Anti-Money Laundering (Busfin) Flashcards by Kyle Torres

its been described by many as
the lifeblood of crime and
is a major threat to the economic and social
well-being of societies.

Money laundering

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is an act or series or combination of acts whereby proceeds of an unlawful activity, whether in cash, property or other assets, are converted, concealed or disguised to make them appear to have originated from legitimate sources.

Money laundering

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Money laundering is a serious threat. It has devastating consequences for the financial system and for national security, since it provides funds for terrorists, drug traffickers, arms
dealers, and criminal groups.

WHY MONEY LAUNDERING

A SERIOUS PROBLEM?

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IS ANTI -MONEY LAUNDERING
A FOREIGN POLICY?

Yes

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Anti-money laundering initiatives rose to global prominence in 1989, when a group of countries and organizations around the world formed the ____________. Its mission is to devise international standards to prevent money laundering and promote their
implementation.

In October 2001, following the 9/11 terrorist attacks, FATF expanded its mandate to include
combating terrorist financing.

Financial Action Task Force (FATF).

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Anti-money laundering (AML)
refers to the laws, regulations
and procedures intended to
prevent criminals from
disguising illegally obtained
funds as legitimate income.

According to Investopedia

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Otherwise known as the Anti-Money Laundering Act of 2001 (AMLA), as amended, defined money laundering as a scheme whereby proceeds of an unlawful activity are transacted or attempted to be transacted, thereby making them appear to have originated from legitimate sources.

REPUBLIC ACT 9160

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The government enacted Republic Act (R.A.) No. 9160 (The
Anti-Money Laundering Act of 2001), which took effect on __
October 2001.

Certain provisions of AMLA were amended by R.A. No.
____ (An Act Amending R.A. 9160) effective 23 March 2003.

It has also issued the ____________ implementing R.A. No. 9160, as amended.

17
9194
3.Revised Implementing Rules and
Regulations (RIRR)

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Can Money Laundering be Stopped?

Money laundering cannot be completely stopped but it can be reduced through constant vigilance.

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how many unlawful activities or predicate crimes covered by
the AMLA. These are enumerated in the law:

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34 unlawful actvities

Kidnapping for ransom
Drug offenses
Graft and corrupt practices
Plunder
Robbery and extortion
Jueteng and masiao
Piracy on the high seas
Qualified theft
Swindling
Smuggling
Electronic Commerce crimes
Hijacking, destructive arson and murder, including those perpetrated against
non-combatant persons (terrorist acts)
Terrorism and conspiracy to commit terrorism;
Financing of Terrorism (FT) including the attempt and conspiracy to commit FT (RA No.
10168)
Bribery and Corruption of Public Officials under the Revised Penal Code
Frauds and other illegal transactions under Articles 213,214,215 and 216 of the Revised
Penal Code)
Malversation of Public Funds and Property
Forgeries and Counterfeiting
Violations of RA 9208 (Anti Trafficking in Persons Act of 2003)
Violations under PD No. 705 (Revised Forestry Code of the Philippines
Violations under RA 8559 (Philippine Fisheries Code of 1998)
Violations under RA 7942 (Philippine Mining Act)
Violations under RA 9147 (Wildlife Resources Conservation and Protection Act)
Violations of RA 9072 (National Caves and Cave Resources Management Protection
Act)
Violation under RA 6539 (Anti-Carnapping Act of 2002)
“Codifying the Laws on Illegal/Unlawful Possession, Manufacture, Dealing In, Acquisition
or Disposition of Firearms, Ammunition or Explosives”;
Anti Fencing Law (pagbili ng mga nakaw na bagay)
Violation of Section 6 of Republic Act No. 8042, otherwise known as the “Migrant
Workers and Overseas Filipinos Act of 1995, as amended”; (Illegal recruitment)
Violation of Republic Act No. 8293, otherwise known as the “Intellectual Property Code
of the Philippines, as amended”;
Violation of Section 4 of Republic Act No. 9995, otherwise known as the “Anti-Photo and
Video Voyeurism Act of 2009”;
Violation of Section 4 of Republic Act No. 9775, otherwise known as the “Anti-Child
Pornography Act of 2009”;
Violations of Sections 5, 7, 8, 9, 10 (c), (d) and (e), 11, 12 and 14 of Republic Act No.
7610, otherwise known as the “Special Protection of Children Against
Abuse, Exploitation and Discrimination”
Fraudulent practices and other violations under Republic Act No. 8799, otherwise known
as the “SecuritiesRegulation Code”
Felonies or offenses of a nature similar to the aforementioned unlawful activities that are
punishable under the penal laws of other countries.

