Title
BCD Foreign Exchange Corp. vs. Republic, rep. by Anti-Money Laundering Council and Metropolitan Bank and Trust Company
Case
G.R. No. 231495
Decision Date
Oct 13, 2021
BCD's accounts frozen under AMLA due to links to suspicious transactions; SC upheld CA's ruling, citing probable cause and compliance with anti-money laundering laws.
freeze order
anti
money laundering
A

Case Summary (G.R. No. 187200)

Antecedents Leading to the Freeze Order

The Republic, through AMLC, filed the ex-parte petition after separate buy-bust operations resulted in the arrest of Claudio Branzuela Bontilao, Jr. (Claudio) and Jovannie Quirante Llego (Jovannie), who were later charged with violation of Section 5, Article II of RA 9165, or the Comprehensive Dangerous Drugs Act of 2002. During the arrests, multiple items were seized, including deposit slips in the names of Powleean Electronics Marketing, Inc. (Powleean) and several individuals, which later became relevant to AMLC’s effort to trace funds through bank accounts.

AMLC found Powleean’s operations doubtful. It noted that no regular business activity was conducted in the company’s declared addresses. AMLC further highlighted that Powleean’s paid-up capital was P31,250.00, yet between 2015 and 2016 it allegedly had transactions reaching billions of pesos, with cash deposits totaling P1,844,516,398.00 and withdrawals amounting to P2,269,661,751.44. AMLC also examined the accounts of Chen Jiali, Elsa Alasad (also known as Elsa Alasad Wu), and Lianggun Wu (also known as Liang Gun Wu) as incorporators and directors of Powleean. AMLC alleged that Chen Jiali’s over-the-counter withdrawals from 2005 to 2016 amounted to P7,171,790,903.62, which AMLC considered unlikely to be generated from Powleean, his sole declared source of income. AMLC also alleged that Chen Jiali was involved in CA-G.R. AMLA Case No. 00151 as one of the persons who allegedly received funds from drug trafficking.

Based on these allegations, AMLC prayed for the issuance of a freeze order targeting bank accounts and related accounts, including those “wherever they may be found,” upon a determination of probable cause that the accounts were related to or involved in an unlawful activity.

Issuance and Initial Implementation of the Freeze Order

On 29 September 2016, the CA issued a Freeze Order effective for six months from notice to the impleaded banks, finding a well-founded belief that the bank accounts of the mentioned parties were related to or involved in unlawful activity. The CA directed the banks to submit a return detailing the specified accounts or related web of accounts within twenty-four hours from receipt of the resolution. The CA’s resolution also required immediate compliance with the freeze mechanism.

In response, Metrobank complied and submitted detailed returns. On 26 October 2016, Metrobank filed its Fourth Supplemental Return, identifying accounts under BCD’s name as recipients of funds in the context of the freeze order. It reported two accounts: Account No. 7-285-51225-1, characterized as an old closed account (Old BCD Account), and Account No. 7-285-51261-8, the account holding PhP 48,539,839.65 (Subject BCD Account).

On the following day, Metrobank sent BCD a letter notifying it that the cited accounts were identified as related and/or materially linked to one of the accounts covered by the freeze order. BCD then sought judicial relief.

BCD’s Motion to Lift and the CA’s Resolutions

On 15 February 2017, BCD filed a Motion praying for the lifting and setting aside of the freeze order and all its effects over the Subject BCD Account. BCD argued that Metrobank, as a private entity, lacked legal authority to freeze BCD’s accounts or to determine whether the accounts were part of the related web covered by the freeze order. BCD also contended that Metrobank could not have frozen the accounts without violating the Bank Secrecy Law.

On 21 March 2017, the CA denied BCD’s Motion through the assailed Resolution. The CA recognized that BCD was not named as a respondent in AMLC’s ex-parte petition. However, the CA held that Metrobank identified BCD’s accounts as related accounts in compliance with the relevant AMLA implementing rules. The CA noted that between March and November 2013, the Old BCD Account received thirty-six deposit transactions amounting to P48,262,720.00 from Chen Jiali’s Metrobank Savings Account No. 30115279290, which was among the accounts listed in the freeze order. The CA further observed that BCD failed to show proof of legitimate transactions with Chen Jiali. It emphasized that the Old BCD Account was closed on 06 December 2013, while the Subject BCD Account contained P48,539,839.65.

The CA also credited AMLC’s allegation that voluminous financial documents in BCD’s name were recovered during a drug operation conducted in 2013, which allegedly implicated the spouses Shi Xiu Lun and Wu Rong. Finally, the CA held that there was no violation of bank secrecy, because the AMLA provides exceptions when there is probable cause that deposits are related to unlawful activities.

