Anti-Money Laundering Act
February 15, 2013 and took effect on March
(R.A. 9160, as amended by
R.A. 9194)
Money laundering is a crime whereby the
proceeds of an unlawful activity are
transacted, thereby making them appear to
have originated from legitimate sources.
(Sec. 4)
POLICY OF THE LAW
It is the policy of the State to protect and
preserve the integrity and confidentiality of
bank accounts and to ensure that the
Philippines shall not be used as a money
laundering site for the proceeds of any
unlawful activity. Consistent with its foreign
policy, the State shall extend cooperation in
transnational investigations and
prosecutions of persons involved in money
laundering activities whenever committed.
(Sec. 2)
COVERED INSTITUTIONS
(1) Banks, non-banks, quasi-banks,
trust entities, and all other institutions and
their subsidiaries and affiliates supervised
or regulated by the Banko Sentral ng
Pilipinas (BSP);
(2) Insurance companies and all
other institutions supervised or regulated
by the Insurance Commission;
(3) (i) securities dealers, brokers,
salesmen, investment houses and other
similar entities managing securities or
rendering services as investment agent,
advisor, or consultant,
(ii) mutual funds, close-end
investment companies, common
trust funds, pre-need companies and
other similar entities,
(iii) foreign exchange
corporations, money changers,
money payment, remittance, and
transfer companies and other similar
entities, and
(iv) other entities
administering or otherwise dealing in
currency, commodities or financial
derivatives based thereon, valuable
objects, cash substitutes and other
similar monetary instruments or
property supervised or regulated by
the Securities and Exchange
Commission (Sec. 3 [a])
RA 10365 (Amending RA 9160, approved
7, 2013) referred to the foregoing as
Covered Persons and added the following
persons:
(4) jewelry dealers in precious
metals, who, as a business, trade in
precious metals, for transactions in excess
of One million pesos (P1,000,000.00);
(5) jewelry dealers in precious
stones, who, as a business, trade in
precious stones, for transactions in excess
of One million pesos (P1,000,000.00);
(6) company service providers which,
as a business, provide any of the following
services to third parties: (i) acting as a
formation agent of juridical persons; (ii)
acting as (or arranging for another person
to act as) a director or corporate secretary
of a company, a partner of a partnership, or
a similar position in relation to other
juridical persons; (iii) providing a registered
office, business address or accommodation,
correspondence or administrative address
for a company, a partnership or any other
legal person or arrangement; and (iv)
acting as (or arranging for another person
to act as) a nominee shareholder for
another person; and
(7) persons who provide any of the
following services:
i. managing of client money,
securities or other assets;
ii. management of bank,
savings or securities accounts;
iii. organization of
contributions for the creation,
operation or management of
companies; and
iv. creation, operation or
management of juridical persons or
arrangements, and buying and
selling business entities.
Notwithstanding the foregoing, the term
covered persons shall exclude lawyers and
accountants acting as independent legal
professionals in relation to information
concerning their clients or where disclosure
of information would compromise client
confidences or the attorney-client
relationship: Provided, That these lawyers
and accountants are authorized to practice
in the Philippines and shall continue to be
subject to the provisions of their respective
codes of conduct and/or professional
responsibility or any of its amendments.
(Sec. 1, RA 10365)

OBLIGATIONS OF COVERED
INSTITUTIONS
(1) Customer Identification
(2) Record Keeping
(3) Reporting of Covered and Suspicious
Transactions (Sec. 9)
Customer Identification
Covered institutions shall establish and
record the true identity of its clients based
on official documents. They shall maintain a
system of verifying the true identity of their
clients and, in case of corporate clients,
require a system of verifying their legal
existence and organizational structure, as
well as the authority and identification of all
persons purporting to act on their behalf.
The provisions of existing laws to the
contrary notwithstanding, anonymous
accounts, accounts under fictitious names,
and all other similar accounts shall be
absolutely prohibited. Peso and foreign
currency non-checking numbered accounts
shall be allowed. The BSP may conduct
annual testing solely limited to the
determination of the existence and true
identity of the owners of such accounts.
Record Keeping
All records of all transactions of covered
institutions shall be maintained and safely
stored for five (5) years from the dates of
transactions.
With respect to closed accounts, the
records on customer identification, account
files and business correspondence, shall be
preserved and safely stored for at least five
(5) years from the dates when they were
closed.
Reporting of Covered and Suspicious
Transactions
Covered institutions shall report to the
AMLC all covered transactions and
suspicious transactions within five (5)
working days from occurrence thereof,
unless the Supervising Authority prescribes
a longer period not exceeding ten (10)
working days.
Should a transaction be determined to be
both a covered transaction and a suspicious
transaction, the covered institution shall be
required to report the same as a suspicious
transaction.
When reporting covered or suspicious
transactions to the AMLC, covered
institutions and their officers and
employees [,representatives, agents,
advisors, consultants or associates not
included; repealed by RA 9194] shall not be
deemed to have violated Republic Act No.
1405, as amended, Republic Act No. 6426,
as amended, Republic Act No. 8791 and
other similar laws, but are prohibited from
communicating, directly or indirectly, in any
manner or by any means, to any person,
the fact that a covered or suspicious
transaction report was made, the contents
thereof, or any other information in relation
thereto. In case of violation thereof, the
concerned officer and employee of the
covered institution shall be criminally liable.
However, no administrative, criminal or civil
proceedings, shall lie against any person
for having made a covered or suspicious
transaction report in the regular
performance of his duties in good faith,
whether or not such reporting results in any
criminal prosecution under this Act or any
other law.
When reporting covered or suspicious
transactions to the AMLC, covered
institutions and their officers and
employees are prohibited from
communicating directly or indirectly, in any
manner or by any means, to any person or
entity, the media, the fact that a covered or
suspicious transaction report was made,
the contents thereof, or any other
information in relation thereto. Neither may
such reporting be published or aired in any
manner or form by the mass media,
electronic mail, or other similar devices. In
case of violation thereof, the concerned
officer and employee of the covered
institution and media shall be held
criminally liable.
Sec. 7 of RA 10365 amended the
foregoing to read as follows:
Covered persons shall report to the AMLC
all covered transactions and suspicious
transactions within five (5) working days
from occurrence thereof, unless the AMLC
prescribes a different period not exceeding
fifteen (15) working days.
Lawyers and accountants acting as
independent legal professionals are not
required to report covered and suspicious
transactions if the relevant information was
obtained in circumstances where they are
subject to professional secrecy or legal
professional privilege.
x x x
x x x
When reporting covered or suspicious
transactions to the AMLC, covered persons
and their officers and employees are
prohibited from communicating, directly or
indirectly, in any manner or by any means,
to any person or entity, the media, the fact
that a covered or suspicious transaction
has been reported or is about to be
reported, the contents of the report, or any
other information in relation thereto.
Neither may such reporting be published or
aired in any manner or form by the mass
media, electronic mail, or other similar
devices. In case of violation thereof, the
concerned officer and employee of the
covered person and media shall be held
criminally liable.
