Republic Act No. 9160, as amended (Anti-Money Laundering Act of 2001 [AMLA]): Strong Anti-Money Laundering Regime a Deterrent

to Corruption in the Public Sector.

Allan Julius AzcuetaUniversity of the Philippines, NCPAG

Abstract

This study aims to explain how the Anti-Money Laundering Act of 2001, as amended, can be used as an effective tool in fighting corruption in the public sector. The study will likewise illicit its deficiencies and offer some recommendations that would make the AMLA more effective.

I. Introduction

Corruption has been generally defined as the misuse or abuse of public office for private

gain (World Bank, 1997; Jayawickrama, 1998; UNDP, 1999). It involves members of government

and the private sector. It comes in several forms or as Klitgaard1 puts it, “a wide array of illicit

behaviors including bribery, extortion, fraud, nepotism, graft, speed money, pilferage, theft,

embezzlement, falsification of records, kickbacks, influence-peddling, and campaign

contributions.”

According to Kofi Anan, Secretary General, United Nations, corruption is an insidious

plague that has a wide range of corrosive effects on societies. He further stated that corruption

undermines democracy and the rule of law, leads to violations of human rights, distorts

markets, erodes the quality of life and allows organized crime, terrorism and other threats to

human security to flourish.

This evil phenomenon of corruption is found in all countries, regardless of its size and

economic stature; however, it is usually the developing world that feels its enormous

destructive effects. Corruption always hurts the poor because funds intended for development

are diverted, government’s ability to provide basic services are undermined, and foreign aid

1 See Robert Klitgaard, “Strategies Against Corruption, http://unpan1.un.org/intradoc/groups/public/documents/clad/clad0035403.pdf

1 | P a g e

and investment are discouraged. Corruption is a key element in economic underperformance,

and a major obstacle to poverty alleviation and development.

The Philippines is not spared from the curse of corruption. In fact, Transparency

International2 ranks the Philippines at No. 129/183 in its Corruption Perceptions Index in 2011.

The Corruption Perceptions Index ranks countries/territories based on how corrupt their public

sector is perceived to be. A country/territory’s score indicates the perceived level of public

sector corruption on a scale of 0 - 10, where 0 means that a country is perceived as highly

corrupt and 10 means that a country is perceived as very clean. A country's rank indicates its

position relative to the other countries/territories included in the index. In 2011, the Philippines

had a Corruption Perceptions Index score of 2.6.

It is acknowledged that the Philippines has a long history of corruption, all governments

after former president Marcos was ousted in 1986 have struggled with the problem. Just

recently, Sandiganbayan ordered the arrest of former president Gloria Macapagal Arroyo for

allegedly misusing PhP366 million in state lottery funds during her last years in office.3

Corruption is usually committed for the purpose of gathering vast amount of money.

However, the stolen assets of a corrupt public official are useless unless they are laundered.

Thus, corruption and money laundering are inherently linked.

While corruption can be equated to stealing from the coffers of the government, money

laundering is the process of concealing the proceeds of the unlawful activity (corruption). By

successfully laundering the proceeds of corruption offence, the proceeds may be enjoyed

without fear of being confiscated and/or being prosecuted for the corrupt practices.

Heads’ of States recognize that an effective Anti-Money Laundering (AML) and Counter-

Terrorist Financing (CTF) regimes are effective tools in fighting corruption. In fact, the G204

2 a non-profit, non-governmental organisation dedicated to fighting corruption. They can be found in the internet at http://www.transparency.org3 Manila Standard Today, 5 October 20124 The Group of Twenty, or G20, is the premier forum for international cooperation on the most important aspects of the international economic and financial agenda. It brings together the world’s major advanced and emerging economies. Members: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Republic of Korea, Russia, Saudi Arabia, South Africa, Turkey, United Kingdom, United States, European Union.

2 | P a g e

leaders have sought the assistance of the Financial Action Task Force (FATF)5 to help in the

detection and deterring the proceeds of corruption by strengthening their recommendations.

