BANKING MORALES 02
Cancio v Court of Tax Appeals (1987)
CASE SUMMARY
Customs seized Cancios undeclared US dollars before she could begin her trip to the US for
heart treatment. The Court of Tax Appeals affirmed the seizure, but the SC reversed it. As a
foreign currency depositor with PCIB, the Foreign Currency Deposit Act allows Cancio to
bring foreign currency out of the country even without declaring it.
Facts
Cancio was clearing through the Manila International Airports Pre-Boarding area on a
flight to Hong Kong. She did not declare that she was carrying cash at the airports
Customs area.
The airports pre-boarding detector rang an alarm and it was discovered that she was
carrying an undeclared amount of money: $102,900.00 in cash, $600.00 in travellers
checks, and P1500.00.
o the money was hidden inside 2 large chocolate boxes, which were securely
wrapped in foil-back paper.
The Commissioner of Customs ordered the seizure of the money because Cancio
failed to present the requisite Central Bank authorization allowing her to bring the
money out of the Philippines.
During the seizure proceedings, Cancio presented a photocopy of her bankbook for
foreign currency deposit with PCIB and alleged that
o she was a foreign currency depositor pursuant to the Foreign Currency Deposit
Act (RA 6426), as implemented by Central Bank Circular 343.
o she had withdrawn the cash in preparation for her trip to the US where she
would get medical treatment for her heart
o the cash was concealed in the chocolate boxes for security reasons
The CTA affirmed the forfeiture of Cancios money.
Issue
Was the CTA wrong to uphold the forfeiture of Cancios money? YES
Held/Ratio
The general rule provided by Central Bank Circulars 265 and 534 is that no person
may take foreign currency out of the Philippines without Central Bank authorization.
o CB Circ 265: 3. No person shall take out or export from the Philippines foreign
currency or any other foreign exchange except as otherwise authorized by the
Central Bank.
o CB Circ 534: Sec. 3. Unless specifically authorized by the Central Bank or
allowed under existing international agreements or Central Bank regulations,
no person shall take or transmit or attempt to take or transmit foreign
exchange, in any form out of the Philippines only, through other persons,
through the mails, or through international carriers.
The provisions of this Section shall not apply to tourists and non-resident
temporary visitors who are taking or sending out of the Philippines their own
foreign exchange brought in by them.
However, Cancio falls under the exception because she is a foreign currency
depositor.
The Foreign Currency Deposit Act loosens the restriction on transferability of foreign
currency for those who are foreign currency depositors. The only requirement before
a foreign currency depositor may take foreign currency out of the Philippines is that
any restriction from the contract between the depositor and the bank be followed.
o SEC. 5. 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.
THE CTA ARGUES that this provision only gives the foreign currency depositor
freedom of withdrawal, not freedom of transferability abroad.
o This is wrong, because of a Circular Letter issued by the Central Bank
requiring banks to advise their foreign currency depositors to carry the
certificate of withdrawal when they travel. It is thus the duty of the bank, not
the depositor, to remind the latter to bring their certificates of withdrawal
whenever they travel with foreign currency.
o While Cancio did not present a certificate of withdrawal for failure of PCIB to
advise her to bring such document, the SC considered the presentation of her
foreign currency bank book in evidence as substantial compliance.
The underlying objective of the Foreign Currency Deposit Act is to attract and invite
the deposit of foreign currencies which are acceptable as part of the international
reserve in duly authorized banks in order that they may be put into the stream of the
banking system.
It would defeat the very purpose of the law to place undue restrictions on the
transferability of such funds. The countervailing effect would be to discourage
prospective foreign currency depositors to the detriment of the banking system.
diane agustin
