Anti Money Laundering Handout

8/19/2019 Anti Money Laundering Handout

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The Anti-Money Laundering ActRepublic Act 9160, as amended

What is money laundering?

•

It is the act of transferring monetaryproceeds derived from illicit activities intofunds with an apparently legal source.

• Under the AMLA, it is defined as a crimewhereby the proceeds of an unlawful activityare transacted thereby maing them appear to have come from legitimate sources !"ec.#$

What is an unlawful activity?

Unlawful activity refers to any act oromission or series or combination thereofinvolving or having direct relation to thecrimes enumerated under "ec. %!i$ of the

AMLA.

&he first AMLA enumerated '#unlawful activities. &he recent amendmenthowever e(panded the coverage to %#unlawful activities.

Why do we need such a law?

• Money laundering compromises the

stability, transparency, and efficiency of thefinancial system and it undermineseconomic prosperity.

• Without a law against money laundering,crime rates will continually increasebecause the success of a criminalenterprise is based on its ability to saniti)eill*gotten gains by moving them through la(and corrupt financial systems.

• &he +hilippines is included in the list of on*-ooperative -ountries and &erritoriesissued by the inancial Action &as orce

prior to the enactment of the law. &hissituation is not good for the economy.

/istory of the AMLA

"eptember 011' 2A 3'41 and its I22

was enactedMarch 011% irst amendment, 2A

3'3#

5 &he threshold for a

covered transaction

was reduced from #

million to +611,1117une 01'0 "econd amendment,

2A '1'48

5 Amendment relating

to free)ing of

monetary instrument

and the and the

authority to in9uire into

ban depositsebruary 01'% &hird amendment, 2A

'1%46

5 e(panded the crime

of money laundering

:eclaration of "tate +olicy

It is hereby declared the policy of the"tate to protect and preserve the integrityand confidentiality of ban accounts and toensure that the +hilippines shall not be usedas a money laundering site for the proceedsof any unlawful activity. -onsistent with itsforeign policy, the "tate shall e(tendcooperation in transnational investigationsand prosecution of persons involved inmoney laundering activities wherevercommitted !"ec. 0$.

What are the covered institutions under the AMLA?

-overed institutions are classified asfollows;

• <ntities supervised and=or regulated by the>ango "entral ng +ilipinas

•<ntities supervised and=or regulated by theInsurance -ommission

• <ntities supervised and=or regulated by the"ecurities and <(change -ommission

• +ersons included under 2A '1%46

"pecifically,

"ec. % !a$ -overed persons, natural or @uridical, refer to;

'. bans, non*bans, 9uasi*bans, trustentities, foreign e(change dealers,pawnshops, money changers, remittanceand transfer companies and other similarentities and all other persons and theirsubsidiaries and affiliates supervised orregulated by the >ango "entral ng+ilipinas !>"+$

0. insurance companies, pre*need companiesand all other persons supervised orregulated by the Insurance -ommission!I-$

%. !i$ securities dealers, broers, salesmen,investment houses and other similarpersons managing securities or renderingservices as investment agent, advisor, orconsultant, !ii$ mutual funds, close*endinvestment companies, common trust funds,and other similar persons, and !iii$ otherentities administering or otherwise dealingin currency, commodities or financialderivatives based thereon, valuable ob@ects,

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cash substitutes and other similar monetaryinstruments or property supervised orregulated by the "ecurities and <(change-ommission !"<-$

#. @ewelry dealers in precious metals, who, asa business, trade in precious metals, for

transactions in e(cess of Bne million pesos!+',111,111.11$

6. @ewelry dealers in precious stones, who, asa business, trade in precious stones, fortransactions in e(cess of Bne million pesos!+',111,111.11$

4. company service providers which, as abusiness, provide any of the followingservices to third parties; !i$ acting as aformation agent of @uridical persons !ii$acting as !or arranging for another person toact as$ a director or corporate secretary of a

company, a partner of a partnership, or asimilar position in relation to other @uridicalpersons !iii$ providing a registered office,business address or accommodation,correspondence or administrative addressfor a company, a partnership or any otherlegal person or arrangement and !iv$ actingas !or arranging for another person to actas$ a nominee shareholder for anotherperson and

