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Anti Money Laundering Act Case Digests
Anti Money Laundering Act Case Digests
ANTI MONEY LAUNDERING ACT (AMLA) utilizing the same for the duration of the freeze order. To make such
freeze order anteceded by a judicial proceeding with notice to the
1. Republic of the Philippines vs Hon. Antonio M. account holder would allow for or lead to the dissipation of such funds
Eugenio Jr. even before the order could be issued.
2. The complaint provides for a specific cause of action b) Any proceeding relating to the unlawful activity shall be
given precedence over the prosecution of any offense or
Section 4, Title II of the Rule of Procedure in Cases of Civil Forfeiture violation under the AMLA without prejudice to the application
provides: ex-parte by the AMLC to the Court of Appeals for a freeze
order with respect to the monetary instrument or property
Sec. 4. Contents of the petition for civil forfeiture. - The petition for involved therein and resort to other remedies provided under
civil forfeiture shall be verified and contain the following allegations: the AMLA, the Rules of Court and other pertinent laws and
rules.
(a) The name and address of the respondent;
Finally, Section 27 of the Rule of Procedure in Cases of Civil Forfeiture
(b) A description with reasonable particularity of the monetary provides:
instrument, property, or proceeds, and their location; and
Sec. 27. No prior charge, pendency or conviction necessary. No prior
(c) The acts or omissions prohibited by and the specific provisions of criminal charge, pendency of or conviction for an unlawful
the Anti-Money Laundering Act, as amended, which are alleged to be activity or money laundering offense is necessary for the
the grounds relied upon for the forfeiture of the monetary instrument, commencement or the resolution of a petition for civil
property, or proceeds; and forfeiture. (emphasis supplied)
[(d)] The reliefs prayed for. Thus, regardless of the absence, pendency or outcome of a criminal
prosecution for the unlawful activity or for money laundering, an action
In this case, the complaint was able to meet the requirements stated for civil forfeiture may be separately and independently prosecuted
in Section 4. and resolved.
i. When there is a suspicious transaction report or a covered 1. SEC vs Universal Rightfield Property Holdings Inc.
transaction report deemed suspicious after investigation by
the AMLC and Facts: Petitioner Securities and Exchange Commission (SEC), through
its Corporate Finance Department, issued an Order revoking URPHI's
ii. The court has, in a petition filed for the purpose, ordered the Registration of Securities and Permit to Sell Securities to the Public for
seizure of any monetary instrument or property, in whole or its failure to timely file its Year 2001 Annual Report and Year 2002 1st,
in part, directly or indirectly, related to said report. 2nd and 3rd Quarterly Reports pursuant to Section 173 of the
Securities Regulation Code (SRC).
It is the preliminary seizure which brings the property within the reach
of the court. The injunctive writ placed the said property in the URPI was given an extension, yet they still failed to comply with the
possession of the court. requirements. SEC revoked URPHI's Registration of Securities and
Permit to Sell Securities to the Public for its failure to submit its
Since the account covered a series of covered and suspicious reportorial requirements within the final extension period.
transactions and was placed in the process of the court, the case was
not prematurely filed. The CA granted the petition and set aside the SEC Order of Revocation
after finding that URPHI was not afforded due process because no due
Whether or not there is truth in the allegation that the account notice was given and no hearing was conducted before its registration
contains the proceeds of unlawful activities is an evidentiary matter of securities and permit to sell them to the public was revoked. The CA
that may be proven during trial. noted that the hearing conducted was only for the purpose of
determining whether URPHI's registration and permit to sell should be
A criminal conviction for an unlawful activity is not a prerequisite for suspended and not whether said registration should be revoked.
the institution of a civil forfeiture proceeding. Stated otherwise, a
finding of guilt for an unlawful activity is not an essential element of Issue: Whether a separate notice is needed for the revocation of the
civil forfeiture. permit?
