CORRUPTION AND MONEY-LAUNDERING:THE PHILIPPINE SITUATION
Robert Michael N. Razon*

I. INTRODUCTION
Money-laundering has become a very serious threat not just in the Philippines but also inalmost every country. Criminals have become more creative, ingenious and resourceful inlaundering the proceeds of their criminal activities. With the advent of new technology and thefast pace of its updates, anti-money-laundering authorities are now working overtime to keep up
with the everchanging trends and doubling their efforts to give more teeth and power to existinglaws, rules, regulations and guidelines.
One of the most perennial concerns that governments face is the issue on graft and corruption
perpetrated by its officials and employees. Governments do not just stop in securing a convictionof these corrupt officials but would also ensure that the proceeds of these criminal acts are traced,frozen, recovered and forfeited in favour of the government.
The Republic of the Philippines is no exception to this problem. The Philippines has seen
several government scandals that involved high-ranking officials involved in multi-million-dollar
corruption cases, which eventually lead to uncovering a much bigger and wider web of corruption
activities.
The exposé on the corruption scandal involving the Armed Forces of the Philippines gives us
a glimpse on how deeply seethed is the problem of corruption. And it surprises us to discover that
it is much harder at times in securing a conviction and the eventual civil forfeiture of the criminal
proceeds.
II. SITUATION
Looking at the current situation of money-laundering activities will give us a better view andunderstanding of where corruption and money-laundering stand in the Philippines right now.
The Anti-Money-Laundering Council (AMLC) is the Philippines’ central government agency
tasked to monitor money-laundering activities in the country and mandated to strictly implement
and enforce anti-money-laundering laws and regulations. The AMLC was created pursuant to
Republic Act No. 9160, otherwise known as the “Anti-Money-Laundering Act of 2001” (AMLA),
to protect the integrity and confidentiality of bank accounts and to ensure that the Philippines shallnot be used as a money-laundering site for the proceeds of any unlawful activity.1
Senior Assistant Regional Prosecutor, Regional Prosecution Office XI, Department of Justice, Republic of thePhilippines.
1
Anti-Money-Laundering Council website, http://www.amlc.gov.ph/.
*- 85 -

The AMLC is the Philippines’ Financial Intelligence Unit (FIU) tasked to implement the AntiMoney-Laundering Act (AMLA), as amended by Republic Act Nos. 9194, 10167, and 10365, as
well as Republic Act No. 10168, otherwise known as the “Terrorism Financing Prevention andSuppression Act of 2012”.2
In the 2017 published report of the Anti-Money-Laundering Council entitled National Risk
Assessment on Money Laundering and Terrorist Financing 2015-2016, it stated, to wit:
After considering the proceeds generated by select predicate crimes, money
laundering trends and techniques, the prevalence of sectoral threats and external
threats, the national money laundering threat is assessed to be HIGH. Afterconsidering the ratings for National Combating Ability and Sectoral Vulnerabilities,
the national vulnerability for money laundering is assessed to be Medium.
Following the risk map of the assessment tool, the Money Laundering Risk at
National Level is rated as Medium-High.3
The same assessment report further stated that threat in Plunder and Violations of the AntiGraft and Corrupt Practices Act (Republic Act 3019) is still generally high, viz:
It is estimated that 20% of the Philippines’ yearly national budget is lost to
corruption. Following the same pattern and based on the 2015 (Php2.6 Trillion) and2016 (Php3.0 Trillion) national budgets, about Php520 to Php600 Billion were lostto corruption in 2015 and 2016. 4 From 2015 to 2016, the NBI conducted 222
corruption-related investigations. For the same period, the Ombudsman convicted
299 individuals for cases of bribery, malversation of public funds and violation of
RA No. 3019. Filed before the Sandiganbayan were 2,207 corruption-related cases
from 2011 to 2016; 1,019 of these cases were filed from 2015 to 2016. The AMLC
conducted 15 ML investigations predicated on corruption-related cases from 2015
to 2016. Ten (10) cases and two (2) cases being investigated by the AMLC and its
Secretariat in 2015 and 2016, respectively, are related to the alleged unlawful
appropriation and use of the Priority Development Funds (PDAF) funds of subject
lawmakers. All the 15 money laundering cases under AMLC investigation from2015 to 2016 involve corruption proceeds approximately amounting to Php750
Million. For the same period, corruption proceeds subject of civil forfeiture
amounted to Php223 Million in funds and properties. The amount constitutes
22.3% of the estimated Php1 Billion in funds and properties subject of civil
forfeiture corruption-related cases as of 31 December 2016. The foregoing data on
the corruption-related cases investigated and prosecuted for the period 2011 to2016 show no increasing trend, but the figures remain significantly high. As to theamount of corruption proceeds, about Php689.7 Million and Php750 Million are
involved in the cases for forfeiture of illicit funds pending before the
Sandiganbayan and money laundering investigations of the AMLC, respectively.
Ibid.
2nd National Risk Assessment – Philippines 2015-2016, page 3.
4Developing a Corruption-intolerant Society (www.ph.undp.org).
2
3- 86 -

