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Banking and the Human Security Act

(Article published in the July 25, 2007 issue of Manila Standard Today)  

      R.A. No. 9372, which wants to be known as the “Human Security Act of 2007,” is weird.  P.D. 1612, or the Anti-Fencing Law of 1979, defines in its section 2 the term “fencing.”  R.A. No. 9160, or the Anti-Money Laundering Law of 2001, defines “money laundering” in section 4 thereof.  But nowhere in the Human Security Act is there a definition of “human security.”

     The reason is that R.A. No. 9372 is not concerned with what it takes to be “human” nor with what a human being needs in order to feel “secure”.  Instead, R.A. No. 9372 situates itself in the genre of the USA Patriot Act of 2001 in terms of true intent and false name.  By reason of similar constitutional constraints, both the Philippine R.A. No. 9372 and the US Patriot Act had to reveal in their respective titles their true purpose: for R.A. No. 9372, it was “to secure the state and protect our people from terrorism”; for the USA Patriot Act, it was for “uniting and strengthening America by providing appropriate tools required to intercept and obstruct terrorism.” But, unabashedly, both thus seek to elicit support by wanting to be known as protector of motherhood ideals,, “human security” for the Philippine version and being a “patriot” for its American model.

     Terrorism” is the common word found in the more honest titles of both laws and, of course, terrorists, like governments, need funds.  Funds, in this day and age, necessarily involve banks. Hence, both laws devote several provisions encroaching on the placid world of bankers.  For the Philippine banking industry, both the service providers and their clientele, Sections 27 to 43 of R.A. No. 9372 are must reads. ****Atty. Celia M. Escareal-Sandejas, in her lecture at the UP MCLE Series in Baguio last month, gave figures of the estimated operational funds that must have been spent by terrorists to effect their recent attacks.  It appears that, except for funds estimated to have been needed to pull off the 9/11 attacks which were placed at US$500,000 and the Limburg Bombing in 2002 at US$127,000, terrorist operational funds were not very substantial.  The USS Cole bombing in 2000 was estimated to have been done at the coust of around US$10,000; the Djerba Mosque bombing in 2002 at US$20,000; the Bali bombing of the same year at US$74,000 and the Madrid train bombing in 2004 at US$10,000.  Surely, those figures resemble just the modest dollar holdings of us law school teachers whose acts of “terrorism” are limited to the confines of the classroom and directed to a small number of students unprepared for our brand of inquisitorial recitation.


     But, because money, unlike goods, does not have bar codes, trademarks, or other identifying marks, there is no way of separating money that is to be used for terrorism from money that is not. Consequently, anti-terrorism legislation, like the anti-money laundering laws, necessarily must affect all money and, at the very least inconvenience, all banks and bankers as well as all funders and users, whether guilty or clean.  ****The responsibility for the proper and effective implementation of the anti-terrorism policy in the country is vested on the, appropriately named, Anti-Terrorism Council established in Section 53 of R.A. No. 9372.  It is given a wide range of “functions” (which are really better called “powers”) in Section 54, of which the most relevant to the banking industry is the authority to “freeze the funds, property, bank deposits, placements, trust accounts, assets and records belonging to a person suspected of or charged with the crime of terrorism or conspiracy to commit terrorism…”  It constitutes the most recent attack by public authorities on the much vaunted and vaulted character of banking, namely, privacy.

     This latest state encroachment on banking privacy begins with the Anti-Terrorism Council authorizing in writing “a police or law enforcement official” to file an application for authority from the Court of Appeals to examine the bank accounts, and gather information about such accounts, belonging to (a) persons who are charged with or even just suspected of the crime of terrorism; or (b) judicially declared and outlawed terrorist organization or (c) a member of such organization.

     The justices of the division of the Court of Appeals designated as a special court to handle terrorism cases must satisfy themselves in a hearing called for that purpose that there is what lawyers call “probable cause” and that there is a need and urgency for examining and freezing the bank deposits, placements, trust accounts, assets and records.  In this hearing, the applicant and the witnesses he or she may produce must be examined under oath.

     The authorizing order from the Court of Appeals, under Section 29, is required to contain (a) the identity of the person who is charged or suspected of the crime of terrorism, or of the terrorist organization or the member thereof whose account is subject of the order; (b) the identity of the bank or financial institution where the account is kept; and (c) the identity of the person who will conduct the examination and gathering of the desired information. Section 30 further provides that a definite period be fixed in the authorizing order for the conduct of the operation.  In no case can the period be more than 30 days.  But it is renewable for another maximum of 30 days upon application.

     The law contains these, and more, requirements preliminary to the examination, but, they are of little comfort since the first time the bank will become aware that one of its accounts is going to be subjected to examination and collection of information is when the order is served on it.  At that point, the law expressly says that “the bank or financial institution concerned shall not refuse to allow such examination and to provide the desired information.

     The client himself will not know that his account is being examined and information is being gathered unless he is either secretly tipped off or he is told, should he try to withdraw, that he could not because the account was frozen.  Section 29 gives him the right to be informed of the acts done by the law enforcement authorities in the premises or to challenge the legality of the interference, but is silent as who is required to so inform him and how soon after the fact.  The earliest time that I could find when the client will be notified is under Section 30.  That section requires that he be informed in writing within 30 days after the period of examination has terminated that no case has been filed. If a case has been filed, the client presumably would surmise his account has been subjected to scrutiny when he is served his warrant of arrest.

     The secrecy in this “peek, seek, and gather” operation on bank accounts is repeatedly  mandated by the law.  The application and the hearing at the Court of Appeals is ex parte, i.e. without notice to the parties who may be affected thereby.  The order of the Court of Appeals and the written authorization from the Anti-Terrorism Council for the law enforcement officer that triggered the process are both declared “classified information” by Section 29.

     The time when the Court of Appeals authorization is received is obviously not the best time for a bank and its officers to learn about their respective rights and duties under R.A. No. 9372.  That is why we organized for bankers and their clients a round-table discussion to be held on August 14, 2007 from 1:00 pm to 5:00 pm at the Top of the City, 34th Floor of the Citibank Tower on Paseo De Roxas,  Makati City on the implications of this law on banks and banking.  Resource persons include Attys. Juan de Zuñiga, Jr.,General Counsel and Assistant Governor of the Bangko Sentral and Vicente Aquino, Executive Director of the Anti-Money Laundering Council,  as well as Atty. Antonio V. Viray, now Special Counsel but formerly SVP-General Counsel of Metropolitan Bank and Trust Company.

     Those interested would please contact my secretary Mel at 848-0114 for details.  We expect a big audience so please arrange for your participation, if interested, as early as you can, so I could try to ensure a seat for you.