Last of Two Parts
UNLESS THE Anti-Money Laundering Council (AMLC) moves faster than usual, the clan implicated in the Nov. 23, 2009 Maguindanao Massacre might soon retake control of what by all accounts is a scandalously vast estate of money and mansions, and wheels and weapons it had acquired while governing over a dirt-poor province.
Next week, on Dec. 2, a freeze order on 597 bank accounts, 142 firearms, 132 motor vehicles, and 113 houses and lots, recorded in the names of 27 Ampatuan family members and their associates, will lapse.
The bank accounts alone are estimated to be worth more than a billion pesos – multiple times more money than what the Ampatuans who held elective office had declared in their asset disclosure records to be their lawful incomes and net worth.
The AMLC – which is unduly secretive in the country but quite open about its operations in international forums and toward donor agencies – is mum about what it plans to do next.
Unfortunately, it barely inspires confidence, if the last two years since the massacre are any reference.
Indeed, by most indications, the AMLC and monetary and banking officials, along with the banks, have taken largely a series of administrative half-steps and missteps against the Ampatuans, who until the massacre that killed 58 people, including 32 media workers, were the lords of Maguindanao.
In truth, the story of how the Ampatuans managed to move massive amounts of money to and from hundreds of bank accounts is also the story of why regulatory agencies failed to enforce banking laws vis-à-vis the banks.
Too, it is the story of why the banks had acquiesced to keep the financial deals of the Ampatuans secret for so long, in clear violation of their duty to report “suspicious transactions” under banking and AMLC rules.
And whether or not the banks failed to report the Ampatuans’ series of suspicious transactions in the years before the massacre occurred, and in the 18 months that followed, begs the question of whether or not the AMLC had taken action, any action at all, against the banks.
Can’t bare moves?
In fact, it was only last May that the AMLC formally moved to freeze the multibillion assets and hundreds of bank accounts of the Ampatuans.
On Jun. 8, 2011, the Court of Appeals, acting on the AMLC’s 94-page “urgent ex-parte petition for freeze order,” issued a 20-day provisional asset preservation order. This was followed by a six-month freeze order, again on AMLC’s motion, that would lapse on Dec. 2, 2011.
Recent repeated requests by the PCIJ for an interview with AMLC’s senior officials yielded just this email reply: “We cannot disclose to anyone what we plan to do in relation to cases that we have filed or intending to file because this will telegraph our moves to the persons that we are investigating or prosecuting.”
Specific questions about whether or not to banks had filed suspicious transaction reports on the Ampatuan bank accounts prior to the Maguindanao massacre, and what the AMLC had done or plan to do either way, received this curt reply: “We cannot cite particular suspicious or covered transaction reports, specific cases and identify persons subject of our legal action because this will violate the confidentiality provisions of the AMLA (Anti-Money Laundering Act) of 2001, as amended and its Revised Implementing Rules & Regulations.”
But the reply also stated that the AMLC secretariat “investigates suspicious transactions and covered transactions deemed suspicious, money laundering activities and other violations of the AMLA. Hence, it immediately analyzes and investigates suspicious transactions reported to it by banks and other financial institutions. It also analyzes and investigates covered transactions (a transaction is considered covered where the amount involved exceeds P500 thousand within one banking day), which are deemed suspicious after initial inquiry.”
Yet by filing its urgent ex-parte petition before the Court of Appeals a full 18 months after the massacre, the AMLC had sounded the alarm much too belatedly on the financial deals of the Ampatuans.
This is even though it seemed to appreciate the need for quick action on the clan’s assets, arguing in its motion for a freeze order: “Unless the bank accounts and other properties subject of this petition are frozen and placed under the custody of the law, there is imminent certainty that the funds contained therein and other identified properties will be withdrawn, removed, transferred, concealed or otherwise dispose of, thereby placing them beyond the reach of law enforcers, and would render ineffective government effort to forfeit the subject assets and prevent their use for other unlawful activities.”
A report by the Office of the Ombudsman, which conducted a lifestyle check on the Ampatuans in 2010, said that Ampatuan Sr. alone “has amassed unexplained wealth manifestly and excessively out of proportion to his legitimate income for the years 2000 to 2009 in the aggregate amount of P183,424,326.71.”