8. persons who provide any of the followingservices;

!i$ managing of client money, securities orother assets

!ii$ !ii$ management of ban, savings orsecurities accounts

!iii$ organi)ation of contributions for thecreation, operation or management ofcompanies and

!iv$ creation, operation or management of @uridical persons or arrangements, andbuying and selling business entities.

ote; the term Ccovered persons shall

e(clude lawyers and accountants acting asindependent legal professionals in relationto information concerning their clients orwhere disclosure of information wouldcompromise client confidences or theattorney*client relationship; +rovided, theyare authori)ed to practice in the +hilippinesand shall continue to be sub@ect to theprovisions of their respective codes ofconduct and=or professional responsibility or any of its amendments.

What are the obligations of coveredinstitutions?

Under "ec. 3 of the AMLA, the following aretheir obligations;

• -ustomer Identification

• 2ecord Deeping

• 2eporting of -overed and "uspicious&ransactions

-ustomer Identification

-overed institutions shall establish

and record the true identity of their clientsbased on official documents and shallmaintain a system of verifying the trueidentity of their clients.

or natural persons, specifiedminimum information and documents suchas personal and wor information andgovernment*issued identification documentsare re9uired.

or @uridical persons, their legale(istence, organi)ational structure, andidentity and authority of all persons actingon their behalf should be verified. "pecifiedminimum information and documents suchas articles of incorporation or partnership bylaws, list of directors, and principalstocholders are re9uired.

E; Are anonymous accounts under fictitiousnames such as princessbutterfly*(o(o orsimilar accounts allowed?

A; o. -overed institutions are mandated by

law to maintain accounts only in the trueand full name of the account owner orholder.

E; Are numbered accounts allowed?

A; Fes. +eso and foreign currency non*checing accounts shall be allowed,provided the true identity of the customer isobtained and recorded that is open toe(amination by the >"+, "<-, andInsurance -ommission.

2ecord Deeping

All records of transactions ofcovered institutions shall be maintained andsafely stored for 6 years from the date oftransactions.

With respect to closed accounts,records on customer identification, accountfiles, and business correspondence shall bepreserved and safely stored for at least 6years from the date the account was closed.

/owever, if a money launderingcase has been filed, the records of thetransaction shall be retained beyond 6 yearsuntil the case has been finally resolved orterminated by the court.

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2eporting of -overed and "uspicious&ransactions

E; What is a transaction?

A; It refers to any act establishing any right

or obligation or giving rise to any contractualor legal relationship between the partiesthereto. It also includes any movement offunds by any means with coveredinstitutions !"ec. % !h$ $.

Bnly covered and suspicious transactionsare sub@ect to the AMLA.

E; What is a covered transaction?

A; It is a transaction in cash or othere9uivalent monetary instrument involving a

total amount in e(cess of ive /undred&housand +esos within one baning day.

E; What are suspicious transactions?

A; &hese are transactions, regardless ofamount, where any of the followingcircumstances e(ists;

'. &here is no underlying legal or tradeobligation, purpose or economic

@ustification0. &he client is not properly identified%. &he amount involved is not commensurate

with the business or financial capacity of theclient

#. &aing to account all nown circumstances,it may be perceived that the clientstransaction is structured in order to avoidbeing the sub@ect of reporting re9uirementsunder the Act

6. Any circumstance relating to the transactionwhich is observed to deviate from the profileof the client and=or the clients pasttransactions with the covered institution

4. &he transaction is in any way related to anunlawful activity or any money launderingactivity or offense under the AMLA that isabout to be, is being, or has beencommitted or

8. Any transaction similar, analogous, oridentical to any of the foregoing.

-overed institutions shall report tothe Anti*Money Laundering -ouncil !AML-$all covered and suspicious transactionswithin 6 woring days from the date of the

transaction unless the AML- prescribes alonger period not e(ceeding '6 days.

2eports shall be made in the formsprescribed by the AML- and submittedelectronically.

E; Is there a violation of the "ecrecy of>an :eposits !">:$ and similar laws whenreporting covered or suspicioustransactions?