In June 2000, the Philippines was included in the list of Non-Cooperative Countries and

Territories (NCCT list) because of its strict bank secrecy law and lack of anti-money laundering

law. Considering the economic and other sanctions that the FATF member countries may

impose to the Philippines, Republic Act No. 9160, otherwise known as the Anti-Money

Laundering Act of 2001, was passed by Congress. The law took effect in 2001. Because of

several deficiencies, relative to the FATF recommendations, particularly the transactional

threshold of approximately US$10,000.00 and Suspicious Transaction Reporting (STR) it was

later amended by Republic Act No. 9194 (AMLA). The Revised Implementing Rules and

Regulations (RIRRs) pursuant to the AMLA took effect on 7 September 2003. These laws and

regulations are the core of our legislative and regulatory framework in implementing a

comprehensive AML regime. The AMLA also provides for the creation of the Anti-Money

Laundering Council (AMLC) as our Financial Intelligence Unit (FIU).

With the implementation of the AMLA, banks and other financial institutions are now

required to file a report to the AMLC if it involves transactions which are more than PhP500

thousand pesos or if it appears that the monetary instruments or properties being transacted

are proceeds of corruption (unlawful activities). Furthermore, the AMLC is authorized to freeze

and forfeit all monetary instruments and properties that may represent, involves, or relates to

corruption.

II. Corruption Experience of the Philippines before the AMLA

In the late 1980’s, the Philippines entered the Guinness Book of World Records for

allegedly the biggest corruption of all time, referring to the period of the dictatorship of the

former president Ferdinand Marcos. However, corruption never stopped after Marcos was

5 The Financial Action Task Force (FATF) is the inter-governmental policy-making body with the mandate to develop and promote the effective implementation of anti-money laundering and combating the financing of terrorism standards (the FATF Recommendations). The FATF Recommendations are the internationally recognized and globally endorsed standards in this area.

3 | P a g e

ousted from his two decades of presidency by a bloodless people’s power revolution in

February 1986. Although, the presidency of the late President Corazon Aquino was geared

towards stopping the institutionalized corruption and cronyism, which includes the effort to

recover the assets the Marcos’ and their cronies have stolen from the people, it was not spared

from the menace of corruption. In fact, the satisfaction rating on the fight against graft and

corruption by her government (Corazon Aquino) showed a stiff decline from 72 percent in

March 1987 to 26 percent in July 1989.

In addition, it is not a secret that the administration of Cory Aquino that lasted for seven

years was also plagued by corruption, the so called Kamag-Anak Inc. and the alleged Northern

Alliance or the jueteng operation in northern Luzon by Peping Cojuangco. Both issues have

flagrantly violated the law and the personalities involved have lorded over corruption,

unfortunately, no one was made to account for their transgressions.

In 1992, President Ramos was also involved in hundreds of billions of pesos of scams,

from the P7-billion Centennial Expo scam to the P40-billion Fort Bonifacio scam, the sale of

which was supposed to go to the Armed Forces Modernization Fund but disappeared into thin

air.

Ironically, it was only President Joseph Estrada who started serious investigations into

these cases. That's why the supporters of Cory Aquino, including Fidel Ramos, conspired to

depose the elected leader to keep the plunder cases from ever seeing the light of justice.

III. Impact of Corruption in the Delivery of Government Services

The Marcos government has been considered as the most corrupt of all. However,

succeeding political administrations had their own share and has not effectively controlled the

problem. In fact, after the Marcos the gate to corruption was actually opened to more players

and each administration had their own share of corruption experience. Corruption is

characterized by a combination of societal factors, institutional factors and an incentives system

4 | P a g e

that contributes to corruption. According to the December 2011 report of Global Financial

Integrity, the conservative estimate of cumulative illicit financial outflows between 2000 and

2009 amounts to US$142 billion or around PHP663 billion per year. 50.6% of the illicit outflows

accounts to trade mispricing while the remaining 49.4% represents transfer of proceeds of

corruption, bribery, theft, kickbacks and tax evasion. In 2011, the total budget for education,

health and public works is around PhP323 billion or half of the average reported annual illicit

outflows of around PhP663 billion. In 2000, the World Bank also estimated that the Philippines

had lost around PhP2 trillion to corruption from 1977 to 1997 or around PhP100 million per

year.

