Freezing the funds and fruits of flood control: An overview of the effects and extent of freeze orders

The flood control fiasco has permeated our daily lives, consistently making its way to headlines, conversations, and in typical Filipino humor. It has become a relevant and timely national issue in our country as it placed in hot water both public and private individuals allegedly involved in the massive dissipation and misuse of public funds for private gain.

Despite the frequent use of the term “freeze order” in news reports and official statements, many are still unfamiliar with what it truly means, how it is issued, how far it can go, and what its effects are on the assets and rights of those subjected to its chilling repercussions.

Far from being a mere legal phrase, a freeze order directly affects a person’s ability to access, manage, and use money or property. Freeze orders play a vital role in preserving assets while investigations, such as those conducted in relation to the flood control issue, are ongoing. Understanding freeze orders is therefore imperative in appreciating how the law balances accountability with fairness in the midst of a highly publicized and sensationalized controversy.

WHAT IS A FREEZE ORDER?
As discussed by the Supreme Court in the case of Republic of the Philippines v. Roberto V. Ongpin, et al. (G.R. No. 207078, June 20, 2022), a freeze order is an extraordinary and interim relief issued by the Court of Appeals to prevent the dissipation, removal, or disposal of properties that are suspected to be the proceeds of, or related to, unlawful activities. The purpose or objective of a freeze order is to temporarily preserve monetary instruments or property that are in any way related to an unlawful activity or money laundering, by preventing the owner from utilizing them during the duration of the freeze order.

The issuance of a freeze order is governed by Section 10 of Republic Act No. 9160, otherwise known as the Anti-Money Laundering Act, as amended. Since its enactment in 2001, the Anti-Money Laundering Act has been amended five times, primarily to broaden its definition of covered persons, suspicious transactions, and predicate crimes. The State’s efforts to fortify the legal framework against money laundering and related illegal activities, particularly in cases where public funds may be involved, are reflected in these amendments in order to keep up with crimes that emerge over time.

Moreover, Section 10 of the same law makes it clear that the freeze order shall be limited to the value of the money or property found to be related to a predicate crime and shall not apply to amounts in the same account in excess of the value of the proceeds of the predicate crime. Otherwise stated, a freeze order may cover only the amount of cash, monetary instrument, or value of real or personal property that the Court of Appeals believes to be the proceeds of an unlawful activity, and not more.

For a freeze order to be issued, the Anti-Money Laundering Council must file a verified ex parte petition, that is, without notice to the account holder, before the Court of Appeals. Once the Court of Appeals determines that the accounts sought to be frozen are probably related to any of the predicate crimes under the Anti-Money Laundering Act, the Court of Appeals may issue a freeze order, which shall be effective immediately for a period of 20 days.

Within this period, the Court of Appeals should conduct a summary hearing, this time with notice to the parties, to determine whether or not to extend the freeze order. Should the Court of Appeals decide to extend the freeze order, the extended period may not exceed six months, which includes the initial 20 days. This post-issuance hearing is significant because it is during this hearing that the Court of Appeals will determine whether or not to modify, lift, or extend the freeze order, and account holders will have the opportunity to move and argue for the lifting of the freeze order.

SHOULD THERE BE A PENDING CASE BEFORE FREEZE ORDERS CAN BE ISSUED?
The common question is whether or not a case must first be filed against the account holders before a freeze order may be issued. The law says no. A criminal case is not a prerequisite for the issuance of a freeze order because the purpose is to preserve assets while investigations or case build-up are still ongoing.

However, the law contains a built-in safeguard: if there is no case filed against the account holder within the period determined by the Court of Appeals, then the freeze order shall be deemed ipso facto lifted. In other words, once the period of extension imposed by the Court of Appeals passes, the freeze order automatically expires or is lifted by operation of law, without requiring another resolution or motion to end it. This ensures that freeze orders are not issued for an indefinite period of time.

REMEDIES UNDER THE LAW
Account holders are not without any recourse under the law as they are allowed to file a motion to lift the freeze order or participate in the post-issuance hearing to be conducted within the 20-day period.

As stated, the post-issuance hearing must be with notice to the parties because it is during this proceeding that the Court of Appeals will determine whether or not to modify, lift, or extend the freeze order, subject to the presentation of evidence to prove that the monetary instruments or properties frozen are legitimate or in excess of what is allowed by law.

WHAT NOW?
As of Oct. 10, the Anti-Money Laundering Council has obtained six freeze orders in connection with the flood control fiasco, with total frozen assets amounting to at least P4.6 billion. This is a clear demonstration of both the far-reaching effects of the situation and the significance of freeze orders as a legal tool. Indeed, freeze orders serve to protect potential evidence and ensure that assets possibly linked to unlawful activities remain intact. At the same time, they are subject to clear limits on scope and duration, and cannot be used indefinitely without violating the law.

The views and opinions expressed in this article are those of the author. This article is for general informational and educational purposes only and not offered as and does not constitute legal advice or legal opinion.

France Kevin T. Degamo is an associate of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW), Cebu Branch.

ftdegamo@accralaw.com