COVERED TRANSACTIONS
A transaction in cash or other equivalent
monetary instrument involving a total
amount in excess of five hundred thousand
pesos (P500,000.00) within one banking
day. (Sec. 3 [b], as amended by Sec. 1 of
RA 9194)
SUSPICIOUS TRANSACTIONS
Transactions with covered institutions,
regardless of the amounts involved, where
any of the following circumstances exist:
(1) There is no underlying legal or
trade obligation, purpose or economic
justification;
(2) The client is not properly
identified;
(3) The amount involved is not
commensurate with the business or
financial capacity of the client;
(4) Taking into account all known
circumstances, it may be perceived that the
clients transaction is structured in order to
avoid being the subject of reporting
requirements under the Act;
(5) Any circumstance relating to the
transaction which is observed to deviate
from the profile of the client and/or the
clients past transactions with the covered
institution;
(6) The transaction is in anyway
related to an unlawful activity or offense
under this Act that is about to be, is being
or has been committed; or
(7) Any transaction that is similar or
analogous to any of the foregoing (Sec. 3
[b-1], added by Sec. 2 of RA 9194)
WHEN IS MONEY LAUNDERING
COMMITTED
Money laundering is a crime whereby the
proceeds of an unlawful activity are
transacted, thereby making them appear to
have originated from legitimate sources.
It is committed by the following:
(1) Any person knowing that any
monetary instrument or property
represents, involves, or relates to the
proceeds of any unlawful activity, transacts
or attempts to transact said monetary
instrument or property.
(2) Any person knowing that any
monetary instrument or property involves
the proceeds of any unlawful activity,
performs or fails to perform any act as a
result of which he facilitates the offense of
money laundering referred to in paragraph
(a) above.
(3) Any person knowing that any
monetary instrument or property is
required under this Act to be disclosed and
filed with the Anti-Money Laundering
Council (AMLC), fails to do so. (Sec. 4)
Sec. 4 of RA 10365 amends this section as
follows:
Money laundering is committed by any
person who, knowing that any monetary
instrument or property represents,
involves, or relates to the proceeds of any
unlawful activity:
(a) transacts said monetary
instrument or property;
(b) converts, transfers, disposes of,
moves, acquires, possesses or uses said
monetary instrument or property;
(c) conceals or disguises the true
nature, source, location, disposition,
movement or ownership of or rights with
respect to said monetary instrument or
property;
(d) attempts or conspires to commit
money laundering offenses referred to in
paragraphs (a), (b) or (c);
(e) aids, abets, assists in or counsels
the commission of the money laundering
offenses referred to in paragraphs (a), (b)
or (c) above; and
(f) performs or fails to perform any
act as a result of which he facilitates the
offense of money laundering referred to in
paragraphs (a), (b) or (c) above.
Money laundering is also committed by any
covered person who, knowing that a
covered or suspicious transaction is
required under this Act to be reported to
the Anti-Money Laundering Council (AMLC),
fails to do so.
UNLAWFUL ACTIVITIES OR PREDICATE
CRIMES
Unlawful activity refers to any act or
omission or series or combination thereof
involving or having direct relation to the
following:
(1) Kidnapping for ransom under
Article 267 of Act No. 3815, otherwise
known as the Revised Penal Code, as
amended;
(2) Sections 4, 5, 6, 8, 9, 10, 12, 13,
14, 15, and 16 of Republic Act No. 9165,
otherwise known as the Comprehensive
Dangerous Drugs Act of 2002;
(3) Section 3 paragraphs B, C, E, G, H
and I of Republic Act No. 3019, as
amended; otherwise known as the Anti-
Graft and Corrupt Practices Act;
(4) Plunder under Republic Act No.
7080, as amended;
(5) Robbery and extortion under
Articles 294, 295, 296, 299, 300, 301 and
302 of the Revised Penal Code, as
amended;
(6) Jueteng and Masiao punished as
illegal gambling under Presidential Decree
No. 1602;
(7) Piracy on the high seas under the
Revised Penal Code, as amended and
Presidential Decree No. 532;
(8) Qualified theft under Article 310
of the Revised Penal Code, as amended;
(9) Swindling under Article 315 of the
Revised Penal Code, as amended;
(10) Smuggling under Republic Act
Nos. 455 and 1937;
(11) Violations under Republic Act
No. 8792, otherwise known as the
Electronic Commerce Act of 2000;
(12) Hijacking and other violations
under Republic Act No. 6235; destructive
arson and murder, as defined under the
Revised Penal Code, as amended, including
those perpetrated by terrorists against non-
combatant persons and similar targets;
(13) Fraudulent practices and other
violations under Republic Act No. 8799,
otherwise
known as the Securities Regulation Code of
2000;
(14) Felonies or offenses of a similar
nature that are punishable under the penal
laws of other countries. (Sec. 3 [i])
RA 10365 added the following:
(15) Terrorism and conspiracy to
commit terrorism as defined and penalized
under Sections 3 and 4 of Republic Act No.
9372
(16) Financing of terrorism under
Section 4 and offenses punishable under
Sections 5, 6, 7 and 8 of Republic Act No.
10168, otherwise known as the Terrorism
Financing Prevention and Suppression Act
of 2012:
(17) Bribery under Articles 210, 211
and 211-A of the Revised Penal Code, as
amended, and Corruption of Public Officers
under Article 212 of the Revised Penal
Code, as amended;
(18) Frauds and Illegal Exactions and
Transactions under Articles 213, 214, 215
and 216 of the Revised Penal Code, as
amended;
(19) Malversation of Public Funds and
Property under Articles 217 and 222 of the
Revised Penal Code, as amended;
(20) Forgeries and Counterfeiting
under Articles 163, 166, 167, 168, 169 and
176 of the Revised Penal Code, as
amended;
(21) Violations of Sections 4 to 6 of
Republic Act No. 9208, otherwise known as
the Anti-Trafficking in Persons Act of 2003;
(22) Violations of Sections 78 to 79
of Chapter IV, of Presidential Decree No.
705, otherwise known as the Revised
Forestry Code of the Philippines, as
amended;
(23) Violations of Sections 86 to 106
of Chapter VI, of Republic Act No. 8550,
otherwise known as the Philippine Fisheries
Code of 1998;
(24) Violations of Sections 101 to
107, and 110 of Republic Act No. 7942,
otherwise known as the Philippine Mining
Act of 1995;
(25) Violations of Section 27(c), (e),
(f), (g) and (i), of Republic Act No. 9147,
otherwise known as the Wildlife Resources
Conservation and Protection Act;
(26) Violation of Section 7(b) of
Republic Act No. 9072, otherwise known as
the National Caves and Cave Resources
Management Protection Act;
(27) Violation of Republic Act No.
6539, otherwise known as the Anti-
Carnapping Act of 2002, as amended;
(28) Violations of Sections 1, 3 and 5
of Presidential Decree No. 1866, as
amended, otherwise known as the decree
Codifying the Laws on Illegal/Unlawful
Possession, Manufacture, Dealing In,
Acquisition or Disposition of Firearms,
Ammunition or Explosives;
(29) Violation of Presidential Decree
No. 1612, otherwise known as the Anti-
Fencing Law;
(30) Violation of Section 6 of
Republic Act No. 8042, otherwise known as
the Migrant Workers and Overseas Filipinos
Act of 1995, as amended by Republic Act
No. 10022;
(31) Violation of Republic Act No.