Section 6 of RA 9160, as amended, provides: Held: No, Contrary to the view that a separate notice of hearing to
revoke is necessary to initiate the revocation proceeding, the Court
SEC. 6. Prosecution of Money Laundering. holds that such notice would be a superfluity since the Order dated
July 27, 2004 already states that such proceeding shall ensue if URPHI
(a) Any person may be charged with and convicted of both the would still fail to submit the reportorial requirements after the lapse of
offense of money laundering and the unlawful activity as the 60-day suspension period. After all, "due notice" simply means the
herein defined. information that must be given or made to a particular person or to
the public within a legally mandated period of time so that its recipient
(b) Any proceeding relating to the unlawful activity shall be will have the opportunity to respond to a situation or to allegations
given precedence over the prosecution of any offense or that affect the individual's or public's legal rights or duties.
violation under this Act without prejudice to the freezing and
other remedies provided. Granted that no formal hearing was held before the issuance of the
Order of Revocation, the Court finds that there was substantial
Rule 6.1 of the Revised Implementing Rules and Regulations of RA compliance with the requirements of due process when URPHI was
9160, as amended, states: given opportunity to be heard. Upon receipt of the SEC Order dated
July 27, 2004, URPHI filed the letters dated September 13 and 28,
Rule 6.1. Prosecution of Money Laundering 2004, seeking a final extension to submit the reportorial requirements,
and admitting that its failure to submit its 2nd Quarterly Report for
2004 was due to the same reasons that it was unable to submit its
2003 Annual Report and 1st Quarterly Report for 2004. Notably, in its FACTS: Subic Bay Golf Course, also known as Binictican Valley Golf
Order of Revocation, the SEC considered URPHI's letters and stated Course, was operated by Subic Bay Metropolitan Authority (SBMA).
that it still failed to submit the required reports, despite the lapse of Universal International Group of Taiwan (UIG), a Taiwanese
the final extension requested. corporation, was chosen to implement the plan to privatize the golf
course.
There is no dispute that violation of the reportorial requirements under
Section 17.119 of the Amended Implementing Rules and Regulation20 Subsequently, SBMA and UIG entered into a Lease and Development
of the SRC is a ground for suspension or revocation of registration of Agreement. UIG agreed to "develop, manage and maintain the golf
securities pursuant to Sections 13.1 and 54.1 of the SRC. However, course and other related facilities within the complex.” Later, Universal
contrary to the CA ruling that separate notices and hearings for International Group Development Corporation (UIGDC) succeeded to
suspension and revocation of registration of securities and permit to the interests of UIG on the golf course development.
sell them to the public are required, Sections 13 .1 and 54.1 of the
SRC expressly provide that the SEC may suspend or revoke such UIGDC executed a Deed of Assignment in favor of Subic Bay Golf and
registration only after due notice and hearing, to wit: Country Club, Inc. (SBGCCI). Under the Deed of Assignment, UIGDC
assigned all its rights and interests in the golf course's development,
13.1. The Commission may reject a registration statement and refuse operations, and marketing to SBGCCI. SBGCCI and UIGDC entered into
registration of the security thereunder, or revoke the effectivity of a a Development Agreement. UIGDC agreed to "finance, construct and
registration statement and the registration of the security thereunder develop the golf course for and in consideration of the payment by
after due notice and hearing by issuing an order to such effect, setting SBGCCI of its 1,530 shares of stock."
forth its findings in respect thereto, if it finds that:
Thereafter, SBGCCI applied in the SEC for the permit to offer the
a) The issuer: shares. The SEC then approved the sale of 3,000 shares valued at
P425,000 per share. The proceeds will be used to pay UIGDC for the
xxxx development of the golf course.
(ii) Has violated any of the provisions of this Code, the rules Thereafter, certain buyers of the shares asked for a refund because
promulgated pursuant thereto, or any order of the Commission of the promised facilities of the golf course were not delivered. Moreover,
which the issuer has notice in connection with the offering for which a they claimed that despite SBGCCI's and UIGDC's failure to deliver the
registration statement has been filed; promised amenities, they started to charge them monthly dues. They
also never received any billing statement from them until they were
xxxx sent a demand notice to pay the alleged back dues of P39,000.00
within five (5) days.
