BSP Circular Letter

January 7, 2002 BSP CIRCULAR LETTER TO : All Banks/NBFs : Attached is a Model Anti-Money Laundering Operating Manual which we endorse as a guide/reference material in developing your own anti-money laundering programs and in complying with R.A. No. 9160, otherwise known as the "Anti-Money Laundering Law of 2001" as well as with the various BSP rules and regulations against money laundering. For your reference/guidance. (SGD.) ALBERTO V. REYES Deputy Governor ATTACHMENT ANTI-MONEY LAUNDERING MODEL OPERATING MANUAL FOR BANKS AND OTHER COVERED INSTITUTIONS GUIDELINES ON MEASURES AGAINST MONEY LAUNDERING Introduction The international drive against serious crimes, especially drug trafficking and terrorism, had led to an obligation on banks and other financial institutions to do whatever they can to avoid transactions which assist criminals in laundering the proceeds of their crime. Banks and Non-bank Financial Institutions under the supervising and regulation of the Bangko Sentral ng Pilipinas must support this drive and assist the authorities in identifying potential money laundering transactions. These guidelines are therefore, adopted to support governments, law enforcement agencies and international bodies such as the Financial Action Task Force in their efforts to combat the use of the financial system for the laundering of the proceeds of crime. While the country's anti-money laundering law (R.A. No. 9160) was already enacted, the law on the secrecy of bank deposits remains stringent, however. Hence, in implementing procedures related to money laundering, care should be taken that laws are not violated. These guidelines are set to ensure compliance with the Anti-Money Laundering Law and its implementing rules and regulations, as well as other applicable regulations without violating other relevant laws and without losing bona-fide business/clients in the process. The guidelines are intended to help this process and to ensure high standards in the following areas: Establishing the identity of new individual customers. Identifying the true owners when opening new accounts for companies/corporations. Identifying the principal of an agent. Producing and retaining identification and transaction records. Reporting suspicious transactions to the competent authorities. Enhancing relationships with the authorities. Preventive procedures, training, pre-employment screening and internal controls. It should be emphasized that the procedures being introduced in each of these areas are intended to be complementary to existing operating procedures and to the requirements of laws and regulations. It should be noted that in some countries, for example U.S.A., Australia and Canada, the law requires procedures additional to those set out in these guidelines. For example, in the U.S.A. certain transactions of $10K or more must be reported and recent legislation requires that, inter alia , a log must be kept of sales of instruments, such as money orders and travelers 'cheques, of $3K or more. Where the law is more stringent than these guidelines then obviously the law, must prevail. Appendix A List of Financial Action Task Force Member Countries. Appendix B Guidance material on the nature of money laundering. Appendix C List of relevant international organizations. Appendix D List of examples of suspicious transactions. Appendix E Note on the scope of necessary training. Appendix F Glossary Appendix G Internal Form for reporting suspicious transactions Appendix G-1 Money Laundering Suspicion-Evaluation Record Appendix H Form for reporting suspicious transactions to the Anti-Money Laundering Council Appendix I R.A. No. 9160 Appendix J BSP Circular No. 251 dated July 7, 2000 Appendix K BSP Circular No. 253 dated July 31, 2000 Appendix L BSP Circular No. 302 dated October 11, 2001 Appendix M FATF Forty Recommendation Principles 1. When establishing a business relationship or conducting a single transaction the identity of the customer must be established based on official or other reliable identifying documents. 2. Business units must not keep anonymous accounts or accounts in obviously fictitious names. 3. Where a customer is not clearly acting on his own behalf, reasonable measures should be taken to obtain information about the true identity of the principal. 4. Business units must keep records of customer identification for at least five years after the account is closed. These documents should be available to the competent authorities as allowed by law. 5. To enable compliance with requests for information from competent authorities business units must retain records of all transactions. As a minimum, account ledger entries and the records supporting them must be kept for five years. 6. Covered transactions, as defined under R.A. No. 9160, otherwise known as the Anti-Money Laundering Act of 2001 shall be reported to the Anti-Money Laundering Council (AMLC) within five (5) working days from the date of the transaction or from the date the concerned institution gained/acquired information/knowledge that the transaction is a covered transaction. 7. Business units should give special attention to business relations and transactions with persons, companies, and financial institutions from countries which do not apply sufficient controls against money laundering. For example those countries which are not members of the Financial Action Task Force (See Appendix A). Whenever these transactions have no apparent economic or visible lawful purpose or where the transaction is unusually large, their background and purpose should, as far as possible, be established, recorded in writing, and reported to the AMLC if said transaction(s) falls under the definition of a covered transaction. 