Anti-money laundering loophole
THE Anti-Money Laundering Law is facing an acid test amid reports that some $100-million worth of “dirty money” from abroad were laundered recently in local casinos.
The money, which was allegedly hacked from a Bangladeshi bank, was deposited in local banks then sold to a foreign exchange broker and used to buy gambling chips in three local casinos. The gambling proceeds were later remitted to the money broker and transferred to overseas bank accounts.
The Anti-Money Laundering Council (AMLC) is investigating the incident to determine if any of the parties involved can be held liable for violation of the law.
The paper trail of the money in the local banks can be easily traced. Under existing rules, banks have to report to AMLC all transactions that involve amounts in excess of P500,000 in one banking day, otherwise called “covered transactions.”
If the amount is below that threshold, but the bank doubts the legitimacy of its source or destination, the transaction still has to be reported to AMLC as a “suspicious transaction.”
The reporting obligation applies to all business entities supervised or regulated by the Bangko Sentral ng Pilipinas, Insurance Commission and Securities and Exchange Commission.
Under pressure from the Financial Action Task Force, an inter-governmental organization that aims to combat money laundering, terrorist financing and other related activities, Congress enacted the first anti-money laundering law in 2001.
There were repeated attempts to expand the coverage of the law to include in the covered institutions other entities, such as, casinos and other gambling centers (e.g., lottery and bingo), art galleries and real estate brokers, through which money can be laundered. However, several lawmakers objected to proposals to widen the scope of the reporting obligations.
Some said an expanded law can be used as an instrument for political harassment. Others claimed aligning the country’s laws with international anti-money laundering practices would infringe on our economic sovereignty.
When the inclusion of casinos and other gambling outlets in the covered institutions was taken up in Congress, the objection to the proposal centered on the adverse effects of the reporting requirements to the nascent gaming (that’s the politically correct term for gambling) industry in the country.
The apprehension was raised that high rollers would be discouraged or deterred from trying the country’s gaming tables if their identities are disclosed or their winnings reported.
Without the region’s big-time gamblers, there is no way the more than 30 casinos operating under the auspices of the Philippine Gaming Corporation (Pagcor) can rake in billions of pesos in profits.
Neither would investors agree to construct and operate gambling casinos and posh hotels (three are operating in Manila, Pasay and Parañaque) if prospective patrons are turned off by mandatory reporting requirements.
Bottom line, a gloomy gambling atmosphere would result in Pagcor being unable to remit huge dividends to the government, and foreign gaming investors pulling out their investments and, in the process, thousands of Filipinos losing their jobs or livelihood.
The fact that the government has awarded a project to construct, operate and maintain a toll road from the international airport to a site built for casinos shows it considers the gaming industry valuable.
So why kill the goose that lays the golden egg?
Despite the hullabaloo created by the $100 million allegedly laundered, it is doubtful if the lawmakers can be arm-twisted into agreeing to include casinos and other gambling outlets in the covered institutions.
It’s a choice between inclusion in the “gray list” and being subjected to strict financial monitoring requirements (as AMLC claims may happen) or forfeiting the revenue windfall and livelihood opportunities.
The AMLC has to make a paradigm shift in its approach to this problem.
Rather than expand the scope of covered institutions (whose effectiveness in implementation remains to be proven), it should focus on reinforcing or enhancing the capability of existing financial or business institutions concerned to prevent or detect the entry of suspicious deposits and remittances.
In other words, the capability of the “gatekeepers” to efficiently perform their obligations should be enhanced through appropriate policy measures or operational recommendations.
The AMLC has sufficient resources to be pro-active in figuring out the dirty schemes. It should put itself in the mind of the felon and think and act like him, in the same way foreign intelligence agencies engage the services of hackers to test a system’s vulnerability.
By this time, assuming the AMLC staff who have attended countless anti-money laundering conferences and seminars abroad did their homework, foreign money launderers would have stricken the Philippines from their checklist of preferred areas of operation.
Rigorous enforcement and strategic thinking, not expansion of the law, will prevent a repeat of the reported $100-million money laundering.
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