Moreover, insofar as the 15 money laundering cases are concerned, only 30% of
the proceeds of these cases are subject of civil forfeiture. The foregoing
considerations provide reasonable bases to retain the HIGH rating of the threat
posed by plunder and other corruption-related cases.5
For a better perspective, a staggering US$ 10,400,000,000 to US$ 12,000,000,000 were lost to
corruption in 2015 to 2016. The Anti-Money-Laundering Council investigated 15 cases which
involved US$ 15,000,000. For the same period, the amount representing civil forfeiture of theproceeds of these crimes equals to US$ 4,460,000.6
The data and the figures presented in the foregoing report clearly show that corruption andmoney-laundering is not just a problem but has already become a menace in the Philippines.
Continued efforts and additional laws and regulations are constantly passed and implemented toaddress this problem.
III. ACTUAL CASE STUDY
A. The Game of the Generals
An interesting case in the Philippines which involved graft and corruption, money-laundering,
forfeiture and the effective use of a Mutual Legal Assistance Treaty is that of Major General Carlos
F. Garcia, then Deputy Chief of Staff for Comptrollership, J6, of the Armed Forces of thePhilippines.
On 27 September 2004, Atty. Maria Olivia Elena A. Roxas, Graft Investigation andProsecution Officer II of the Field Investigation Office of the Office of the Ombudsman, after due
investigation, filed a complaint against Garcia, before the Office of the Ombudsman, (1) for
violation of Sec. 8, in relation to Sec. 11 of Republic Act (R.A.) No. 6713, (2) violation of Art.
183 of the Revised Penal Code, and (3) violation of Section 52 (A)(1), (3) and (20) of the Civil
Service Law. Based on this complaint, a case for violations of R.A. No. 1379,4 Art. 183 of the
Revised Penal Code, and Sec. 8 in relation to Sec. 11 of R.A. No. 6713 was before the anti-graft
court, the Sandiganbayan.
In April 2005, the Office of the Ombudsman filed against Garcia before the Sandiganbayan
criminal charges of Plunder, Perjury and Money Laundering for allegedly amassing P303,270,000
in ill-gotten wealth while he was in active service in the Armed Forces of the Philippines. His
wife Clarita Depakakibo Garcia, and their three sons, Ian Carl, Juan Paolo and Timothy Mark, allsurnamed Garcia, were named co-defendants for allegedly helping him conceal suspectedunlawfully acquired assets. The Garcia family is also facing money-laundering charges following
alleged withdrawals from their numerous bank accounts.
In May 2011, Garcia was eventually convicted of Perjury, but for the cases of Plunder andMoney Laundering, he entered into a plea-bargaining agreement with the government. The
Sandiganbayan approved the former general's guilty plea to the lesser offence of Indirect Bribery
and the lesser offence of Facilitating Money Laundering under Section 4 (b) of Republic Act 9160,
56

2nd National Risk Assessment – Philippines 2015 -2016, pages 7-8.
Php 50.00 = US$ 1.00.