8. Business units must not warn their customers when information relating to them is being reported to the competent authorities. 9. When a business unit reports its suspicions to the competent authorities it must comply with their instructions, as provided or allowed by law. 10. When a business unit develops strong suspicions about operations of a customer, this should be reported immediately to the Head of Investigations and to the Head of Compliance. A copy of the report should be given to the Head of Operations of the reporting unit. 11. The programme against money laundering based on these guidelines, should include: the development of internal controls, policies and procedures; adequate screening procedures to ensure high standards when recruiting employees; an on-going employee training programme; and an internal control function to test the system. GUIDELINES 1. The identity of a customer with whom a covered institution is entering into a business relationship or conducting a single transaction must be established from official or other reliable identifying documents . prcd A business relationship is defined as an arrangement to carry out transactions on a frequent or regular basis. The Basle principles and local regulations require financial institutions to do all they can to determine the true identity of all customers using their services. Accordingly, business units should obtain evidence of identification from new customers. In particular, care should be taken to identify the ownership of all accounts, portfolios and funds and the identity of those using safe-custody facilities at the time when the relationship is established. Transactions should not be conducted with customers who fail to provide adequate evidence of their identity. This applies to single transactions relating to fund transfers, foreign exchange, money market or wholesale deposits, safe deposit boxes and large amounts of cash by non account holders as well as to longer banking and investment relationships. Account opening procedures should normally include: personal presence of the account holder. scrutiny of original identification documents. completion of a standard account opening form. verifications of any photographs. comparison of signatures with live signatures. For banking business the standard account opening form should be completed personally by the prospective customer. Where the account holder cannot be personally present because he is abroad, or otherwise unavailable, the account should be treated with caution and steps taken in the longer term to correct the position. Meanwhile, any covered transaction should be reported to the competent authority. (See principle 6). Copies of documents should be retained in accordance with Principle 4. The identifying documents should provide evidence of true name or names used, permanent address, date of birth and nationality. Identifying documents should preferably include at least one bearing a photograph and preferably be pre-signed. The identifying documents which are considered to be most reliable are official identity cards and passports. Identification documents that are easily obtained in any name e.g. medical cards, credit cards and student identification cards should not be accepted as sole means of identification. Where the authenticity of an identification document is in doubt, no transaction should be conducted unless the transaction is approved by a bank officer with authorities to do so. Normal banking and business prudence in conducting any transaction should prevail. A good form of verification of identity is personal introduction by a known and respected customer, enquiries will need to be made to verify identity. The customer may also be asked to provide a reference from another financial institution and, if other identification enquiries are not satisfactory, it should be verified. For prospective customers who are normally resident in another country, and where satisfactory verification of identity cannot be obtained locally, identification procedures should proceed to verification by a branch or another financial institution. A branch or business unit, which instructs another business unit to conduct transactions on behalf of account holders, is responsible for ensuring that identification and "know your customer" procedures have been followed. This will apply particularly when the instruction emanates from an overseas branch. The following minimum information/documents shall be obtained from individual customers: (1) Name; (2) Present address; (3) Permanent address; (4) Date and place of birth; (5) Nationality; (6) Nature of work and name of employer or nature of self-employment/business; (7) Specimen signature; and (8) Source of funds (s) Company Accounts Before establishing business relationships, covered institutions shall endeavor to ensure that the customer that is a corporate or juridical entity has not been or is not in the process of being, dissolved, wound up or voided, or that its business or operations has not been or is not in the process of being, closed, shut down, phased out, or terminated. Dealings with shell companies and corporations, which have no business substance in their own right but through which financial transactions may be conducted, should be undertaken with extreme caution. The following minimum information/documents shall be obtained from customers that are corporate or juridical entities: (1) Articles of Incorporation/Partnership; (2) By-laws; (3) Official address or principal business address; (4) List