Privileged deposits

The executive director of the Anti-Money Laundering Council (AMLC), Ronel Buenaventura, was asked by Sen. Robinhood Padilla yesterday if he thought amendments were needed in the country’s laws against dirty money.

Buenaventura should have sought more teeth and resources for the AMLC, including a further loosening of secrecy laws covering both peso and foreign currency bank deposits, as well as easing of restrictions governing public disclosure of the council’s probes and findings.

It seemed though that Padilla wasn’t really interested in proposed amendments that would stop the flow of dirty money. He just wanted to emphasize that he didn’t receive any funds from China through his group the Tapang at Malasakit Foundation, as alleged by that meanie, Antonio Trillanes IV.

We’ve had bank secrecy laws in this country since 1955. At the time, Republic Act 1405 was meant to encourage Filipinos to maintain bank savings, invest in government securities and discourage currency hoarding. RA 1405 also aimed to attract foreign currency deposits and investments to bolster national reserves.

During the first Marcos regime, bank secrecy was extended specifically to foreign currency deposits. RA 6426, the Foreign Currency Deposit Act, was passed on April 4, 1972.

It was meant to discourage dollar salting and hoarding. Unfortunately for our plundered nation, the ones who salted away the largest amounts of cash overseas turned out to be Ferdinand and Imelda Marcos, a.k.a. William Saunders and Jane Ryan in their massive Swiss bank deposits. And equally unfortunately, the loot was found and returned to the Philippines, but no looter ever went to prison.

As the global economy evolved, bank secrecy increasingly became an incentive not for building up foreign currency reserves, but for money laundering, tax evasion and financing of criminal activities as well as terrorism.

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In July 1989, the international community set up the Paris-based Financial Action Task Force (FATF), to protect the integrity of the global financial system. Special attention was focused on the financial transactions of politically exposed persons and groups classified as terrorist organizations by democratic states.

Among the common moves of the global financial community was the lifting of bank secrecy laws. The Philippines has been strenuously bucking this trend.

At the outset, the country landed on the FATF blacklist because of the near-absence of laws and rules against money laundering.

As the country and its massive army of overseas Filipino workers felt the punitive consequences of the FATF blacklist, RA 9160, the Anti-Money Laundering Act was passed in 2001. Still, the AMLA had to undergo several amendments over the years to expand the types of covered transactions.

A former AMLC official told me that in extracting those amendments from Congress, lawmakers behaved as if they were having an abscessed molar pulled without anesthesia.

Even with the reforms, the country got out of the FATF gray list only last year. The Philippines could be tossed back into the gray list, being among the few holdouts in easing bank secrecy laws, and if the FATF sees the highly efficient dirty money laundromat in this country: election campaign finance.

A primer of the Bangko Sentral ng Pilipinas (BSP) on bank secrecy rules, dated 2012/2023, stated: “As early as 2011, the Group of Twenty or G20 declared that the ‘era of bank secrecy is over’ after it endorsed the standards on transparency and exchange of information.”

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“According to the International Monetary Fund (IMF), the existing secrecy of bank deposit laws of the Philippines restrict the ability of Bangko Sentral to undertake effective supervision,” the BSP primer said. “The IMF noted that our secrecy laws undermine financial stability, financial integrity, and development of the banking sector, and expose the banking system to reputational risk.”

The BSP welcomed the passage on July 20, 2024, of RA 12010, the Anti-Financial Account Scamming Act. The AFASA seeks to combat financial cybercrimes, safeguard the interests of financial consumers and uphold the integrity of the financial system.

AFASA authorizes the BSP to investigate and inquire into financial accounts that would have been prohibited under the laws on bank secrecy and RA 8367, the Revised Non-Stock Savings and Loan Association Act of 1997.

Still, there’s a wide room for easing of bank secrecy laws, especially on foreign currency accounts.

We’re seeing the consequences of these strict bank secrecy laws in the ongoing impeachment trial of Vice President Sara Duterte, with the most strenuous opposition revolving around the disclosure of foreign currency deposits.

We’re also likely to see a similar strong pushback on the disclosure of bank accounts during the trial of former house speaker Martin Romualdez, who faces charges of plunder and money laundering.

If you can’t probe foreign currency accounts, that’s a toothless anti-money laundering regime. Laws on financial privacy must not be used as a shield for criminal activity.

Bankers themselves should welcome any reforms that boost their reputational integrity.