Gaping Holes in our AMLA's Net

ESCAPING the blacklisting of our country during last month's plenary of the FATF ought not to lull us into complacency. Some more fine-tuning and recalibration need to be done in order to make our anti-money laundering and anti-terrorist financing laws fully compliant with what the FATF considers to be acceptable international standards.

Atty. Reynaldo Geronimo

The Trust Guru

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Towards that end, I suggest we compare what we so far have with the Model Legislation on Money Laundering and Financing of Terrorism ("Model Legislation").

The Model Legislation was the joint work product of the UN Office on Drugs and Crime (UNODC) and the International Monetary Fund (IMF). Experts on money laundering and combating terrorist financing held several meetings -- Vienna in May 2004, in Brussels in June 2004, and in Washington in September 2004 and March 2005 -- and at the very least the Model Legislation represents their consensus on what a satisfactory law ought to contain.

Our law, since its initial passage about a year after our having been blacklisted in June 2000, has indeed come a long way. But only a few, save those most blinded by self-interest or those completely made clue-less by their warped sense of nationalism, would argue that it is, as it now stands, good enough.

Central to the achievement by any piece of anti-money laundering and anti-terrorist financing legislation is the width and breadth of the net that it casts in order to catch and haul in the perpetrators. R.A. 10365, the last of our four amendments since 2001, by our narrow local standards may appear sufficient. But, from the perspective of the Model Legislation, the net that we have still suffers from some gaping holes that hamper its effectiveness.

For instance, casinos, whether on site or internet, are not among the "covered" institutions and, as such, are thus required to do some reporting to the Anti-Money Laundering Council. Both Senate Bill No. 3123, which was sponsored by Senators Sergio Osmeña III and Teofisto "TG" Guingona III, and House Bill No. 6565, authored by Congressmen Feliciano Belmonte Jr., Neptali M. Gonzales II, and Danilo L. Suarez. had casinos in their proposals for covered institutions.

But after the bills went through the Conference Committee, which some cynically call the Third Chamber of Congress, casinos were nowhere to be found in the list. And yet, casinos are among the easiest places to do money laundering.

All the criminal elements have to do is have the proceeds of their crime, some way or another, get converted into gambling chips, and, after some pseudo winning and losing, at the end of the gambling day convert those chips into cash or check. That check effectively disguises the proceeds of their crime. When deposited with a bank, the money that it compels the bank to pay is as clean as yours or mine.

Another gaping hole in the net is the omission of real estate companies and real estate transactions from covered persons. As in the case of casinos, both the introductory bills in the Senate and House of Representatives had real estate agents as well as persons who buy and sell real estate in the list of covered persons. The final version of bill had them left out.

But the real estate transactions have long been exposed as an internationally favorite vehicle for laundering dirty money. A very thorough presentation and exposure of eight different typologies or techniques of doing so is embodied, among other works, in FATF's June 29, 2007 Report entitled "Money Laundering and Terrorist Financing Through the Real Estate Sector."

That Report was, according to Footnote 1, "the product of research carried out by a project team operating under the umbrella of the FATF typologies initiative. The FATF project team was led by Spain and the Netherlands with the participation of Australia, Belgium, Canada, Japan, Lebanon, Luxembourg, Mexico, Myanmar, Norway, Pakistan, Portugal, South Africa, South Korea, Sweden, Ukraine, the United Kingdom, the United States, Interpol, the European Central Bank, and the OECD."

Senator Manny Villar, the man who at one time would be President of our nation, is a recognized leader in the Philippine real estate sector. Perhaps, he should spur a Senate investigation on why the FATF did not mention, perhaps did not even think of including, a Philippine representative in the team that developed that Report. I would feel slighted, if I were him.

A third group that escaped being listed as covered, but only in a manner of speaking, is the group of jewelry dealers in precious metals and dealers in precious stones. The Senate and House bills also had dealers in precious metals and dealers in precious stones included as covered persons, period -- no further qualification.

But, the law, however, streamlined its coverage only to those dealers "who as a business, trade..." in precious metals or precious stones, and, even so, they are covered only "for transactions in excess of One Million (P1,000,000) pesos." The escape route is thus wide open for the jewellers to argue that their trading in jewelry is not their business, but rather an incident only of their running the business of a pawnshop, or of repairing jewelry, or, even, of only manufacturing (as distinguished from trading) jewelry.

Claiming the benefit of the doubt before the court hearing the matter ought to be a cinch for these dealers since the Anti-Money Laundering Law to the extent that it imposes the penalties of fines and imprisonment is a criminal statute whose interpretation ought to lean in favor of the accused.

Finally, tax evasion continues to be not in the list of illegal activities the proceeds of which, if hidden, can be made subject of a money laundering prosecution. Tax evasion, locally and globally practiced, threatens the viability of programs designed to better the lot of society. It must, at the very least, recognized as a menace.

On that justification, my former student BIR Commissioner Kim Jacinto-Henares, with her revitalized Run After Tax Evaders (Rate) program, correctly trains her guns on those who would not bear their fair share in putting up the needed finances of government.

(For comments, e-mail me at thetrustguru@icloud.com; geronimoreynaldo632@gmail.com)