Clearly the enormous amount of money stolen from the treasury could have been used

to build school rooms, used for medical care, build farm to market roads or used to increase the

salaries of government employees or could have been used for economic development.

Corruption is not only a domestic problem. For example, in the asset recovery case

mounted by Zambia, the court described the ―cynical and unjustified expenditures from stolen

funds (moved through a shell company) to pay for the wardrobe of Frederick Titus Chiluba,

then the President of Zambia. The court noted that the more than USD 1 million in payments to

a single tailor was five times the total of the President‘s salary for his ten years in office. 6 The US

Senate and, separately, the NGO Global Witness recounted in great detail the expenditures of

another public official from a West African country – a country with a per capita income that

ranks as one of the highest in the world, yet 77% of whose population lives in poverty –

spending millions on personal luxuries, including dozens of exotic automobiles. This included, in

2004, a single two-day period in which the public official made payments of USD 80,000 to

Gucci and USD 51,000 to Dolce & Gabbana, and a 2003 Paris-based shopping spree in which the

public official bought 30 designer suits.

6 Attorney General of Zambia v. Meer Care, et al, (2007)

5 | P a g e

Corruption can really slow down both economic and social development. Inferior quality

of public services and infrastructures becomes a norm. Generally, it is the poor who usually

suffer because they cannot avail free medical or health services, education, legal services, and

other basic and social services. Corruption in the government can even lead to catastrophic

accidents such as destruction of properties and deaths caused by collapse of buildings that are

allowed to be constructed, using unsafe structural design and/or sub-standard materials, by

government engineers or building inspectors in exchange of gift and bribes. Sea tragedy may

also take place if coast guard officers are bribed to allow a non-sea worthy or an overloaded

ship to leave port.

Government priority projects are neglected in exchange of those that generate the

greatest personal gains to public officials. Projects such as improvement of communication and

transportation system that would essentially improve economic development are put to halt in

exchange of projects that would give huge kickbacks to corrupt public officials. The diversion of

money from the government budget to expenses with lower multiplier effects also affects

economic development. For example, money that is meant as an investment in economic

development or poverty alleviation is diverted as result of embezzlement or other forms of

public corruption towards private spending – it will in most cases incur a transfer towards

expenditures with a lower multiplier effect, such as imported luxury vehicles instead of

medicines in the hospitals, or Italian furniture in newly built city mansions instead of school

materials or buildings.

Corruption can even discourage investment because doing business becomes just so

costly for investors. Bribes and kickbacks have to be paid just to secure business permits and

other documents to do business. Another effect from the viewpoint of the business community

is that corruption presents an administrative and financial burden on firms. According to the

World Bank‘s Enterprise Survey of Malawi in 2009, ―corruption creates an unfavorable

6 | P a g e

business environment by undermining the operational efficiency of firms and raising the costs

and risks associated with doing business.

Foreign aid or assistance may no longer be extended because large part of it goes to

corruption which effectively deprives other equally qualified beneficiary countries from

receiving aids or assistance of the same nature.

Why Public Servants Engage in Corruption

Developing economies such as of the Philippines are always victim of corruption of all

sorts. As with other nations corruption is rooted in its socio-political and cultural psyche and

existence. The most common cause of corruption is the issue on patronage politics. When an

official is elected to his/her post he/she is pressured to fulfill all his/her promises given during

the campaign period. To be able to fulfill all his/her obligations and promises, politicians

usually engage in corrupt practices. Friends and supporters are also given different projects in

exchange for the assistance received during campaign.

There are also psychological factors that can actually lead to corruption. Some

politicians are actually “born evil” and will actually commit unlawful activities including

corruption. Peer pressure is also a possibility. If a public official is surrounded by individuals

who are engage in corruption and are actually benefiting from said acts, the likelihood that the

public official may also be tempted to do the same is high. Nepotism and the so called dynasty

in government offices is another factor. Government officials may and will try to hold on power

and will be engaged into corruption in attaining their goal.

The feeling of monopoly of power can also cause corruption. The government official

vested with the authority to govern can actually practice discretion on how and when to

perform acts of corruption depending on the circumstances.

