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The serious task of enforcing the law against dirty money

(Article published in the November 19, 2001 issue of TODAY, Business Section)

The integrity of our financial system, like the stability of the legal environment, is a condition sine qua non if Filipino estate owners are to be convinced to keep their wealth in the Philippines. It makes no sense to keep your investments in the country if their value is in serious danger of being contaminated by money from drugs, terrorism and other illegal activities. Illegitimate money destabilizes banks and other financial institutions and, almost by definition on account of its lack of loyalty to the host country, undermines a nation’s economy.

That is why last week’s three issuances from the Bangko Sentral ng Pilipinas are worthy of note. The most significant was the circular issued on November 15 by Deputy Gov. Alberto Reyes, officer in charge of the BSP while its governor is out of the country with the presidential party now in the United States.

Starting January 1, 2002, any person who wants to bring into or take out of the Philippines foreign currency in excess of $10,000 or its equivalent must declare the same in writing, presumably to the Bureau of Customs, at his point of entry or departure, and furnish information on the source and purpose of the transport of such currency.

Unlike existing law that prohibits the transport of Philippine currency beyond a certain amount, the circular merely requires disclosure. It nevertheless restricts what had been a wide-open avenue for taking dollars and other foreign currency, which could be from ellicit sources, out of the country. One recalls that, recently, the authorities were at a loss as to what to do when a person was found by the Customs officials at the Ninoy Aquino International Airport (NAIA) with millions of dollars in his baggage.

The two other issuances were memoranda to all banks and offshore banking units complying with two resolutions of the Antimoney-Laundering Council dated November 7, 2001. The first circularized five condemnations of terrorism made by the United Nations Security Council from as early as October 15, 1999, to those issued on September 12 and 28, 2001, precipitated by the World Trade Center and Pentagon terrorist attacks.

These resolutions, among items, exhorted the Council members to freeze funds and other financial resources of the Taliban, to cooperate with one another in bringing to justice perpetrators of terrorist acts, as well as freeze funds and other financial assets of Osama bin Laden and those associated with him.

The second memorandum gives President Gloria Macapagal-Arroyo additional topics for her conversation with US President George Bush this week. It publishes Executive Order 13244, which was issued by Bush on September 23, 2001. Section 6, among other items, orders the relevant US officials to try to get other countries to assist in suppressing acts of terrorism, including the denial of financing and financial services to terrorists and terrorist organizations. Number two in the Annex to the Executive Order, containing the names of persons and groups determined to be terrorists is our very own "Abu Sayyaf Group."

Banks and offshore banking units are ordered by the BSP memorandum to make the necessary report to the Antimoney-Laundering Council of all their transactions with terrorists individual and groups that call under the so-called "covered transaction" as defined in the Antimoney-Laundering Act of 2001.

The cumulative effect of these issuances is to demonstrate to the international community, particularly those members of the Financial Action Task Force, that we are seriously establishing an antimoney laundering regime in the country. After all, passing the Antimoney-Laundering Act of 2001 alone, is not sufficient to save us from sanctions to be imposed on noncooperative jurisdictions. Enforcement and compliance are just as, if not more crucial, important as having a law.