Anti-Money Laundering Training and Seminar

Anti-Money Laundering Seminar

Rural Bank of Dolores (Quezon), Inc.

MONEY LAUNDERING & TERRORIST FINANCING PREVENTION PROGRAM

What is Money Laundering?

• Processing of criminal proceeds in order to disguise their illegal origin legitimization of proceeds of an unlawful activity are transacted thereby making them appear to have originated from legitimate sources

Definition of Terms:• Covered Institutions (CIs)- banks and other financial institutions

(FIs) which under special laws are subject to BSP supervision and/or regulation

• Money Instruments- coins or legal tender, checks, deposit certificates, transaction tickets, confirmation of sale or investments, money market instruments

• Transaction- any act of establishing any right or obligation or giving rise to any contractual or legal relationship between the parties thereto. It includes any movement of funds by any means with a covered institution.

• Customers- any person or entity that keeps an account or transacts business with a CI, and any person or entity on whose behalf an account is maintained or a transaction is conducted, as well as beneficiary of said transaction (beneficial owner)

• Politically Exposed Person (PEP)- individual who is or has been entrusted with prominent public position in the Phil. Or in foreign state (e.g. heads of state, politicians, gov’t. officials, etc.) including their immediate family members

• Customer Identification Process- a system of verifying the true identity of their individual customers, and legal existence, organizational structure as well as the authority and identification of all persons acting on their behalf (authorized signatories)

Elements of Crime of Money Laundering

• Unlawful activity

• Monetary Instruments or property (MI/P)

• Transaction/attempted transaction of MI/P

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

Stages of Money Laundering

Stage 1 Placement

Definition

• Involve initial placement or introduction of the illegal fund into the financial system. Banks and other financial institutions are usually used at this point.

Example:a. Smurfing- the issue of transactions structured to avoid certain record keeping and reporting requirements mandated by law

• Converted into the financial instruments

• Commingled with legitimate funds

• Purchase of insurance contract

Layering

• Involves a series of financial transactions during which the dirty money is passed through a series of procedures, putting layer upon layer of persons and financing activities into the laundering process.

Examples:

• Electronic transfer of fund

• Disguise the transfer as payment of goods or services

• Transfer the funds to shell corporation

Integration

• The money is once again available to the criminal with the occupation and geographic origin obscured or concealed. The laundered funds are now integrated back into the legitimate economy through , the purchase of properties, business and other investments.

The “Anti-money Laundering Act of 2001”

RA Act. No. 9160 as amended byRepublic Act 9194

Salient features• Criminalize money

laundering

• Create financial intelligence unit or implementing agency

• Imposes requirements re:– Customer identification– Record keeping – Reporting of covered and

suspicious transactions

Covered Institutions

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

• Insurance companies, pre-need companies supervised by the Insurance Commission;

• All those supervised and regulated by the Securities and Exchange Commission (SEC)

Covered Transaction• Is a transaction in cash or other

equivalent monetary instrument involving a total amount in excess of Five Hundred Thousand (Php 500,000) within one (1) banking day.

Suspicious Transaction

Is a transaction with covered institution, regardless of the amount involved, where any of the circumstances exist (s);

• 1. there is no underlying legal or trade obligation, purpose or economic

justification;

• 2. the client is not properly identified

• 3. the amount involved is not commensurate with the business or financial capacity of the client;

• 4. Taking into account all known circumstances, it may be perceived that the client’s transaction are structured in order to avoid being subject of reporting requirements under the Act;

• 5. Any circumstance relating to the transaction is observed which deviates from the profile of the client and/or the client’s past transaction with the covered institution

• 6. the transaction is in any way related to an unlawful activity or any money laundering activity or offense under this act is about to be or being or has been committed; or

• 7. Any transaction analogous or identical to any of the foregoing.

Offenses/ Penalties

• For knowingly transacting or attempting to transact any monetary instrument or property which represents, involved or relates to the proceeds of any unlawful activity (the money launderer itself)

• 7 to 14 years imprisonment and

• Fine not less than P 3 million but not more than twice the value of the monetary instrument or property

Offenses/Penalties

• For knowingly performing or falling to perform an act in relation to an monetary instrument or property involving proceeds of any unlawful activity as a result of which he facilitated the offense of money laundering (The person who assists the money launderer)

• 4 to 7 years imprisonment and a fine of not less than P 1.5 million but not more than P 3 Million.

