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SEC bats for national ID system vs dirty money

/ 02:02 AM April 01, 2016

Besides easing the bank secrecy law, the Philippines should legislate a national identification system to combat money laundering more effectively and to improve government delivery of services, according to the head of the Securities and Exchange Commission (SEC).

READ: Economists want bank secrecy laws relaxed

SEC Chair Teresita Herbosa, also cochair of the Anti-Money Laundering Council (AMLC), on Thursday agreed with the proposal of the Foundation for Economic Freedom (FEF) that the implementation of a biometrics-based national ID system would prevent the easy creation of fictitious accounts as what had happened to the case of the recent $81-million money-laundering case via the Jupiter branch of Rizal Commercial Banking Corp. (RCBC).

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Together with sound bank practices, such as the know-your-client rule, a biometrics-based national ID system could be used as an additional safeguard to prevent money laundering in banks and other financial institutions, FEF said.

Herbosa said she was advocating the implementation of a national ID system, which however would need a separate legislation.

No national system

Although the Commission on Elections has adopted a biometrics-based ID system, the country has yet to institutionalize a national ID system. Human rights advocates and militant groups fear that the introduction of such an ID system would violate a citizen’s right to privacy and would be prone to abuse by the state.

Herbosa, who also chairs Credit Information Corp. that operates a national credit registry, said, “Theoretically, each Filipino should have an account there that would show credit history but the fact that we don’t have a national ID system compelled us four years ago to guarantee or at least to be sure to get a system that will merge data subjects.”

At present, she said it was difficult to merge data on people who may end up using different names when they borrow from different institutions.

“If you had a national ID system, all you have to do is put in your number and right there we know that all those loans belong to you. So it’s really much easier for tracking and all,” she said in interview at the Philippine Dealing System.

In the United States, Herbosa said there was no national ID system as well but its Social Security System assigned ID numbers to all, even to minors.

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Many unbanked people

“For us, we really don’t have any and [there are] so many unbanked [people]—almost 80 percent. For me, it’s really a pressing need to be really able to identify each and every person—whether adult, minor or newly born baby—for availment of government services… It’s imperative,” she said.

FEF has also argued that a biometrics-based national ID system could help in the targeted delivery of public assistance and in the promotion of financial inclusion.

Herbosa earlier called for the easing of the bank secrecy law and the strengthening of AMLC’s mandate to combat money laundering. Apart from the inclusion of casinos, real estate and art dealers among the institutions covered by the antimoney laundering law, Herbosa said the body would need authority to look into and immediately freeze suspicious bank accounts.

At present, AMLC needs to ask for an order from the Court of Appeals to be able to freeze suspicious transactions. In the case of the $81-million stolen money from the central bank of Bangladesh that slipped into the country, bank accounts used for money laundering along with related accounts were frozen only by March 1 or almost a month after the dirty money had been wired to the bank accounts at RCBC.

The $81-million remittance from Bangladesh came in on Feb. 5 and was reported as “fraudulent” by Feb. 9.

Error in judgment

Herbosa said the money had shown how people on the ground should be more vigilant, citing some “error in judgment” in the RCBC case.

“So, it’s really your frontline people who should be able to discern whether an STR (suspicious transaction report) should be filed. Any covered person or institution should really try and strengthen the ones who deal with the potential offender or money launderer,” Herbosa said.

Even in international meetings, Herbosa said the best formula would really be the strict enforcement of the rules along with trying to change people’s attitude.

“I don’t want to say there must be distrust all the time. But if you’re there and you’re part of any institution that’s part of the Amla (Anti-Money Laundering Act), you should be mindful and try to look at all circumstances and make a decision on how you will act.

“If you’re not mindful, all these things will go past by you and when you look at it, realize how come your intuition failed and you didn’t realize where it’s going. If it’s just always hindsight (that you rely on), that’s bad,” the SEC chief said.

Reforms at RCBC

RCBC, the bank at the center of the $81-million money laundering controversy, has announced new measures to guard against money laundering.

“Down the road, RCBC intends to implement best practice policies and procedures gained from international institutions for rigorous strengthening of compliance with antimoney laundering measures. This is meant to comply with all regulations while continuing to protect the interest of customer accounts,” the bank said.

For instance, RCBC has reduced its straight-through processing threshold amount for both inward and outward remittances. Previously, only amounts in excess of P1 billion or its US dollar equivalent would be brought to the attention of senior management while people on the ground were given authority to decide on small amounts.

New threshold amounts have been established for corporate and individual accounts but these were not disclosed.

In addition, RCBC has also increased the frequency of after-posting reviews. “There will be greater focus on unusual transactions, which will be escalated to the group head via separate and frequent operations reports. Further, activities are also being programmed to ensure early and timely tracking and action on any suspicious transaction, with controls in place for higher level action,” the bank said.

RCBC said it had also taken action on strengthening the account opening process. All in-branch account opening will be signed by two officers, each reporting to different units of the bank.

Photos will be taken of walk-in clients, who are opening accounts. Unusual transactions will be escalated to the regional and/or national higher level officers for independent verification. All know-your-customer procedures are also being reviewed for strengthening.

“These are immediate steps that are being implemented with even more studies to be made and activated in the next months to ensure compliance and protect customer accounts,” RCBC said.

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TAGS: AMLC, Anti-Money Laundering Council, Credit Information Corp, FEF, Foundation for Economic Freedom, money laundering, National ID System, RCBC, Rizal Commercial Banking Corp., SEC, Securities and Exhange Commission, Teresita Herbosa
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