What is Money Laundering?

Money laundering is the process of transforming the profits of crime and corruption into ostensibly
"legitimate" assets. In a number of legal and regulatory systems, however, the term money laundering
has become conflated with other forms of financial and business crime, and is sometimes used more
generally to include misuse of the financial system (involving things such as securities, digital currencies,
credit cards, and traditional currency), including terrorism financing and evasion of international
sanctions. Most anti-money laundering laws openly conflate money laundering (which is concerned with
source of funds) with terrorism financing (which is concerned with destination of funds) when regulating
the financial system.

(Local Example: Politicians business fund)

U.S. labels Philippines as major money laundering site

March 16, 2017

The Philippines was once again tagged as a major money laundering site by the US State Department,
which cited the $81-million cyber bank heist that was coursed through the local banking system as well
as the country's "international drug trade" as reasons.

The country remains among the 88 major money laundering sites listed in the US State Department's
2017 International Narcotics Control Strategy Report (Volume II Money Laundering and Financial
Crimes). The Philippines has been in the list since 2011.

"Money laundering is a serious concern due to the Philippines' international narcotics trade, high degree
of corruption among government officials, trafficking in persons, and the high volume of remittances
from Filipinos living abroad," the US State Department said in its report.

It said that sophisticated transnational organized crime and drug trafficking organizations use the
Philippines as a drug transit country.

"Criminal groups use the Philippine banking system, commercial enterprises, and particularly casinos, to
transfer drug and other illicit proceeds from the Philippines to offshore accounts," the US State
Department said.

In 2016, the government investigated the biggest documented case of money laundering in Philippine
history where about $81 million stolen from the Bangladesh Bank's account at the Federal Reserve
Bank of New York was coursed through Rizal Commercial Banking Corporation (RCBC), converted into
pesos, and then played in large casinos in the country.

Philippine authorities were not able to trace the exact location of the stolen money, citing the country's
"strict bank secrecy and weak Anti-Money Laundering Act (AMLA)" as hindrances to reach a meaningful
probe.

Weak laws

BIGGEST. The biggest money laundering scandal so far hit the Philippines in 2016, drawing attention to
the urgency of putting more teeth into the Anti-Money Laundering Act.

For the US State Department, the non-inclusion of casinos as covered institutions in the Philippines'
AMLA "remains an especially critical concern."

Senator Francis Escudero, chairman of the Senate committee on banks, financial institutions, and
currencies, filed a committee report last November on putting more teeth into the AMLA, like including
casinos, real estate developers, money transfer firms, junket operators, and dealers of high-value item
goods under scrutiny.

Last year's Senate probe into Bangladesh Bank's stolen millions ended with an upset foreign envoy and
hard lessons learned on how the Philippines' banking loopholes and its flawed anti-money laundering
law can put the country in a bad light.

"The current AML regime does not yet list tax evasion as a predicate crime, and covered entities do not
include real estate agents and brokers and auto and art dealers. The cyber heist also exposed the
vulnerability posed by weakly supervised remittance agents," the US State Department said.

According to the report, drug trafficking remains the biggest source of illicit funds amounting to about
P6.18 billion in 2014, followed by those from plunder and corruption.
"Finally, insurgent and transnational terrorist groups in the southern Philippines engage in money
laundering through ties to organized crime," the US State Department said.

While the US State Department acknowledged the Philippines' progress in enacting laws and issuing
regulations, it said limited human and financial resources constrain tighter monitoring and enforcement.

"The continuing lack of prosecutions and convictions is not surprising since only 49 cases have been filed
since the AMLC began operating in October 2001," the US State Department said.

The Philippines is also seen to be in danger of returning to the "gray list" of the Financial Action Task
Force (FATF) due to the Bangladesh Bank cyber heist.

Casinos now covered by anti-money laundering act under new law

CNN Philippines, July 19, 2017

Casino operations in the Philippines are now covered by the Anti-Money Laundering Act (AMLA) of
2001, under a new law signed on July 14 by President Rodrigo Duterte.

Republic Act No. 10927 effectively amends AMLA, or Republic Act No. 9160, to include casinos as
"covered persons," a copy of the law obtained from Malacanang Palace on Wednesday said.

The AMLA also states that single cash transactions of casinos in excess of P5 million or its equivalent in
any other currency, must be reported to the Anti-Money Laundering Council (AMLC).

