Deconstructing the AMLA: The story so far and the gaps to fill (Part 1)

The Philippines gained notoriety when the country got involved in a money laundering scandal wherein $81 million from Bangladesh Bank's account at the New York Federal Reserve was transferred in Philippine banks and ended up in casinos. This sophisticated attack was considered as potentially the biggest documented money laundering case in the country. With the credibility of the Philippine financial system compromised, Anti-Money Laundering Council (AMLC) Executive Director Julia Abad Bacay in a budget hearing of the Senate Committee on Finance last October 2016 warned the legislators that this incident might put the Philippines in Financial Action Task Force’s (FATF) blacklist if casinos will not be included in the coverage of Anti Money Laundering Act (AMLA) before the said international financial watch group’s next mutual evaluation in 2018. Let us take a look at one of the most controversial legislations still haunting the Philippine congress today.

The History of AMLA

This is not the first time that the Philippines was included on the list of Non-Cooperative Countries and Territories (NCCTs) by FATF, but it will be the first time to be blacklisted if the Philippines failed to give more “teeth” to AMLA.

In June 2000, Philippines was included in the list due to absence of measures and regulatory agency to prevent money-laundering activities/transactions in the country. Republic Act (RA) 9160 or the Anti-Money Laundering Act of 2001 was born - signed into law by President Gloria Macapagal-Arroyo on September 29, 2001, a day before the deadline set by FATF.

However, on June 22, 2002, the FATF released its 2001-2002 NCCTs list, and the Philippines was again included. According to the report, though there was progress since June 2000, RA 9160 was not able to meet the FATF standards. This prompted President Arroyo to sign RA 9194 on March 4, 2003, amending AMLA with the following:

• Lowered the threshold amount for single covered transactions from P4 million to P500,000 within one banking day;

• Expanded financial institution reporting requirements to include the reporting of suspicious transactions;

• Authorized Anti-Money Laundering Council (AMLC) to inquire into or examine any particular deposit or investment, with any banking institution or non-bank financial institution;

• Authorized the Bangko Sentral ng Pilipinas (BSP) to inquire into or examine any deposit or investment with any banking institution or nonbank financial, in accordance with the rules of examination of the BSP; and

• Transferred the authority to freeze any money/property from the AMLC to the Court of Appeals.

On February 2005, the Philippines was removed from the FAFT’s Annual and Overall Review of NCCT after the Asia Pacific Group on Money Laundering (APG), an international organization assessing compliance of its members with the global standards, confirmed that the Philippines has effectively implemented its anti-money laundering measures.

From “Gray” to “Dark Gray” to “Gray”

Five years later, the FATF-International Review Group (ICRG) included the Philippines on its pool of vulnerable jurisdictions or the “gray” list. On February 16, 2012, the FATF decided to downgrade the Philippines from the “grey” list to the “dark gray” list of vulnerable jurisdictions due to failure to enact into law the bills on AMLA amendments and on the Terrorist Financing Suppression on the given deadline, December 31, 2011.

Thus, RA 10167 or An Act to Further Strengthen the Anti‐Money Laundering Law, Amending for the Purpose Sections 10 and 11 of Republic Act No. 9160, otherwise known as the Anti‐Money Laundering Act of 2001, as amended, and for Other Purposes, and R.A. No. 10168 or An Act Defining the Crime of Financing of Terrorism, Providing Penalties Therefor and for Other Purposes were signed into law by President Benigno Aquino III.

^{Republic Act 10167, signed by President Benigno “Noynoy” Aquino III, is the third in the trail of amendments to further strengthen the AMLA.}

Following the enactment of two (2) laws, the FATF upgraded the Philippines to the “gray” list only due to failure to submit the third of the three (3) amendments, which is to include non-financial businesses and professions in the coverage of reporting entities and to expand the list of crimes or unlawful activities. The Philippines was given until October 19, 2012 to enact the said amendment. The bicameral conference committee report recommending the approval of HB No. 6565 in consolidation with SB No. 3123 was submitted and enacted into law by President Aquino on February 15, 2013 as RA 10365. The following are the amendments stated in RA 10167 and RA 10365:

• Included other forms of swindling under Article 316 of the Revised Penal Code as unlawful activity;

• Additional crime predicates such as trafficking in persons, carnapping, bribery, counterfeiting, fraud and other illegal transactions, forgery, child abuse, exploitation and discrimination, malversation of public funds, environmental crimes, and terrorism and its financing;

• Defined precious metals as gold, silver, platinum, palladium, rhodium, ruthenium, iridium and osmium, and precious stones as diamond, ruby, emerald, sapphire, opal, amethyst, beryl, topaz, and garnet that are used in jewelry making, including those formerly classified as semi-precious stones;

• Required the Land Registration Authority (LRA) and all its Registries of Deeds to submit reports on all real estate transactions to AMLC. The AMLC may also require the LRA and all its Registries of Deeds to submit copies of relevant documents of all real estate transactions;

• Gave the Court of Appeals power to issue a freeze order which shall not exceed to six (6) months, depending upon the circumstances;

• The person whose account has been frozen may file a motion to lift freeze order, and must be resolved by the court before the twenty (20) day expiration;

• Only the Supreme Court has the power to issue a temporary restraining order or a writ of injunction against any freeze order;

• Bangko Sentral ng Pilipinas (BSP) should refer to AMLC’s rules and regulations in course of a periodic or special examination;

• AMLC must first obtain a court order before proceeding with inquiry of any related accounts same with the principal account; and

• AMLC should impose administrative sanction with a corresponding penalty no exceeding P500,000.00.

