Category Archives: money laundering

Freeze orders under the AMLA: assets unfrozen but preserved

In a recent decision (Ligot v. Republic, March 6, 2013), the Supreme Court emphasized the rationale behind freeze orders issued under Republic Act 9160, as amended or the Anti-Money Laundering Act (AMLA):

“A freeze order is an extraordinary and interim relief issued by the CA to prevent the dissipation, removal, or disposal of properties that are suspected to be the proceeds of, or related to, unlawful activities as defined in Section 3(i) of RA No. 9160, as amended. The primary objective of a freeze order is to temporarily preserve monetary instruments or property that are in any way related to an unlawful activity or money laundering, by preventing the owner from utilizing them during the duration of the freeze order. The relief is pre-emptive in character, meant to prevent the owner from disposing his property and thwarting the State’s effort in building its case and eventually filing civil forfeiture proceedings and/or prosecuting the owner.

…a freeze order is meant to have a temporary effect; it was never intended to supplant or replace the actual forfeiture cases where the provisional remedy – which means, the remedy is an adjunct of or an incident to the main action – of asking for the issuance of an asset preservation order from the court where the petition is filed is precisely available. For emphasis, a freeze order is both a preservatory and preemptive remedy.”

The Court underscored that the probable cause required for the issuance of a freeze order under Section 10 of the AMLA: “such facts and circumstances which would lead a reasonably discreet, prudent or cautious man to believe that an unlawful activity and/or a money laundering offense is about to be, is being or has been committed and that the account or any monetary instrument or property subject thereof sought to be frozen is in any way related to said unlawful activity and/or money laundering offense,” is different from the probable cause required for the institution of a criminal action:

“In other words, in resolving the issue of whether probable cause exists, the CA’s statutorily-guided determination’s focus is not on the probable commission of an unlawful activity (or money laundering) that the Office of the Ombudsman has already determined to exist, but on whether the bank accounts, assets, or other monetary instruments sought to be frozen are in any way related to any of the illegal activities enumerated under RA No. 9160, as amended. Otherwise stated, probable cause refers to the sufficiency of the relation between an unlawful activity and the property or monetary instrument which is the focal point of Section 10 of RA No. 9160, as amended…”

Indeed, as early as Republic v. Glasgow Credit and Collection Services, Inc. (January 18, 2008), the Court already underscored distinction between the two, when it held that” a criminal conviction for an unlawful activity is not a prerequisite for the institution of a civil forfeiture proceeding. Stated otherwise, a finding of guilt for an unlawful activity is not an essential element of civil forfeiture.”

The Court explained that under Section 10 of RA 9160, the Anti-Money Laundering Council (AMLC) may apply ex parte with the Court of Appeals (CA) for the issuance of a 20-day freeze order, which may be extended by the Court. It noted that “the law is silent on the maximum period of time that the freeze order can be extended by the CA.” and that the same cannot be for an indefinite period. Thus in Sections 53(b) and 55 of AM No. 05-11-04-SC or the Rule in Civil Forfeiture Cases, it stated that the CA “may for good cause extend its effectivity for a period not exceeding six months.” But it also underscored that the six-month period is not an inflexible rule.

It noted that while the freeze order over the Ligots’ properties had been in effect since 2005 it was only on September 26, 2011 that a Petition for Civil Forfeiture was filed against them in the RTC of Manila, which issued a Provisional Asset Preservation Order and, on October 5, 2011, after due hearing, an Asset Preservation Order. And as of October 29, 2012, Civil Case No. 0197 for forfeiture of unlawfully acquired properties under RA No. 1379 (An Act Declaring Forfeiture in Favor of the State Any Property Found to Have Been Unlawfully Acquired by Any Public Officer or Employee and Providing for the Proceedings Therefor) was pending before the Sandiganbayan.

Nevertheless, the Court ruled that the Ligot petition was not moot and academic and resolved the same on the merits, because –

“The Ligots’ case perfectly illustrates the inequity that would result from giving the CA the power to extend freeze orders without limitations. As narrated above, the CA, via its September 20, 2005 resolution, extended the freeze order over the Ligots’ various bank accounts and personal properties “until after all the appropriate proceedings and/or investigations being conducted are terminated.” By its very terms, the CA resolution effectively bars the Ligots from using any of the property covered by the freeze order until after an eventual civil forfeiture proceeding is concluded in their favor and after they shall have been adjudged not guilty of the rimes they are suspected of committing… …the Ligots have not been able to access the properties subject of the freeze order for six years or so simply on the basis of the existence of probable cause to issue a freeze order, which was intended mainly as an interim preemptive remedy.”

Thus the Supreme Court granted the Ligots’ petition and lifted the freeze order issued by the CA, but the lifting is “without prejudice to, and shall not affect, the preservation orders that the lower courts have ordered on the same properties in the cases pending before them”.

Ligots’ petition granted, freeze order lifted – but without prejudice to the preservation orders issued by the lower courts, which were issued with notice to them, i.e. they had the opportunity to oppose the same, in contrast to the freeze order which was issued ex parte.

And so the Ligots can be secure in the thought that they have enriched jurisprudence.

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