8293, otherwise known as the Intellectual
Property Code of the Philippines;
(32) Violation of Section 4 of
Republic Act No. 9995, otherwise known as
the Anti-Photo and Video Voyeurism Act of
2009;
(33) Violation of Section 4 of
Republic Act No. 9775, otherwise known as
the Anti-Child Pornography Act of 2009;
(34) Violations of Sections 5, 7, 8, 9,
10(c), (d) and (e), 11, 12 and 14 of Republic
Act No. 7610, otherwise known as the
Special Protection of Children Against
Abuse, Exploitation and Discrimination;
ANTI-MONEY LAUNDERING COUNCIL
The Anti-Money Laundering Council shall be
composed of the Governor of the Bangko
Sentral ng Pilipinas as chairman, the
Commissioner of the Insurance Commission
and the Chairman of the Securities and
Exchange Commission as members. (Sec.
7)
FUNCTIONS
The AMLC shall act unanimously in the
discharge of its functions as defined
hereunder:
(1) to require and receive covered or
suspicious transaction reports from covered
institutions;
(2) to issue orders addressed to the
appropriate Supervising Authority or the
covered institution to determine the true
identity of the owner of any monetary
instrument or property subject of a covered
transaction or suspicious transaction report
or request for assistance from a foreign
State, or believed by the Council, on the
basis of substantial evidence, to be, in
whole or in part, wherever located,
representing, involving, or related to,
directly or indirectly, in any manner or by
any means, the proceeds of an unlawful
activity.
(3) to institute civil forfeiture
proceedings and all other remedial
proceedings through the Office of the
Solicitor General;
(4) to cause the filing of complaints
with the Department of Justice or the
Ombudsman for the prosecution of money
laundering offenses;
(5) to investigate suspicious
transactions and covered transactions
deemed suspicious after an investigation
by AMLC, money laundering activities, and
other violations of this Act;
(6) to apply before the Court of
Appeals, ex parte, for the freezing of any
monetary instrument or property alleged to
be the proceeds of any unlawful activity as
defined in Section 3(i) hereof;
(7) to implement such measures as
may be necessary and justified under this
Act to counteract money laundering;
(8) to receive and take action in
respect of, any request from foreign states
for assistance in their own anti-money
laundering operations provided in this Act;
(9) to develop educational programs
on the pernicious effects of money
laundering, the methods and techniques
used in money laundering, the viable
means of preventing money laundering and
the effective ways of prosecuting and
punishing offenders;
(10) to enlist the assistance of any
branch, department, bureau, office, agency
or instrumentality of the government,
including government-owned and
-controlled corporations, in undertaking any
and all anti-money laundering operations,
which may include the use of its personnel,
facilities and resources for the more
resolute prevention, detection and
investigation of money laundering offenses
and prosecution of offenders; and
(11) to impose administrative
sanctions for the violation of laws, rules,
regulations and orders and resolutions
issued pursuant thereto. (Sec. 7)
Sec. 6 of RA 10365 added the following
power to the AMLC:
(12) to require the Land Registration
Authority and all its Registries of Deeds to
submit to the AMLC, reports on all real
estate transactions involving an amount in
excess of Five hundred thousand pesos
(P500,000.00) within fifteen (15) days from
the date of registration of the transaction,
in a form to be prescribed by the AMLC. The
AMLC may also require the Land
Registration Authority and all its Registries
of Deeds to submit copies of relevant
documents of all real estate transactions.
FREEZING OF MONETARY INSTRUMENT
OR PROPERTY
The Court of Appeals, upon application ex
parte by the AMLC and after determination
that probable cause exists that any
monetary instrument or property is in any
way related to an unlawful activity as
defined in Section 3(i) hereof, may issue a
freeze order which shall be effective
immediately. The freeze order shall be for a
period not exceeding six (6) months
depending upon the circumstances of the
case. No court can issue a temporary
restraining order or a writ of injunction
against any freeze order, except the
Supreme Court. (Sec. 10)
Sec. 8 of RA 10365 revised the
freezing mechanism to be as follows:
Upon a verified ex parte petition by the
AMLC and after determination that
probable cause exists that any monetary
instrument or property is in any way related
to an unlawful activity as defined in Section
3(i) hereof, the Court of Appeals may issue
a freeze order which shall be effective
immediately, and which shall not exceed
six (6) months depending upon the
circumstances of the case: Provided, That if
there is no case filed against a person
whose account has been frozen within the
period determined by the court, the freeze
order shall be deemed ipso facto lifted:
Provided, further, That this new rule shall
not apply to pending cases in the courts. In
any case, the court should act on the
petition to freeze within twenty-four (24)
hours from filing of the petition. If the
application is filed a day before a
nonworking day, the computation of the
twenty-four (24)-hour period shall exclude
the nonworking days.
A person whose account has been frozen
may file a motion to lift the freeze order
and the court must resolve this motion
before the expiration of the freeze order.
No court shall issue a temporary restraining
order or a writ of injunction against any
freeze order, except the Supreme Court.
AUTHORITY TO INQUIRE INTO BANK
DEPOSITS
Notwithstanding the provisions of Republic
Act No. 1405, as amended, Republic Act No.
6426, as amended, Republic Act No. 8791,
and other laws, the AMLC may inquire into
or examine any particular deposit or
investment with any banking institution or
non-bank financial institution upon order of
any competent court in cases of violation of
this Act when it has been established that
(1) there is probable cause that the
deposits OR
(2) investments involved are related
to an unlawful activity as defined in Section
3(i) hereof or a money laundering offense
under Section 4 hereof; except that no
court order shall be required in cases
involving unlawful activities defined in
Sections 3(i)(1), (2) and (12).
To ensure compliance with this Act, the
Bangko Sentral ng Pilipinas (BSP) may
inquire into or examine any deposit or
investment with any banking institution or
non-bank financial institution when the
examination is made in the course of a
periodic or special examination, in
accordance with the rules of examination of
the BSP. (Sec.11)
Sec. 2 of RA 10167 amended Sec. 11 to
read as follows:
Notwithstanding the provisions of Republic
Act No. 1405, as amended; Republic Act No.
6426, as amended; Republic Act No. 8791;
and other laws, the AMLC may inquire into
or examine any particular deposit or
investment, including related accounts,
with any banking institution or non-bank
financial institution upon order of any
competent court based on an ex parte
application in cases of violations of this Act,
when it has been established that there is
probable cause that the deposits or
investments, including related accounts
involved, are related to an unlawful activity
as defined in Section 3(i) hereof or a money
laundering offense under Section 4 hereof;
except that no court order shall be required
in cases involving activities defined in
Section 3(i)(1), (2), and (12) hereof, and
felonies or offenses of a nature similar to
those mentioned in Section 3(i)(1), (2), and
(12), which are Punishable under the penal
laws of other countries, and terrorism and
conspiracy to commit terrorism as defined
and penalized under Republic Act No.
9372."
"The Court of Appeals shall act on the
application to inquire into or examine any
deposit or investment with any banking
institution or non-bank financial institution
within twenty-four (24) hours from filing of
the application."
"To ensure compliance with this Act, the
Bangko Sentral ng Pilipinas may, in the
course of a periodic or special examination,
check the compliance of a Covered
institution with the requirements of the
AMLA and its implementing rules and
regulations."
