The Supreme Court upheld the constitutionality of Section 11 of the Anti-Money Laundering Act (AMLA), which allows the Anti-Money Laundering Council (AMLC) to inquire into bank accounts ex parte (without notifying the account holder) based on probable cause, provided certain safeguards are met. The Court found that this power does not violate due process or the right to privacy because the AMLC’s inquiry is investigative, not adjudicative, and subject to judicial oversight. This decision clarifies the extent to which the government can access private financial information in its efforts to combat money laundering, balancing individual rights with the public interest in preventing financial crimes.

Unveiling Secrets: Can the Government Peek into Your Bank Account?

In 2015, amid reports of disproportionate wealth involving then-Vice President Jejomar Binay and his family, the Subido Pagente Certeza Mendoza & Binay Law Firm (SPCMB) found itself caught in the crosshairs. An article in the Manila Times mentioned that the AMLC had requested the Court of Appeals (CA) to inspect the Binays’ bank accounts, including those of a law office with family ties. SPCMB, concerned that its accounts were being targeted, sought to verify this information with the CA. The Presiding Justice of the CA denied their request, citing confidentiality rules. This led SPCMB to directly petition the Supreme Court, challenging the constitutionality of Section 11 of the AMLA.

The central legal question was whether Section 11 of the AMLA, which allows the AMLC to apply for an ex parte order to inquire into bank deposits and investments, violates the constitutional rights to due process and privacy.

The Supreme Court addressed the procedural issue of whether Congress should have been impleaded in the petition. It affirmed that cases questioning the constitutionality of a law do not necessarily require Congress to be impleaded, provided the requisites of a judicial inquiry are met. These requisites include an actual case or controversy, the question of constitutionality raised by the proper party, raised at the earliest possible opportunity, and necessary to the determination of the case itself.

The Court then delved into the substantive issue of whether Section 11 of the AMLA violates due process. The due process clause of the Constitution states:

SECTION 1. No person shall be deprived of life, liberty or property without due process of law, nor shall any person be denied the equal protection of the laws.

The Court distinguished between substantive and procedural due process. **Substantive due process** concerns the validity of the law itself, while **procedural due process** concerns the rules the government must follow when depriving a person of life, liberty, or property. The Court noted that Section 11, as amended, involves an ex parte application by the AMLC, a determination of probable cause by the CA, and exceptions for certain unlawful activities where a court order is not required.

The Court referenced the case of Rep. of the Phils. v. Hon. Judge Eugenio, Jr., et al., which previously addressed the extent of the AMLC’s authority to inquire into bank accounts. Eugenio clarified that absent specific wording in the AMLA allowing for ex parte proceedings, notice to the affected party is generally required. However, Congress subsequently amended Section 11 to specifically allow for ex parte applications, leading to the present challenge by SPCMB.

The Court held that Section 11 of the AMLA does not violate substantive due process because the inquiry into bank deposits and investments does not involve a physical seizure of property at that stage. Quoting Eugenio, the Court differentiated a bank inquiry order from a freeze order, stating that the former only authorizes the examination of deposits and investments, while the latter necessitates physical seizure.

Regarding procedural due process, the Court emphasized that it essentially means the opportunity to be heard. While SPCMB demanded notice and a hearing during the AMLC’s investigation, the Court found that the ex parte procedure authorized by the AMLA passes constitutional muster.

To fully understand the extent of the AMLC powers the court then specified the stages of determination. Textually, the AMLA is the first line of defense against money laundering in compliance with our international obligation. There are three (3) stages of determination, two (2) levels of investigation, falling under three (3) jurisdictions:

• The AMLC investigates possible money laundering offenses and initially determines whether there is probable cause to charge any person with a money laundering offence under Section 4 of the AMLA, resulting in the filing of a complaint with the Department of Justice or the Office of the Ombudsman;
• The DOJ or the Ombudsman conducts the preliminary investigation proceeding and if after due notice and hearing finds probable cause for money laundering offences, shall file the necessary information before the Regional Trial Courts or the Sandiganbayan;
• The RTCs or the Sandiganbayan shall try all cases on money laundering, as may be applicable.

The Court found that the AMLC’s functions are primarily investigatory, akin to those of the National Bureau of Investigation (NBI), rather than quasi-judicial. The AMLC investigates, determines probable cause, and files complaints with the Department of Justice or the Ombudsman, which then conduct preliminary investigations and file necessary information before the courts.

