Review AMLC membership

It’s back to the drawing board for more refinements on the Anti-Money Laundering Act when Congress re-convenes after the midterm elections.

The latest amendments to the law were not good enough for the Financial Action Task Force to remove the Philippines from the list of countries that are not fully compliant with its anti-money laundering standards

When Congress undertakes that review, it may be a good idea for it to take a second look at the composition of the Anti-Money Laundering Council with the view to making it more efficient in the performance of its duties and responsibilities.

At present, AMLC consists of the governor of the Bangko Sentral ng Pilipinas, the chair of the Securities and Exchange Commission and the Insurance Commissioner.

Unlike other collegial bodies that follow the “majority rule” principle, the law requires unanimity among AMLC members in its actions.

The presence of the BSP governor and SEC chair in the council is understandable. Since banks and quasi-banks are the facilities often used for money laundering, the BSP, as principal regulator of these institutions, should logically be part of AMLC.

The SEC chair likewise deserves a seat because securities dealers, lending corporations, financing companies and investment houses—which are all under its regulatory supervision—are known conduits for money laundering.

Insurance

A close review of the funds earlier ordered frozen by AMLC for suspected money laundering activities will show that the majority, if not all, of them are either deposited or parked in entities regulated by the BSP and SEC.

This situation brings to the fore the value of or justification for making the Insurance Commissioner a member of AMLC. Its membership is premised on the inclusion of “insurance companies and other institutions supervised by the Insurance Commissioner” in the list of covered institutions.

The reality on the ground, however, is insurance and pre-need companies—the only businesses the IC supervises—can hardly be considered credible or potential areas for money laundering in our country.

Unlike other developed countries where insurance companies are virtual cash cows through which “dirty money” can be easily laundered because of heavy volume of business and liberal payment policies, the local insurance industry suffers from poor market penetration and restrictive regulations.

The handful of insurance companies that can handle huge amounts of cash for money laundering purposes are either affiliated with banks that are supervised by the BSP or have links with multinational insurance conglomerates that have strict rules against money laundering.

True, insurance companies with low capital bases can be used as fronts for money laundering. But the risk of dirty money disappearing in the company’s sink hole or it going bankrupt due to mismanagement may defeat the purpose for using that company as a conduit for money laundering.

Expertise

Forget the pre-need companies. At the rate many of these companies are filing for rehabilitation or closing down, no money launderer in his right mind would avail himself of their facilities to serve his evil objectives.

Thus, the apprehension that insurance or pre-need companies can be used as vehicles for money laundering to justify the appointment of the IC in AMLC is exaggerated, if not misplaced.

In lieu of the IC, Congress should consider the idea of making the secretary of justice the third member of AMLC.

The justice secretary can provide the expertise needed in deciding on what many consider a very contentious aspect of anti-money laundering action—determination of “probable cause” or suspicion that a deposit or any similar account is related to an unlawful activity.

The finding of probable cause triggers the application by AMLC with the Court of Appeals for the issuance of a freeze order on the deposit or account concerned for a period not exceeding six months depending on the circumstances of the case.

With the order, the bank or entity in which the deposit or account is lodged is prohibited from releasing its proceeds to its owner or anybody who may claim a right over it.

Parameters

Unless the appellate court rules otherwise, no withdrawals can be made until the issue of whether the funds in question violate anti-money laundering regulations is resolved with finality.

Although the law lays down the parameters for determining probable cause, it is essentially a judgment call. Depending on their experience or expertise, lawyers can have different interpretations on whether or not a deposit or account is tainted or product of an unlawful activity.

Thus, for example, what may appear to a corporate lawyer as a legitimate investment in certain securities may be looked at by a labor lawyer as an attempt to launder money.

Since probable cause provides, among others, the basis for prosecution for money laundering, its determination should have the benefit of close review by an official honed in criminal investigation to prevent any possible miscarriage of justice.

The adverse effects of an improvidently issued freeze order are incalculable and beyond reparation.

The justice secretary has the capability, borne out of his or her exposure to preliminary investigations or court practice, to determine if a deposit or act is worth looking into for possible violation of anti-money laundering rules.

True, the justice secretary serves at the pleasure of the president. So does the Insurance Commissioner. The odds will not change but the quality of decision making can improve.

For comments, send your e-mail to [email protected].