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DoF, BSP renew push for lifting of bank secrecy

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Carlos G. Dominguez III
Finance Secretary Carlos G. Dominguez III -- PCCO.GOV.PH

THE Department of Finance (DoF) and the Bangko Sentral ng Pilipinas (BSP) renewed their call for the lifting of bank secrecy, after the Philippines was dragged into a financial scandal involving German payments company Wirecard AG last month.

“Passage of our proposed measure to get our bank secrecy law in line with international best practices,” Finance Secretary Carlos G. Dominguez III said in a Viber message to reporters when asked what the government can do to deter incidents of financial fraud.

Bank of the Philippine Islands (BPI) and BDO Unibank, Inc. last month were entangled in the international scandal after the German firm initially said it kept $2.1 billion in the two banks. BPI and BDO denied Wirecard was their client, but have sacked employees involved in fabricating bank documents.

BSP Governor Benjamin E. Diokno said amending the Republic Act (RA) No. 1405, the law on secrecy of bank deposits, will further protect the country’s banking system from potential fraud.

“Lifting of the bank secrecy is one of the key reforms that the BSP has been pushing for years, the BSP will continue to communicate to Congress the importance of the reform to align our laws with international best practices, as well as to better protect our banking system and our people from potential fraudsters,” Mr. Diokno said in forum last week.

He said the central bank and the Anti-Money Laundering Council (AMLC) “are open and eager to collaborate with international agencies and German regulators” in responding to the recent Wirecard incident and hold those involved accountable.

In 2016, the Philippines was involved in an international money laundering incident, when cyber-criminals stole $81 million from the Bangladesh Bank and transferred the funds to allegedly fake accounts with Rizal Commercial Banking Corp. The money was withdrawn and later used in casinos, where the money trail ended.

The DoF has called for the lifting of bank secrecy for tax purposes, saying this will make it easier for the Bureau of Internal Revenue to go after tax evaders.

President Rodrigo R. Duterte in February 2019 vetoed the general tax amnesty provision when he signed into law RA 11213 or the Tax Amnesty Act due to lack of safeguards on potential false declaration of assets or net worth.

Mr. Diokno noted the Philippines and Lebanon are the only two countries with stringent bank secrecy laws.

“BSP is also working closely with the DoF to help push for the immediate passage of this critical piece of legislation that will finally break the walls of bank secrecy law in fraud cases,” Mr. Diokno said.

Meanwhile, Mr. Dominguez said regulators should also strengthen enforcement of their rules against fraud.

“(I) have discussed with the SEC (Securities and Exchange Commission) their poor record of law enforcement of financial fraud perpetrators — for example no convictions of pyramid scheme operators,” he said.

AMLA AMENDMENTS
Meanwhile, a bill seeking to amend the Anti-Money Laundering Act of 2001 (AMLA) is likely to be passed by the House Committee on Banks and Financial Intermediaries within two weeks after Congress opens its second regular session on July 27.

“I think we have sufficient data to finalize our committee report,” Quirino Rep. Junie E. Cua, chair of the House committee, said in a phone interview on Saturday.

“When we resume within the first two weeks siguro matatapos na namin ’yan… Hopefully, when we resume the session it would be ready for committee approval then, that can go to the plenary na for second reading,” he added.

House Bill 6174 proposes to introduce more stringent provisions in RA 9160 or the AMLA.

Changes to the AMLA are needed so the Philippines can avoid being graylisted by the Financial Action Task Force (FATF). The Philippines is currently under a 12-month observation period to address deficiencies in anti-money laundering measures.

The FATF has extended the deadline of its observation period to February 2021 from October 2020 due to the global crisis, saying that the pandemic made it “impossible for assessed jurisdictions and assessors alike to conduct on-site visits and in-person meetings.” — Beatrice M. Laforga with P.S.Gajitos





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