(Article published in the Jul 7,2003 issue of TODAY, Business Section)
gasped in disbelief last month when the Antimoney Laundering Council (AMLC)
admitted that despite the passage of Republic Act 9194 incorporating,
after much hawing from our legislators, the amendments required by the
Financial Action Task Force (FATF) to our original Antimoney Laundering
Law (RA 9160), the country continues to be in the list of noncooperative
countries and territories (NCCT).
business and transactions from the Grenadines and Saint Vincent,
jurisdictions which have taken off the NCCT list, those from the
Philippines, as the transactions from the Cook Islands, Egypt, Guatemala,
Indonesia, Myanmar, Nauru, Nigeria and Ukraine, remain to be object of
“special attention” from financial institutions of FATF member.
The passage of RA 1994 simply saved the country from the
countermeasures threatened by the FATF members and qualified the
Philippines for an invitation from the international body to submit plans
on the implementation of the revised antimoney-laundering law.
Before taking us of the list, the FATF would still want to see how
the law works and not just how the law is worded.
next FATF review is just four months away, including this current July,
and the Philippines does not seem to be in any particular hurry to get off
the NCCT list. While the AMLC
finished the revisions on the Implementing Rules and Regulation on June 3,
until now, after over a month, not all the 14 members of the oversight
body of legislators have signed the revised rules.
The signatures of five lawmakers are still missing, four from the
opposition-Vicente Sotto III, Edgardo Angara, Celso Lobregat and Didagen
Dilangalen-and one from the administration, that is Renato Cayetano who at
this point has gone to a territory farthest removed from such mundane
cares as money laundering. Hence,
the AMLC still has no formal signal to enforce the new rules.
Congressional procrastination is of course not new (after all, both the
original antimoney-laundering law and its amendments were passed just
before the relevant deadlines) but it has made making our exit from the
NCCT more difficult. We have
been overtaken by events. While
our legislators were dilly dallying, the FATF revised its Forty
Recommendations, making our law (even as amended) and the revised
implementing regulations (even if considered approved by the oversight
committee of Congress) fall short of the new standards.
When our antimoney-laundering regime is reviewed once again in
October of this year, it would not be surprising if its not tested against
the old Forty Recommendations but rather against the new one passed this
to the increasingly sophisticated combinations of techniques used by money
launderers, the FATF, in its final Plenary Meeting in June Berlin, came up
with what it calls “an enhanced, comprehensive and consistent framework
of measures for combating money laundering and terrorist financing”
Eight major changes were made on the previous Forty Recommendations; of
these eight, at least four make our present law, as amended, noncomplaint.
first major revision involves the scope of what we call “unlawful
activity” which underpin the money laundering offense, this called
“predicate offenses.” The
FATF, although zeroing in only on serious offenses, wants to cast a very
big net and include “the widest range of predicate offenses.” It thus recommended that each country at a minimum include a
range of offenses within each of the “designated categories of
offenses.” Those on the
minimum list of “designated categories of offenses” are in our own
list of “unlawful activities,” but there is at least one that is not,
namely, environmental crime. That
has to be included by a statutory amendment.
big change is the expansion of the due diligence process for financial
institutions. FATF insists
that financial institutions should be diligent in determining the
legitimacy of the money they handle not only at the beginning but also
throughout the life of its relationship with its clients.
Careful scrutiny must be made not only when an account is opened
but every time its suspicion is aroused or doubts are raised about even a
long-time client’s transaction. In fact, an “ongoing due diligence” is expected
throughout the course of the relation “to ensure that the transactions
being conducted are consistent with the institution’s knowledge of the
customer, their business and risk profile, including, where necessary, the
source of funds.”
insistence on continuing due diligence is not very pronounced in our
antimoney-laundering regime, where the focus, even if suspicious or
covered transaction are to be reported regardless of whether it is at the
start or in the course of the relationship, is concentrated at the account
concept of “politically exposed persons” (PEP) on whom the FATF
suggests due diligence measures in addition to the normal procedures is
another new feature of the revised recommendations.
PEPs are “individuals who are or have been entrusted with
prominent public functions in a country.”
Some examples: heads of state or governments, senior politicians,
senior government, judicial or military officials, senior executives of
state owned corporation, and important political party officials.
Perhaps knowing too well the influence of close relatives and
friends, the FATF observes that “business relationships with family
members or close associates of PEPs involve reputational risks similar to
those with PEPs themselves.” In
the local environment, PEPs include, I have no doubt, lawyers of choice of
the PEPs themselves.
are, of course, not singled out by our own antimoney laundering law, even
as revised. Our legislators
are politicians who almost all consider themselves “senior
politicians.” They also
think of themselves as part of their constituencies and therefore work for
their own interest also. That
is why, I am being fecesious (spelling deliberate) here, election offenses
are not on the list of “unlawful activities.”
But if our law is to adhere to the revised standards, then our
lawmakers must, as in other cases of life, admit that they are a class
apart and therefore should be treated differently.
I will not be surprised, of course, if some nitwit legislator were
to claim that singling out PEPs for more stringent due diligence
procedures by financial institutions is against the equal protection
clause of the constitution.
fourth major change in our law is the extension of antimoney-laundering
measures to designated nonfinancial business and professions, like
casinos, real-estate agents, dealers of precious metals/stones,
accountants, lawyers, notaries, independent legal professions, and trust
and company service providers. Of
these suggested new entrants into the club of “covered institutions,”
lawyers present in money laundering, as in many other aspects of our
national life, the most problems because of the long standing rule on
the FATF does not seem unduly harsh on lawyers.
Under Recommendation 12, they are to be considered covered
institutions “when they prepare for or carry out transactions for their
client concerning the following activities: buying and selling real
estate; managing of client money, securities or other assets; management
of bank, sayings or securities accounts; organization of contributions for
the creation, operation or management of companies; and creation,
operation or management of legal persons or arrangements and buying and
selling of business entities.” Consequently, countries are encouraged to
make them execute, when the occasion demands, the necessary suspicious
transaction report (STR).
Recommendation 16 quickly qualifies the duty by saying that they “ are
not required to report their suspicious if the relevant information was
obtained in circumstances where they are subject to professional secrecy
or legal professional privilege.” Hence,
our rules on legitimate lawyering could come in handy as a defense of
lawyers accused of failure to report.
the Interpretative Notes accompanying the recommendations recognize that
“it is for each jurisdiction to determine the matters that would fall
under legal professional privilege or professional secrecy” and concede
that “countries may allow lawyers” to send their STR to their
appropriate self-regulatory organizations, provided that there are
appropriate forms of cooperation between these organizations and the FIU
or financial intelligence unit, like the AMLC.