- 87 -

based on the plea-bargaining agreement between Garcia and the Office of the Ombudsman. Under
the controversial agreement, Garcia will be allowed to plead guilty and post bail to the lesser
offences of Indirect Bribery and Facilitating Money Laundering on the condition that he would
return to the government half of the P303.27 million that he had allegedly stolen.
As part of the plea-bargaining deal between Garcia and the government, Garcia transferred real
properties worth P 21,269,520.50 and personal properties amounting to P4,416,380 in favour of
the Republic of the Philippines. Likewise, total cash and bank deposits in the amount of
P52,510,980.00 were turned over in favour of the government.7 Two of Garcia's sons are facing
bulk cash smuggling charges in a US court for attempting to slip US$100,000 into the UnitedStates from the Philippines in 2003. The government is working for their extradition.
Through effective Mutual Legal Assistance, the US Embassy in the Philippines in June 2015
turned over to the Philippine government a check amounting to some US$ 1,300,000 as the second
tranche of proceeds from the forfeited assets of Garcia. Then US Ambassador to the Philippines
Philip Goldberg handed over a US Treasury check amounting to US$ 1,384,940.28 or aroundP61,000,000 to then Ombudsman Conchita Carpio-Morales, who represented the Philippine
government. The check represented the net proceeds from the sale of Garcia’s condominium unit
at The Trump Tower in Manhattan, New York, and the balance from the former general’s twobank accounts in Citibank New York. The money from Garcia’s bank accounts in Citibank New
York had earlier been traced by the US Department of Homeland Security to be part of thelaundered assets of Garcia. In sum, the Philippine Government was able to recover a total amountof P135,433,387.84 from former Major General Carlos F. Garcia, his wife and his three sons.
Another high-ranking official of the Armed Forces of the Philippines that got embroiled in a
corruption scandal is the predecessor of Major General Carlos F. Garcia as Comptroller, Retired
Lieutenant General Jacinto Ligot. This case is one of the biggest corruption scandals in Philippine
military history, first exposed in 2004 and culminated in multiple investigations in 2011, where
Ligot and other officials were accused of amassing unexplained wealth, including receiving sendoff money. After a series of Senate investigations in 2011, former military chief Angelo Reyes,
who was also dragged into the issue, took his life in front of his mother’s grave.
The prosecution accused Ligot of acquiring tax deficiencies worth P428,000,000 from 2001 to
2004. The Department of Justice (DOJ) prosecution found out that the Statements of Assets
Liabilities and Net Worth (SALNs) of General Ligot did not declare bank deposits, assets andinvestments, the value of which are beyond their compensation, considering that his wife, Erlinda
Ligot, is described as a mere ‘housewife’ in those documents with no source of income. The
Department of Justice (DOJ) prosecution surmised that there can be no other conclusion that Ligot
and his spouse failed to declare their true and correct income in their income tax returns, thereby
evading the payment of correct income taxes.
Aside from bank assets, the Department of Justice (DOJ) prosecution uncovered the Ligots
real estate including a 14-hectare land in Malaybalay City in Bukidnon; two Paseo Parkview
Tower 2 Condominium units with one parking slot in Makati City; a unit at Essensa East Forbes
People of the Philippines vs. Carlos F. Garcia, et. al., Criminal Cases Nos. 28197 & SB-09-CRM-0194, 09 May
2011.
7- 88 -

