SCHEME BEYOND BORDERS: PHILIPPINES’ FIGHT AGAINSTMONEY LAUNDERING
Dennis L. Garcia*

I.

INTRODUCTION

Money laundering is a massive and evolving challenge around the world, and theincreasing sophistication of technology only worsens detection and deterrence of the crime.
In place of guns and masks, the crime may now be committed by computer experts
operating in the shadowy world of hacking and manipulating information; and may be carriedout with just a few keystrokes.
Millions of funds may now be transferred from a particular system to a far-flungnetwork, moving swiftly as data over the Internet. This is exactly how the most brazen bankheist in the 21st century was realized—with the Philippines serving as cashing crew for highprofile anonymous thieves.
The International Monetary Fund states that “money laundering refers to activities
intended to disguise the origins of the proceeds of the crime through processes that transform
illegal inputs into apparently legitimate sources.”1
In the Philippines, money laundering was criminalized by Section 4 of Republic Act
9160, or the Anti-Money Laundering Act (AMLA) of 2001. It is committed by any person who,
knowing that any monetary instrument or property relates to the proceeds of an unlawful
activity, does the following:
i.
ii.
iii.
iv.
v.
vi.

transacts said monetary instrument or property;
converts, transfers, disposes of, moves, acquires, possesses, or uses saidmonetary instruments or property;
conceals or disguises the true nature, source, location, disposition, movement,
ownership of rights with respect to said monetary instrument or property;
attempts or conspires to commit money laundering offences;aids, abets, assists in or counsels the commission of money laundering offences;andperforms or fails to perform any act as a result of which he facilitates theoffence.2

But while the law is already in place, and amendments to it are being constantly updated,
there are still some loopholes which clever criminals use to their advantage.

*

Director, Office of the Ombudsman, Republic of the Philippines.
SOCTA Philippines. (2013). Serious and Organize Crime Threat Assessment: Money Laundering, p. 168.
2
Ibid.
1

This paper seeks to present the vulnerabilities of current financial regulations in thePhilippines, particularly the AMLA, amidst the complexities of cyberspace and the online
remittance system worldwide. It postulates the need for further amendment of the AMLA to
include casinos and other related transactions within the coverage of the law.
II. EVOLUTION OF THE ANTI-MONEY LAUNDERING ACT IN THE
PHILIPPINES
Money laundering, simply put, is literally sanitizing the money trail to legitimize
criminally acquired assets or cash—thus, the term “laundering.”
As such, proceeds of the crime appear in public like legitimate income; and withoutmeans to actually check the origin of the funds, criminals are given incentives to continue theirillegal activities. In the long run, money laundering has the effect of destabilizing thegovernment and weakening the state’s financial system—making it altogether a threat tonational security.3
It is for this reason that the Philippines, on 18 September 2001, enacted RA 9160, whichputs into effect the policy of the State “to protect and preserve the integrity and confidentialityof bank accounts and to ensure that the Philippines shall not be used as a money launderingsite for the proceeds of any unlawful activity.”4The law created the Anti-Money Laundering Council (AMLC)—the government agency
primarily tasked with implementing the AMLA. Among the functions of the AMLC are as
follows:
i.
ii.
iii.
iv.
v.
vi.

Implementation of necessary measures to counteract money laundering;
Investigation of suspicious transactions and covered transactions deemedsuspicious;
Filing of complaints with the Department of Justice or Office of the
Ombudsman for prosecution;
Institution of civil forfeiture and all other remedial proceedings through the
Office of the Solicitor General;
To receive and take action in respect of any request from foreign states forassistance in their own anti-money laundering operations; andInvestigation of financing terrorism and any property or funds relating to theoffence.5

Under the law, transactions in cash or other equivalent monetary instruments involving
a total amount of P500,000 and above within one business day must be reported to the AMLC.
These are referred to as “Covered Transactions.”“Suspicious transactions,” which are also required under the law to be under thecognizance of the AMLC, are those transactions, regardless of the amount involved, that havethe following circumstances:3

Bangko Sentral ng Pilipinas. (2012, February 21). BSP briefer on the Anti-Money Laundering Act of 2001.
Retrieved <http://www.gov.ph/2012/02/21/bsp-briefer-on-anti-money-laundering-act-of-2001/>.
4
Republic Act 9160
5
Bautista, C.C.P. (2014). Getting the Deal Through – Anti-Money Laundering. pp. 116-117.

i.
ii.
iii.
iv.
v.
vi.

There is no underlying legal or trade obligation, purpose, or economic justification;
Client is not properly identified;Amount involved is not commensurate with the financial capacity of the client;Transaction is structured in order to avoid being subject to reporting requirements;
Any circumstance which deviates from the profile of the client or his pasttransactions;
The transaction is in any way related to unlawful activity that is about to be, is being,or has been committed.

Reports to the AMLC of such transactions shall be made within 5 working days from theoccurrence thereof, unless the Bangko Sentral ng Pilipinas, Securities and Exchange
Commission, or the Insurance Commission prescribes a longer period not exceeding 10
working days.
Failure to report such covered and/or suspicious transactions will be subject to a penalty
of 6 months’ to 4 years’ imprisonment or a fine of not less than P100,000 but not more thanP500,000.
The reportorial requirement of such covered and/or suspicious transactions under the
AMLA provides for confidentiality restrictions. Officers and employees of the AMLC areprohibited in any manner from communicating to any person about the fact that a report was
made. Contents thereof shall remain confidential, and must not be published or aired in any
manner. For this offence, the penalty is 3 to 8 years’ imprisonment and a fine of not less thanP500,000.00 but not more than P1 million.6
A.

