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Money-Laundering in Corruption-Related Cases, Emerging Threats and Trends: The Philippine Scenario
Money-Laundering in Corruption-Related Cases, Emerging Threats and Trends: The Philippine Scenario
I. INTRODUCTION
In the Philippines, money-laundering was criminalized by the passage of Republic Act 9160,
or the Anti-Money-Laundering Act of 2001, as amended. The Anti-Money-Laundering Council
(AMLC), the Philippines’ Financial Intelligence Unit, is in the forefront of this battle against the
ill effects of money-laundering and terrorist financing. With the advent of technological
advancement, the dilemma becomes more complex and intricate. It enables individuals, banks,
financial institutions, among others, to communicate, finalize their business dealings and transfer
funds faster, deeper and cheaper than ever before, anywhere and anytime in the world. Indeed, the
development and introduction of modern technologies have expanded the opportunities of money
launderers, organized criminals and corrupt public officials and individuals to conceal their
identities and the source of their illicit funds. The emergence of new threats and trends has given
rise to greater risks, which presents a serious challenge to law enforcement agencies, financial
regulators, investigators and prosecutors in countering money-laundering (ML), terrorist financing
(TF) and corruption, both in the public and private sectors.
The Office of the Ombudsman, being the premiere anti-corruption body of the Philippines, is
committed to fight corruption on all fronts and takes an active role in the prevention and detection
of corruption-related offences including predicate crimes involving money-laundering and
terrorist financing (ML/TF). For this purpose, it maintains a strong collaboration and coordination
with the Anti-Money-Laundering Council and various law enforcement agencies on sharing of
vital information to ensure effective investigation and prosecution of these offences involving
public officials and employees and persons who conspired with them.
*
Deputy Special Prosecutor, Office of the Ombudsman, Republic of the Philippines.
1
National Defense College of the Philippines’ Definition of National Security: “The State or condition wherein the
nation’s sovereignty and territorial integrity, the people’s well-being, core values, way of life and the State, and its
institutions are protected and enhanced.”
Retrieved from https://www.officialgazette.gov.ph/downloads/2018/08aug/20180802-national-security-strategy.pdf
- 92 -
For the Office of the Ombudsman, it has also adopted a multi-sectoral approach in its
corruption prevention programmes to deter the prevalence and commission of corruption-related
offences, placing a premium on values formation.
Understanding the global threat of ML and the international community’s response will assist
law enforcement agencies pursuing the evidentiary trail of launderers by identifying the
enforcement tools and techniques developed to overcome obstacles encountered when crossing
international boundaries.2
This paper will discuss the structure and functions of the Philippines’ Financial Intelligence
Unit (FIU), the role of the Office of the Ombudsman (OMB) in combating ML and TF and
corruption, the recent developments of the country’s anti-money-laundering and combating
terrorist financing (AML/CTF) regime, the challenges posed by digital or virtual currencies (VCs)
in the fight against ML and TF and the measures adopted by the Philippines to prevent virtual
currencies as a medium in committing money-laundering, terrorist financing and corruption. In
this magical world, so to speak, of cyberspace and virtual reality, the Philippines remains vigilant
in its efforts to combat money-laundering, terrorist financing and corruption.
2
Schroeder, W. R., Money Laundering: A Global Threat and the International Community’s Response, FBI Law
Enforcement Bulletin, May 2001. Retrieved https://www.unl.edu.
3
An Act Amending Republic Act No. 9160, Otherwise Known as the “Anti-Money-Laundering Act of 2001.
4
An Act to Further Strengthen the Anti-Money-Laundering Law, amending for the Purpose Sections 10 and 11 of
Republic Act No. 9160, Otherwise known as the “Anti-Money-Laundering Act of 2001”, as Amended, and For Other
Purposes.
5
An Act to Further Strengthening the Anti-Money-Laundering Law, amending for the Purpose Republic Act No. 9160,
Otherwise Known as the “Anti-Money-Laundering Act of 2001”, as Amended.
6
An Act Designating Casinos as Covered Persons Under Republic Act no. 9160, Otherwise Known as the Anti-
Money-Laundering Act of 2001, as Amended.
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otherwise known as the “Terrorism Financing Prevention and Suppression Act of 2012”.
2. To ensure that the Philippines shall not be used as a money-laundering site for proceeds
of any unlawful activity;
The AMLA, as amended, and the Terrorist Financing Prevention and Suppression Act of 2012
authorized the AMLC to, among others, perform the following functions in relation to the
investigation of money-laundering/terrorist financing (ML/TF) activities:
3. Act on requests for investigation or requests for information from domestic law
enforcement and other agencies of the government as well as requests for assistance of
other jurisdictions and international organizations;
4. Gather evidence for the purpose of establishing probable cause required in the filing of
petitions for freeze orders, applications for bank inquiry, civil forfeiture cases and
criminal complaints for ML;
C. Suspicious Transaction (ST) and Covered Transactions (CT) Under the AMLA
ST refers to a transaction, regardless of amount, where any of the following circumstances
exist:
7
http://www.amlc.gov.ph/about-us. Retrieved: 11/08/2019.
8
AMLC Annual Report 2016, p. 15. Retrieved: http://www.amlc.gov.ph.