54.1. If, after due notice and hearing, the Commission finds that: (a)
There is a violation of this Code, its rules, or its orders; (b) Any The SEC made an investigation and found out that SBGCII failed to
registered broker or dealer, associated person thereof has failed substantially comply with their obligation. In effect, it ordered SBGCII
reasonably to supervise, with a view to preventing violations, another to make the necessary refund. The Corporation Finance Department
person subject to supervision who commits any such violation; ( c) Any found that Filart and Villareal invested in the golf course because of
registrant or other person has, in a registration statement or in other SBGCCI and UIGDC's representation that a 27-hole, world-class golf
reports, applications, accounts, records or documents required by law course would be developed. It also found that SBGCCI and UIGDC
or rules to be filed with the Commission, made any untrue statement failed to comply with their commitments and representations as stated
of a material fact, or omitted to state any material fact required to be in their prospectus.
stated therein or necessary to make the statements therein not
misleading; or, in the case of an underwriter, has failed to conduct an The CA said that the SEC acted in excess of its jurisdiction because the
inquiry with reasonable diligence to insure that a registration case was that of an intra corporate dispute.
statement is accurate and complete in all material respects; or ( d) Any
person has refused to permit any lawful examinations into its affairs, it The SEC contends that it acted within its jurisdiction because it was
shall, in its discretion, and subject only to the limitations hereinafter done pursuant to its rule making power.
prescribed, impose any or all of the following sanctions as may be
appropriate in light of the facts and circumstances: ISSUE: Whether the SEC did not have any jurisdiction to rule on the
case?
(i) Suspension, or revocation of any registration for the offering of
securities; HELD: The SEC had jurisdiction.
The Court has consistently held that the essence of due process is Under Presidential Decree No. 902-A, the Securities and Exchange
simply an opportunity to be heard, or as applied to administrative Commission has jurisdiction over acts amounting to fraud and
proceedings, an opportunity to explain one's side or an opportunity to misrepresentation by a corporation's board of directors, business
seek a reconsideration of the action or ruling complained of. Any associates, and officers. It also provides that it has jurisdiction over
seeming defect in its observance is cured by the filing of a motion for intra-corporate disputes.
reconsideration, and denial of due process cannot be successfully
invoked by a party who has had the opportunity to be heard on such For a dispute to be "intra-corporate," it must satisfy the relationship
motion. What the law prohibits is not the absence of previous notice, and nature of controversy tests.
but the absolute absence thereof and the lack of opportunity to be
heard. The relationship test requires that the dispute be between a
corporation/partnership/association and the public; a
2. SEC vs Subic Bay Golf and Country Club Inc. corporation/partnership/association and the state regarding the entity's
franchise, permit, or license to operate; a
Intra-corporate controversies, previously under the Securities and corporation/partnership/association and its stockholders, partners,
Exchange Commission's jurisdiction, are now under the jurisdiction of members, or officers; and among stockholders, partners, or associates
Regional Trial Courts designated as commercial courts. However, the of the entity.
transfer of jurisdiction to the trial courts does not oust the Securities
and Exchange Commission of its jurisdiction to determine if The nature of the controversy test requires that the action involves the
administrative rules and regulations were violated. enforcement of corporate rights and obligations.