First Amendment: Republic Act No. 9194
Before the enactment of the AMLA, the Philippines lacked a basic set of anti-money
laundering regulations, and system of reporting suspicious transactions. The country was also
listed as among the Non-Cooperative Countries and Territories (NCCT) in the Paris-based
Financial Action Task Force (FATF)—an organization which sets the international standards
for combating money laundering and terrorist financing.
But even with the enactment of RA 9160, the Philippines remained on the NCCT list
based on the FATF’s findings that additional countermeasures must be taken to address theidentified deficiencies in its anti-money laundering legislation. 7 Thus, on 5 March 2003,
President Gloria Macapagal-Arroyo signed into law RA 9194, amending RA 9160.
On 11 February 2005, the Philippines was taken off the NCCT list after the FATF’s AsiaPacific Group’s (APG) review confirmed that the country was effectively implementing antimoney laundering measures.
From 22 September to 6 October 2008, the Philippines underwent an evaluation
conducted jointly by the World Bank and the APG on Money Laundering. By February 2010,
the Philippines was placed on the “grey list,” which signifies that it was “making sufficient

6

Bangko Sentral ng Pilipinas. (2012, February 21). BSP briefer on the Anti-Money Laundering Act of 2001.
Retrieved <http://www.gov.ph/2012/02/21/bsp-briefer-on-anti-money-laundering-act-of-2001/>.
7
Bacay-Abad, J.C. The Anti-Money Laundering Act of 2001, as amended.

progress in the global campaign against money launderers and terrorists.”8 The evaluators,
though, had set December 2011 as the deadline for the Philippines to address the identified
deficiencies in RA 9194.
However, in February 2012, the country was downgraded from the “grey list” to the “darkgrey list” for its failure to meet the deadline previously set by the APG. While the Philippines
persisted in battling for reforms to its anti-money laundering regulations, the government
continued to circle around the FATF’s “black list” area.
A black-listed nation is subjected to restrictions, more stringent inspections, andadditional reporting requirements by the FATF. In the long run, it could cause inconvenience
to remittances, which is something the Philippines could not afford, considering the thousandsof Overseas Filipino Workers detailed across the globe.
B.

Second Amendment: Republic Act No. 10167
Signed on 18 June 2012, RA 10167 was signed into law by President Benigno S. Aquino
III. This further amended RA 9194 and placed the Philippines back on the “grey list”. The
FATF thus recognized the significant steps the government has taken in its anti-money
laundering system; but it also noted in its statement made in Rome in June 2012 that “certain
deficiencies remain; and that the FATF encourages the Philippines to address its remaining
deficiencies and continue the process of implementing its action plan.”9C.

Third Amendment: Republic Act No. 10365
Based on the FATF’s assessment, the government once again amended the law andenacted RA 10365 on 15 February 2013. A week later, or on 22 February 2013, the FATF
noted the significant progress made, and decided to conduct an on-site visit to the Philippines.
However, the FATF still raised concerns on the non-inclusion of the casino sector in its existinganti-money laundering regulations.
On 17-21 June 2013, a plenary meeting was conducted in Oslo, Norway, wherein thePhilippines was officially removed from the FATF list of monitored jurisdictions. The
pronouncement reads:“The FATF welcomes the Philippines’ significant progress in
improving its AML/CFT regime and notes that the Philippines has
established the legal and regulatory framework to meet its
commitments in its Action Plan regarding the strategic deficiencies
that the FATF identified in October 2010. The Philippines istherefore no longer subject to FATF’s monitoring process under its
on-going global AML/CFT compliance process.”10D.

Significant Amendments
The subsequent amendments to the Anti-Money Laundering Act reaped the followingchanges:11

8

Chipongian, L.C. (2016, March 20). What is money Laundering. Manila Bulletin. Retrieved
http://www.mb.com.ph/what-is-money-laundering/
9
Bacay-Abad, J.C. The Anti-Money Laundering Act of 2001, As Amended.
10
Bacay-Abad, J.C. The Anti-Money Laundering Act of 2001, As Amended.
11
Ibid.

R.A. No. 9160 (2001)
R.A. No. 10167 (2012)
On Petition for Freeze OrderNo specific period within which the Court Amended Sec. 10, reads as follows:
should act on the ex parte petition“…In any case, the court
should act on the petition to freeze
within twenty-four (24) hours fromfiling of the petition…” –Sec. 1., par.
1.
No provision on the remedy available to a Amended Sec. 10, reads as follows:
person whose property has been frozen“…A person whose accounthas been frozen may file a motion tolift the freeze order and the court
must resolve this motion before theexpiration of the twenty (20)-dayoriginal freeze order...” –Sec. 1, par.
2
No provision against Temporary Restraining Amended Sec. 10, reads as follows:
Order, or Writ of Injunction"No court shall issue a
temporary restraining order or a writof injunction against any freeze
order, except the Supreme Court."—Sec. 1., par. 3
On Application for Bank Inquiry
No express provision on which Court has Amended Sec. 11, reads as follows:
jurisdiction; filed with the Regional Trial
Court"The Court of Appeals shall act
on the application to inquire into or
examine any deposit or investment
with any banking institution or nonbank financial institution withintwenty-four (24) hours from filing of
the application." – Sec. 2, par. 2
No express provision on procedure; but Amended Sec. 11, reads as follows:
notice and hearing required (pursuant to
Republic vs. Eugenio, G.R. No. 174629,“…the AMLC may inquire
February 14, 2008)
into or examine any particular deposit
or investment, including related“The necessary implication of
accounts, with any banking institution
the [the] finding that Section 11 ofor non-bank financial institution upon
the AMLA does not generallyorder of any competent court based on
authorize the issuance ex parte of thean ex parte application in cases ofbank inquiry order would be that
violations of this Act…” –Sec. 2, par.
such orders cannot be issued unless1
notice is given to the owners of theaccount, allowing them theopportunity to contest the issuanceof the order…”