"For purposes of this section, related
accounts shall refer to accounts, the funds
and sources of which originated from
and/or are materially linked to the
monetary instrument(s) or property (ies)
subject of the freeze order(s)."
"A court order ex parte must first be
obtained before the AMLC can inquire into
these related Accounts: Provided, That the
procedure for the ex parte application of
the ex parte court order for the principal
account shall be the same with that of the
related accounts."
"The authority to inquire into or examine
the main account and the related accounts
shall comply with the requirements of
Article III, Sections 2 and 3 of the 1987
Constitution, which are hereby incorporated
by reference."
Amendments under RA 9194
(a) Lowers the threshold amount for single
covered transactions (cash or other
equivalent monetary instrument) from P4M
to P500,000.00 within one (1) banking day.
(b) Expands the reporting requirements to
include the reporting of suspicious
transactions regardless of the amount
involved
(c) Authorizes AMLC to inquire into or
examine any particular deposit or
investment, with any banking institution or
non-bank financial institution and their
subsidiaries and affiliates upon order of any
competent court in cases of violation of this
Act, when it has been established that
there is probable cause that the deposits or
investments are related to an unlawful
activity. However, no court order is required
in cases involving unlawful activities of
kidnapping for ransom, narcotics offenses
and hijacking, destructive arson and
murder, including those perpetrated by
terrorists against non-combatant persons
and similar targets.
(d) Authorizes the Bangko Sentral ng
Pilipinas to inquire into or examine any
deposit or investment with any banking
institution or non-bank financial institution
and their subsidiaries and affiliates when
the examination is made in the course of a
periodic or special examination, in
accordance with the rules of examination of
the BSP to ensure compliance with R.A. No.
9160, as amended.
(e) Transfers the authority to freeze any
money/property from the AMLC to the Court
of Appeal
REPUBLIC V. JUDGE EUGENIO
G.R. NO. 174629, 14 FEBRUARY 2008
FACTS: After the Agan v. PIATCO ruling, a
series of investigations concerning the
award of the NAIA 3 contracts to PIATCO
were undertaken by the Ombudsman and
the Compliance and Investigation Staff
(CIS) of the Anti-Money Laundering
Council (AMLC).
The OSG wrote AMLC requesting
AMLCs assistance in obtaining more
evidence to completely reveal the financial
trail of corruption surrounding the NAIA 3
Project, and also noting that the Republic
was presently defending itself in two
international arbitration cases. The CIS
conducted an intelligence database search
on the financial transactions of certain
individuals involved in the award, including
Alvarez (Chairman of the Pre-Qualification
Bids and Awards Technical Committee). By
this time, Alvarez had already been
charged by the Ombudsman with violation
of Section 3(J) of the Anti Graft and Corrupt
Practices Act. The search revealed that
Alvarez maintained 8 bank accounts with 6
different banks
The AMLC issued a resolution authorizing
its Executive Director to sign and verify an
application to inquire into the deposits or
investments of Alvarez et al. and to
authorize the AMLC Secretariat to conduct
an inquiry once the RTC grants the
application. The rationale for the resolution
was founded on the findings of the CIS that
amounts were transferred from a Hong
Kong bank account to bank accounts in
the Philippines maintained by respondents.
The Resolution also noted that by awarding
the contract to PIATCO (despite its lack of
financial capacity) Alvarez violated Section
3(E) of the Anti Graft and Corrupt Practices
Act. The MAKATI RTC rendered an Order
granting the AMLC the authority to inquire
and examine the subject bank accounts of
Alvarez et al.
In response to a letter of Special Prosecutor
Villa-Ignacio, AMLC issued a Resolution
authorizing its Executive Director to inquire
into and examine the accounts of Alvarez,
PIATCO, and several other entities involved
in the nullified contract. AMLC filed an
application before the MANILA RTC to
inquire into the accounts alleged as having
been used to facilitate corruption in the
NAIA 3 Project. The ex parte application
was granted and the MANILA RTC issued a
bank inquiry order.
Alvarez alleged that he fortuitously learned
of the bank inquiry order, which was issued
following an ex parte application, and he
argued that nothing in the Anti-Money
Laundering Act (AMLA) authorized the
AMLC to seek the authority to inquire into
bank accounts ex parte.
After several motions, manifestations,
orders and resolutions the case went up to
the SC. Alvarez et al.s position: The AMLA,
being a substantive penal statute, has no
retroactive effect and the bank inquiry
order could not apply to deposits or
investments opened prior to the effectivity
of the AMLA (17 October 2001). The subject
bank accounts, opened in 1989 to 1990,
could not be the subject of the bank inquiry
order without violating the constitutional
prohibition against ex post facto laws.
ISSUE: Whether or not the proscription
against ex post facto laws applies to
Section 11 of the AMLA (a provision which
does not provide a penal sanction BUT
which merely authorizes the inspection of
suspect accounts and deposits).
HELD: YES. It is clear that no person may
be prosecuted under the PENAL provisions
of the AMLA for acts committed prior to the
enactment of the law (17 October 2001).
With respect to the AUTHORITY TO
INSPECT, it should be noted that an ex post
facto law is one that (among others)
deprives a person accused of a crime of
some lawful protection to which he has
become entitled, such as the protection of
a former conviction or acquittal, or a
proclamation of amnesty.
PRIOR to the AMLA:
(1) The fact that bank accounts were
involved in activities later on enumerated
in the law did not, by itself, remove such
accounts from the shelter of absolute
confidentiality.
(2) In order that bank accounts could be
examined, there was need to secure either
the written permission of the depositor OR
a court order authorizing such examination,
assuming that they were involved in cases
of bribery or dereliction of duty of public
officials, or in a case where the money
deposited or invested was itself the subject
matter of the litigation.
The passage of the AMLA stripped another
layer off the rule on absolute confidentiality
that provided a measure of lawful
protection to the account holder. The
application of the bank inquiry order as a
means of inquiring into transactions
entered into prior to the passage of the
AMLA would be constitutionally infirm,
offensive as to the ex post facto clause.
NEVERTHELESS, the argument that the
prohibition against ex post facto laws goes
as far as to prohibit any inquiry into
deposits in bank accounts OPENED prior to
the effectivity of the AMLA even if the
TRANSACTIONS were entered into when the
law had already taken effect cannot be
sustained. This argument will create a
loophole in the AMLA that would result to
further money laundering. It is hard to
presume that Congress intended to enact a
self-defeating law in the first place, and the
courts are inhibited from such a offense are located; provided, however,
construction by the cardinal rule that a law
should be interpreted with a view to
upholding rather than destroying it.
REPUBLIC OF THE PHILIPPINES, VS.
GLASGOW CREDIT AND COLLECTION
SERVICES, INC. AND CITYSTATE
SAVINGS BANK, INC., G.R. No. 170281,
January 18, 2008
FACTS: On October 27, 2005, the trial court
issued the assailed order. It dismissed the
case on the following grounds: (1) improper
venue as it should have been filed in the
RTC of Pasig where CSBI, the depository
bank of the account sought to be forfeited,
was located; (2) insufficiency of the
complaint in form and substance and (3)
failure to prosecute. It lifted the writ of
preliminary injunction and directed CSBI to
release to Glasgow or its authorized
representative the funds in CA-005-10-
000121-5.
