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Signs of Sabotage in AML Law
Oct 9,2001

Probably no other piece of recent legislation contains as many seeds of internal contradiction as the Anti-Money Laundering Act of 2001 (Republic Act No. 9160). One can almost hear, screaming out of the provisions of the new law, a voice saying "we do not want this law to succeed". Prescinding for the moment from the questions of vagueness raised by Constitutional expert, Exequiel Javier on the floor of the House of Representatives, we can identify at least three major provisions one can suspect were designed to derail, if not frustrate, the proper implementation of the law.

The first refers to the Anti-Money Laundering Council. On its shoulders primarily rest the task of giving effect to the law and it is composed of the governor of the Bangko Sentral as chairman, and the insurance commissioner and chairman of the Securities and Exchange Commission as members. One would think that this council would be given the ability to act expeditiously in such high-tech dominated activity as money laundering. But no, the law wants this council to act unanimously in the discharge of its functions. Maybe unanimity is advisable in case of freezing monetary instruments alleged to be proceeds of an unlawful activity. But why require the members to be unanimous in simply receiving covered transaction reports, requiring covered institutions to determine the true identity of owners of accounts, merely instituting forfeiture cases and just initiating investigations of money laundering?

The second involves the process of reporting suspicious transactions to the Anti-Money Laundering Council. An effective suspicious transaction reporting regime is essential to frustrating money laundering since denying the criminal the fruits of his crime is the primary intent of an anti-money laundering law. Thus, the money launderer must be caught in process, in flagrante delicto as it were. So, one would think that the law should encourage those who are in the frontlines to make their reports without fear of reprisals from those who might be affected.

Again, the law disappoints. Content with giving lip service in the form of an assurance that "no administrative, criminal or civil proceedings, shall lie against any person for having made a covered transaction report in the regular performance of his duties and in good faith," the law devotes an entire subsection imposing the criminal penalty of imprisonment and fine (without benefit of the Probation Law) to any person who, with malice or in bad faith, reports or files a completely unwarranted or false information relative to money laundering transaction against any person.

Everyone knows, however, how easy it is in this country to accuse a person of crime. The Ombudsman accepts unsigned and anonymous complaints. Fiscals as a matter of course accept sworn complaints. The mere prospect of having to face a criminal case, even if the person accused is certain that in the end (which could come after years of expensive litigation) he will be found innocent, is sufficient to make a front liner, with a career in front of him or a reputation to save, hesitate to make any report at all at the slightest justification. After all, in the natural scheme of things, he is more at risk from the person adversely affected by his report than from a disinterested law enforcer who might fault him for not reporting. This effectively constricts the channel of useful information and impedes the necessary inflow of leads which the Anti-Money Laundering Council needs to create an effective data base and discern the money laundering pattern in a serious of what, singly, can be appear to be legitimate activities.

Instead of this chilling threat of prosecution, what is needed is indemnification for legal costs and related expenses incurred by persons wrongly accused of malicious reporting.

Finally, there is this curious set of rules relating to the process of forfeiting the monetary instrument or property involved in the crime of money laundering. The first sentence of Section 12(b) provides that where a court has issued an order of forfeiture, the offender himself may apply, by verified petition, for a declaration that the property legitimately belongs to him and ask for the segregation or exclusion of the property. The petition, Section 12(b) in the second sentence further provides, is to be tried with the court which rendered the judgment of conviction and order of forfeiture.

In order words, a judgment of conviction and order of forfeiture must be first be issued by the court. This is the import of the second sentence of Section 12(b). Obviously, that conviction must be against the offender. But that same offender is given, by the first sentence, another opportunity to prove that the property ordered to be forfeited is really his. But, if he has been convicted, doesn’t that necessarily mean that the property was proceeds of illegal activity? If so, why should he be given a second chance to litigate the same issue? The only plausible explanation is the unsaid legislative intent to prolong the process, if not effectively prevent, the forfeiture of laundered money.

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