I.

Introduction

According to RA 9610 or the Anti-Money Laundering Act of 2001, Sec. 4, money

laundering is a crime whereby the proceeds of an unlawful activity are transacted, thereby
making them appear to have originated from legitimate sources

The Philippine bank secrecy laws, among the strictest in the world, have made our
country extremely vulnerable to corruption, tax evasion and money laundering and have
made corruption and tax evasion investigations extremely difficult. With the recent $81
million of Bangladesh bank heist, its money was electronically transferred out of that
country’s account at the Federal Reserve Bank of New York and was money laundered
through the Philippine financial system. One of the largest digital heists in history, this caper
has exposed the glaring weaknesses in our extremely strict bank secrecy laws.

The establishment of organized crime groups in our society has become the mid-wife
of another intricate web of criminality. Its wide and long-ranging threats undermine the
sovereignty of states, their economic stability, financial structures and their criminal justice
system. This is the transnational crime of Money Laundering which organized crime groups,
from drug syndicates, arms trafficking and the other burgeoning areas of criminal activity, to
perpetuate their existence, expand their operations and institutionalize their presence in a
mafia type fashion.

In the early 17th century, the Catholic Church decreed against the imposition of
usurious rates and considered it as a mortal sin compelling merchants and moneylenders to
engaged in a variety of practices that eventually become the precursors or models of modern
techniques for hiding, moving and washing criminal money. By the year 1612, the world
witnessed the first modern amnesty to criminal money when England offered pirates who
abandoned their trade, both full pardon and the right to keep their proceeds. It is only in
1920’s that the term money laundering emerged to have been coined in the United States,
when street gangs sought a seemingly legitimate explanation for the origins of their racket
money. In Asia, it is heartening to note that during the 6 th ASEAN Summit on 15 December
1998, various countries have expressed recognition on transnational character of criminal
activities, including the threats of money-laundering.
II. Facts about Bangladesh Bank money-laundering heist

Since the Anti-Money Laundering Council (AMLC) started its probe into the heist on
February 19th of 2016, a lot has happened- from confessions to resignations.

On March 15, 2015, four dollar bank accounts under fictitious names, namely Enrico
Teodoro Vasquez, Alfred Santos Vergara, Michael Francisco Cruz and Jessie Christopher
Lagrosas, were opened with Rizal Commercial Banking Corporation (RCBC) Jupiter Branch
in Makati. The accounts were dormant not until February 4 th of the same year, wherein
hackers broke into Bangladesh Bank (BB) with the Federal Reserve Bank of New York,
which ordered the transfer of 35 payment instructions, involving $ 951M, 30 of which were
blocked due to lack of details, one (1) which were transferred to a fake foundation in Sri
Lanka, wherein $20M were salvaged, and four (4) of which were transferred to RCBC-
Jupiter Branch worth $81M. The $81M found their way to the four fake bank account of
RCBC, accordingly $6 million was deposited to Cruz’s account, $19.99 million to Vergara,
$25 million to Vasquez, and bulk or $30 million to Lagrosas. The money was then
consolidated and deposited to a new dollar account opened on the same day of William So
Go of DBA Centurytex Trading.

Later, the stolen funds were transferred to Philrem Services Corporation. Philrem
converted into pesos some of the $81 million and delivered the money in cash to a registered
casino junket operator named Weikang Xu, Eastern Hawaii Leisure Company, and
Bloomberry Hotels Incorporated. Bangladesh Bank ordered for a “stop payment” to RCBC
and thus requesting for the return of the stolen funds. But despite the order, RCBC-Jupiter
Branch continued to allow withdrawals from the accounts.

On Febuary 16, Bangladesh Bank Governor Atiur Rahman told Bangko Sentral ng
Pilipinas Governor Amando Tetangco Jr that Society for Worldwide Interbank Financial
Telecommunication (SWIFT) code MT103 on February 4, which ordered the inward
remittance to the Philippines of $81 million, "is fraudulent." Rahman then asked Tetangco to
help them regain the loss of $81 million from their account with the Federal Reserve Bank.
Febuary 23, the real William So Go said RCBC Jupiter branch manager Maia Santos-
Deguito, asked to meet her at Fort Bonifacio, Taguig. Go revealed that Deguito informed him
that she opened a fictitious dollar and peso bank accounts for Centurytex without him
knowing. On March 1, the Court of Appeals started freezing the accounts including Kam Sin
“Kim” Wong, the president and general manager of Eastern Hawaii Leisure Company, and
other related accounts.