Villareal and Filart's right to a refund of the value of their shares was Has failed to comply with any requirement that the Commission may
based on SBGCCI and UIGDC's alleged failure to abide by their impose as a condition for registration of the security for which the
representations in their prospectus. Specifically, Villareal and Filart registration statement has been filed; or
alleged in their letter-complaint that the world-class golf course that
was promised to them when they purchased shares did not The registration statement is on its face incomplete or inaccurate in
materialize. This is an intra-corporate matter that is under the any material respect or includes any untrue statement of a material
designated Regional Trial Court's jurisdiction. It involves the fact or omits to state a material fact required to be stated therein or
determination of a shareholder's rights under the Corporation Code or necessary to make the statements therein not misleading; or
other intra-corporate rules when the corporation or association fails to
fulfill its obligations. The issuer, any officer, director or controlling person of the issuer, or
person performing similar functions, or any underwriter has been
However, even though the Complaint filed before the Securities and convicted, by a competent judicial or administrative body, upon plea of
Exchange Commission contains allegations that are intra-corporate in guilty, or otherwise, of an offense involving moral turpitude and/or
nature, it does not necessarily oust the Securities and Exchange fraud or is enjoined or restrained by the Commission or other
Commission of its regulatory and administrative jurisdiction to competent judicial or administrative body for violations of securities,
determine and act if there were administrative violations committed. commodities, and other related laws.
....
Any fraud or misrepresentation in the issuance of securities injures the
public. The Securities and Exchange Commission's power to suspend 13.4. If the Commission deems it necessary, it may issue an order
or revoke registrations and to impose fines and other penalties suspending the offer and sale of the securities pending any
provides the public with a certain level of assurance that the securities investigation. The order shall state the grounds for taking such action,
contain representations that are true, and that misrepresentations if but such order of suspension although binding upon the persons
later found, would be detrimental to the erring corporation. It creates notified thereof, shall be deemed confidential, and shall not be
risks to corporations that issue securities and adds cost to errors, published. Upon the issuance of the suspension order, no further offer
misrepresentations, and violations related to the issuance of those or sale of such security shall be made until the same is lifted or set
securities. This protects the public who will rely on representations of aside by the Commission. Otherwise, such sale shall be void.
corporations and partnerships regarding financial instruments that they
issue. The Securities and Exchange Commission's regulatory power ....
over securities-related activities is tied to the government's duty to
protect the investing public from illegal and fraudulent instruments. SEC. 15. Suspension of Registration. - 15.1. If, at any time, the
information contained in the registration statement filed is or has
Thus, when Villareal and Filart alleged in their letter-complaint that become misleading, incorrect, inadequate or incomplete in any
SBGCCI and UIGDC committed misrepresentations in the sale of their material respect, or the sale or offering for sale of the security
shares, nothing prevented the Securities and Exchange Commission registered thereunder may work or tend to work a fraud, the
from taking cognizance of it to determine if SBGCCI and UIGDC Commission may require from the issuer such further information as
committed administrative violations and were liable under the may In its judgment be necessary to enable the Commission to
Securities Regulation Code. The Securities and Exchange Commission ascertain whether the registration of such security should be revoked
may investigate activities of corporations under its jurisdiction to on any ground specified in this Code. The Commission may also
ensure compliance with the law. suspend the right to sell and offer for sale such security pending
further investigation, by entering an order specifying the grounds for
However, the Securities and Exchange Commission's regulatory power such action, and by notifying the issuer, underwriter, dealer or broker
does not include the authority to order the refund of the purchase known as participating in such offering.80
price of Villareal's and Filart's shares in the golf club. The issue of To ensure compliance with the law and the rules, the Securities and
refund is intra-corporate or civil in nature. Similar to issues such as the Exchange Commission is also given the power to impose fines and
existence or inexistence of appraisal rights, pre-emptive rights, and the penalties. It may also investigate motu proprio whether corporations
right to inspect books and corporate records, the issue of refund is an comply with the Corporation Code, Securities Regulation Code, and
intra-corporate dispute that requires the court to determine and rules implemented by the Securities and Exchange Commission.
