Money-laundering threat in PH rated ‘high’

The money-laundering threat in the country has been classified as “high,” with the threat posed by drug trafficking rated the highest among predicate crimes, a government report showed.

According to “The 1st National Risk Assessment on Money Laundering and Terrorism Financing” report posted on the Anti-Money Laundering Council’s (AMLC) website, a self-assessment by Philippine authorities using 2011-2014 data showed that “the national money laundering threat is assessed to be high.”

Released this year, the report said this assessment was “based on the proceeds generated by select predicate crimes, money laundering trends and techniques and the prevalence of sectoral threats.”

Also, “after considering the ratings for national combating ability and sectoral vulnerabilities, the national vulnerability for money laundering is assessed to be ‘medium,’” the report added.

Vulnerability was measured through the quality of anti-money-laundering controls and products of the banking, insurance and securities sectors, other financial institutions as well as designated nonfinancial businesses and professions, it explained.

At the national level, the money-laundering risk was rated “medium-high,” according to the report.

Among the predicate crimes to money laundering, drug trafficking “[appeared] to be the most prevalent crime based on the number of operations conducted (from 12,269 in 2011 to 16,939 in 2014), amount of drugs seized (P4.67 billion in 2011 to P6.18 billion in 2014) and cases filed for the four-year period,” the report said.

“However, only 2 percent of the total value of confiscated items were recovered or forfeited using antimoney laundering mechanisms. There were also only four cases for violation of antimoney laundering laws compared to more than 77,000 cases filed on the predicate crime,” it noted.

As such, the report said the threat being posed by trafficking has been assessed as “high.”

Threats from plunder and violations of anti-graft and corrupt practices, investment scams and fraud, smuggling, human trafficking, violations of the Intellectual Property Code, environmental crimes as well as illegal arms trafficking have also been rated by the report as “high.”

In the case of corruption, the report said that while the actual value or amount being lost to corruption each year could not be determined, estimates by Washington, D.C.-based research and advisory organization Global Financial Integrity would peg losses to corruption to about 20 percent of the annual national budgets.

“The period covered, however, saw some gains in the country’s fight against corruption, with the improvement of the ranking of the Philippines in Transparency International’s Corruption Index from 129th (out of 189) in 2011 to 85th (out of 175) in 2014. There was also an increase in the number of corruption-related cases filed before the courts for the given period. Also, a total of P730.35 million has been subject to civil forfeiture cases filed by the AMLC. While there were gains, the threat remains high given the number of investigation and prosecution vis-a-vis the amount subject of civil forfeiture and the noncollection of data on the proceeds of the crime,” the report said.

When rated by sector, “high” threats were posed in the banking and securities sectors as well as among foreign exchange dealers and remittance agencies.

“The banking sector comprises about 90 percent of the covered persons and account for 99 percent of the total covered and suspicious transaction reports submitted to the AMLC. This is the main sector through which proceeds of crimes are channeled. Threat to the securities sector is also high despite regulation as it has been widely utilized in fraudulent schemes despite the repeated advisories of the Securities and Exchange Commission,” the report explained.

As for remittance agencies and foreign exchange dealers, the report noted that  launderers “prefer” to use them “since these entities conduct cash intensive operations and there is significant non-reporting of coverage transaction reports and suspicious transaction reports due to non-registration of these stand-alone money service businesses with the AMLC.”

As for terrorist financing, the rating given by the report was “medium-high to high,” citing for instance the involvement of terrorist groups such as the Abu Sayyaf in extortion and kidnap for ransom.

The national risk assessment report used the World Bank’s national money laundering and terrorist financing risk assessment tool in measuring the threats.

Early this year, the Philippines was thrust into the global limelight by the cyberheist involving the theft of $81 million from the central bank of Bangladesh.

Hackers reportedly from China tried to steal $1 billion from the Bangladesh central bank’s account at the Federal Reserve Bank of New York last February and succeeded in transferring $81 million to four accounts at Rizal Commercial Banking Corp.’s branch in Jupiter, Makati. During the Senate hearings into the heist before the national elections last May, casino junket operator Kam Sin Wong (a.k.a. Kim Wong) admitted to have received $35 million of the stolen funds but returned only $15 million, claiming some of the funds ended up with other casino personalities who remained at large and that part of the money was still with Philrem, the foreign exchange trader that served as the main link between RCBC and the Philippine recipients.

A local court has cleared the return of the $15 million kept in the vault of the Bangko Sentral ng Pilipinas to the Bangladesh central bank.