of directors/partners; (5) List of principal stockholders owning at least two percent (2%) of the capital stock; (6) Beneficial owners, if any; and (7) Verification of the authority and identification of the person purporting to act on behalf of the client. The nature of the company's business should be recorded. Where the person who opens the account is not the person who will be operating the account, the latter should be identified and checks conducted as for an individual account holder. Where there is any doubt, the certificate of registration should be verified. Where the company is registered abroad, documents comparable to those above should be examined. Where the overseas company is not a known customer, all company documents should be verified. All signatories to the account must be properly identified. Treatment of Dormant Accounts Sometimes bank accounts which have been dormant for many years are activated for fraudulent or other criminal purposes. Where a dormant account becomes active it should be reviewed to ensure that the identification procedures have been followed and can still be relied upon. In case of doubt new account identification procedures should be instituted. Transactions Undertaken for Non-Account Holders Transactions undertaken for non-account holders demand special care and vigilance. Where the transaction involves significant amounts, the customer should be asked to produce positive evidence of identity including nationality, if the customer is not a Filipino. File copies of the identification documents should be retained. Identification documents should be treated as part of transaction records and should be retained and retrievable. Funds deposited by non-account holders into an existing account should be handled with particular care. Overseas Resident Corporate Investors For corporate customers the identity of directors and shareholders of the company should be sought. This should extend as far as practicable to identifying those ultimately interested in the ownership and control of the company. Evidence of the relationship between the individual introducing the company, the individual giving instructions on its behalf and that individual's authority to represent the company should be sought and retained. These principles are similar to those mentioned under paragraph headed "Company Accounts". 2. Business units must not keep anonymous accounts or accounts in obviously fictitious names . Anonymous accounts and accounts under fictitious names should not be accepted. The Bangko Sentral prohibits the use of fictitious or anonymous accounts. 3. Where a customer is not clearly acting on his own behalf business units must take reasonable measures to obtain information about the true identity of his principal . This type of account includes accounts opened by lawyers, accountants and financial institutions conducting affairs on behalf of their clients. It is an area of concern since money launderers will exploit the difficulty in establishing the identity of beneficiaries behind trusts and companies. The concern applies particularly to institutions, corporations, foundations and trusts that do not conduct any commercial or manufacturing business in the country where their registered office is located. Verification of identity procedures, under principle 1, should be conducted in respect of all parties to the account. If satisfactory evidence of identity is not readily available the counterparty should be informed that the account cannot be operated without the provision of full evidence of identity of the parties. When an account is opened for a trust, any written authority to open the account should be examined and the identity of the trustees should be verified. Where a company is in liquidation or in receivership the identification procedures should be followed as far as possible and a copy of a letter of appointment, or similar document, should be seen and copied. Similar checks should be conducted for non-incorporated bodies. Identity checks on partners who are authorized to operate a partnership account should be conducted as if they were individual customers. 4. Business units must keep records of customer identification for at least five years after the account is closed . When an account is opened, photocopies should be made of the documents used to establish the identity of the account holder. These should be retained in the account file, together with other account opening forms. At least, the record should include full name, address, date of birth, nationality, and occupation, or nature of business. 5. Business units must retain records of all transactions . As a minimum, account ledger entries and the records supporting them must be kept for five years . All records relating to the account must be retained for five years. If the account or a covered transaction involving the account is under investigation, all relevant records shall be retained, even after five years, until after, the investigation is completed. Retention may be by way of original documents, disc, photocopies or microfiche. It should be sufficient to permit reconstruction of individual transactions (including the amounts and types of currency involved) to provide, if necessary, evidence for prosecution of relevant criminal behavior. The records to be retained will, of course, depend on the nature of the transaction, as follows: (a) Cash Deposits . Generally, require: paying-in slip or credit voucher showing account name, number and amount; daily posting register showing account number and amount; ledger entry. (b) Cash Transfers . Generally, require: debit voucher (cheque or