Offenses/ Penalties

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

• 6 months to 4 years imprisonment or a fine not less than

P 100,000 but not more than P 500,000. or both.

Other Offenses under RA 9160, as amended

Offenses/ Penalties

• For failure to keep recordsAll records of all transactions of covered institutions shall be maintained and safely stored for five(5) years from dates of transactions/when they were closed

• 6 months to 1 year imprisonment or a fine of not less than P 100,000. but not more than P 500,000, or both

Offenses / Penalties

• For malicious reporting any person who reports or files a completely unwarranted of false information relative to money laundering transaction against any person shall be held criminally liable.

• 6 months to 4 years imprisonment and a fine of not less than P100,000 but not more than P500,000;provided that the offender is not entitled to the benefits of the Probation Law.

Other Offenses

• If the offender is a corporation, association, association, partnership or any juridical person, the penalty shall imposed upon the responsible officers, as the case may be, who participated in, or allowed, by their gross negligence, the commission of the crime.

Other Offenses

• If the offender is a juridical person, the court may suspend or revoke its license.

Breach of Confidentiality

• When reporting covered or suspicious transactions to the AMLC, 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. In case of violation thereof, of the concerned officers and media (the responsible reporter, writer, president, publisher, manager, editor-in-chief) shall be held criminally liable.

Penalty

• 3 to 8 years imprisonment and fine of not less than P 500,000. but not more P 1 Million.

Jurisdiction Over Money Laundering Cases (Sec. 5 of RA No. 9160, as amended)

• Regional Trial Courts shall have jurisdiction to try all cases on money laundering.

• (Special Anti-Money Laundering Courts/Commercial Courts shall try and decide violations of RA No. 9160, as amended, per SC En Banc Resolution No. dated 1 June 2004 in relation to SC Administrative Cir. No. 08-2001.)

The Role of Bangko Sentral ng Pilipinas

• “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.”

3 major Requirements for Compliance with CIs

• Customer identification and due diligence

• Record keeping

• Reporting of suspicious and covered transactions

Customer Identification

For Individual

• Clients who engage in a financial transaction with the bank 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

“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• Private entities or institutions registered with or

supervised or regulated either by the Bangko Sentral ng Pilipinas (BSP) or Securioties and Exchange Commission (SEC) or Insurance Commission (IC)

Minimum required information/documents

• Name – includes any other name used (e.g. maiden name);• Present address;• Permanent address – full address, PO Box number is not sufficient• Date and place of birth;• Nationality;• Nature of work and name of employer or nature of self-

employment/business;• Contact numbers – preferably landline;• Tax Identification Number, SSS No., GSIS No/E-Card No.;• Specimen signature; • Source of fund(s); and• Valid ID bearing a signature and photograph.

List of Valid IDs• Passport• Driver’s License • Professional Regulatory Commission (PRC) ID• National Bureau of Investigation (NBI) Clearance • Police Clearance • Postal ID • Voter’s ID • Barangay Certification • Government Service Insurance System (GSIS) e-Card • Social Security System (SSS) Card • Senior Citizen Card

• Overseas Workers Welfare Administration (OWWA) ID • OFW ID • Seaman’s Book • Alien Certification of Registration/Immigrant Certificate of

Registration • Government Office and GOCC ID, e.g. Armed forces of the

Philippines (AFP ID), Home Development Mutual Fund (HDMF ID) • 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 IDs by private entities or institutions registered with

or supervised or regulated by either Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC) and Insurance Commission (IC). 

Corporate/Juridical Customers

CIs 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.

Minimum information/ documents required:

• 1. Article of incorporation/Partnership• 2. By-Laws• 3. General information sheet;

– Office address/principal business address– List of Directors/partners– List of principal stockholders owning at least 2% of

the capital stock– Contact numbers– Beneficial owner, if any;– Others

4. Verification of the authority and identification of the person purporting to act on behalf of the client.

Related BSP Circulars

Circular 608 dated 20 May 2008• Clients who engage in a financial transaction with covered

institutions 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.  FOR THIS PURPOSE, 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 BANGKO SENTRAL NG PILIPINAS (BSP) OR SECURITIES AND EXCHANGE COMMISSION (SEC) OR INSURANCE COMMISSION (IC).

