briefer on the Anti-Money Laundering Act of 2001

The Anti-Money Laundering Act of 2001

1. What is money laundering?

Money laundering is an act or series or combination of acts whereby

proceeds of an unlawful activity, whether in cash, property or other assets,
are converted, concealed or disguised to make them appear to have
originated from legitimate sources. One way of laundering money is
through the financial system. 
 Republic Act No. 9160, otherwise known
as the Anti-Money Laundering Act of 2001 (AMLA), as amended, defined
money laundering as a scheme whereby proceeds of an unlawful activity
are transacted or attempted to be transacted, thereby making them
appear to have originated from legitimate sources.

2. What has the Philippine government done to curb money

laundering?

The government enacted Republic Act (R.A.) No. 9160 (The Anti-Money
Laundering Act of 2001), which took effect on 17 October 2001. Certain
provisions of AMLA were amended by R.A. No. 9194(An Act Amending
R.A. 9160) effective 23 March 2003. It has also issued the Revised
Implementing Rules and Regulations (RIRR) implementing R.A. No. 9160,
as amended.

3. What are considered unlawful activities under the AMLA, as

amended?


There are 14 unlawful activities or predicate crimes covered by the AMLA.

These are, 
 in the order enumerated in the law:

 Kidnapping for ransom

 Drug offenses
 Graft and corrupt practices
 Plunder
 Robbery and extortion
 Jueteng and masiao
 Piracy on the high seas
 Qualified theft
 Swindling
 Smuggling
 Electronic Commerce crimes
 Hijacking, destructive arson and murder, including those
perpetrated against non-combatant persons (terrorist acts)
 Securities fraud
  Felonies or offenses of a similar nature punishable under penal
laws of other 
 countries

4. How is money laundered through the financial system?

Placement – involves initial placement or introduction of the illegal funds

into the financial system. Financial institutions are usually used at this
point.

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 financial activities into the laundering process. Ex.
wire transfers, use of shell corporations, etc.

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

5. Why is Money Laundering a problem?

Money laundering allows criminals to preserve and enjoy the proceeds of

their crimes, thus providing them with the incentives and the means to
continue their illegal activities. At the same time, it provides them the
opportunity to appear in public like legitimate entrepreneurs. Organized
crime, through money laundering, is known to have the capacity to
destabilize governments and undermine their financial systems. It is thus a
threat to national security.

6. What are the salient features of the law?

 It criminalizes money laundering, meaning it makes money

laundering a crime, and 
 provides penalties for its commission,
including hefty fines and imprisonment.
 It states clearly the determination of the government to prevent the
Philippines from becoming a haven for money laundering, while
ensuring to preserve the integrity and confidentiality of good bank
accounts.
 It creates an Anti-Money Laundering Council (AMLC) that is tasked
to oversee the implementation of the law and to act as a financial
intelligence unit to receive and analyze covered and suspicious
transaction reports.
 It establishes the rules and the administration process for the
prevention, detection and prosecution of money laundering
activities.
  It relaxes the bank deposit secrecy laws authorizing the AMLC and
the Bangko Sentral ng Pilipinas access to deposit and investment
accounts in specific circumstances.
 It requires covered institutions to report covered and suspicious
transactions and to cooperate with the government in prosecuting
offenders. It also requires them to know their customers and to
safely keep all records of their transactions.
 It carries provisions to protect innocent parties by providing
penalties for causing the disclosure to the public of confidential
information contained in the covered and suspicious transactions.
 It establishes procedures for international cooperation and
assistance in the apprehension and prosecution of money
laundering suspects.

7. What is the Anti-Money Laundering Council (AMLC)? What are its

powers?

The AMLC is the Philippines’ financial intelligence unit, which is tasked to

implement the AMLA. It is composed of the Governor of the Bangko
Sentral ng Pilipinas (BSP) as Chairman & the Commissioner of the
Insurance Commission (IC) and the Chairman of the Securities and
Exchange Commission (SEC) as members. 
 The AMLC is authorized to:

 Require and receive covered or suspicious transaction reports from

covered institutions.
 Issue orders to determine the true identity of the owner of any
monetary instrument or property that is the subject of a covered or
suspicious transaction report, and to request the assistance of a
foreign country if the Council believes it is necessary.
 Institute civil forfeiture and all other remedial proceedings through
the Office of the Solicitor General.
 Cause the filing of complaints with the Department of Justice or the
Ombudsman for the prosecution of money laundering offenses.
 Investigate suspicious transactions, covered transactions deemed
suspicious, money laundering activities and other violations of the
AMLA.
 Secure the order of the Court of Appeals to freeze any monetary
instrument or property alleged to be the proceeds of unlawful
activity.
 Implement such measures as may be necessary and justified to
counteract money laundering.
 Receive and take action on any request from foreign countries for
assistance in their own anti-money laundering operations.
 Develop educational programs to make the public aware of the
pernicious effects of money laundering and how they can
participate in bringing the offenders to the fold of the law.
  Enlist the assistance of any branch of government for the
prevention, detection and investigation of money laundering
offenses and the prosecution of offenders. In this connection, the
AMLC can require intelligence agencies of the government to
divulge any information that will facilitate the work of the Council in
going after money launderers.
 Impose administrative sanctions on those who violate the law, and
the rules, regulations, orders and resolutions issued in connection
with the enforcement of the law.

