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Disorder in the Senate over court order

(Article published in the Mar 19,2003 issue of TODAY, Business Section)

Because of the passage of Republic Act 9194, the FATF, as many expected, on March 13 (Paris time), decided not to impose countermeasures to the Philippines.  While the country stays on its list of noncooperative countries and territories (NCCT) and therefore continues to be the subject of Recommendation 21 which asks financial institutions to “give special attention” to Philippine-based business relations and transactions, the decision is most welcome because we get some breathing time to demonstrate that we are serious in establishing an effective antimoney, laundering regime in the country.

Understandably elated is Sen. Ramon Magsaysay, Jr., a worthy son of a worthy father, who was the untiring proponent of amendments to RA 9160, the original antimoney-laundering law, that truly addressed its major defects.  Like a true statesman, he claims credit not for himself, but instead calls RA 9194 “an achievement of the entire Filipino nation”.  And very Filipino, he proclaims “there are no losers here, only winners”.

With due respects, my good senator, I beg to disagree.  There are a number of losers in your company.  Not that it will matter to them or to anyone else except me, but a handful of your colleagues lost some of my respect with the way they conducted themselves when the fate of RA 9194 still hang in the balance.  Losers in my book are your fellow senators who initially postured that they will resist any proposal to do away with a court order to open bank accounts, who then completely capitulated to the FATF demand, and finally, lacking in both grace and humility, put the blame for their foolishness on others.

They were all fire and thunder in the beginning.  One, who was principal partner in The Firm during the Marcos regime, rhetorically asked why the government and the BSP were allowing the country to be “bamboozled” by the FATF.  The implication was, over his dead body, he will not permit any provision that would effectively relax the country’s bank secrecy law. 

Another, a once high profile billionaire who was reduced to senator when  the real estate market fell due to the Asian currency crisis, attacked the FATF for supposedly taking upon itself the role of dictating what the government should do under pain of dire financial consequences.  He argues “if these groups were correct, we should have improved economically.  How come we are still poor”  His question, obviously, is as unfair as “if, Mr. Senator, you are such a hot shot, why did your flagship company default in its loans and restructure its commercial papers?”

A third warned that meeting the FATF requirements, particularly on bank secrecy, would create a “Center of Power with immunity and with no accountability just like the kings of medieval times who were above the law”.  One would think that this one would at least cast a negative vote.  But no, long before the gloom of Holy Week has set in, he does a Pontius Pilate and abstains. 

A fourth, one not famous for preparation and the leader of the lot, claimed “we haven’t been told just exactly what it is that FATF wants except that they have cavalierly dismissed what we have done as non-compliant”.

What was the FATF criticism of RA 9160 that these characters did not want to grapple with in the beginning?  The bone of contention was the secrecy of bank deposits.

It is easy to see what the FATF wanted.  A good antimoney-laundering regime needs, after the requirement that banks and subject institutions  know their clients and report suspicious transactions,  a mechanism for checking whether or not, as a matter of fact, the subject institutions are complying with their duties under the law.  Obviously, in order to determine whether a bank was or was not reporting suspicious transactions, some authority, in charge with the supervision of banks (that is the BSP for us), should be able to look into deposits and investments with the bank.  Otherwise, all that the financial intelligence unit (the AMLC in our case) could go by is faith in that banks will, even without the fear of being discovered as reneging in their obligation, nevertheless report suspicious transactions.

Section 25 of the New Central Bank Act (RA 7653), while allowing the BSP to examine the books and records of persons and entities relative to or in connection with the operations, activities or transactions of the bank, nevertheless makes that authority “subject to the provision of existing laws protecting or safeguarding the secrecy or confidentiality of banks deposits as well as investments of private persons…” Since except for the written permission of the depositor, a court order is the method of opening a bank account, the result is that the BSP could not look into a deposit account to determine whether the bank correctly or incorrectly did or did not report it as suspicious, unless it got a order from a court.