BCD sought reconsideration, but the CA denied it on 10 May 2017. Hence, BCD pursued the petition before the Supreme Court.

Issues Raised by BCD

The central question before the Supreme Court was whether the CA erred in maintaining the freeze order’s effects over BCD’s Subject BCD Account. In attacking the CA’s Resolutions, BCD relied on three principal arguments: (one) that Metrobank had no authority to freeze the Subject BCD Account or to determine whether it was “materially linked” or part of the “related web of accounts”; (two) that Metrobank could not derive authority from the AMLA’s revised implementing rules to freeze BCD’s account; and (three) that the freezing violated the Bank Secrecy Law.

Procedural Developments and the Mootness Argument

Respondents argued that the petition should be dismissed as moot and academic because the freeze order had already expired on 30 March 2017. They explained that, on 28 March 2017, the Republic had instituted a civil forfeiture case before the RTC of Manila, which issued a Provisional Asset Preservation Order (PAPO) and an Asset Preservation Order (APO) covering the Subject BCD Account.

The Supreme Court discussed the doctrine of mootness, explaining that a case becomes moot when supervening events eliminate the legal issue between the parties, leaving no practical relief. The Court noted that after the expiration of the freeze order, the CA remanded the matter and transmitted the records to the RTC of Manila for consolidation with the pending civil forfeiture case in accordance with Section 56 of A.M. No. 05-11-04-SC. On that basis, the petition could be dismissed as moot, since BCD’s remedy would be to challenge the incidents arising in the civil forfeiture proceedings.

Nonetheless, the Court observed that BCD alleged that the Subject BCD Account would not have been included in the civil forfeiture case but for the CA proceedings. The Court further noted that in the civil forfeiture case, BCD filed a Motion to Discharge questioning the inclusion of the Subject BCD Account under the APO. The RTC initially granted the motion in an Order dated 09 July 2018, but later reversed it on a motion for reconsideration. The RTC resolution specifically referred to BCD’s pending review petition before the Supreme Court, thus indicating the need to resolve BCD’s due process and proprietary rights concerns arising from the CA’s inclusion of the Subject BCD Account as a related account.

In light of that context, and to prevent similar issues from re-emerging in the civil forfeiture case or other freeze order cases, the Court proceeded to resolve the core question.

Governing Framework on Freeze Orders, Related Accounts, and Bank Obligations

The Supreme Court anchored its analysis on the rules governing civil forfeiture and freeze orders under the AMLA procedure. It referred to Section 56 of A.M. No. 05-11-04-SC, which provides for the CA to issue an ex-parte freeze order if the CA is satisfied from the petition’s allegations that there exists probable cause that the monetary instrument, property, or proceeds are related to or involved in any unlawful activity as defined in Section 3(i) of RA 9160, as amended by RA 9194. The Court also cited Section 55, which requires covered institutions, upon receipt of a freeze order, to immediately desist from any transaction, withdrawal, deposit, transfer, removal, conversion, other movement, or concealment of accounts representing, involving, or relating to the subject monetary instrument, property, proceeds, or their related web of accounts.

The Court reiterated the definition of related accounts as accounts whose funds and sources originated from and/or are materially linked to the monetary instruments or properties subject of the freeze order. It then addressed BCD’s claim that Metrobank improperly exercised authority by including BCD’s accounts in the return.

Court’s Findings on Metrobank’s Role and Good Faith

The Supreme Court rejected BCD’s position that Metrobank determined probable cause. The Court explained that probable cause was a determination made by the CA in issuing the freeze order. It held that, after receiving the freeze order and complying with the CA’s instructions, Metrobank discovered that the Old BCD Account was a direct recipient of funds amounting to P48,262,720.00 from Chen Jiali’s Metrobank Savings Account, a listed account in the freeze order. Although the Old BCD Account was later closed, BCD opened a new account with almost the same cash amount, which became the Subject BCD Account containing P48,539,839.65. Metrobank included both accounts in its report when it verified that the accounts were recipients of funds from an account subject of the freeze order.

According to the Court, Metrobank acted in good faith in compiling and reporting information to the CA and AMLC. BCD’s contrary theory—that Metrobank itself performed the probable-cause determination—was deemed inconsistent with the clear rule that the CA issues the freeze order after finding probable cause. The Court added that if Metrobank had refused or failed to include related accounts upon verification, it would have exposed itself to potential liability under the AMLA, as amended by RA 10365.

Remedy of the Aggrieved Party and BCD’s Opportunity to Be Heard

The Sup

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