Strengthening AMLA

The Senate and the House of Representatives last week worked out their policy differences and finally ratified the final version of a bill that aims to put more teeth into the Anti-Money Laundering Act (Amla) of 2001. The bill hammered together by the bicameral conference committee now only needs President Duterte’s signature before it becomes law, thus likely saving the Philippines from being placed on the dreaded “gray list” of the Paris-based watchdog Financial Action Task Force (FATF), an intergovernmental organization tasked to develop policies to combat money laundering and terrorism financing.

Congress leaders were spurred to find a “middle ground” and pass the bill after long months of wrangling, as the consequent return to the “gray list” of countries deemed presenting a risk to the international financial system would mean the blocking of the country’s road to a top “A” international credit rating and the imposition of additional layers of scrutiny from regulators and financial institutions. These, in turn, would result in increased cost in financial transactions, including remittances from overseas Filipino workers.

The FATF gave the government until Feb. 1—extended from October 2020 due to the COVID-19 pandemic—to enact and implement changes to the Amla to make it at par with strict global standards designed to block money laundering and cross-border flows of illicit funds. The FATF published the Mutual Evaluation Report for the Philippines in October 2019, outlining recommendations on how to amend existing anti-money laundering laws and avoid falling into the gray list, or worse, the black list.

The Philippines was graylisted in 2000 for failing to address dirty money concerns, leading to the passage in 2001 of the Amla, albeit a “watered down” version of what was originally sought because of stiff opposition to the proposal to include casinos in the list of covered institutions.

The Amla had been amended since then as the list of covered predicate crimes and institutions was expanded. Because of these changes, the Philippines was eventually removed from the list in February 2005.

Among the key changes in the harmonized bill is the inclusion in the Amla’s purview of all transactions worth at least P500,000 of all Philippine offshore gaming operators or Pogos as well as service providers, which mainly service clients in China. “This shows both the Senate’s and the House’s commitment in making sure that Pogos and service providers are regulated and are not made as avenues for nefarious activity in the country,” said Sen. Grace Poe, who chaired the Senate panel in the bicameral conference committee.

Anti-Money Laundering Council (AMLC) Secretariat executive director Mel Georgie Racela disclosed during a Senate hearing last year that at least P14 billion worth of Pogo transactions from January 2017 to October 2019 had been flagged as suspicious for possible money laundering, but it was then not able to look into these funds due to the Philippines’ extra-tight bank secrecy laws.

Sen. Richard Gordon likewise exposed last year the alleged entry of as much as $633 million from September 2019 to March 2020, with Chinese and Filipino couriers able to easily hand-carry more than $447 million through the Ninoy Aquino International Airport.

With a new law in place, the AMLC now has more tools to fight money laundering and put an end to the unabated entry of questionable funds. The reconciled bicameral version, for example, finally included tax evasion of at least P25 million as a predicate offense to money laundering, meaning that it will trigger the scrutiny of the AMLC, as tax evasion is often correlated with money laundering.

The bicameral panel also agreed to require the submission of reports on all real estate transactions worth at least P7.5 million, a measure pushed by the AMLC as real estate is also said to have been used as a “vehicle” for money laundering and financing terrorist activities. The AMLC was granted expanded powers to investigate, issue subpoenas, and conduct search and seizure, thus making it easier for the council to go after accounts suspected of harboring dirty money; and to preserve, manage, or dispose of assets pursuant to a freeze order, preservation order, or judgment of forfeiture.

These are eagerly awaited developments by finance officials, who had earlier bemoaned the “unrestricted influx of millions of dollars worth of foreign currency” that they feared could end up with international criminal syndicates or terrorist networks.

Of course, the big caveat: The strengthened law is only as strong as its implementation—how committed the government is to use the weapons enshrined in it to prevent the country from becoming notorious as a safe haven for dirty money.