Philippines: blames subversive influences for AMLA problems; alleges dirty tricks

The Philippines appointed a consultancy project called AGILE to assist in the drafting of the money laundering laws and procedures and other things.

AGILE has been working with the Philippines since before March 2001, before the Philippines had its first major run-in with the FATF under threat of sanctions.

There was a reprieve but the battle blew up again in recent weeks. AGILE is a US aid project. In the Philippines, The Philippines Securities and Exchange Commission (SEC), the Supreme Court (SC) and the Department of Justice (DOJ) have used AGILE"s assistance to:

- Support capital markets regulation

- Adopt critical reforms in pension system to mobilize domestic savings

- Establish Fixed Income Exchange (FIE)

- Harmonize insolvency laws and provide institutional support to commercial courts

- Enhance the impact of judicial decisions on economic policy through a sound legal framework and a knowledgeable and committed judiciary

- The Bureau of Internal Revenue (BIR), Department of Finance (DOF), Department of Budget and Management (DBM) and Bureau of Customs (BOC) are using AGILE"s assistance to strengthen revenue administration.

- Reengineering the BIR for a more transparent and efficient revenue generation

- Strengthening trade facilitation, audit and risk management capacity of the BOC

- Strengthening tax databases and analytic modeling for more efficient and equitable tax policy

- Strengthening the financing of local government units

- The DBM, DOF, NEDA have also availed of AGILE"s resources to strengthen expenditure management.

- Institutionalising the Public Expenditure Management (PEM) to introduce efficiency and good governance into government bureaucracy

- Improving the management of contingent liabilities

- Rationalising fiscal incentives

- Improving government procurement system

- The Bangko Sentral ng Pilipinas (BSP), DOJ and SEC are using AGILE"s assistance to reduce money laundering and strengthen bank supervision.

The current fuss arises as a result of Sen. Aquilino Pimentel Jr.'s request to the Senate to investigate the actions of AGILE. Pimentel also asked the Senate to summon officials "of a non-government body called Agile, which is leading the lobby for AMLA amendments imposed by the Financial Action Task Force."

In the Senate, Pimentel pressed home his attack, alleging that senators had become aware that Agile told the FATF the details of the proposed AMLA amendments "even before [it] was officially forwarded to the President" and that the FATF reported its displeasure with the proposals to AGILE instead of directly to the Philippines government representatives. He demanded that the officials of AGILE, "not its messengers or janitors" appear before the Senate to explain themselves.

The pressure on the Philippines was increased by terms attached to a PP8 milliard loan from the Asian Development Bank under the NonBank Finance Government Programme: according to Senator Ralph Recto, the loan was conditional upon various issues including the passing of laws that meet the FATF demands. Before the first PP100 million could be called down, various conditions must be met and amending AMLA was a high priority and must also commence money laundering cases in Court.

The FATF suffered an embarrassing leak of information in advance of its meeting in Paris last week when a German minister issued a statement saying that the FATF would remove Ukraine from its countermeasures list and that German intervention had been significant factor in that decision. The Philippines President has refused to comment on reports that similar information had leaked about the Philippines, and that it was known before the FATF meeting that the FATF intended to place the Philippines on a "pending countermeasures" status regardless of the changes being made in the Senate. Some commentators believe that it was this that led President Arroyo to decline to sign off the deal thrashed out between the Senate and Congress until the FATF formally announced its decision.

Senator Sotto has said that Anti Money Laundering Council and Banco Sentral Philippinas had briefed against the amendments as they felt the amendments did not give them enough immunity when investigations are under way.

Senator Beltro went so far as to call for the withdrawal of AMLA as it was an unpopular measure. That is clearly going too far yet it was one of the less radical comments made by Senators who have now reached the stage of desperate wrangling.

The comments that the FATF displays a bias against the Philippines, made by one Senator according to press reports in the Philippines, may or may not be true: what is clear, however, is that the Philippines clearly has no friends of the stature of Germany within the heart of the FATF.

And the wisdom of using consultants influenced by and paid for by the main proponent of the measures that concern the Philippines (cash transaction reporting and non-judicial examination of bank accounts) is called into question.

The Philippines is just one country which is finding that independent advice is not independent when it is paid for by an overseas or NGO aid agency. Such agencies have been rampant across South East Asia for several years and governments have been pressed into ill advised measures as a condition of continued assistance, aid and trade. The Philippines experience will be replicated across the region.