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ANTI-MONEY LAUNDERING 101

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Definitions of Money Laundering

processing of criminal proceeds in order to disguise their illegal origin

legitimization of proceeds of specified unlawful activity

crime whereby the proceeds of an unlawful activity are transacted thereby making them appear to have originated from legitimate sources (AMLA definition)

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Elements of the Crime of Money Laundering

Monetary instrument or property (MI/P) from an unlawful activity

Transaction/Attempted transaction of MI/P

Knowledge that the MI/P represents, involves, or relates to the proceeds of the unlawful activity

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REPUBLIC ACT NO. 9160

as amended byREPUBLIC ACT NO. 9194

THE “ANTI-MONEY LAUNDERING ACT OF

2001”

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Covered Institutions

1. Banks, non-banks, quasi-banks, trust entities, other institutions and their subsidiaries and affiliates supervised or regulated by the Bangko Sentral ng Pilipinas (BSP);

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Covered Institutions2. Insurance companies and all other

institutions supervised or regulated by the Insurance Commission (IC); and

3. All those supervised or regulated by the Securities and Exchange Commission (SEC), including securities dealers, brokers, investment houses, trading advisors, and other entities administering or otherwise dealing in currency, commodities or financial derivatives based thereon.

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Definition of Terms “Proceeds” – not limited to those

realized/derived from the unlawful activity.

“Transaction” – refers to any act establishing any right or obligation. It also includes any movement of funds by any means with a covered institution

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Covered Transaction

‘Covered transaction’ - a transaction in cash or other equivalent monetary instrument involving a total amount in excess of Five Hundred Thousand Pesos (Php500,000.00) within one (1) banking day.

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Suspicious TransactionSuspicious

transaction - a transaction with a covered institution, regardless of the amount involved, where any of the following circumstances exist(s):

1.No underlying legal or trade obligation, purpose or economic justification;

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Suspicious Transaction

2. Client is not properly identified;3. Not commensurate with the business

or financial capacity of the client;

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Suspicious Transaction4. Structuring;5. Deviation from the

profile; 6. Media reports;7. Similar, analogous or

identical to any of the foregoing.

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Money Laundering Red Flags -General

1. Refusal or reluctance to proceed with a transaction, or abruptly withdrawing a transaction, or provide information or identification.

2. Structured or recurring, non-reportable transactions.

3. Multiple third parties conducting separate, but related, non-reportable transactions.

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Money Laundering Red Flags -General

4. Transactions structured to lose the paper trail.

5. Significant increases in the number or amount of transactions.

6. Transactions which are not consistent with the customer’s business or income level.

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Money Laundering Red Flags – Other Activities Involving Customers

and/or Employees1. Questions or discussion on how to avoid

reporting/recordkeeping2. Customer attempt to influence an

employee not to file a report3. Lavish lifestyles of customers or

employees4. Short-term or no vacations5. Circumvention of internal control

procedures6. Incorrect or incomplete CTRs

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Unlawful activity (a.k.a. predicate offense)

‘Unlawful activity’ refers to any act or omission or series or combination thereof involving or having direct relation to the following:

1.Kidnapping for ransom2.Drug Trafficking and

other violations of the Comprehensive Dangerous Drugs Act of 2002

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Unlawful activity (a.k.a. predicate offense)

3. Graft and Corruption under R.A. No. 3019, as amended

4. Plunder (R.A. No. 7080, as amended)

5. Robbery and extortion6. Jueteng and Masiao (PD

1602)7. Piracy (RPC & PD 532)

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8. Qualified Theft under Art. 310, RPC

9. Swindling under Art. 315, RPC

10.Smuggling under RA Nos. 455 & 1937

11.Violations of Electronic Commerce Act of 2000 (R.A. No. 8792)

Unlawful activity (a.k.a. predicate

offense

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Unlawful activity (a.k.a. predicate offense)

12. Hijacking, destructive arson and murder, including those perpetrated by terrorists against non-combatant persons and similar targets

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Unlawful activity (a.k.a. predicate offense)

13. Fraudulent practices and other violations under the Securities Regulation Code of 2000 (RA 8799)

14. Felonies or offenses of a similar nature that are punishable under the penal laws of other countries.

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Money Laundering Offenses / Penalties

1. Knowingly transacting or attempting to transact any monetary instrument or property (MI/P) which represents, involves or relates to the proceeds of any unlawful activity (UA) (The money launderer himself) Penalty

7 to 14 years imprisonment Fine: not less than P 3

Million but not more than 2x the value of the MI/P

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Money Laundering Offenses / Penalties

2. Knowingly performing or failing to perform an act in relation to any MI/P involving the proceeds of any UA as a result of which he facilitated the offense of money laundering (The person who assists the money launderer) Penalty

4 to 7 years imprisonment Fine: not less than P1.5

Million but not more than P3 Million.

