The Virtual Presser: Anti-Money Laundering And Counter Terrorism Financing in the Philippines

0
68
advertisement

At the forefront of the Philippine government’s fight against money laundering and terrorism financing is the Anti-Money Laundering Council or AMLC. So to understand how we as a country combat money laundering and terrorism financing, it is essential that we understand how AMLC works.

What the AMLC does, however, is a massive undertaking which also involves proactive coordination with our government agencies, law enforcement agencies, as well as the private sector. So in the interest of time, I will only be providing a brief overview.

VirtualPresser3a
PCOO Assistant Secretary JV Arcena with Executive Director Attorney Racela, Anti-Money Laundering Council

The AMLC is the Philippine’s financial intelligence unit or FIU. But unlike most FIUs, the AMLC is a hybrid FIU with authority to receive and analyze covert and suspicious transaction reports submitted by covered persons, investigate money laundering and terrorism financing, and cause the filing of forfeiture proceeding and money laundering cases pursuant to mandate under the Money Laundering Act of 2001 or AMLA, the Terrorism Financing Prevention and Suppression Act of 2012 or TFPSA, and just recently, the Anti-Terrorism Act of 2020. Having said that, the AMLC aims to be a fully functional FIU. [garbled] partner in law enforcement [garbled] forfeiture and an efficient supervisor.

I will go and discuss over these three core functions more thoroughly in a while. These operational functions are supported by AMLC’s overarching support services that among others ensure the country’s compliance with the international anti-money laundering and counter-terrorism financing standards, conducts national risk assessments and develops AMLC CTF policies.

Milestones include the approval of the second national risk assessment report which was mentioned by Asec. JV a while ago, which evaluated the overall threat and effectiveness of the Philippine’s AMLC CTF mechanisms, as well as the approval of the Executive Order #68 Series of 2018 by the President which embodies the country’s National AMLC CTF Strategy or NACS.

The NACS adopts a whole-of-government approach aimed at coordinating efforts of the government and the private sector in combating money laundering and terrorism financing in the country.


The AMLC gathers evidence to establish probable cause required in the filing of applications of bank inquiry, petitions for freeze order, civil forfeiture cases and criminal complaints for money laundering. The AMLC has handled notable cases including the indefinite freezing of bank accounts, assets and properties of the Maute Group in 2017, involving 52 million pesos cold cash and several checks, and 28,000 pesos from bank accounts, nine vehicles and a 120-hectare land in Lanao del Sur which was used by the Maute terrorists as their training ground.

Now, let me proceed to discuss the three core functions of the AMLC. As a fully functional FIU, apart from receiving and analyzing financial information and disseminating financial intelligence reports to law enforcement agencies and other FIUs, the AMLC also releases proactive risk assessments, studies and reports which have become tools to inform stakeholders such as law enforcement, supervising authorities and the private sector on the risk of money laundering of certain sectors and to guide the decision-makers in crafting policy initiatives.

Since 2017, the AMLC has produced the following reports and studies: First, this data mining reports on patterns related to drug trafficking and investment scams; quality reviews on suspicious transaction reports; risk assessments on the non-profit organization sector on the Philippines exposure to external threats based on STRs on the internet-based casino sector, we call this the POGO risk assessment; studies on the transaction profile of accredited virtual currency exchanges in the Philippines; typologies on the use of designated non-financial businesses and professions for money laundering and on drug trafficking.

The AMLC also conducted an analysis of financial crime trends in the Philippines using STRs in covering the period of the COVID-19 pandemic. Another notable project is the Egmont information exchange working groups combatting child sexual abuse and exploitation through financial intelligence project report which the AMLC collaborated with the United Kingdom Financial Intelligence Unit or UKFIU and Australian Transaction Reports and Analysis Center or AUSTRAC which is the Australia’s FIU.

Child sexual abuse and exploitation is a global crime that crosses borders where the demand comes from foreign countries and the supply is done domestically. Countering CSAE then calls for a united front to disrupt if not eradicate this crime against our children.

This collaboration then produced a consolidated list of financial indicators and keywords that can be used to proactively identify financial transactions likely to be linked to the online streaming of child sexual abuse and exploitation. In fact, I am pleased to share that it was the AMLC’s 2019 study on child pornography which identified approximately 700 persons of interest that paved the way for the creation of the Egmont information exchange working group on CSAE bringing together the UKFIU, AUSTRAC and the AMLC as projects leads. Thus, by co-leading the CSAE project and sharing it with counterparts, more than 60 countries, the demand side is breached. And by disseminating the CSAE report with AMLC’s domestic law enforcement agencies and its public-private partnership program partners, the supply side is also derailed.

Now, let’s proceed with the second core function of the AMLC which is as a reliable partner in law enforcement, prosecution and asset forfeiture. The AMLC investigate [garbled] transactions, covert transactions deemed suspicious money laundering and terrorism financing activities, and violation of AMLC CTF laws, rules and regulations.

The AMLC gathers evidence to establish probable cause required in the filing of applications of bank inquiry, petitions for freeze order, civil forfeiture cases and criminal complaints for money laundering. The AMLC has handled notable cases including the indefinite freezing of bank accounts, assets and properties of the Maute Group in 2017, involving 52 million pesos cold cash and several checks, and 28,000 pesos from bank accounts, nine vehicles and a 120-hectare land in Lanao del Sur which was used by the Maute terrorists as their training ground.

The conviction of Maia Deguito on eight counts of money laundering in 2019, relative to the 81 million bank heist, with the punishment of four to seven years of imprisonment for each count of money laundering and a 103 million pesos penalty. And drug trafficking cases which have amounted to approximately 1.5 billion worth of forfeited drug proceeds since 2017.

