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Anti-Terrorist Financing Regulations

(Article published in the Aug 22,2012 issue of Manila Standard Today)   

Banks, insurance companies, companies, and all other institutions  supervised or rulated by the Banko Sentral ng Pilipinas (BSP) or the Insurance Commission (IC), or the Securities and Exchange Commission (SEC) must secure pronto copies of the recently issued Implementing Rules and Regulations (the “Regulations”) of Republic Act No. 10168. Republic Act No. 10168, among other things, criminalized the financing of terrorism, thereby asserting to the international community, in unmistakeable terms, that we are one with them in combating the common enemy called Terrorism.

The Regulations is available at our Anti-Money Laundering Council’s website and was published in print in another broadsheet of general circulation in the second week-end of this August.  It is a “must read” not only for those involved in the handling of the flow of money but also for those interested in drafting instructions for bureaucrats, both in government or in the private sector.  Its greatest virtue, almost to a fault, is its completeness.  It is so detailed that, if I may be permitted to engage in some exaggeration, it is like a how-to-sleep-well book that tells you on which side of the bed to sleep every night of the calendar month of the year.

The mountain of detail in the Regulations, in fairness, is justified.  R.A. No. 10168 is so drastic a measure and so demanding of the persons directly affected (so much so that, from the point of view of the more liberal amongst us, it can be seen as bordering on the undue invasive of one’s human rights, particularly privacy), precisely because terrorism is, by nature indiscriminate as to victim and by design geographically widespread. Terrorism is a menace that itself violates the humanity of everyone affected in some way or another, be he or she a holder of high position and a video game addict, or both.  Consequently, its implementing rules cannot do justice to the law’s mission and vision without the corresponding and necessary minutia.










     

A clear example is the trouble that the Regulations went through to show who can be tagged as  a terrorist with whom we ought, generally, not to have any financial dealings.  To ensure that no one is accidentally so tagged and irrationally dealt with, the Regulations went through a two-step process. 

First, it took time to define the process of “designation” or “listing” of a terrorist.  Rule 3.a.6 says that the term “designation” or “listing” means “the identification of a person, organization, association, or group of persons that is subject to targeted financial sanctions pursuant to the applicable United Nations Security Council Resolutions.”  Obvious is the attempt to stress that the process of designation or listing of terrorists and terrorist organizations is not at all random like carpet bombing that used to be done by attacking World War II airplanes.  Instead, it is as scalpel-sharp and as laser-precise as post-War of Iran guided missiles.  Moreover, there is the assurance that  the sanctions to be imposed on persons and entities who had the misfortune of being so labelled are not purely local and home-grown. The sanctions that can be imposed on those identified as terrorist are only those that can be imposed “pursuant to the applicable United Nations Security Council Resolutions.”

In the same vein, the Regulations further insures that it neither adds to nor subtracts from what R.A. No. 10168 itself considers “designated persons.”  For this reason Rule 3.a.5 copies word for word Section 3(e) of the law that defines a designated person.  While the word “any” which precedes each group of items enumerated suggests a broad sweep, the precision in listing of those mentioned, characterized by the citation of the specific chapter and verse of local law, bars the temptation to expand its scope beyond what the law intended.

Stickler that it is to precision, the Regulations, nevertheless, is not averse to completion; where definitely beneficial to stakeholders, the Regulations does not hesitate to give, for their guidance, a copious enumeration of instances that are clearly within the law, albeit only by reference.  

Section 17 of R.A. No. 10168 makes the financing of terrorism, as principal (by direct participation or being a conspirator) or as accomplice, or as accessory, a “predicate offense” to money laundering and therefore “subject to its suspicious transaction reporting requirement.”  The question for stakeholders on the ground is therefore what facts that a covered institution becomes aware of would trigger an obligation to report as suspicious of terrorist financing.  The text of R.A. No. 10168 does not say. 

But the Regulations is happy to oblige.  Rule 3.a.15 list the covered institutions a long list—as many as 15 triggering circumstances, inclusive of the all-embracing “any other transaction that is similar, identical, or analogous...”   Among the more outstanding ones are (a) “wire transfers, between accounts, without visible legal, economic, or business purpose, especially if the wire transfers are effected through countries which are identified or connected with terrorist activities, (b) “repetitive deposits or withdrawals that cannot be satisfactorily explained or do not make economic or business sense; (c) “Transactions of individuals, companies, or Non-Governmental Organizations (NGOs)/Non-Profit Organizations (NPOs) that are affiliated or related to people suspected of having connection with a terrorist individual, organization, association or group of persons.”

         What jumps out of the page is both adherence to the letter and thoroughness beyond compare with respect to its spirit.  Once again, it puts the heavy burden of knowing-your-client (KYC) where it belongs, on the sturdy shoulders of the covered, particularly financial, institutions.

     

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