Banks engaged in money laundering face stiffer sanctions under new law

Banks and other financial institutions engaged in money-laundering activities face even stiffer administrative sanctions from the Bangko Sentral ng Pilipinas (BSP) ranging from fines to revocation of their licenses.

The BSP issued yesterday a circular allowing the Monetary Board to impose additional sanctions under the Central Bank Act on banks violating the new Anti-Money Laundering Act of 2001.

Under Circular 302 Series of 2001, financial institutions could face criminal liabilities and the attending penalties of P50,000 to P200,000. Moreover, the officers or other persons responsible for the violation could face sanctions of not less than two years in prison.

On top of the criminal liabilities faced by the institution and its officials, however, the BSP said violations of the Anti-Money Laundering Act would be punishable by further administrative sanctions at the discretion of the Monetary Board.

The BSP circular said violations would be further subject to Section 37 of the Central Bank Act which provides for sanctions that include, among others, the suspension of the institution’s rediscounting privileges or access to BSP credit facilities.

The BSP can also order the suspension of the erring institution’s lending or foreign exchange operations or authority to accept new deposits or make new investments; suspension of interbank clearing privileges and ultimately revoke its quasi-banking license.

The new BSP circular also reiterated Section 9 of the new Anti-Money Laundering Act which requires banks to strictly monitor and preserve records of closed accounts, customer identity and records of all transactions of covered institutions for at least five years.

Under the circular, the BSP invoked the Anti-Money Laundering Law that requires covered institutions to establish and record the true identity of their clients based on official documents. They are also required to maintain a system for the verification of the identities of their individual and corporate clients.

The circular also prohibits institutions from allowing the creation of anonymous accounts, accounts under fictitious names and other similarly spurious accounts. Only peso and foreign currency non-checking numbered accounts would be allowed.

The government has been tightening up on financial institutions to comply with the demands of the Paris-based Financial Action Task Force (FATC), made even more urgent by the terrorist attacks against the US and the subsequent crackdown on the financial network of suspected terrorist groups and individuals.

The new Anti-Money Laundering Law criminalizes money laundering and sets up a monitoring system for reporting of covered transactions. It also designates implementing agencies limited access to deposits related to money laundered accounts and compels institutions to provide information.

The Philippines was forced to pass the proposed measure post-haste or face sanctions from the FATF and its member-countries for its continued inclusion in the list of 15 "uncooperative" countries that have yet to pass a law on anti-money laundering.