In 2018, the AMLC adopted an asset preservation system on the management and preservation of assets and properties that are subject of asset preservation order and judgment or forfeiture.

Now, the third core function which is to be an efficient supervisor, the AMLC undertakes studies on money laundering and terrorism financing trends and standards for the adoption of necessary policies. Then, the AMLC ensures compliance of covered persons with AMLC CTF rules and regulations by conducting regular and targeted on-site examination and off-site supervision of covered person such as banks, designated non-financial businesses and professions and other entities listed as covered persons in the AMLA as amended.

It must be noted that the supervisory approach on covered persons may be likened to an inverted triangle – at the top, the AMLC is in one corner; and the supervising authorities, that is the Bangko Sentral ng Pilipinas, Securities and Exchange Commission and the Insurance Commission in the other.

-In the case of casinos, instead of supervising authorities, we have appropriate government agencies, that is the Philippine Amusement and Gaming Corporation or PAGCOR, Cagayan Economic Zone Authority or CEZA and Aurora Pacific Economic Zone and Freeport or APECO.

In other words, we aim as a partners with supervising authorities in appropriate government agencies to ensure covered persons under their respective jurisdictions comply with AML/CTF policies and regulations.

To prevent money laundering and terrorism financing, covered persons are obliged to comply with the requirements of AMLA’s 2018 Implementing Rules and Regulations as amended: Preventive measures would include a risk-based approach to customer identification and profiling and continuous ongoing monitoring of such customers; Second is covered transaction reporting, which involves reporting transactions exceeding P500,000; Third is suspicious transaction reporting and, unlike covered transaction reports, STR’s involved any amount, no upper or lower limits; Fourth are training programs, it is crucial for covered persons to ensure that their personnel and officers undergo continuous training on AML/CTF laws and policies, as these do evolve over time; Fifth is record-keeping with the 5-year retention period.

Further, apart from the 2018 Implementing Rules and Regulations as amended, to ensure compliance with best practices and due diligence and know your customer policies, the AMLC also issued the following regulations among others: The Casino Implementing Rules and Regulations; Guidelines on Identifying Beneficial Ownership; Guidelines on Digitization of Customer Records and the DNFBP Guidelines. The AMLC issued likewise the rules of procedure in administrative cases to enforce the AMLA as amended, the Financing Prevention and Suppression Act and the aforesaid regulations.

Just this July, the AMLC together with other law enforcement and intelligence agencies were successful in pushing for the passage of the Anti-Terrorism Act of 2020. The new provisions included in the ATA, which are likewise key to the Philippines’ non-inclusion to the Financial Action Task Force-International Cooperation Review Group Gray List, include the following: Designation mechanism under Section 25 and criminalization of foreign terrorist under Section 11 as well as the financing and facilitation of travel of foreign terrorist among others. These were among the noted deficiencies in the law during the Philippines’ mutual evaluation which was an assessment of the country’s level of technical compliance with international AML/CTF standards, and effectiveness of country’s existing AML/CTF mechanisms.

Currently, the AMLC is working toward avoiding the country’s inclusion in the FATF-ICRG Gray List. The Philippines was placed under a 12-month observation period by the FATF in October of 2019 following the adoption of our Mutual Evaluation Report. This observation period which has since been extended to February 2021 due to the pandemic is the last opportunity for the Philippine Competent Authorities to address/identify deficiencies in the MER to avoid gray listing.

Inclusion in the FATF-ICRG Gray List will publicly identify the Philippines and its citizens as a risk to international financial system for having strategic deficiencies in its AML/CTF framework. Consequently, the Philippines’ inclusion will result to an additional layer of scrutiny from regulators and financial institutions thereby increasing the cost of doing business with Filipinos, delay the processing of transactions and blocking the country’s road to an A credit rating.

Although the passage of the ATA is a welcome development, this is not enough as the Philippines is being assessed both on technical and effectiveness compliance. The country must also demonstrate effective implementation of the ATA before the observation period ends in February 2021. Now that the ATA has been passed, the Philippines has an opportunity to implement it and demonstrate progress in fulfilling our international commitments.

The same attention and commitment however must be given to amendments to the AMLA. During the mutual evaluation, among the noted gaps in the AMLA include:

  1. Inclusion of tax crimes as predicate crimes to money laundering.
  2. Inclusion of real estate developers and brokers who engage in buying and selling of real properties, and
  3. Expansion of the powers of the AMLC, that is subpoena and contempt powers.

Failure to pass and to implement the amendments to the AMLA as amended, before February 2021 will have similar effects – that is the Philippines’ inclusion in the FATF-ICRG Gray List.

So these are the challenges we are facing, as well as the initiatives and regulations we have been implementing for a more robust AML/CTF system in our country. We trust that our discussion has been informative, if not enlightening.

About the show:

The Virtual Presser
Hosted By PCOO Assistant Secretary JV Arcena
Office Of The Global Media And Public Affairs
September 11, 2020

About the guest:

Executive Director Attorney Racela had been holding positions in the Bangko Sentral ng Pilipinas for 21 years in the areas of banking supervision, legal counselling and litigation, as well as financial investigation. Since 2017 he has been executing the AMLC’s vision and ensuring sustainable reforms for the Secretariat and contributed largely to legislative and regulatory framework developments which filled critical gaps in the country’s anti-money laundering and counter terrorism financing defense.

Under his supervision were the approval of the second National Risk Assessment Report and the Executive Order No. 68 Series of 2018 by the President which embodies the country’s National AML/CTF Strategy or NACS. The NACS adopt a whole-of-government approach aimed at coordinating efforts of the government and the private sector in combatting money laundering and terrorism financing in the country.

advertisement