IN 1985, the year I graduated high school, the bizarre and darkly comedic film Brazil was released. Although it quickly became one of those movies that are tritely described as “a cult classic,” it was largely a bust at the mainstream box office; the reaction of my girlfriend at the time—“I wasn’t sure if I was supposed to laugh or not”—was apparently typical of most of the audience, who just couldn’t quite wrap their heads around the film’s message.
I loved it, and it remains among my top three or four favorite movies of all time. Until this week, however, I had no idea it was actually a documentary.
In the movie, Brazil (the title, incidentally, is taken from the film’s signature song, “Aquarela do Brasil,” and not the actual country) is a consumption-addicted dystopia ruled by a bloated, serially redundant bureaucracy that is paradoxically faceless and driven by personal connections at the same time, where even the simplest function of government is hopelessly mired in procedure and paperwork. A typical exchange: “Here is your receipt. And here is my receipt for your receipt.”
In one of the best examples of life imitating art that I’ve seen in a long time, the Anti-Money Laundering Council (AMLC) informed Bangladesh ambassador John Gomes that the agency could not return the small fraction of the money stolen from his country’s central bank and surrendered by Kam Sin Wong until the latter provides a written authorization.
Wong, who is identified in the scant evidence revealed so far as a slippery little hustler at best and possibly the chief architect of the impressively brazen heist, has already agreed that the money must be from the Bangladesh robbery (despite claiming in his Senate testimony that he didn’t know where it came from). So Ambassador Gomes on Tuesday expressed hope, not unreasonably and not without obvious frustration, that the problem could be cleared up quickly. If Wong decided not to cooperate, however, the AMLC would have to obtain a court order authorizing the confiscation and return of the money.
It seems fantastic that in a case in which, once the stolen funds crossed the border into the Philippines, every extensive process concerned with the movement of large sums of money, illicit or not, either broke down or was intentionally bypassed with very little effort, the AMLC decides to hew strictly to procedure at a point where the victim of the crime can actually be given a little relief. But that is precisely what has happened, and as a result, the government can now add “insincerity” to the global impression of “ineptitude” it already has.
I cannot recall any large-scale scandal, in at least the decade-plus I have been in this country, that was a result, directly or indirectly, of not enough regulation; I’ll concede the point if someone can provide an example, but I don’t think anyone can. The RCBC scandal is an excellent illustration of the problematic mindset this country has: almost immediately upon the news becoming public, the reaction of the responsible authorities in the AMLC, the broader central bank organization, and the legislature was that “loopholes” in the existing anti-money laundering law made the receipt and distribution of Bangladesh’s stolen money possible. It is a laughable assertion, because stories abound—it even happened to me, in connection with a large insurance settlement I received from the US several years ago—of ordinary individuals and businesses who have had transactions scrutinized by the country’s financial gatekeepers.
If the existing law and related regulations and procedures were followed in the RCBC case, the money would have never gotten into the thieves’ hands in the first place. Whether through inability, incompetence, or willful misbehavior, several layers of oversight failed, beginning with the AMLC’s monitoring of large transactions, which are, for the most part, automatically reported to it. The excuse that the agency lacks enough qualified people to handle the workload is specious; if it can flag a relatively small $14,000 transaction for extra verification (the amount involved in my one brush with anti-money laundering authorities), there is no acceptable reason for missing a batch of transactions ranging in size from $6 million to $30 million arriving all at once at one particular bank branch.
More government is not the solution to government that works poorly or not at all, and yet the belief otherwise is so strong here that it might as well be scripture. This is part of the ‘unpredictability’ that INSEAD Business School Dean Ilian Mihov recently highlighted as a discouragement to greater investment in the Philippines: Investors already face a daunting challenge in navigating the bloated, multi-level morass of Philippine bureaucracy just to complete the most basic steps in setting up a business, and have to add the awareness that the process might suddenly expand or change direction mid-course if some sort of breakdown occurs, or even just if some self-important official wishes to put his own stamp on it, such as what happened to the mining industry with President BS Aquino 3rd’s ill-considered EO 79 in 2011.
It is an economic axiom that the efficiency of a system decreases with increasing complexity; the phenomenon is well known in tax systems, but can just as accurately apply to any sort of bureaucratic framework. If the Philippines has not already gone well beyond the point were diminishing returns turn into actual losses—and the RCBC scandal is strong evidence that it may have—it is certainly well on its way. And as long as that is the persistent character of the regulatory environment, the country will continue to be bypassed by the best investors and be an attractive proposition only to the very brave or very dumb.