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3 Stages of Money Laundering

Placement
Layering
Integration

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involves initial
placement or introduction of the
illegal money.

Placement

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involves a series of financial
transactions during which the dirty money is passed through a series of procedures, putting layer upon layer of persons and
financial activities into the laundering process.

Ex. wire transfers, use of shell corporations, etc.

Layering

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the money is once again
made available to the criminal with the occupational and geographic origin obscured or concealed.

The laundered funds are now integrated back into the legitimate economy through
the purchase of properties, businesses and other investments.

Integration

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Money laundering allows criminals to preserve and
enjoy the proceeds of their crimes, thus providing
them with the incentives and the means to continue
their illegal activities.

At the same time, it provides them the opportunity to
appear in public like legitimate entrepreneurs.

Organized crime, through money laundering, is known to have the capacity to destabilize governments and undermine their financial systems. It is thus a threat to national security.

Why is Money Laundering a problem?

The AMLC is the Philippines’ financial intelligence
unit, which is tasked to implement the AMLA. It is
composed of the:

Governor of the Bangko Sentral ng Pilipinas (BSP) as
Chairman

Commissioner of the Insurance Commission (IC) as
member ,and

Chairman of the Securities and Exchange Commission
(SEC) as member.

that is tasked to oversee
the implementation of the law and to act as a financial intelligence unit to receive
and analyze covered and suspicious transaction reports.

It creates an Anti-Money Laundering
Council (AMLC)

The AMLC is authorized to:

Require and receive covered or suspicious transaction
reports from covered institutions.

Issue orders to determine the true identity of the owner of
any monetary instrument or property that is the subject of a
covered or suspicious transaction report, and to request the
assistance of a foreign country if the Council believes it is
necessary.

Investigate suspicious transactions, covered transactions deemed suspicious, money laundering activities and other violations of the AMLA.

Secure the order of the Court of Appeals to freeze any monetary
instrument or property alleged to be the proceeds of unlawful
activity.

Implement such measures as may be necessary and justified to
counteract money laundering.

Receive and take action on any request from foreign countries for
assistance in their own anti-money laundering operations.

Develop educational programs to make the public aware of the
pernicious effects of money laundering and how they can participate
in bringing the offenders to the fold of the law.

It requires _______________ to report covered and suspicious transactions and to cooperate with the government in prosecuting offenders. It also requires them to know their customers and to safely keep all records of their transactions.

Covered institutions

What are the covered institutions?

Banks, offshore banking
units, quasi-banks, trust
entities, non-stock savings and
loan associations, pawnshops, and all other institutions, including their subsidiaries and affiliates
supervised and/or regulated by
the Bangko Sentral ng Pilipinas (BSP)

Insurance companies, pre-need companies and all other persons
supervised or regulated by the IC;

Securities dealers, brokers,
investment houses, trading advisers, as well as other entities supervised or regulated by the Securities and Exchange Commission (SEC)

Philippine Gaming Corporations
the government has expanded anti-money laundering laws to cover casinos, including internet and ship-based casinos.

KYC RULE

Know

Your

Client

Establish and record the true identity of their clients based on official documents.

In case of individual clients, maintain a system of verifying the true identity of their clients.

In case of corporate clients, require a system verifying their legal existence and organizational structure, as well as the authority and identification of all persons purporting to act in
their behalf.

Establish appropriate systems and methods based on internationally compliant standards and adequate internal controls for verifying and recording the true and full identify of their customers.

Customer Identification Requirements – KYC
(Know Your Customer Rule)

procedures are a critical function to assess
customer risk and a legal requirement to comply with Anti-Money Laundering (AML) laws.

Effective KYC involves knowing a customers identity, their financial activities and the risk they pose.

Customer Identification Program

Customer Due Diligence

Do you know your customer? At any rate, you ought to. If you’re a financial institution (FI), you could face possible fines, sanctions, and reputational damage, if you do business with a money launderer or terrorist.

More importantly, KYC is a fundamental practice to protect your organization from fraud and losses resulting from illegal funds
and transactions.

“KYC” refers to the steps taken by a financial institution (or business) to:

Establish customer identity.

Understand the nature of the customer’s activities (primary goal is to satisfy that the source of the customer’s funds is legitimate).

