Part Two
ONE of the questions that came to mind following the theft of $81 million from the Bangladesh central bank’s account with the Federal Reserve Bank of New York was the safety of the international reserves held by the Philippine government through the Bangko Sentral ng Pilipinas (BSP).
Are our international reserves intact? Where are these kept? Is there a mechanism in place to monitor their movements in real time? Does the BSP have enough safeguards to prevent a similar theft from happening with its accounts?
Every month the BSP reports on the country’s gross international reserves (GIR), which indicate the country’s capability to pay foreign loans and imports, among other external obligations. As of end-March 2016, the country’s GIR stood at $82.6 billion.
However, I would like to find out where the BSP invests or deposits the currency portion of the reserves. In addition to foreign currencies, the reserves also include gold (mainly purchased from local producers), bonds and deposits with the International Monetary Fund (IMF).
Reports on the ongoing investigation into the Bangladesh heist focus on the theft itself and the involvement of different parties. I have yet to see a report on the safety condition of the BSP accounts in other institutions, considering that the $81 million was stolen from the BSP’s peer in Bangladesh.
With no adverse reports coming out of the BSP, I can only assume and hope that our reserves are intact and safe. At least, the BSP has given assurances about its vigilant monitoring of the banking system. In a statement issued after the Bangladesh case, the BSP said it was implementing a comprehensive risk-based approach that is aligned with international best practices.
Bank supervision, according to the BSP, is focused on ensuring the safety and soundness of individual banks. This is done by periodic on-site examination of banks, as well as off-site supervision on a continuing basis.
The BSP also has specialist examination teams, which evaluate the effectiveness of a bank’s prevention program to ensure bank handling of the risks out of information technology and cybersecurity issues, money laundering and terrorist financing.
Despite the safeguards, and considering the increasing number of cyber thefts, the risks remain. BSP Deputy Governor Nestor A. Espenilla Jr. was quoted in a recent news report as saying, “no banking system is safe,” because transfers of illicit funds are happening on a global scale.
On March 14 this paper quoted Philippine National Police (PNP) Director General Ricardo C. Marquez as saying local banks have been losing billions of pesos to hackers.
Marquez said in the report that in November 2015 one of the country’s largest banks approached the PNP Anti-Cybercrime Group (ACG) for help in resolving theft by cyber criminals, which had caused “very significant losses” for the bank.
The PNP chief said he had directed the ACG to take more proactive actions in protecting the economy from cyber criminals.
Proactive is good, but I believe that addressing cybercrime should be forward-looking, because this new technology-based activity seems to enjoy a step ahead of law enforcement and is getting more sophisticated.
Victims of cyber criminals, although not in the scale of the Bangladesh heist, are increasing. According to the web site of the Australia and New Zealand Banking Group (ANZ), bank customers are seen as potential target for fraudulent activities. And ANZ cited the following threats faced by bank customers: electronic fraud, identity theft, credit-/debit-card fraud and check fraud.
No doubt about it, cybercrime is going on, and it’s getting big.
For comments, e-mail mbv.secretariat@gmail.com or visit www.mannyvillar.com.ph.