Escolar Documentos
Profissional Documentos
Cultura Documentos
Informal Survey
No
Others
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3
Today, I am posing the same question to this group, which is the basic theme of
my presentation. However, instead of asking you point blank, let us look into the
following scenarios:
Situation No. 1.
Atty. Jose Cruz is a solo practitioner with a small law office in Laguna. The bulk of his work
comes from clients who seek his assistance in selling or buying real estate. One day, a classmate
from law school who is now based in Davao City referred to him a couple from Mindanao, Mr.
and Mrs. Santos, who wants to purchase real estate properties anywhere in Laguna. As
instructed, he arranged a series of meetings with lot owners who are selling their land. Before
meeting with the lot owners, they went to a number of money exchange centers to convert the
couples dollars to peso. Having prepared the necessary transaction documents, the lot sellers
were paid immediately with cash. He was given a hefty commission and was invited to the hotel
where the couple was staying for further instructions. Later, in the hotel room where the couple
was staying, he was asked to notarize the deed of sale even in the absence of the supposed
buyers (deed of sale named a number of persons, who the couple claimed are their married
daughters and/or son-in- law). When he was given the money for the transfer taxes and other
expenses, he was given dollars again and he noticed that the money came from a bag full of
dollars in various denominations.
By Dr. George V. Carmona, Lecturer, Philippine Judicial Academy, Ateneo de Manila University School
of Law and San Beda College Master of Laws program. The author is also an international development
consultant.
Suppose that two (2) weeks before, there was a kidnapping of foreigners in Mindanao and that
according to the media, ransom was paid. In situations like this, is it proper to require Atty. Cruz
to submit suspicious transaction report on Mr. and Mrs. Santos? Are the attendant circumstances
in this case suspicious enough to warrant the submission of STR, if it were required by the
government?
Situation No. 2. Atty. John Reyes is a young lawyer working in a law office in Makati. He is
personally handling the account of a corporation (Chemsafe, Inc.) that imports chemicals from
Taiwan for domestic use. One day, he was asked by the owner, Mr. Jose, to set up Promising
Scholars Foundation (PSF) that would fund the scholarship of poor students all over the
Philippines. The foundation was given an initial fund of P 1 million and every month it receives
an average of P 1 million from Chemsafe and sister companies. Six (6) months after the
incorporation of the foundation, he was asked to amend the primary purpose of the foundation
to enable it to provide financial assistance to charitable institutions accredited by the PSF. At the
same time, a group of Chinese businessmen, accompanied by the Chemsafe owner, asked him to
incorporate and register five (5) corporations (charity corporations), whose primary functions
are to engage in charitable works but are allowed to acquire and sell real properties if they
receive enough donations. He was given a list of names to be used as incorporators. Suppose
that most of the donations of Chemsafe ended up in these five (5) corporations. Assume further
that the financial statement of Chemsafe showed a steep increase in its net income on the year
that the foundation was set up. Having familiarity with the concept of money laundering, Atty.
Reyes strongly believes that his client is engaged in money laundering activities. Is it proper to
require him to submit STR on his client?
Suppose further that a plant of Chemsafe turned out to be a shabu laboratory and was raided by
the police and subsequently, a case was filed against Mr. Jose. Knowing that a case is pending
against him, Mr. Jose talked to Atty. Reyes and revealed that the Chinese businessmen
convinced him to convert his plants into shabu laboratories. Can Atty. Reyes still submit the
STR? The following day, he was asked by the Chinese businessmen to prepare the necessary
documents for the transfer of the assets of charity corporations to another foundation. Is this
sufficient ground to require Atty. Reyes to submit STR?
Situation No. 3.
Atty. Juan Vasquez is a partner in a big law office. One day, his law office was approached by a
group of Middle Eastern looking businessmen who told him that they represent some of the
biggest charitable organizations in Saudi Arabia. They wanted to establish a foundation in the
Philippines to provide funding assistance to religious organizations based in Mindanao. The
transaction went smoothly and for more than a year the law office of Atty. Vasquez was
handling the legal matters of the foundation and its beneficiaries, which all appeared to be
legitimate organizations. Two and a half years later, a series of bombings rocked Metro Manila
and Mindanao. These bombings and other terrorist activities went on for a couple of months. By
sheer accident, Atty. Vasquez noticed that every time the foundation sends the money to its
beneficiaries, some terrorist activities would happen within a month or so. There appears to be a
pattern, which is difficult to ignore.