Wong told the senate that casinojunkt operators Ding Zhize and Gao Shuhua
facilitated the entry of the laundered money into Philippine Casinos. Gao, who Wong had
known for about 8 years, had a P450-million debt to Wong after losing money in casinos in
2014, he said.Wong said that he knew Ding through Gao who, he said, had "promised" him
that he would bring in more casino players in the Philippines. 

"Two foreigners brought the $81 million in the country. One of them has been in and
out of the country and is a popular junket agent and high roller. I will write their names and
put it in a sealed envelope, with a copy of their passport and will submit it to the committee,"
Wong told the Senate panel in Filipino. (Rappler, 2016)

Wong also recalled that on February 5, he received a phone call from Deguito,
informing him that there would be a huge amount of funds that would enter the junket
operators' accounts. He said he advised Deguito to send the money to Solaire Resort and
Casino in "cold cash."Also within the day, Wong said Salud Reyes-Bautista, PhilRem
president, personally delivered P80 million in cash, while Deguito brought in about P20
million.

On March 12, Deguito and her husband were aboard to Tokyo, japan, but were
offloaded due to the immigration bureau’s orders. Three days after, BB’s governor resigned
and three (3) of his subordinates were fired. March 17, the Senate Blue Ribbon Committee,
on resumption said that Go’s signature has been forged thus these accounts were believed to
not belong to Go. One of them is banker officer Romualdo Agarrado, who testified that
Deguito knew about the "stop payment" but proceeded with releasing the money, telling him
she feared for her life. (Rappler 2016)
III. Body

The case led to the resignation of its executive vice president Raul Victor Tan. It said
the reason for Tan’s resignation is “to pursue other endeavors,” which were not revealed.
RCBC thanked Tan for his seven years of "valuable services" to the company and wished
him well for his future endeavors. The bank’s board of directors appointed Carlos Cesar
Mercado, senior vice president, to replace Tan as acting treasurer effective also Wednesday.
Tan attended several Senate hearings on the money laundering case but the RCBC
management itself has given him clearance from the controversy.

“RCBC's internal investigation had previously cleared Mr. Raul Tan of any
participation in or breach of banking policies with respect to the $81M money laundering
issue,” the RCBC reiterated in a statement attached to the disclosure. RCBC Legal and
Regulatory Affairs Head Macel Estavillo said it was not the first time Tan expressed intent to
resign. "Out of decency and honor, and despite his lack of involvement in the same, he
tendered his resignation because of command responsibility, as Deguito - whose culpability
has been clearly and convincingly established - was under him," Estavillo said in a statement.
RCBC earlier issued an apology for the involvement of its personnel in the money laundering
scheme, such as former branch manager Maia Santos-Deguito.

The scandal should prod the government to conduct a thorough review of two things:
first, the technical security of our banking system, to ensure that a similar cybertheft will not
happen or is not already happening; second, our antimoney laundering laws and regulations,
in conjunction with the internal controls of banks, to identify the loopholes that enabled such
a huge amount of stolen money to be laundered through a local bank. Our antimoney
laundering laws impose penalties if it is proven that the bank allowed the proceeds of crimes
like robbery, corruption, drugs and illegal gambling to be deposited with it. The penalty for
bank employees is imprisonment, and for the bank itself, revocation or suspension of its
banking license.

The Senate inquiry into the scandal is limiting its focus to the personal liabilities of
the employees of the bank branch involved. The senators are treating RCBC with kid gloves,
as shown in their lack of probing questions on the potential liability of the banking
institution. Wittingly or unwittingly, the senators are conducting their investigation not “in
aid of legislation,” but in aid of proving the defense of RCBC—that the scandal is the sole
liability of a “rogue employee” who was making money on her own. The bank is projecting
itself as an injured party.

