Sunday, November 23, 2008

CASH WASH (On the The Anti-Money Laundering Act of 2001)

By Obiter07

The story goes on how a law office had this client once who was engaged in the fish market business. And that every time this client would pay for legal bills, it would be by means of crumpled bills and coins, straight from the market, with the currency likewise distinguishable by their fishy smell. Now that was literally dirty (as well as smelly) money. However, the recent detention abroad of a local police official awash with undeclared and still unexplained cash in his luggage brings to mind the law on anti-money laundering, geared as it is towards clamping down on the practice of legitimizing cash derived from illegal activities.

See, if the policeman’s 100,000 euros were legitimate, it would have been so much easy for him to place the amount in the bank and just withdraw from an ATM anywhere he went. Isn’t that what normal travelers do? Who puts the amount equivalent to the cost of a house and lot in his luggage?

Anti-Money Laundering Act


Republic Act No. 9160 (as amended by R.A. 9194) otherwise known as The Anti-Money Laundering Act of 2001 was passed 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.” And that “the State shall extend cooperation in transnational investigations and prosecutions of persons involved in money laundering activities wherever committed.”

Offense Defined

Under said statute, money–laundering is classified as a criminal offense “whereby the proceeds of an unlawful activity as herein defined are transacted, thereby making them appear to have originated from legitimate sources. It is committed by the following:
a) Any person knowing that any monetary instrument or property represents, involves, or relates to, the proceeds of any unlawful activity, transacts or attempts to transact said monetary instrument or property.
b) Any person knowing that any monetary instrument or property involves the proceeds of any unlawful activity, performs or fails to perform any act as a result of which he facilitates the offense of money laundering referred to in paragraph (a) above.
c) Any person knowing that any monetary instrument or property is required under this Act to be disclosed and filed with the Anti-Money Laundering Council (AMLC), fails to do so."
Remember the ErapMuslim Youth Foundation? During Erap’s impeachment trial, her accountant (Yolanda Ricaforte) testified that she received 200M in checks from Gov Singson and gave the checks to Erap’s lawyer and fellow foundation incorporator, Atty. Edward Serapio. The prosecution claimed the funds were from jueteng operations and were ‘donated’ to the foundation’ to launder them.
Activities Covered

Proceeds from the following unlawful activities are covered by the law:
"(i) 'Unlawful activity' refers to any act or omission or series or combination thereof involving or having direct relation to the following:
(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code, as amended;
(2) Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, and 16 of Republic Act No. 9165, otherwise known as the Comprehensive Dangerous Drugs Act of 2002;
(3) 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;
(4) Plunder under Republic Act No. 7080, as amended;
(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the Revised Penal Code, as amended;
(6) Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602;
(7) Piracy on the high seas under the Revised Penal Code, as amended and Presidential Decree No. 532;
(8) Qualified theft under Article 310 of the Revised Penal Code, as amended;
(9) Swindling under Article 315 of the Revised Penal Code, as amended;
(10) Smuggling under Republic Act Nos. 455 and 1937;
(11) Violations under Republic Act No. 8792, otherwise known as the Electronic Commerce Act of 2000;
(12) Hijacking and other violations under Republic Act No. 6235; destructive arson and murder, as defined under the Revised Penal Code, as amended, including those perpetrated by terrorists against non-combatant persons and similar targets;
(13) Fraudulent practices and other violations under Republic Act No. 8799, otherwise known as the Securities Regulation Code of 2000;
(14) Felonies or offenses of a similar nature that are punishable under the penal laws of other countries."
This is why suspicions arise when someone is very liquid yet has no known legitimate income-earning activity. Criminals can’t easily go to banks because banks are now required to report suspicious transactions (discussed below). It’s easier for criminals to buy things, even really expensive things, and buy them all in cash. That’s one way to launder money. But if you are in government, you have a lot to explain if you have assets that are not commensurate to your means.

Covered and Suspicious Transactions

Most money-making crimes and schemes appear to be covered. And money laundering can be monitored if it is a “covered or a suspicious transaction.”

Covered transactions relate to "a transaction in cash or other equivalent monetary instrument involving a total amount in excess of Five hundred thousand pesos (P500,000.00) within one (1) banking day." Previously, the threshold amount was Four million Philippine pesos (Php 4,000,000.00).

However, the amount of the transaction is not determinative of whether or not there is money-laundering. Also included are “suspicious transactions” or “transactions with covered institutions, regardless of the amounts involved, where any of the following circumstances exist:
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 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;
6. the transaction is in any 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."
Covered Institutions

Covered institutions subject to the requirements of R.A. 9160 are as follows:
(1) banks, non-banks, quasi-banks, trust entities, and all other institutions and their subsidiaries and affiliates supervised or regulated by the Bangko Sentral ng Pilipinas (BSP);
(2) insurance companies and all other institutions supervised or regulated by the Insurance Commission; and
(3) (i) securities dealers, brokers, salesmen, investment houses and other similar entities managing securities or rendering services as investment agent, advisor, or consultant,
(ii) mutual funds, close and investment companies. common trust funds, pre-need companies and other similar entities,
(iii) foreign exchange corporations, money changers, money payment, remittance, and 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 or regulated by Securities and Exchange Commission.”
To prevent money laundering, covered institutions are required to “maintain a system of verifying the true identity of their clients and, in case of corporate clients, require a system of verifying their legal existence and organizational structure, as well as the authority and identification of all persons purporting to act on their behalf.” The days of Jose Velarde are over as this statute prohibits “anonymous accounts, accounts under fictitious names, and all other similar accounts shall be absolutely prohibited.”

Covered institutions are to “report to the AMLC all covered transactions and suspicious transactions within five (5) working days from occurrence thereof, unless the Supervising Authority prescribes a longer period not exceeding ten (10) working days." Should a transaction be determined to be both a covered transaction and a suspicious transaction, the covered institution shall be required to report the same as a suspicious transaction.”

Brigands and bandits may have to go back to their old ways and keep their money in briefcases, filing cabinets and mattresses. The law seeks to make life harder for them, denying them the use of legitimate institutions in cleaning up their booty, where currencies can easily move from one account to another by electronic or other means. And this could be the reason why someone got to be caught via an old fashioned method, during a routine search at an airport which turned up a bag of cash.


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