ON Thursday evening, a report circulated that RCBC, better known these days as “the bank up to its eyeballs in the fallout from the biggest single bank robbery in history,” had disclosed that it shut down its remittance office in Rome, “because it could not meet on time the computer systems capabilities required of it by [the]Banca D’Italia since 2014.” The report was based on a statement issued by the office of RCBC Global Transaction Banking group head Manny Narciso.
Of course the closure—which was really no big deal, the bank said, because remittances are a low-margin business with high operating costs—had nothing at all to do with the ongoing scandal, despite the unfortunate timing of the news. Just a bit of organizational streamlining, is all. Nothing to see here, move along.
To be fair, RCBC’s assertion that the closure of its remittance branch in Italy was not specifically related to the Bangladesh heist and the bank’s subsequent role in moving the stolen funds is not entirely inaccurate, but the implication that it was merely a business decision was not at all honest. As it turns out, it was not even RCBC’s decision.
In a tersely-worded order—at least as terse as anything written in the lyrical Italian language can be—on February 23, the Bank of Italy issued a Revoca dell’autorizzazione alla prestazione di servizi di pagamento, which according to Google Translate means “wallop yon horse with a parachute,” but according to my own admittedly weak grasp of Italian means “revocation of the authorization to provide services of payment.”
RCBC didn’t ‘decide’ to close its Rome remittance office; in other words, it had its license to continue doing business there revoked by the Italian authorities.
Although details of what specifically provoked the February 23 order have not been made available yet, the presumption for now is that it was, in fact, the current scandal that finally pushed the Bank of Italy to act against RCBC. Italy has particularly stringent regulations to combat money-laundering—the country is, after all, the birthplace of the Mafia—and other Philippine banks have found it difficult to operate remittance services there; largely because of costs associated with directives such as the computer system requirements cited by RCBC’s Narciso, several banks have already pulled out. BDO, Metrobank, PNB, and Landbank reportedly all closed shop more than a year ago, about the time the ‘systems capabilities’ guidelines were imposed, after they found themselves cut off from corresponding banks in the US; the new Italian regulations apparently obliged the corresponding banks to add a couple of steps to the remittance transfer process, which they were unwilling to do given the relatively small amount of revenue at stake.
In a notice dated March 13, BPI informed its customers that it, too, would be pulling the plug on its remittance offices located in Rome and Milan on June 1. As of this writing, BPI has not yet clarified whether the planned closure is the result of similar difficulties with corresponding banks or just a judgment that doing business in Italy is more trouble than it’s worth; either way, the end result is the same.
As far as I have been able to determine, none of the aforementioned banks ran afoul of the Italian regulators, but that is not the case with RCBC. Back in December 2012, its remittance operation was fined 22,000 euros (not the “hefty $74,500” reported by Rappler and a few others) by the Bank of Italy for having insufficient internal controls with respect to Italy’s anti-money laundering regulations. It was a relatively minor penalty, and to be clear, it was not imposed as a result of a criminal violation, but rather a failure to meet requirements after a reasonable amount of time.
Unfortunately for RCBC, the penalty landed them on the Italians’ “we’d better keep an eye on this outfit” list. As we are now learning, by the second week of February the news about what happened to Bangladesh Bank was generally known among the world’s banking community, although the bank had yet to inform the public or even its own government; both the New York Fed and the SWIFT system had sent out alerts around February 11 or 12 at the latest.
The revocation order of February 23, all two sentences of it, does not say it was issued because of the scandal here, so in an extremely literal sense RCBC was telling the truth.
But the order doesn’t give a reason at all—except for its rather obvious timing. From their point of view, the Italians had to act; in a country so sensitive to perceptions of financial irregularities, continuing to permit the very bank at the center of the drama to operate in the country, particularly after it had already been sanctioned for not maintaining acceptable standards, was simply not possible.
Whether in Italy or anywhere else, the presence of any Philippine financial institutions is a matter of indulgence and not obligation on the part of the host country; the risks posed are not something it has to accept. Italy may be more sensitive than most markets, but it is unlikely to be the only one to reassess the risk and decide the returns are not worth it.