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The AMLA and the Bank Secrecy Law

Bangladesh and the Philippines became the focus of world attention after the international news media reported that hackers stole US$81-million from the central bank of Bangladesh; that the stolen funds were transferred to bank accounts in the Philippines through the Rizal Commercial Banking Corp. of the Yuchengco group of companies; and that the money was diverted to business interests running casinos in the country.  It was obviously a case of large-scale money laundering.

 The Philippine government believes that unless this crime is solved quickly, the country will develop a reputation as a haven for laundered money, something the Cayman Islands in the western hemisphere currently enjoys with ignominy.  That reputation used to be reserved only for the Swiss banking system.  So far, Philippine officials appear to be coordinating their investigation with representatives of other nations, if only to downplay the embarrassment already experienced by Manila.   

Private banks and their depositors are also upset.  The relationship between a bank and its clients, its depositors in particular, is fiduciary in character, or one characterized by a very high degree of trust.  After all, no person will deposit his hard-earned money with a bank he does not trust.  This fiduciary relationship between the bank and its clients is further strengthened by Republic Act No. 1405, or the Bank Secrecy Law, which prohibits banks from disclosing information about bank deposits without the consent of the depositor concerned.

 Under Republic Act No. 9160, or the Anti-Money Laundering Act, as amended, banks are now required to report to the Anti-Money Laundering Council created under the Amla any “suspicious transaction” made by any of its clients, with anything half a million pesos and more presumed to be “suspicious.”  Banks and their clients find this provision of the Amla objectionable because it forces the bank to snitch on its own clients—an act that is completely incompatible with the fiduciary relationship between the bank and its depositors. 

What’s worse is the Amla requires a private entity (the bank) to conduct a criminal investigation, a function better left to either the AMLC or the Department of Justice.

Laws governing banking operations are supposed to protect the general public.  They are not supposed to make banking institutions squeal on their own customers.

 When then banking system loses the trust of its depositors, the banking system will collapse.  Since current interest rates on bank deposits are practically negligible anyway, depositors will just keep their money in safety deposit boxes rather than deposit the same in the bank.  Only checking accounts with minimum balances will be maintained for the payment of household utilities.  This arrangement will decrease the available supply of cash, and will trigger a marked increase in interests on loans which, in turn, will discourage investments.  An economic crisis is almost sure to follow.

The knee-jerk reaction of the government to the RCBC incident is expected.  So far, the Bangko Sentral and the Securities and Exchange Commission want to do away with the Bank Secrecy Law and strengthen the Amla. 

Doing away with the secrecy of bank deposits is an ill-advised measure.  That move will not be in line with the public interest.  It is also tantamount to burning the barn just to roast the pig.  The State cannot afford an economic crisis once the bulk of Filipino bank depositors lose their trust in the banking system, especially under a law which allows banks to betray their clients to the AMLC.

Before resorting to any amendment of either the Bank Secrecy Law or the Amla, the AMLC should focus its attention on this latest large-scale money laundering controversy.  Since the pertinent evidence can be readily obtained because the RCBC management and other key figures in the whole mess appear to be cooperating in the investigation, the AMLC should not find it difficult to establish a case against everyone involved in the scam under existing laws.

Besides, amending the laws at this stage will serve no useful purpose to the ongoing investigation because laws cannot be given any retroactive effect, especially if they are penal in character.

Moreover, owners of erring banks, and not just their top executives, should be held liable for large-scale money laundering done with their actual or constructive knowledge.  It’s time the owners are made to account for how their businesses are operated by their hirelings.

Surprisingly, casinos are not included in the coverage of the Amla.  After the RCBC scam is solved, the Amla may then be amended to include casinos within its coverage.  Since gambling is supposed to be illegal in this country, and considering that casinos operate by virtue of a license issued by the State, then casinos should be required by law to allow AMLC auditors to make periodic reviews of their operations with a view towards discouraging and ultimately penalizing, to the fullest extent of the law, future acts of large-scale money laundering in the country.

  Considering that organized crime can afford the services of the smartest computer hackers money can hire, the AMLC should arm its auditors with its own team of cyber geniuses if only to level the playing field.  

* * *

What’s wrong with the Commission on Elections?  The Omnibus Election Code prohibits putting up election precincts in private buildings, but the Comelec recently allowed voting in commercial malls.  Under the election automation law, the Comelec must print out voters’ receipts, but it refused to do so, until the Supreme Court ordered it to obey the law.  The Comelec refuses to enjoin senatorial candidate Manny Pacquiao from pushing through with his boxing match set for today, which is a clear violation of the Fair Elections Act, on the flimsy excuse that it has no power to do so.  Now, the Comelec wants the national canvass of votes to be held at the plush premises of the Manila Hotel, at the expense of the taxpayers, of course.  Impeachment raps should be prepared against the Comelec commissioners soon.

Topics: Victor Avecilla , Anti-Money Laundering Act , AMLA , AMLC , Bank Secrecy Law , Rizal Commercial Banking Corp.
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