7 | P a g e

Weak judicial and punitive system plays a vital role in corruption as well. Any public

official will be willing and in fact will be encouraged to commit corruption if they know that

they will never be charged or punished for their illegal activities.

Corruption however committed and for whatever purpose will generate proceeds.

These proceeds are the main reason why they want to stay on power.

How R.A. No. 9160, as amended, can be an effective tool to stop corruption

To strengthen the anti-corruption efforts of the Philippines, the World Bank in its report

dated 30 September 2001, entitled “Combatting Corruption in the Philippines: An Update”,

recommended that an anti-money laundering bill must be passed and implemented.

With the enactment of R.A. No. 9160, also known as the Anti-Money Laundering Act of

2001, as amended, proceeds of corruption can now be frozen, recovered, and forfeited in favor

of the national treasury.

IV. Money laundering as a tool to enjoy the proceeds of corruption (How corrupt officials enjoy the fruits of their unlawful activities)

The fight against corruption is intimately interwoven with that against money

laundering. The stolen assets of corrupt public officials are useless unless they are (laundered)

placed, layered, and integrated into the global financial network or legitimate economy in a

manner that does not raise suspicion. In some ways, a public official (known as a politically

exposed person, or ―PEP)7 who gathers vast sums of money through corrupt means is far more

vulnerable than some other criminals. An illegal drug trafficker may be able to remain

anonymous with his vast amount of money while a public official will immediately begin to

7 Rule 3.b.2 of the RIRR of R.A. No. 9160, as amended. - “Politically Exposed Person” (PEP) refers to a natural person who is or has been entrusted with prominent public positions in the Philippines or in a foreign State, including heads of state or government, senior politicians, senior national or local government, judicial or military officials, senior executives of government or state owned or controlled corporations and important political party officials.

8 | P a g e

draw unwanted attention as soon as he is associated with significant sums from unknown

sources. Thus, the corrupt PEP‘s vulnerability presents an opportunity for those authorities

engaged in both anti-money laundering/combating the financing of terrorism (AML/CFT) and

anti-corruption (AC) enforcement.

The 2009 FATF Strategic Surveillance Survey noted that PEPs are considered to be one of

the largest categories of high-risk customers for money laundering purposes. PEPs in the

international community are considered as high risk for money laundering because of the

nature of their position. PEPs have access to public funds and they have the knowledge and

ability to control budgets and preparation of contracts. Corrupt PEPs may use their knowledge

and ability to award contracts in return for personal financial reward, or simply create

structures or front (dummy) companies to drain money from government coffers.

Considering the risk attached to PEP as far as detection of money laundering activity is

concerned, they need to employ new trends and techniques.

Financial Crimes Enforcement Network or (FinCEN - US FIU) of the United States

Department of Treasury defines money laundering as - the process of making illegally-gained

proceeds (i.e. "dirty money") appear legal (i.e. "clean"). Typically, it involves three steps:

placement, layering and integration. First, the illegitimate funds are furtively introduced into

the legitimate financial system (covered institutions). Then, the money is moved around to

create confusion, sometimes by wiring or transferring through numerous accounts. Finally, it is

integrated into the financial system through additional transactions until the "dirty money"

appears "clean." Money laundering can facilitate crimes such as corruption, drug trafficking and

terrorism, and can adversely impact the global economy.

Under our law, however, money laundering is defined as follows:

“Rule 4. Money Laundering Offense. Money laundering‐ is a crime whereby the proceeds of an unlawful activity as herein defined are transacted, thereby making them appear to have originated from legitimate sources.”

9 | P a g e

Before we can fully understand money laundering in our jurisdiction, it is imperative

that the words proceeds and unlawful activity be defined first.

Under R.A. No. 9160, as amended, the following are defined as follows:

“Unlawful Activity - refers to any act or omission or series or combination thereofinvolving or having relation, to the following:

a) Xxx.b) Xxx. c) Section 3 paragraphs b, c, e, g, h and i of Republic Act No.

3019, as amended, otherwise known as the Anti Graft and‐ Corrupt Practices Act;

d) Plunder under Republic Act No. 7080, as amended;e) Xxx.”