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Money Laundering Offenses / Penalties

3. For knowingly failing to disclose and file with the AMLC any monetary instrument or property required to be disclosed and filed –

Penalty 6 months to 4 years

imprisonment Fine: not less than

P100,000.00 but not more than P500,000.00,

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Other Offenses under R.A. 9160, as amended

1. For failure to keep records Records of all transactions of covered institutions

Maintained and safely stored for five (5) years from date of transaction/closure.

Penalty 6 months to 1 year

imprisonment Fine: not less than

P100,000.00 but not more than P500,000.00

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Other Offenses under R.A. 9160, as amended

2. For malicious reporting – Reporting or filing a completely

unwarranted or false information relative to money laundering transaction against any personPenalty

6 months to 4 years imprisonment Fine: not less than P100,000.00 but not

more than P500,000.00; Offender not entitled to the benefits of

the Probation Law.

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Offender is a corporation, association, partnership or any juridical person

Penalty imposed upon responsible officers who participated in, or allowed by their gross negligence

Other Offenses under R.A. 9160, as amended

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Offender is a juridical person - court may suspend or revoke its license.

Offender is an alien - deported without further proceedings after serving the penalties prescribed.

Other Offenses under R.A. 9160, as amended

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Offender is a public official or employee - perpetual or temporary absolute disqualification from office in addition to the penalties prescribed

Public official or employee called to testify and refuses purposely fails to testify - suffer the same penalties prescribed.

Other Offenses under R.A. 9160, as amended

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3. For breach of confidentiality

Covered institutions and their officers and employees are prohibited from:

communicating directly or indirectly, in any manner or by any means, to any person or entity, the media, the fact that a covered or suspicious

transaction report was made, the contents thereof, or any other information in relation thereto.

Neither may such reporting be published or aired in any manner or form by the mass media, electronic mail or other similar devices.

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Penalty 3 to 8 years imprisonment

and a fine of not less than P500,000.00 but not more than P1.0 Million.

concerned officer and employee of the covered institution and media (the responsible reporter, writer, president, publisher, manager and editor-in-chief) shall be held criminally liable.

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THE ANTI-MONEYLAUNDERING COUNCILOF THE PHILIPPINES

(AMLC)

The Philippines’ Financial Intelligence Unit

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Composition1. The BSP Governor – as

Chairman

2. The SEC Chairperson – as Member

3. The IC Commissioner – as Member

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AMLC SecretariatExecutive Director

Technical Staff

Compliance andInvestigation Group

Legal EvaluationGroup

InformationManagement andAnalysis Group

Administrative andFinance Group

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Functions of the AMLC

(1) to require submission of and receive covered or suspicious transaction reports from covered institutions (Secs 7[1] & 9[c].

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Functions of the AMLC

(2) to issue orders addressed to the appropriate Supervising Authority or the covered institution to determine the true identity of the owner of any monetary instrument or property (Sec. 7[2]

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Functions of the AMLC

(3) to institute civil forfeiture proceedings and all other remedial proceedings through the Office of the Solicitor General.

(4) to cause the filing of complaints with the Department of Justice or the Ombudsman for the prosecution of money laundering offenses.

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Functions of the AMLC

“(5) to investigate suspicious transactions and covered transactions deemed suspicious after an investigation by AMLC, money laundering activities, and other violations of this Act.

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Functions of the AMLC

“(6) to apply before the Court of Appeals, ex parte, for the freezing of any monetary instrument or property alleged to be the proceeds of any unlawful activity as defined in Section 3(i) hereof.

