• AMLC’s big fail: RCBC money laundering scandal

    15

    Insurance Commissioner and Anti-Money Laundering Council (AMLC) co-chair Emmanuel Dooc’s impassioned plea to “put more teeth” in our anti-money laundering law during last week’s Senate hearing on the alleged $81-million cyber heist is a lame attempt at covering up the massive failure of the country’s financial intelligence unit to detect and stop the entry of “dirty money” into our financial system.

    Taking a swipe at our legislators for not including casinos and casino operators in the anti-money laundering law, Dooc declared:

    “There are gaping holes in our laws. We have to include casinos as covered entities.” But Dooc’s pass-the-buck strategy backfired when Senator Juan Ponce Enrile asked him the simple but brilliant question: “Had the casinos been included in the 2013 amendment [to the anti-money laundering law], would this incident have been prevented?”

    After two Senate hearings, the answer is obviously a big “NO.” The deficiency clearly does not lie with the anti-money laundering law but in its implementation and enforcement, primarily by the AMLC and collaterally, by the banks and “covered institutions” under its supervision like the Rizal Commercial Banking Corporation (RCBC) and foreign exchange brokers-cum-remittance companies such as Philrem Service Corporation. If anything, this money laundering scandal exposed the impotence of AMLC at preventing the entry of illegally-acquired funds into our banking system.

    It appears that AMLC does not at all scrutinize the large volume of transactional data (i.e. covered or suspicious transactions) provided by the banks. We’re told the council does not employ data mining or data matching techniques, for instance, to identify persons of transactions potentially engaged in possible money laundering activity. Instead, the AMLC merely relies on the banks and other covered institutions to identify and report possible “dirty money” inflows.

    But what happens when these same financial institutions – the main gatekeepers against money laundering – are infiltrated by money launderers?

    Experts often stress that an anti-money laundering program is no stronger than its weakest link. In the case of the “cyber robbery” of the Bangladesh central bank, that is the gatekeeper – RCBC.

    Based on the narration of events during the Senate hearing, four individuals opened US dollar account with the RCBC Jupiter St., Makati branch headed by branch manager Maia Deguito on May 15, 2015. Aside from the initial $500 deposit for the account opening, the accounts remained dormant for around 9 months until last February 5 when approximately $81-million from the Federal Reserve Bank of New York was wired to the account of Michael Cruz ($6M), Jessie Lagrosas ($30M), Alfred Vergara ($20M), and Enrico Vasquez ($25M).

    On February 9, some $66M was withdrawn from the accounts and transferred (and consolidated) to the newly-opened (February 5) dollar account of a certain William So Go while the remaining $15-million from the Vasquez account was transferred to Philrem.

    The day before, on February 8, the Bangladesh central bank already sent a “stop payment” order to RCBC asking the latter to “freeze” the funds but it was not acted upon since it was the Chinese New Year holiday. The next working day (February 9) RCBC’s settlement branch sent a “request for freeze” to Deguito who allegedly ignored the notice and withdrew the funds from Go’s account and deposited it to Philrem’s account, with the verbal instruction to transfer the same to three beneficiaries: Wei Kang Xu, a purported junket operator ($30M); the Eastern Hawaii Leisure Co. Ltd., operator of a hotel-casino in Cagayan ($21M); and Bloomberry, operator of Solaire ($29M). It was only at 7:45 p.m. of the same day that RCBC responded to the stop payment order.

    Between February 9 and 12, Philrem subsequently converted some $63 million into pesos through RCBC’s treasury department (another tidy profit for the bank) before remitting the peso-equivalent of $51-million to Bloomberry (P1.35 billion) and Eastern Hawaii (P987M). Another P584-million and $18-million in cash were delivered by Philrem to Wei Kang Xu.

    A ranking RCBC official claimed the bank reported the suspicious transaction once it got wind of the transfer. But according to Julia Bacay-Abad, AMLC executive director, they first learned of the money laundering incident only on February 11 after Bangko Sentral ng Pilipinas (BSP) governor Amando Tetangco Jr. received a call from the governor of the central bank of Bangladesh, “seeking assistance to trace and possibly freeze the funds that have been stolen from Bangladesh bank.”

