BRIEFING ON THE ANTI-MONEY LAUNDERING LAW

What is money laundering?

RA 9160 (Anti-Money Laundering Act of 2001 [AMLA]) Sec. 4: Money laundering is a CRIME whereby the proceeds of an unlawful activity as herein defined are TRANSACTED, thereby making them appear to have originated from legitimate sources

Elements of the Crime of Money Laundering

Unlawful

activity Monetary instrument or property (MI/P) Transaction/Attempted transaction Knowledge that the MI/P represents, involves, or relates to the proceeds of the unlawful activity

Elements of the Crime of Money Laundering

UNLAWFUL ACTIVITY [Sec. 3(i) of AMLA]

Kidnapping for ransom Comprehensive Dangerous Drugs Act of 2002 Anti-Graft and Corrupt Practices Act Plunder Robbery and Extortion Jueteng and Masiao

Elements of the Crime of Money Laundering

UNLAWFUL ACTIVITY [Sec. 3(i) of AMLA]
Piracy on high seas and Phil. waters Qualified theft Swindling under Art. 315 of RPC Smuggling Electronic Commerce Act of 2000

Elements of the Crime of Money Laundering

UNLAWFUL ACTIVITY [Sec. 3(i) of AMLA]

Hijacking; Destructive Arson and murder, including those perpetrated by terrorists against non-combatant persons and other targets
- International Islamic Relief Organization (IIRO) - IIRO (Philippines)

Elements of the Crime of Money Laundering

UNLAWFUL ACTIVITY [Sec. 3(i) of AMLA]

Securities Regulation Code of 2000 Felonies or offenses of a similar nature that are punishable under the penal laws of other countries

Elements of the Crime of Money Laundering

a. Monetary Instruments [Sec.3(c) AMLA; Rule 3.c. RIRR]
1. coins or currency of legal tender of the Phils. or any other country 2. drafts, checks and notes 3. securities and negotiable instruments, bonds, commercial papers

4. deposit certificates, trust certificates

Elements of the Crime of Money Laundering

5. custodial receipts or deposit substitute inst. 6. trading orders, transaction tickets 7. confirmation of sale or investments 8. money market instruments, 9. other similar instruments where title thereto passes to another by endorsement, assignment or delivery - E-Money defined in BSP Circular No. 649

Elements of the Crime of Money Laundering

a. Globe G-Cash b. Smart Cash c. Bank issued cash and stored value prepaid cards (e.g. Visa prepaid card issued by Unionbank) 10. Insurance contracts, and contract of suretyship

Elements of the Crime of Money Laundering

b. Property as defined under the Civil Code
Art. 414. All things which are or may be the object of appropriation are considered either: (1) immovable or real property; or (2) movable or personal property.

Elements of the Crime of Money Laundering

Transaction [Sec. 3 (h) of AMLA]
refers

to any act establishing any right or obligation or giving rise to any contractual or legal relationship between the parties thereto. It also includes any movement of funds by any means with a covered institution.

Elements of the Crime of Money Laundering

Transaction includes: Cash and check deposits Over-the-counter withdrawals or check encashment opening of deposit accounts Loan applications/loan payments Sale of foreclosed properties or acquired assets Issuance of credit cards, etc.

Elements of the Crime of Money Laundering

Transaction includes: (Contn)
Trust related transactions Remittance and receipt of remittance Foreign currency exchange Pawning and redemption of pawned property

Elements of the Crime of Money Laundering

Knowledge (Rule 6.5 of the RIRR)
Knowledge may be established by direct evidence or inferred from the attendant circumstances

Why is money laundering a problem?

Money

laundering allows criminals to preserve and enjoy the proceeds of their crimes, thus providing them with the incentives and the means to continue their illegal activities.

How is money laundering carried out?/Stages of ML

Placement
Proceeds institutions placed in financial

Layering
Further distancing their origin proceeds from

Integration
Funds re-enter legitimate circulation

Stages
1. Placement involves the initial
placement or introduction of the illegal funds into the financial system. Ex. a. Smurfing or structuring b. Purchase of insurance contract

Stages
2. Layering involves a series of financial
transactions during which the dirty money is passed through a series of procedures, putting layer upon layer of persons and financial activities into the laundering process. Ex. a. electronic transfer of funds b. disguised transfer of funds as payment for goods or services

Stages
3. Integration the money is once again
made available to the criminal with the occupational and geographic origin obscured or concealed. The laundered funds are now integrated back into the legitimate economy through the purchase of properties, businesses and other investments.

