A second look at BDO’s operations and we found some reasons to suspect the bank enjoys protection from regulatory bodies and even from legislators. Coincidental or not, Banco de Oro (BDO), the listed finance conglomerate of retail taipan Henry Sy, has often been linked to some shady deals, but hardly censured by monetary authorities. From suspected smugglers and terrorists to corrupt government officials and scam artists, they have one thing in common: they use BDO among banks as a conduit in transacting business. Now we’re not supposed to be surprised why BDO is the country’s number one bank. What’s suprising is BDO—has so far escaped unscathed, despite breaching an existing law, Republic Act No. 10365, the Anti-Money Laundering Act. Undoubtedly a multi-billion peso business, money laundering involves the use of banks and other non-bank channels to legitimize transfer of money from illegal sources such as smuggling, bribery, fraud and malversation of public funds. Under the law, as amended, banks are required to report to monetary authorities any transaction that involves movement of at least P500,000, a requirement many banks have yet to comply with. Moreover, the threshold amount is a pittance considering the oodles and oodles of money criminal syndicates and corrupt individuals handle at any time. Smuggling A Senate inquiry last year pointed to BDO, the country’s biggest bank in assets, and China Bank, also owned by Sy, as handling the accounts of big-time rice smugglers following the illegal entry of P487 million worth of Indian and Vietnamese rice shipments. The involvement of the country’s biggest bank in acts of crime would have merited investigations. No investigation happened, raising eyebrows even in a country used to corruption at the highest places in government. In its analysis, the IMF pegged at over P16.6 billion the worth of rice smuggled from Vietnam alone in the first two years of President Aquino’s six-year term. One can only surmise how much of that amount is laundered using banks and how much they profit from it. With help from banks like BDO at the disposal of smugglers, it’s no strange why the Philippines has become Asia’s “center of rice smuggling' Despite the Senate’s findings implicating Sy’s banks in money laundering, the Bangko Sentral ng Pilipinas(BSP) chose to look the other way in the absence of solid proofs. “In general, BSP doesn’t act on mere accusations and allegations,” says Deputy Governor Nestor Espenilla. Such stance by BSP only lent credence to market rumors that BDO is a “favored crony.” This is despite that BSP has a unit called the Anti-Money Laundering Specialist Group focused on guarding against potential laundering activities. In the United States, erring banks are swiftly meted out penalties for money laundering. HSBC, a London-based bank that traces its roots to Hong Kong, paid US$1.2 billion to the US government to settle money laundering charges. Aside from HSBC, the list of iconic banking institutions that have been slapped fines for violation of anti-money laundering rules include The Royal Bank of Scotland, £1.25 million; American Express International Bank, US$65 million; and Coutts, the bank of the Queen of England, £8.75 million. American regulators have likewise probed the New York branch of Standard Chartered Bank for allegedly laundering US$250 billion worth of dirty money from Iran. The serious effort to stop crime, the purpose of money laundering law, is serious in advanced countries. In the Philippines, that law is a simple PR job, even used to cover up crime. A tool in crime cover up, that law has made many in government, in the legislative and executive branches, very rich. Threats of investigations have resulted in big crime operators coughing up tens of millions to buy silence in the government. BDO, a highly diversified banking giant with interests in insurance, property, securities trading and other allied ventures, figured prominently in a recent Court of Appeals (CA) decision freezing the bank accounts of an alleged terrorist, a senior member of the separatist Moro Islamic Liberation Front (MILF). No less than a government watchdog, the Anti-Money Laundering Council (AMLC), asked the CA to freeze the accounts of the MILF member with some banks, one of which was BDO, on fears these would help finance the MILF’s campaign of terror. *** Terrorism The fact that a rebel organization has accounts with banks only showed the Philippines’ failure to fight terrorism financing, says the US State Department in its country report on terrorism for 2012. It attributed this to the country’s flaws in the monitoring mechanism and weak anti-money laundering efforts despite AMLC’s creation by law. “Monitoring is weak due to insufficient coordination and lack of resources of regulatory bodies," it said. Last July 5, the law, RA 10168, went into effect to help prevent and suppress terrorism financing. It allowed the AMLC to issue an ex parte order to freeze without delay property/funds related to the financing of terrorism or acts of terrorism, the report said. Unexplained Wealth It also allowed the AMLC to inquire into bank accounts based on an ex parte application with the courts and other acts related to conspiracy to commit terrorism. Other sensational cases dragging down BDO were the alleged ill-gotten wealth amounting to millions of retired military generals which found a safe haven in the bank’s vaults. Lawmakers looking into the bank accounts of the generals and their families could not hide their frustrations over why banks such as BDO accept deposits coming from dubious sources. The P12 billion investment scam perpetrated by Malaysian firm Aman Futures Group duping some 15,000 persons, mostly in Visayas and Mindanao, is another case involving the BDO and other banks acting as financial intermediaries. Under the existing law, a person who transacts money coming from unlawful sources can be imprisoned from seven to 14 years and pay a maximum fine of P3 million. Prison terms and fines are also imposed on banks for failure to keep records, malicious reporting on money laundering, failure of a public official to testify in AMLA cases and breach of confidentiality. Strict Enough In the case of malicious reporting, if the offender is a corporation, association, partnership or any juridical person, the penalty is imposed on the persons who participated in the commission of the crime. But the corporation or juridical entity may go scot-free because the law merely provides that “the court may suspend or revoke its license.” The law is silent on the penalties imposable on corporations or other juridical entities that violate its provisions. A bank found to have accepted for deposit, say,P100 million worth of dirty money, either knowingly or for failure to observe the proper measures to prevent that deposit, the most that it can be held liable for is the sum of P500,000. But, BSP says, its banking supervision is strict enough to help ensure that unscrupulous individuals and terrorist groups are not able to launder money in the country. Last June, the Paris-based Financial Action Task Force (FATF), an international body cracking down on money laundering, upgraded the Philippines from the “dark gray” to the gray list” after Congress passed key amendments that tightened the Anti-Money Laundering Act. In particular, the amended version no longer requires the AMLC to notify a suspect that his bank account is being investigated. Moreover, the stricter law criminalizes the extension by banks of any transaction in whatever form to alleged money launderers, including terrorists, and other shady characters. FAST FACTS -Linked to shady deals, BDO has defied the Anti Money-Laundering Law, engaging in illegal transactions under the very nose of Bangko Sentral ng Pilpinas (BSP), giving rise to speculations that the country’s biggest bank owned by the wealthiest retail taipan Henry Sy is untouchable and a “crony” of monetary authorities -Despite BSP’s claims that the law is a deterrent to money laundering, its provisions are deemed weak in enforcement, obviously an offshoot of intense lobbying by BDO and other banks to soften its punitive effects and insure their continued money-making activities at the expense of public interests -Despite that the law is a watered down version of its original intent to discourage malpractices in the banking industry, President Aquino signed it nonetheless as he succumbed to pressures mounted by the Paris-based global finance watchdog, the Financial Action Task Force (FATF), on threats the Philippines would be “blacklisted.” -Open defiance by BDO and other banks of the law has reduced it to a toothless legislative measure, making the BSP and the inter-agency Anti-Money mere “paper tigers.
Posted on: Sat, 13 Jul 2013 23:26:24 +0000
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