Andal Sr. illiquid?
But Sigfrid Fortun, counsel of Andal Sr., takes exception to details asserted in the AMLC petition. “Andal Sr. is illiquid and has no cash to spend for his families’ needs,” Fortun says in an emailed reply to PCIJ’s queries.
He also writes that his client, in his comments on the lifestyle check report, had said, “most of the assets listed as theirs are not owned by them as the Panel made assumptions without factual basis. Some of their source documents are dated or obsolete.”
“The bank accounts are a listing of all accounts bearing their name whether existing since the ’70s or closed for some reason,” adds Fortun. “They do maintain bank accounts but most if not all of them had been closed even before any investigation of their supposed ill-gotten wealth commenced.”
According to Fortun, the family of Bai Leila Uy, the first of Andal Sr.’s six wives, “has significant landholdings, which became revenue source for new businesses organized by Andal Sr. before he became a public official.” Most of the properties registered in Andal Sr.’s name “were acquired before he became a public official.”
Old, new accounts
Fortun could be correct in regard to some of the bank accounts being old, such as those enrolled with the Equitable PCIBank, which has since been acquired and networked under Banco de Oro Unibank Inc. In the AMLC documents, 73 bank accounts of the Ampatuans were supposedly opened with Equitable PCIBank, and with Banco de Oro, another 231 accounts, or nearly 40 percent of the 597 total accounts.
Interestingly, though, the 597 bank accounts on the AMLC’s list include 46 with the Land Bank of the Philippines, and another six with the Development Bank of the Philippines – government depository banks that are allowed in law to receive and disburse public funds. These accounts were listed mostly in the names of Zaldy and Andal Jr., who had served as elective officials.
A week after the appellate court froze the accounts, civil servants in the Autonomous Region in Muslim Mindanao (ARMM) had held a rally in Cotabato City to protest the inclusion of their salaries and benefits supposedly deposited in the one of the Land Bank accounts in the name of the Ampatuans.
The court’s freeze order apparently had the uncanny result of also freezing the salaries of the supposedly 30,000 employees of ARMM, including 22,000 public school teachers, as well as funds for the core shelter program that the Aquino administration had planned to roll out for local folk.
Why the account with the Land Bank branch on Magallanes Street in Cotabato City was opened in the name of an Ampatuan, and apparently continued to receive public funds 18 months after the massacre, remains a mystery.
Failed regulators
To be sure the Ampatuans’ intricate web of bank accounts points to two failures: the first, the failure of the banks to comply with clearly established banking and AMLC rules, and the second, the failure of the AMLC and monetary agencies to regulate the banks and enforce the laws.
And yet the AMLC alone – from its birth 10 years ago on Sept. 29, 2001 through Republic Act No. 9160, or the Anti-Money Laundering Act of 2001 – has enjoyed broad powers and command of resources to be able to do its job well.
Under the rules implementing RA 9160, the AMLC is a collegial body composed of Bangko Sentral governor (chairperson) and the heads of the Insurance Commission and the Securities and Exchange Commission as members. The law christened the AMLC with the fancy title of being “the Philippines’ Financial Intelligence Unit.”
The AMLC has embraced a lofty vision: “To be a world-class financial intelligence unit that will help establish and maintain an internationally compliant and effective anti-money laundering regime which will provide the Filipino people with a sound, dynamic and strong financial system in an environment conducive to the promotion of social justice, political stability and sustainable economic growth. Towards this goal, the AMLC shall, without fear or favor, investigate and cause the prosecution of money laundering offenses.”
The AMLC secretariat, headed by its executive director with a five-year fixed term, administers day-to-day operations with a staff complement of undisclosed numbers. Some AMLC personnel are seconded from the Bangko Sentral and other agencies, while others are consultants with fees covered by donor agencies.
In 2011, the AMLC received a P9.7-million budget, down from its so far largest annual allocation of P25.65 million in 2010. This was slightly higher than the P20.65 million that the agency got in 2009, P15.2 million in 2008, and P10 million in 2007 and 2005. This year’s budget allowed the AMLC zero funds for capital outlay and intelligence gathering.