“Proceeds - refers to an amount derived or realized from an unlawful activity. It includes:

(i) All material results, profits, effects and any amount realized from any unlawful activity;

(ii) All monetary, financial or economic means, devices, documents, papers or things used in or having any relation to any unlawful activity; and

(iii) All moneys, expenditures, payments, disbursements, costs, outlays, charges, accounts, refunds and other similar items for the financing, operations, and maintenance of any unlawful activity.”

As can be gleaned from the preceding definitions, any person who generates any

proceeds from (unlawful activities) corruption or plunder and transact or attempts to transact

said proceeds with any financial institution can be held liable for money laundering.

To emphasize, vast amount of money in the possession of a public official without legal

justification as to its source will raise suspicion that the monetary instrument or property being

transacted are proceeds of unlawful activity, such as corruption, which may invite the attention

of law enforcement agencies including the AMLC. In the event that the AMLC, after

investigation, found out that the assets (monetary instrument or property) are proceeds of

corruption it will be frozen and thereafter, a case for the confiscation (civil forfeiture) will be

filed in court.

10 | P a g e

Hence, to avoid detection, and possible confiscation of the proceeds of corruption, the

public official must launder the money so as to obscure its source and give it a legitimate and

clean appearance.

There can be a variety of ways to launder corruption proceeds depending on the nature

of the corrupt act.

In bribery, the corrupt official may use Shell Company8 or an associate to receive the

proceeds of bribery. The money may not be necessarily be transacted locally, it may be

deposited to an account abroad. In the event that the payment is made locally, a factitious

account may be opened in behalf of the PEP.

It was also noted in some cases that corruption proceeds are hidden by going through a

sale of overpriced properties to favored contractors.

Some PEP also engages the services of professionals such as lawyers and accountants to

manage and transact business for them. Lawyers are usually used to create corporate vehicles,

open bank accounts, transfer proceeds, purchase property, and do other means to bypass any

AML control. They can even hide in the rules of attorney-client privilege to protect the identity

of their PEP clients.

As earlier discussed, PEP are considered high risk clients for money laundering, thus, it is

very difficult to transact with foreign financial institution. More often than not, transactions will

always be scrutinized and reported by the concerned bank to their Financial Intelligence Unit.

As a result, PEP may utilize domestic banks to launder corruption proceeds. Example is the case

involving assets stolen by Joshua Chibi Dariye which highlight the use of domestic accounts in at

least the initial stages of a more complex scheme. Dariye, the Governor of Plateau State in the

Federal Republic of Nigeria from May 1999 through May 2007, embezzled money belonging to

8 The term “shell company” generally refers to limited liability companies and other business entities with no significant assets or ongoing business activities. Shell companies – formed for both legitimate and illicit purposes – typically have no physical presence other than a mailing address, employ no one, and produce little to no independent economic value. (FinCEN)

11 | P a g e

the state in several ways. Checks issued from the central bank of Nigeria to Plateau State for

ecological works were received by Dariye and, rather than being deposited into a government

account, were instead diverted to an account in Nigeria Dariye had established using an alias.

The money was then transferred to accounts held in Dariye‘s own name in the UK. Likewise,

Dariye purchased real estate by diverting money destined for a Plateau State account into an

account in Nigeria in the name of a corporation he controlled. That corporation, in turn,

transferred money to UK accounts in the corporation‘s name to effectuate the real estate

purchase.9

Another favorite money laundering tool is the use of offshore or banks located abroad.

A concrete example is the case of an Italian businessman, Nino Rovelli, who bribed federal

judges to win in a civil case against a bank in Italy. Approximately USD 575 million was paid out

to individuals as a result of bribes paid to judicial officials. The money ultimately was moved

and disguised in a series of financial transactions involving accounts and corporate vehicles in

the United States, British Virgin Islands, Singapore, Cook Islands and Costa Rica.

The use of offshore banks is the favorite and most efficient way to launder money. The

reason for this preference is obvious. Accounts located abroad hold the advantage of being

more difficult to investigate for the victim country, they are also perceived to be more stable

and safer, and are more easily accessed than accounts held in the PEPs domestic banks. In

addition, a PEP can ― pile foreign jurisdictions: a bank account in one country could be owned

by a corporation in another jurisdiction, which is in turn owned by a trust in a third jurisdiction.