Meanwhile, the following provisions were added to R.A. 10365:12
R.A. 9160 (2001)
R.A. No. 10365 (2013)
As to covered institutions/persons“Covered institutions” –Sec. 3 (a)“Covered persons, natural or juridical,…” –Sec. 1 (a)Refers only to:
Added new covered persons, to wit:a. Banks, non-banks, quasi-banks,
a. Jewelry dealers in precious metals,
trust entities, and all otherwho, as a business trade in precious
institutions, regulated by themetals in transactions in excess of P1
Bangko Sentral ng Pilipinas —million. – Sec. 1 (a), par. 4
Sec. 3(a), par. 1;
b. Jewelry dealers in precious stones,b. Insurance companies and allwho, as a business trade in precious
other institutions supervised orstones for transactions in excess ofregulated by the Insurance
P1 million. – Sec. 1 (a), par. 5
Commission -- Sec. 3(a), par. 2;
c. Company service providers. – Sec. 1
and(a), par. 6
c. Securities dealers, mutual funds
d. Persons who manage clients’ moneycompanies, foreign exchangeor bank accounts, organize
corporations, and other entities
contributions for operation of a
dealing with currency orcompany; and/or create, operate or
financial derivatives – Sec. 3(a),manage juridical persons orpar. 3.
arrangements. – Sec. 1 (a), par. 7
Definition of Money Laundering“SEC. 4. Money Laundering"SEC. 4. Money Laundering
Offence. – Money laundering is a
Offence. – Money laundering iscrime whereby the proceeds of ancommitted by any person who,
unlawful activity are transacted,
knowing that any monetary
thereby making them appear to
instrument or property represents,
have originated from legitimate
involves, or relates to the proceeds
sources. It is committed by theof any unlawful activity:
following:"(a) transacts said monetary(a) Any person knowing that
instrument or property;
any monetary instrument orproperty represents, involves,"(b) converts, transfers,
or relates to, the proceeds ofdisposes of, moves, acquires,
any unlawful activity,
possesses or uses said monetarytransacts or attempts toinstrument or property;
transact said monetary
instrument or property.
"(c) conceals or disguises thetrue nature, source, location,(b) Any person knowing that
disposition, movement or
any monetary instrument orownership of or rights withproperty involves therespect to said monetaryproceeds of any unlawful
instrument or property;
12

Bacay-Abad, J.C. The Anti-Money Laundering Act of 2001, as amended.

activity, performs or fails toperform any act as a result of
which he facilitates theoffence of money launderingreferred to in paragraph (a)above.
(c) Any person knowing thatany monetary instrument orproperty is required under thisAct to be disclosed and filedwith the Anti-Money
Laundering Council (AMLC),
fails to do so.”"(d) attempts or conspires tocommit money laundering
offences referred to inparagraphs (a), (b) or (c);"(e) aids, abets, assists in orcounsels the commission of themoney laundering offencesreferred to in paragraphs (a), (b)or (c) above; and"(f) performs or fails to perform
any act as a result of which hefacilitates the offence of money
laundering referred to inparagraphs (a), (b) or (c) above.

"Money laundering is also
committed by any covered person
who, knowing that a covered or
suspicious transaction is required
under this Act to be reported to theAnti-Money Laundering Council(AMLC), fails to do so."Unlawful Activities
Unlawful Activity refers to any act orSec. 2 of the amended law added theomission or series or combination
following unlawful activities:
thereof involving or having relation to
1. Financing of Terrorism;
the following:
2. Bribery;
1. Kidnapping for ransom;
3. Frauds and Illegal Exactions and
2. Violation of Dangerous Drugs
Transactions;
Act of 1972;
4. Malversation of Public Funds;
3. Violation of Anti-Graft and5. Forgeries and Counterfeiting;Corrupt Practices Act;
6. Violations of Anti-Trafficking in
4. Plunder;
Persons Act of 20013;
5. Robbery and Extortion;
7. Violations of Revised Forestry
6. Jueteng and Masiao punished as
Code;Illegal Gambling;
8. Violations of Philippine
7. Piracy on high seas;
Fisheries Code of 1998;
8. Qualified theft;
9. Violations of Philippine Mining
9. Swindling;
Act of 1995;
10. Smuggling;
10. Violations of Wildlife Resources
11. Violations of Electronic
Conservation and Protection Act;
Commerce Act;
11. Violations of National Caves and12. Hijacking, destructive arson,
Cave Resources Management
and murder, including thoseProtection Act;
perpetrated by terrorists against
12. Violations of Anti-Carnapping
non-combatant persons andAct of 2002;
similar targets;13. Fraudulent practices under the
Securities Regulation Code of
2000; and14. Felonies punishable under penal
laws of other countries. –Sec. 3(i)