Attempts to include casinos

Initially, the Senate and the House versions of the proposed amendments included casinos and internet gaming in the coverage of reporting entities. After the casino operators lobbied to exclude casinos in the proposed House Bill through a position paper submitted to the Chairman of the Games and Amusement Committee and Representative Amado Bagatsing (5th Dist, Manila), the House removed casinos from the bill and was passed on 3rd reading. The Senate insisted the inclusion of casinos on its version. However, it was removed by the bicameral committee members after the House panel argued that it might create potential impact on casino industry.

Years after discounting casinos as part of covered institutions in the AMLA, the Philippines was also advised to work with APG in regulating the casino sector¹ during the FATF meeting in June 2013 in Oslo, Norway. In the 16th Congress, Senator Serge Osmeña attempted to introduce stronger measures by filing SB 3227 that would include casinos, real estate brokers, art dealers and motor vehicle dealers as covered persons. The bill was referred to Committees on Banks, Financial Institutions and Currencies, and Justice and Human Rights, and was left pending in the committee level. Meanwhile, in the Lower House, Committee Report No. 902 recommending the approval of HB 6182 to designate casino operators as covered persons under RA 9160 was submitted to the Committee on Banks and Financial Intermediaries. The said committee recommended its approval and referred the bill to the Committee on Rules, but was also left pending.

 ^{Senator Sergio “Serge” Osmeña, Former Chair of the Senate Committee on Banks, Financial Institutions & Currencies, sponsored Senate Bill 3227}

Now, the inclusion of casinos and internet gaming is being pushed again by the 17th congress. In the Lower House, bills authored by Representatives Josephine Sato of Mindoro Occidental, Winston Castelo of Quezon City and Henry Oaminal of Misamis

Occidental were filed and referred to Committee On Banks and Financial Intermediaries for consolidation and consideration. In the Senate, SB No. 1256 authored by Senators Panfilo M. Lacson, Joel Villanueva, Paolo Benigno "Bam" Aquino IV, Francis "Chiz" G. Escudero, and Richard J. Gordon would include casino operators, junket operators, and real estate agents and brokers, and dealers of high-value goods as covered persons and is now pending on Second Reading. If passed, AMLA will be amended with the following changes:

• Inclusion of Trust and Company service providers as covered persons;

• Inclusion of casinos, as well as internet and ship-based casinos, and chipwashing or junket operators, with respect to their financial transactions related to their gaming operations as covered persons;

• Additional crime predicates such as cybercrime, falsification of documents, data breach, and financial fraud. Adapted RA 10591 or the Comprehensive Firearms and Ammunition Regulation Act;

• Defined dealers, high value items or goods, casino (including internet-based and ship-based), chipwashing or junket operator, gaming operations, casino premises, and junket player;

• Issuance of order related to predicate offenses notwithstanding the provisions of RAs 1405 (An Act Prohibiting Disclosure Of Or Inquiry Into, Deposits With Any Banking Institution And Providing Penalty Therefore, as amended), 6426 (An Act Instituting A Foreign Currency Deposit System In The Philippines, And For Other Purposes, as amended), 8791 (An Act Providing For The Regulation Of The Organization And Operations Of Banks, Quasi-Banks, Trust Entities And For Other Purpose), and 10173 (An Act Protecting Individual Personal Information In Information And Communications Systems In The Government And The Private Sector, Creating For This Purpose A National Privacy Commission, And For Other Purposes and other Laws);

• AMLC Secretariat may investigate other violations of the Act motu propio, or upon complaint or request of appropriate department, office or agency, or branch of government, or foreign state or authority;

• May require any person his/her attendance to production and information or document, or to give statement under oath for purposes of verification and investigation;

• Immunity of AMLC and its secretariat from any civil or criminal and administrative liabilities; and

• The motion to lift the freeze order must be filed within 15 days.

In a sponsorship speech of Senator Chiz Escudero last December 5, 2016, he mentioned that the Philippines is given only until June 2017 to pass a legislation to further strengthen AMLA. Failure to enact the said measure would include the Philippines in the “gray” list again of FATF, and might lead to blacklisting.

(To be continued…)

Photos were retrieved from the official Senate and Gazette websites.