authority to debit) showing name, account number and signature, or ATM transaction record showing account number, amount and time; payment or posting register, showing cheque number, amount and account number; ledger entry. (c) A foreign exchange transaction with account holder . Requires the customer or account name, the amount, the currency purchased or sold and the exchange rate. When an account is being debited or credited, the normal debit/credit vouchers and entries apply. If a remittance is involved, copies of application to purchase/remit foreign exchange and record of remittances should be kept. (d) A foreign exchange transaction with a non-account holder . This requires names, addresses and signatures in addition to the currency and exchange rate. Identification of purchaser/remitter and application to purchase/remit foreign exchange with the record of remittance, if remittance is involved. (e) The sale of negotiable instrument for cash . The minimum requirement for non-account holders should be a purchase form or instruction on which the customer records his full name, address and amount. Any contentious correspondence should be retained for a much longer time, until the issue is finally resolved. 6. If the business units suspect that funds stem from relevant criminal activity they must promptly report their suspicions to their Head of Operations and to the Compliance Officer (with staff reporting to their branch manager or superior officer) and record the circumstances in writing . Recognition of Suspicious Transactions As the type of transactions which may be used by a money launderer is almost unlimited, it is difficult to define a suspicious transaction. However, a suspicious transaction will often be one which is inconsistent with a customer's known, legitimate business or personal activities or with the normal business for the type of account. Therefore, the first key to recognition is knowing enough about the customer's business to recognize that the transaction, or series of transactions, is unusual. Accordingly procedures should be in place so that activity on account is monitored by staff who are familiar with those accounts. This day to day monitoring is made easier if the identification of suspicious transactions can be automated. Examples of circumstances where funds might stem from drug-trafficking, terrorism and other serious crimes are shown in Appendix C. What might appear to be suspicious or to constitute unusual activity on the account of a particular customer in the eyes of staff at one branch may be explicable by reference to the conduct of the same customer's account at another branch. Thus, it is important that suspicions reported by branches are reviewed centrally at the main office. Where transactions are conducted by a business unit (e.g. Treasury) not holding all the customer or account information, special vigilance is required. When a doubt arises about a specific transaction further information about the customer should be sought from the branch holding the customer records. IDESTH When a suspicious transaction is rejected for commercial reasons, a record should be maintained. Each branch should require each staff who deals directly with accounts and customers to report any suspicion to the branch manager (or to the staffs superior officer) using the form in Appendix G. The Branch Manager (or superior officer) should review/evaluate such suspicion of money laundering using the form in Appendix G-1. Where the Branch Manager (or the superior officer) is satisfied that the suspicion is reasonable he should report it immediately to the Head of Operations of the business unit and to the Compliance Officer by forwarding to them the completed report forms shown in Appendix G and G-1. It is, of course, important that, as far as possible, normal business relations with account holders are maintained. 7. Business units should give special attention to business relations and transactions with persons, companies, and financial institutions from countries which do not apply sufficient controls against money laundering . Whenever these transactions have no apparent economic or visible lawful purpose, their background and purpose should, as far as possible, be established, recorded in writing, and be reported to the Branch Manager or to the staff's superior officer, who will report to the Head of Operations and to the Compliance Officer if, in his evaluation, the staffs suspicion is reasonably justified . Where there is public information that particular countries or institutions have weak controls against money laundering then business units should regard themselves as being on notice to be cautious in handling transactions with them. 8. Business units must not warn their customers when information relating to them is being reported to the competent authorities . Covered institutions should co-operate with authorities throughout the world in tackling money laundering. Therefore, customers should not be warned when a report on covered transactions is made to competent authorities. Moreover, in the event of the authorities regarding the account or transaction as bona-fide, relationship with the customer will not then have been damaged unnecessarily. In some countries, for example the UK, it is a criminal offense to inform the customer, or any party, that a report has been made to the authorities. 