Bank transactions of PEPs

While the country’s attention was drawn to the death of 44 SAF policemen in an operation in Maguindanao, a House of Representatives committee quietly conducted a hearing the other week on the difficulties that politicians allegedly go through in their banking transactions.

The hearing is an offshoot of House Resolution 1857, which seeks an inquiry into the practice of banks of refusing to accept deposits to the accounts of their legitimate depositors, or the opening of news accounts of relatives, of politically exposed persons even for amounts not covered by law.

Its proponent, Rep. Rodolfo Fariñas, said the banks’ action was “causing undue convenience, damage and prejudice” to those persons.

A politically exposed person (PEP) is “a natural person who is or has been entrusted with prominent public positions in the Philippines or in a foreign State, including heads of state or government, senior politicians, senior national or local government, judicial or military officials, senior executives of government or state owned or controlled corporations and important political party officials.”

At the hearing, Fariñas cited his experience of being treated as a “criminal perpetrator” when he tried to deposit P450,000 in his Citibank account. Citibank denied the imputation and said it conducts due diligence in the acceptance of deposits in compliance with banking regulations.

A Bangko Sentral ng Pilipinas (BSP) official stated banks should accept deposits as long as they do not exceed P500,000 and are not suspicious under the Anti-Money Laundering Act.

Treatment

It is no surprise that the congressmen spent precious tax money on a matter that could have been resolved by the simple expedient of getting in touch with Citibank or BSP.

No, they had to flex their muscles to show who’s who in this country.

Our honorable (ugh!) congressmen, like many other elected officials, have this mistaken notion that they are God’s blessing and should therefore be treated with extreme deference.

They look at the mandate they supposedly earned from their election to office as justification for demanding special treatment in the application of the laws they themselves enacted.

With this kind of hubris, when they transact business with the banks, they do not expect to be made to undergo the “humiliation” of close scrutiny that banks are required to perform in processing their deposits. But the banks cannot be faulted for being extra careful in handling the transactions of PEPs, if not treat them with a 10-foot pole. That’s what the rules of the Anti-Money Laundering Council prescribe.

If a bank feels or anticipates high risk business relationship with PEPs (i.e. certain elements of money laundering and terrorist financing may exist), it is obliged to apply “enhanced due diligence measures.”

Examination

At the minimum, it should secure approval from senior management for establishing or continuing (for existing clients) such business relationship. It also has to “take reasonable measures to establish the source of wealth and source of funds.” Finally, it should conduct enhanced ongoing monitoring of the business relationship.

Take note these are only the minimum requirements. The bank may, at its discretion or in its judgment circumstances so warrant, take other steps to ensure that the transaction is clear of any possible links to money laundering. The same precautionary action applies to the transactions of PEP’s family members or close associates.

The expansion of the lookout coverage may, at first blush, seem unfair, but considering the Filipinos’ close family ties and the manner by which many of us take friendship or business ties to the extreme, there is sufficient justification for it.

Considering the stiff administrative, civil and criminal penalties that attach to any violation of the anti-money laundering rules, the banks (and for that matter, all institutions covered by such rules) have no choice but very scrupulous in making sure their business relations with PEPs are completely beyond reproach.

No client or customer is too big or too precious for a covered institution to keep in exchange for being remiss or negligent in the enforcement of the rules against money laundering.

Consequences

According to bank insiders, accounts of PEPs and their family members are “asterisked” or “red-lined,” meaning, if any of their accounts is accessed for any transaction, that status appears in the computer monitor. That would be cue for the bank staff concerned to go through a prepared checklist on verifying the integrity of, say, the deposit made or transfer of funds requested.

If any doubt arises in the verification process, the matter may have to be referred to the bank manager or a higher person in authority for further review and approval.

Too bad if the transaction takes longer than usual or, worse, disallowed. That’s how the cookie crumbles for PEPs. It’s one of the trade-offs for the perks and privileges that come with a PEP status.

There’s no reason to raise Cain or rave and rant in Congress to demand an investigation funded by government money and resources on the perceived discriminatory treatment.

The worse thing that can happen to a bank that strictly complies with anti-money laundering rules in dealing with PEPs, in particular, congressmen and senators, is to be the subject of a privilege speech in Congress.

But who cares? Nobody pays attention to those oral exercises anyway, half of which are senseless and the other half useless.

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