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BSP backs easing
of bank secrecy

Posted on March 19, 2016

MONETARY AUTHORITIES support the easing of “very strict” bank secrecy restrictions that have stood in the way of thwarting and tracking illegal fund transfers, as seen in the difficulty the government has encountered in following the trail of some $81 million stolen from Bangladesh that entered the country last month.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr., who heads the Anti-Money Laundering Council (AMLC), said he favors the easing or lifting of stern bank secrecy rules “under certain conditions” in order to enable government to promptly examine deposits and act on suspicious transfers.

Mr. Tetangco made the remarks as the government tries to track and recover $81 million stolen from Bangladesh Bank’s accounts with the United States Federal Reserve and then “cleansed” in the Philippines’ financial system and casinos.

“Right now, the prevention of this particular illegal activity like money laundering is being hampered by the very strict bank deposit secrecy law,” Mr. Tetangco told reporters on the sidelines of the Chamber of Thrift Banks national convention on Friday.

“For us to be able to track the flow of funds, we need that extra authority because once the funds go into a bank deposit, that’s it -- the trail turns cold and we cannot look into that,” he explained.

“If you have a legal framework -- assuming it’s an adequate legal framework -- the next important thing to ensure will be the requirement that the prevention aspect would be there. When the case reaches AMLC, that’s already the investigation stage so the incident has already happened.”

The AMLC is investigating the reported influx of the stolen funds, which were deposited into the accounts of Michael F. Cruz, Jessie C. Lagrosas, Alfred S. Vergara, and Enrico T. Vasquez at the Jupiter Street branch of the Rizal Commercial Banking Corp. (RCBC), and were transferred to fake accounts under the name of businessman William S. Go, according to Ma. Cecilia F. Estavillo, head RCBC’s legal and regulatory affairs who is conducting the bank’s internal probe. The accounts were opened in May 2015 and were left untouched until Feb. 5, when wire transfers amounting to $81 million flowed in.

RCBC investigators eventually found the accounts “fictitious” -- opened through “simulated forgery” allegedly under the watch of branch manager Maia Santos-Deguito.

The AMLC has filed charges against Ms. Deguito for her alleged knowledge that she was dealing with stolen money, alongside the four owners of the accounts through which the funds were coursed.

AMLC Secretariat Julia Bacay-Abad confirmed before the Senate Blue Ribbon Committee that multiple fund transfers of $66 million in Mr. Go’s purportedly fake accounts and $15 million through the Vasquez account eventually went to PhilRem Service Corp., which reportedly delivered the money to casino junket operator WeiKang Xu.

In the course of the Senate inquiry on Thursday, Ms. Deguito and other bank officials refused to discuss details of the bank transactions and deposits, citing provisions under Republic Act 1405 or the Law on Secrecy of Bank Deposits signed in 1995.

PhilRem president Salud Bautista has refused to waive bank secrecy to allow full access to the company’s accounts, but committed to issue a check worth P10.747 million to the Bangladesh government to express apology and “willingness” to serve justice. But AMLC’s Ms. Bacay-Abad said this did not strip the company and its officers of possible criminal liability.

Asked whether the recent case -- the first cross-border money laundering reported in the country -- has any impact on the country’s financial system, Mr. Tetangco said he has not seen any feedback from the market so far, but flagged it as a “risk.”

“If you look at the behavior of financial markets over the last several days, there has been no indication that there is a negative impact. In fact the peso has been appreciating over the last few days, bond market is steady, the PSEi (Philippine Stock Exchange index) has been holding steady, at times even going up,” the BSP official said.

“But we have to recognize that there is a risk associated with this and therefore we need to address that. We have to show that there is action that’s being taken with respect to this particular case and with respect to further strengthening the legal framework or anti-money laundering and financing terrorism.”

Apart from amendments to the bank secrecy law, Mr. Tetangco also pressed the need to update the Anti-Money Laundering Act of 2001 to include casinos and real estate dealers as covered institutions.

“We will be working with the government and Congress again to further enhance and cover any possible loopholes,” Mr. Tetangco added.

AMLC member Emmanuel F. Dooc also told reporters on Thursday that regulators would lobby to regain its power to immediately freeze questionable bank transactions and accounts, citing the need to be able to act immediately on suspicious activity.

Sen. Teofisto D. Guingona III, who heads the Senate body probing the incident, said he expects more details to be revealed as the committee resumes its inquiry on March 29, noting that the scheme may have been performed by a larger “syndicate.” During the Senate’s closed-door session with Ms. Deguito on Thursday, the branch manager supposedly named two RCBC executives who were supposedly part of the scheme, Mr. Guingona said but refused to identify them. -- Melissa Luz T. Lopez