FATF sanctions will derail economy, BSP Gov warns

Any sanctions imposed or encouraged by the influential Financial Action Task Force (FATF) could result in serious pressure of Philippine banks wanting to operate or expand overseas. Likewise, sanction could lead to negative economic repercussion on the Philippine economy.

The FATF is controlled by major economic powers including Japan, Germany, the United States and other industrialized countries, which are also the trading partners of the Philippines.

According to the international body, it will "warn multinational corporations away from doing business with the Philippines and the other uncooperative countries and territories (NCCTs). An NCCT is a country that does not or would not implement legislative actions countering money laundering in their respective jurisdiction."

Other possible measures are: Asking the banks dealing with the NCCTs to demand detailed information before conducting transactions with citizens or companies in those countries; and making it more difficult for banks based in those NCCT countries to operate overseas.

Philippine monetary authorities including the legaslative branch of government is presently working on an anti-money laundering law. However, it conceded that it would not able to meet the Sept. 31 deadline imposed by the FATF.

Failure to meet the deadline would result in the above mentioned sanctions.

Bangko Sentral ng Pilipinas (BSP) Governor Rafael B. Buenaventura said that they would not be seeking an extension from the FATF deadline. Rather it sent an official communications explaining the steps it has taken, and further steps the country is taking to enact a law "criminalizing" money laundering.

Buenaventura explained that the monetary authorities, including the BSP has issued several administrative order to the banking system which in effect counters money laundering.

"However, these orders do not have the force of law. That is why we are cooperating fully with the legislative branch of government to make make money laundering a criminal offense," he explained.

Meanwhile, the US Department of the Treasury released an advisory to all financial dealing with the Philippines regarding the country’s deficiencies in countering money laundering.

"The counter money laundering regime embodied in the legal, supervisory and regulatory systems of the Philippines suffers from serious systemic problems," the advisory stated.

Among those systemic problems outlined are:

•That money laundering is not a crime under the laws of the land;

•That any current requirement that the Philippine financial institutions verify the identity of their customers, or maintain complete records of those identities or of customers’ financial transactions, are at best ambiguous and very limited;

•That the obligation of financial institutions operating in the Philippines to report suspicious transactions is also ambiguous at best;

•That the Philippines’ bank secrecy laws make it virtually impossible for government authorities to obtain any financial information that is collected and maintained by banks about any bank "deposits" by customers;

•That prior to July 6, 2000, the BSP had not issued any counter-money laundering regulations or guidelines. On that date the BSP approved the issuance of a new bank circular that would require financial institutions to take measures to verify and record the identity of their customers and to report suspicious transactions to the "competent" Philippine authorities. The new BSP bank circular is currently under review by Treasury officials.

According to the advisory, banks and other financial institutions operating in the US "should carefully consider, when dealing with transactions originating in or routed to or through the Philippines, or involving entities organized or domiciled, or persons maintaining accounts, in the Philippines, how the deficiencies of the counter-money laundering controls inthe Philippines affect the possibility that those transactions are being used for illegal purposes."

The US Department of Treasury notice futher instructed banks to carefully examine transactions with Philippine financial institutions, companies or individuals to determine if such transactions of $5,000 and above requires reporting to the appropriate agencies.

"All institutions are particularly advised to give enhanced scrutiny to transactions or banking relationships that do not involve established, adequately identified and understood, commercial and investment enterprises," it said.

It further stated that reports of relating to the pointers mentioned "constitute a report of a suspicious transaction relevant to a possible violation of law and of regulation, for purposes of the prohibitions against disclosure and the protection from liability from reporting of suspicious transactions."

However, the US Department of Treasury said that it was prepared to assist Philippine authorities to remedy the deficiencies in its anti-money laundering systems.