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5. any circumstance 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 person;
6. the transaction is in any way related to an unlawful activity or any money-laundering
activity or offence that is about to be committed, is being or has been committed; or
7. any transaction that is similar, analogous or identical to any of the foregoing.9
On the other hand, a CT refers to a transaction in cash or other equivalent monetary instrument
exceeding Five Hundred Thousand pesos (Php500,000.00) within one banking day or a transaction
exceeding One Million pesos (Php1,000,000.00) in cases of jewellery dealers, dealers in precious
metals and dealers in precious stones.10 In casinos, is a single casino transaction involving an
amount exceeding Five Million pesos (Php5,000,000.00), or its equivalent in any foreign currency
is considered a CT.11
9
Rule III, 2016 Revised Implementing Rules and Regulations of the AMLA, as amended. Retrieved:
http://www.amlc.gov.ph/laws/money-laundering/2016-revised-implementing-rules-and-regulations-of-republic-act-
no-9160-as-amended
10
Ibid.
11
Rule 3, Section 6 (M), IRR of RA 10927. Retrieved: http://www.amlc.gov.ph/laws/money-laundering/casino-
implementing-rules-and-regulations-of-republic-act-no-10927
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19. Accessory to terrorism financing.12
3. Persons supervised or regulated by the Securities and Exchange Commission (SEC), such as:
a. Securities dealers, brokers, salesmen, investment houses, and other similar persons
managing securities or rendering services, such as investment agents, advisors, or
consultants.
b. Mutual funds or open-end investment companies, close-end investment companies
or issuers, and other similar entities;
c. Other entities, administering or otherwise dealing in commodities, or financial
derivatives based thereon, valuable objects, cash substitutes, and other similar
monetary instruments or properties, supervised or regulated by the SEC.
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ii. acting as (or arranging for another person to act as) a director or corporate
secretary of a company, a partner of a partnership, or a similar position in relation
to other juridical persons;
iii. providing a registered office; business address or accommodation,
correspondence or administrative address for a company, a partnership or any other
legal person or arrangement; and
iv. acting as (or arranging for another person to act as) a nominee shareholder for
another person.
c. Persons, including lawyers and accountants, who provide any of the following
services:
i. Managing of client money, securities or other assets;
ii. Management of bank, savings, securities or other assets;
iii. Organization of contributions for the creation, operation or management of
companies; and
iv. Creation, operation or management of juridical persons or arrangements, and
buying and selling business entities.
Let it be stressed that the herein enumerated CPs are required to submit CT or ST reports with
the AMLC and to comply with AML and/or CTF measures under the AMLA and its Implementing
Rules and Regulations (IRR). Under RA No. 10927 and its IRR, all casinos, including internet and
ship-based casinos, operating within the territorial jurisdiction of the Philippines and authorized
by the Appropriate Government Agency (AGA) to engage in gaming operations are now CPs, and
are required to comply with the AML measures and requirement.
When, after its investigation, the AMLC finds that money-laundering has been committed, it
causes the filing of a criminal complaint with the Department of Justice (DOJ), in cases involving
the private sector or with the Office of the Ombudsman (Ombudsman) in cases involving public
officers or employees, which conducts the preliminary investigation of the case, including the
administrative adjudication of the same. If the DOJ or the Ombudsman finds probable cause to
indict the offenders, criminal cases are filed with the Regional Trial Courts which have the
jurisdiction to try all cases of money-laundering, or with the Sandiganbayan if the offender is a
high ranking public officer or a private person in conspiracy with the public officer.13
For the Philippines, the biggest stumbling block in the investigation of corruption-related
offences is the Bank Secrecy Law (Republic Act 1405) whereby Philippine bank deposits are
privileged and confidential and the subsequent ruling in the case promulgated by the Supreme
Court entitled “Lourdes T. Marquez vs. Hon. Aniano A. Desierto, et al.,” (G.R. No. 135882, June
13
J.B. Abad, Retrieved: https://www.unafei.or.jp/publications/pdf/GG3/Third_GGSeminar_P34-38.pdf
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27, 2001) which bar the Office of the Ombudsman from obtaining bank records which are crucial
in validating the “money trail” in corruption cases.
As of December 2018, the AMLC has 43 Memoranda of Understanding (MOUs) with foreign
FIUs and counterparts. The MOU conforms with the model MOU of the Egmont Group and is
consistent with its Principles for Information Exchange between FIUs.14 Moreover, the AMLC
also enlists the assistance of any branch, department, bureau, office, agency or instrumentality of
the government, including government-owned and controlled corporations, in undertaking any and
all AML/CTF operations.15
The Office of the Ombudsman (OMB) was created by the 1987 Philippine Constitution as an
independent body,16 and to serve as protector of the people.17 In order to achieve this role, the
Constitution granted the Ombudsman powers to investigate and prosecute graft and corruption
cases and to impose the administrative liabilities upon erring public officials and employees.18 The
Philippines, being a signatory to the United Nations Convention Against Corruption (UNCAC), is
compliant with Article 1, Chapter 1, of the UNCAC, particularly on promoting and strengthening
measures to prevent and combat corruption more efficiently and effectively. The Office of the
Ombudsman, being the premiere anti-corruption body of the Philippines, takes centre stage in this
regard. It has for its mandate, under Section 13 of Republic Act 6770 (An Act Providing for the
Functional and Structural Organization of the Office of the Ombudsman, and for Other Purposes):
“The Ombudsman and his Deputies, as protectors of the people shall act promptly on complaints
filed in any form or manner against officers or employees of the Government, or of any subdivision,
agency or instrumentality thereof, including government-owned or controlled corporations, and
enforce their administrative, civil and criminal liability in every case where the evidence warrants
in order to promote efficient service by the Government to the people” (Section 13, R.A. No. 6770;
Section 12 Article XI of the 1987 Constitution).