13. Illegal/Unlawful Possession,
Manufacture, Dealing In,
Acquisition or Disposition ofFirearms, Ammunition or
Explosives;
14. Violation of the Anti-Fencing
Law;
15. Violation the Migrant Workers
and Overseas Filipinos Act of1995;
16. Violation of the Intellectual
Property Code of the Philippines;
17. Violation of the Anti-Photo andVideo Voyeurism Act of 2009;18. Violation of the Anti-Child
Pornography Act of 2009; and19. Violations of the Special
Protection of Children Against
Abuse, Exploitation andDiscrimination.
Powers of the AMLC
“Sec. 7. Creation of Anti-Money
Amended, as follows:
Laundering Council (AMLC)…
"(6) to apply before the Court of(6) to freeze any monetary
Appeals, ex parte, for the freezing of any
instrument or property alleged to bemonetary instrument or property alleged
proceeds of any unlawful activity;”
to be laundered, proceeds from, or
instrumentalities used in or intended foruse in any unlawful activity as definedin Section 3(i) hereof;” – Sec. 6, par. 2
No express provision on reporting real
Requires the Land Registration
estate transactions
Authority and all its Registries of Deeds
to submit to the AMLC, reports on all
real estate transactions involving anamount in excess of P500,000 within 15
days from the date of registration of thetransaction, in a form to be prescribed by
the AMLC. The AMLC may also
require the Land Registration Authority
and all its Registries of Deeds to submit
copies of relevant documents of all realestate transactions. – Sec. 6, par. 3.
III.

MONEY LAUNDERING TYPOLOGIES

Money laundering is deeply entrenched in terrorist financing and crime groups, and thethreats posed by it to the government and its people should not be discounted.

According to FATF’s statistical data, there were about 288 money laundering and relatedcases filed in the Philippines from 2008 to 2013. Of the said number, 62 civil forfeiture cases
were filed before the Regional Trial Courts, and at least 73 applications for freeze orders werefiled before the Court of Appeals.
The following amounts were involved in numerous applications for freeze orders: 1.88billion PHP; 4.5-million USD, 7-thousand EURO, and 6.66-thousand GBP. Meanwhile, thefollowing were the amounts subject of petitions for civil forfeiture filed: 4.72-billion PHP; 6million USD; 7.29-thousand EURO; 3-thousand CNY; 6.65-thousand GBP; and 561-thousand
HKD.13
With the recent passage of RA 10365, the Philippines sees a strengthened mechanism tocombat money laundering. The law now gives the AMLC a broadened power to investigate
and prosecute more money laundering cases covering a wider range of unlawful activities.
However, money launderers are said to be always a step ahead of the financial investigators
tasked to stop them. It is thus imperative to get a grasp of the recent typologies used by money
launderers in cases investigated by the AMLC.
“Typologies” refer to the various techniques used to launder money or financeterrorism.14 The Mutual Evaluation Report of the FATF for 2009 notes that money launderingin the Philippines is usually perpetrated through crimes committed within the Philippines. The
same report, however, likewise underscores the fact that some foreign nationals launder into
the Philippines the proceeds of their criminal enterprise.
According to FATF, money laundering is conducted as follows:15
a. Collection, where money is gathered from unlawful activities;
b. Placement, where dirty money is integrated into the financial system as clean
money;c. Layering, where funds are transferred between various offshore/onshore banks orfinancial institution; andd. Integration, where such funds are being used to purchase assets, financial
investments, and other commercial/industrial enterprise.

13

SOCTA Philippines. (2013). Serious and Organize Crime Threat Assessment: Money Laundering, p. 173.
SOCTA Philippines. (2014). Serious and Organize Crime Threat Assessment: Money Laundering, p. 124.
15
Financial Action Task Force. (2009). Money Laundering and Terrorist Financing Typologies.
14

A TYPICAL MONEY LAUNDERING SCHEME16

The FATF also identified in the same report17 other strategies which money launderers
exploit to complete the crime, to wit:a. Money launderers make use of the various services being offered by mainstream
retail banking with the aid of forged identities;b. The securities and insurance sectors are also exploited using fake identities;
c. Domestic and international fund transfers likewise facilitate money laundering;d. In a smaller scale, money changers and foreign currency dealers have also beenused to launder money from criminal enterprise; ande. Cash smuggling into and outside of the country is another usual practice of money
launderers.
IV. THE $81-M BANGLADESH CYBERHEIST“This money laundering controversy had put the Philippines in anegative light globally and heightened calls to repeal the banksecrecy law and give more teeth to the AMLC to directly freeze andinvestigate suspicious accounts as well as to include casinos
among entities covered by reporting obligations under the AMLA.”–Philippine Daily Inquirer, 29 March 2016
Dubbed as the biggest money laundering scandal to hit the Philippines, the recent issueof the $81-million Bangladesh cyberheist has placed the country’s financial industry the
spotlight—drawing attention to the urgency of putting more teeth into the Anti-Money
Laundering Act.
16

Renner. P. (2012) Retrieved <http://kycmap.com/wordpress/wp-content/uploads/2012/12/Paul-Renner-C6KYC-money-laundering-example.jpg>.
17
Ibid.

The money, coming from the US Federal Reserve of New York account of the
Bangladesh Central Bank, is said to have reached the Philippine banking system sometime
between 4-5 February 2016.
As culled from the Philippine Senate Blue Ribbon Committee probe, the money was
initially wired into four Rizal Commercial Banking Corporation (RCBC) foreign currency
accounts in its Jupiter, Makati branch.
The accounts, which were later on found out to be under fictitious identities, had thefollowing account names and deposits each covering a divided share of the loot: (a) Jessie
Christopher Magno Lagrosas, $30-million; (b) Michael Francisco Cruz, $6-million; (c) Alfred
Santos Vergara, $20-million; and (d) Enrico Teodoro Vasquez, $25-million.18
According to RCBC officials, said accounts were opened as early as 15 May 2015, withinitial deposits of $500 each. These accounts remained untouched until 4 February 2016—thedate when the transfer from the US Federal Reserve Bank of New York was made.19
The funds were then transferred to a foreign exchange broker, Philrem Service
Corporation (Philrem), which converted part of the loot into Philippine pesos; then it was
returned to RCBC and consolidated in the account of a Chinese-Filipino businessman named
William Go.
Soon after, the money was sent to two big-time casino junket operators, namely, Weikang
Xu and Kim Wong, who then moved the proceeds to different casino high-rollers throughMidas Hotel and Casino, and Solaire Resort and Casino.
Maia Santos-Deguito, Manager of RCBC Jupiter, Makati Branch, allegedly processed
and facilitated the movement of said funds and is said to have worked in collusion with themastermind of the entire money-laundering operations.
A.

