The Department of Finance (DOF) and the Anti-Money Laundering Council (AMLC) have renewed their firm commitment to step up joint efforts against money laundering and terrorism financing.
 
Finance Secretary Carlos Dominguez III and AMLC Secretariat Executive Director Mel Georgie Racela signed an updated memorandum of agreement (MOA) that aims to strengthen the cooperation and exchange of information between the two agencies in detecting, investigating, and prosecuting persons suspected of money laundering, terrorism financing, and other violations of the Anti-Money Laundering Act of 2001 (AMLA), as amended.  
 
Witnesses to the accord signing were DOF Revenue Integrity Protection Service (RIPS) Undersecretary Bayani Agabin and AMLC Secretariat Commitments and Policy Group Deputy Director Alvin Bermido.

"This updated MOA underlines the unrelenting drive by the Duterte administration to flush out money launderers and terrorist financiers and stop the Philippine financial system from becoming a harbor for their nefarious activities along with other AMLA violations," Dominguez said.

The AMLC is the Philippines’ Financial Intelligence Unit (FIU). But unlike most FIUs, the AMLC is a hybrid FIU with authority to receive and analyze suspicious transaction reports, investigate money laundering and terrorism financing, and initiate the filing of forfeiture proceedings and money laundering cases. This is pursuant to the AMLC’s mandate under the AMLA, as amended, the Terrorism Financing Prevention and Suppression Act of 2012, and the Anti-Terrorism Act of 2020.

The DOF, on the other hand, is the government's steward of sound fiscal policy. It formulates revenue policies to ensure funding of critical government programs that promote public welfare and accelerate economic growth and stability.

Created under Executive Order (EO) No. 259, series of 2003, RIPS is the anti-corruption arm of the DOF, which under the MOA may request financial information from the AMLC to support its ongoing probe into suspected money laundering activities and other violations of the AMLA by officials and employees of the DOF and its attached agencies, including their family members. The RIPS is tasked to investigate allegations of corrupt practices of officials and employees of the DOF and all its agencies, such as the Bureaus of Internal Revenue (BIR) and of Customs (BOC). It investigates unusual or unjustified accumulation of wealth disproportionate to the earning capacity of government officials and employees; gathers evidence and files appropriate criminal, administrative, and civil complaints against errant government officials and employees; and assists in the prosecution of cases for the recovery or forfeiture of ill-gotten wealth.

The DOF and AMLC previously signed a MOA on information-sharing and capacity building on 8 July 2014 to facilitate the efficient investigation and prosecution of officials and employees of revenue-generating agencies, who engage in smuggling as well as graft and corruption. The revised MOA further institutionalizes mechanisms for the efficient exchange of information.

"As the country’s situation evolves, so does the fight against money laundering and terrorism financing. This MOA represents another chapter of collaboration and information-sharing between the DOF and the AMLC,” Racela said.  

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AMLC Advisory Typologies Report on Use of Filipinos and Businesses as Dummies by Foreign Nationals

 The AMLC typologies report on money laundering related to illegal drug activities identified the modus operandi involving Filipino nationals ("front"), who register businesses with the company registries on behalf of foreign nationals, who are the actual and ultimate beneficial owners or the UBOs of the said businesses.

 These companies are under the complete control and operation of the foreign nationals. After registration with the company registry, the “front” goes to the bank (mostly commercial and universal banks are utilized) with the newly acquired business registration permit, to open an account in the name of the business. The said bank account will then be managed and controlled by the foreign nationals - the UBOs, for the purpose of receiving funds from illegal proceeds. Moreover, majority of the registered businesses, as identified in this modus operandi, are discovered to be "shell companies" or inexistent companies. The receiving and/or transacting of proceeds of illegal activities using the scheme and accounts set up by the Filipinos and foreign nationals for that purpose, is a violation of the Anti-Money Laundering Act, as amended.

 The red flag indicators and suspicious behaviors that have emerged from the analysis of the information gathered, which are related to possible money laundering activities associated with illegal drug trade are as follows:

• Significant or large transactions incurred in a short period of time;
• Unjustified large cash deposits;
• Transactions seem to be inconsistent with the customer’s financial standing;
• Transaction activity is inconsistent with what is expected from business declaration;
• Unusual transactions or activities compared with normal everyday trade or dealings;
• Application of sophisticated products or use of complex techniques;
• Multiple accounts associated with a single business;
• Structured cash deposits and money transfers;
  • Use of multiple accounts by a single transactor;
  • Use of several money service businesses to send funds; and
• Use of authorized representative with no clear and underlying valid reason or justification.