The agency budget has consistently reflected no allocation for personal services. It does not disclose, too, the millions of dollars in grants, technical assistance, and overseas training for personnel that it has received from donor agencies. These include the Asian Development Bank (that gave US$1 million in 2002 for “Strengthening the Anti-Money Laundering Regime,” and US$400,000 more in 2005), and the European Union (that gave EUR 811, 000 or US$ 1,057,245 from September 2005 to September 2008).
Money laundering
RA 9160 criminalized money laundering in the Philippines and introduced “civil forfeiture as an appropriate remedy for the seizure and forfeiture in favor of the State, without the necessity of conviction or prosecution in a criminal case, of monetary instrument, property or proceeds involved in or related to an unlawful activity or money laundering offense as defined in the law.”
The law defined money laundering as “a crime whereby the proceeds of an unlawful activity are transacted thereby making them appear to have originated from legitimate sources.”
It spelled out the “unlawful activities” that are “predicate offenses” to money laundering include “any act or omission or series or combination thereof involving or having direct relation” to kidnapping for ransom; drug trafficking and other violations of the Comprehensive Dangerous Drugs Act of 2002; graft and corruption; plunder; robbery and extortion; jueteng and masiao; piracy on the high seas; qualified theft; smuggling; swindling; hijacking; destructive arson and murder, including those perpetrated by terrorists against non-combatant persons and similar targets; fraudulent practices and other violations under the Securities Regulation Code of 2000; and felonies or offenses of a similar nature punishable under the penal laws of other countries.
Covered institutions
The law allowed the AMLC access to and supervision over a broad range of “covered institutions,” or practically the whole universe of entities under the regulatory command of the Bangko Sentral, the Insurance Commission, and the Securities and Exchange Commission.
These include:
- Offshore banking units, quasi-banks, trust entities, non-stock savings and loan associations, pawnshops, and all other institutions including their subsidiaries and affiliates supervised and/or regulated by the Bangko Sentral.
- Insurance companies, insurance agents, insurance brokers, professional reinsurers, reinsurance brokers, holding companies, holding company systems, and all other persons and entities supervised and/or regulated by the Insurance Commission.
- Securities dealers, brokers, salesmen, associated persons of brokers or dealers, investment houses, investment agents and consultants, trading advisors, and other entities managing securities or rendering similar services, mutual funds or open-end investment companies, close-end investment companies, common trust funds, pre-need companies or issuers and other similar entities; foreign exchange corporations, money changers, money payment, remittance, and transfer companies and other similar entities, and other entities administering or otherwise dealing in currency, commodities or financial derivatives based thereon, valuable objects, cash substitutes and other similar monetary instruments or property supervised and/or regulated by the Securities and Exchange Commission.
Thus, under the AMLC’s rules, all banks and covered institutions are under “mandatory duty and obligation” to file “covered transactions reports” or CTRs and “suspicious transaction reports” or STRs, within five banking days from the date of the transactions.
By all indications, the steady spike in the amounts of money and the number of bank accounts that the Ampatuans had chalked up over the years should not have escaped the notice of their banks and the AMLC.
Suspicious transactions
The AMLC’s rules, as amended in March 2003, specify that “covered transactions” I are “transactions in cash or other equivalent monetary instrument involving a total amount in excess of five hundred thousand pesos (P500,000.00) within one (1) banking day.”
On the other hand, “suspicious transactions” are defined as transactions with covered institutions, “regardless of the amounts involved,” where any of the following circumstances exist:
- “There is no underlying legal or trade obligation, purpose or economic justification;
- “The client is not properly identified;
- “The amount involved is not commensurate with the business or financial capacity of the client;
- “Taking into account all known circumstances, it may be perceived that the client’s transaction is structured in order to avoid being the subject of reporting requirements under the (Anti-Money Laundering) Act;
- “Any circumstance relating to the transaction which is observed to deviate from the profile of the client and/or the client’s past transactions with the covered institution;
- “The transaction is in any way related to an unlawful activity or offense under this Act that is about to be, is being or has been committed; or
- “Any transaction that is similar or analogous to any of the foregoing.”
In its ex-parte report, the AMLC made no specific allegations about big amounts involved in single-day transactions for any of the bank accounts listed in the names of the Ampatuans and their associates. But under two principles that the AMLC has repeatedly exhorted the banks to observe, due diligence by the bankers and their account persons could reasonably be expected.