Condominium; properties in Anaheim and Orange County in California; and a parcel of land in
Tanay, Rizal.
The Anti-Money-Laundering Council (AMLC) was able to generate a report of the mismatchin assets and lawful income, but in 2015, the Court of Tax Appeals (CTA) struck all evidence off
the record because they did not fall “within any exception of the best evidence rule.” The CTA
said the AMLC probe was sanctioned for a case at the Makati Regional Trial Court (RTC), not for
the tax cases.
Bank secrecy laws in the Philippines will not apply in certain cases such as impeachment, cases
related to the Human Security Act, and some kinds of forfeiture cases such as when a deposit
makes its way to a wrong account and the bank needs to retrieve it. The CTA ruled that these
exceptions to the Bank Secrecy Law also find no application in the case of Ligot and his spouse.
It also enunciated that having no assets purportedly purchased with other income, they could nothave willfully violated Secs. 254 and 255 of the National Internal Revenue Code (NIRC). The
earlier deficiency assessment of the Bureau of Internal Revenue (BIR) still stands, said the CTA.
The CTA Third Division acquitted the Ligots in a decision promulgated January 8, 2019,
mainly because an extensive paper trail of bank evidence was stricken off the record for violatingbank secrecy laws. Ligot tried to invoke the bank secrecy law in arguing that his foreign deposit
records were accessed without his consent. The Philippine bank secrecy law got Ligot acquitted in
the P428,000,000 tax case in the Court of Tax Appeals (CTA).
However, the Sandiganbayan ruled that while Section 2 of Republic Act No. 1405, enacted in
1955, declares bank records confidential except in certain conditions, Section 8 of Republic Act
No. 3019, or the Anti-Graft and Corrupt Practices Act, amended that when it said bank deposits"shall be taken into consideration" in the investigation into unexplained wealth. The anti-graft law
was enacted in 1960. The later law typically prevails over earlier laws.
In the CTA decision that acquitted Ligot, tax court justices strictly applied Section 2 of R.A
1405, which waives confidentiality of bank records "in cases of impeachment, or upon order of acompetent court in cases of bribery or dereliction of duty of public officials, or in cases where themoney deposited or invested is the subject matter of the litigation." The Sandiganbayan, however,applied the last exemption and said: "Bank representatives are allowed to testify on the subject
bank accounts because the accounts allegedly contain the unlawfully acquired money of
respondent Jacinto during his service, the same constitute the subject matter of the present
litigation. The anti-graft court also said that the bank investigation "is an exercise of the power ofthe Anti-Money-Laundering Council under the law."
In April 2019, the Sandiganbayan convicted Ligot of 6 counts of perjury over misdeclarations
in his Statements of Assets, Liabilities, and Net Worth (SALNs). The Office of the Ombudsman
has been working to forfeit in favour of the government P55,596,000 in unlawfully acquired bankdeposits and investment accounts of General Ligot, his wife, and other co-accused. Last July 2019,
the Sandiganbayan denied the Demurrer to Evidence filed by General Ligot.