9. When a business unit reports its suspicions it must comply with lawful instructions from the competent authorities . Since the authority will often require time to investigate the reported suspicion, it should be expected to issue a lawful instruction on how the account should be handled. Usually, authorities will request that a normal account relationship should be maintained so that the customer does not become aware of official enquiries. Where transactions have been reported the relevant records should be retained until the issue is finally concluded. The competent authorities should be asked to provide feedback to the business unit about the result of investigations. This will facilitate a better understanding by employees of circumstances which might properly be considered suspicious. 10. When a business unit develops strong suspicions about operations of a customer, the circumstances should be reported through the usual process, to business Head of Operations and Compliance Officer and to higher officer or body, if applicable . All suspicions about the operations of a customer, should be reported through the usual process, to the Head of Operations of the business unit and to the Compliance Officer and to higher officer or body, if applicable. LAW AND REGULATIONS Following are the applicable law and rules and regulations on Money Laundering: a. R.A. 9160 Appendix I b. BSP Circular No. 251 dated July 7, 2000 Appendix J c. BSP No. 302 Dated October 11, 2001 Appendix K REPORTING PROCEDURE 1. All covered transactions should be reported by the staff to the Branch Manager or to the staffs superior officer using the form in Appendix G. Upon receipt of the report (Appendix G) the Branch Manager (or superior officer) will evaluate the report using Appendix G-1. If the Branch Manager (or the staffs superior officer) is of the opinion that there is/are reasonable basis for the suspicion, he/she should forward the report form G and G-1 to the Head of Operations of the business unit and to the Compliance Officer. 2. Upon receipt of a report on suspicion on Money Laundering (Appendix G and G-1), the Compliance Officer should convene a meeting of the Committee on Money Laundering composed of the (1) Compliance Officer, (2) The Head of Service Delivery - C&IB and Treasury, (3) The Head of Operations - Consumer Banking, to evaluate the report and determine if the suspicion is based on reasonable grounds. 3. If the Money Laundering Committee decides that there is reasonable basis for considering a covered transaction, or other illegal activity, a report will be made to the Anti-Money Laundering Council using a report form shown in Appendix H, to be signed by the Division Head of the function making the report. A copy of the report to the Central Bank should be given immediately to other members of the Management Committee (Mancom). 4. If applicable, covered transaction or other illegal activity should also be reported to the Regional Head of Investigations. The report may be in narrative form containing all information considered significant. The report should be made by the local Head of Investigation, if there is one, who should be given a copy of the report to the Anti-Money Laundering Council by the Committee on Money Laundering. If there is no local Head of Investigations, the report to the Regional Head of Investigations should be made by the Compliance Officer. 5. R.A. No. 9160 defined/specified covered transactions to be reported to the AMLC (Appendix I). APPENDIX A FINANCIAL ACTION TASK FORCE MEMBER COUNTRIES Australia Austria Belgium Canada China Denmark European Commission Finland France Germany Greece Gulf Co-operation Council Hong Kong Iceland Ireland Italy Japan Luxemburg Netherlands New Zealand Norway Portugal Singapore Spain Sweden Switzerland Turkey United Kingdom United States APPENDIX B GUIDELINES ON MEASURES AGAINST MONEY LAUNDERING The Nature of Money Laundering Money laundering may be briefly defined as the conversion or transfer of money to disguise its illicit origin. In many countries, it is already a criminal offense to be knowingly involved in money laundering and other countries have pending legislation. The involvement will include any intentional or negligent act by financial institutions and their employees that assist drug traffickers and other criminals to conceal or transfer the proceeds of their crimes or to build up funds with which to finance crime. It is estimated that 80% of world drug trafficking revenue (about US$500 billion per year) is subsequently laundered. Money obtained from drug trafficking usually starts in the form of a large volume of cash in mixed denomination notes. This volume is often larger than the volume of the drugs themselves. The trafficker needs cash with as little risk as possible and it is easier if the cash is in a hard currency. Clearly, the stage of depositing cash in a financial institution is the critical one for the money launderer. Deposits may often be made in the name of a company whose beneficial owners do not have to be disclosed in its country of incorporation or elsewhere. Deposits are also made into accounts in the name of trustees where the beneficiaries are kept secret. Sometimes, these deposits are made by the legal profession where the rules of legal confidentiality may be exploited. Deposits of cash are sometimes achieved by using false identities. Criminals also utilize informal banking systems such as "Hawalla bankers" who conduct an international exchange of gold bullion, gold jewelry or currency. Such cash deposits would tend to go to jurisdictions where the banking system is insufficiently regulated and where "letter box" companies are permitted. These jurisdictions include small countries who derive a source of revenue from the sale of banking licenses or who create tax havens. As a result, the proceeds of criminal acts will often be transferred to a financial