• A new center of excellence in financial services

    Ben D. Kritz

    Ben D. Kritz

    THE ongoing scandal involving the Philippines’ role in laundering at least $81 million in funds stolen from a New York account belonging to Bangladesh Bank reminds me of a line uttered by Robin Williams in one of his more obscure movie roles years ago: “Figure out what you are, and be that.”

    The case has caused much wailing and gnashing of teeth here, but I think the government, the banking and gaming sectors, and the media are looking at the issue in the wrong way.

    Rather than regarding it as a crisis and another embarrassing blot on the country’s reputation, perhaps it would be better to consider it an opportunity. Efficient money-laundering services are evidently in high demand; with most of the needed infrastructure already in place, the Philippines, with just a little more effort, could become the world leader in the industry.

    Why not? The scandal has proven that the country is powerless to either stop or deal with the consequences of money-laundering; it may as well make a business out of it.

    To quickly summarize what has happened for those who may be unfamiliar with the case, on February 5 someone—widely believed to be “Chinese hackers,” although based on what evidence is not clear—hacked the account of the central bank of Bangladesh at the Fed in New York and snatched $100 million, transferring it into a number of accounts in RCBC bank, using the Jupiter Street branch in Makati. The money was then reportedly passed through a foreign exchange dealer and three local casinos—a typical money-laundering exercise—before being transferred to other accounts in Hong Kong, Sri Lanka, and possibly other places.

    The authorities in Bangladesh discovered the theft on or about February 8, at which point they urgently requested RCBC to stop all transactions involving the stolen money and return it, but February 8 happened to be Chinese New Year, a non-working holiday; by the time RCBC got the message the following day, it was too late. $81 million of the $100 million has disappeared, for the time being at least; the remaining $19 million was intercepted by Sri Lankan banking regulators, and returned to Bangladesh earlier this week.

    A second, even bigger attempted theft, actually a collection of payment requests totaling $870 million soon after the transfer of the first $100 million was stopped by alert authorities at Deutsche Bank, the Dhaka Tribune reported yesterday, because the unknown hacker misspelled the word “foundation” in the name of the bogus NGO listed as one of the recipients.

    Amid all the finger-pointing here—Bangladesh blamed the Fed and the RCBC, the RCBC branch manager threw her bank’s top management under the bus, RCBC executives blamed the Fed (and implicitly blamed the media for their own apparent internal communications difficulties), and the Fed pleaded ignorance—what is escaping most everyone’s attention is that over the past three or four years the country has set itself up perfectly to be a conduit for money-laundering. Not coincidentally, that began just about the time President BS Aquino 3rd and his minions were heavily engaged in the ouster of former chief justice Renato Corona, a drama among whose side effects was a money-laundering law in shambles. What emerged from that, sometime during 2012, was an amended law with a significant omission: The exemption of casinos from the list of those required to report large transactions.

    Also beginning at around that time, the Philippines began heavily promoting its gaming sector, an effort driven mostly by the private sector but with a substantial amount of support provided in various ways by the government. The effort intensified starting in 2013, when it became apparent that Chinese authorities were cracking down on money-laundering through Macau’s casinos. The increased scrutiny drove away illegitimate and legitimate gamblers alike; by the next year, Macau’s casino revenues had been halved, and gaming interests here smelled opportunity.

    Despite assurances that the country’s anti-laundering defenses would surely prevent Macao’s sort of illicit business taking root here, to the surprise of no one it quickly did, with the Bangladesh funds heist being a result so predictable it’s almost a cliché. Whatever the government’s anti-laundering program was supposed to achieve, it goes without saying that achieving the exact opposite result—in other words, enabling rather than stopping money-laundering—is more or less the ultimate definition of failure.

    It’s a failure that is so completely off the scale that all concerned would probably be better off, and probably sound more credible if they told everyone it’s what they intended from the start.



    Please follow our commenting guidelines.

    Comments are closed.