G.R. No. 231495 - BCD Foreign Exchange Corp. vs. Republic, rep. by Anti-Money Laundering Council and Metropolitan Bank and Trust Company

Case Summary (G.R. No. 231495)

Background and Initial Proceedings

BCD Foreign Exchange Corporation is involved in foreign exchange business. On September 28, 2016, the AMLC filed an Ex-Parte Petition for the Issuance of a Freeze Order under Section 10 of the AMLA and Section 44 of the Supreme Court's administrative rules. The freeze targeted bank accounts related to Powleean Electronics Marketing, Inc. and various individuals associated with drug-related offenses following separate buy-bust operations resulting in arrests and seizures of deposit slips and financial documents.

AMLC’s investigation revealed suspicious activity inconsistent with Powleean’s declared capital and business operations, including billions in transactions and large deposits and withdrawals. Chen Jiali, an incorporator, was noted for unusually high over-the-counter withdrawals amounting to over P7 billion during 2005-2016, unrelated to his declared income. Consequently, the Court of Appeals issued a six-month Freeze Order effective September 29, 2016, against specified bank accounts and related web of accounts.

Metrobank’s Role and Identification of Related Accounts

Metrobank, complying with the Freeze Order, submitted detailed returns identifying accounts under BCD’s name as recipients of funds from accounts subject to the Freeze Order. Specifically, two BCD accounts were noted: a closed "Old BCD Account" and the active "Subject BCD Account," holding over P48 million.

Metrobank notified BCD that its accounts were materially linked to the frozen accounts. In response, BCD filed a Motion to Lift Freeze Order, contending that Metrobank, as a private entity, lacked authority to freeze BCD’s accounts or determine they were related, and that the freezing violated the Bank Secrecy Law.

Court of Appeals Decision

The Court of Appeals upheld the Freeze Order and denied BCD’s motion. It found that under the 2016 Revised Implementing Rules and Regulations (RIRR) of the AMLA, Metrobank rightly identified related accounts based on its directive to submit detailed returns. The CA noted evidence of substantial deposits from Chen Jiali’s frozen account to the Old BCD Account and subsequently to the Subject BCD Account. BCD failed to prove legitimate transactions or sources of funds, undermining its arguments.

The CA ruled there was no violation of the Bank Secrecy Law since exceptions apply when probable cause exists that accounts relate to unlawful activity, such as drug trafficking. The CA’s resolution was final and denied reconsideration.

Issue on Appeal

Whether the Court of Appeals erred in maintaining the Freeze Order and denying BCD’s Motion to Lift Freeze Order over its Metrobank account.

Supreme Court’s Ruling and Analysis

The Supreme Court affirmed the Court of Appeals’ decisions, ruling the petition without merit.

Procedural Observations and Mootness:
Respondents noted the Freeze Order expired on March 30, 2017, and the subject accounts were covered by subsequent civil forfeiture proceedings with Asset Preservation Orders (APOs). The CA transmitted the matter to the RTC for consolidation of cases. While this raised a mootness argument, the Supreme Court proceeded to rule due to the proprietary rights involved and to prevent recurring disputes.
Authority to Freeze Related Accounts:
Under Section 56 of the Rule of Procedure in Cases of Civil Forfeiture, the Court of Appeals may issue an ex-parte Freeze Order when probable cause exists that monetary instruments or properties are related to unlawful activity. Section 55 imposes a duty on covered institutions (banks) to freeze accounts related to those under the Freeze Order.
Definition of Related Accounts and Metrobank’s Compliance:
A related account is defined as one with funds originating from or materially linked to the monetary instruments or properties under freeze. Metrobank, following its obligations, identified BCD’s old and current accounts as related due to substantial transfers from Chen Jiali’s frozen account. In doing so, Metrobank acted under direct court order and complied with AMLA’s implementing rules. They did not determine probable cause themselves but merely reported related accounts as instructed.
Probable Cause and Burden of Proof:
The freeze is a preventive remedy requiring probable cause, not proof beyond reasonable doubt. AMLC showed probable cause based on financial records and BCD’s suspicious transactions and failure to show legitimate business activities or sources of funds. Recovery of financial documents linked to BCD during a drug operation further supported the link to unlawful activity.
Remedy for Account Holders:
AML law grants parties whose accounts are frozen

Case Syllabus (G.R. No. 231495)

Antecedents and Parties Involved

Petitioner BCD Foreign Exchange Corp. (BCD) is a domestic corporation registered with the Securities and Exchange Commission (SEC) to engage in foreign exchange business.
Respondent AMLC represents the Republic of the Philippines as the government agency implementing the Anti-Money Laundering Act of 2001 (RA 9160), as amended.
Respondent Metrobank is a private domestic bank duly registered with the SEC and relevant banking regulators.
On 28 September 2016, AMLC, for the Republic, filed an Ex-Parte Petition for a Freeze Order pursuant to Section 10 of the AMLA and Section 44 of A.M. No. 05-11-04-SC, targeting multiple bank accounts linked to entities and individuals allegedly involved in unlawful activities.
The Freeze Order arose from buy-bust operations that led to the arrest of Claudio Branzuela Bontilao, Jr. and Jovannie Quirante Llego, charged under the Comprehensive Dangerous Drugs Act of 2002.
Items seized during arrests included deposit slips naming various persons and entities, including BCD and Powleean Electronics Marketing, Inc. (Powleean).
AMLC investigation revealed suspicious financial activities of Powleean including massive transactions inconsistent with declared capital and business operations, casting doubt on legitimacy.
Extended inquiry involved incorporators and directors of Powleean, with Chen Jiali’s withdrawals totalling over P7 billion from 2005 to 2016, suggesting illicit fund flow related to drug trafficking cases.
The Court of Appeals (CA) issued a six-month Freeze Order effective 29 September 2016 for the accounts concerned and related web of accounts, directing banks to submit detailed returns.

Procedural History and Actions of Metrobank

Metrobank complied by submitting detailed returns identifying two BCD accounts as related: the old closed BCD Account No. 7-285-51225-1 and the active Subject BCD Account No. 7-285-51261-8.
Metrobank notified BCD that these accounts were materially linked to the accounts under freeze pursuant to the Freeze Order.
BCD thereafter filed a Motion to Lift the Freeze Order on 15 February 2017, arguing that Metrobank had no legal authority to freeze its accounts and that their freezing violated the Bank Secrecy Law.

Ruling of the Court of Appeals

On 21 March 2017, the CA denied BCD’s Motion to Lift the Freeze Order, affirming the soundness of Metrobank’s identification of related accounts under the Revised Implementing Rules and Regulations (RIRR) of the AMLA.
Evidence showed the Old BCD Account received P48,262,720.00 in deposits from an account of Chen Jiali subject to the Free