On November 15, 2005, this Court issued
A.M. No. 05-11-04-SC, the 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 RA 9160, as amended (Rule
of Procedure in Cases of Civil Forfeiture).
The order dismissing the Republic's
complaint for civil forfeiture of Glasgow's
account in CSBI has not yet attained finality
on account of the pendency of this appeal.
Thus, the Rule of Procedure in Cases of Civil
Forfeiture applies to the Republic's
complaint. Moreover, Glasgow itself
judicially admitted that the Rule of
Procedure in Cases of Civil Forfeiture is
"applicable to the instant case."
Section 3, Title II (Civil Forfeiture in the
Regional Trial Court) of the Rule of
Procedure in Cases of Civil Forfeiture
provides:
Sec. 3. Venue of cases cognizable by the
regional trial court. - A petition for civil
forfeiture shall be filed in any regional trial
court of the judicial region where the
monetary instrument, property or proceeds
representing, involving, or relating to an
unlawful activity or to a money laundering
that where all or any portion of the
monetary instrument, property or proceeds
is located outside the Philippines, the
petition may be filed in the regional trial
court in Manila or of the judicial region
where any portion of the monetary
instrument, property, or proceeds is
located, at the option of the petitioner.
(emphasis supplied)
Under Section 3, Title II of the Rule of
Procedure in Cases of Civil Forfeiture,
therefore, the venue of civil forfeiture cases
is any RTC of the judicial region where the
monetary instrument, property or proceeds
representing, involving, or relating to an
unlawful activity or to a money laundering
offense are located. Pasig City, where the
account sought to be forfeited in this case
is situated, is within the National Capital
Judicial Region (NCJR). Clearly, the
complaint for civil forfeiture of the account
may be filed in any RTC of the NCJR. Since
the RTC Manila is one of the RTCs of the
NCJR, it was a proper venue of the
Republic's complaint for civil forfeiture of
Glasgow's account.
In relation thereto, Rule 12.2 of the Revised
Implementing Rules and Regulations of RA
9160, as amended, states:
RULE 12
Forfeiture Provisions
xxx xxx xxx
Rule 12.2. When Civil Forfeiture May be
Applied. - When there is a SUSPICIOUS
TRANSACTION REPORT OR A COVERED
TRANSACTION REPORT DEEMED
SUSPICIOUS AFTER INVESTIGATION BY THE
AMLC, and the court has, in a petition filed
for the purpose, ordered the seizure of any
monetary instrument or property, in whole
or in part, directly or indirectly, related to
said report, the Revised Rules of Court on
civil forfeiture shall apply.
RA 9160, as amended, and its
implementing rules and regulations lay
down two conditions when applying for civil
forfeiture:
(1) when there is a suspicious transaction
report or a covered transaction report
deemed suspicious after investigation by
the AMLC and

(2) the court has, in a petition filed for the
purpose, ordered the seizure of any
monetary instrument or property, in whole
or in part, directly or indirectly, related to
said report.
Rule 6.1. Prosecution of Money Laundering -
(a) Any person may be charged with and C.
convicted of both the offense of money
laundering and the unlawful activity as
defined under Rule 3(i) of the AMLA.
(b) Any proceeding relating to the unlawful
activity shall be given precedence over the
prosecution of any offense or violation
under the AMLA without prejudice to the
application ex-parte by the AMLC to the
Court of Appeals for a freeze order with
respect to the monetary instrument or
D.
property involved therein and resort to
other remedies provided under the AMLA,
the Rules of Court and other pertinent laws
and rules. (emphasis supplied)
Foreign Currency Deposit Act
of the Philippines
(R.A 6426)
A. Authority to deposit foreign currencies
Any person, natural or juridical, may,
deposit with such Philippine banks in
good standing, foreign currencies
which are acceptable as part of the
international reserve. (Section 2)
B. Authority of banks to accept foreign
currency deposits
The banks designated by the Central
Bank under Section two hereof shall
have the authority:
(1) To accept deposits and to accept
foreign currencies in trust Provided,
That numbered accounts for
recording and servicing of said
deposits shall be allowed;
(2) To issue certificates to evidence
such deposits;
(3) To discount said certificates;
(4) To accept said deposits as
collateral for loans subject to such
rules and regulations as may be
promulgated by the Central Bank
from time to time; and
(5) To pay interest in foreign currency
on such deposits. (Section 3)
Withdrawability and transferability of
deposits
There shall be no restriction on the
withdrawal by the depositor of his
deposit or on the transferability of
the same abroad except those
arising from the contract between
the depositor and the bank. (Section
5)
Tax exemption
All foreign currency deposits
made including interest and all other
income or earnings of such deposits,
are hereby exempted from any and
all taxes whatsoever irrespective of
whether or not these deposits are
made by residents or nonresidents
so long as the deposits are eligible or
allowed under aforementioned laws
and, in the case of nonresidents,
irrespective of whether or not they
are engaged in trade or business in
the Philippines. (Section 6)
Although originally exempt
from tax, foreign currency
deposits and their interests,
are now under RA 9294
subject to the following tax
rules:
a. Income derived by depositary
banks on foreign currency
deposit transactions with
nonresidents, offshore banking
units in the Philippines, local
commercial banks, shall
continue to be subject to
regular income tax due from
banks;
b. Income derived from foreign
currency loans granted to such
depository banks to residents
 other than offshore banking Intengan v. CA (G.R. No. 128996,
units in the Philippines shall be February 15, 2002)
subject to a final tax of 10%;
Facts:
c. Any income of nonresidents,
whether individuals or - Citibank filed a complaint for
corporations, from violation of section 31, in relation to
transactions with depository section 144 of the Corporation Code
banks shall be exempt from against two (2) of its officers, Dante
income tax. L. Santos and Marilou Genuino

- Attached to the complaint was an

affidavit executed by private
E. Secrecy of foreign currency deposits respondent Vic Lim, a vice-president
of Citibank
1) All foreign currency deposits are
hereby declared as and - Santos and Genuino appeared to
considered of an absolutely have been actively engaged in
confidential nature and in no business endeavors that were in
instance be examined, inquired or conflict with the business of the bank
looked into by any person, and that out of these transactions,
government official, bureau or they derived substantial financial
office whether judicial or gains
administrative or legislative, or
any other entity whether public or - The bank clients which Santos and
private. Genuino helped/caused to divert
their deposits/money placements
Exception: Upon the written with Citibank, NA to Torrance and
permission of the depositor Global (their family corporations)
were petitioners herein
2) Said foreign currency deposits
shall be exempt from attachment, - The provincial prosecutor directed
garnishment, or any other order the filing of informations against
or process of any court, private respondents for alleged
legislative body, government violation of Republic Act No. 1405,
agency or any administrative otherwise known as the Bank
body whatsoever. (Section 8) Secrecy Law

F. Penal provisions - Private respondents counsel then

filed an appeal before the
Any willful violation of this Act or any Department of Justice (DOJ)
regulation duly promulgated by the
Monetary Board pursuant hereto - DOJ Secretary Franklin M. Drilon
shall subject the offender upon issued a Resolution ordering the
conviction to an imprisonment of not withdrawal of the aforesaid
less than one year nor more than informations against private
five years or a fine of not less than respondents
five thousand pesos nor more than
twenty-five thousand pesos, or both - Petitioners motion for
such fine and imprisonment at the reconsideration was denied by DOJ
discretion of the court. (Section 10) Acting Secretary Demetrio G.
