MANILA, 2 July — Money laundering was a hot topic in Manila last week after the Paris-based Financial Action Task Force (FATF), an arm of the Group of Seven organization of the world’s most industrialized nations, listed the Philippines as one of three countries taking insufficient steps “to fight the recycling of illicit gains” from money laundering. Russia and Nauru are the other blacklisted countries.
There is reason for the FATF to be alarmed. At present, money laundering, or the transfer of money derived from criminal activities such as narcotics trade, racketeering, kidnapping, and fraud to mask their origin, is not a crime under the country’s existing laws. Given this legal loophole, the Philippines has the potential to become an international money-laundering haven. Right?
Wrong, says Governor Rafael Buenaventura of the Bangko Sentral ng Pilipinas (BSP). In a forum the BSP organized last week, Buenaventura categorically denied there is big-time money laundering activities going on in the country. Citing the volume of foreign currency coming in, he said any attempt to launder money in the country “would stick out like a sore thumb.” The US government estimates that some $600 billion worth of illegally sourced funds are “laundered” around the world annually.
Buenaventura said he understands the concern of the FATF that the Philippines may be used as a transshipment point for laundered money by global drug cartels. Apart from the absence of a law against money laundering, the country has a strict deposit secrecy law that prevents effective monitoring of suspicious bank accounts.
Despite the absence of a specific anti-money laundering law in the Philippines, Buenaventura said the country’s penal system is comprehensively governed by the Revised Penal Code and special laws that penalize the custodian of “laundered” money. “Banks and financial institutions are adequately supervised, and there is a comprehensive Manual of Regulations with rigid reporting requirements,” he said.
Buenaventura, however, admitted that the government is hard-pressed to legislate strong anti-money laundering measures given FATF’s threat to slap sanctions against the Philippines if it fails to adopt sufficient safeguards against money laundering. “We are hoping we can get the proposed bill through Congress to avoid the sanctions,” he said, expressing fears they may not be able to meet the September 2001 deadline imposed by FATF. The central bank governor explained that the sanctions would hurt the country if and when FATF makes good its threat. “The international financial community will scrutinize all our transactions, a time-consuming and costly process, and they might discourage their own people from dealing with us,” Buenaventura said. Given the time constraint, he said the government might be able to convince the FATF to hold off any countermeasures against the country if it sees that the anti-money laundering bill is being deliberated on in Congress.
A group of lawyers from the BSP, Department of Justice, Department of Finance and Department of Foreign Affairs is finalizing the proposed anti-money laundering bill, which will be endorsed and certified as an urgent bill by President Gloria Macapagal Arroyo, according to Buenaventura.
Meanwhile, the United States wants to use its own anti-money laundering law — the Racketeer-Influenced and Corrupt Organizations (RICO) law — in the Philippines. Specifically, the US wants to extend the legal jurisdiction of its RICO law to cover money-laundering cases in the Philippines, but only those involving US funds.
Business and industry leaders, however, promptly shot down the proposal. “This (proposal) sends a bad signal, as if we are coddling all those elements here. We do not want our country to be used as a money-laundering base. And we don’t need the US government to tell us that. We believe the government is very supportive on passing a law against money laundering,” they said.
With this development, an Asian Development Bank official advised the government to enact an anti-money laundering law that adapts to local conditions. Gunther Hecker, ADB country director for the Philippines, cautioned the government against strictly patterning its anti-money laundering law after the laws being enforced by developed nations. He said the government must pass an anti-money laundering law that “harmonizes” well with existing local laws governing the secrecy of bank deposits.