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Restraints on anti-money laundering initiatives

The Supreme Court of the Philippines promulgated its decision in Republic v Eugenio, Jr (2008), which effectively restrained the initiatives of the Anti-Money Laundering Council (AMLC) to combat money laundering activities in the country.

The issue revolved around the interpretation of Section 11 of the Anti-Money Laundering Act, which generally authorises the AMLC to "inquire into or examine any particular deposit or investment with any banking institution or non-bank financial institution upon order of any competent court in cases of violation of this Act, when it has been established that there is probable cause that the deposits or investments are related to any unlawful activity as defined in Section 3(i) [t]hereof or a money laundering offence under Section 4 [t]hereof." Specifically, the issue was whether or not the court can authorise such an inquiry by the AMLC through an ex parte proceeding (without the presence or participation of the depositor or investor concerned).

In ruling against the AMLC, the Supreme Court noted that Section 10 of the statute explicitly allows ex parte applications for a court order to freeze monetary instruments, but Section 11 does not have a similar ex parte language. The Supreme Court also cited the confidentiality of deposits and investments under the Bank Secrecy Act of 1955.

In light of this Supreme Court ruling, the Anti-Money Laundering Act cannot be said to have fully complied with Recommendation 4 of the Financial Action Task Force that "countries should ensure that financial institution secrecy laws do not inhibit implementation of FATF Recommendations."

Rafael A Morales

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