Each additional country multiplies the complexity of the investigation, reduces the chances of a

successful result, and extends the time needed to complete the investigation.

Some government officials even use or abuse their diplomatic bag to transport cash

from one country to another. The general public may not be aware, but PEPs have a tool not

available to the general public: the ― diplomatic pouch. The diplomatic pouch is intended to

9 Federal Republic of Nigeria v. Joshua Chibi Dariye (2007) (UK)

12 | P a g e

protect free communication between diplomats and their foreign missions, a diplomatic bag is

protected from search or seizure by the 1961 Convention on Diplomatic Relations.10 A

diplomatic bag may only be used for official materials and, while the Convention protects it

from search, it does not relieve the carrier of adherence to the laws of the host nation,

including cross-border currency reporting requirements.

The above mentioned typologies are just few ways to launder proceeds of corruption

with the ultimate goal of enjoying it.

V. Preventing corruption through strong and efficient anti-money laundering counter measures.

Money laundering is an inherent part of corruption. They are so intertwined together

and inseparable. Remove money laundering from the equation and surely, corrupt public

officials cannot use or enjoy the proceeds of corruption without being detected resulting to

confiscation of the assets and even conviction for corruption offense and money laundering.

The FATF recognizes the link between corruption and money laundering and how their

AML/CFT recommendations can help combat corruption. During mutual evaluation on the

compliance to the FATF recommendations, issues on corruption is always taken. Statistics on

number of cases filed and prosecuted for money laundering, corruption and the amount of

money and value of assets that are frozen or confiscated are always taken into consideration.

The FATF even check if the countries have solid framework measures to prevent or combat

corruption through respect for transparency, good governance principles, high ethical and

professional requirements, and the existence of efficient judicial system that is capable to

properly enforce court decisions.

According to FATF, the effective implementation of their Recommendations, countries

can better safeguard the integrity of the public sector, protect designated private sector

10 http://untreaty.un.org/ilc/texts/instruments/english/conventions/9_1_1961.pdf

13 | P a g e

institutions from abuse, increase transparency of the financial system, and facilitate the

detection, investigation and prosecution of corruption and money laundering, and the recovery

of stolen assets.

A country that is largely compliant to the Recommendations of FATF can create an

environment which is more difficult for corruption to flourish and unpunished.

In December 9, 2003, United Nations Convention against Corruption (UNCAC), referred

to as the Merida Convention, the first universal legal instrument intended to prevent and

combat this phenomenon was signed. UNCAC came into force in 2005.

The States party to this instrument are required or encouraged to criminalize and

penalize active corruption of national, international, and foreign public officials. The convention

also organizes the return of stolen or money laundered assets.

Summary of the UNCAC against corruption will readily show that it also have the key

elements of AML based on the 40 + 9 Recommendations of the FATF.

The following are the key elements of AML that are present in the UNCAC:

Prevention of Money Laundering

Enabling of Asset Recovery

Criminalizing the transfer or concealment of proceeds of corruption

Cooperation among government agencies

Relaxation of Bank Secrecy Laws

Presence of dual criminality provision (conduct is a criminal offense in

both States)

Law Enforcement Cooperation

International Assistance to recover assets

Facilitation of International Confiscation

Return of recovered assets

Establishment of an FIU

14 | P a g e

The preceding enumerations are provisions that already exist under the AMLA. Hence,

proper implementation of the law will greatly discourage public officials from engaging in

corruption.

VI. Recommendations

AMLA if properly implemented will deter if not stop corruption in the public sector.

Corruption under the AMLA is listed as one of the predicated offenses or unlawful activities.

Therefore, a person who shall transact or attempt to transact the proceeds of corruption with

any covered institution11 can be held liable for money laundering. Furthermore, the proceeds of

corruption that can be identified by the AMLC can be frozen and eventually confiscated or

forfeited in favor of the national treasury.

