Failing the litmus test
BECAUSE OF one of the most restrictive bank secrecy laws in the world, the Philippines had long been suspected by the international financial community as a jurisdiction in which the proceeds of illegal activities are laundered. It was a mere suspicion, but it had been kept alive by the occasional rumor and anecdotal evidence of “dirty money” that was never enough to pass muster in the legal system.
But with the details emerging from the Senate inquiry into the $81 million stolen from the Bangladesh central bank, the country—nay, the world—now has proof that large-scale facilitation of “dirty money” through the financial system does occur in the Philippines.
That the perps laundered the proceeds of their electronic crime through the Philippines is no surprise. After all, lawmakers did exempt casinos from coverage of the Anti-Money Laundering Act, ostensibly in an effort to help the fledgling gaming industry attract high rollers. But to blame casinos alone for the laundering of funds stolen from impoverished Bangladesh is to take the easy way out. Casinos are vulnerable to the transit of dirty money, but the inescapable truth is that the so-called proximate cause—the weak link exploited by international criminals to get their loot to the casinos—was the Philippine banking system.
This is the same banking system praised here and abroad for a level of financial strength that exceeds those in wealthy nations. It is the same banking system supervised by reputedly some of the most professional regulators in the world—the Bangko Sentral ng Pilipinas and its adjunct, the Anti-Money Laundering Council.
In the tangled narrative of the cyberheist, what is clear is that a low-level Rizal Commercial Banking Corp. official, branch manager Maia Deguito, is a key player in the laundering operation. But is she the lone financial evil genius that the bank’s leadership is portraying her to be? Or did she have help, directly or indirectly, from superior officers? If so, from how high up the bank’s chain of command did this help come?
At worst, someone higher up intentionally let in $81 million in dirty money through mechanisms meant to prevent precisely a crime like this from happening. At best, someone higher up was sleeping on the job and the bank had weak internal controls—controls that are vetted and approved by the BSP and AMLC.
So if the bank’s claim is true that its automated systems had minimal human intervention (thus allowing the funds to be withdrawn despite panicked requests from overseas the evening before to hold the funds), the BSP and AMLC—whose job it is to vet and issue an imprimatur on all banks’ manuals of operation—are negligent or incompetent, as well.
The Anti-Money Laundering Act was put in place in 2001, originally to stop the flow of proceeds from large-scale transnational crimes like this. And between last Feb. 5 and 13—faced with the litmus test of the biggest laundering activity ever to hit local shores—safeguards established by one of the country’s largest banks were foiled. Meanwhile, the BSP and AMLC failed to respond in a timely and effective manner, freezing the suspect bank accounts only three weeks after the stolen loot had come and gone. It appears that the entire system failed the litmus test.
Going forward, it is clear that no industry involved in the controversy will emerge unscathed. Everyone will have to give up something in varying degrees.
The scandal constitutes a call to all parties involved in this sordid affair—to big and small banks, from bank CEOs to clerks, casinos, money changers, and financial regulators, especially the BSP and AMLC: Examine yourselves closely, identify your weaknesses (this episode reveals that there are many), then reform and shape up.
Everyone involved should swallow the bitter pill of change now. As a sign of good faith toward the Filipino public and the global public, everyone involved should implement the needed reforms voluntarily. It can be done immediately, or it can be forced upon everyone involved, painfully, by the rest of the world. The choice is clear.