Stages

REPUBLIC ACT NO. 9160 otherwise known as THE ANTI-MONEY LAUNDERING ACT OF 2001 as amended by REPUBLIC ACT NO. 9194

FINANCIAL ACTION TASK FORCE (FATF)

R.A. 9160, otherwise known as the ANTIMONEY LAUNDERING ACT OF 2001 (AMLA), as amended, came into being as a result of the creation of the FATF.

FATF
Formed

in 1989 Based in Paris, France An international body formed by G-7 with a mission of paving the way for the effective prevention and detection of money laundering by ensuring that appropriate measures against money laundering are implemented in all nations

FATF

In 1990, FATF prepared a set of recommendations which provides a comprehensive plan of action needed to fight money laundering. It provides a complete set of counter-measures against money laundering covering: 1. Criminal justice system and law enforcement, 2. Financial system and its regulation, and 3. International cooperation.

FATF
1990 - FATF issued 40 Recommendations 2001 - FATF issued 8 Special Recommendations which requires countries to have measures in place to fight financing of terrorism (Recommendation VIII Calls for the review of adequacy of laws and regulations on NPOs) 2004 - FATF Added Recommendation No. (Cash Couriers) 9

FATF
8 Special Recommendations
Recommendation VII-Countries should review the adequacy of laws and regulations that relate to entities that can be abused for the financing of terrorism. Non profit organizations are particularly vulnerable, and countries should ensure that they cannot be misused: (i) by terrorist organizations posing as legitimate entities; (ii) to exploit legitimate entities as conduits for terrorist financing; and (iii) to conceal the clandestine diversion of funds intended for legitimate purpose to terrorist organizations.

FATF
To

enforce compliance with the recommendations, it created and maintained a list of Non Cooperative Countries and Territories (NCCT List) under the list are subject to

Countries

sanctions.

FATF

In June 2000, the FATF placed the Philippines in its list of Non-Cooperative Countries and Territories (NCCT) for the following reasons: 1. It has no existing anti-money laundering law. 2. It has no financial intelligence unit. 3. The Philippines has a very strict bank deposit secrecy law. 4. Its banks and other covered institutions do not report suspicious transactions.

Effectivity Dates

AMLA

R.A. No. 9160

R.A. No. 9194 Revised IRRs

- October 17, 2001

- March 23, 2003 - September 7, 2003

FATF
With

the enactment of the AMLA and its amendments by R.A. 9194, the Philippines was removed from the NCCT List, and no longer subject to FATF monitoring since, February 11, 2005.

Covered Institutions
[Sec. 3 (a) AMLA]
1. Banks, non-banks, quasi-banks, trust entities, and all other institutions and their subsidiaries and affiliates supervised or regulated by the Bangko Sentral ng Pilipinas; 2. Insurance Companies and all other institutions supervised or regulated by the Insurance Commission; and

Covered Institutions
[Sec. 3 (a) AMLA]
3. All those supervised or regulated by the Securities and Exchange Commission as grantees of secondary license, such as: i. securities dealers, brokers, salesmen, investment houses; and ii. Mutual funds, closed end investment companies, common trust funds, preneed companies, investment houses.

AMLAs 3 Major Requirements for Compliance by Banks and other Covered Institutions
1. Reporting of covered and suspicious transactions 2. Customer identification and due diligence or Know Your Customer (KYC) 3. Record-keeping

Reporting of Covered and Suspicious Transactions

[Sec. 8(c)AMLA]

All covered institutions shall report to the AMLC all covered transactions and suspicious transactions

Covered Transaction
[Sec. 3(b) AMLA]

Covered transaction is a transaction in cash or other equivalent monetary instrument involving a total amount in excess of Five Hundred Thousand Pesos (Php500,000.00) within one (1) banking day.

Covered Transaction
[Sec. 3(b) AMLA]
- It is a single transaction in excess of P500,000.00 within one banking day. - Therefore, multiple transactions or series of transactions with an amount not more than P500,000.00 each, but whose total amount exceeds the threshold amount, are not reportable as Covered Transaction.

Suspicious transactions
[Sec. 3(b-1) AMLA]

are transactions with covered institutions, regardless of the amounts involved, where any of the following circumstances exist: 1. Client is not properly identified; 2. There is no underlying legal or trade obligation, purpose or economic justification for the transaction; 3. The amount involved is not commensurate with the business or financial capacity of the client;

Suspicious transactions (cont.):

[Sec. 3(b-1) AMLA]

4. The transaction is structured in a manner that invites suspicion that it is trying to avoid the reporting requirements under the AMLA; 5. Any circumstance relating to the transaction which is observed to deviate from the clients past transactions; 6. The transaction is in any way related to an unlawful activity under the AMLA; and 7. Any transaction that is similar or analogous to any of the foregoing.