Supposing that a large amount of money has just been wired for transfer to the beneficiary
organizations in Mindanao, is this a sufficient ground to compel Atty. Vasquez to file a STR on
its client? Suppose further that within a month after the new money was given to the
beneficiaries, bombs exploded in Manila and Mindanao resulting to large casualties, is this
sufficient ground for enactment of a law to make Atty. Vasquez submit a STR?
As the above hypothetical situations show, organized crimes and terrorist groups can
be very creative in moving and/or concealing huge amount of illegal money across
international boundaries through the international financial system. With the help of
professional advisers and intermediaries, they are not only able to disguise and protect the
source of the illicit fund but to also enjoy proceeds thereof without attracting the attention
of authorities. 2
It is for this reason that the FTAF enjoins its member countries to enact laws,
regulations and administrative practice that would facilitate better cooperation by the socalled gatekeepers in the fight against money laundering. The gatekeepers are the
professionals and intermediaries consisting of lawyers, notaries, real estate agents and
dealers in high value goods, independent professionals, trust and company service
providers, investment advisers, and accountants, who advise on and help with
transactions involving the movement of money.3
II. The Gatekeeper initiative
The "Gatekeeper Initiative" is a concept for anti-money laundering initiatives
directed specifically at certain professionals, like lawyers, accountants and auditors. It
stems from a Communiqu of the G-8 Finance Ministers in Moscow in October 1999
calling upon countries to consider various means to address money laundering with the
help of professional "gatekeepers" to the international financial/business markets.4 It is
now contained in the revised FATF 40 Recommendations, which represent a set of
international standards for countries to establish an effective anti-money laundering
regime. Although not binding, member countries are expected to adopt anti-money
laundering policies that are compliant to these Recommendations. The Initiative seeks to
impose due diligence requirements on gatekeepers similar to financial institutions (e.g.
know their client, identify and report suspicious transactions and not tip off the persons
engaging in suspicious transactions that a suspicious activity report has been filed). Past
experiences in anti-money laundering enforcement showed that money laundering
investigations stop as soon as they hit the lawyers office.
Under the revised FTAF 40 Recommendations, which was introduced in March 2003,
lawyers have specific gatekeeping roles when engaged in certain transactions. Of specific
concern to the lawyers are Recommendations No. 12, 14 and 16. Recommendation 12
mandates the imposition of due diligence and recordkeeping requirements to lawyers
when they prepare for or carry out transactions concerning the following:
buying and selling real-estate;
managing client money, securities or other assets;
management of bank savings or securities accounts;
organization of contributions for the creation, operation or management of
companies; and
creation, operation, or management legal persons or arrangements and buying and
selling business entities.5
2
Lim, Francis Ed., Anti-Money Laundering Initiatives: Ramifications on the Legal Profession (2007).
Zagris, Bruce, The Gatekeeper initiative: An Emerging Challenge For Professional Advisors Of
International Business And Tax Matters (2002).
4
ABA Position Paper on Gatekeeper initiative
5
Recommendation 12 (d).
3
Recommendation 16.
7 Recommendation 14.
8
Interpretive Note to Recommendation 16.
9
Ibid.
10
see IBA website, http://www.anti-moneylaundering.org/globalchart.asp.
7
Lim, Francis Ed., Anti-Money Laundering Initiatives: Ramifications on the Legal Profession (2007).
Ibid.
IBA Anti- Money Laundering Forum: The Lawyers Guide to Legislation and Compliance.
http://www.antimoneylaundering.org/countrydetail.asp?countryid=39
14
IBA Anti- Money Laundering Forum: The Lawyers Guide to Legislation and Compliance.
http://www.antimoneylaundering
15
Lim, p. 20.
assistance.16
ABA argued that requiring lawyers to submit suspicious transaction reports on
clients and establish "due diligence" compliance programs have serious legal and ethical
implications. Specifically, it cited the following dangers:
Undermines the independence of the bar. The Bar must never become an agent of the
government. To assist clients in understanding the requirements of the law and
avoiding unlawful conduct, and to render sound legal advice, lawyers must be able to
have candid and confidential discussions with these clients and act independently of
the government.