    We can therefore reasonably conclude that the suspicious transaction was reported by RCBC to AMLC only after February 11, or after Tetangco mobilized AMLC to investigate the cyber robbery.

    So why did it take at least two days after receiving the Bangladesh central bank’s “stop payment” order for RCBC to file a suspicious transaction report with the AMLC? And why did the AMLC not immediately apply for a “freeze order” as early as February 12 when the money had not yet been completely distributed?

    The narrative ignorantly peddled by mainstream media that casinos are the culprits in the money laundering fiasco is pure BS. Casinos are being used as a convenient scapegoat for AMLC and RCBC’s gross negligence.

    We find it ludicrous that AMLC is laying the blame on casinos when only around one-third of the Bangladeshi money found its way to the casino floor. The bigger bulk actually ended up with a junket operator and a hotel–casino company but there is no proof that it was used in gambling.

    Moreover, since the purpose of money laundering is to conceal the source of illegally-acquired funds, the money laundering scheme was consummated as soon as the “dirty money” was taken out of RCBC and into the hands of Philrem. It did not have to pass through a casino for it to be “laundered.” The cash delivery by Philrem to Wei Kang Xu, for instance, effectively severed the link with the original crime because the money could then be easily converted to legitimate assets like jewelry, luxury cars, etc.

    This is why we find it quite alarming that, like Pontius Pilate, AMLC is now washing its hands of the debacle.

    More on this unfolding saga in our future column.

    Share.
    loading...
    Loading...

    Please follow our commenting guidelines.

    15 Comments

    1. Ms. Deguito is the most guilty of the players.
      1. She brazenly opened 5 fictitious accounts way back in 2015.
      2. She defied the stop order from main office.
      3. She personally instructed Philrem to convert the dollars to pesos and deliver to criminals.
      Without Deguito the money transfer could not have happened.

      Now she will lie and name some higher ups in RCBC to save her own skin!

      • I agree, Dequito was the principal cause of transfer all the dollars to fictitious accounts in which she opened herself.

    2. Federico Lojo on

      AMLC acts with lighting speed against people not allied with pnoy but otherwise sleeps on their duties. What a mess we are now into courtesy of a president’s student council kind ofleadership.

    3. Hector David on

      Why are DOF and BSP not called to the hearings .. these officials are fast to take credit but no responsibility .. like the occupant by the Pasig river

    4. Hector David on

      Government is sleeping. It was never awake .. when 10 million are in hunger while tens if not millions of pesos are used to bribe senators to impeach. When the supreme court acts as if it is beholden -.:when the middle class is overtaxed while the wealthy are given tax incentives .. when gas prices do not reflect world prices and food eats up 70%of one’s paycheck … if you are employed at all on minimum wage.. our govErnest is one of oppression not service .. they should flush themselves down the toilet after returning the money they have stolen from hard working citizens

    5. Wasn’t the $81M traced already? Why doesn’t the government order these beneficiaries to return the stolen money? Are the beneficiaries fictitious also? I can’t understand why the senators are quick to say that the money cannot be retrieved anymore. It has been identified how much went to each beneficiary. => “…Wei Kang Xu, a purported junket operator ($30M); the Eastern Hawaii Leisure Co. Ltd., operator of a hotel-casino in Cagayan ($21M); and Bloomberry, operator of Solaire ($29M)… Philrem subsequently converted some $63 million into pesos through RCBC’s treasury department (another tidy profit for the bank) before remitting the peso-equivalent of $51-million to Bloomberry (P1.35 billion) and Eastern Hawaii (P987M). Another P584-million and $18-million in cash were delivered by Philrem to Wei Kang Xu”

    6. Busy and AMLC ni Julia Abad sa paghahanap ng ipapanira kay VP Binay at mga kalaban ng LP. Kaya napabayaan nila ang trabaho nila! this is karma.