adjudicate the parties' rights based on law or contract. Injuries, rights,
and obligations involved in intra-corporate disputes are specific to the SEC. 5. Powers and Functions of the Commission. - 5.1. The
parties involved. They do not affect the Securities and Exchange Commission shall act with transparency and shall have the powers and
Commission or the public directly. functions provided by this Code, Presidential Decree No. 902-A, the
Corporation Code, the Investment Houses Law, the Financing
Provisions of the SRC: Company Act and other existing laws. Pursuant thereto the
Commission shall have, among others, the following powers and
SEC. 13. Rejection and Revocation of Registration of Securities. - 13.1. functions:
The Commission may reject a registration statement and refuse
registration of the security thereunder, or revoke the effectivity of a ...
registration statement and the registration of the security thereunder d. Regulate, investigate or supervise the activities of persons to ensure
after due notice and hearing by issuing an order to such effect, setting compliance;
forth its findings in respect thereto, if it finds that: ...
The issuer:
f. Impose sanctions for the violation of laws and the rules, regulations
and orders issued pursuant thereto;
Has been judicially declared insolvent;
...
i. Issue cease and desist orders to prevent fraud or injury to the
Has violated any of the provisions of this Code, the rules promulgated
investing public;
pursuant thereto, or any order of the Commission of which the issuer
...
has notice in connection with the offering for which a registration
m. Suspend, or revoke, after proper notice and hearing the franchise
statement has been filed;
or certificate of registration of corporations, partnerships or
associations, upon any of the grounds provided by law; and
Has been engaged or is about to engage in fraudulent transactions;
Has made any false or misleading representation of material facts in
n. Exercise such other powers as may be provided by law as well as
any prospectus concerning the issuer or its securities;
those which may be implied from, or which are necessary or incidental
to the carrying out of, the express powers granted the Commission to the efforts of those who manage and operate that company. SMC has
achieve the objectives and purposes of these laws. to register these commercial papers with the SEC before offering them
to investors.
3. SEC vs Baguio Country Club Corporation
Here, PCIs clients do not make such investments. They buy a product
Facts: Respondent in this case amended their by laws increasing the of some value to them: an Internet website of a 15-MB capacity. The
term of the BODs to 2 years. After the amendment, someone asked client can use this website to enable people to have internet access to
the SEC’s opinion on the validity of the said provision to which the SEC what he has to offer to them, say, some skin cream. The buyers of the
said that it was done contrary to law. website do not invest money in PCI that it could use for running some
business that would generate profits for the investors. The price of
Respondent on the other hand claims that the SEC can no longer rule US$234.00 is what the buyer pays for the use of the website, a
otherwise on the amendment since it already approved of the same. tangible asset that PCI creates, using its computer facilities and
Thereafter, the complaint was formalized before the SEC where they technical skills.
asked that the SEC issue an order mandating the election of the BOD.
Actually, PCI appears to be engaged in network marketing, a scheme
BCC questioned the said order and said that Erlinda and Ramon
adopted by companies for getting people to buy their products outside
Ilusorio both do not have legal standing in questioning the said order
the usual retail system where products are bought from the stores
as both of them are not stockholders. Moreover, BCC claims that the
shelf. Under this scheme, adopted by most health product distributors,
matter is an intra corporate dispute and therefore jurisdiction is with
the buyer can become a down-line seller. The latter earns commissions
the RTC and not with the SEC.
from purchases made by new buyers whom he refers to the person
who sold the product to him. The network goes down the line where
Issue: Whether or not the SEC has jurisdiction over the case?
the orders to buy come.
Held:
5. PHIL. VETERAN’S BANK VS CALLANGAN, GR NO.
191995
The OSG argues that the matter at hand does not involve an intra
corporate dispute as the said matter was merely seeking for an
Facts: Respondent Justina F. Callangan, the Director of the Corporation
affirmative remedy.
Finance Department of the Securities and Exchange Commission
(SEC), sent the Bank a letter, informing it that it qualifies as a public
The petition must be denied. The petitions have been rendered moot
company under Section 17.2 of the Securities Regulation Code (SRC)
by the 2005 amendment of the by-laws. The validity of the two (2)
in relation with Rule 3(1)(m) of the Amended Implementing Rules and
year term provision and the calling of meeting for the election of
Regulations of the SRC. The Bank is thus required to comply with the
members of the board of directors to replace those holding a two (2)
reportorial requirements set forth in Section 17.1 of the SRC.
year term should no longer be in issue.