14
2017-2018 AMLC Annual Report, page 22. Retrieved: http://www.amlc.gov.ph/images/PDFs/2017-
2018%20AMLC%20ANNUAL%20REPORT.pdf
15
Ibid.
16
Section 5, Article XI, 1987 Philippine Constitution.
17
Section 12, Ibid.
18
Section 13, Ibid., see also Section 13 of RA No. 6770, or the Ombudsman Act of 1989.
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The Ombudsman shall give priority to complaints filed against high ranking government
officials and/or those occupying supervisory positions, complaints involving grave offences as
well as complaints involving large sums of money and/or properties (Sec. 15, R.A. No. 6770).
The power to investigate and to prosecute granted by law to the Ombudsman is plenary and
unqualified. It pertains to any act or omission of any public officer or employee when such act or
omission appears to be illegal, unjust, improper or inefficient. The law does not make a distinction
between cases cognizable by the Sandiganbayan and those cognizable by regular courts. It has
been held that the clause "any illegal act or omission of any public official" is broad enough to
embrace any crime committed by a public officer or employee.19
While the jurisdiction of the Office of the Ombudsman extends to government officials and
employees, including persons who conspired with them, the AMLC has the power to investigate
money-laundering/terrorist financing offences committed by individuals, juridical persons, banks
and financial institutions in the private sector and for unlawful activities/predicate crimes that may
be committed by government officials and employees, which may be filed with the Office of the
Ombudsman for possible investigation and prosecution. The AMLC’s criminal complaints or
charges involving public officials or employees are filed with the Ombudsman for the conduct of
preliminary investigation to determine probable cause and that there are sufficient grounds to
engender a well-founded belief that a crime has been committed, and that the accused is probably
guilty thereof and should be held for trial. It does not require an inquiry as to whether there is
sufficient evidence to secure a conviction. All other ML cases not involving public officials or
employees are filed with the Department of Justice (DOJ), likewise for preliminary investigation.
Should the Ombudsman, after preliminary investigation, establish the existence of probable cause
to warrant the filing of charge/s against the offending public officials, the Ombudsman shall cause
the filing of criminal case/s with the Sandiganbayan20 and prosecute the said case/s before said
court.
19
Uy vs. Sandiganbayan, G.R. Nos. 105965-70, March 20, 2001.
20
The Sandiganbayan is a special court in the Philippines that has jurisdiction over criminal and civil cases involving
graft and corrupt practices and other offences committed in relation to office by public officers with Salary Grade 27
and above, including those in government-owned and controlled corporations.
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cooperate in the areas of information exchange and capacity-building measures to enhance both
parties in addressing ML/TF and other unlawful activities in the Philippines.21
A corruption-related case may be emphasized in view of the efforts of the OMB in close
coordination with the AMLC. The case in point addressed large-scale corruption through the use
of non-governmental organizations (NGOs), dummy corporations, and foreign exchange dealers
(AMLC Annual Report 2014).
In an alleged misuse of the Priority Development Assistance Fund (PDAF), or pork barrel, by
several members of the Philippine Congress, the scam involved the funding of agricultural “ghost
projects,” using the PDAF of participating lawmakers. Funds would be processed through fake
foundations and Non-Governmental Organizations (NGOs) established under the holding
company of Ms. N. Each foundation or NGO served as an official recipient of a particular
legislator’s PDAF funds for the supposed implementation of these projects. The funds, however,
would be withdrawn and split among Ms. N, the lawmaker, the facilitator of the fund transfers,
and the local mayor or governor. Some of Ms. N’s employees eventually became whistle-blowers,
agreeing to expose the scam and testify against her. International Cooperation Investigations
revealed that Ms. N and members of her family transferred money to the USA. Through the
Egmont Secure Web (ESW) of the Egmont Group of Financial Intelligence Units, fostering
reciprocal exchange of financial intelligence information, the AMLC sought the assistance of the
Financial Crimes Enforcement Network (FinCen), the FIU of the US, yielding positive results.
Material information showed how the money was transferred and established how money changers
acted as conduits. In 2018, the AMLC, NBI, and OMB acted on the Mutual Legal Assistance
Treaty (MLAT) request from the US for the production of documents in relation to the seizure and
eventual forfeiture of the properties of Ms. N and members of her immediate family in the said
jurisdiction, which were acquired during the pork barrel scam. Civil Forfeiture and ML cases
resulting from the MLAT close coordination with US authorities have resulted to the filing of a
civil forfeiture case against the assets of Ms. N found in the US, amounting to around USD12.5
million. On August 1, 2018, a US federal grand jury indicted Ms. N and her cohorts, for conspiring
21
OMB-AMLC Memorandum of Agreement dated May 22, 2018, at Article 1 thereof.
22
https://www.jfklibrary.org/archives/other-resources/john-f-kennedy-speeches/inaugural-address-19610120.
