Philippines: Anti money laundering law still a long way off

The Philippines is still embroiled in internal debate about the scope of its proposed anti money laundering laws. The Philippines passed a law two years ago but the FATF, and in particular the USA have been pressing for amendments. The Philippines says that the FATF and the USA have their own agenda and that they are deliberately failing to acknowledge that the Philippines is entitled to set its own laws.

The main sticking point is about cash transaction reporting. FATF members are not required to make reports based on the amount of cash banked. However, the Australian and US systems require this to be so.

The USA in particular has started a media assault on the Philippines, demanding that it change its law. This is widely seen as the precursor to further FATF action if the laws are not altered. Late last week, US Ambassador Francis Ricciardone reportedly told a foreign correspondents' lunch that the law needed to be changed and that there was still time to beat a FATF deadline set for 23 February. "The right reason to do this is to give the Filipino citizens and their banking system the literaly world-class legal protection they deserve," he reportdly said. bt if it did not, it would face "international opprobrium and financial penalties," he is said to have added.

The demands were pre-empted by remarks made by US Secretary of State Kenneth Dam who has told Philippines Finance Secretary Jose Isidro Camacho that the USA expects the Philippines to make significant alterations to its laws.

The argument centres on the issue of cash thresholds: the current law provides for investigation into amounts exceeding 4 million pesos: below that figure a court order is required to examine bank accounts. But suspicious transaction reports are required for any transaction that the banks reports as suspicious regardless of the amount involved.

Within the Philippines, there is concern that carte blanche to examine all accounts would lead to abuses and also as to the amount of work required for both banks and enforcement agencies if smaller transactions are subject to automatic reporting.

The Central Bank takes the view that the fact that there is no minimum figure for suspicious transactions provides adequate protection, and points out that FATF members are not required to have cash transaction reporting at all. It complains that the FATF will not allow the Philippines to attend its meetings to explain the law and that foreign interpretation of it has missed the point. The FATF and Philippines officials will meet soon to discuss the position.