Threatens the attorney-client relationship. The confidentiality that clients have come
to expect could be greatly eroded by a requirement that lawyers report -- in secret -on vague, undefined "suspicious activities" of the client to government authorities.
The trust relationship that is essential to the attorney-client relationship, the duty of
loyalty owed to a client, must be maintained for the proper functioning of our system
of justice.
Erodes the attorney-client privilege. Filing a suspicious transaction report with the
government could be inconsistent with the client's attorney-client privilege, the right
against self-incrimination, and ethical rules concerning the maintenance of client
confidences.
Presents serious law practice management issues. Ethical obligations with regard to a
client after a suspicious transaction report has been filed are problematic. Continuing
to advise or assist the client would be precarious, exposing a lawyer or law firm to
possible criminal prosecution. Yet terminating the relationship in the middle of a case
or undertaking may lead to liability due to breach of contract or malpractice due to
the collapse of a transaction. Lawyers may become less accessible to clients. The cost
of legal services could increase It noted that although attorneys may serve as
gatekeepers to the domestic and international monetary system, they also serve as
gatekeepers to the system of justice and administration of law for citizens of the U.S.
and other countries.17
Krauland, Edward J. and Aaron Hurtman, Money Laundering Enforcement And Policy (2004).
Zagaris, ibid.
requirements.
Japan Federation of Bar Associations
The bar association of Japan strongly opposed the gatekeeper initiative when a
bill that required lawyers to file STR was proposed. It argues that by using the socalled
gatekeeper legislation to impose lawyers the obligation to report suspicious
transactions for the purpose of controlling money laundering, the role of lawyers in
upholding the rule of law and bringing about a democratic society will be severely
impaired. Thus, while it is important to fight for the eradication of money laundering,
lawyers play a more important role in upholding the rule of law and bringing about a
democratic society.
Because of this opposition, the Japanese National Police Agency decided to
exempt lawyers from the obligation to report dubious money transactions to authorities
under a bill to fight money laundering. This exemption comes as a concession to the
Japanese Federation of Bar Association.18
VI. Introducing Gatekeepers Legislation in the Philippines
Currently, the Philippines does not have a law to implement the recommendations
of the FATF on the role of lawyers. Reporting and customers due diligence requirements
are still limited to institutions regulated by the Bangko Sentral ng Pilipinas, the Securities
and Exchange Commission and the Insurance Commission. Under the Anti-Money
Laundering Act of 2001,19 as amended, only institutions that are regulated by the
Philippine Central Bank, Securities and Exchange Commission and Insurance
Commission are covered by the reporting and customer due diligence requirements.
AMLAW provides that transactions in cash or other equivalent monetary instrument
involving a total amount in excess of 500,000 pesos within one business day and
suspicious transactions must be reported to the Anti- Money Laundering Council
(AMLC).
Although the informal survey conducted for this presentation covered only a
small number of lawyers, it is indicative of how lawyers would react to the introduction
of a gatekeepers legislation in the Philippines. Very clearly, practicing lawyers oppose
the very idea of requiring them to file STR on their clients.
The Rule on Privileged Communication as a Bar to Gatekeeping Legislation
In the Philippines, a lawyer-client relationship is highly fiduciary in nature; it is
delicate, exacting and confidential. It requires a high standard of conduct and demands
utmost fidelity, candor, fairness and good faith.20 It is established from the very first
moment a client asked the lawyer for legal advice regarding the formers business.21
18
IBA Anti-Money Laundering Forum: The Lawyers Guide to Legislation and Compliance, IBA AntiMoney Laundering Forum: The Lawyers Guide to Legislation and Compliance. http://www.antimoneylaundering.org/ countrydetail.asp?countryid=97.
19
Republic Act No. 9160 was amended by Republic Act No. 9164 in March 2003.
20
Marilay vs. Serina, AC No. 6951, May 4, 2005; see also Angeles vs. Uy, Jr., AC No. 5019, April 6,
2000.