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to funnel in and out of the US some USD20 million of Philippine public funds obtained through a
multi-year bribery and fraud scheme.23
Related to this PDAF Scam, the OMB requested the AMLC to provide information and to
conduct financial investigation on the bank accounts and transactions of the involved personalities
in the scam. The result of AMLC’s investigation and its supporting documents, as well as the
evidence gathered by the OMB, were used as bases for the filing of a Plunder case with the
Sandiganbayan against Ms. N and those involved public officials, including their cohort private
individuals. This specific case of plunder involved Php224.5 million government funds diverted
by the accused through the scam. In prosecuting the plunder case, the OMB utilized the AMLC’s
Financial Investigation Report and its supporting documents (e.g. bank records) as evidence for
the prosecution to prove the paper trail of the diverted funds. The OMB likewise presented as vital
prosecution witnesses the AMLC’s investigating officers during the trial.
On December 7, 2018, the Sandiganbayan convicted Ms. N and one public official of the crime
of Plunder and were sentenced to suffer the penalty of reclusion perpetua (30 years’ imprisonment),
with perpetual absolute disqualification to hold any public office. In addition, said accused were
likewise ordered to return the amount plundered (Php124.5 million) to the Philippine National
Treasury.24
The Office of the Ombudsman is not just about investigation and prosecution of corruption-
related offences that can possibly include money-laundering/terrorist financing predicate offences.
Upon the assumption of Justice Samuel R. Martires (a retired Philippine Supreme Court Justice)
as the Ombudsman of the Republic of the Philippines in August 2018, he developed and introduced
the “OMB Public Accountability Blueprint” (OmbPAB), a more vibrant multi-sectoral approach
on corruption prevention, to be implemented over the period 2019 to 2025. This OmbPAB outlines
the policies/projects and strategies of the Office of the Ombudsman. The battle cry under the
OmbPAB is “WE PROTECT” that stands for Working to Establish
P-UBLIC
R-ESPONSIBILITY
O-UTCOMES
T-HROUGH
E-NFORCEMENT
C-OLLABORATION and
T-RANSFORMATION
23
2017-2018 AMLC Annual Report, at page 38. Retrieved: http://www.amlc.gov.ph/images/PDFs/2017-
2018%20AMLC%20ANNUAL%20REPORT.pdf.
24
People vs. Revilla, et al., Retrieved: http://sb.judiciary.gov.ph/DECISIONS/2018/L_Crim_SB-14-CRM-
0240_People%20vs%20Revilla,Jr,%20et%20al_12_07_2018.pdf.
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with focus on corruption prevention, having in mind the old adage, “an ounce of prevention is
better than a pound of cure,” and placing a premium on values formation, “return to values”, which
is the long-term solution for addressing corruption.
The OmbPAB is envisioned with the purpose of making “An Office of the Ombudsman that
will transform public accountability into the norm and be recognized as the central corruption
prevention arm of the government”.
The Philippines underwent the Second (2nd) Round Mutual Evaluation (ME) in 2008, wherein
its technical compliance with the Financial Action Task Force (FATF) Recommendations was
assessed. The Philippines got a relatively poor rating due to major shortcomings in the country’s
AML/CFT legal framework. As a result of this, the Philippines was placed on the FATF’s “grey
list” and was subject to the FATF’s International Cooperation Review Group (ICRG) process.25
Since the 2nd ME back in 2008, the Philippines adopted measures to deal with ML/TF risks. In
2013, the country was removed from the “Grey List” of FATF’s ICRG, as most of the deficiencies
identified in the 2nd ME have been addressed. The notable AML/CTF measures adopted by the
Philippines to address the deficiencies noted during its 2nd ME back in 2008 were:
1. Passage on June 12, 2012 of RA No. 10168 or the Terrorism Financing Prevention
and Suppression Act of 2012; The said law reinforced the Philippines’ fight against
terrorism by criminalizing the financing of terrorism and related offences, and by
preventing and suppressing the commission of said offences through freezing and
forfeiture of properties and funds while protecting human rights.26
2. Passage on February 15, 2013 of RA No. 10365 which strengthened the AMLA,
with additional predicate offences in accordance with Financial Action Task Force
(FATF)-designated categories of offences; Other features of the said law include:
• Expansion of the definition of the crime of money-laundering: AMLC can
now go after persons who engage in the conversion, transfer, movement,
disposal of, possession, use, and concealment or disguise, of the monetary
proceeds of an unlawful activity, that was previously limited to the
transaction of laundered funds and property;
• Inclusion of jewellery dealers in precious metals and stones whose
transactions are in excess of Php1,000,000.00 and company service
25
Operational Guidelines In The Conduct Of The 2018 Third Round Mutual Evaluation Of The Philippines. Retrieved:
http://www.amlc.gov.ph.
26
Retrieved: http://www.amlc.gov.ph/laws/terrorism-financing/2015-10-16-02-51-58.