In relation to the findings of the Typologies Report, covered persons are reminded of the following obligations relating to the Customer Due Diligence (CDD):

• To conduct CDD for the following purposes: (a) To identify the customer, and its agents and beneficial owners; (b) To determine the risk posed by each customer; (c) To establish, maintain, close or terminate the account or business relationship; and (d) To assess the level of monitoring to be applied (Sec. 1.1 Rule 18 of the 2018 IRR).

• For customers that are juridical persons or legal arrangements, CPs should maintain a system of understanding the nature of the customer’s business or profession, and ownership and control structure, as well as the authority and identification of all persons purporting to act on their behalf (Sec. 4.2 Rule 18 of 2018 IRR).

• To verify the validity of the authority of the agent and in case it entertains doubts as to whether the account holder or person purporting to act on behalf of the customer is being used as a dummy in circumvention of existing laws, it shall apply enhanced due diligence and file a suspicious transaction report (STR), if warranted (Sec. 5.3 of Rule 18 of 2018 IRR).

• To identify the beneficial owner and take reasonable measures to verify the identity of the beneficial owner, using the relevant information or data obtained from a reliable source, such that the covered person is satisfied that it knows who the beneficial owner is (Sec. 6.1 Rule 18 of 2018 IRR).

• Covered persons who are unable to comply with the relevant CDD measures shall: (a) refuse to open an account, commence business relations or perform the transaction; or shall terminate the business relationship; and (b) File an STR in relation to the customer, if circumstances warrant (Sec. 12 Rule 18 of 2018 IRR).

 When reporting these transactions, CPs are encouraged to use any of these applicable keyword phrases:

1. Front business or front individual
2. Multiple accounts
3. Transactor different from account owner
4. Shell companies
5. Sole proprietorship
6. Wholesale/retail business
7. General merchandise/ Trading business
8. Newly formed business
9. Special power of attorney
10. Use of Agents or representative agents or representative office/authorized representative
11. Methamphetamine hydrochloride / Methamphetamine/Shabu/Ecstasy/Marijuana
12. Illegal drugs
13. Drug trafficking/Drug distributor/Drug peddler
14. Fake identification/IDs
15. Substantial cash deposits
16. Multiple deposits
17. Small-denominated bills

Covered persons are advised that failure to comply with the above requirements of the 2018 IRRs shall be subject to applicable sanctions under Rule IV of Rules of Procedure on Administrative Cases under Republic Act No. 9160 or the Anti-Money Laundering Act of 2001, as Amended, and its Implementing Rules and Regulations, and Guidelines and Other Issuances of the Anti-Money Laundering Council.

To download the Typologies Report on the Use of Filipinos and Businesses as Dummies

by Foreign Nationals, please click the link.

The AMLC releases “Online Sexual Exploitation of Children: A Crime with a Global Impact and an Evolving Transnational Threat,” a money laundering and terrorism financing assessment. The study examines the risk exposure of the Philippines to the crime of online sexual exploitation of children (OSEC) or popularly known as “child pornography.”

OSEC is one of the progressing transnational issues that is affecting the domestic population and that has further worsened because of the COVID-19 pandemic. The study uses a descriptive approach in gauging risks associated with OSEC. The study also identifies, describes, and assesses what the factors behind the rapid increase of local OSEC cases are and how these factors evolve. The country’s existing defense mechanisms against OSEC, such as regulatory oversight and controls, are discussed as well.

This risk assessment is designed to provide guidance to covered persons (CPs) and law enforcement authorities (LEAs). OSEC-related financial indicators, suspicious triggers, and case typologies disclosed in the study provide a strategy to assist CPs and LEAs in identifying and detecting financial transactions possibly associated with OSEC-linked activities.

Although the study presents multiple financial indicators and suspicious triggers, these are not intended to be comprehensive and conclusive because they may not be present in all cases. Nonetheless, the financial indicators and triggers may be helpful in analyses and investigations as these provide hints and leads to possible OSEC-related transactions.

It must also be noted that red flag indicators, suspicious triggers, and case typologies relative to OSEC are not limited to those included in the study. OSEC constantly changes and grows due to the development of information and communication technology. Moreover, it is advised that if a certain financial transaction is suspected to be associated with OSEC, it is highly encouraged that said transaction is reported to law enforcement or to the FIU, in the case of CPs. The presence of indicators, triggers, and mechanisms in the typologies must urge further monitoring, investigation, and reporting.

Overall assessment
OSEC poses a high risk to money laundering due to the following reasons:
Global and domestic threats are high;
Vulnerabilities are present, and they continue to exploit the financial system;
The regulatory controls are not enough to reduce the inherent risk; and
The existing Public-Private Partnership Program (PPPP) framework is useful to a certain extent as only a handful of institutions are engaged.

A whole government approach is needed to combat OSEC and its money laundering impact.

To download the study, please click the link.