Gaps in anti-money laundering

In the late 60s, Lino Bocalan reportedly gained a reputation in Cavite as the untouchable man behind a lucrative cigarette smuggling operations, initially operating along the coast of Tanza, and later expanding to Sulu and Zamboanga with a growing syndicate of smugglers.

Bocalan later became known as a “lucky” man after winning a number of major Sweepstakes draws supervised by the Philippine Charity Sweepstakes Office. His “luck,” it turned out later, was much more contrived than due to providence.

It was the late Sen. Benigno Aquino Jr. who had exposed the shenanigans of the infamous Bocalan. “Luck” apparently was not through the switching of tickets as the lawmaker had originally said, but by buying winning tickets from real winners and passing them off as his own.

Why did Bocalan do this, and later in cahoots with Bureau of Customs officials associated with him? As it turned out, Bocalan was earning so much money that some of this had to be legitimized. Buying winning Sweepstakes tickets apparently became one of his earliest attempts at money laundering.

When the scheme was exposed, PCSO then took some steps to make it more difficult for Bocalan and others who needed some ways to legitimize illegally acquired money.

More sophisticated

One could say that money laundering is as old as organized and syndicated crime. With the passing of time, how ill-gotten money is passed into the legitimate financial system has become more sophisticated and creative.

Today, as the tentacles of crime extend across country boundaries and continents, even through the unfettered highways of cyberspace, the task of guarding new channels used for money laundering has compelled such groups as the Financial Action Task Force (FATF) to tighten their watch.

In recent years, especially with brigand Filipino Muslims being linked to global terrorism, the Philippines has taken a more active role in putting in place safeguards that will prevent crime organizations and more importantly, terrorist financing groups, from moving large sums of money into or out of the country.

So far, our lawmakers have managed to deliver on the requirements of FATF that will allow the country to comply with international anti-money laundering standards. Having been put on the dreaded FATF Blacklist for a couple of years has been a humbling experience for our banks.

There are actually no sanctions imposed by the FATF for countries on the blacklist, but being on the list triggers an alarm that initiates intense financial scrutiny – and substantially increased paperwork and delays – in transactions with major financial institutions.

Deficiencies in the Philippines

During the most recent FATF-supervised meeting for the Asia Pacific grouping, new deficiencies had been pinpointed for the Philippines, including the absence of a stand-alone law that would prosecute individuals or groups found guilty of terrorist financing.

With the Philippines’ Anti-Money Laundering Council insisting that the country’s existing anti-terrorism law is already adequate to prosecute and indict individuals and entities caught providing funds for terrorist acts, the possibility of being put back in the blacklist could pressure lawmakers to work on the FATF recommendation.

Changes would also seem necessary especially since all bank inquiries into suspicious transactions to date have essentially been suspended with a pending case before the Supreme Court.

Inadequate disclosures

There is likewise a larger loophole in the existing Anti-Money Laundering Act (AMLA) that needs to be addressed. This involves the need to engage non-financial businesses and professions such as casinos, lawyers, accountants and other gatekeepers to report suspicious transactions and observe customer due diligence.

There had been several instances where non-government organizations had been used as channels to receive overseas funding that in turn were used to funnel money to terrorist groups in the country.

A big money laundering organization in the country linked in the past to a number of narco criminal deals had also been monitored of widening its scope of business by including in its roster of services the transfer of funds to terrorist groups.

Casinos as facilitators

FATP has also issued a lengthy warning based on observations of abuse and money laundering in the operations of casinos. With significant global activity, casinos being cash intensive and competitive in its growth are vulnerable to criminal exploitation.

In a paper, the Paris-based money laundering watchdog identified significant gaps in awareness of money laundering opportunities, gaps in regulatory and law enforcement responses, gaps in online gaming typologies, issues with controls over junkets / VIP programs, and significant issues with controls over “high seas” gaming.

The FATP noted that while casinos in the Philippines are regulated, there is no competent authority for anti-money laundering matters. But this is somehow mitigated by the initiative of the Philippine Amusement and Gaming Corp. (PAGCOR), which regulates casino operations in the country, to voluntarily submit suspicious transaction reports to the Anti-Money Laundering Council.

However, with an aggressive global terrorism network being increasingly thwarted in its attempts to move funds across country boundaries, and with a strong armed Muslim group still operating south of Mindanao with links to big terrorist organizations, the Philippines will find itself being asked time and again to tighten its watch over new money laundering schemes.

This will demand from our lawmakers the agility to introduce changes in existing laws as quickly as possible if the country’s financial institutions are to be spared of the inconveniences of being on the dreaded blacklist.

Philippine Collegiate Championship update

The North-Central Luzon Regional Championship games to determine the team that will represent the region in the next phase of the Philippine Collegiate Championship will be hosted by Dagupan City during the first week of October. This was confirmed by Seato Ginomil, Coordinator of the local organizing group.

Participating in the games are twenty nine teams of the “mother leagues” from Ilocos, the SCUAA (Lauro B. Tacbas Cup), Baguio Benguet Educational Athletic League (BEAL), Universities and Colleges Athletic Association of Pangasinan (UCAAP) and the United Central Luzon Athletic Association (UCLAA) from Pampanga.

The champion teams of these leagues will play at the Divine World gym to dispute the Regional Championship and the right to represent North-Central Luzon at the Zonal Qualifying games to be held in Manila.

Visit www.CollegiateChampionsLeague.net for more details about the 2009 Philippine Collegiate Championship games.

Should you wish to share any insights, write me at Link Edge, 25^th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.