institution in an insufficiently regulated "of shore" jurisdiction and then transferred back to a well regulated regime in the form of a loan or an investment in property. Stages in Money Laundering There are three stages of money laundering during which there may be numerous transactions made by launderers that could alert a financial institution to criminal activity: (a) Placement the physical disposal of cash proceeds derived from illegal activity. (b) Layering separating illicit proceeds from their source by creating complex layers of financial transactions designed to disguise the audit trail and provide anonymity. (c) Integration the provision of apparent legitimacy to criminally derived wealth. If the layering process has succeeded, integration schemes place the laundered proceeds back into the economy in such a way that they re-enter the financial system appearing to be normal business funds. Abuse of the Investment Industry in the Money Laundering Process Because investment business is not generally cash based, it is probably less at risk from the initial placement of criminally derived funds than mainstream banking. Most payments are made by way of cheque from another financial institution and it can therefore be assumed that the first stage of money laundering has already been achieved. Nevertheless, the purchase of investments for cash is not unknown and therefore the risk of investment business being used at the placement stage cannot be ignored. However, investment business is arguably more at risk from the second stage of money laundering i.e. the layering process. Unlike laundering via the mainstream banking networks, investment business allows the launderer to change the form of funds, not just from cash in hand to cash on deposit but from money in whatever from to an entirely different asset or range of assets as many times as required. Investments that are cash equivalent i.e. bearer bonds and similar investments in which ownership can be evidenced without reference to registration of identity may be particularly attractive as vehicle for laundering money. Investment transactions incorporate an added attraction to the launderer in that the alternative asset is normally highly liquid. The ability to liquidate investment portfolios containing both lawful and illicit proceeds, whilst concealing the criminal source of the latter, combined with the huge variety of investments available, and the ease of transfer between them, offers the sophisticated criminal launderer an ideal route to effective integration into the legitimate economy. Money Laundering Schemes Uncovered Drug investigations are sometimes initiated by an alert teller who observes unusual activity related to cash deposits. The following recent UK cases are illustrations. A teller had observed that a non-customer occasionally remitted money to Penn for collection by his brother. Subsequently, the man opened an account and regularly deposited approximately GBP5,000 in cash which he claimed derived from his business as a fruit importer. The bank reported the circumstances to the authorities and the police conducted an investigation which led to the discovery of a cocaine refining laboratory in England. Approximately 30 Kgs of cocaine was seized, other bank accounts were discovered and GBP1.5M was confiscated. A man opened an account with a UK bank and deposited GBP50K in cash, subsequently requesting that it be transferred to a company account held at the bank's Guernsey subsidiary. The bank was suspicious and made discreet enquiries of the customer who claimed that the money was the proceeds of the sale of a boat. Following a request for a money to be transferred to a different company account in Guernsey, the bank reported the proposed transaction to the authorities who discovered connections with drug trafficking in Spain. Two men were subsequently arrested and respectively received 14 years and 61/2 years imprisonment. Nearly GBP400K was seized. A teller noticed that a Dutch non-customer had visited the branch on several occasions exchanging in all GBP14K of cash into Dutch currency. This was regarded as suspicious because it was known that the man had an account at another branch nearby. The circumstances were reported to the authorities and the man was subsequently arrested for importing cannabis. A joint account through which, for several years, only small transactions were conducted received several cash deposits amounting to GBP52K. The deposits were unexplained and inconsistent with the humble character of the account holders. The circumstances were reported to the police and investigations revealed a conspiracy to supply heroine and cocaine. Money launderers also set up or buy corporations in off-shore jurisdictions using nominee directors who open local bank accounts. The corporation will then make deposits of cash to finance loans to other ostensibly unconnected companies in larger states. Another well used technique of money laundering is to under value or over value goods imported or exported so as to illicitly transfer value to hard currency countries. This may be achieved by false invoicing. The most common form of money laundering that insurance companies, brokers, and independent financial advisers will encounter takes the form of a proposal to enter into a single premium contract. Examples of the type of contract that are particularly attractive as a vehicle for laundering money are: investment bonds; purchased annuities; lump sum top-ups to an existing life insurance contract; and lump sum contributions to personal pensions contracts. As in the example below, these contracts in themselves