However, our AMLA is not yet fully compliant with the FATF Recommendations. We are

currently listed under the so called gray list or jurisdictions which have strategic AML/CFT

deficiencies. The FATF have given us until the end of October 2012 to correct the deficiencies

otherwise we may be included in the black list or high-risk non-cooperative jurisdictions and

consequently, we will be subjected to severe counter measures by the FATF and FATF Style

Regional Bodies (FSRBs) member countries.

Currently, the AMLA amendment team is working doubly hard together with both the

House of Representative and Senate to meet the deadline.

To address the effectiveness of the AMLA in fighting corruption in the public sector, the

following recommendations are included as part of the amendment being pushed in congress:

11 “Covered Institution” refers to: 1. Banks, offshore banking units, quasi banks, trust entities, non stock savings‐ ‐ and loan associations, pawnshops, foreign exchange dealers, money changers, remittance agents, electronic money issuers and other financial institutions which under special laws are subject to Bangko Sentral ng Pilipinas (BSP) supervision and/or regulation, including their subsidiaries and affiliates. 2. Insurance companies, insurance agents, insurance brokers, professional reinsurers, reinsurance brokers, holding companies, holding company systems, pre need companies, mutual benefit associations and all other persons and entities supervised and/or‐ regulated by the Insurance Commission (IC). 3. (i) Securities dealers, brokers, salesmen, investment houses, investment agents and consultants, trading advisors, and other entities managing securities or rendering similar services; (ii) mutual funds or open end investment companies, close end investment companies, common trust‐ ‐ funds or issuers and other similar entities; (iii) transfer companies and other similar entities; and (iv) other entities administering or otherwise dealing in currency, commodities or financial derivatives based thereon, valuable objects, cash substitutes and other similar monetary instruments or property supervised and/or regulated by the Securities and Exchange Commission (SEC).

15 | P a g e

1. It is recommended that the definition of Money Laundering be amended and adopt

the internationally acceptable definition which does not limit money laundering to

transaction of proceeds but should also include the act of conversion, transfer,

disposing, moving, possession, use, concealment and disguise of the proceeds of

(unlawful activities) corruption.

The purpose of this recommendation is to allow the AMLC to investigate a possible

violation of AMLA without waiting for the proceeds of corruption to be transacted first with a

covered institution before an investigation can be conducted.

The AMLA cannot conduct a bank inquiry to determine connections of bank transactions

with the activities of corruption without securing an authority from the Court of Appeals.

Furthermore, the AMLC cannot apply for an authority to conduct bank inquiry if no money

laundering aspect is present. Our current laws, particularly our laws on bank secrecy prohibits

anyone including the AMLC to look into bank deposit accounts without court order and unless

an investigation for possible money laundering offense is being conducted.

2. The DNFBPs or Designated Non-Financial Business or Professions should be included

in the covered institutions. The DNFBPs are the Lawyers, Accountants, Real Estate

Brokers, Casinos, Dealer of precious metals and stones, and Dealer of Valuable

Objects.

The above mentioned DNFBPs are now the favourite go to person or establishments of

money launderers. Vast or big amount of money (proceeds of corruption) can be converted or

transacted with them without the need of submitting any identity documents. Furthermore,

transactions with them are not reported to the AMLC even if the transactions are considered to

be suspicious12 or covered. 12 “Suspicious Transaction” is a transaction, regardless of amount, where any of the following circumstance exists:(a) there is no underlying legal or trade obligation, purpose or economic justification; (b) the client is not properly identified; (c) the amount involved is not commensurate with the business or financial capacity of the client; (d) 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; (e) 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 institution; (f) the transaction is in any way related to an unlawful activity or any money laundering activity or

16 | P a g e

3. Identity theft should be criminalized and a stiffer penalty should be imposed to

those who are in the business of printing fake identification cards. Legislation for the

creation of a single or national ID card should also be passed.

Investigators not only of the AMLC but, also of the other law enforcement agencies are

having difficulties in identifying the perpetrators of unlawful activities and money laundering

because of the proliferation of fake identification cards and lack of national ID system. Should

there be a national ID system it will be easy to verify the identities of clients which would

prevent any fraudulent transactions done using fictitious names.

