DESPITE the threat of the country being on the bad side of international finance watchdogs again, lawmakers will not be rushed into giving blanket approval to the proposed amendments to the Anti-Money Laundering Act of 2001. They believe the specifics of the law could be used for overregulation, inequality in implementation and harassment.
One glaring observation they made: the proposed amendments subject to constant scrutiny real-estate transactions set at a very low threshold (P1 million), when money-laundering regulators cannot even detect wrongdoing by Philippine Offshore Gaming Operators (POGOs) that transact by the billions.
The Committee on Banks, Financial Institutions and Currencies discussed in a hearing this week steps to strengthen Republic Act 9160 or the Anti-Money Laundering Law.
The Anti-Money Laundering Act was enacted in 2001 to ensure that the Philippines shall not be used as a money-laundering site for the proceeds of any unlawful activity.
However, the international money-laundering watchdog Financial Action Task Force (FATF) said the current anti-money laundering (AML) law of the Philippines does not meet the globally practiced standard.
As a result, the Philippines was then placed under a 12-month observation period by the FATF in October 2019, following the country’s evaluation. However, in view of the general pause in the review process due to the pandemic, the observation period was extended until February 2021.
Under this 12-month observation period, the Philippines must address the recommended actions to avoid being included on the international organization’s grey list. Being on the grey list is expected to result in an additional layer of scrutiny from international regulators and financial institutions and will increase the cost of doing business and delay the processing of transactions.
According to FATF’s data, there are currently 18 countries on its grey list. These are Albania, the Bahamas, Barbados, Botswana, Cambodia, Ghana, Iceland, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Pakistan, Panama, Syria, Uganda, Yemen and Zimbabwe.
Contentious amendments
SENATORS, however, called for further time and review of the proposed additional powers for the AML Council (AMLC). Among those that concerned senators include the oversight in the real-estate sector, inequality of oversight among various sectors, proper definition of scope of terms and grant of juridical powers to the agency.
“We must be very careful here, because indeed, while we know that we should not be used as a haven for terrorist financing, a grant of broad powers can result in abuses,” Sen. Franklin Drilon said.
Among the heavily debated during the three-hour hearing was the proposal to subject real-estate transactions of over P1 million to investigation and regulatory submissions.
Senators, along with real-estate stakeholders present in the discussion, said this will not only be an additional burden to the real-estate industry, but will also hamper the development of low-cost socialized housing units in the country, some of which already surpass the P1-million threshold.
Drilon rejected a proposal to pass on to 42,000 real-estate agents and brokers the burden of reporting covered and suspicious transactions, saying it should be done by the Land Registration Authority or the Bureau of Internal Revenue (BIR).
Drilon blocked the proposal under Senate Bill 1412 requiring all real-estate developers and brokers to report to the Anti-Money Laundering Council single cash transactions in excess of P1 million, and other suspicious transactions within five working days from occurrence thereof.
If senators approve this, Drilon warned, all 42,000 real-estate agents and brokers will have to do the following: establish and record the true identity of their clients based on official documents, and maintain a system of verifying the true identity of their clients; record, maintain and store all documents; and report to AMLC all covered and suspicious transactions.
“Under AMLC’s proposal, brokers and agents will now be required to ask their clients where they got their money. And they need to submit tons of requirements to the AMLC. Why burden agents and brokers with all these paper works?” Drilon asked.
Note, Drilon added, that if the real-estate brokers and agents fail to report these transactions to AMLC or they fail to keep the records, they may be imprisoned from six months to four years or be made to pay a fine of not less than P100,000 but not more than P500,000, or both.
“I think this is too much. Let me warn AMLC that we must always be guided by the requirements of the Constitution. We must always pass a law that is grounded on reason and free from arbitrariness,” said Drilon, a former Justice secretary.
He pointed out that under the current law, AMLC can already require the Land Registration Authority and all its Registries of Deeds to submit to the AMLC, reports on all real-estate transactions involving an amount in excess of P500,000 within 15 days from the date of registration of the transaction, in a form to be prescribed by the AMLC. It may also require the Land Registration Authority and all its Registries of Deeds to submit copies of relevant documents of all real-estate transactions.
Drilon, who was the Senate President when the AMLA was passed in 2000, said requiring 42,000 agents and brokers in the country to submit a report to AMLC for every P1 million transaction, the threshold being proposed, is too much a burden to individuals who are only trying to make a living.
“I can’t understand why we will impose the burden on the private sector. Itong real-estate agents mga individual practitioners, maliliit lang po ito, mostly housewives who would engage in real-estate brokering to earn income on the side. Can you imagine the burden? We are not talking here about real-estate brokers as institutions, you have thousands of real-estate brokers, mom-and-pop operations, housewives, somebody in the family who, to earn extra income, would go into real-estate brokering,” Drilon said.
“Wala na pong gagawin itong real-estate agents kung hindi mag-report sa AMLC. And we are talking about real properties here, hence the threshold of one million is too low. It will cover almost all real-estate transactions,” he added.
Drilon said the reports will only pile up in the AMLC without being examined. He further questioned the capacity of AMLC to sift through all the papers and analyze the same.
Drilon said he hopes for the Philippines “to see the light at the end of the tunnel” on the matter of compliance with the FATF, wondering aloud why the country always gets regular “threats” from the FATF despite having amended the AMLA many times to address the task force’s concerns.
Win: How about Pogos?
Sen. Sherwin Gatchalian, meanwhile, questioned the ALMC’s capability to handle additional powers, when not all sectors are not being covered and investigated equally. Gatchalian pointed out the questionable movement of money among Pogos.
“Here we are asking real-estate brokers to fill out so many forms because they have transacted with a million pesos, but the Pogos are transacting by the billions of dollars but we don’t even know who are the ones gambling. We want to know who bought the P1-million socialized housing units but the ones betting abroad we don’t even know if they are drug dealers, terrorists or whatnot. We have to apply the law equally,” Gatchalian said.
Sen. Grace Poe, Banks committee chief, said a further review and stakeholder involvement is needed to pass a law that will “really benefit” the country and not just something that will be passed out of a deadline.
“We have other priority measures in the Senate now. I just want to give you a realistic view. Number one, the budget which was actually submitted to us a little bit delayed. Number two, we have the CREATE [Corporate Recovery and Tax Incentives for Enterprises] bill that is still pending and is also crucial; and number three—this is also very important that we pass—the FIST [Financial Institutions Strategic Transfer] bill so that we can free up more capital for our banks to lend to MSMEs. All of these things are due before we take a break,” Poe said.
“I’d like to be realistic: if we want a proper debate on this and come up with something that is not just for window dressing that might later on be detrimental to us, please set your sights realistically,” she added.
Image credits: Sebastian Harms | Dreamstime.com