Cancio v.

Court of Appeals (Court of Tax Appeals)

G.R. No. 73882 | October 22, 1987 |MELENCIO-HERRERA, J. |
TOPIC: Foreign Currency Deposit Unit

FACTS:
1. Cancio was clearing through the Manila International Airport’s Pre-Boarding area on a flight to Hong
Kong. She did not declare that she was carrying cash at the airport’s Customs area.
2. The airport’s pre-boarding detector rang an alarm and it was discovered that she was carrying an
undeclared amount of money: $102,900 in cash, $600 in travellers checks, and P1500 in cash.
a. the money was hidden inside 2 local chocolate boxes, which were securely wrapped in tin foil-
back paper.
3. Commissioner of Customs ordered the seizure of the money because Cancio failed to present the
required Central Bank authorization allowing her to bring the money out of the Philippines.
4. During the proceedings, Cancio presented a photocopy of her bankbook for foreign currency deposit
with PCIB, dollar remittances in telegraphic transfers from abroad for deposits in her account, and
withdrawal cards, and alleged that:
a. She was a foreign currency depositor pursuant to the Foreign Currency Deposit Act (RA 6426),
as implemented by Central Bank Circular 343.
b. She had withdrawn the cash in preparation for her departure for Hong Kong and from Hong
Kong to the US where she would get medical treatment for her heart ailment.
c. The cash was concealed in the chocolate boxes for security reasons.
5. By reason of forfeiture of Customs Commissioner, Cancio appealed to CTA, which affirmed the
forfeiture with the exception of P1,500 on the ground that Cancio was travelling with her husband and 3
children, the said amount did not exceed the P500 at that each traveller is allowed to bring out of the
country without a CB permit.

ISSUE: WON the forfeiture is correct? NO.

HELD:
● 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.
○ CB Circ 265: “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.”
○ 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.”
● Cancio falls under the exception because she is a foreign currency depositor. Relevant and applicable to
her is the Foreign Currency Deposit Act (RA 6426)
● The FCDA 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. Neither is a Central Bank authority required for the transferability abroad of foreign
currency deposits.
 ○ “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.”
● CTA argues that this provision only gives the foreign currency depositor freedom of withdrawal, not
freedom of transferability abroad.
● 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.
○ While Cancio did not present a certificate of withdrawal for failure of PCIB to advise her to bring
such document, SC considered the presentation of her foreign currency bank book and her
withdrawal cards 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.