• Valid IDs include the following:• Passport• Driver’s License• Professional Regulation Commission (PRC) ID• National Bureau of Investigation (NBI) Clearance• Police Clearance• Postal ID• Voter’s ID• Barangay Certification• Government Service Insurance System (GSIS) e-Card• Social Security System (SSS) Card• Senior Citizen Card• Overseas Workers Welfare Administration (OWWA) ID• OFW ID

• Seaman’s Book• Alien Certification of Registration/Immigrant Certificate of

Registration• Government Office and GOCC ID, e.g. Armed forces of the

Philippines (AFP ID), Home Development Mutual Fund (HDMF ID)• 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 IDs ISSUED BY PRIVATE ENTITIES OR

INSTITUTIONS REGISTERED WITH OR SUPERVISED OR REGULATED EITHER BY THE BSP,  SEC OR IC 

•

• Students who are beneficiaries of REMITTANCES/FUND TRANSFERS who are not yet of voting age may be allowed to present THE ORIGINAL AND SUBMIT A CLEAR COPY OF ONE (1) VALID photo-bearing school ID duly signed by the principal or head of the school.

• c) Banks and non-bank financial institutions under BSP supervision shall require their clients to submit clear copy of the ONE (1) valid ID on a one-time basis only, or at the commencement of a business relationship.  They shall require their clients to submit an updated photo and other relevant information whenever the need for it arises.

• THE FOREGOING SHALL BE IN ADDITION TO THE CUSTOMER IDENTIFICATION REQUIREMENTS UNDER RULE 9.1.C OF THE REVISED IMPLEMENTING RULES AND REGULATIONS (RIRRS) OF R.A. NO. 9160, OTHERWISE KNOWN AS THE “ANTI-MONEY LAUNDERING ACT OF 2001”, AS AMENDED.

• a financial transaction is “any act establishing any right or obligation or giving rise to any contractual or legal relationship between the parties thereto.  It also includes any movement of funds by any means with a covered institution.”

• Failure to observe the Customer Identification and Due Diligence Requirement (KYC) is not a crime under AMLA. It is only an administrative offense However, it may constitute both criminal and an administrative offense under BSP Cir. 302 & 333, series of 2002 of the BSP Charter (R.A. 7653)

Record Keeping Requirement

• Maintain and safely store all records of all their transactions for 5 years from transaction dates.

• Ensure that records/files contain the full and true identity of the owners or holders of the accounts involved in the covered transactions and all other identification documents.

• Undertake the necessary adequate measures to ensure the confidentiality of such file.

• Anent closed accounts, preserve and safely store the records on the customer identification, account files and business correspondence for at least 5 years from closure dates.

• If a money laundering case based on any record kept by the covered institution has been filed in court, retain said file until it is confirmed that the case has been finally resolved or terminated by the court.

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

Reporting Requirements

Reporting of STRs and CTRsBSP Circular No. 612 dated 13 June 2008

• Extension of the deadline for submission of reports on CTR and STR to AMLC

•  the Monetary Board in its Resolution No. 630 dated 22 May 2008, approved the extension of the deadline for submission of covered transaction reports (CTRs) and suspicious transaction reports (STRs) by all banks and non-bank financial institutions under the supervision and regulation of the Bangko Sentral ng Pilipinas (BSP) to the Anti-Money Laundering Council  (AMLC) from five (5) working days to ten (10) working days from occurrence thereof.  This Circular shall take effect fifteen (15) days after its publication either in the Official Gazette or in a newspaper of general circulation.

• Should a transaction be determined to be both a covered transaction and a suspicious transaction. The covered institution shall be required to report such transactions.

Safe Harbor Provision

• When reporting covered or suspicious transactions to the AMLC, covered institution and their officers and employees shall not be deemed to have violated RA No. 1405, as amended RA No. 6426, as amended, RA No. 8791 and other similar laws.

The end