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Money laundering law needs cleaning up
Oct 2,2001

Sometime last August, writing for another broad sheet, I expressed doubts on the ability of Congress to pass an anti-money laundering law by 30 September for the country to avoid the sanctions threatened by the Financial Action Task Force. I am now prepared to recant.

Obviously concerned that our country would suffer the stigma of being a money laundering center compounded by negative picture due to recent news items linking the country to terrorist financier Osama bin Laden, our legislators turned statesmen, except for a few dissenters, and came up with a bill that became Republic Act No. 9160, signed by President Arroyo in the waning hours of the deadline. For all its warts, R.A. No. 9160 still is a law which could somehow put our country in line with the rest of the financial world seeking to deny criminals the fruits of their crime.

"Somehow", though is the operative word, because it is clear from the text of the law, that our cooperation is not wholehearted. The law’s Declaration of Policy —a standard feature in many pieces of major legislation that nobody takes seriously since it traditionally contains purely motherhood statements - breaks from tradition and announces, perhaps in a Freudian slip, the true sentiments of the lawmakers.

Section 2 of R.A. No. 9160 provides:

"Declaration of Policy – It is hereby declared the policy of the State to protect and preserve the integrity and confidentiality of bank accounts and to ensure that the Philippines shall not be used as a money-laundering site for the proceeds of any unlawful activity. Consistent with its foreign policy, the State shall extend cooperation in transnational investigations and prosecutions of persons involved in money laundering activities wherever committed."

Notice that while the law is to be known, under Section 1, as an "Anti-Money Laundering Act," Section 2 declares a contrary policy of protecting and preserving the confidentiality of bank deposits. This twist of language is not without precedent, albeit in the reverse, elsewhere. In the United States, they passed a law known as the Bank Secrecy Act of 1970. The purpose of the law, however, is not to enhance bank secrecy, but instead to limit it regarding certain financial transactions. This goes to show that legal double talk is a politician’s malady, irrespective of nationality.

At any rate, that the preservation of the secrecy of bank deposits was mentioned ahead of the objective of insuring that the Philippines is not used as a money laundering site for the proceeds of any unlawful activity provides a window into the soul of the law. In effect, what the lawmakers appeared to be saying is that their opposition to money laundering ends where their love for bank secrecy begins.

This tension of loyalties is exemplified in how the Anti-Money Laundering Council (AMLC) can handle into bank accounts. Section 10 allows the AMLC to freeze a deposit, with immediate effect for 15 days, when it determines that there is probable cause to believe that the account is in some way related to an unlawful activity. The depositor is to be given notice of the freeze order and he can within 72 hours explain why the order should be lifted. The AMLC has, for its part, another 72 hours to accept or reject the explanation. The 15-day freeze period may be extended upon order of the court.

In the meantime, can the AMLC, without court approval, look into the account? Section 11 answers in the negative. The AMLC can inquire into a deposit only upon court order in cases of violation of the law when it has been established that there is probable cause that the deposit is in any way related to a money laundering offense.

Note that the probable cause needed for freezing a deposit is its relation to an unlawful activity, known as the predicate offense, and the probable cause for inquiring into it, if the court should so allow, is some relation to a money laundering offense. In both cases, however, probable cause must exist before an account can be frozen or looked into. The account itself cannot be frozen or examined for the purpose of determining probable cause. Probable cause must be established independently of the deposit.

In effect, the only practical purpose of inquiring into a deposit is simply to confirm information that the law enforcers are constrained, by the Secrecy of Bank Deposits Law, to gather from other sources and the freezing of the deposit is only for the purpose of immobilizing an account temporarily and eliciting from the depositor an explanation of his deposit. If the depositor was quick enough to empty the account before it was frozen, he can refuse to explain and leave the AMLC in the dark about the deposit. This gives a new meaning to the term "covered transaction".

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