Freezing of related accounts in money laundering cases

Freezing of related accounts in money laundering cases | Daily Tribune

The Supreme Court has spoken decisively: in money laundering investigations, even bank accounts not directly in the name of a respondent may be frozen — so long as they are related or materially linked to suspected unlawful activity. While this may seem alarming, the law and jurisprudence provide necessary safeguards to prevent abuse.

In a landmark en banc decision penned by one of the Court’s most respected financial law jurists, Justice Japar Dimaampao, the High Tribunal affirmed the authority of the Court of Appeals (CA) to issue freeze orders not only on assets directly associated with unlawful activities, but also on related accounts.

This authority, the Court held, emanates from Section 10 of the Anti-Money Laundering Act (AMLA), as well as its Implementing Rules and Regulations (IRR), even if the precise phrase “related accounts” is not expressly stated in the law.

The controversy arose from a long-running case involving allegations of corruption and plunder relating to a public infrastructure project. The Anti-Money Laundering Council (AMLC) sought to freeze not only the named respondent’s accounts but also those belonging to family members and associates. The basis? Suspicious patterns of financial movement that appeared to serve as conduits for illicit funds.

Unsurprisingly, several account holders objected, arguing that their names did not appear in the original complaint and that their accounts were frozen without due process, thereby violating their right to privacy and to property.

The Supreme Court, however, upheld the freeze orders. It noted that money laundering is rarely conducted in plain sight. Funds often travel through a maze of transactions, pass through various entities, and are layered among seemingly innocuous accounts — all with the intent to mask their illicit origin. To effectively dismantle these schemes, law enforcement agencies must be empowered to act on accounts that are reasonably connected to the offense.

But — and this is crucial — the Court was equally emphatic about the need to protect individual rights. It laid down strict procedural safeguards to ensure that the power to freeze is not wielded arbitrarily or capriciously.

These safeguards include:

1. The AMLC must file a verified petition before the Court of Appeals specifically identifying the monetary instruments or properties involved. If related or materially linked accounts are included, the petition must describe these accounts in detail, including account numbers and approximate amounts.

2. The CA must make an independent finding of probable cause, not merely accept the AMLC’s representations. There must be a reasonable belief, based on evidence, that the identified accounts are in any way connected to an unlawful activity.

3. Freeze orders cannot exceed the value of the funds or properties that are reasonably suspected to be the proceeds of unlawful activity. This ensures proportionality in enforcement.

4. Initial freeze orders take effect immediately but only for 20 days. Within this period, a summary hearing must be conducted, with notice to the affected parties, to determine whether to lift, modify, or extend the freeze. Any extension cannot exceed six months.

5. Affected account holders have the right to file a motion to lift the freeze. The Court is mandated to resolve this before the freeze order expires.

6. If no forfeiture case is filed against the account holder within the allowable period, the freeze order is automatically lifted.

7. Even during the freeze period, a person may withdraw reasonable amounts as determined by the AMLC for basic needs, medical expenses, and legal fees.

In sum, the Court reaffirmed the State’s commitment to combating money laundering by giving real teeth to the law. At the same time, it ensured that constitutional guarantees are not sacrificed at the altar of enforcement.

The ruling represents a calibrated balance: empowering financial watchdogs to chase complex laundering trails while preserving the rights of innocent account holders.

For more of Dean Nilo Divina’s legal tidbits, please visit www.divinalaw.com. For comments and questions, please send an email to cad@divinalaw.com.