PH anti-money laundering ranking outdated – Palace

MANILA, Philippines – Malacañang brushed off as outdated a recently released study that placed the Philippines as the 15th largest exporter of illegal capital in the developing world, saying the country has improved in its efforts to curb money laundering.

“So there has been a number of movements, positive movements, and I am certain that ranking is dated already since it covered only the periods of 2003 to 2012,” said Presidential Spokesperson Edwin Lacierda on Wednesday, December 17.

Lacierda cited the 2013 amendments to the Anti-Money Laundering Act of 2001 or Republic Act 9160. The amendments expanded the definition of money laundering to cover more predicate crimes and more businesses subject to monitoring.

However, not a single money laundering conviction has been secured so far under the new predicate crimes outlined under the RA 10365 of 2013, the law that Lacierda spoke of.

Predicate crimes are unlawful activities which generate dirty money or property. Anti-money laundering advocates successfully expanded the number of these crimes, but previous convictions have all been obtained in relation to the original list of predicate offenses.

“In terms of measurable outcomes, wala pa (there is none yet),” said lawyer Allan Julius Azcueta, legal officer and legislative liaison officer of the Anti-Money Laundering Council (AMLC). 

He, however, said it is still too early to assess the gains and the real ranking of the Philippines in terms of compliance with anti-money laundering standards.

A year-long national risk assessment set to finish by October 2015 will shed light on the matter, to know how much in dirty money deprived the Philippine economy of funds that could have been used to combat poverty and boost growth.

Through the assessment, the government will be able to better understand where the proceeds of crimes are coming from and what types of crimes are most prevalent insofar as money laundering is concerned.

Washington-based research and advisory group Global Financial Integrity (GFI) said a total of $93.49 billion or an average of $9.35 billion yearly from 2003 to 2012 illegally streamed out of the country – an amount that facilitated crime, corruption, and tax evasion. (READ: PH 15th largest exporter of dirty money in developing world)

Parallel investigations urged

The AMLC, the country’s financial intelligence unit, urged other law enforcement agencies to intensify information sharing with the council in order to run after proceeds from illegal activity.

Azcueta said the country’s gains in combatting the movement of dirty money rely mostly on the 2013 legislation.

But he added that the financial aspect of the crime can only be investigated if the crime had been unravelled in the first place by other law enforcement and investigative agencies tasked to do this.

These include the Philippines Drug Enforcement Agency for drug-related activities; the Department of Environment and Natural Resources for environment-related offenses; the Ombudsman for plunder, graft, and corrupt practices; the Securities and Exchange Commission for violation of the Securities Regulation Code; the Bureau of Customs for referrals of smuggling suspicions; and other law enforcement agencies for various other offenses.

“What triggers the investigation is not the money laundering itself,” said Azcueta.

The AMLC can, on its own initiative, conduct investigations, but the ideal setup would be parallel investigations with other agencies, he added.

“Ngayon kasi, ang nangyayari, they will only refer the case to us after the offender is charged in court,” he said. (Right now, what is happening is that the agencies will only refer the case to us after the offender is charged in court.)

By that time, Azcueta said, the proceeds and assets acquired by the offender through his or her crime can rarely be recovered. They have, more often than not, already been concealed or spent.

For motu propio investigations, the AMLC is mostly looking into pyramid scams as these are easier to trace due to the velocity of transactions.

Anti-money laundering gains

In defense of the government’s anti-money laundering efforts, Lacierda said France removed the Philippines from the blacklist of tax havens in 2013.

He added that the Philippines is no longer covered by the anti-money laundering compliance process of the Financial Action Task Force (FATF), an inter-governmental policy-making body combating money laundering, terrorist financing and other related threats.

The FATF on June 2013 commended the Philippines for “significant progress” in the legal and regulatory framework tackling the movement of illicit capital.

• Kidnapping for ransom
• Drug trafficking and related offenses
• Graft and corrupt practices
• Plunder
• Robbery and Extortion
• Jueteng and Masiao
• Piracy
• Qualified theft
• Swindling
• Smuggling
• Violations under the Electronic Commerce Act of 2000
• Hijacking; destructive arson; and murder, including those perpetrated by terrorists against non-combatant persons and similar targets
• Fraudulent practices and other violations under the Securities Regulation Code of 2000
• Felonies or offenses of a similar nature that are punishable under the penal laws of other countries
• Terrorism financing and organizing or directing others to commit terrorism financing (RA 10168)
• Attempt/conspiracy to commit terrorism financing and organizing or directing others to commit terrorism financing (RA 10168)
• Attempt/conspiracy to commit dealing with property or funds of designated person
• Accomplice to terrorism financing or conspiracy to commit terrorism financing
• Accessory to terrorism financing

Challenges ahead

The AMLC acknowledged that the challenge is to effectively implement the necessary regulatory framework in place.

As for trade misinvoicing – which the GFI study said accounted for 77.8% of all illicit flows in the developing world – bank compliance is still sorely needed. 

Trade misinvoicing is where the value of a commercial transaction on an invoice submitted to customs is deliberately misreported. The price, quantity, or quality of a good or service is fraudulently manipulated.

GFI said it is made possible by “the fact that trading partners write their own trade documents.”

Trade misinvoicing enables “corrupt government officials, criminals, and commercial tax evaders” to “easily move assets out of countries and into tax havens, anonymous companies, and secret bank accounts,” the report read further.

In the Philippines, banks are required to report suspicions of trade misinvoicing. They learn this through their own evaluation of the trade documents of their client and on-site check of the businesses in order to know they are not merely shell companies.

Difficulty in running after tax evaders

There is also difficulty in running after an offender’s tax liability using information, specifically bank inquiry results, from AMLC, Bureau of Internal Revenue (BIR) Commissioner Kim Henares earlier told Rappler. (READ: BIR ‘constrained’ in using bank info to go after Revilla)

“We are constrained, because tax evasion is not a predicate crime of money laundering [in the Philippines]…. It’s like pulling teeth,” she said.

She said the BIR bases its assessment of tax liability on 3rd-party information, tax documents, like income tax returns, records of properties, and data other than bank information.

Congress had barred joint investigations by and coordinations between the BIR and the AMLC, Henares added.