‘Money launderers are using RA 1405, the country’s bank secrecy law enacted in September 1955, as their shield against the long arm of the laws.’
OUR country is on the brink of being blacklisted again by the Financial Action Task Force (FATF) due to glaring deficiencies in our anti-money laundering (AML) and countering terrorism financing controls (CTF) controls.
This became more evident during the investigation by the House of Representatives recently on the illegal Philippine Offshore Gaming Operators (POGO).
Surigao del Norte Rep. Robert Ace Barbers brought to light specific deficiencies in our financial system, including the mandatory submission of reports by covered institutions (banks and other financial institutions) as per the Revised Implementing Rules and Regulations of the Republic Act 9160 as amended by Republic Act 9194 and Republic Act 10167.
The son of former Sen. Bobby Barbers exposed the glaring lapses done intentionally or not that put a further dent in our financial system. The following are what the grandson of former General Jimmy Barbers discovered:
a. Failure of Banks to do enhanced customer due diligence and determine the source of funds.
b. Failure of Banks to submit covered transaction reports (CTRs) and suspicious transaction reports (STRs) to the Anti-Money Laundering Council.
c. And Banks allowed withdrawals of large amounts of money after depositing to banks.
A covered transaction is defined as a transaction in cash or other equivalent monetary instrument involving a total amount over P500,000 within one banking day while a suspicious transaction is a transaction, regardless of amount, where any of the following circumstances exists:
1. There is no underlying legal or trade obligation, purpose or economic justification.
2. The client is not properly identified.
3. The amount involved is not commensurate with the business or financial capacity of the client.
4. Taking into account all known circumstances, it may be perceived that the client’s transaction is structured to avoid being the subject of reporting requirements under the AMLA.
5. Any circumstance relating to the transaction that is observed to deviate from the profile of the client and/or the client’s past transactions with the covered institutions.
6. The transaction is in any way related to an unlawful activity or any money laundering activity or offense under the AMLA, as amended, is being or has been committed.
7. Any transaction that is similar, analogous or identical to any of the foregoing.
The submission of CTRs and STRs by Banks and other covered institutions plays a critical role in AMLC’s fight against money laundering and terrorism financing.
Before the discovery of Congressman Barbers on the specific gaps, our country has been under grey list by the FATF since June 2021. Our country’s AML and CTF controls are up for review in the next few months with the hope that we will be removed from the grey list and not be blacklisted.
Money laundering is the transitioning of dirty money originating from criminal activities to placing laundered money into the legal financial framework, moving unlawfully obtained funds through a series of financial transactions and reintegrating illicitly obtained funds into the legitimate financial system.
I have a high respect for AMLC Secretariat Executive Director Atty. Mel Georgie Racela, who I had the privilege to meet in person in 2017 when I conducted a walk-through of several homegrown innovative software including but not limited to the first homegrown AML/CTF Compliance App to make sure it conforms with existing laws on anti-money laundering and the Revised Implementing Rules and Regulations of the Bangko Sentral ng Pilipinas (BSP).
I remembered mentioning it to Atty. Racela that information on politically exposed persons (PEPs) should be made available to the covered institutions and embedded in the PEPs and United Nations Security Council’s Consolidated List to the AML/CTF Compliance App.
In fact, I offered Atty. Racela, at no cost to the AMLC, the use of the AML/CTF Compliance App which we designed as middleware, customizable and multi-tenant. My position remains the same should Atty. Racela finds the AML/CTF Compliance App useful and helpful.
PEP is defined as a natural person who is or has been entrusted with prominent public positions in the Philippines or a foreign state, including heads of state or government, senior politicians, senior national or local government, judicial or military officials, senior executives of government or state-owned or controlled corporations and important political party officials.
It is public knowledge that many money launderers have turned into political kingpins who are bankrolling the candidacy of those aspiring to become the country’s President, Vice President, Senators, Congressmen and other elective positions.
These criminals-cum-political kingpins are aiding their spouse or children to win elective government positions in their localities, thereby protecting their illicit trade and ensuring the smooth transition of their laundered money to the legitimate financial system through their shell companies.
Based on the National Risk Assessment, it was learned that more than 20 percent of the country’s approved General Appropriations Act every year is lost due to corruption. To illustrate, if the national budget is P5,768,000,000,000 then P1,153,600,000,000 goes to corruption.
Our country is exposed to significant terrorism and terrorist financing risks. We all saw the vulnerability of our country to terrorism and terrorist financing during the siege of Marawi in Mindanao last 2017. It was mentioned that terrorist financing before the Marawi siege ranged from various activities such as recruitment of domestic and foreign fighters, procurement of weapons, and training. Unfortunately, our government did not file any case against any financiers of the Marawi siege.
Indeed, these criminals are exploiting the existing deficiencies of our country’s entire financial system from account opening and money transfer to legislative and procedural hurdles that delay or prevent investigation and prosecution of money laundering and terrorist financing.
The AMLC is far from perfect, indeed. The good news is that some incumbent or former members of the Philippine Congress like Congressman Barbers, Senate President Chiz Escudero and former Sen. Ping Lacson have an idea on to do so that the AMLC will be able to effectively gather evidence, perform its mandate and keep the integrity of our country’s financial system impeccable.
Money launderers are using RA 1405, the country’s bank secrecy law enacted in September 1955, as their shield against the long arm of the laws.
If our government fails to act with dispatch in reinforcing our country’s existing AML/CTF controls, there is a possibility that the FATF would blacklist the Philippines, which would destabilize our country’s financial system and undermine economic prospects.
