Small businesses being used as front for ‘dirty money’ activities

GAPS IN MONITORING suspicious transactions performed and channeled through  informal businesses and legal persons still need to be addressed, the Anti-Money Laundering Council (AMLC) said in a report.

From 2015 to 2019, the value involved in 87,190 suspicious transaction reports involving business entities and legal persons reached P52.328 trillion, based on a study conducted by the watchdog.

“The overall risk of legal persons and business entities to money laundering is medium high that requires collective mitigating strategic actions that can be implemented from short to medium term,” the AMLC said in a report published on Tuesday.

The study found that P4.6 billion or around 95% of frozen assets in the sample cases involved cases related to graft, e-commerce violations, and illegal drugs.

It noted that cash-intensive industries are at risk of being avenues for “dirty money” activities of criminals in order to hide the nature of their funds.

“Given the anonymous character of cash, authorities face difficulties in tracing the nexus between the funds and the criminal activities,” AMLC said.

Nearly half (49%) of suspicious transaction reports used in the study involved cash deposits.

The watchdog said they observed a trend that criminals are using businesses like wholesale or retail trading to move illegal funds that will be mixed with legitimate income.

It said some cases involved businesses established by Filipino dummies backed by foreign nationals that have control and ownership of the firms.

Most or 95% of suspicious transaction reports were filed by banks, followed by credit card firms (1.11%), while those from money issuers rose to 1,148 from 2017 to 2019 from having no reports in the preceding two years.

On the other hand, reports filed by insurance and financing companies and investment houses only comprised 0.12% and 1.24%, respectively, of the total.

“Based on the sample suspicious transaction reports, there is low threat involving the insurance sector, while there appears a low-medium threat on the use of financing companies and investment houses by entities suspected to be involved in illegal transactions,” the AMLC said.

The AMLC on Sunday issued implementing rules and regulations following the signing of Republic Act 11521 on Friday that strengthened the country’s anti-money laundering and counter-terrorism measures.

This beat the Feb. 1 deadline given by the Financial Action Task Force for the Philippines to address gaps in its anti-money laundering and counter-terrorism financing measures. — L.W.T. Noble