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Monetary InstrumentsCoins, currency of legal tender, drafts, checks, notes, securities, negotiable instruments, bonds, commercial papers, deposit certificates, trust certificates, transaction tickets, confirmation of sale or investments, money market instruments, other similar instruments where title thereto passes to another by endorsement, assignment or delivery.

What can be frozen?

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What can be frozen?

Property – as defined under the Civil Code

Art. 414. All things which are or may be the object of appropriation are considered either:

(1) immovable or real property; or (2) movable or personal property.

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What can be frozen?

Related Web of Accounts – Rule 10.4

“Related web of accounts pertaining to the monetary instrument of property subject of the freeze order” is defined as those accounts, the funds and sources of which originated from and/or are materially linked to the monetary instrument(s) or property(ies) subject of the freeze order.

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Functions of the AMLC

“(7) to implement such measures as may be necessary and justified under this Act to counteract money laundering.

“(8) to receive and take action in respect of, any request from foreign states for assistance in their own anti-money laundering operations provided in this Act.

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Functions of the AMLC

“(9) to develop educational programs on the pernicious effects of money laundering, the methods and techniques used in money laundering, the viable means of preventing money laundering and the effective ways of prosecuting and punishing offenders.

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Functions of the AMLC

“(10)to enlist the assistance of any branch, department, bureau, office, agency or instrumentality of the government, including government-owned and –controlled corporations, in undertaking any and all anti-money laundering operations, which may include the use of its personnel, facilities and resources for the more resolute prevention, detection and investigation of money laundering offenses and prosecution of offenders.

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Functions of the AMLC

“(11) to impose administrative sanctions for the violation of laws, rules, regulations and orders and resolutions issued pursuant thereto.”

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AMLC Special Powers To inquire into bank/NBFI

deposits/investments- without a court order- with a court order

To cause a freeze/restraint on suspected dirty money/property

- freeze order To cause forfeiture of dirty

money/property To implement necessary/justified

measures to counteract money laundering

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AMLC Authority to Inquire with or Without Court Order

(Sec. 11) To inquire into or examine any

particular deposits or investments upon order of a competent court, except in cases where the unlawful activity involves Kidnapping for Ransom (KFR), drug-related cases and terrorist related cases.

AMLC Resolution Court Order

KFR the rest of the Drugs-related predicate crimes Terrorist-related under Sec. 3 (i)

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Bangko Sentral ng Pilipinas (BSP)

“To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may inquire into or examine any deposit or investment with any banking institution or non-bank financial institution when the examination is made in the course of a periodic or special examination, in accordance with the rules of examination of the BSP.”

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Freezing of Monetary Instrument or

Property AMLC Resolution authorizing the

filing of a petition for freeze order before the Court of Appeals (CA).

Freeze Order Effective immediately Initial duration of twenty (20) days

– summary hearing to determine whether to modify, lift or extend

May be extended by the CA for a period not exceeding six (6) months

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Duty of Covered Institutions Upon Receipt of Freeze Order

Immediately freeze the monetary instrument or property and related web of accounts;

Within 24 hours, Covered Institutions (CIs) shall submit to the Court of Appeals and the AMLC, by personal delivery, a detailed written return on the freeze order – Account numbers Name(s) of account holders Amount Other relevant information Time

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Extension of the Freeze Order

Immediately furnish a copy of the notice of the freeze order upon the owner or holder;

The CI shall not lift the effects of the freeze order without securing official confirmation from the AMLC.

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3 Major Requirements for Compliance by CIs

1. Customer identification and due diligence

2. Record-keeping3. Reporting of

suspicious and covered transactions

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Customer Identification /Know Your Customer (KYC)

One (1) valid photo-bearing ID issued by an official authority.

Maintain accounts only in the true and full name of the account owner or holder.

Not allow opening and creation of new accounts without face-to-face contact and full compliance with the requirements on minimum information/ documents, for individual customers.

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INDIVIDUAL CUSTOMERSCovered institutions shall require individual

customers to produce:1. original documents of identity issued by

an official authority, bearing a photograph of the customer, i.e., identity cards and passports.

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INDIVIDUAL CUSTOMERSMinimum information/documents

required: Name Present address Permanent address Date and place of birth Nationality Nature of work and name of employer or nature of

self-employment/business Contact numbers TIN, SSS No., GSIS No. Specimen signature Source of fund(s), and Names of beneficiaries in case of insurance contracts

and whenever applicable.