A; one. When reporting covered or

suspicious transactions to the AML-,covered institutions and their officers andemployees, shall not be deemed to haveviolated the ">: and similar laws.

In fact, no administrative, criminal, or civil proceedings shall lie against anyperson for having made a covered orsuspicious transaction report in the regularperformance of his duties and in good faith,whether or not such reporting results in anycriminal prosecution under the AMLA or any

other law. &his is a safe harbor proision!

-overed institutions and theirofficers and employees are howeverprohibited from communicating, directly orindirectly, in any manner or by any means,to any person, entity, the media, that acovered or suspicious transaction reportwas made, the contents thereof, or anyinformation in relation thereto. either maysuch reporting be published or aired in anymanner or form by the mass media,electronic mail, or other similar devices. Incase of violation, the concerned officers andemployee of the covered institutions ormedia shall be held criminally liable.

<(amples of "uspicious &ransactions2espectively

'. If a business man consistently earns acertain amount for years and suddenlyearns big amounts successively as shownin his accounts !but not e(ceeding+611,111.11$ without showing or proof of

any obligation or business from where thebig amounts had come from.

0. Te"as Man #entenced for Role in$%lac& Mar&et 'eso ("change) #cheme*Bn "eptember '', 01'%, in /ouston, &e(as,Willie Whitehurst with four others weresentenced to '6' months in prison for hisrole as one of the leaders of a criminalconspiracy that laundered more than G01million through Hshell business banaccounts.

In August 01'0, a federal grand @ury in/ouston indicted the five defendants fortheir parts in a large H>lac Maret +eso<(change scheme. rom Bctober 0113 to"eptember 01'', the defendants placedUnited "tates currency gained through thesale of drugs into ban accounts held in the

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names of the organi)ations Hshellcompanies.

&he money was then transferred to differentaccounts in the United "tates and inMe(ico. In e(change, pesos were

transferred bac to accounts owned by theorgani)ations clients.

%. AMLA +ase against R(T! LT! (!.A+/T +! L/T, (RL/A 2! L/T,'A3L 2! L/T, R/4A 2! L/T, andM/3(L 2! L/T

Bn 7une 08, 0116, the 2epublic of the+hilippines, represented by the Anti*MoneyLaundering -ouncil, filed an Urgent <(*+arte Application for the issuance of afree)e order with the -A against certainmonetary instruments and properties of thepetitioners, pursuant to "ection '1 of2epublic Act o. 3'41. &his application wasbased on the ebruary ', 0116 letter of theBffice of the Bmbudsman to the AML-,recommending that the latter conduct aninvestigation on Lt. Jen. Ligot and his familyfor possible violation of 2A o. 3'41.

Lt. Jen. Ligot declared in his "AL that asof :ecember %', 011%, he had assets in thetotal amount of +%,K#K,11%.11. In contrast,

his declared assets in his '3K0 "ALamounted to only +'16,111.11.

>ut aside from these declared assets, theBmbudsmans investigation revealed thatLt. Jen. Ligot and his family had otherproperties and ban accounts, not declaredin his "AL, amounting to atleast +6#,11',0'8.11.

Undeclared Assets Amount

7acinto Ligots undeclared assets +#','K6,6K%.6%

7acinto Ligots childrens assets ',8##,1%6.41

&uition fees and travel e(penses + 0,%1K,1#8.K8

<dgardo Fambaos assets relativeto the real properties

+ K,84%,661.11

&otal +

6#,11',0'8.11

With Lt. Jen. Ligots main source of incomewas his salary as an officer of the A+, hiswife and childrens lac of any othersubstantial sources of income, theBmbudsman declared the assets registeredin Lt. Jen. Ligots name, as well as those in

his wifes and childrens names, to beillegally obtained and une(plained wealth. "uch amount is clearly not commensuratewith Lt. Jen. Ligots and his familysfinancial capacity considering thecircumstances.

#. Republic s! (ugenio r! 15679;

Where the AML- filed before the2&- Maati for the issuance of the order toe(amine the various ban accounts andinvestments of Alvare), &rinidad, Liongsonand -heng Fong, the persons involved inthe alleged corruption concerning the AIAterminal %. &he ban accounts ofrespondents consisted of several accountson various baning institution in the country.

