No haven for launderers (1)

published 24 Nov 2008, MST

It’s a long and winding path to the office of the secretariat of the Anti-Money Laundering Council at the premises of the Bangko Sentral in Manila. After hurdling security checks at the ground floor, one has to take the elevator, alight at the third floor, look for the bridgeway, make ninety-degree turns three times, enter yet another building, ascend another two floors, and then look for the sign that tells you where it is. The main door of the secretariat reveals... a couch. Visitors are made to wait there for a while. There is yet another door that can be activated only by employees’ security cards. There are layers of glass.

This is home to the 63 lawyers, certified public accountants, information technology analysts and administrative support staff who make up the secretariat of the country’s financial intelligence institution. Their boss, lawyer Vicente Aquino, who has been executive director since 2001 (he reports to the council composed of the Bangko Sentral governor as chairman and the Securities and Exchange Commission chairman and Insurance commissioner as members), says the physical environment is indicative of the risks—physical and otherwise—the secretariat constantly faces. Death threats are common fare. They also run the risk of being sued for simply doing their jobs.

Nonetheless, the secretariat goes about its business, deliberately keeping a low profile and refusing to be a party to the highly politicized fanfare that normally goes with probes of money from questionable sources. Aquino wants to assure the public that the agency is doing its job, even as it shies away from the limelight. “It’s taxpayers’ money well and wisely spent,” he claims.

But the fight against money laundering remains tortuous.

The work starts upon the secretariat’s receipt of reports of covered and suspicious transactions from its covered institutions— namely banks and all other institutions supervised and regulated by the Bangko Sentral, insurance companies and other institutions supervised or regulated by the Insurance Commission and securities dealers, pre-need companies, foreign exchange corporations and other entities supervised or regulated by the Securities and Exchange Commission.

Covered transactions refer to single transactions in cash or other equivalent monetary instrument involving a total amount in excess of P500,000 within one banking day. This amount had been lowered to the present from the P4 million when the Anti-Money Laundering Act was passed in 2001.

On the other hand, suspicious transactions are transactions with covered institutions, regardless of the amount involved, where any of the following circumstances exist: there is no underlying legal or trade obligation, purpose or economic justification; the client is not properly identified; the amount involved is not commensurate with the business or financial capacity of the client; the transaction is structured to avoid being the subject of reporting requirements under the Anti-Money Laundering Law; there is a deviation from the client’s profile or past transactions; the transaction is related to an unlawful activity or offense to the AMLA; and other transactions similar or analogous to the above.

An unlawful activity, known as the predicate crime, is the offense which generates dirty money. Thus far, there are 14 on the list: kidnapping for ransom, drug trafficking and related offenses, graft and corrupt practices, plunder, robbery and extortion, jueteng and masiao, piracy, qualified theft, swindling, smuggling, violations of the electronic commerce law, hijacking, destructive arson and murder, including those perpetrated by terrorists against non-combatant persons and similar targets.

Other offenses under the law are failure to keep records (on the part of the covered institutions), malicious reporting, and breach of confidentiality (after a report has been made).

Aside from covered institutions, the secretariat is also alerted by requests from other law enforcement agencies (domestic or foreign) and reports coming out in the media or filed by concerned individuals.

According to its accomplishment report of October 2008, there have been 130,773,762 reports of covered transactions and 22,609 reports of suspicious transactions since the creation of the council after the law was passed in 2001. On a monthly average, the number of suspicious transactions reported have increased from 11 in 2002, 18 in 2003, 46 in 2004, 87 in 2005, 381 in 2006, 329 in 2007 to 434 in 2008.

There have been 11,395 investigations triggered by these reports of suspicious transactions.

Based on these reports, the council determines whether probable cause (that funds are related to unlawful activity) exists. Probable cause, of course, serves as the common basis for account inquiry, asset freeze, asset preservation, civil forfeiture and money laundering or terrorist financing offenses.

In the beginning, the council had to secure a court order to look into subject bank accounts or transactions. This greatly hampered the work because the release of the order took time. The criminals were thus given the time and the opportunity to take out their funds, beating the council. By the time the inquiries were made, the money was already gone.

Now, a court order is no longer necessary in cases involving kidnapping for ransom, narcotics offenses, and hijacking, destructive arson and murder, including those perpetrated by terrorists against non-combatant persons and similar targets.

More on asset freezing, civil forfeiture, inter-agency efforts, international cooperation—and the executive director’s thoughts next week.