Demetria
Case:
- Petitioners sought the reversal of the
DOJ resolutions via a petition
 for certiorari and mandamus filed
with the Supreme Court
- The Former First Division of the Court
referred the matter to the Court of
Appeals
- CA rendered judgment dismissing
the petition ruling that Clearly, the
disclosure of petitioners deposits was
necessary to establish the allegation
that Santos and Genuino had
violated Section 31 of the
Corporation Code in acquiring any
interest adverse to the corporation in
respect of any matter which has
been reposed in him in confidence.
To substantiate the alleged scheme
of Santos and Genuino, private
respondents had to present the
records of the monies which were
manipulated by the two officers
which included the bank records of
herein petitioners.
- In assailing the appellate courts
findings, petitioners assert that the
disclosure of their bank records was
unwarranted and illegal
Issue:
- Whether the disclosure of
petitioners accounts is legal
Ruling:
- Petition is not meritorious
- The accounts in question are U.S.
dollar deposits; consequently, the
applicable law is not Republic Act No.
1405 but Republic Act No.
6426, known as the Foreign Currency
Deposit Act of the Philippines,
section 8 of which provides:
Sec. 8. Secrecy of Foreign Currency
Deposits.- All foreign currency
deposits authorized under this Act,
as amended by Presidential Decree
No. 1035, as well as foreign currency
deposits authorized under
Presidential Decree No. 1034, are
hereby declared as and considered of
an absolutely confidential nature
and, except upon the written
permission of the depositor, in no
instance shall such foreign currency
deposits be examined, inquired or
looked into by any person,
government official bureau or office
whether judicial or administrative or
legislative or any other entity
whether public or private: Provided,
however, that said foreign currency
deposits shall be exempt from
attachment, garnishment, or any
other order or process of any court,
legislative body, government agency
or any administrative body
whatsoever.
- Thus, under R.A. No. 6426 there is
only a single exception to the
secrecy of foreign currency deposits,
that is, disclosure is allowed only
upon the written permission of
the depositor.
- Private respondents Lim and Reyes
admitted that they had disclosed
details of petitioners dollar
deposits without the latters written
permission. It does not matter if such
disclosure was necessary to establish
Citibanks case against Santos and
Genuino
- However, Applying Act No. 3326, the
offense prescribes in eight years. Per
available records, private
respondents may no longer be haled
before the courts for violation of
Republic Act No. 6426
-
TRUTH IN LENDING ACT
RA No. 3765
Purpose of truth in lending act:
1) To protect persons from lack of
awareness of the true cost of credit
2) And to prevent the uninformed use
of credit
TILA apply:
 It applies to creditors who extend
loans, sales on installments and other
credit transactions.
Items required to be disclosed?
1. In credit sales:
a. Cash price or delivered price
b. Credit for down payment or
trade in
c. Total amount to be financed;
d. Charges not incident to the
sale;
e. Finance charges amounts to
be paid by the debtor incident
to the extension of credit such
as interest, discounts,
collection fees, credit
investigation fees and
attorneys fees
f. Percentage of the finance
charges of the amount to be
fincaned
g. Effective interest rate
h. Repayment program and
i. Default or delinquency
charges or late payments
2. In consumer loans:
a. Amount of credit
b. Charges
c. Amount to be financed
d. Amount of finance charge
e. Effective interest rate
f. Percentage of finance charge
and amount to be financed
g. Default or delinquency
charges and
h. Description of security
Disclosure be made?
Prior to the consummation of the
transaction and in clear statement in
writing
Credit transactions covered by TILA
1) Loans, mortgages, deeds of trust,
advnces and discounts;
2) Conditional sales contracts, any
contract to sell, or sale or
contract of sale of property or
services, either for present or
future delivery, under which part
or all of the price is payable
subsequent to the making of such
sale or contract
3) Any rental-purchase contract
4) Any contract for the hire,
bailment or other leasing of
property;
5) Any option, demand, lien, pledge
or other claim against, or for
delivery of, property or money;
6) Any purchase, or other acquisition
of, or any credit upon the security
of, any obligation or claim arising
out of any of the foregoing; and
7) Any transaction or series of
transactions having a similar
purpose or effect.
Transactions not covered by TILA
` 1) those which do not involve the
payment of any finance charges by the
debtor; and
2) where the debtor is the one
specifying a definite and fixed set
of credit terms such as bank
deposits, insurance contracts,
sale of bonds, etc.
Effect of non-compliance
ON Transaction:
Charges not itemized cannot
be collected. If already paid, can be
recovered
On Creditor:
Liable in the amount of P100
or in an amount equal to twice the finance
chaged required by such creditor,
whichever is the greater, however, such
liability shall not exceed P2,000 on any
credit transaction.
Willful violation of any provision of TILA
On creditor:
Shall be liable to a fine of not
less than P1,000 OR ORE THAN p5,000 or
imprisonment for not less than 6 months,
nor more than one year or both.
An action for violation of the TILA must be
brought:
Within 1 year from the date of the
occurrence of the violation.
 BPI vs SPS Angelina YU and Tuanson
Builders Corporation, GR No. 184122,
Jan. 20, 2010
Facts:
Respondent Norman and Angelina
YU, doing business as Tuanson Trading, and
Tuanson Builders Corporation borrowed
various sums totaling P75M from Far East
Bank and Trust Company. For collateral,
they executed real estate mortgages over
several of their properties, including certain
lands in Legaspi City owned by Tuanson
Trading. In 1999, unable to pay their loans,
the Yus and Tuanson Builders requested a
loan restructuring, which the bank, now
merged with Bank of the Phil islands,
granted. By this time, the Yus loan balance
stood at P33,400,000.00. The restructured
loan used the same collaterals.
The BPI failed to state the penalty charges
in the disclosure statement, however the
PN that the YUS signed, on the same date
as the disclosure statement contained a
penalty clause that said: I/we JOINTLY AND
SEVERALLY, promise to further pay a late
payment charge on any overdue amount
herein at the rate of 3% per month.
Issue:
Whether or not BPI complied with the
requirement of TILA
Ruling: yes, the consolidated bank and trust
corporation v court of appeals declared
valid the penalty charges that are
stipulated in the PN. What the court
disallowed was the collection of a handling
charge that the promissory notes did not
contain.
In the case of Development Bank of
the Phillipines v Arcilla, Jr. The court said
under circular 158 of the central bank, the
lender is required by ra 3765 in the
contract covering the credit transaction or
any other document to be acknowledged
and signed by the borrower. In addition, the
contract or document shall specify
additional charges, if any, which will be
collected in case certain stipulations in the
contract are not met by the debtor. In this
case, the PN signed by the YUS contained
data, including penalty charges, required
by the TILA.
FOREIGN INVESTMENTS ACT
(R.A. 7042)
POLICY OF THE LAW
SEC. 2. Declaration of Policy. - It is the policy
productive investments from foreign individuals,
including their political subdivisions, in activitie
industrialization and socio-economic developmen
allowed in such activity by the Constitution and
encouraged in enterprises that significantly expan
Filipinos; enhance economic value of farm produc
expand the scope, quality and volume of exports
transfer relevant technologies in agriculture, indus
shall be welcome as a supplement to Filipino capit
mainly the domestic market.
