Senators treating RCBC with kid gloves

In one of the biggest bank robberies in world history, $81 million (P3.8 billion) was stolen from the Bangladesh Central Bank account maintained at the US Federal Reserve Bank of New York. The stolen money was transferred to several accounts at the Rizal Commercial Banking Corp. (RCBC) branch on Jupiter Street, Makati City. Part of the funds was converted to P20 million and loaded into a car, and the rest was moved to casino accounts and ultimately disappeared.

The bank robbery has caught the intense interest of many Filipinos because of its thrilling conspiracies. But beyond its movie-worthy plot, this scandal should seriously worry ordinary bank depositors because the vulnerability of their funds to similar schemes of cybertheft has been exposed.

If cybercriminals, with a mere click on a computer, can rob the account of a foreign government’s central bank that is maintained in the US central bank (known as the US Federal Reserve Bank), how much easily can they steal from ordinary citizens’ accounts maintained in private banks?

What guarantee do we have that cybercriminals or bank syndicates will not steal or are not already stealing under the radar amounts of P10 or P100 from the millions of bank accounts of ordinary depositors on a monthly basis? Of the millions of bank depositors, how many check their monthly balance up to a peso accuracy?

The scandal should prod the government to conduct a thorough review of two things: first, the technical security of our banking system, to ensure that a similar cybertheft will not happen or is not already happening; second, our antimoney laundering laws and regulations, in conjunction with the internal controls of banks, to identify the loopholes that enabled such a huge amount of stolen money to be laundered through a local bank.

Our antimoney laundering laws impose penalties if it is proven that the bank allowed the proceeds of crimes like robbery, corruption, drugs and illegal gambling to be deposited with it. The penalty for bank employees is imprisonment, and for the bank itself, revocation or suspension of its banking license.

The Senate inquiry into the scandal is limiting its focus to the personal liabilities of the employees of the bank branch involved. The senators are treating RCBC with kid gloves, as shown in their lack of probing questions on the potential liability of the banking institution.

Wittingly or unwittingly, the senators are conducting their investigation not “in aid of legislation,” but in aid of proving the defense of RCBC—that the scandal is the sole liability of a “rogue employee” who was making money on her own. The bank is projecting itself as an injured party.

This “rogue employee” defense has been rejected by First World countries in favor of the principle of “respondeat superior,” a Latin phrase that means “Let the master answer.” Under this principle, a company employee who acts within the scope of his or her employment, and for the benefit of the company, is deemed an agent of the company. If this employee commits a crime connected to his or her employment, criminal liability is not confined to the employee alone but extends to the company as well.

In other countries, the bank itself is criminally liable if there was systemic failure or inadequacies in its internal controls to prevent the money laundering. The bank is also criminally liable if it commits “willful blindness” despite the clear presence of “red flags.”

Any bank must not benefit from a scheme of creating a fictitious wall to insulate its top management from liability. Top executives must not be allowed to bury their heads in the sand while dirty money is being laundered in one of their branches, thereby enabling the bank to reap windfall profits if the crime is not noticed, and to confine liability to scapegoat employees if the crime is exposed.

The senators should leave the criminal investigation of the bank employees to the

Department of  Justice and instead focus their attention on reviewing what RCBC did when the red flags of money laundering appeared on their monitoring screens.

Late in 2012, according to a Reuters report, British bank giant HSBC (Hong Kong and Shanghai Banking Corp.) agreed to pay a record $1.92 billion in fines to US authorities “for allowing itself to be used to launder a river of drug money flowing out of Mexico.” (Reuters)

In 2015, Banamex USA, an affiliate of US bank giant Citibank, was fined $140 million by US authorities because it failed to maintain adequate internal controls reasonably designed to detect and report illegal transactions.

Also in 2015, an investigation was commenced on German bank giant Deutsche Bank for suspected violations of money laundering rules in connection with its handling of $10 billion in suspicious funds from its Russian clients.

Even the Vatican Bank was embroiled in allegations of money laundering violations in 2015, when revelations came out that, among others, beatification and sainthood were being sold for as much as $550,000.

Money laundering is a “profit center” for many banks all over the world because they derive huge profits from proceeds of corruption, illegal drugs, illegal gambling and other crimes.

If the Senate is serious in strengthening Philippine laws to prevent money laundering, it must initiate amendments by making banks liable to pay hundreds of millions, or even billions, of pesos in criminal penalty under the doctrine of “let the master answer.”

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