The central bank on Monday said the involvement of a local bank and a remittance firm in the $81-million Bangladesh Bank heist could have been prevented if monetary authorities had supervisory powers over money service businesses (MSB) and were allowed by law to look into bank accounts.
“Earlier Mr. Senator you asked if the famous case could have been prevented. I think there would have been a better chance of detecting that at an early stage if the BSP [Bangko Sentral ng Pilipinas] had two things: One, supervisory powers over money service businesses; and two, the authority to look into the accounts,” BSP Governor Amando Tetangco Jr. told Senator Franklin Drilon during a joint meeting of the committees on banks and ways and means.
In February, hackers supposedly stole $81 million from a Bangladesh Bank account at the Federal Reserve Bank of New York. The funds were the deposited into fictitious accounts at the Rizal Commercial Banking Corp. (RCBC) Jupiter Street branch n Makati City.
In August, the central bank imposed a P1-billion fine on RCBC for non-compliance with banking laws and regulations in connection with the $81M Bangladesh Bank Cyber Heist.
Remittance firm Philrem Service Corp., the company which transferred the funds from RCBC to casinos and junket operators was sued by the Bureau of Internal Revenue before the Department of Justice (DOJ) for non-payment of P35.61 million of taxes.
The BSP also canceled Philrem’s certificate of registration for failure to comply with anti-money laundering rules.
Tetangco said the central bank is firm on its proposal to relax the bank secrecy law to strengthen the central bank’s regulatory powers.
“This means that the BSP is asking for authority from Congress to be able to look into bank accounts … when in the course of bank examination … when there is reasonable ground to believe that fraud, unlawful activity or irregularity has been committed or is being committed … and being able to look into bank accounts would establish that such is really the case,” he told reporters on the sidelines of the Senate meeting.
Tetangco said the Philippines is only one of the two countries that still has a bank secrecy law in place, the other being Lebanon.
“The concern that I raised was really about the Philippines being one of the few countries with bank secrecy laws and that the regulator is not exempted from the bank secrecy law. The concern is really that since many countries have already lifted their bank secrecy regulations, the Philippines might attract dirty money or laundered money because of the existence of strict bank secrecy laws here. That was the concern,” he said.
“Based on our experience, when fraud is committed, the proceeds of the crime would normally be deposited in a bank account. Once that happens, the BSP can no longer pursue its investigation because it cannot look into those bank accounts,” he added.
He said the central bank’s main concern is to be able to strengthen its authority to enforce it regulatory functions by being able to look into an account when an irregularity has been committed or is being committed.
BSP Deputy Governor Nestor Espenilla Jr. said the central bank is also seeking to expand its supervision on money service business (MSB) like pawnshops and remittance firms through the proposed amendments to its Charter.
Unlike banks, money service businesses are not actually under formal supervision by the BSP.
“But they are under us for one narrow purpose – for compliance of anti-money laundering law. Because of that, they have to register with the BSP. So it is some kind of oversight, but not as complete supervision,” he said.
The most that the BSP can do to a non-compliant MSB is cancel its registration, but the central bank cannot impose penalties like monetary fines because those things come with the powers of supervision, Espenilla noted.
“That is really why in the proposed BSP Charter amendments, we are seeking formalization of a supervision authority similar to that of banks. Although, of course, the intensity is going to be different because banks take deposits, they do not. So it has to be also proportionate,” he said.
An expanded central bank supervision on MSBs can come about via the BSP charter amendment and putting MSBs under BSP supervision under the proposed amendments to the Anti-Money Laundering Act, he added.