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.