Going after dummies and money launderers

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Emeterio Sd. Perez

Emeterio Sd. Perez

IS the Securities and Exchange Commission (SEC) really serious in going after foreigners who use dummies to circumvent the 60-40 legal ratio of ownership in favor of Filipinos?

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If so, then SEC officials will be doing the right thing. The task may not be easy because they have nothing yet to start with. Besides, they have not followed up their own posting on sec.gov.ph. as to how they intend to implement a “no-dummy” policy for stock corporations engaged in industries where foreigners should own only up to 40 percent of capital stock.

But they would find it easier today than say many years ago to run after those who hide their holdings by hiring Filipinos who may only be willing to act as paid dummies. Unlike in the past, the government did not have an Anti-Money Laundering Council (AMLC) although it already had as it has always had the Bureau of Internal Revenue (BIR).

As this country’s chief tax collector, BIR Commissioner Kim Henares is armed with so awesome powers that sow fears among taxpayers. She implements policies that she also created. But in the meantime, let us forget her selective policy of collecting from big business. Rather, the focus this time is SEC officials’ plan of ending the collusion between foreigners and Filipinos in circumventing the 40-60 ratio of ownership of certain stock corporations.

Definitely, the SEC could not put an end to the illegal practice without the help of at least two other government offices. One is the AMLC, which could help the SEC trace the source of foreign money used to invest in local companies. Its link with its counterparts in other countries would facilitate the job of the SEC in establishing the identities of investors, such as their backgrounds and their local connections.

Definitely, the BIR could play a crucial role in implementing the SEC’s anti-dummy initiative. Just imagine the impact of the tax agency’s examination on the investments of Filipino stockholders who may not have the capacity to invest huge amounts without the funding of outsiders. Henares has only to ask her examiners to find the suspicious amounts of investments, and determine if the stockholders suspected of acting for foreigners have fully paid the taxes due on his or her investible funds.

With the BIR’s finding that no tax payments were made, the AMLC could be tapped to check the foreigners’ businesses in their home countries, with the assistance of the local council’s counterparts in those countries.

The resulting effective cooperation among these three offices—AMLC, BIR and SEC—could even be expanded to include the search for untaxed hidden money of both Filipinos and foreigners in stock corporations with the use of dummies. There could be few if not many dummy corporations among the corporate files that are posted on sec.gov.ph. All you have to do, if you are an enterprising researcher, is look for information about suspicious entries in SEC’s data banks, identify the companies, then go to the SEC files section and study every available documents.

Researching on individual companies may not only be expensive; it is also taxing. Imagine yourself going over general information sheets (GIS), audited financial statements, and articles of incorporation.

And what could be more frustrating than finding the stockholders in the GIS are holding companies. You would encounter what could be thick layers and layers of ownerships that if there are three of them in one file, chances are these holding companies may also be owned by companies that, in turn, also list corporate stockholders.

But you don’t have to give up easily. You only rest when you have successfully uncovered the REAL owners behind the dummies and holding companies acting as stockholders.

If you are ready to spend at least a thousand pesos on just one company to find violators of corporate ownerships law, then start digging for them. Who knows, you might also encounter along the way dummies and money launderers.

To paraphrase Dirty Harry played by Clint Eastwood, “Go ahead, make THEIR day.”

esdperes@gmail.com

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