AMLC Resolution No. 59

Suspicious transaction indicators:

1. Transactions of individuals or entities that are affiliated to people suspected of being connected to a terrorist group or a group that advocates violent overthrow of a government
2. The NGO does not appear to have expenses normally related to relief or humanitarian efforts

AMLC Resolution No. 59 (contd)

3. The absence of contributions from donors located within the country of origin of the NGO 4. A mismatch between the pattern and size of financial transactions on the one hand and the stated purpose and activity of the NGO on the other 5. Incongruities between apparent sources and amount of funds raised or moved by the NGO

Period of Reporting of Covered and Suspicious Transactions

[Sec. 8(c)AMLA]

Should a transaction be determined to be both a covered transaction and a suspicious transaction, the covered institution shall be required to report the same as a suspicious transaction

Customer Identification and Due

Diligence/Know your Customer
(CDD/KYC)
1. Establishing and recording the true identity of clients based on official documents, 2. Maintaining a system of verifying the true identity of clients. - In case of corporate clients, the system must include
a process of verifying their legal existence, organizational structure and authority of the person purporting to act in their behalf.

Establishing and recording the true identity

-Involves:
1. Requiring a client to produce at least one (1) valid original photo bearing official document of identity (ID) issued by an official authority. 2. Recording the ID of the client.

CDD/KYC

Establishing and recording the true identity

What does Official Document of Identity mean? -Document of identity that is issued by an authority What does Official Authority mean? official

CDD/KYC

Establishing and recording the true identity

Official Authority refers to any of the following: 1. Government of the Republic of the Philippines; 2. Its political subdivisions and instrumentalities; 3. Government-owned and/or controlled corporations (GOCCs); and 4. Private entities or institutions registered with or supervised or regulated either by the BSP or SEC or IC.

CDD/KYC

Establishing and recording the true identity

Valid IDs: Passport Drivers license Professional Regulations Commission (PRC) ID National Bureau of Investigation (NBI) clearance Police clearance Postal ID Voters ID Barangay certification Government Service and Insurance System (GSIS) eCard

CDD/KYC

Establishing and recording the true identity

Valid IDs: Certification from the National Council for the Welfare of Disabled Persons (NCWDP) Department of Social Welfare and Development (DSWD) Certification Company issued by private entities or institutions registered with or supervised or regulated either by the BSP, SEC or IC Integrated Bar of the Philippines ID

CDD/KYC

Valid IDs: Social Security System (SSS) card Senior Citizen Card Overseas Workers Welfare Administration (OWWA) ID OFW ID Seamans Book Alien Certification of Registration/Immigrant Certificate of Registration Government Office and GOCC ID e.g. Armed Forces of the Philippines (AFP), Home Development Mutual Fund (HDMF)

Establishing and recording the true identity

CDD/KYC

Establishing and recording the true identity

Valid IDs: Passports issued by foreign governments For purpose of remittance to students who are not yet of voting age, photo-bearing school ID duly signed by the principal of head of the school

CDD/KYC

under the Revised Implementing Rules & Regulations (RIRR)

Minimum information required: Name Present address Permanent address Date and place of birth Nationality Nature of work and name of employer or nature of selfemployment/business

CDD/KYC

under the RIRR

Minimum Information Required: (cont.) Contact numbers TIN, SSS No., GSIS No. Specimen signature Source of fund(s), and Names of beneficiaries in case of insurance contracts and whenever applicable.

CDD/KYC

(for juridical persons)

Covered institutions shall endeavor to ensure that a: 1. corporate juridical entity has not been or is not being dissolved, wound up or voided. 2. its business or operations has not been or is not being closed, shut down, phased out, or terminated. 3. Shell companies should be dealt with extreme caution.

under the RIRR

CDD/KYC

(for juridical persons)

Minimum information/documents:

under the RIRR

CDD/KYC

Articles of Incorporation/Partnership By-laws Official address/principal business address List of directors/partners List of principal stockholders owning at least 2% of the capital stock

(for juridical persons)

Minimum information/documents: (cont.)

under the RIRR

CDD/KYC

Contact numbers Beneficial owners, if any; and Verification of the authority and identification of the person purporting to act on behalf of the client.

RECORD-KEEPING REQUIREMENTS
All covered institutions shall: maintain and safely store all records of all their transactions for 5 years from the transaction dates. anent closed accounts, preserve and safely store the records on customer identification, account files and business correspondence for at least 5 years from closure dates. if a money laundering case based on any record kept by the covered institution has been filed in court, retain said file until it is confirmed that the case has been finally resolved or terminated by the court.