The Loot Onset“It is the digital version of the heist depicted in the movie “Ocean’s
Eleven.” The trend is moving from opportunistic crime to
Hollywood-scale attacks.” –Adrian Nish, Cyberthreat Intelligence
Team Head, BAE Systems

Hackers have successfully carried out the most brazen digital bank heist in the history ofcybercrime after siphoning millions of dollars by breaching the highly trusted internationalbank messaging system called SWIFT, or the Society for Worldwide Interbank Financial
Telecommunication.
SWIFT is billed as a secure system that banks use to authorize payments from one
account to another. What began in 1973 as a relatively small network of 240 banks has

18

Dumlao-Abadilla, D. (2016, March 29). Faces behind fictitious accounts known. Philippine Daily Inquirer,
pp. A1, A16
19
Ibid.

expanded to 11,000 users around the world, which reflects an increasingly global andinterconnected financial system.20
Under the SWIFT system, each bank is identified by a set of codes; and it was the set ofcodes assigned to Bangladesh Central Bank that was recognized and authenticated on 4
February 2016, when it transferred a whopping amount of $81-million to the Philippines.21
According to FireEye’s Mandiant forensics, Bangladesh investigators of the cyberheist,
the hackers are believed to have installed some type of malware into the Central Bank’s
computer system, and observed how transfers are done. The malware is classified as a Remote
Access Trojan (RAT), a form of spyware that allowed hackers to gain access to the bank’s
credentials.22
The hackers’ timing was perfect. When officials from the US Federal Bank tried to reachBangladesh as regards the receipt of instruction to move funds, it was a weekend there and noone was working. By the time central bankers in Bangladesh discovered the fraud, it was also
a weekend in New York and the Federal offices were closed.23
On 5 February 2016, the RCBC Jupiter, Makati Branch saw the $81-million inward
remittance and applied the funds to the four beneficiary accounts.24
The Bangladesh Central Bank, on 8 February 2016, sent an urgent message to the RCBC,
which reads: “PLEASE be informed that this is a doubtful transaction. You are requested tostop the payment, and if you already made the payment then freeze the account of thebeneficiary for proper investigation. We think that the transaction is contradictory with theanti-money laundering law.”25
However, RCBC was closed that day in view of the Chinese New Year holiday.
On 9 February 2016, the same message was again sent by the Bangladesh Central Bank
to RCBC. By the time RCBC gained access to said messages, the $81-million had already been
withdrawn.26
On 11 February 2016, the Bangladesh Central Bank alerted the Philippine Central Bank
Governor who, in turn, informed the AMLC on what was later revealed to be the largest
laundering caper in Philippine history.
20

Corkery, M. (2016, April 30). Hackers’ $81 Million Attack on World Banking. Retrieved<http://www.nytimes.com/2016/05/01/business/dealbook/hackers-81-million-sneak-attack-on-worldbanking.html?_r=1>.
21
Ibid.
22
Quadir, S. (2016, March 11). Spelling mistake stops hackers stealing $1 billion in Bangladesh bank heist.
Retrieved <http://www.independent.co.uk/news/world/asia/spelling-mistake-stops-hackers-stealing-1-billion-inbangladesh-bank-heist-a6924971.html>.
23
Corkery, M. (2016, April 30). Hackers’ $81 Million Attack on World Banking. Retrieved<http://www.nytimes.com/2016/05/01/business/dealbook/hackers-81-million-sneak-attack-on-worldbanking.html?_r=1>.
24
Chempo. (2016, March 18). The Great Bangladesh Central Bank Heist. Retrieved<https://joeam.com/2016/03/18/the-great-bangladesh-central-bank-heist/>.
25
Lucas, D.L. (2016, April 13). Dhaka bank sent 3 urgent messages. Philippine Daily Inquirer, pp. A1, A17
26
Salaverria, L.B. (2016, April 13). $81M withdrawn when stop payment order came, says Deguito. Philippine
Daily Inquirer, p. A17.

The AMLC and the National Bureau of Investigation probe began on 19 February 2016.
On 29 February 2016, the Philippine Daily Inquirer, a newspaper of general circulation,broke the news to the public.
By 15 March 2016, the Philippine Senate began its hearing led by Senator Teofisto
Guingona III, head of the Blue Ribbon Committee and Congressional Oversight Committee on
the Anti-Money Laundering Act.
The sophistication of the scheme eased the movement of funds to various accounts in thePhilippine banking system, then later on into the gaming and amusement system (casinos)—an industry which is currently exempt from many of the country’s anti-money laundering
requirements.
B.

The Lead Characters“I am but a pawn in a high-stakes chess game played by giants ininternational banking and high finance. If this committee islooking for a ‘grandmaster,’ it’s not me.” –Maia Santos-Deguito,
sacked RCBC Branch Manager, on her alleged involvement in themoney laundering scandal.