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providers as defined and listed under RA 10365, are now included as
“Covered Persons”;
• Expansion of the definition of unlawful activities relative to money-
laundering. The additional crimes among others include trafficking in
persons, bribery, counterfeiting, fraud and other illegal exactions, forgery,
malversation, various environmental crimes, and terrorism and its
financing;
• Authorize the AMLC to require the Land Registration Authority and all its
Registers of Deeds to submit reports to the AMLC covering real estate
transactions in excess of P500,000.00;
• Issuance of freeze order by the Court is now valid for a maximum period of
six (6) months, from the previous twenty (20) days’ validity under RA
10167.27
3. Casinos are now covered persons (CPs) under RA No. 10927 signed into law on
July 14, 2017, which amended the AMLA. In the same year (on November 4, 2017),
the Casino Implementing Rules and Regulations were prescribed. New AMLC
Registration and Reporting Guidelines for CPs, and the AMLC Registration and
Reporting Guidelines for Casinos have been adopted as well. 28 Pursuant to RA
10927, casinos, including internet and ship-based casinos, with respect to their
casino cash transactions related to their gaming operations, and such other entities
as may be hereafter determined by Appropriate Government Agency (AGA), are
hereby designated as covered persons under the AMLA. Further, under the same
law, casinos shall be regulated to prevent money-laundering and terrorist financing,
as well as from undermining the Philippine financial system. Casinos shall
therefore apply the following principles throughout their businesses:
4. Conform with high ethical standards and observe good corporate governance
consistent with the guidelines issued by the AGA in order to protect the integrity
of their operations and that of the gaming industry;
5. Know sufficiently their customer to prevent suspicious individuals or entities from
transacting with, or establishing or maintaining relationships with, casinos;
a. Adopt and effectively implement an appropriate anti-money-laundering
(AML) and countering of financing of terrorism (CFT) risk management
system that identifies, assesses, monitors, and controls risks associated with
money-laundering and terrorist financing;
b. Ensure that officers and employees are aware of their respective
responsibilities under this CIRR and carry them out in accordance with its
Money Laundering Prevention Program; and
c. Cooperate with the AMLC and the AGA for the effective implementation
of the AMLA and this CIRR, and other applicable issuances.
On November 12, 2018, the President of the Philippines issued Executive Order (EO) No. 68,
a measure adopting the National Anti-Money-Laundering and Counter-Financing of Terrorism
27
Retrieved: http://www.bsp.gov.ph/about/advocacies_anti.asp.
28
Retrieved: http://www.amlc.gov.ph.
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Strategy (NACS) and the creation of the National AML/CTF Coordinating Committee. 29 The
NACS was formulated by the AMLC, together with relevant government agencies, the Office of
the Ombudsman included, to enable the government and the private sector to have a strategic and
coordinated approach toward combating ML and TF. The NACS is envisioned to be implemented
over the period 2018 to 2022.
The NACS 2018-2022 (NACS) contains the country’s priority policies consistent with
international standards, defined targets, action plans, and insights harvested during the dynamic
involvement of all departments, bureaus, offices, and agencies of the Executive Branch, including
government financial institutions and government-owned or controlled corporations.30
In particular, the NACS lays out seven (7) concrete strategic objectives 31 ranging from
enhancement of Philippine laws and regulations, strengthening the AMLC’s investigations and
prosecutions, coordinated action among government agencies, development of mechanisms to
deter ML/TF, improved supervision of covered persons, international cooperation, and
information dissemination to combat ML/TF, specified as follows:
Strategic Objective 2: Strengthen the Anti-Money-Laundering Council and its Capacity for
Money-Laundering and Terrorism Financing Intelligence Gathering, Investigations and
Prosecutions in order to become a more Effective Partner in Combating Money-Laundering
and its Predicate Offences, Terrorism and Terrorism Financing;
Strategic Objective 3: Improve Capacity and Collaboration among the Financial Intelligence
Unit, Law Enforcement Agencies and Prosecutors for the Effective Investigation and
Prosecution of, as well as the Confiscation of Proceeds Relating to Money-Laundering, its
Predicate Offences, Terrorism and Terrorism Financing;
Strategic Objective 5: Develop and Strengthen Mechanisms to Prevent, Disrupt and Combat
Terrorism, Terrorism Financing and Proliferation Financing Strategic Objective 6-Strengthen
Domestic and International Cooperation Mechanisms for the Effective Exchange of
Information, Facilitate Actions against Criminals and their Assets and Assist in the Capacity
Building of Relevant Government Agencies;
29
Executive Order No. 68, s. 2018. Retrieved: https://www.officialgazette.gov.ph/2018/11/12/executive-order-no-68-
s-2018/.
30
NACS 2018 to 2022, at page 2. Retrieved: http://www.amlc.gov.ph/images/PDFs/NACS.pdf.
31
NACS 2018 to 2022, at page 8. Retrieved: http://www.amlc.gov.ph/images/PDFs/NACS.pdf.
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Strategic Objective 6: Promote AML/CFT Awareness of Government Agencies, Covered
Persons and the General Public to Effectively Combat Money-Laundering and Terrorism
Financing EO No. 68 also created the National AML/CFT Coordinating Committee (NACC),
a body tasked to oversee implementation of the NACS, composed of various government
agencies, including the Bangko Sentral ng Pilipinas (BSP), the Insurance Commission, the
Securities and Exchange Commission (SEC), the Department of Finance, and the Department
of National Defense, among others. The AMLC will serve as the Secretariat for the NACC.32
The National Anti-Money-Laundering and Counter Terrorism Financing Strategy and the
creation of the National AML/CTF Coordinating Committee and National Law Enforcement
Coordinating Committee (NALECC), may be considered as a powerhouse and a milestone for the
Philippine Government as it provides effective coordination of all law enforcement activities of
various government law enforcement agencies to ensure a united front in the suppression of
criminal activities that includes investigation of money-laundering, terrorist financing and
corruption-related cases – a best practice that may be highlighted.
