By Lester Gallego, JD1 and Steffani Mitchelle Patriarca
Republic Act 9160 otherwise known as the Anti-Money Laundering Act of 2001 (hereinafter “AMLA”) was approved on September 29, 2001. Unlike other domestic laws in the Philippines, the AMLA was intended to be more far-reaching considering that money-laundering activities, the object sought to be prevented and punished by the AMLA, cross state borders. It is a known fact that criminal organizations prefer to commit money laundering through overseas entities rather than in their local place of operation so they can avoid detection. Accordingly, the purpose of the AMLA is to protect and preserve the integrity and confidentiality of bank accounts and to ensure that the Philippines shall not be used as a money laundering site for the proceeds of any unlawful activity. Consistent with said foreign policy, it is mandated by the AMLA that the State shall extend cooperation in transnational investigations and prosecutions of persons involved in money laundering activities wherever committed. See Section 2 of the AMLA, as amended.
Two decades later, the AMLA has been subjected to various amendments, all of which seek to strengthen the drive against money laundering. The AMLA was amended by Republic Act 9194, further amended by Republic Acts 10167, 10365 and 10927, and amended even further quite recently in the year 2021 by Republic Act 11521. The subsequent amendments essentially expanded either, some or all of the institutions, transactions, instruments and activities regulated by the provisions of said law in order to put a stop to the ever surreptitious money laundering activities.
So what is money laundering?
The International Criminal Police Organization (Interpol) defined “Money Laundering” as concealing or disguising the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources. It is frequently a component of other, much more serious, crimes such as drug trafficking, robbery or extortion. Money laundering is omnipresent and found in areas where it might least be expected, such as environmental crimes. The advent of cryptocurrency, such as bitcoins, has exacerbated this phenomenon. Criminal gangs move illegally obtained funds around the globe using banks, shell companies, intermediaries and money transmitters, attempting to integrate the illegal funds in legal businesses and economies. Nowadays, money mules play a key role in this context. These are people who act as intermediaries for criminal gangs, even when they are not aware of the fact they are laundering illegal funds.
The AMLA appears to provide for a more pervasive inclusion of what is considered as a money laundering activity. This specific provision of the AMLA penalizes not only the positive act of concealing or disguising the proceeds of any unlawful activity, but also requires the performance of specific acts, failing in which constitutes as an omission punishable under said law. Money laundering, under Section 2 of the AMLA, includes the acts of: 1. transacting the monetary instrument or property subject of an unlawful activity; 2. converting, transferring, disposing, moving, acquiring, possessing and using the same; 3. concealing or disguising the true nature, source, location, disposition, movement or ownership; 4. attempting or conspiring to commit money laundering; 5. aiding, abetting, assisting, or counselling in its commission; and 6. failing to perform an act which, as a result, facilitates the offense of money laundering. Moreover, any person or entity which is required by the AMLA to make a report, and who fails to make such report, is likewise punishable under the AMLA. See Section 4 of the AMLA, as amended
So what are the unlawful activities, transacting the proceeds of which constitutes as money laundering, under the AMLA?
The AMLA provides for a wide array of acts deemed as unlawful activities. To name some, the unlawful activities include kidnapping, plunder robbery and extortion, piracy, qualified theft, swindling, smuggling, violations of the electronic commerce act of 2000, hijacking, destructive arson, murder, terrorism and conspiracy to commit terrorism, financing of terrorism, bribery and corruption of public officers, frauds and illegal exactions and transactions, malversation of public funds and property, forgeries and counterfeiting. It should be remembered, however, that what is being punished under the AMLA is the transaction, concealment, and other acts concerning the proceeds of the above unlawful activities although the offender may be prosecuted for both violation of the AMLA and the unlawful activity itself. See Section 3(i) of the AMLA, as amended.
Who are the covered persons under the AMLA?
Another important matter in this discussion is the provision on “covered persons” under the AMLA. Essentially, they are those persons or entities where the proceeds of the unlawful activities are usually transacted. As such, the AMLA imposes certain obligations upon said covered persons in order to curb acts of money laundering. Perhaps the most important obligation imposed is the duty to report transactions that are indicative of money laundering. Originally, covered persons include only banks and non-bank financial institutions. However, as stated above, amendments were made expanding the coverage of the AMLA. Covered persons now include insurance companies, pre-need companies, securities dealers, brokers, salesmen, investment houses and other similar persons managing securities, jewelry dealers, company service providers, individuals who manage money, Philippine offshore gaming operators and even real estate brokers and developers. See Section 3(a) of the AMLA, as amended.
What are the transactions covered by the AMLA?