Pinned down as the main mover in the laundering scheme, Maia Santos-Deguito testified
before the Senate hearing that “a crime of this magnitude could be possible only with theparticipation of people from the highest officialdom of RCBC, in cahoots with extremely
wealthy businessmen whose far-reaching powers and influence span several countries.”27
Deguito, who has been relieved from work since the scandal broke, said that officials of
RCBC allowed several transactions, involving the $81-million fund stolen from the Bangladesh
Central Bank to be credited and withdrawn despite her queries.
She detailed how the funds passed through several layers of control within the bank. She
testified that she was told by RCBC treasurer Raul Tan that it was not the bank’s problem thatmost of the stolen funds had been withdrawn when the request to hold them came.28
As to prior withdrawals, Deguito asserted that RCBC Regional Director Brigitte Capina
effectively said that there was no reason to hold the funds after they were flagged by the bankdays earlier. Deguito added that because of said instructions, which she asserted were duly
documented, she then processed the withdrawals.29
RCBC, for its part, denied the allegations adding that Deguito herself admitted that theaccounts were credited automatically without need of any approval. Bank records show that,at the end of the day on 5 February 2016, a hold order was initiated by the operations group. It

27

Salaverria, L.B. and Avendano, C.O. (2016, April 6). Conflicting testimonies noted. Philippine Daily
Inquirer, pp. A1, A4.
28
Salaverria, L.B. (2016, April 13). $81M withdrawn when stop payment order came, says Deguito. Philippine
Daily Inquirer, p. A17.
29
Ibid.

was then lifted when Deguito explained that the amounts were expected and that the “knowyour-client” documents were in order.30
The Yuchengco family-led financial institution said that the bank was also a victim of
the money laundering scam; that it can validly invoke the defense that it exercised due diligencein the supervision of a ‘rouge employee;’ and that it did not contribute to the wrongdoing.31
Meanwhile, William Go, the Chinese-businessman whose name appears on the newly
created US dollar account, and which was the same account used to consolidate the proceedsof the loot, vehemently denied participation in the scandal. He denied owning the peso accountin the RCBC Jupiter, Makati branch, or authorizing any withdrawal of funds for that matter.
He asserted that Deguito even offered him P10 million to participate in the scheme and keep
quiet about it.32
On 19 March 2016, Go filed a criminal complaint before the Office of the City Prosecutorof Makati against Deguito and resigned RCBC senior customer relations officer Angela Ruth
Torres for falsification of documents relative to the Bangladesh Bank heist.33
Also identified as a ‘major player’ in the money laundering scam is junket operator Kim
Wong, who testified that he did not know that the funds were suspected to have come from theelectronic heist. He said that the local casino industry rarely asks its clients about the origin of
their funds, especially from high-rollers who regularly bring in and gamble billions of pesos.
Wong said that he assumes in good faith that the money is clean the moment it passess throughthe laundering safeguards of the banking system.34
As to how the money got into his hands, Wong said that his Beijing-based friend, Shuhua
Gao, and one of his Macau-based casino players, Ding Zhize, were responsible for bringing thefunds into the country. He said that all he was told was that they are going to invest and pay
their debts to him.35
On several occasions during the Senate hearing, Wong had turned over to the AMLC for
safekeeping and eventual return to Bangladesh, the following amounts: $4.63-million as thefirst tranche, PhP32.82-million as the second tranche, P200-million as the third tranche, andP250-million as the final tranche, all in cash.36
Meanwhile, Weikang Xu, another person indicted in the scam, is believed to havereceived P600 million and $18 million in cash, remains at large. The National Bureau of30

Lucas, D.L. (2016, April 22). Deguito: RCBC allowed transactions involving $81M. Philippine Daily
Inquirer, p. A6.
31
Lucas, D.L. (2016, April 4). RCBC lawyers say bank a ‘victim’ of money laundering scam. Philippine Daily
Inquirer, p. A20.
32
Dumlao-Abadilla, D. (2016, March 19). Businessman William Go sues bank manager. Retrieved<http://newsinfo.inquirer.net/775082/businessman-william-go-sues-bank-manager>.
33
Dela Paz, C. (2016, March 21). Deguito: William Go wanted 10% of $81-M dirty money. Retrieved<http://www.rappler.com/business/industries/209-banking-and-financial-services/126603-william-gobangladesh-bank-heist>.
34
Lucas, D.L. (2016, March 29). Kim Wong to name brains. Philippine Daily Inquirer, pp. A1, A16.
35
Ibid.
36
Lucas, D.L. (2016, May 5). Kim Wong hands over another P250M to AMLC. Philippine Daily Inquirer, pp.
A16.

Investigation has been tasked to look for him. To date, the AMLC maintains that Xu is still inpossession of the stolen funds.37
As for Philrem, the foreign exchange trader that handled the conversion and deliveries ofthe stolen money from the bank branch to the casino beneficiaries, it asserted that it did notknow that the deal involved Wong. Its officials, Salud and Michael Bautista, said that since themoney came from RCBC, and that its branch manager Deguito was involved, Philrem trusted
the transaction.38
V.

