PHL needs to strengthen fight vs financial crimes

By Luz Wendy T. Noble, Reporter

THE Philippines should review its information-sharing mechanism to better address issues related to financial crimes, according to an analyst.

This as the country was recently dragged into the scandal involving Wirecard AG, after the German company initially claimed $2.1 billion of its missing funds were kept in two Philippine banks.

“Having in place a legal regime which allows for the transfer of information on financial crime-related data — both tactical and strategic — will greatly improve outcomes by allowing for a more targeted approach to identifying economic criminal activity,” International Institute of Finance (IIF) Senior Policy Adviser Matthew Ekberg said in an e-mail to BusinessWorld.

Mr. Ekberg said there could be improvements on understanding of the concept of beneficial ownership across public and private sectors, which for now, is “varied but generally weak.”

“By ensuring access — for both the public and private sectors — to reliable and verifiable beneficial ownership information, you can help mitigate the ability of criminals to shield their financial activity and misuse the financial system,” he said.

To crack down on financial crimes, Mr. Ekberg said the Philippines can learn from Hong Kong, Singapore, and Australia which have financial intelligence-sharing partnerships that involve financial institutions, law enforcement, and financial intelligence units.

Even as Wirecard now acknowledged the $2 billion in missing funds probably doesn’t exist, the National Bureau of Investigation and the Anti-Money Laundering Council are now investigating individuals linked to the scandal.

“The Wirecard issue does not pose a significant reputational impact on the Philippines. We also do not see negative impact on investor optimism,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Thursday, saying market volatilities in the country are mainly attributable to the pandemic crisis and not the Wirecard scandal.

The Wirecard incident could be a turning point for the banking industry to further secure their operating procedures.

“[W]e have advised the Bankers Association of the Philippines (BAP) to tighten their operating procedures, because in the past we have instituted many reforms in promoting good corporate governance and effective risk management systems,” Mr. Diokno said in a television interview on June 29.

“And it worked because otherwise you won’t catch this scandal and I think this is the time to tighten it even more,” he added.

The BAP said the banking industry is already armed with strict rules on issuance of bank certifications.

“Some individuals may try to forge or falsify these documents, but their authenticity can be readily ascertained through careful scrutiny or verification by the appropriate institutions,” BAP said in a statement sent to BusinessWorld.

“We continue to work with the BSP and other government agencies to improve our processes and our member banks are regularly and proactively strengthening security checks and systems to ensure integrity at every level,” it added.

Bank of the Philippine Islands (BPI), which is one of two local lenders initially linked by Wirecard to the missing funds, said they have stringent measures in place in terms of issuance of banking certifications.

“Thus, we can readily detect when certifications are spurious, as in the case of the Wirecard-related documents presented to us,” BPI said in a statement sent to BusinessWorld.

“This was a case of bad conduct on the part of a very junior officer who has since been terminated, with further legal action to follow,” BPI added.

BDO Unibank, Inc. has also earlier denied that Wirecard is a client.

The country is facing a possible inclusion in a “gray list” of economies with lax laws on anti-money laundering (AML) and counter-terrorism financing (CTF) if it fails to amend some existing laws meant to strengthen its mechanisms against dirty money.

It is currently under an observation period by the Financial Action Task Force which was originally scheduled to end in October but was extended to February 2021 in light of the pandemic.

Proposed legislations to improve AML and CTF include the controversial Anti-Terror Act currently awaiting the signature of President Rodrigo R. Duterte, which revises the Human Security Act of 2007. Meanwhile, proposed amendments for the Anti-Money Laundering Act have yet to go beyond the committee level at both the House of Representatives and the Senate.