ALTHOUGH the progress of ongoing investigations by agencies with actual law enforcement functions has not been disclosed, what has been revealed so far in the entertaining but forensically deficient Senate hearings into the $81 million money-laundering scandal strongly suggests that RCBC bank as an organization was not privy to or an active participant in the plot to rob the central bank of Bangladesh.
Ironically, it would be better for the banking and financial sector of the country, and maybe even for RCBC itself, if it had been an intentional conspirator. That would be a much easier problem to solve than the comprehensive dysfunction that made RCBC an unwitting part of the scandal.
Consider this: As far as we know at this point, setting up the bank accounts that would receive the stolen funds, which happened in May of last year, was the first step in the entire plot to rob Bangladesh Bank; of all the banks in all the world, as one of my banker friends pointed out some time ago, the plotters chose to open those accounts at RCBC. And they did that a full eight months before they even broke into Bangladesh Bank’s systems.
What gave the conspirators that much confidence in the all-important receiving end of their process that they could set it up and forget about it until it was needed months later? One or two rogue managers in one branch office was certainly not enough; the plotters had to know that the system the money would have to pass through was too weak to prevent the money-laundering, that there were either enough people in key positions who could be compromised, or that processes and oversight were so sloppy and prone to error that they could be overcome.
Again, the amount of time that passed between the setting up of the accounts in May 2015 and the actual robbery on February 4 this year indicates a great deal of confidence on the part of the conspirators, and suggests that their choice of RCBC was not based at all on the right people being in the right places, but rather known vulnerabilities in the bank’s systems. It is not even certain that Bangladesh Bank was the target when the spurious accounts at RCBC were set up; the forensic investigation on the Bangladesh side so far has only been able to determine the intrusion into the bank’s systems occurred sometime in mid-January this year. Regardless of what the conspirators had in mind eight months prior to that, making the assumption that people in the bank—especially if they were not actually in on the plot—would still be in the same positions later would be too big a risk.
If RCBC as an organization—which is another way of saying, “RCBC’s top management”—was a party to the plot, which is the accusation disgraced branch manager Maia Deguito made against CEO Lorenzo Tan, it would indicate that the bank’s processes are basically sound, but that they were just being bypassed or intentionally thwarted. That problem would be easily solved by the bank’s simply ridding itself of the offending parties, and replacing them with ones committed to strictly following procedures. It has become fairly obvious through hours of Senate testimony and other revelations, however, that no one above the lowly level of Maia Deguito had any idea what was afoot, and simply had no control over the situation. The conspirators knew that was the environment at RCBC, which is why they were confident in their choice of that bank as the landing place for their stolen loot.
One sobering conclusion this suggests is that the potential for misuse of the banking system on a large scale is much higher than we realize. RCBC is not organized differently than any of its peers in the Philippines, and does not operate according to a different set of rules. If the problems that beset RCBC are viewed as having been the result of the wrong people having been in place, that means the only thing that clearly prevents something similar from happening in another Philippine bank is having the right people in place. People are a variable—they have different levels of skill and ambition; they move from one job to another; they retire; they die.
Relying on a variable to ensure the soundness of a system, whether in a single bank like RCBC or across the entire banking sector, is risk-taking to the point of recklessness. Of course, people are necessary to the system, but the system has to be robust enough not to collapse entirely and permit something like the largest single bank robbery in history from taking place if one or two bad ones find a place in it.
RCBC has a lot to do to repair its battered reputation, beginning with finding (and paying premium compensation to) a high-profile and ethically-ironclad replacement for its presumably soon-to-be former CEO Tan. Beyond that, however, the BSP and the country’s political leadership needs to reflect on the state of banking governance and management in general, and find ways to plug the gaps that almost overnight turned the country’s reputation for having a sound banking system on its head.