NON-INCLUSION OF CASINOS IN THE AMENDED AMLA

What started out as a seemingly harmless amendment—excluding casinos from the listof covered persons in the revised AMLA—now wreaks havoc in the country’s fight againstmoney laundering.
Congressional records show that attempts to amend the AMLA through Senate Bill
3123—authored by Senators Sergio Osmena III and Teofisto Guingona III; and House Bill
6565—authored by Speaker Sonny Belmonte, Majority Leader Neptali Gonzales II, andMinority Leader Danilo Suarez, originally included casinos and internet casinos as additional
covered transactions.39 However, due to incessant lobbying of operators, through the House
Games and Amusement Committee (HGAC), exclusion from the list was carried out on 5
December 2012 via a final vote of 141 in favor, 7 against, and 1 abstention.
During the plenary deliberations on House Bill 6565, HGAC Chairman Amado
Bagatsing posited that it is impossible to comply with the AMLA “when anything beyond$10,000, we have to report.” He pointed out that said threshold is very inconsequential for bigtime rollers, especially tourists coming from Singapore, China, and Japan; adding that “to them
$10,000 is not even enough to pay for a Louis Vuitton bag.”40
Bagatsing also said that he had to look at the bigger picture due to the number of investors
coming in. He noted that inclusion of casinos on the list would negate the very purpose of anentertainment city—which is to promote tourism and generate employment. He thusemphasized that it would be more beneficial to exclude it from AMLA coverage.
It was, more or less, the same result at the plenary deliberations of Senate Bill 3123, on
30 January 2013, where Senate President Juan Ponce Enrile moved to exclude casinos “because
their inclusion would prejudice many people who have already invested huge amounts ofmoney.”41 He further pointed out that reporting such transactions would be very tedious andwould impede the competitiveness of the casino gaming market; and, as such, it is more
important to prioritize the country’s interest than to comply with FATF assessments.
37

Carvajal, N. (2016, March 29). $81M laundering: PH officials get hold of ‘suspect’ Weikang Xu’s passport.
Retrieved <http://globalnation.inquirer.net/138170/81m-launder-case-ph-officials-get-hold-of-suspect-weikangxus-passport#ixzz49c7atSgw>.
38
Salaverria, L.B. and Avendano, C.O. (2016, April 6). Conflicting testimonies noted. Philippine Daily
Inquirer, pp. A1, A4
39
Cruz, R. (2016, March 2). Casinos lobbied for exclusion from AMLA. Retrieved <http://news.abscbn.com/nation/03/02/16/casinos-lobbied-for-exclusion-from-amla>.
40
Ibid.
41
Ibid.

Enrile emphasized that casinos and internet gaming are not, after all, totally excluded
from the AMLA, as these businesses remain covered in the reporting requirements so long as
there is knowledge or suspicion of money laundering, consistent with the principle of “knowyour-customer.”
The Senate approved its version on 4 February 2013, with 15 voting in favor and no one
against the exclusion of casinos in the list.
A.

Lobby for Casinos’ Tight Monitoring
At present, debates are still rife as regards the inclusion of casinos in the list of covered
institutions in the AMLA. Proponents believe that the $81-million Bangladesh cyberheist
would have been prevented if not for Congress’ lack of foresight at the time when amendments
were introduced.
With the Philippines on the heels of slipping back to the FATF’s “gray-list,” variousorganizations have now called for urgent legal reforms.
The World Bank, for one, already expressed its support for the AMLA’s amendment
listing casinos among the covered institutions. In its Philippine Economic Update dated April
2016, the organization revealed that “global concerns over money laundering could affect thecost of sending remittances, if there is an increase in the closure of bank accounts of remittanceforwarding companies.”42
It further stated that while the AMLA brings the Philippines’ regulatory regime on money
laundering closer to international standards, better compliance with these standards, throughfurther legal and regulatory reform is needed. For instance, the coverage of the Act should be
expanded to include sectors such as casinos.43
The Securities and Exchange Commission, through Chairperson Teresita Herbosa, also
said that they are pushing for the inclusion of casinos. She said the Philippines has an“international commitment to do so,”44 adding that its addition to AMLA’s ambit will preventthe country from being black-listed by the FATF.
This was the same stance given by Insurance Commissioner Emmanuel Dooc, sayingthat inclusion of casinos and casino operators is necessary to put more teeth in the AMLA.45
He also said that other amendments included in the draft of the updated AMLA, currently being
prepared for the Senate, were intended to ease bank secrecy laws, and give AMLC wider
powers to freeze suspicious accounts without relying on court orders.
Despite believing that the inclusion of casinos in the AMLA will not guarantee protection
against money launderers, the Philippine Amusement and Gaming Corporation (PAGCOR)
also pledged its support to the legal reform.
42

Caraballo, M. U. (2016, April 11). WB backs anti-money laundering reform. Retrieved<http://www.manilatimes.net/wb-backs-anti-money-laundering-reform/255501/>.
43
World Bank. (2016). Moving Full Speed Ahead: Accelerating Reforms To Create More And Better Jobs.
Philippine Economic Update, p. 16.
44
Caraballo, M. U. (2016, April 11). WB backs anti-money laundering reform. Retrieved<http://www.manilatimes.net/wb-backs-anti-money-laundering-reform/255501/>.
45
Cabuenas, J.V. (2016, March 15). AMLC wants casinos within the purview of anti-money laundering law.
Retrieved <http://www.gmanetwork.com/news/story/559096/money/personalfinance/amlc-wants-casinoswithin-purview-of-anti-money-laundering-law#sthash.kZ0OZlE9.dpuf>.

PAGCOR’s Chairman Cristino Naguiat, Jr. said: “Laundering money in casinos is highly
unlikely since converting illicit money into gaming chips would mean risking losses on the partof the perpetrator. Also, all the winnings in casinos are duly recorded by PAGCOR and caneasily be accessed by the government.”46
However, he said PAGCOR welcomes any move to include casinos within the law’s
coverage in the spirit of transparency; maintaining though that if legislation is to be passed,“the threshold amount for reporting must be consistent with the value of typical transaction
sizes in the casino industry." 47
B.