Finally, the Court addressed whether Section 11 violates the constitutional right to privacy. SPCMB argued that the CA’s denial of its request for copies of the AMLC’s ex parte application and related documents constituted grave abuse of discretion, and that the blanket authority under Section 11 partakes of a general warrant. The Court underscored that the AMLA incorporates by reference Article III, Sections 2 and 3 of the Constitution, which protect against unreasonable searches and seizures and guarantee the privacy of communication and correspondence.

The Court reiterated principles established in Eugenio, including that the Constitution did not allocate specific rights peculiar to bank deposits, the general rule of absolute confidentiality of bank deposits is statutory, and exceptions to this rule have been carved out by the Legislature. The Court emphasized that Section 11 provides safeguards before a bank inquiry order is issued, ensuring adherence to the policy of preserving the confidential nature of Philippine bank accounts. These safeguards include the AMLC establishing probable cause, the CA making an independent finding of probable cause, and compliance with constitutional requirements.

Nonetheless, although the bank inquiry order ex-parte passes constitutional muster, the court declared that there is nothing in Section 11 nor the implementing rules and regulations of the AMLA which prohibits the owner of the bank account, as in this instance SPCMB, to ascertain from the CA, post issuance of the bank inquiry order ex-parte, if his account is indeed the subject of an examination.

The court was hard pressed to to justify a disallowance to an aggrieved owner of a bank account to avail of remedies, after discussing these requirements as basis for a valid exception to the general rule on absolute confidentiality of bank accounts.

As noted in Eugenio, such an allowance accorded the account holder who wants to contest the issuance of the order and the actual investigation by the AMLC, does not cast an unreasonable burden since the bank inquiry order has already been issued. Rule 10.c. of the IRR provides for Duty of the Covered Institution receiving the Freeze Order. Such can likewise be made applicable to covered institutions notified of a bank inquiry order.

The Court declared that the CA is directed to draft rules based on the foregoing discussions to complement the existing A.M. No. 05-11-04-SC Rule of Procedure in Cases of Civil Forfeiture, Asset Preservation, and Freezing of Monetary Instrument, Property, or Proceeds Representing, Involving, or Relating to an Unlawful Activity or Money Laundering Offense under Republic Act No. 9160, as Amended for submission to the Committee on the Revision of the Rules of Court and eventual approval and promulgation of the Court en banc.

FAQs

What was the key issue in this case?	The key issue was whether Section 11 of the Anti-Money Laundering Act (AMLA), which allows the AMLC to inquire into bank accounts ex parte, violates constitutional rights to due process and privacy.
What is an ex parte proceeding?	An ex parte proceeding is one in which only one party is present or given notice, typically without the knowledge of the other party. In this context, it means the AMLC can apply for a bank inquiry order without notifying the account holder.
What is the AMLC?	The Anti-Money Laundering Council (AMLC) is the Philippines’ financial intelligence unit responsible for implementing the AMLA and combating money laundering.
What is probable cause in relation to a bank inquiry order?	Probable cause, in this context, refers to facts and circumstances that would lead a reasonably discreet person to believe that an unlawful activity or money laundering offense is being committed, and the bank account is related to it.
Does this ruling mean the government can always access my bank account without notice?	No, the ruling clarifies that the AMLC needs a court order based on probable cause to inquire into your bank account ex parte, with some exceptions for specific unlawful activities. Furthemore, the actual owner of the account may inquire with the court after the fact.
What is the Bank Secrecy Act?	The Bank Secrecy Act (RA No. 1405) generally protects the confidentiality of bank deposits, but the AMLA provides exceptions to this rule in cases of money laundering and other unlawful activities.
What is the difference between a bank inquiry order and a freeze order?	A bank inquiry order allows the AMLC to examine bank records, while a freeze order prevents the account holder from accessing or transacting with the funds. The Supreme Court clarified that at the freeze order level, the bank account owner may challenge the bank inquiry order.
What should I do if I think my bank account has been unfairly targeted by the AMLC?	The best course of action is to consult with a qualified attorney to understand your rights and legal options, especially after the freeze order has been issued.

In conclusion, the Supreme Court’s decision in Subido Pagente Certeza Mendoza and Binay Law Offices v. Court of Appeals provides important clarity on the balance between individual privacy rights and the government’s efforts to combat money laundering. The Court affirmed that while the AMLC can inquire into bank accounts ex parte under certain conditions, it is also the bank account owner may verify if its accounts are the subject of a bank inquiry. Therefore, there has to be some checks and balances to this process.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Subido Pagente Certeza Mendoza and Binay Law Offices v. Court of Appeals, G.R. No. 216914, December 06, 2016