    7. The AMLC immediately red flags remittances of more than Php500 thousand or more. How come AMLC officials are saying that they knew of these events only after receiving phone calls of Bangladesh officals. The AMLC computer system should have alarmed AMLC officials immediately when redflagged amounts have been reached. Otherwise if the AMLC relies on victims of crime or even on the banks to alarm it
      what use is it? How come AMLC know about the banking activities of VP Binay and ex CJ Corona? Does the AMLC function on selected targets only?

      More important, the heist started not in Bangladesh Central Bank but in the New York Federal reserve where the Banglades account is kept. In short the hacking started right in the center of American financial system. And that should strike fear in all of us. If the New York Federal reserve which we look up to as the place the most rigorous of cyber financial security is subject to hacking- how much more third world countries like the Philippines-how can they defend themselves from cyber crime?

      • Sir if i may, as far as I know AMLC has no online access on the banks system. They only rely on reports sent by covered institutions and these reports as per AMLC has to be transmitted within 10 banking days from transaction date.
        Also, the heist originated from Bangladesh Central Bank – this bank in New York where BCB reserve account is maintained only executed the instruction to transfer money to various accounts – it did not originate there, they just processed a swift transfer instruction that passed all validation requirements from the system.
        For RCBC, as a former banker myself, I believe there are high ranking officials involved in the heist. Just think about the circle of friends that Maia Dequito was into – the chinese drug lord, jason go, lorenzo tan and raul tan (former head of the retail banking group who approved jason go’s lobbying for dequito to be posted in jupiter br) and was later transferred to head the treasury – the dirty money passed through the treasury systems, it was traded and was never questioned.
        Akoy naniwala na hindi inakal ni dequito na sindikato na pala ang napasok nya and it was too late for her to get out of the circle else, she dies and or her family. Taga execute lang si Dequito sa utos ng mga nasa taas sa kanya.

    8. The heist was detected. In fact, the stop payment order was sent and received in a timely manner. It was received Tuesday morning and by late afternoon, the money is gone and was transmitted to various recipient. The officer of the bank acknowledged the e mail sent by the head office. He informed Deguito abot the stop payment order. There was definitely a collusion within the bank. Do not blame the casinos. Blame the bank. Without them, this whole mess will not succeed. When the casinos received the transfer, I am 100 percent sure they double check with the bank. The casinos are very smart and they have total control on each big transfer. Casinos are sure the transfer is clean because it came from the bank but you can call them and they will say that the verified the transfer from the bank. The bank is negligent if not an accessory to the crime. The head office knew there was a heist going on and nobody followed it up. Impossible.

    9. I agree with you. The AMLC was caught sleeping on their job. The AMLC is now use as political tool of Pnoy. It only exist to pry into the account/s of his political enemies, destroying their reputation in the process. They are a shame.

    10. An honest man who is known as the Poor Man’s Governor in our country Bangladesh had to step down taking all the responsibilities and blame on his shoulders . We are weeping . The governor an honest bright man a selfless man who only aimed to work for the poor people of our country had to leave unceremoniously!
      Could we ask the beautiful nation Philippines to express their sorrow for the loss of the money of poor people of Bangladesh and also for we loosing our Poor Man’s Governor .
      Please .

      • Here is one who commiserates with you for losing your Poor Man’s Governor. I read a lot about him after his resignation and was full of admiration for his care and concern for the poor people of Bangladesh who know little about banking, financing, etc. I hope that whoever replaces him will have the same sympathies for the poor and disenfranchised in your country. Would that we have same kind of Governor in the Philippines!

    11. An honest man who is known as the Poor Man’s Governor had to step down taking all the responsibilities and blame on his shoulders . We are weeping . The governor an honest bright man a selfless man who only aimed to work for the poor people of our country had to leave unceremoniously!
      Could we ask the beautiful nation Philippines to express their sorrow for the loss of the money of poor people and also for we loosing our Poor Man’s Governor .
      Please .

      • Shormi, it is but a day of sorrow, that such a huge amount of money which could have be used to help Bangladeshis in need, simply went to the hands of some rich criminal groups.

        I hope authorities will get it back for your country and people. As to your Central Bank governor, he’s act only showed how humble he is as a man of honour who did not make any excuses but too responsibility.