Congress Position
Even with the seemingly unanimous call and support for legal reform seeking to include
casinos in the coverage of the AMLA, Congress appears divided on the issue.
Senator Franklin Drilon, the Senate President at the time the AMLA was enacted in 2001,
said institutions which are extremely vulnerable to money laundering and other illegalmonetary transactions should be put under the close supervision of agencies tasked witheliminating money laundering. The lawmaker noted that recent reports of illegal monetaryactivities in the casinos only point out the need to include casinos in the list of institutions
covered by the AMLA.48
Senator Teofisto Guingona III, who authored Senate Bill 3123, renewed his bid forinclusion of casinos within the purview of the AMLA. While acknowledging that casinos
generate a substantial amount of revenue and employment for the country, Guingona noted that
it is "equally exposed to the raging threats of money laundering and financing of terrorism."
The same is true for Senator Miriam Defensor-Santiago, who said that the country risks
becoming the world’s money laundering capital if the casino sector remains outside thecoverage of the AMLA. She emphasized that the Philippines will suffer higher financialtransaction costs if it gets blacklisted by the FATF.49
Despite the clamor, however, the House of Representatives is not ready to concede thatthe exclusion of casinos may well be considered as a loophole that needs to be plugged. House
Speaker Feliciano Belmonte, Jr. said the casino business was just starting to gain its momentum
in the Philippines. He added: “there was no clear indication, even from the record of Las Vegas
and Macau that it could be a big loophole. And up to this time, it is still under investigation; so
we still don’t know if it is an established fact.”50

46

Leyco, C. (2016, March 16). Pagcor open to include casinos in AMLA. Retrieved<http://www.mb.com.ph/pagcor-open-to-include-casinos-in-amla/#YP9Rz1Rudfx1h2z2.99>.
47
Cruz, R. (2016, March 2). Casinos lobbied for exclusion from AMLA. Retrieved <http://news.abscbn.com/nation/03/02/16/casinos-lobbied-for-exclusion-from-amla>.
48
Manalo, C. (2016, March 2). Partylister to file graft charges vs Purisima for casino fund scam. Retrieved<http://www.tribune.net.ph/headlines/partylister-to-file-graft-charges-vs-purisima-for-casino-fund-scam>.
49
Viray, P.L. (2016, March 17). Senators want casinos covered by Anti-Money Laundering Act. Retrieved<http://www.philstar.com/headlines/2016/03/17/1563862/senators-want-casinos-covered-anti-moneylaundering-act>.
50
Cruz, R. (2016, March 2). Casinos lobbied for exclusion from AMLA. Retrieved <http://news.abscbn.com/nation/03/02/16/casinos-lobbied-for-exclusion-from-amla>.

Representative Amado Bagatsing, taking a similar note, maintained that one isolated case,such as the $81-million Bangladesh cyberheist, is not enough to conclude that exclusion ofcasinos is a loophole to the AMLA. He again emphasized that, “we should look at the big
picture.”51
Bagatsing added: “the Philippines is now open because any tourist will have a wonderfultime in the Philippines, rather than in other countries. We have more to offer. It is up to theCentral Bank to apply the full force of the law.”52
VI.

CONCLUSION AND RECOMMENDATIONS

Money laundering produces negative effects that are too complex to detail with precision.
This illicit shadowy economy flows in and out of the country so fast that it only dampens theoverall economic development of a country. It starves the government of valuable resources by
diverting funds to less productive activity instead of subsidizing real and essential services,making developing nations more susceptible to bigger losses.
A reputation as a money laundering haven may also limit foreign financial transactions
and, in the long run, impede both local and foreign investment. It may also cause significant
distortions to a country’s trade and international capital flows through lessened imports andexports.
The massive amount of remittances sent by Overseas Filipino Workers into thePhilippines may also be adversely affected and, in time, gradually harm the soundness of thecountry’s financial system. It may also ruin the faith of ordinary citizens in duly establishedfinancial institutions.
Given that illicit capital flight drains scarce resources of developing economies,transnational money-laundering activity also impairs the growth of affected countries. Even
worse, criminal groups may convert established productive endeavours into sterile investments
by operating them for the primary purpose of laundering illegal proceeds, rather than as profitgenerating enterprises.
This is the same threat facing the Philippines’ amusement and gaming industry. The
Bangladesh heist shows all this in bold relief.
Casino operations have become a highly profitable sector of the economy in thePhilippines, generating employment and driving tourism. Moreover, the taxation of theindustry has become a significant source of revenue. But today, the Philippine casino industry
seems to be the only weak-link in the anti-money laundering/counter-terrorist financing (AMLCTF) regime.
It is high time that the government should further push for measures that will strengthen
the AMLA, starting with the inclusion of casinos and other similar industries as among thecovered institutions. A comprehensive and effective AMLA, together with timely
51

Cruz, R. (2016, March 2). Casinos lobbied for exclusion from AMLA. Retrieved http://news.abscbn.com/nation/03/02/16/casinos-lobbied-for-exclusion-from-amla
52
Ibid.

implementation and effective enforcement, will certainly reduce the profitable aspects of thiscriminal activity and, ultimately, discourage criminals from pursuing their illicit trade.
The government may complement this by enhancing the structure of the AMLC with
sufficient investigators, budget, and other resources that will advance money laundering
investigations.
The financial sector may also develop its transaction analytics to include a verification
system that will effectively detect suspicious transactions and send red flags to its transacting
clients.
Indeed, the adverse implications of money laundering on the nation’s development are
difficult to quantify, just as the extent of money laundering itself is difficult to estimate.
Nonetheless, it is clear from available evidence that allowing money laundering activity toproceed unchallenged is never the most favourable development policy.
The present AMLA may have its own share of weaknesses and strengths, but with strong
determination, sustained cooperation, and proactive vigilance, the government can effectively
prevent the proliferation of the threat of money laundering.