21
21 Burbe vs. Magulta, AC No. 99-634, June 10, 2002.
As if to emphasize the importance of this principle, the Revised Penal Code even
criminalized betrayal of trust by a lawyer. Article 209 of the Code provides:
ARTICLE 209. Betrayal of trust by an attorney or solicitor. Revelation of secrets.
In addition to the proper administrative action, the penalty of prisin correccional in its
minimum period, or a fine ranging from 200 to 1,000 pesos, or both, shall be imposed
upon any attorney-at-law or solicitor (procurador judicial) who, by any malicious breach
of professional duty or of inexcusable negligence or ignorance, shall prejudice his client,
or reveal any of the secrets of the latter learned by him in his professional capacity.
1. where a strong probability exists that revealing the client's name would implicate
that client in the very activity for which he sought the lawyer's advice;
2. where disclosure would open the client to civil liability;
3. where the government's lawyers have no case against an attorney's client unless,
by revealing the client's name, the said name would furnish the only link that
would form the chain of testimony necessary to convict an individual of a crime,
the client's name is privileged;
4. the content of any client communication to a lawyer lies within the privilege if it
is relevant to the subject matter of the legal problem on which the client seeks
legal assistance; and
5. where the nature of the attorney-client relationship has been previously disclosed
and it is the identity which is intended to be confidential, the identity of the client
has been held to be privileged, since such revelation would otherwise result in
disclosure of the entire transaction.
It must be repeated though that Recommendation 16 states that a lawyer would
not be required to report suspicious transactions where the information was obtained in
circumstances where they are subject to professional secrecy or legal professional
privilege. The interpretive note to Recommendation 16 also states that each jurisdiction
has discretion in setting the standards for professional secrecy and privilege.
Furthermore, the interpretive note indicates a country would be allowed to
institute a system whereby suspicious transaction reports would be submitted to a bar
association or other legal self-regulatory organization (providing that organization
cooperates with the countrys FIU).
Exception to the Lawyer-Client Privileged Communication
The lawyer-client privilege rule is not absolute. In a number of cases, the
Supreme Court ruled that this privilege does not extend to the announced intention of a
client to commit a crime. In the case of People vs. Sandiganbayan24, the Court held that
distinction must be made between confidential communications relating to past crimes
already committed, and future crimes intended to be committed, by the client. x x x
Statements and communications regarding the commission of a crime already committed,
made by a party who committed it, to an attorney, consulted as such, are privileged
communications. Contrarily, the unbroken stream of judicial dicta is to the effect that
communications between attorney and client having to do with the client's contemplated
criminal acts, or in aid or furtherance thereof, are not covered by the cloak of privileges
ordinarily existing in reference to communications between attorney and client.
In Regala case, the Court reiterated that lawyers are mandated not to counsel or
abet activities aimed at defiance of the law or at lessening confidence in the legal system
(Rule 1.02, Canon, 1, Code of Professional Responsibility) and to employ only fair and
honest means to attain the lawful objectives of his client (Rule 19.01, Canon 19, Id.). And
under the Canons of Professional Ethics, a lawyer must steadfastly bear in mind that his
great trust is to be performed within and not without the bounds of the law (Canon 15,
24
Id.), that he advances the honor of his profession and the best interest of his client when
he renders service or gives advice tending to impress upon the client and his undertaking
exact compliance with the strictest principles of moral law (Canon 32, Id.). These canons
strip a lawyer of the lawyer-client privilege whenever he conspires with the client in the
commission of a crime or a fraud.
VII. Implementation Issues
Having discussed the FATF recommendation to introduce gatekeepers legislation
in the country and the possible legal ramifications that it may cause, let me go back to the
hypothetical scenarios described in the first part of this presentation. Using these
situations, I will analyze possible implementation issues if the Philippines were to adopt a
law or administrative policies in line with the gatekeeper initiative.