The first is the KYC or “know your client” rule, and the second, the matter of monitoring PEPs or “politically exposed persons” or politicians, political personalities, and their agents and intermediaries who are known to hold tremendous power and influence, and sometimes “abuse the system, dirty money will continue to end up in banks, often through trusts and corporate vehicles set up by agents and administered by unrelated third parties.”
Silent partners
Why the Ampatuans’ unusual trail of money escaped the notice of the banks and the AMLC is a tragic mystery. It is possibly also a story being repeated many times over across the country where banks and bankers continue to serve as willing vassals and silent partners of crooks in public and private offices.
In the case of the Ampatuans, some banks – all located outside Maguindanao where no single bank exists – had been favored more than others to serve as repositories of the clan’s millions.
The 597 bank accounts listed in the names of the 27 Ampatuans and their associates, according to the AMLC ex-parte report, include:
Table 1. Bank Account Holders and Number of Accounts
Table 2. The Banks and the Ampatuans
The AMLC may have broad and full powers to run after money laundering and all its predicate and related crimes but it offers little proof that it has been as effective in running after grafters and crooks in public office.
Poor to fair record
A July 2009 Mutual Evaluation Report of the AMLC conducted by Asia/Pacific Group on Money Laundering, with assistance from the World Bank, revealed that on its first eight years in office, the AMLC had a poor to fair record, depending on the predicate offenses or cases involved.
From 2003 to January 2007, the AMLC referred to the Department of Justice five complaints of estafa, two of pyramiding/ponzi scheme, and only one case each of qualified theft, kidnapping for ransom, and violation of the Anti-Graft and Corrupt Practices Act. To the Ombudsman, it submitted one case of 105 counts of plunder (against the ‘Euro generals’). The civil forfeiture case of the Ampatuans brings to three the AMLC’s harvest of corruption complaints it has filed in its first decade of life.
In terms of money restituted in favor of the state, the AMLC may be said to have made modest strides, considering its modest budget and small core personnel complement. Excluding the Ampatuans’ estate and bank accounts, as of October 2008 the AMLC has supposedly netted P21.3 million from terminated civil forfeiture cases, apart from a possible P287.8 million that could come from pending cases.
But toward banks defying AMLC rules, the agency is able to show only paltry results. Until October 2008, it reported collecting just P2.1 million in fines of P100,000 each imposed on 21 banks, even as it has yet to collect another P1million in unpaid penalties from 10 other financial institutions.
The latest data on the AMLC’s work are difficult to secure. The latest annual report posted on its official website dates back to 2007. But then again, the reticence of AMLC officials to grant requests for interview and information by Philippine media is the exact opposite of their willingness to open AMLC records and operations to foreign donor agencies and at conferences abroad.
Effete vs corruption
A senior banking regulator says AMLC could only render an effete role in uncovering corruption and plunder cases because of the failure of regulatory agencies, and the indifference, or lack of fear, on the part of banks and bankers toward regulators.
“There is compliance in the breach,” says the banker. “The structures, sanctions, and penalties are not strong enough, and the regulators are not feared or held in awe y bankers.”
Indeed, except for one rural banker, the article of faith that big banks hold is that not any single big banker has been jailed, or may ever see the slammer, for fraud or other violations of banking laws.
The banker notes that all recent big cases of banks going under for corruption or poor management had ended up in the government shelling out billions of pesos in bailout money. Soon after, the banker says, those who had sent their banks to bankruptcy had been recycled and returned to top posts in other banks.
The banker also says that while bank officials tend to strictly follow AMLC’s rules on filing CTRs and STRs in the big cities, in areas where warlords and political clans dominate, “where the rule of law is not there but the rule of the gun, banking rules do not apply.”
Politicians, especially those with virulent tendencies, had and would always intimidate bankers. Says the banker: “If they made deposits at the time they were not notorious at all, the bankers could just say they are valued clients. Now that their reputation is in ruins, as bankers you just hope that their account stays there in your bank.”
“Our monetary policies are okay,” the banker says, “but there’s a hell of a lot to be said in terms of regulatory aspects, legal standards, international standards, personal ties, classmates, and friends getting in the way of the law.”