Assess money laundering risks associated with that customer for purposes of monitoring the
customer’s activities

Know Your Customer (KYC)

The minimum requirements to open an individual financial account are clearly delimited in the CIP:

Name Date of birth Address Identification number

For any financial institution, one of the first analysis made is to determine if you can trust a potential client. You need to make sure a potential customer is trustworthy; customer due diligence (CDD) is a critical element of effectively managing your risks and protecting yourself against criminals, terrorists, and Politically Exposed Persons (PEPs) who might present a risk.

Customer Due Diligence

The privacy of individual client data will be respected in accordance with the laws and regulations of individual jurisdictions. Such data will only be used for the purposes specified at the time the information is collected or as permitted by law, unless otherwise agreed with the client. In the area of client data protection and privacy, many of the well-known laws have already laid the foundations of confidentiality of client data and privacy policies for client information. With the recent advent of IT enabled services and increased use of IT in banking and financial services, the Central Bank of Philippines (BSP) has also taken proactive measures to incorporate data protection laws within the banking framework.

On Data Privacy

Maintain and safely store all records of all their transactions for five years from the transaction dates; Ensure that said records/files contain the full and true identity of the owners or holders of the accounts involved in the covered transactions and all other identification documents; Undertake the necessary adequate measures to ensure the confidentiality of such files; Prepare and maintain documentation, in accordance with client identification requirements, on their customer accounts, relationships and transactions such that any account, relationship or transaction can be so reconstructed as to enable the AMLC and/or the courts to establish an audit trail for money laundering; Maintain and safely store all records of existing and new accounts and of new transactions for 5 years from October 17, 2001 or from the dates of the accounts or transactions, whichever is later; For closed accounts, preserve and safely store the records on customer identification, account files and business correspondence for at least 5 years from the dates they were closed; If a money laundering case based on any record kept by the covered institution has been filed in court, retain said files until it is confirmed that the case has been finally resolved or terminated by the court; and Retain records as originals in such forms as are admissible in court.

Record-Keeping Requirements

Transaction in cash or other equivalent monetary instruments involving a total amount in excess of P500,000.00 within one business day.

Covered transactions

Transactions, regardless of the amount involved, where the following circumstances exist: there is no underlying legal or trade obligation, purpose or economic justification; the client is not properly identified; the amount involved is not commensurate with the business or financial capacity of the client; the transaction is in any way related to an unlawful activity or offense under this Act that is about to be, is being or has been committed;

Suspicious transactions

Covered institutions shall report to the AMLC all covered transactions and suspicious transactions within ______ working days from occurrence thereof, unless the Supervision Authority (the Bangko Sentral ng Pilipinas, the Securities and Exchange Commission, or the Insurance Commission) prescribes a longer period not exceeding ten working days.

Are there sanctions for failure to report covered or suspicious transactions and non-compliance with R.A. 9160, as amended?

Sanctions/penalties shall be imposed on covered institutions that will fail to comply with the provisions of R.A. 9160, as amended.

Any person, required to report covered and suspicious transactions failed to do so will be subjected to penalty of _____________________ imprisonment or a fine of not less than P100,000.00 but not more than P500,000.00, or both.

6 months to 4 years

is committed by any responsible official or employee of a covered institution who fails to maintain and safely store all records of transactions for 5 years from the dates the transactions were made or when the accounts were closed. The penalty is 6 months to 1 year imprisonment or a fine of not less than P100,000.00 but not more than P500,000.00, or both.

Failure to keep records

is committed by any person who, with malice or in bad faith, reports or files a completely unwarranted or false information regarding a money laundering transaction against any person. The penalty is 6 months to 4 years imprisonment and a fine of not less than P100,000.00 but not more than P500,000.00. The offender is not entitled to the benefits of the Probation Law.

Malicious reporting

For this offense, the penalty is 3 to 8 years imprisonment and a fine of not less than P500,000.00 but not more than P1 million. In case the prohibited information is reported by media, the responsible reporter, writer, president, publisher, manager, and editor-in-chief are held criminally liable.

Breach of Confidentiality.

The AMLC, after due investigation, can impose fines from P100,000.00 to P500,000.00 on officers and employees of covered institutions or any person who violates the provisions of the AMLA, as amended, the Implementing Rules and Regulations, and orders and resolutions issued pursuant thereto.

Administrative offenses.

Anti Money Laundering (AML) seeks to deter criminals by making it harder for them to hide ill-gotten money. Criminals use money laundering to conceal their crimes and the money derived from them. AML regulations require financial institutions to monitor customers' transactions and report on suspicious financial activity.

KEY TAKEAWAYS

Who is the AMLC Secretariat?

Atty. Mel Georgie B. Racela, CPA Executive Director