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CORPORATE AND JURIDICAL CUSTOMERS

Covered institutions shall endeavor to ensure that a:

1. corporate juridical entity has not been or is not being dissolved, wound up or voided.

2. its business or operations has not been or is not being closed, shut down, phased out, or terminated.

3. Shell companies should be dealt with extreme caution.

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CORPORATE AND JURIDICAL CUSTOMERS

Minimum information/documents required:1. Articles of Incorporation/Partnership2. By-laws3. Official address/principal business address4. List of directors/partners5. List of principal stockholders owning at least 2% of

the capital stock6. Contact numbers7. Beneficial owners, if any; and8. Verification of the authority and identification of the

person purporting to act on behalf of the client.

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AMLC Resolution No. 8 dated 20 February 2008

Clients who engage in a financial transaction with covered institution for the first time shall be required to present the original and submit a CLEAR copy of at least ONE (1) valid photo-bearing identification document issued by an official authority.

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AMLC Resolution No. 8 dated 20 February 2008

The term “OFFICIAL AUTHORITY” shall refer to any of the following:i. Government of the Republic of the

Philippines;

ii. Its political subdivisions and instrumentalities;

iii. Government-owned and/or controlled corporations (GOCCs); and

iv. Private entities or institutions registered with or supervised or regulated either by the BSP or SEC or IC.

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AMLC Resolution No. 8 dated 20 February 2008

Valid IDs: Passport including those issued by foreign

governments Driver’s license Professional Regulations Commission (PRC) ID National Bureau of Investigation (NBI) clearance Police clearance Postal ID Voter’s ID Barangay certification Government Service and Insurance System (GSIS) e-

Card Social Security System (SSS) card Senior Citizen Card Overseas Workers Welfare Administration (OWWA) ID OFW ID

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AMLC Resolution No. 8 dated 20 February 2008

Valid IDs: Seaman’s Book Alien Certification of Registration/Immigrant Certificate

of Registration Government Office and GOCC ID e.g. Armed Forces of

the Philippines (AFP), Home Development Mutual Fund (HDMF)

Certification from the National Council for the Welfare of Disabled Persons (NCWDP)

Department of Social Welfare and Development (DSWD) Certification

Integrated Bar of the Philippines ID Company issued by private entities or institutions

registered with or supervised or regulated either by the BSP, SEC or IC

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Not a crime under the AMLA or the UARR, only an administrative offense.

However, knowingly failing to observe KYC which leads to knowingly failing to file an STR is a criminal offense under Sec. 4(c) of the AMLA, as amended.

Failure to Observe KYC

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RECORD-KEEPINGREQUIREMENTS

Maintain and safely store all records of all transactions for 5 years from transaction date.

Records/files contain full and true identity of the owners/holders of the accounts

Ensure confidentiality

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RECORD-KEEPING REQUIREMENTS

Closed accounts - preserve and safely store records for at least 5 years from closure dates.

Money laundering case filed in court - retain until case has been finally resolved or terminated by the court.

Retain records as originals in such forms as are admissible in court.

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Reporting of Covered and Suspicious Transactions

Covered transactions and suspicious transactions = within five (5) working days from occurrence unless the supervising authority authorizes a longer period not exceeding ten (10) working days

Transaction determined to be both a covered transaction and a suspicious transaction = report the same as a suspicious transaction

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Circular No. 706, dated 5 January 2011

Updated Anti-Money Laundering Rules and Regulations (UARR)

Extended the deadline for the submission of CTR and STR to the AMLC by all banks and non-bank financial institutions under the supervision and regulation of the BSP from five (5) working days to ten (10) working days from occurrence thereof.

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Safe Harbor Provision When reporting covered or

suspicious transactions to the AMLC, covered institutions and their officers and employees shall not be deemed to have violated Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791 and other similar laws. [Sec. 4(c) of the AMLA, as amended and §X807.5, BSP Circular No. 706 (UARR)]

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OTHER AMLA COMPLIANCE REQUIREMENTS

Covered institutions shall formulate their respective money laundering prevention programs in accordance with the AMLA, including, but not limited to: information dissemination on money

laundering activities and its prevention, detection, and reporting; and

training of responsible officers and personnel of covered institutions.