As the Internet becomes a worldwide phenomenon, prepaid card system, internet payment
services and mobile payment services are potentially subject to a wide range of vulnerabilities that
can be exploited for money-laundering. Numerous third-party payment service providers offer
individuals the ability to make online purchases, funding accounts with wire transfers, money
orders and even cash. In most cases, the provider of this service will not have a face-to-face
relationship with its customers and may even allow anonymous accounts.33
Financial innovation has drastically changed the financial landscape. New technologies,
services and products offer efficient alternatives to classic financial products and can improve
financial inclusion. At the same time, the speed and anonymity of some of these innovative
products can attract criminals and terrorists who wish to use them to launder the proceeds of their
crimes and finance their illicit activities.34
The proceeds of corruption (in cash or fiat money) may be converted to digital or virtual
currencies for money-laundering purposes. It may be noted that the digital or virtual currencies
may now be used as a medium for laundering money because of new technologies. The identity
of the person/s transacting can also be concealed in the process.
32
Retrieved: http://www.amlc.gov.ph/16-news-and-announcements/158-president-duterte-approves-national-aml-
cft-strategy.
33
Tang J. & Ai L., New Technologies and Money Laundering Vulnerabilities. Retrieved https://www.researchgate.net.
34
Guidance for a Risk-Based Approach to virtual Assets and Virtual Assets Service Providers. Retrieved:
https://www.fatf-gafi.org.
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facilitate the movement of funds at a faster, cheaper, and more convenient manner compared to
traditional remittance and payment channels, which accrues benefits in areas such as (1)
remittances and wire transfers, (2) electronic payments, and (3) financial inclusion.
However, the convenience of use and electronic character of VCs poses a challenge to
regulators and law enforcement agencies around the world who are uncertain how to deal with this
payment scheme or method, especially that VCs offer a high degree of anonymity which may be
exploited for ML/TF and other unlawful activities.
Following the rise of the use of VCs for payments and remittances in the Philippines, the BSP issued
Circular No. 94438 (Guidelines for VC Exchanges) on February 6, 2017 establishing a formal regulatory
framework for VC Exchanges in the Philippines. The adoption of the measure is in consonance with
FTAF Recommendation No 1439 that “directs countries to register or license natural or legal
35
An Introduction to Virtual Currency. Retrieved: https://www.cftc.gov.
36
BSP Circular No. 944: “Guidelines for Virtual Currency (VC) Exchanges” issued on 6 February 2017.
37
Virtual Currencies: Key Definitions and Potential AML/CFT Risks. Retrieved: https://www.fatf-gafi.org.
38
BSP Circular No. 944. Retrieved: http://www.bsp.gov.ph/downloads/regulations/attachments/2017/c944.pdf.
39
Guidance for a Risk-Based Approach: Virtual Currencies, at pages 9 and 10. Retrieved: https://www.fatf-
gafi.org/media/fatf/documents/reports/Guidance-RBA-Virtual-Currencies.pdf.
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persons that provide MVTS40 (Money Value Transfer Service) in the country, and ensure their
compliance with the relevant AML/CFT measures”.
Under the circular, VC exchanges or businesses engaged in the exchange of VCs for equivalent
fiat money in the Philippines are required to register with the BSP as remittance and transfer
companies. BSP-registered VC exchanges are now required to put in place adequate safeguards to
address the risks associated with VCs such as basic controls on anti-money-laundering and terrorist
financing, technology risk management and consumer protection.
In addition, the Circular requires of all BSP-registered VC exchanges that large value pay-outs
of more than PhP500,000, or its foreign currency equivalent, in any single transaction with
customers or counterparties, shall only be made via check payment or direct credit to deposit
accounts. VC exchanges are now Covered Persons (CPs) required to submit Covered Transaction
Report (CTRs) and Suspicious Transaction Reports (STRs) to the BSP through the appropriate
department of the Supervision and Examination Sector (SES). In addition, a VC exchange shall
maintain records and submit the following reports to the appropriate department of the SES:
It should be emphasized, however, that though the BSP issued the mentioned circular on VC,
it does not intend to endorse any VC, such as bitcoin, as a currency since it is neither issued or
guaranteed by a central bank nor backed by any commodity. Rather, the BSP aims to regulate VCs
when used for delivery of financial services, particularly, for payments and remittances, which
have material impact on AML/CFT, consumer protection and financial stability.41
40
Including domestic entities providing convertible VC exchange services between VC and fiat currencies (i.e.
VCPPS) in a jurisdiction.
41
Ibid.
42
Ibid., Subsection 4512N.2, at pars. b and f, respectively.
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through a clearing network. 43 As of October 31, 2019, there are thirteen (13) operating BSP-
registered VC exchanges in the Philippines44.
F. Significant Observations
The AMLC’s study yielded the following significant observations that may be used as a basis
for the formulation of policies or regulations to further strengthen existing AML/CTF measures:
43
http://www.amlc.gov.ph/images/PDFs/Study%20on%20VC.pdfn at page 6.
44
List of Remittance and Transfer Companies (RTC) with Money Changing (MC)/ Foreign Exchange Dealing (FXD)
and Virtual Currency (VC) Exchange Service As of 31 October 2019: Source: FSD IX Database. Retrieved:
http://www.bsp.gov.ph/banking/MSB.pdf.