As a general rule, there are no restrictions on ext
In domestic market enterprises, foreigners can inv
equity except in areas included in the negative lis
domestic market shall be encouraged to undertake
participation in their businesses by taking in Filipi
directors, implementing transfer of technology to F
economy and enhancing skills of Filipino workers.
Basically the purpose is to encourage
FOREIGN INVESTMENTS because that would
translate to the creation of jobs, etc. In
other words, it has a multiplier effect.
DEFINITION O
SEC. 3. Definitions. As used in this Act:
a) the term Philippine National shall mean
partnership or association wholly owned by citizen
under the laws of the Philippines of which at le
outstanding and entitled to vote is owned and held
organized abroad and registered as doing business
of which one hundred percent (100%) of the cap
wholly owned by Filipinos or a trustee of funds
separation benefits, where the trustee is a Philippi
the fund will accrue to the benefit of Philippine nat
its non-Filipino stockholders own stocks in a
registered enterprise, at least sixty percent (60%)
vote of each of both corporations must be owned
least sixty percent (60%) of the members of the B
must be citizens of the Philippines, in order that th
national; (as amended by R.A. 8179).
b) the term investment shall mean equity
existing under the laws of the Philippines;
c) the term foreign investment shall mean an
national in the form of foreign exchange and/
Philippines and duly registered with the Central Ba
 of such assets other than foreign exchange; -
YES. Because you are an export
enterprise. Regardless of the
xxxxxxx capitalization, an export
enterprise can be 100% foreign
e) the term export enterprise shall mean an enterpriseowned wherein
fora as
manufacturer,
long as it processor
is not
or service (including tourism) enterprise exports sixty percent
engaged
(60%) orin more
activities
of its output,
where or
wherein a trader purchases products domestically and exportsownership
sixty percent
limited in
(60%)
the negative
or more of
such purchases; list.

f) the term domestic market enterprise shallTAKE mean NOTE

an enterprise
of the items
which
in the 8 TH FOREIGN
products goods for
sale, or renders services to the domestic market INVESTMENT
entirely or if NEGATIVE
exporting LIST
a portion of its output
fails to consistency export at least sixty percent (60%) thereof; and
So:
g) the term Foreign Investments Negative List 1. See if it is in the negative list.
areas of economic activity whose foreign ownership 2. is If
limited
not, to a maximum
follow the rulesof onforty percent
foreign
(40%) of the equity capital of the enterprises engaged therein.
ownership above

When is a corporation considered as a

I. EXPORT ENTERPRISE: at least 60% of its
Philippine national?
production or output is exported
- When at least 60% of the
outstanding capital stock is owned
GENERAL RULE: There are no restrictions
by Filipinos.
on extent of foreign ownership (can be
- If the percentage of Filipino
100% owned by foreigners)
ownership in the corporation is less
- Regardless of the capitalization, for
than 60%, only the number of shares
as long as you are into export, you
corresponding to such percentage
can be 100% owned by foreigners.
shall be considered as of Philippine
EXCEPTION: If they are engaged in
nationality and the other shares shall
activities wherein ownership is limited or
be recorded as belonging to aliens.
restricted in the negative list
SEC. 3. Definitions. As used in this Act:
II. DOMESTIC ENTERPRISE: less than 60%
xxxxxxx
of its production or output is exported
d) the phrase doing business shall include
offices, whether called liaison offices or branch
GENERAL RULE: At least 60% Filipinos; at
domiciled in the Philippines or who in any calen
most 40% Foreigners. Cannot be 100%
periods totaling one hundred eighty (180) days
foreign owned.
supervision or control of any domestic business, fir
EXCEPTIONS: 100% foreign ownership if:
any other act or acts that imply a continuity o
1. Paid-up capital of at least $200,000;
contemplate to that extent the performance of a
or
functions normally incident to, and in progressiv
2. Involved in advanced technology as
purpose and object of the business organization
certified by the DOST (capital must
business shall not be deemed to include mere inv
be at least $100,000); or
domestic corporations duly registered to do bus
3. Minimum of 50 employees (capital
investor; nor having a nominee director or officer
must be at least $100,000).
nor appointing a representative or distributor d
business in its own name and for its own account;
Examples:
What are the requirements if already
1. 55% export. Paid-up capital is only
doing business in the Philippines?
$150k. 50 employees. Can I be 100%
- You have to get a license from the
foreign-owned?
SEC, appoint a resident agent etc.
- YES. Although you are a domestic
enterprise, but you employ 50
What are the consequences if youre
people (and the capital is more
than $100k). Exception #3. doing business without the necessary
permit?
2. 75% export. Paid-up capital of $50k. - GENERAL RULE: Cannot sue but can
30 employees. Can I be 100% be sued.
foreign-owned? - EXCEPTION: ESTOPPEL.
 o Merryl Lynche case: FC tried to
sue DC. DC raised the defense
that it cannot be sued because FC
is doing business without license.
o SC: DC already estopped from
questioning the personality of FC.
Estoppel also applies to domestic
corporations dealing with foreign
corporations without license.
Can a former natural born Filipino now a
naturalized US citizen acquire land in
the Philippines?
- YES Under the FIA but limited only to
a certain number of hectares (5,000
sqm for urban and 3,000 sqm for
rural)
DOING BUSINESS:
1. soliciting orders, service contracts,
opening offices, whether called
liaison offices or branches;
2. appointing representatives or
distributors domiciled in the
Philippines or who in any calendar
year stay in the country for a period
or periods totaling one hundred
eighty (180) days or more;
3. participating in the management,
supervision or control of any
domestic business, firm, entity or
corporation in the Philippines; and
4. any other act or acts that imply a
continuity of commercial dealings
or arrangements, and contemplate to
that extent the performance of acts
or works, or the exercise of some of
the functions normally incident to,
and in progressive prosecution of,
commercial gain or of the purpose
and object of the business
organization
- so, not isolated
NOT DOING BUSINESS:
1. not be deemed to include mere
investment as a shareholder by a
foreign entity in domestic
corporations duly registered to do
business, and/or the exercise of
rights as such investor; nor
2. having a nominee director or
officer to represent its interests in
such corporation; nor
3. appointing a representative or
distributor domiciled in the
Philippines which transacts business
in its own name and for its own
account;
REGISTRATION OF INVESTMENTS O
SEC. 5. Registration of Investments of Non-P
approval, a non-Philippine national, as that term
disqualified by law may, upon registration with th
or with the Bureau of Trade Regulation and Consu
Trade and Industry in the case of single proprietors
this Act or invest in a domestic enterprise up to on
participation of non-Philippine nationals in the en
percentage by existing law and/or under the prov
case may be, shall not impose any limitations on th
additional to those provided in this Act: Provided,
of incentives under the Omnibus Investment Code
Board of Investments (BOI), which shall process s
with the criteria for evaluation prescribed in said
national intending to engage in the same line of b
he or his majority shareholder is a substantial part
addresses of the partners in the existing joint vent
During the transitory period as provided in Sectio
the applying non-Philippine national if the existing
FOREIGN INVESTMENTS IN
SEC. 6. Foreign Investment in Export En
enterprises whose products and services do no
Investment Negative List provided under Section 8
(100%) ownership.