In other countries, the bank itself is criminally liable if there was systemic failure or
inadequacies in its internal controls to prevent the money laundering. The bank is also
criminally liable if it commits “willful blindness” despite the clear presence of “red flags.”
Any bank must not benefit from a scheme of creating a fictitious wall to insulate its top
management from liability. Top executives must not be allowed to bury their heads in the
sand while dirty money is being laundered in one of their branches, thereby enabling the
bank to reap windfall profits if the crime is not noticed, and to confine liability to scapegoat
employees if the crime is exposed.

The senators should leave the criminal investigation of the bank employees to the
Department of Justice and instead focus their attention on reviewing what RCBC did when
the red flags of money laundering appeared on their monitoring screens.

IV. Conclusion

The Philippines has become an ideal place for money laundering because its strict
bank secrecy laws make it very easy for criminals and money launderers. The Philippine
anti-money laundering laws also do not cover casinos and financial transactions in real estate,
jewelry and non- profit organizations. These are the areas where money laundering is
normally done. It is tempting to believe that these areas were deliberately not included
specifically to facilitate money laundering and tax evasion practices. Money laundering is a
“profit center” for many banks all over the world because they derive huge profits from
proceeds of corruption, illegal drugs, illegal gambling and other crimes.

The Philippine government should be more active in implementing its laws to prevent
these illegal acts from entering the country. Lawmakers should revise and amen the RA 9610
or the Anti-Money Laundering Act of 2001 and lessening the secrecy on bank accounts
 which are under the RA 1405 or the Law on Secrecy of Bank Deposits. RCBC, PhilRem with
other entities involved and all business not involved, should improve their practice on being
ethical. If they would these scandals will be lessen thus improving the occurrence of such
illegal and unethical acts. It would also help the Philippines reputation.

If the Senate is serious in strengthening Philippine laws to prevent money laundering,

it must initiate amendments by making banks liable to pay hundreds of millions, or even
billions, of pesos in criminal penalty under the doctrine of “let the master answer.”

V. References

2016 Bangladesh Bank heist. (n.d.). Retrieved December 01, 2016, from
https://en.wikipedia.org/wiki/2016_Bangladesh_Bank_heist

Anti-Money Laundering Act of 2001 (RA 9160). Retrieved December 01, 2016, from,
http://www.bsp.gov.ph/regulations/laws_aml.asp

Butuyan, J.R. ( 2016, March 21). Senators treating RCBC with kid gloves. Retrieved December
03, 2016, from http://opinion.inquirer.net/93945/senators-treating-rcbc-kid-
gloves#ixzz4S16LuAyL

Dela, Paz, C. (2016, April 2). 6 things we know about RCBC money-laundering scam. Retrieved
December 01, 2016, from http://www.rappler.com/business/127655-developments-rcbc-
money-laundering-bangladesh-bank-heist

Dela Paz, C. (2016, March 17). TIMELINE: Tracing the $81-million stolen fund from
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Dela Paz, C. (2016, March 30). Casino junket operator gives new leads in Bangladesh bank heist.
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De Vera, B.O. (2016, November 22). AMLC files charges vs. 6 RCBC excess for “money-
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Gavilan, J. ( 2016, March 31). Network: Who’s who in the RCBC money-laundering scam.
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scam-rcbc-scandal-money-laundering

How $81 million slipped through Philippine cracks. (2016, March 22). Retrieved December
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81-million-slipped-through-philippine-cracks&id=124838

Money Laundering. (n.d.) Retrieved December 01, 2016, from

http://www.pctc.gov.ph/papers/MoneyLaundering.htm

PH money laundering probe: What we know so far. (n.d.). Retrieved December 01, 2016, from
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so-far.html

RCBC reorganizes board after Bangladesh Bank Heist Scandal. (2016, July 26). Retrieved
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financial-services/141019-rcbc-reorganizes-board-bangladesh-bank-heist

RCBC treasurer resigns amid money laundering scandal. (2016, April 22). Retrieved December
01, 2016, from http://cnnphilippines.com/news/2016/04/21/RCBC-81-million-money-
laundering-case-treasurer-resigns.html

Villanueva, M.A. ( 2016, April 15). Money-laundering “business”. Retrieved December 1, 2016,
from http://www.philstar.com/opinion/2016/04/25/1576557/money-laundering-business