45
Strengthening Anti-Money-Laundering Surveillance Alongside Advancements in Financial Technology. Retrieved:
http://www.amlc.gov.ph/images/PDFs/Study%20on%20VC.pdf.
46
Betur, Inc. and Rebittance, Inc., registered and accredited by BSP in September and October2017, respectively.
47
The VC exchanges began submitting CTRs and STRs in 2017. Since STR submission hinges on the determination
of the suspicious nature of a specific transaction regardless of the date it was executed, some reported transactions
covered in the dataset were carried out on the VC exchanges’ platforms in previous years (i.e., starting 2014).
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register their remittance business with the BSP under Circular No. 471 (Rules and Regulations for
Foreign Exchange Dealers, Money Changers, and Remittance Agents) issued on January 24, 2005.
Becoming duly registered remittance agents (RAs) would allow them to open bank accounts.
The narratives for some transactions were also noted to demonstrate a degree of coordination
between the VC exchanges and other CPs (such as correspondent banks), which has aided the
former in identifying suspicious individuals and transactions. These may be indicative of proactive
AML investigation and robust controls on the part of the regulated entities. Inter-entity
coordination and knowledge sharing would also strengthen the capacity of the broader financial
system in detecting and countering money-laundering and terrorist financing.
2. Deviations Were Noted on the Clients’ Profile and/or Transaction History, Including
Transaction Amounts Not Commensurate with One’s Financial Capacity
The bulk of the total number of STRs (at 41.9%) were tagged as deviations from the clients’
profile and/or transaction history, including transaction amounts not commensurate with one’s
financial capacity. Aside from such reasons relating to doubts on the clients’ profile and/or nature
of transactions, the three most frequently cited reasons for suspicion or circumstances warranting
the filing of STRs all shared links to investment fraud, such as participation in (1) investment
schemes, (2) swindling, and (3) fraudulent practices and other violations under the Securities
Regulations Code of 2000. Taken together, these account for 6,670 STRs amounting to PHP121.8
million (equivalent to 31.3% of the total volume and 18.5% of the total value of STRs)
3. Most Suspicious Transactions Reported by the VC Exchanges Are Smaller Ticket Items
Most suspicious transactions reported by the VC exchanges are smaller ticket items, with
95.7% of the sample amounting to below PHP100,000. Nonetheless, despite the volume of STRs
from the smallest bracket of PHP 1–9,999 (at 9,231 transactions or 43.4% of total), these account
for only 4.6% of the total value of transactions. On the other hand, while STRs belonging to the
PHP 100,000–499,999 bracket comprise 4.2% of the total in terms of volume, these account for
the largest aggregate value, at 35.7% of the total. To date, seven transactions exceeding
PhP500,000 have been identified as suspicious, with reasons as follows: (1) association of account
owner with online gambling; (2) account owner suspected to be in violation of the Cybercrime
Prevention Act of 2012; and (3) no established legal/trade purpose nor economic justification for
the transactions involved.
It can be observed that the volume and value of cash deposits tagged as suspicious have
increased significantly in 2017, although these appear to have decreased in 2018 thus far.
Examining monthly data, large cash deposit flows were noted for September to December 2017,
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amounting to PHP237.7 million, or 73.0% of the total cash deposit STRs for the year. The large
inflow of cash deposits was observed to continue to January 2018, which accounted for PHP32.0
million, or 82.1% of the total value of cash deposit STRs reported year-to-date.
3. Identity Theft
The perpetrator using this scheme assumes the identity of a legitimate online store and sells
items on the Internet similar to those being sold by the online store, advising the victim–a
prospective customer–to remit payments to an account in the VC platform prior to shipment of the
purchased items. Payments are immediately withdrawn from the account and all communication
with the victim is cut. The perpetrator may also deceive a victim by pretending to be the victim’s
relative and then requests money through a payment centre, possibly through a VC platform.
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5. Fraud (with Claims of Hacking of the Suspect’s Account)
The victim is contacted by an acquaintance (in this particular case, a colleague) asking if there
is a nearby payment centre to the victim and subsequently seeks assistance in making
payments/deposits to particular reference numbers, promising to pay off the debt as soon as they
meet. However, after completion of the transaction, the acquaintance claims that the account was
hacked.
1. Unusually high volume of fund inflows (via cash deposits and/or incoming transfers
from other VC platform users) and/or outflows (typically via outgoing transfers to
external VC wallets or conversion to cash);
2. Multiple person-to-person (P2P) transfers from various accounts within the VC
exchange;
3. Immediate turnover of newly received funds;
4. Attempts to purchase verified accounts within the VC platform.
An individual used his company originally registered as a sole proprietorship under a different
purpose to operate a pyramid scheme using VC bitcoin as a front to explain the company’s source
of earnings and VC exchange platforms to facilitate payments and investments. Under the scheme,
investors were promised double-digit interest rates every few weeks. As the suspects resorted to
pyramiding and employed middlemen to serve as recruiters of new investors, the scheme’s
geographical reach extended nationwide. The perpetrators were eventually arrested. Months prior
to the arrest, the VC exchange’s systems flagged suspicious account activities, transactions, and
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individuals associated with the scheme, leading to the filing of STRs on the group and their
associates/cohorts.48
Relevant laws should be passed by Philippine legislators giving more powers to the Anti-
Money-Laundering Council and the Office of the Ombudsman for more effective investigation
and prosecution of cases. It is high time to revisit Republic Act 1405, for it impedes law
enforcement authorities and investigators and prosecution officers in the performance of their
duties and responsibilities.