Export enterprises which are non-Philippine natio
reports that may be required to ensure continuing
export requirement. BOI shall advise SEC or BTRCP
that fails to meet the export ratio requirement. The
complying export enterprise to reduce its sales to
percent (40%) of its total production; failure to co
justifiable reason, shall subject the enterprise to ca
the penalties provided in Section 14 hereof.
FOREIGN INVESTMENT IN DOME
SEC. 7. Foreign Investment in Domestic Market Ent
to one hundred percent (100%) of domestic marke
is prohibited or limited by the Constitution existin
under Section 8 hereof. (As amended by R.A. 8179)
Steelcase, Inc. vs. Design International
Selections, Inc., G.R. No. 171995, 18
April 2012
FACTS: Petitioner Steelcase, Inc.
("Steelcase") is a foreign corporation
existing under the laws of Michigan, United
States of America (U.S.A.), and engaged in
the manufacture of office furniture with
dealers worldwide. Respondent Design
International Selections, Inc. ("DISI") is a
corporation existing under Philippine Laws
and engaged in the furniture business,
including the distribution of furniture.
Sometime in 1986 or 1987, Steelcase and
DISI orally entered into a dealership
agreement whereby Steelcase granted DISI
the right to market, sell, distribute, install,
and service its products to end-user
customers within the Philippines. The
business relationship continued smoothly
until it was terminated sometime in January
1999 after the agreement was breached
with neither party admitting any fault.
Steelcase filed a complaint for sum of
money against DISI alleging, among others,
that DISI had an unpaid account of
US$600,000.00. Steelcase prayed that DISI
be ordered to pay actual or compensatory
damages, exemplary damages, attorneys
fees, and costs of suit. Among the counter-
arguments raised, DISI alleged that the
complaint failed to state a cause of action
and to contain the required allegations on
Steelcases capacity to sue in the
Philippines despite the fact that Steelcase
was doing business in the Philippines
without the required license to do so.
Consequently, it posited that the complaint
should be dismissed because of Steelcases
lack of legal capacity to sue in Philippine
courts.
The Regional Trial Court (RTC) dismissed the
complaint and granted the temporary
restraining order prayed for by DISI. The
RTC stated that in requiring DISI to meet
the Dealer Performance Expectation and in
terminating the dealership agreement with
DISI based on its failure to improve its
performance in the areas of business
planning, organizational structure,
operational effectiveness, and efficiency,
Steelcase unwittingly revealed that it
participated in the operations of DISI.
Despite a showing that DISI transacted with
the local customers in its own name and for
its own account, the RTC stated that any
doubt in the factual environment should be
resolved in favor of a pronouncement that a
foreign corporation was doing business in
the Philippines, considering the twelve-year
period that DISI had been distributing
Steelcase products in the Philippines. The
RTC concluded that Steelcase was "doing
business" in the Philippines, as
contemplated by the Foreign Investments
Act of 1991, and since it did not have the
license to do business in the country, it was
barred from seeking redress from our
courts until it obtained the requisite license
to do so. Steelcase moved for the
reconsideration of the dismissal but the
same was denied.
Aggrieved, Steelcase appealed the case to
the Court of Appeals. The Court of Appeals
rendered its Decision affirming the RTC
orders, ruling that Steelcase was a foreign
corporation doing or transacting business in
the Philippines without a license. Steelcase
filed a motion for reconsideration but it was
denied by the Court of Appeals.
Steelcase filed a Petition for Review with
the Supreme Court. The issues in the
Supreme Court petition are: (a) whether or
not Steelcase is doing business in the
Philippines without a license; and (b)
whether or not DISI is estopped from
challenging the Steelcases legal capacity
to sue.
Supreme Courts Ruling
The Supreme Court ruled in favor of
Steelcase.
Steelcase is an unlicensed foreign
corporation not doing business in the
Philippines
According to the Supreme Court, the
following acts shall not be deemed "doing
business" in the Philippines: (a) mere
investment as a shareholder by a foreign
entity in domestic corporations duly
registered to do business, and/or the
exercise of rights as such investor; (b)
having a nominee director or officer to
represent its interest in such corporation;
(c) appointing a representative or
distributor domiciled in the Philippines
which transacts business in the
representative's or distributor's own name
and account; (d) the publication of a
general advertisement through any print or
broadcast media; (e) maintaining a stock of
goods in the Philippines solely for the
purpose of having the same processed by
another entity in the Philippines; (f)
consignment by a foreign entity of
equipment with a local company to be used
in the processing of products for export; (g)
collecting information in the Philippines;
and (h) performing services auxiliary to an
existing isolated contract of sale which are
not on a continuing basis, such as installing
in the Philippines machinery it has
manufactured or exported to the
Philippines, servicing the same, training
domestic workers to operate it, and similar
incidental services.
Based on this list, the Supreme Court said
that the appointment of a distributor in the
Philippines is not sufficient to constitute
"doing business" unless it is under the full
control of the foreign corporation. If the
distributor is an independent entity which
buys and distributes products, other than
those of the foreign corporation, for its own
name and its own account, the latter
cannot be considered to be doing business
in the Philippines.
Applying these rules, the Supreme Court
said that DISI was founded in 1979 and is
independently owned and managed. In
addition to Steelcase products, DISI also
distributed products of other companies
including carpet tiles, relocatable walls and
theater settings. The dealership agreement
between Steelcase and DISI had been
described by the owner himself as a buy
and sell arrangement. This clearly belies
DISIs assertion that it was a mere conduit
through which Steelcase conducted its
business in the country. From the preceding
facts, the only reasonable conclusion that
can be reached is that DISI was an
independent contractor, distributing
various products of Steelcase and of other
companies, acting in its own name and for
its own account. As a result, Steelcase
cannot be considered to be doing business
in the Philippines by its act of appointing a
distributor as it falls under one of the
exceptions under R.A. No. 7042.
DISI is estopped from challenging
Steelcase's capacity to sue
On this point, the Supreme Court declared
that if indeed Steelcase had been doing
business in the Philippines without a
license, DISI would nonetheless be
estopped from challenging the formers
legal capacity to sue xxx A foreign
corporation doing business in the
Philippines may sue in Philippine Courts
although not authorized to do business
here against a Philippine citizen or entity
who had contracted with and benefited by
said corporation. To put it in another way, a
party is estopped to challenge the
personality of a corporation after having
acknowledged the same by entering into a
contract with it. And the doctrine of
estoppel to deny corporate existence
applies to a foreign as well as to domestic
corporations. One who has dealt with a
corporation of foreign origin as a corporate
entity is estopped to deny its corporate
existence and capacity.
Relevance
Although the foreign corporation in this
case was declared to be not doing business
in the Philippines, this case, nonetheless,
explicitly declares another exception to the
rule provided in Section 133 of the
Corporation Code of the Philippines that
[n]o foreign corporation transacting
business in the Philippines without a
license, or its successors or assigns, shall
be permitted to maintain or intervene in
any action, suit or proceeding in any court
or administrative agency of the
Philippines Following the ruling in this
case, a foreign corporation doing business
in the Philippines without a license may
maintain suit in the Philippines against a
domestic corporation or person who is
party to a contract as the domestic
corporation or person is deemed estopped
from challenging the personality of the
foreign corporation.