Bankers discuss ways to cut dirty money flow

AHEAD of Tuesday’s Senate blue ribbon committee hearing on the stolen $81 million that slipped through the cracks of the local financial system, the banking industry Monday met with regulators to brainstorm on ways to cut off the pipeline of dirty money into the country and better police bank employees.

As authorities probe deeper into the Bangladesh bank heist, the banking industry discussed the antimoney laundering framework, cybersecurity issues, people risk, the foreign exchange black market and the setting up of an electronic national payment system.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr., BSP Deputy Governor Nestor Espenilla Jr. and the BSP supervision and examination sector met with the new board of the Bankers Association of the Philippines (BAP).  Espenilla said the meeting was to “map out reform priorities with universal commercial banks and maximize cooperation opportunities.”

“We do this regularly with all new bank industry associations. Besides, it’s Easter. (It’s a) new beginning,” Espenilla said.

Other banking sources said the entry into the country of money stolen from the central bank of Bangladesh raised fresh concerns on how to weed out “black sheep” employees and prevent bank staff from being lured by the underworld.

The banking industry is also under challenge to exercise greater due diligence on remittance companies and their clients.

Now under scrutiny amid the recent money laundering transaction that used fictitious accounts set up at Rizal Commercial Banking Corp.’s Jupiter Street branch is remittance firm Philrem, the company that acted as a courier to transfer most of the $81 million dirty money to local casinos and other entities.  Philrem’s head, Salud Bautista, has said Philrem did not know that the funds had been stolen from Bangladesh and added that her company had only taken orders from RCBC branch manager Maia Santos-Deguito—who is now facing money-laundering charges filed by the Anti-Money Laundering Council.

Liberalization

Likewise cited as a priority—pending the tightening of antimoney laundering rules that still need to pass through Congress—is the liberalization of the undocumented foreign exchange limit to discourage legitimate foreign exchange deals from going into the “black market”—or foreign exchange brokerage or money changers outside the formal banking system.

“The BSP requested the BAP board for a recommendation on further foreign exchange relaxation with attendant safeguards,” said one banker privy to the meeting.

The BAP’s open market committee tasked to look into the matter is proposing an increase in the amount of foreign exchange that banks can sell to residents without prior BSP approval from $120,000 to $2 million.

At present, the BSP requires banks to ask customers for underlying documents if these customers want to buy over $120,000 per day from the banking system.  With the proposed liberalization of the foreign exchange limit, bankers hope that corporations and the public in need of dollars would no longer buy from the black market.

Based on industry estimates, about 85 percent of foreign exchange transactions in the country are being conducted outside the banking system.  In the Philippines, however, foreign exchange and money changing services outside the banking system are not illegal.  They are required to be registered and are also covered by the antimoney laundering law like the banks.  Some argue that they need to be part of the entire ecosystem to grease the financial system.

But to prevent foreign exchange deals that are really meant to go underground, some bankers suggest the tightening of regulations on money changers.

Many bankers believe that money service brokers should be audited and reviewed by the BSP annually and not just require registration. “A notarized monthly confirmation from the bank CEOs (chief executive officers) that they have not dealt with black market operators will kill the retail individuals engaged in black market operations,” one banker said, adding that data could be validated from the know-your-client database of banks.

New BAP officers

The BAP recently elected a new board of directors and a new president, Nestor Tan, the president of Banco de Oro Unibank.  The other four elected officers are Justo Ortiz (Union Bank), first vice president; Cezar Consing (Bank of the Philippine Islands), second vice president; Abraham Co (Asia United Bank), secretary; and Roberto Panlilio (JP Morgan Chase), treasurer. Cesar Virtusio remains as the managing director.

Other newly elected members of the BAP board are: Roberto Benares (Bank of Commerce); Ricardo Chua (China Bank); Fabian Dee (Metropolitan Bank & Trust Co.); Roberto de Ocampo (Philippine Veterans Bank); Herminio Famatigan (Maybank Philippines Inc.); Consuelo Garcia (ING Bank); Reynaldo Maclang (Philippine National Bank); Tadahiro Miyamoto (Philippine National Bank); Alfonso Salceo Jr. (Security Bank Corp.) and Jose Arnulfo Veloso (HSBC).

RCBC president Lorenzo Tan, in his farewell speech as president of BAP, proposed to the incoming BAP board the creation of an antifinancial crime committee to be chaired by a member of the board, a review of all existing laws, rules and guidelines against financial crime and the strengthening of the individual bank and industry-level compliance and enforcement structures.

The BAP has 39 commercial banks as members, of which 21 are local banks and 18 are foreign bank branches.