The legislative proposals introduced by Philippine legislators to aid the AMLC and OMB to
fulfil their respective mandates can be considered as a welcome development. These proposals
include, among others, amendments to RA 1405; the Subscriber Identity Module (SIM) Card
Registration Bill49 to raise the level of the country’s financial literacy and educate the public in
performing their own due diligence, especially in assessing investment opportunities; classifying
vote-buying and vote-selling as unlawful activity under the AMLA50; a proposal strengthening the
institutional capacity of the Office of the Ombudsman by amending certain provisions of RA 6770
and giving power to the Office of the Ombudsman to employ wiretapping as an investigative
technique.51
Moreover, instead of just legislative proposals, pertinent laws, rules and regulations should
be adopted to counter ML-TF and corruption. The passage of Republic Act No. 11055, otherwise
known as the Philippine Identification System Act, on August 6, 2018, is a step closer to aid in
curbing anonymity. Pursuant to Section 2 of said law, it is a declared state policy, “to enhance
administrative governance, to reduce corruption, and curtail bureaucratic red tape, to avert
fraudulent transactions and misrepresentations, to strengthen financial inclusion and to promote
ease of doing business. Towards this end, a resilient digital system shall be deployed to secure data
collected and ensure that the people’s right to privacy, confidentiality and other basic rights are at
all times upheld and protected.”52
While the emerging threats and trends in virtual currencies are present, the Bangko Sentral ng
Pilipinas (BSP or the Central Bank of the Philippines) Issuance of Circular No. 944 Guidelines for
48
Strengthening Anti-Money-Laundering Surveillance Alongside Advancements in Financial Technology, at pages 13
to 14. Retrieved: http://www.amlc.gov.ph/images/PDFs/Study%20on%20VC.pdf.
49
2017=2018 AMLC Annual Report, p. 25. Retrieved: http://www.amlc.gov.ph/images/PDFs/2017-
2018%20AMLC%20ANNUAL%20REPORT.pdf.
50
SBN-926 Retrieved https://www.senate.gov.ph/lis/bill_res.aspx?congress=18&q=SBN-926.
51
http://www.congress.gov.ph/members/search.php?id=cabochan-m.
52
https://www.officialgazette.gov.ph/downloads/2018/08aug/20180806-RA-11055-RRD.pdf.
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Virtual Currency Exchanges provides a silver lining to counter money-laundering, terrorist
financing and corruption. The adoption of the National Anti-Money-Laundering Counter
Financing of Terrorism Strategy 53 and the creation of its National Anti-Money-Laundering
Counter-Financing of Terrorism Coordinating Committee may be considered as a best practice for
the Philippine Government since it adopts a holistic approach.
Most of these activities outlined in the NACS are not just good on paper but are already in
place. In fact, an enhanced collaboration in the form of joint investigations, capacity-building and
training and workshops between the AMLC and OMB investigators and prosecutors are good
indicators of the serious efforts of the government to fight money-laundering, terrorist financing
and corruption. It is hoped that more technical assistance may be provided by developmental
partners in this score.
X. CONCLUSION/RECOMMENDATIONS
Money-laundering, terrorist financing and corruption have adverse impacts on the economy
and political stability of a country; thus, such crimes must be curbed with an iron hand. The
Philippine Government, through the AMLC and the Office of the Ombudsman, in its unrelenting
stance in fighting the menace of money-laundering, terrorist financing and corruption is taking
positive steps. The strong collaboration between said offices manifested through their
Memorandum of Understanding is indeed imperative.
The establishment by the Bangko Sentral ng Pilipinas (The Central Bank of the Philippines)
of a regulatory framework for virtual currencies exchanges has strengthened safeguards against
risks associated with virtual currencies, such as controls on Anti-Money-Laundering and Counter
Terrorist Financing, technology risk management and consumer protection. In particular, the
53
http://www.amlc.gov.ph/images/PDFs/NACS.pdf.
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inclusion of virtual currencies exchanges as Covered Persons has allowed for more comprehensive
monitoring of the financial behaviour of individuals and entities possibly connected to illicit
activities as well as closer coordination and information sharing among Covered Persons in the
conduct of Anti-Money-Laundering surveillance.
However, there is still much to be desired to mitigate the vulnerabilities of virtual currencies
as tools or vehicles for laundering money and other crimes. To reduce the prevalence of fraudulent
activities using virtual currency exchanges, the following measures should be adopted or imposed:
The adoption and effective implementations of the recommended measures are dependent on
the political will of those in power. Political will is a necessary prerequisite to have a clean and
honest governance. As Singapore’s Prime Minister Lee Kuan Yew said: “Political will is the key
to a clean government”55.
After all has been said and done, the strong political will of the national leadership would spell
a great difference.
54
2017=2018 AMLC Annual Report, p. 25. Retrieved: http://www.amlc.gov.ph/images/PDFs/2017-
2018%20AMLC%20ANNUAL%20REPORT.pdf.
55
Retrieved: https://www.cpib.gov.sg/lee-kuan-yew-political-will-key-clean-government-.
56
https://www.officialgazette.gov.ph/2016/06/30/inaugural-address-of-president-rodrigo-roa-duterte-june-30-2016/.
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