Penalty pushed vs banks of launderers

By Mia M. Gonzalez, BusinessMIrror

Posted at Jan 21 2013 07:31 AM | Updated as of Jan 21 2013 07:31 PM

MANILA - When the 15th Congress resumes session on Monday, Sen. Joker Arroyo will ask the Anti-Money Laundering Council (Amlc) why it is against penalizing banks that accept deposits from money launderers when they are supposed to be the “first line of defense” against such criminals.

Arroyo said in a radio interview over the weekend that the Philippines should follow the anti-money laundering model of countries, such as the United States, where banks are penalized for accepting “dirty money” deposits. Such sanction had resulted in $195 billion, or nearly P8 trillion, in penalties paid by the banks to the US government over the last three years.

“How about the bank that accepted it [dirty money]?” the senator asked. “Should it be penalized or not? That is the crucial question. The Amlc said that they should not be penalized and to penalize only the owner of the dirty money. Now there would be no money laundering if no bank would accept their money.”

Arroyo wondered aloud why AMLC seemed to be protecting banks by taking such position.

“We cannot understand that. They are protecting the banks. That’s why the banks are taking it easy, and [are] just accepting deposits [from money launderers],” he said.

According to Arroyo, he has prepared a PowerPoint presentation to support his position to penalize banks that accept dirty-money deposits.

“Money laundering cannot be cured if banks cannot be cured,” he said.

Arroyo added that there is a basic bank rule to know one’s depositor prior to accepting his deposit, “especially if the amount is so big and not commensurate to the financial standing of the depositor.”

“The bank would ask, ‘Where did this money come from?’ If the explanation is not satisfactory, they would not accept it. In other words, the bank has a responsibility…. If [it] didn’t accept the money, then the holder of the dirty money would have a hard time looking for places where he can put that money,” he said.

Arroyo added that if banks are not held accountable as well, money laundering “will never stop.”

“The first line of defense [against] money laundering are the banks. Why? Banks are bound by the customer- identification guidelines and procedures under the ‘Know-your-customer’ rules. This means that when someone opens a bank account, the bank is duty-bound to inquire who this depositor is,” he said.

The senator added that in the US, authorities first go to banks after discovering that dirty money had been deposited there, and file the appropriate case against these banks for dealing with money launderers.

Arroyo said that these banks agree to “just pay a penalty for as long as they are not prosecuted, so a deferred prosecution agreement” with US authorities.

“If you total [the penalties paid by the banks], for the past three years, it’s $195 billion. Translated to Philippine peso, it’s P7.8 trillion,” he added.

Arroyo said that since the defiant banks face heavy penalties in the US, they are deterred from accepting dirty money.

Here at home, the senator explained, even if banks report questionable transactions, the account or accounts would be frozen and this would be to the bank’s advantage.

“They accept the money because they would earn from it. For example, Juan deposited P100 million in that bank. It was frozen by Amlc. The money remains in the bank. The status of the money is it’s just in the bank… The bank continues to make money out of that,” Arroyo said.

He added that penalties for money laundering should be approached the same way as bribery, where both the briber and the bribe-taker are “equally guilty.”

“Same as with the banks, the depositor and the bank should be equally guilty. As for me, I don’t give a hoot anymore. Whether they believe me or not, that’s my position. I researched on this,” Arroyo said.

On concerns that penalizing banks could hurt the local banking industry, he noted that the rule has not adversely affected the US banking industry.

Senate Bill (SB) 3123, which proposes amendments to the Anti-Money Laundering Act (Amla), is among the measures that is expected to be tackled by lawmakers in the remaining session days.

SB 3123 seeks to expand institutions covered by the Amla such as casinos, pre-need companies, real-estate agents, dealers in precious metals/stones and money changers.

It also seeks to expand the list of predicate crimes or unlawful activities to include terrorism, conspiracy to commit terrorism, bribery, fraud and illegal exactions.