4. Sharing of information between law enforcement agencies should be

institutionalized using a national criminal database concept. This type of infrastructure will

hasten the investigation process being conducted by law enforcement agencies.

5. The AMLC should be authorized or deputized by the Office of the Solicitor

General (OSG) to file or handle its cases especially when it involves the filing of application for

freeze order. Although the current legal framework of AMLA mandates the Court of Appeals to

issue a freeze order within 24 hours from the time of application, the process of having the

application or petition go through the OSG before it is filed in court is just too cumbersome. In

fact, the practice of having the application for freeze order go through OSG has the risk of

having the bank accounts subject of a freeze order emptied out by the respective account

owners even before the application is filed in court. Usually, it takes the OSG a week or more

before they file the petition or application for freeze order.

If the above mentioned recommendations can be implemented and taken into

immediate consideration, the AMLC can be more effective in the performance of its mandate

and corruption in the public sector can be curtailed if not totally eradicated.

VII. Conclusion

offense under the AMLA, as amended, is being or has been committed; (g) any transaction that is similar, analogous or identical to any of the foregoing.

17 | P a g e

The Philippine legal system is replete with constitutional provisions and pertinent laws

which combats graft and corruption:

1. 1987 Philippine Constitution;

2. Provisions in the Revised Penal Code relating to crimes committed by public officers;

3. Specific Anti-Graft Laws, namely:

(i) the Anti-Graft and Corrupt Practices Act;13

(ii) the Code of Conduct and Ethical Standards for Public Officials and

Employees;14

(iii) the Civil Service Law;15

(iv) the Forfeiture of Unlawfully Acquired Property;16

(v) the Plunder Law.17 and,

(vi) the Anti-Money Laundering Act;18

There are even numbers of remedies available against abuses of public officials including

the forfeiture of their unlawfully acquired property. These are: (a) impeachment; (b) recall; (c)

civil action for damages; (d) administrative disciplinary action; (e) criminal complaint; (f) special

civil action; (g) general election; (h) forfeiture under RA 1379; and (i) the civil forfeiture under

RA 9160, as amended.

Considering the above mentioned laws and remedies available, an effective

implementation of the Anti-Money Laundering Act of 2001, as amended appears to be the most

promising. The AMLA appears to be the most effective tool currently available to recover stolen

assets by corrupt public officials. The power of the AMLC to forfeit proceeds of corruption in a

non-conviction base proceeding is also a power that corrupt officials have to reckon with. The

13 Republic Act No. 3019 (1960).14 Republic Act No. 6713 (1989).15 Presidential Decree 807.16 Republic Act 1379 (1955).17 Republic Act 7080 (1991).18 Republic Act 9160 (2001), as amended by Republic Act 9194 (2003) and Republic Act 10167 (2012).

18 | P a g e

AMLC can quickly freeze and forfeit assets of corrupt public officials, if probable cause exist that

the same are actually fruits of corruption, in less than 3 days.

Currently, the AMLC has already forfeited the amount of PhP88.8 million, currently

forfeiting the amount of PhP9 million, and frozen the amount of PhP2 million, all proceeds of

corruption. The total current amount subject of civil forfeiture case is PhP1.3 billion while total

forfeited assets now amounts to PhP169 million.

With the way the AMLC is currently performing its mandate and with the support of the

legislature in passing the needed AMLA amendment, there is no doubt that corruption in the

public sector will be dramatically reduced and in no time eradicated.

References:

19 | P a g e

United Nations Convention Against Corruption, New York, 2004

United Nations Asia and Far East Institute for the Prevention of Crime and the Treatment of Offenders (UNAFEI), Resource Material Series No. 65, March 2005

CORRUPTION, A Reference Guide and Information Note on the use of the FATF Recommendations to support the fight against Corruption, FATF, 2010

Graft and Corruption in the Aquino Administration: How True and How Bad is it?, Tony G. Guidote, 1989

Combating Corruption in the Philippines: An Update, September 30, 2001, World Bank Report No.: 23687-PH

Republic Act No. 9160, as amended by R.A. No. 9194 and R.A. No. 10167

Laundering the Proceeds of Corruption, FATF Report, July 2011

20 | P a g e