8. What are the covered institutions?

 Banks, 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 ng Pilipinas (BSP)
 Insurance companies, holding companies and all other institutions
supervised or regulated by the Insurance Commission (IC)
 Securities dealers, brokers, pre-need companies, foreign exchange
corporations, investment houses, trading advisers, as well as other
entities supervised or regulated by the Securities and Exchange
Commission (SEC)

9. What are the Customer Identification Requirements – KYC (Know

Your Customer Rule)?

Covered institutions shall:

 Establish and record the true identity of their clients based on

official documents.
 In case of individual clients, maintain a system of verifying the true
identity of their clients.
 In case of corporate clients, require a system verifying their legal
existence and organizational structure, as well as the authority and
identification of all persons purporting to act in their behalf.
 Establish appropriate systems and methods based on
internationally compliant standards and adequate internal controls
for verifying and recording the true and full identify of their
customers.

10. What are the Record-Keeping Requirements?


 All covered institutions shall:

 Maintain and safely store all records of all their transactions for five
years from the transaction dates;
  Ensure that said 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 files;
 Prepare and maintain documentation, in accordance with client
identification requirements, on their customer accounts,
relationships and transactions such that any account, relationship
or transaction can be so reconstructed as to enable the AMLC
and/or the courts to establish an audit trail for money laundering;
 Maintain and safely store all records of existing and new accounts
and of new transactions for 5 years from October 17, 2001 or from
the dates of the accounts or transactions, whichever is later;
 Anent closed accounts, preserve and safely store the records on
customer identification, account files and business correspondence
for at least 5 years from the dates they were closed;
 If a money laundering case based on any record kept by the
covered institution has been filed in court, retain said files until it is
confirmed that the case has been finally resolved or terminated by
the court; and
 Retain records as originals in such forms as are admissible in court

11. What are covered transactions?

Transaction in cash or other equivalent monetary instruments involving a

total amount in excess of P500,000.00 within one business day.

12. What are suspicious transactions?


 Transactions, regardless of the amount involved, where the following

circumstances 
 exist:

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

justification;

b.the client is not properly identified;

c. the amount involved is not commensurate with the business or financial

capacity of the client;

d. 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 Act;
e. 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;

f. 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

g. any transaction that is similar or analogous to the foregoing.

13. What are the reporting requirements?

Covered institutions shall report to the AMLC all covered transactions and
suspicious transactions within five working days from occurrence thereof,
unless the Supervision Authority (the Bangko Sentral ng Pilipinas, the
Securities and Exchange Commission, or the Insurance Commission)
prescribes a longer period not exceeding ten working days. 
 Should a
transaction be determined to be both a covered transaction and a
suspicious transaction, it shall be reported as suspicious transaction.

14. How is reporting done?

The reports on covered and/or suspicious transactions shall be

accomplished in the prescribed formats and submitted within five business
days from occurrence of the transactions in a secured manner to the
AMLC in electronic form, either via diskettes, leased lines, or through
internet facilities. The corresponding hard copy for suspicious transactions
shall be sent to AMLC at the 5th Floor EDPC Building, Bangko Sentral ng
Pilipinas Complex, Manila, Philippines. All pawnshops should coordinate
with the AMLC thru tel. nos. 523-4421, 521-5662 or 302-3979 on reporting
requirements, procedures and deadlines.

15. Are there sanctions for failure to report covered or suspicious

transactions and non-compliance with R.A. 9160, as amended?


 Sanctions/penalties shall be imposed on pawnshops that will fail to

comply with the provisions of R.A. 9160, as amended.

16. What are the sanctions for failure to report covered or suspicious
transactions?

Any person, required to report covered and suspicious transactions failed

to do so will be subjected to penalty of 6 months to 4 years imprisonment
or a fine of not less than P100,000.00 but not more than P500,000.00, or
both.
17. Are there confidentiality restrictions on the reporting of covered
transaction and/or suspicious transaction?


 When reporting covered transactions 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, 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, the concerned officer, and
employee, of the covered institution, or media shall be held criminally
liable.

18. What are the other offenses punishable under the AMLA, as
amended?

a. Failure to keep records is committed by any responsible official or

employee of a covered institution who fails to maintain and safely store all
records of transactions for 5 years from the dates the transactions were
made or when the accounts were closed. 
 The penalty is 6 months to 1
year imprisonment or a fine of not less than P100,000.00 but not more
than P500,000.00, or both.

b. Malicious reporting is committed by any person who, with malice or in

bad faith, reports or files a completely unwarranted or false information
regarding a money laundering transaction against any person. 
 The
penalty is 6 months to 4 years imprisonment and a fine of not less than
P100,000.00 but not more than P500,000.00. The offender is not entitled
to the benefits of the Probation Law.

c. Breach of Confidentiality. For this offense, the penalty is 3 to 8 years

imprisonment and a fine of not less than P500,000.00 but not more than
P1 million. In case the prohibited information is reported by media, the
responsible reporter, writer, president, publisher, manager, and editor-in-
chief are held criminally liable.

d. Administrative offenses. The AMLC, after due investigation, can impose

fines from P100,000.00 to P500,000.00 on officers and employees of
covered institutions or any person who violates the provisions of the
AMLA, as amended, the Implementing Rules and Regulations, and orders
and resolutions issued pursuant thereto.

First published in bsp.gov.ph on March 14, 2006.

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