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moneylaunder.jpg (5298 bytes) Facts from myths about money laundering law

(Article published in the August 23, 2001 issue of TODAY, Business Section)

With the September 30 deadline imposed by the Financial Action Task Force (FATF) fast approaching, we are hearing more and more voices asking Congress to pass an anti-money laundering bill.

Essentially designed against criminal elements, any anti-money laundering law worthy of its name however will necessarily impact also on transactions which are legitimate, albeit confidential. To enable estate owners to separate the wheat from the chaff, it is necessary to expose the myths which seem to underlie the call for an anti-money laundering law.

Myth No. 1: The Philippine law does not prohibit money-laundering. This is not correct.

If "money-laundering" is taken to mean, in the basic sense formulated by the FATF, "the processing of criminal proceeds in order to disguise their illegal origin", then we have in Art. 19(b), in conjunction with Art. 16 of the Revised Penal Code (RPC) a rudimentary form of anti-money laundering law.

Art 19(b) of the RPC considers in accessory one who takes part in committing a crime by "concealing or destroying the body of the crime, or the effects or instruments thereof, in order to prevent its discovery". And an accessory, under Art. 16 of the RPC, is criminally liable for grave and less grave felonies. Clearly, one who disguises the illegal origin of criminal proceeds is concealing the effects of criminal activity and is therefore considered an offender under Philippine law.

It is more accurate to say is that the FATF against money-laundering is not satisfied with that law. For one thing, Art. 19(b) describes a degree of participation in the commission of a crime. It does not make the act of concealing the effects of a crime in itself a crime separate from the crime which produced the effect.

But, more significantly, the Philippines has laws, particularly those upholding the secrecy of bank deposits, that make it very difficult, if not impossible, to detect and frustrate such concealment. Essentially, these laws consider bank accounts confidential and beyond scrutiny except under stringent conditions.

These laws are Republic Act 1405, as amended, known as the law on the secrecy of bank deposits; Republic Act 6426, as amended, or the Foreign Currency Deposit Act and Republic Act 8791, the General Banking Law of 2000.

Myth No. 2: All that has to be done is to lift the secrecy of bank deposits and money in the custody of banks.

This is a major step, but not enough. It fails to take into account at least two major difficulties: first, banks are not the only institutions used in laundering money. Insurance companies, money changers, casinos, and, basically, any institution that handles a lot of money in its daily business could be a money laundering venue; and second, while lifting the veil of secrecy is a major aim of a money-laundering law, the more important objective is to globally deny dirty money a safe haven.

It is important to the FATF to also see legal provisions which deter the very flow of dirty money into and out of the Philippines, such as (1) criminalizing the act of concealing itself, separate from the predicate offense; (2) putting in place a system that mandates the reporting suspicious transactions to a central body; (3) imposing on front liners the duty to determine, in the first instance, whether a transaction could involve dirty money; and (4) linking Philippine efforts with the world-wide campaign to combat money laundering.

Myth No. 3. The Bangko Sentral (BSP) has not issued the necessary regulations to combat money-laundering through the Banks.

On the contrary, within the parameters of existing law, the BSP has already issued a number of administrative measures designed to approximate international standards against money-laundering. To name some: On June 20, 2000, a circular letter was issued to banks requiring their forex corporations to report every day the names and other details of purchases of foreign exchange. When the transaction is in excess of US$250,000, the identities and addresses of the parties as well as the purpose of the transaction are required.

Circular No. 251, the primary circular on money laundering, was issued on July 7, 2000. It stressed the "Know Your Client" obligation of banks and required banks to develop programs against money laundering. This was closely followed by Circular No. 253 which established a suspicious transaction reporting system.

Manager’s, cashier’s and certified checks payable to cash or bearer or numbered account were prohibited by Circular No. 259 in September 2000. And following the threshold amount in the United States, Circular No. 264, on October 27, 2000, required a written notarized application and supporting documents from the resident-buyers of foreign exchange amounting to US$10,000 and above.

All these circulars make it difficult to launder money in the Philippines and send it abroad. But, as the FATF keeps stressing, on account of our laws on the secrecy of bank deposits, it is possible for a money launderer, albeit with difficulty, to pass dirty money through the Philippines without being discovered most of the time.

Myth No. 4. The passage of an anti-money laundering law with features acceptable to the FATF, by itself, will take the Philippines out of the uncooperative countries list.

They are not that stupid. A law is a prerequisite, but it is not all that is required. More than anything else, compliance is essential. The government must add muscle to the law and show strong political will in enforcing it. This requires the formulation of detailed implementing regulations and effective enforcement.

And Myth No. 5. If only legislators could put politics aside for a while, the anti-money laundering bill will make it easily through both Houses of Congress and meet the September 30 deadline.

A moratorium on politicking is a consummation devoutly to be wished, however, politics is not the only culprit. So also is self-interest.

Money laundering in the Philippines is mostly domestic money laundering. No big time launderer will dare pass his money through our banking system. That means some members of our legislative or those they proxy for may not be interested in passing the law. We also pray for quick action but the record of previous Congresses on important pieces of legislation indicates that is not the way to bet.