Not all transactions are subject to the provisions of the AMLA. Only those transactions which reach a specific threshold amount are deemed “covered transactions”. If a particular transaction with a covered person falls within the definition of a “covered transaction”, it must be reported to the proper authorities under the AMLA for appropriate investigation and action. The following are the covered transactions under said law:
1. A transaction in cash or other equivalent monetary instrument exceeding Five Hundred Thousand pesos (Php500,000.00);
2. A transaction with or involving jewelry dealers, dealers in precious metals and dealers in precious stones in cash or other equivalent monetary instrument exceeding One Million pesos (Php1,000,000.00);
3. A casino cash transaction exceeding Five Million Pesos (Php5,000,000.00) or its equivalent in other currency; and
4. A cash transaction with or involving real estate developers or brokers exceeding Seven Million Five Hundred Thousand Pesos (Php7,500,000.00) or its equivalent in any other currency.
See Section 3(b) of the AMLA, as amended.
Does it mean that any transaction involving less than the above threshold amounts can no longer be subject to the provisions of the AMLA?
No. The AMLA also covers “suspicious transactions” which, regardless of any amount involved, must likewise be reported. Said transactions include those where:
1. There is no underlying legal or trade obligation, purpose or economic justification;
2. The client is not properly identified;
3. The amount involved is not commensurate with the business or financial capacity of the client;
4. Taking into account all known circumstances, it may be perceived that the client’s transaction is structured in order to avoid being the subject of reporting requirements under the Act;
5. Any circumstances relating to the transaction which is observed to deviate from the profile of the client and/or the client’s past transactions with the covered institution;
6. The transactions is in a way related to an unlawful activity or offense under this Act that is about to be, is being or has been committed; or
7. Any transaction that is similar or analogous to any of the foregoing.
See Section 3(b-1) of the AMLA, as amended.
How does the AMLA combat money laundering?
The salient provisions of the AMLA which combat money laundering, among others, are:
1. Section 6 which provides that any person may be charged with and convicted of both the offense of money laundering and the unlawful activity.
2. Sections 7 and 8 which respectively created the Anti-Money Laundering Council (AMLC) and the Secretariat whose functions involve overseeing the proper implementation of the AMLA, among many others. The AMLC is the body where the covered and suspicious transactions must be reported by the covered persons.
3. Section 9 which mandates the covered persons to perform customer identification, record-keeping and reporting functions in order to ascertain both the identities of the clients and the true nature of the transactions, as well as to report covered and suspicious transactions to the AMLC.
4. Section 10 which authorizes the Court of Appeals to issue freeze orders which puts on hold the monetary instrument or property after determination that probable cause exists that the same is in any way related to an unlawful activity under the AMLA. The freeze order shall be effective for a period of 20 days unless the order relates to financing of the proliferation of weapons of mass destruction in which case the freeze order is effective until lifted by the Court of Appeals or the Supreme Court.
5. Section 11 which empowers the AMLC to inquire into or examine any particular deposit or investment, including related accounts, with any banking institution or non-bank financial institution upon order of any competent court.
6. Section 12 which subjects to forfeiture any monetary instrument or property subject of money laundering.
Is the AMLA Effective?
The AMLA appears to have taken notable strides in preventing money laundering. Prior to the enactment of the AMLA, the Philippines was included in the Financial Action Task Force (FATF) blacklist. This blacklist enumerates countries that are non-cooperative in the global effort against money laundering. FATF is the global money laundering and terrorist financing watchdog. This inter-governmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society. As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. After the enactment and implementation of the AMLA, and compliance to FATF standards, the Philippines was removed from the blacklist.
The aforementioned amendments to the AMLA likewise show how committed the Philippine Government is in preventing money laundering. Relevant to mention that the recent increase in casinos/POGOS lead to the amendment of the AMLA in 2021 to include said entities among those covered by the provisions of the AMLA.
However, the Philippines’ moves towards the prevention of money laundering somewhat took a big blow when said country’s financial institutions were allegedly involved in what was labelled as the biggest money laundering scandal that hit the Philippines, the $81 Million Bangladesh Bank Heist in 2016. The stolen money was wired into several fictitious Philippine bank accounts, withdrawn, and laundered in local casinos. Only a small portion of the money has been recovered so far. In 2017, the Philippine Military reported that the Islamic State (ISIS) funded the Maute Group. The money was used to acquire firearms for the Marawi Siege, as well as food and supplies of local rebels. This event likewise casted doubts on the effectiveness of money laundering policies of the Philippines in relation to mitigating the adverse effects of criminal activities.
Sadly, in June 2021, the Philippines was among the jurisdictions included in the FATF grey list which will be under increased monitoring due to strategic deficiencies in policies to counter money laundering, terrorist financing and proliferation financing.
All in all, while the Philippines has taken steps in addressing money laundering, a lot is still left to be desired. With the technological advancement, complexities in the movement of money and the high vulnerability of online gambling sites to criminal activity, the Philippine Government must not only address but instead prioritize efforts against money laundering.