The FATF demand therefore was to lift the secrecy of bank deposits to the extent, and only to the extent, of permitting the BSP, without need of getting a court go-ahead, to look into bank accounts for the purpose of determining whether the banks were complying with their duty to report suspicious transactions. This was the demand of the FATF  from the very first time it assessed  RA 9160.  That remained the demand during the deliberations on the initial version of RA 9194 and all the way through during the meeting between the senators and the officials of FATF member countries on the evening of March 3. 

It was an inflexible and non-negotiable demand for without it the other parts of the anti-money laundering law would be useless in the fight against dirty money.  And there should be no soft-pedaling, no sugar coating, no glossing over.  The Senate, as it should have right from the very beginning, gave in.

Instead of honestly admitting, however, that the Senate had in fact surrendered, and correctly so, those who made the mistake of previously convoluting the issue of complying with the FATF requirements from simple economics to emotional nationalism, had to find a tale to save what remained of their faces.  The no-brainer alibi: We were misled.

Their leader set the tone.  He blamed the Department of Finance and the BSP  “for being less than candid and, worse, even misleading Congress on the banking secrecy issue”.  Another,  who apparently having very little between the eyes  failed to see that he had in fact changed his position and said, “If there was opposition (to the Senate AMLA version), it came not from Paris but from Manila”.  And the erstwhile head of the defaulting flagship said, “it is clear we have been misled by our own government officials” and “it is very clear that what the FATF officials told us last night was different from what our government officials had told us”.

Less than candid, your honors? Misled? Maybe you were not doing your homework.

Here is the record.

As early as July 29, 2002, Securities and Exchange Commission Chairman Baustista reported to the Congressional Oversight Committee, that based on her meeting with the FATF in Paris “their main point is that the law should be changed to lower the threshold to $10,000 to $15,000 and that the Bank Secrecy Law should be amended to allow the regulators to look into any bank account as part of their regulatory function”.  Any problems understanding that?

Maybe, their honors did not want to believe a Filipino.  But then, on August 6, 2003, your Oversight Committee received from the AMLC a copy of the FATF letter dated July 4, 2002.  The second demand of the FATF was clearly to “delegate supervisory responsibilities for money laundering compliance to the BSP and lift secrecy provisions restricting BSP access to account information”.  This is straight from the horse’s mouth. It ought to be very clear even to the ears of asses.

On November 12, 2002, again your Oversight Committee received from the AMLC a copy of the letter dated October 24, 2002 of Jochem Sanio, FATF head, commenting  on the amendments being proposed to RA 9160 and explaining, in the attached detailed explanation which may have been too long for you to read,  the need to give BSP “full access to information for anti-money laundering compliance” by providing the BSP power to look into any deposit of whatever nature without a court order. 

And, as recent as January 23, the Senate President received from  Vicente S. Aquino, AMLC executive director, in a report dated January 21, 2003, on the face-to-face meeting between the AMLC and the FATF Asia Pacific Review Group.  There he clearly stated that the FATF’s latest proposals included the “grant of authority to the Bangko Sentral ng Pilipinas to inquire into or examine, for the purpose solely of ensuring effective implementation of and compliance with the AMLA, any deposit or investment with any banking institution or non-bank financial institution in the course of a periodic or special examination conducted in accordance with the rules of examination by the BSP, the provision of any law to the contrary notwithstanding”. 

How substantially different is that from what, through Section 8 of RA 9194 you added to Section 11 of RA 9160, that provides “To ensure compliance with this Act, the Bangko Sentral ng Pilipinas may inquire into or examine any deposit or investment with any banking institution or non-bank financial institution when the examination is made in the course of a periodic or special examination, in accordance with the rules of examination of the BSP”?

Let us cut out the crap, gentlemen.  You gave in and abandoned your initial resistance to BSP examination of bank accounts without a court order.  You had only yourselves to blame for converting a purely economic issue to a political grandstanding affair. Had you acted like the House of Representatives, there would have been no need for dancing away from your mischief.

But thanks anyway, your honors, for passing RA 9194.  And thanks too for giving us the best argument, so far, for a unicameral legislature.