Money Laundering Offenses/Penalties

1. Knowingly transacting or attempting to transact any monetary instrument or property which represents, involves or relates to the proceeds of any unlawful activity (The money launderer himself)
Penalty
7 to 14 years imprisonment and a fine of not less than P 3 Million but not more than twice the value of the monetary instrument or property.

Money Laundering Offenses / Penalties

2 Knowingly performing or failing to perform an act in relation to any monetary instrument or property involving the proceeds of any unlawful activity as a result of which he facilitated the offense of money laundering (The person who assists the money launderer)
(Crim. Case No. 127802, PP vs. Eric Allagadan first money laundering
conviction )

Penalty

4 to 7 years imprisonment and a fine of not less than P1.5 Million but not more than P3 Million.

Money Laundering Offenses/Penalties

3. Knowingly failing to disclose and file with the AMLC any monetary instrument or property required to be disclosed and filed

Penalty
6 months to 4 years imprisonment or a fine of not less than P100,000.00 but not more than P500,000.00, or both.

Other Offenses under R.A. 9160, as amended

1.For failure to keep records
All records of all transactions of covered institutions shall be maintained and safely stored for five (5) years from the dates of transactions/when they were closed.

Penalty
6 months to 1 year imprisonment or a fine of not less than P100,000.00 but not more than P500,000.00, or both.

Other Offenses under R.A. 9160, as amended

2.For malicious reporting
Any person who reports or files a completely unwarranted or false information relative to money laundering transaction against any person shall be held criminally liable.
Penalty
6 months to 4 years imprisonment and a fine of not less than P100,000.00 but not more than P500,000.00; provided that the offender is not entitled to the benefits of the Probation Law. (Sec. 14 (c), AMLA)

 No

administrative, criminal or civil proceedings, shall lie against any person for having made a covered or suspicious transaction report in the regular performance of his duties in good faith, whether or not such reporting results in any criminal prosecution under this Act or any other law.

Other Offenses under R.A. 9160, as amended

Safe Harbor Provision

When reporting covered or suspicious transactions to the AMLC, covered institutions and their officers and employees shall not be deemed to have violated Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791 and other similar laws. (Sec. 9,
AMLA)

Other offenses under R.A. 9160, as amended

3.For breach of confidentiality
When reporting covered or suspicious transactions to the AMLC, covered institutions and their officers and employees are prohibited from communicating directly or indirectly, in any manner or by any means, to any person or entity, the media, the fact that a covered or suspicious transaction report was made, the contents thereof, or any other information in relation thereto.

Penalty
3 to 8 years imprisonment and a fine of not less than P500,000.00 but not more than P1.0 Million.

Confidentiality Provision of the RIRR

Rule

8.4. Confidentiality Provision-The members of the AMLC, xxx and all members of the Secretariat, shall not reveal , in any manner, any information known to them by reason of their office. This provision shall apply even after their separation from the AMLC. Violation is punished in accordance with the provision of the Central Bank Act.

ADMINISTRATIVE OFFENSES AND SANCTION

Rule 14.1.d of Revised Implementing Rules and Regulations Violations of AMLA, rules, issuances, order, resolutions, regulations Not less than P100,000.00 but not exceeding P500,000.00

Prosecution of Money Laundering Cases

Any person may be charged with and convicted of both the offense of money laundering (subject offense) and the unlawful activity (predicate offense)
Any proceeding relating to the unlawful activity shall be given precedence over the prosecution of any offense or violation under R.A. No. 9160 without prejudice to the freezing and other legal remedies.

Prosecution of Money Laundering Cases

Rule 6.6. further provides that All the elements of every money laundering offense under Section 4 of the AMLA must be proved by evidence beyond reasonable doubt, including the element of knowledge that the monetary instrument or property represents, involves or relates to the proceeds of any unlawful activity.

Prosecution of Money Laundering Cases

Rule 6.7 clearly states that No element of the unlawful activity, however, including the identity of the perpetrators and the details of the actual commission of the unlawful activity need be established by proof beyond reasonable doubt. The elements of the offense of money laundering are separate and distinct from the elements of the felony or offense constituting the unlawful activity.

THE ANTI-MONEY LAUNDERING COUNCIL OF THE PHILIPPINES (AMLC)

The Philippines Financial Intelligence Unit

INSURANCE COMMISSIONER

BSP GOVERNOR

SEC CHAIRMAN

SECRETARIAT

Executive Director

Legal Evaluation

Compliance And Investigation

Information Management And Analysis

Administrative And Financial Services

AMLC
Acts

unanimously in the discharge of their functions

Secretariat
Members

of the Secretariat hold full time permanent position within the BSP (Sec. 8, AMLA) Members of the Secretariat are regular employees of the BSP (Rule 8.2., RIRR)

Functions of the AMLC

(1) to require submission of and receive covered or suspicious transaction reports from covered institutions (Sections 7[1] & 9[c].