Situation No. 1
In the first scenario, the transaction facilitated by Atty. Cruz is covered by
Recommendation 12, which mandates due diligence and record keeping requirements to
lawyers25 when they prepare or carry transactions concerning, among others, the buying
and selling of real estate. Thus, Atty. Cruz would need to conduct due diligence on the
couple. In his paper, Lim questioned the fairness in the manner by which this
recommendation is implemented among lawyers. He noted that the term designated nonfinancial businesses and profession for the gatekeeping tasks put the sole practitioners in
equal footing with partners or employed professionals within professional firms. This
condition, according to him, is inequitable and prejudicial, considering that sole
practitioners normally have limited time, staff, and resources to adopt and comply with
effective anti-money laundering laws or programs as compared with partnerships or
professional firms.
Recommendation 16 would have also required Atty. Cruz to submit STR given
the facts attendant to this transaction. The question, however, is whether or not the
relevant information was obtained in circumstances where they are subject to
professional secrecy or legal professional privilege. If it were, then filing of STR is not
required by the said Recommendation.
Situation No. 2
The same question would arise if Situation No. 2 is to be analyzed. As indicated
in the hypothetical scenario, the lawyer fully believes his client is engaged in money
laundering activities, thereby making Recommendation 16 applicable if the submission of
the STR would not violate legal professional privilege. This issue what information
constitutes privilege communication under similar circumstances will have to be
threshed out by very clear implementing rules and guidelines to guide lawyers.
The second set of questions in this situation seems to be clear insofar as the issue
of privilege communication is concerned. When Mr. Cruz approached Atty. Reyes asking
for legal advice and in the process revealing some information, it is clearly a protected
privilege communication. In that case, Atty. Reyes is not required to submit STR. Having
25
Lim, ibid.
heard Mr. Cruz about his confession, can Atty. Reyes still submit STR to report the
activities of the Chinese businessmen? Is that not covered by the privilege
communication rule? On the other hand, since the Chinese businessmen are about to
engage in a criminal activity (i.e. money laundering), does it not fall under the exemption
to the lawyer-client privileged communication rule?
Situation No. 3
This hypothetical scenario brings to fore the issue of balancing the sanctity of
lawyer/client privilege versus the protection of society from terrorists and/or organized
crimes who are helped, wittingly or unwittingly, by lawyers. If in the above example the
information that the lawyer acquired is a protected privilege communication, is there a
way to bring the attention of the authorities to important leads that can help them in their
investigation without violating the lawyer-client relationship?
VIII. CONCLUSION
The important and indispensable role that professional advisers play in complex
financial transactions has made them a logical partner in the fight against money
laundering and terrorist financing. These professionals who, wittingly or unwittingly,
assist money launderers conceal and/or move proceeds of illegal activities across
international boundaries through the financial system are in a unique position to observe
transactions and possibly identify potential suspicious activities that may indicate money
laundering, terrorist financing or other unlawful conduct.
However, since these gatekeeper professionals are often subject to confidentiality
commitments or legal privileges which underlie the professional relationships that allow
them to perform these necessary gatekeeping roles,26 the incorporation of gatekeeper
initiative in the legal system of many countries proved to be cumbersome and difficult.
Among the professionals, it is the legal profession that has raised the loudest opposition
to the initiative because of its unprecedented impact on client confidentiality, the
attorney-client relationship, the independence of the bar, and the compliance-counseling
role of lawyers in the society.27
The trend, however, seems to indicate that more and more countries are
incorporation legislation in their legal system. 85 of the 135 countries studied by the
International Bar Association already have gatekeeping laws for lawyers. Other countries
like Indonesia, although do not have specific gatekeeping legislation for the legal
professionals, already impose reporting function to lawyers in certain transactions. The
Philippines has yet to adopt its own gatekeeper legislation. Very soon, however, it can be
anticipated that the government will attempt to incorporate the gatekeeper initiative into
its legal system in order to effectively combat money laundering and terrorist funding. In
that eventuality, our court will have to balance the sanctity of lawyer/client privilege
versus the protection of society from the dangers of money laundering and terrorist
financing. But as has been shown in this paper, this will not be easy. Just like in the US,
our extensive ethics rules that apply to the profession and govern confidentiality
26
27
obligations and the critical role of the attorney-client privilege and duty of confidentiality
in ensuring clients obtain accurate and complete legal advice and assistance will be a
major obstacle to the adoption of gatekeeper initiative in the Philippines.