By Henry Balani, Global Head of Strategic Affairs, Accuity & FircoSoft
The Rizal Commercial Banking Corporation (RCBC) case continues to generate worldwide interest, as the issue has highlighted significant gaps in the regulatory coverage and enforcement of potential money laundering instances.
Many central banks have accounts at the Federal Reserve to facilitate cross border settlements in US Dollars, so the actual nature of the transaction is not unusual. In this case, thieves attempted to draw $951 million from the Bangladeshi Central bank account in the NY Federal Reserve, about $101 million was stolen with $80 million ending up in the Philippines and $21 million going to Sri Lankan accounts (later recovered). The majority of the $80 million that landed in Philippines was diverted to casinos through RCBC and to date only $68,000 has been frozen by the Philippines government, while the rest of the money remains missing and the trail seems to have hit a dead end.
During the investigation, it has come to light that the threshold amounts for identifying suspicious transactions (i.e. Red Flags) is $20million, , raising the possibility of breaking up the amount to avoid suspicion. Ultimately there are no restrictions on money being deposited into a banking account and any amount could be deposited if the payment instructions for the wire transfer are accurate. Apart from the cyber security issue, this case reinstates the need for effective implementation of anti-money laundering (AML) controls and the criticality of fostering a strong AML culture.
The issue here is that the existing Philippines Anti-Money Laundering Act (AMLA) does not include casinos, which increases the possibility of dirty money being laundered through the country. Such scandals also deter legitimate businesses from investing in the country, due to the high risks including reputational damage. The concern is that criminal elements can easily exploit deficiencies in the banking system.
Weak AML laws are never good for a country. There needs to be consistency amongst all countries, with Financial Action Task Force (FATF) guidelines providing a global standard. Combatting money laundering is a global issue, and cooperation amongst countries is the only way to slow this criminal activity down. No doubt that this scandal will continue to be investigated by the relevant authorities and weaknesses in the AML laws will be resolved. Until then, we can expect to see scandals like this highlighting the need for reform.
Published in The Asset ‘RCBC and the need for reform in AML laws in Philippines’ read the full article here