&he main issue in this case,however, is whether or not said order canbe granted by the court e( parte. &he"upreme -ourt ruled in favor of therespondents because, according to thecourt, unlie in the case of a free)e order,the sub@ect records of transaction of thee(amination order cannot be hidden ortaen away and the absence of a provisionin the AMLA providing the issuance of theorder e( parte when -ongress could haveeasily added said term. &he subse9uentamendments in the AMLA law howeveraddressed this problem by providing that ane(amination order may now be issued e(parte.

6. &o determine whether an act isunusually different from a clients profile,certain records have to be reviewed toascertain the former transactions he or shehas regularly entered into. More often thannot, clients who have dormant accountswhich suddenly engage in active and

aggressive money wiring or transfer shouldraise a level of suspicion on the part of theban. Aside from such, these are other actslined to money*laundering on Hanycircumstance relating to the transactionwhich is observed to deviate from the profileof the client and=or the clients pasttransactions with the covered institution;

a. >uying and selling of a securitywith no discernible purpose or incircumstances which appear unusual.

b. &he intensity of transactions foran inactive trading account suddenlyincreases without plausible reason.

c. &he entry of matching buys andsells in particular securities, creating anillusion of trading. "uch trading does not

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result in a bona fide maret position, andmight provide Ccover for a money launderer.

d. Unusually short period of holdingsecurities.

e. re9uent selling of securities atsignificant losses.

f. "tructuring transactions to evadesubstantial shareholding.

g. "imultaneous transfer of funds toa group of customers accounts from a thirdparty

h. Larger or unusual settlements ofsecurities transactions in cash form.

i. Bpening of trading accounts withlarge cash sum !above 2M 61,111$.

@. &he crediting of a customersmargin account using cash and by means of numerous credit slips by a customer suchthat the amount of each deposit is notsubstantial, but the total of which issubstantial.

. A customer who suddenly startsmaing investments in large amounts whenit is nown to the 2eporting Institution thatthe customer does not have the capacity todo so.

l. &ransactions that cannot bematched with the investment and incomelevels of the customer.

m. 2e9uests by customers forinvestment management services !eitherforeign currency or securities$ where thesource of the funds is unclear or notconsistent with the customers apparent

standing.

n. In a situation where multipleaccounts are used to transfer fundsbetween accounts by generating offsettinglosses and profits in different accounts.

4. .oseph (! (strada ! #andiganbayan8!R! o! 1:60, oember 19, 7001;

In "eptember 0118, 7oseph <strada wasconvicted by the +hilippine "andiganbayan!anti*graft court$ of the crime of +lunder.

According to an unofficial copy of the courtdecision obtained through the website of the-han and 2obles law firm, Mr. <strada was

accused in an Amended Information filed on April '3, 011' of having amassed, whileserving as +resident from '33K to 011',GK8.% million in une(plained wealth and thatthe funds were derived from bribes, ic*bacs, and protection money collected fromillegal gambling operators. &he chiefgovernment witness against him in the+lunder trial was Jovernor Luis -havit"ingson, his co*conspirator in the collectionof protection money from illegal gamblingoperators.

2uling; &he court stated that some of theillegal proceeds had been deposited in Mr.<stradas <rap Muslim Fouth oundationand a ban account that Mr. <stradaopened in the false name of 7ose Nelarde./e was also convicted of having coercedtwo government agencies to purchaseshares in a gaming company owned by anassociate and collecting commissions fromthe sale of the shares. In addition to asentence of life imprisonment, Mr. <strada

was ordered to forfeit his mansion and morethan G'6 million in assets, including the illicitproceeds from the illegal gamblingoperators that had been transferred to theaccount of the <rap Muslim Fouthoundation and the 7ose Nelardeaccount.

:iscussion;

&he ban account was used as funnel formonies derived from illegal activity. +lacedunder a ban account, dirty money soon

becomes integrated in the financial systemby passing it off as fruits of legitimatepursuits.

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Documents

Anti Money Laundering Handout