- 89 -

IV. NEW LEGISLATION TO ADDRESS NEW TRENDS IN MONEY-LAUNDERING
In 2016, the government investigated the biggest documented case of money-laundering in
Philippine history – where about $81 million stolen from the Bank of Bangladesh's account at theFederal Reserve Bank of New York was coursed through Rizal Commercial Banking Corporation(RCBC), converted into pesos, and then played in large casinos in the country.
Because of this US$ 81,000,000 Bank of Bangladesh money-laundering case, President
Rodrigo Duterte in July 2017 signed Republic Act No. 10927, placing casinos, including internetand “ship-based” ones, under the AMLA. Casino cash transactions of more than P5,000,000 or its
equivalent in other currencies are now considered a transaction covered by the law and must thus
be reported to the Anti-Money-Laundering Council (AMLC). The new amendment now includes,
real estate developers, money transfer firms, junket operators, and dealers of high-value items
under the AMLC's watch. In the amended law, the Anti-Money-Laundering Council still has to
wait for the Court of Appeals to issue a freeze order if they suspect a monetary instrument orproperty is related to an unlawful activity. The freeze order will be effective immediately and will
last 20 days.
The Supreme Court of the Philippines in January 2017, in a unanimous decision penned by
Associate Justice Jose Portugal Perez, held Section 11 of RA 9160 or the Anti-Money Laundering
Act to be valid and constitutional. Section 11 of R.A. 9160 states that the Anti-Money Laundering
Council (AMLC) may "inquire into or examine any particular deposit or investment, including
related accounts, with any banking institution or non-bank financial institution upon order of any
competent court based on an ex parte application.” It allows the AMLC, upon approval from the
Court of Appeals, to check the movement of money and history of the account. Banks could thenwaive their confidentiality agreement without having to notify the account owners.
The constitutionality of the said provision was challenged by a law firm associated with former
Vice-President Binay. In January 2018, anti-money-laundering authorities implemented theAMLC Registration and Reporting Guidelines (ARRG). This AMLA law requires covered persons– like those in banks, insurance companies, and securities dealing firms – to submit suspicioustransaction reports (STRs) within 5 days of an incident. This includes the date of determination of
the suspicious nature of the transaction, which should not exceed 10 calendar days. It also provides
for appropriate sanctions for violators as to ensure a culture of compliance among the covered
persons. Two new facilities would allow covered persons to upload know-your-customer (KYC)
documents for STRs as well as e-returns via the AMLC portal.
In 2018, the AMLC Secretariat issued Resolution No. 59 adopting the Anti-Money-Launderingand Counter-Terrorism Financing (AML/CTF) guidelines for Designated Non-Financial
Businesses and Professions (DNFBPs), which covers and includes jewellery dealers, fundmanagers, lawyers, and accountants. These professionals are now being strictly monitored by
the Anti-Money-Laundering Council (AMLC), as it firms up its battle against money-launderingand terrorist financing.
The guidelines are based on Republic Act No. 10365, which includes under "covered persons"those who deal with precious stones and metals; those who deliver fund or securities management- 90 -

services for other persons; and persons and entities who provide services to organize, create, andmanage companies and arrangements under the amended Anti-Money Laundering Act (AMLA).
Lawyers and accountants, who provide the services enumerated in the amended AMLA, arerequired to report covered and suspicious transactions to the AMLC.
On November 12, 2018, President Rodrigo Duterte signed Executive Order No. 68, which
orders the government to implement a national strategy to fight money-laundering and terrorism
financing from 2018 to 2022. The Executive Order also creates a committee to oversee andcoordinate all government and private sector efforts in pursuit of the strategy. This plan is officiallyknown as the National Anti-Money-Laundering and Countering the Financing of Terrorism
Strategy (NACS). The committee is referred to as the National AML/CFT Coordinating
Committee (NACC). The said committee is mandated to craft operational guidelines and rules ofprocedure to implement the strategy and consult public and private stakeholders on operational
and policy issues that may have implications on the NACS. The NACC is to be chaired by the
Executive Secretary or a representative while its vice chairpersons shall be the Bangko Sentral ng
Pilipinas governor and Anti-Money Laundering Council chairperson. Its members are the Foreign
Secretary, Finance Secretary, Justice Secretary, Defense Secretary, Interior Secretary, Trade
Secretary, Securities and Exchange Commission chairperson, Insurance Commissioner, Philippine
Amusement and Gaming Corporation CEO and chairperson, Cagayan Economic Zone Authority
administrator, and Aurora Pacific Economic Zone and Freeport Authority president. The AMLC
will serve as the committee's secretariat.
V. CONCLUSION
Corruption and money-laundering activities continue to evolve overtime. As such, government
must be faster and quicker in addressing these issues and concerns. It is sad that, most of the time,
new laws and amendments to existing legislation take time to come to fruition as it has to go
through the constitutionally mandated law-making process. Innovations in money-laundering
come about faster than new rules and regulations. However, governments must make use ofexisting mechanisms currently available to combat these threats. Stricter implementation andexecution of current laws, rules and regulations should be had to avoid and to stop, or at least
manage these threats.
Actual cases of graft and corruption with corresponding active prosecution and eventual
forfeiture and recovery of the criminal proceeds, whether successful or a failure, must always serve
as guidance to governments to more strictly enforce anti-money-laundering laws, rules andregulations. There is comfort in knowing that the government authorities continue to pass relevant
and stricter laws that are compliant with international standards and guidelines.

- 91 -