If the AMLC finds that a casino may be involved in unlawful activity, the law states that "the Court of
Appeals may issue a freeze order which shall be effective immediately, for a period of 20 days."

Bank Secrecy Law

Republic Act 1405, or The Law on Secrecy of Bank Deposits, is an act prohibiting the disclosure of or
inquiry into deposits with any banking institution.

Under section 2 of Republic Act (RA) 1405 (An Act Prohibiting Disclosure of or Inquiry into, Deposits with
any Banking Institution and Providing Penalty Therefore), all deposits of whatever nature in banks or
banking institutions in the Philippines and investments in government bonds are absolutely confidential
in nature.

Exemptions:

The depositor gives written permission

Cases of impeachment
Upon order of a competent court in cases of bribery or dereliction of duty of public officials, or
cases where the money deposited or invested is the subject matter of the litigation

The Philippine bank secrecy laws, among the strictest in the world, have made our country extremely
vulnerable to corruption, tax evasion and money laundering and have made corruption and tax evasion
investigations extremely difficult.

NTRC backs lifting of bank secrecy law

OCTOBER 3, 2016

Government think tank National Tax Research Center (NTRC) said it is time to end the Law on Secrecy of
Bank Deposits to give mandated agencies a fighting chance in going after persons involved in tax
evasion, money laundering and other financial crimes.

In this day and age, only the Philippines, Lebanon and Switzerland still have restrictive banking laws that
make it difficult for the government to go after tax evaders and money launderers, the NTRC said in a
report.

The Philippines is the only country in the Asia-Pacific region with highly restrictive law that explicitly
prohibits the Anti-Money Laundering Council (AMLC) from sharing data with the BIR [Bureau of Internal
Revenue], it said.
The bank secrecy law in the Philippines was put in place in 1955 pursuant to Republic Act 14052. It
provides for a confidentiality rule for all types of bank deposits except upon written permission of the
depositor, in case of impeachment, upon order of the court in cases of bribery or dereliction of duty of
public official or where the deposit is the subject of litigation.

The law aims to encourage people to deposit their money in banking institutions and discourage private
hoarding so that money may be properly used by the banks in lending to help the countrys economy to
grow.

In 1981, the law was amended by Presidential Decree 17923 to allow examination of bank records when
authorized by the Monetary Board or when the examination is made by an independent auditor hired by
the bank itself for audit purposes only.

Downside

The NTRC said the lack of access to information of bank accounts for tax purposes has led to inaccurate
tax assessments, weak evidence in tax evasion prosecution, and inability of the tax authority to
determine the true liability of taxpayers.

Bank secrecy is always considered one of the main aspects of private banking. It has also been
pinpointed to be responsible for one of the main instruments of underground economy, tax evasion and
money laundering, it said.

It noted that existing bank secrecy law makes it tough for the BIR to go after tax evaders and money
launderers, a process that would often involve court intervention an additional process prompting the
government to spend more without a clear return of investment.

Easing of bank secrecy rules for tax purposes would allow the BIR to assess tax liabilities and properly
enforce administrative and judicial remedies and ensure the satisfaction of judgment.

It would also increase taxpayer compliance as it would be a global defense against tax evasion. If
implemented, the Philippines can have access to financial information of Filipino citizens and entities
abroad for tax purposes, the think tank said.

With the global call to end excessive protection benefiting dubious parties, it is inevitable that banking
secrecy is set to end, it said.

NTRC said amendments to the bank secrecy law should be viewed as an opportunity for the Philippines
to effectively combat domestic and global tax evasion, money-laundering, and other financial crimes, as
well as foster harmonious and supportive international relations, and to comply with world standards on
transparency.

However, Filipinos should be assured that with the strict standards for confidentiality, the information
gathered are secure and will only be used for the intended purpose, it said.

The Pork Barrel Scam of 2013

In July 2013, the Inquirer exposed the alleged diversion of billions of pesos in Priority Development
Assistance Fund (PDAF) allocations of senators and members of the House of Representatives to bogus
nongovernment organizations (NGOs) set up by businesswoman Janet Lim-Napoles.

Several government-owned and -controlled agencies were allegedly used as conduits in channeling
PDAF funds to ghost livelihood projects of the fake NGOs.

In August of the same year, the Commission on Audit (COA) released a report that named government
agencies that facilitated the release of P6.156 billion in PDAF funds to ghost NGOs from 2007 to 2009.