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The AMLA’S Got You Covered

(Article Published in the Feb 21,2013 issue of Business Mirror)

       When our high-level delegation to the Financial Action Task Force (FATF) submits this week the country’s compliance with the group’s recommendations made last year, the members, I guess, will be muttering beneath their winter mufflers, soto voce, “Very Filipino”. Meaning, “completed at the last minute, held pending for a long-time, and even after such a long wait, not as complete as desired, but clearly well-intentioned, and the apparently best compromise possible for the moment.” My bet is despite the delegates’s frustration, Philippines will not be dragged down this February to FATF’s “Uncooperative List.”

       Last October, the FATF expressed, in the diplomatese but in terms not less certain, its dissatisfaction over the state of our laws on anti-money laundering. While acknowledging our enacting, on the day 6th of June last year, both the law authorizing the examination ex parte of suspected bank accounts (a law which provoked Roberto V. Ongpin’s raging and ranting against Deputy Governor Nestor Espenilla and then AMLC Secretariat’s Executive Director Vicente Aquino) and the law criminalizing the financing of terrorism, the FATF nevertheless observed that the state of our anti-money laundering legislation still bore certain “strategic deficiencies”. The FATF thus recommended the “(a) taking of additional measures to criminalize money laundering, and (b) extending coverage of reporting entities to include nondesignated business and professions.”

       The FATF obviously was aware that the obstacles that prevented our laws from being as compliant as they had wished were rooted in our law-making process; hence, it specifically ended its assessment with, “The FATF strongly encourages the Philippines to enact the pending legislative amendment to the AML.”

       That pending bill has now become, in the fashion of our foot dragging, a law namely, Republic Act No. 10365. It was signed and sealed last week, thanks to the hounding and sometime barking efforts of Senators TG Guingona and Serge Osmena, and will be with the FATF by the time the delegates meet for their plenary in Paris from 20 to 22 February 2013.

       Our first anti-money laundering law (R.A. 9160) had only the following entities as “covered institutions”: (a) banks, non-banks, quasi-banks, trust entities, and all other institutions under the supervision or regulation of the Bangko Sentral ng Philippines; (b) insurance companies and all other institutions supervised or regulated by the Insurance Commission; and (c) securities dealers, brokers, salesmen, investment houses and other similar entities managing securities or rendering services as investment agent, advisor, or consultant; mutual funds, closed-end investment companies, common trust funds, pre-need companies and other similar entities; foreign exchange corporations, money changers, money payment, remittance, and transfer companies and other similar entities, and other entities administering or otherwise dealing in currency, commodities or financial derivatives based thereon, valuable objects, cash substitutes and other similar monetary instruments or property supervised or regulated by Securities and Exchange Commission.

       The listing under R.A. No. 10365 is a marked improvement. Notably, those who are considered as “covered” are no longer just “institutions”. The new law talks of “covered persons, natural or juridical.” In one swoop, single proprietorships, unincorporated associations, and general professional partnerships have became susceptible of being “covered” and therefore subjected to the anti-money laundering regime of reporting.

       More significant, there are new entries in the list. Jewelry dealers in precious metal and in precious stones, are covered for “transactions in excess of One Million (P1,000,000.00). Also now “covered” are the so-called “company service providers,” i.e. those who form companies for other persons, or hold positions, as directors or as corporate secretaries, for usually unnamed third parties, or provide a business address, or engage in correspondence or act as nominee shareholder for others.

       Trust entities, “covered” since the beginning, are now joined, by persons (a) who manage their client’s money, security or other assets, or (b) who manage bank or securities accounts, or (c) who organize funds for the creation, operation or management of companies, or (d) who create, operate or manage entities or relationships, or (e) buy and sell business entities.

       Most enigmatic however is the issue of whether lawyers and accountants are, under the new dispensation, “covered persons.” The term “covered persons”, says the last paragraph of Section 1 of R.A. No. 10365, does not include lawyers and accountants. But the law does not stop there.

       They are excluded only when “acting as independent legal professionals in relation to information concerning their clients” or “where disclosure of information would compromise client confidences or the attorney-client relationship.”

       Not all lawyers and accounts, moreover, are exempt from being “covered”. They must be, for exemption, be authorized to practice in the Philippines. And in lieu of being “covered” they are, instead, to “continue to be subject to the provisions of their respective codes of conduct and/or professional responsibility or any of its amendments.”

       What precisely do those codes of good conduct contain relative to money laundering? Don’t ask me. I got my lowest score, when I took the 1968 Bar examinations, in “Legal Ethics and Practical Exercises.” And my score in that subject was even below 75.