The bank on the other hand claims that it is not a public company
4. SEC VS PROSPERITY COM. INC. (GR NO. 164197)
because it is a private company whose shares of stock are available
only to a limited class or sector, i.e., to World War II veterans, and not
Facts: Prosperity.Com, Inc. (PCI) sold computer software and hosted
to the general public.
websites without providing internet service. To make a profit, PCI
devised a scheme in which, for the price of US$234.00 (subsequently
Issue: Whether the bank is a public company?
increased to US$294), a buyer could acquire from it an internet
website of a 15-Mega Byte (MB) capacity. At the same time, by
Held: Yes.
referring to PCI his own down-line buyers, a first-time buyer could
earn commissions, interest in real estate in the Philippines and in the
To determine whether the Bank is a public company burdened with the
United States, and insurance coverage worth P50,000.00.
reportorial requirements ordered by the SEC, we look to Subsections
17.1 and 17.2 of the SRC, which provide:
The SEC ruled that PCIs scheme constitutes an Investment contract
Section 17. Periodic and Other Reports of Issuers.
and, following the Securities Regulations Code, it should have first
registered such contract or securities with the SEC.
17.1. Every issuer satisfying the requirements in Subsection 17.2
Issue: Whether the scheme involves an investment contract? hereof shall file with the Commission:
Held: No, the scheme is not an investment contract. a) Within one hundred thirty-five (135) days, after the end of the
issuers fiscal year, or such other time as the Commission may
The Securities Regulation Code treats investment contracts as prescribe, an annual report which shall include, among others, a
securities that have to be registered with the SEC before they can be balance sheet, profit and loss statement and statement of cash flows,
distributed and sold. An investment contract is a contract, transaction, for such last fiscal year, certified by an independent certified public
or scheme where a person invests his money in a common enterprise accountant, and a management discussion and analysis of results of
and is led to expect profits primarily from the efforts of others. operations; and
The United States Supreme Court held in Securities and Exchange
Commission v. W.J. Howey Co. that, for an investment contract to b) Such other periodical reports for interim fiscal periods and current
exist, the following elements, referred to as the Howey test must reports on significant developments of the issuer as the Commission
concur: (1) a contract, transaction, or scheme; (2) an investment of may prescribe as necessary to keep current information on the
money; (3) investment is made in a common enterprise; (4) operation of the business and financial condition of the issuer.
expectation of profits; and (5) profits arising primarily from the efforts
of others. Thus, to sustain the SEC position in this case, PCIs scheme 17.2. The reportorial requirements of Subsection 17.1 shall apply to
or contract with its buyers must have all these elements. the following:
The BCO is required to pay US$234 as his enrollment fee. His Direct ownership of Cemco in UCC 17%
enrollment entitles him to recruit two investors who should pay
US$234 each and out of which amount he shall receive US$92. In case Total ownership of Cemco in UCC 53%
the two referrals/enrollees would recruit a minimum of four (4)
persons each recruiting two (2) persons who become his/her own Respondent was aggrieved with the transaction saying that a
down lines, the BCO will receive a total amount of US$147.20 after mandatory tender offer should have been made.
deducting the amount of US$36.80 as property fund from the gross
Issues:
Held:
Violation
The foregoing rule emanates from the SECs power and authority to
regulate, investigate or supervise the activities of persons to ensure
compliance with the Securities Regulation Code, more specifically the
provision on mandatory tender offer under Section 19 thereof.
Under existing SEC Rules, the 15% and 30% threshold acquisition of
shares under the foregoing provision was increased to thirty-five
percent (35%). It is further provided therein that mandatory tender
offer is still applicable even if the acquisition is less than 35% when
the purchase would result in ownership of over 51% of the total
outstanding equity securities of the public company.