Functions of the AMLC

(2) to issue orders to the appropriate Supervising Authority or the covered institution to determine the true identity of the owner of any monetary instrument or property subject of a CTR or STR or request for assistance from a foreign state, or believed by the Council on substantial evidence to be related to an unlawful activity. [Sec. 7(2) AMLA]

Functions of the AMLC

(3) institute civil forfeiture proceedings and all other remedial proceedings through the Office of the Solicitor General. -G.R. No. 170281, R.P. vs. Glasgow Credit and Collection Services, Inc., et al.

Functions of the AMLC

(4) cause the filing of complaints with the Department of Justice or the Ombudsman for the prosecution of money laundering offenses.

Functions of the AMLC

(5) investigate suspicious transactions and covered transactions deemed suspicious after an investigation by AMLC, money laundering activities, and other violations of this Act.

AMLC Authority to Inquire (Sec. 11)

To inquire into or examine any particular deposits or investments upon order of a competent court, except in cases where the unlawful activity involves kidnapping for ransom, drug-related cases and terrorist related cases.

AMLC Resolution
KFR Drugs-related Terrorist-related
-G.R.

Court Order

the rest of the predicate crimes under Sec. 3 (i)

No. 174629, RP vs. Hon. Antonio Eugenio, et al.

Functions of the AMLC

(6)

To apply before the Court of Appeals, ex parte, for the freezing of any monetary instrument or property alleged to be the proceeds of any unlawful activity as defined in Section 3(i) hereof. - The freeze order issued is effective for a period of 20 days and extendible for a period not exceeding 6 months.

Freezing of Monetary Instrument or Property

The Court of Appeals, upon application ex parte by the AMLC and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity as defined in Section 3(i) hereof, may issue a freeze order which shall be effective immediately. The freeze order shall be for a period of twenty (20) days unless extended by the court. G.R. No. 165800, Maj. Gen. Garcia vs. RP, represented by the AMLC

Extension of the Freeze Order

Before the 20 day effectivity period of the freeze order issued by the CA expires, the AMLC may apply in the same court for an extension not exceeding a period of six (6) months.
During the effectivity of the freeze order, the AMLC may avail itself of other legal remedies, such as inquiry, civil forfeiture and/or the filing of money laundering case/s.

What can be frozen?

Monetary instrument Property Related Web of Accounts Rule 10.4

Related web of accounts - those accounts, the funds and sources of which originated from and/or are materially linked to the monetary instrument(s) or property(ies) subject of the freeze order.

Duty of Respondent, Covered Institution or Government Agency Upon Receipt of Freeze Order

Immediately desist from and not allow any transaction, withdrawal, deposit, transfer, removal, conversion, other movement or concealment of the account representing, involving or relating to the subject monetary instrument, property, proceeds or its related web of accounts.

Functions of the AMLC

(11) to impose administrative sanctions for the violation of laws, rules, regulations and orders and resolutions issued pursuant thereto.

Functions of the AMLC

(7) to implement such measures as may be necessary and justified under this Act to counteract money laundering. (8) to receive and take action in respect of, any request from foreign states for assistance in their own antimoney laundering operations provided in this Act.

Functions of the AMLC

(9) to develop educational programs on the pernicious effects of money laundering, the methods and techniques used in money laundering, the viable means of preventing money laundering and the effective ways of prosecuting and punishing offenders.

Functions of the AMLC

(10) to enlist the assistance of any branch, department, bureau, office, agency or instrumentality of the government, including government-owned and controlled corporations, in undertaking any and all anti-money laundering operations, which may include the use of its personnel, facilities and resources for the more resolute prevention, detection and investigation of money laundering offenses and prosecution of offenders.

HOW TO REQUEST ASSISTANCE/REFER CASE TO AMLC?

HOW TO REQUEST ASSISTANCE/REFER CASE TO AMLC?

AML Desks email to vaquino@bsp.gov.ph Call (02) 523-44-21/Fax (02) 524-60-85 Referral Letter (please state case circumstances/details) Prevent fishing expedition Drop by 5 th Flr, EDPC Bldg., BSP Complex, Roxas Blvd., Malate, Manila

Thank you!
Rommel D. Trijo
Legal Officer III Legal and Services Group Anti-Money Laundering Council Secretariat