The sources said the FATF rejected the law because the limit that would trigger government surveillance was deemed too high and could be used as a loophole for those laundering the proceeds of illegal activities.
Meanwhile, President Arroyo ordered Finance Secretary Jose Isidro Camacho and Bangko Sentral ng Pilipinas (BSP) Governor Rafael Buenaventura to map out the government’s next moves following the FATF’s decision.
The President is on a Christmas break in Baguio City until Jan. 1 but she called Camacho and Buenaventura to consult on the FATF’s supposed rejection of the law.
Presidential Spokesman Rigoberto Tiglao downplayed the supposed rejection as an "initial assessment only" and will only be finalized in February.
He said both Camacho and Buenaventura are set to meet with FATF officials in Hong Kong in January "for consultations" on Manila’s compliance with FATF requirements, prior to the task force’s "final review" in February.
BSP sources said financial authorities would likely defer commenting on the issue until Camacho and Buenaventura have spoken with the FATF officials in January.
Tiglao said the initial assessment will not likely delay the removal of the Philippines from a negative list of countries who have not complied with international anti-money laundering prudential standards.
The country has been on that negative list since 1999 and would have suffered international financial sanctions had Congress failed to pass an anti-money laundering law by Sept. 30.
RA 9160 was passed on Sept. 29, or one day before the deadline, because the government had feared the sanctions from the FATF’s 29 members, the world’s most progressive countries.
"If improvements are needed in the law, it can be done through the law’s implementing rules and regulations. If any amendments to the law are needed, we can work it out through Congress," Tiglao added.
"There should be no problem if an amendment is needed," said House Majority Leader Neptali Gonzales II. "We can have it if the financial authorities will ask for it."
Sen. Francis Pangilinan, principal author of the Senate version of the law, agreed that a review is needed not so much because of the opposition of the FATF but to make sure it will be more effective.
Under the law, banks and other covered institutions, including casinos, are required to report all transactions above P4 million to the Anti-Money Laundering Council chaired by the BSP governor.
The House version of the measure pegged the threshold amount at P5 million while the Senate version wanted the lower amount of P3 million. When the two bills were reconciled by a conference committee, the amount became P4 million.
During the House debates, those batting for a much lower threshold argued that a person hiding funds earned from illegal activities can deposit P4 million a day and launder P100 million in 25 banking days without triggering the reporting and monitoring mechanism.
Among those who had wanted a lower amount were Manila Rep. Mario Crespo, better known as Mark Jimenez, and Misamis Oriental Rep. Oscar Moreno, who chairs the economic affairs committee.
Crespo wanted a threshold of P500,000, or about $10,000, similar to the limit in the US anti-money laundering law. He had told his colleagues that $10,000 was considered to be the universal threshold.
The senator said he himself had some misgivings about the P4-million threshold and favored a lower threshold of P1 million.
"I made myself clear on this during the Senate deliberations and during the bicameral conference committee," he said but stressed that other schemes could be considered if amendments to RA 9160 are brought before Congress.
"Another scheme is to do away with the threshold amount altogether and concentrate only on suspicious transactions," he added.
He explained that by using the "suspicious transaction" criterion, the financial standing of the depositor would be given more importance than the amount deposited, even if it is below P4 million.
"If a depositor regularly deposits only P50,000 and then suddenly deposits P1,000,000, that should immediately trigger suspicions and could be reported to the Bangko Sentral," he said.
He added that there is no need to report the millions of pesos in deposits of a business tycoon because that is an ordinary transaction, not a suspicious one.
Pangilinan said that another provision of the Anti-Money Laundering Law that could be reviewed is that on the depositing of a total of P4 million in five consecutive days.
"This provision could provide a loophole. But if we do away with the threshold amount and report only suspicious transactions, then this loophole could also be plugged," he said.
The FATF had pressed for the enactment of the Anti-Money Laundering Law and warned of sanctions should it fail to meet a Sept. 30 deadline.
The imposition of sanctions would have made it more difficult and more expensive for entities abroad or even Filipino overseas to remit dollars to the Philippines or transact business with Philippine-based corporations. — With Marichu Villanueva