this is balanced by the ability of the depositor to just as quickly move for, and secure, a defrost.

The other section amended by R.A. No. 10167 is  Section 11. This section relates to the AMLC’s power to inquire into bank deposits. Understandably, probably because by the time the bill was on second reading at the Senate, the impeachment case against former Chief Justice Corona was quickly going down on a tail spin on account of the revelations concerning his bank deposits, this amendment effected the more changes.

The most significant change in Section 11 is the explicit statement in the law that the AMLC is authorized to examine bank accounts “upon order of any competent court based on an ex parte application.”  It is an explicit a repudiation as can be of the Supreme Court’s dubious conclusion and legal argumentation in the case of Eugenio which was the subject of my column last week.

The second change is an expansion of the instances when no such court application is required.  Under the new law, also exempted are “felonies or offenses of a nature similar to those mentioned in Sections 3(i)(1), (2), and (12) which are punishable under the penal laws of other countries, and terrorism and conspiracy to commit terrorism as defined and penalized under Republic Act No. 9372.” R.A. No. 9372 is the Human Security Act of 2007.

Thirdly, in line with the repudiation of Eugenio, it put bank inquiry at par with account freeze and compelled the Court of Appeals to act on the application also within 24 hours of filing.

The fourth change is enigmatic.  Prior to R.A. No. 10167, the Bangko Sentral “may inquire into or examine any deposit...”.  In contrast, under the new law, the BSP may only “check the compliance of a covered institution with the requirements of the AMLA and its implementing regulations.”  It is a thorny question whether checking compliance with law, is the same as looking into a deposit.  I tend to think, and I hope I am wrong, BSP’s power to inquire into a deposit has been if not removed, at the very least severely watered down.

The fifth change is the inclusion on the coverage of AMLC’s application to inquire into a bank account of so-called “related accounts”.  Related accounts are those “the funds and sources of which originated from and/or are materially linked to the monetary instrument(s) or property(ies) subject of the freeze order(s).  A court order too is required for these related accounts.

Finally, although the Constitution is deemed read into every law legitimately passed, there is an explicit requirement to comply “with the requirements of Article III, Sections 2 and 3 of the 1987 Constitution.” These sections refer to provisions against unreasonable searches and seizures (Sec. 2) and privacy of communication and correspondence (Sec. 3).

There is no question that, as appreciated by the FATF, these changes brought about by R.A. No. 10167 are steps forward.  Whether they will be considered big steps or small steps at the next FATF review remains to been seen.  At least for now, we luckily got an “A” for effort.  Unless some remaining questions are addressed by implementing regulations, we may not be as lucky come the next grading period.

     

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