may be merely one part of a sophisticated web of complex transactions which will often have their origins elsewhere in the financial services sector. Recently in the UK, money laundering involving insurance business was uncovered where cash derived from drug trafficking was deposited in several bank accounts and then transferred to an offshore account. The trafficker entered into a GBP50,000 life insurance contract, having been introduced by a broking firm. Payments was made by two separate transfers from the offshore account. It was supported that the funds used for payment were the proceeds of overseas investments. At the time of the trafficker's arrest, the insurer had received instructions for the early surrender of the contract. Group employees will thus need to give special attention to deposits of cash or other unusual transactions which might fit into one of the techniques outlined above. APPENDIX C GUIDELINES ON MEASURES AGAINST MONEY LAUNDERING These guidelines take into account the findings of a number of public bodies who have considered money laundering. These are the following: (a) The 1988 United Nations Vienna Convention Against Illicit Trafficking in Narcotic Drugs and Psychotropic Substances which, inter alia, proposed improvements in laws and administrative procedures relating to financial institutions. It created an obligation to criminalise money laundering and set forth the principle that banking secrecy should not interfere with criminal investigations. (b) The Basle Committee on Banking Regulations and Supervisory Practices which in December 1988 set out principles to avoid the financial system becoming a conduit for criminal funds. It stated that banks should: i. make reasonable efforts to determine the customer's true identity and bona fides; ii. ensure that business is conducted in conformity with high ethical standards and, that service is not provided where there is good reason to suppose that transactions are associated with laundering activities; iii. co-operate fully with national law enforcement agencies including where there are reasonable grounds for suspecting money laundering taking appropriate measures which are consistent with the law; and iv. adopt policies consistent with the Statement's principles and implement procedures for customer identification and retention of internal records of transactions. (c) The Financial Action Task Force on Money Laundering set up following the G7 Paris Summit in July 1989. It has made 40 detailed recommendations for further action by countries, competent authorities and financial institutions. There are now 26 countries in the Task Force. (d) The UK Joint Money Laundering Working Group , set up by the Bank of England with the BBA, the building societies, the police and H.M. Customs and Excise. The Group was established as a result of the Home Affairs Committee report on Drug Trafficking and Related Serious Crime and the G7 Task Force. Its terms of reference include "To agree recommendations on money laundering to be put to HMG". It produced, in December 1990, Money Laundering Guidance Notes for Banks and Building Societies and in 1991 similar separate guidance notes for insurance and investment business. The guidance notes have since been revised to reflect the EC Directive on Money Laundering and have been issued in 3 separate editions namely: TcHCDE i. Guidance Notes for Mainstream Banking, Lending and Deposit Taking Activities; ii. Guidance Notes for Wholesale, Institutional and Private Client Investment Business; and iii. Guidance Notes for Insurance and Retail Investment Products. They require U.K. registered financial institutions to issue a clear statement of policies relating to money laundering and to alert their overseas branches and subsidiaries to those policies. (e) EC Directive on Prevention of the use of the Financial System for the Purpose of Money Laundering The EC Directive on Money Laundering which is applicable to a broad range of financial sector activity recognizes the risk to the stability of, and confidence in, the financial system if money launderers take advantage of the freedom to supply financial services which a single integrated market will afford. It directs member states to combat money laundering and, in particular, the laundering of proceeds derived from drug trafficking. Financial institutions are required to identify customers by means of suitable evidence and keep records of the evidence in addition to records of individual transactions. Member States are also required to introduce a mandatory suspicions-based reporting regime and all credit and financial institutions are required to train staff and establish proper internal procedures to deal with money laundering. APPENDIX D GUIDELINES ON MEASURES AGAINST MONEY LAUNDERING Examples of Suspicious Transactions A suspicious transaction can be described as any activity which is out of character with the usual running of an account which could relate to the laundering of proceeds of a serious crime such as the following. Cash Transactions Large cash deposits made by an individual or company whose ostensible business activities should not normally generate substantial amounts of cash. The frequent deposit of cash to cover requests for bankers drafts, money transfers or other negotiable and readily marketable money instruments. Frequent exchange of cash into other currencies. Substantial increases in cash deposits by an account holder without apparent cause, especially if such deposits are soon transferred out of the account and/or to a destination not normally associated with that customer. The deposit of cash by means of numerous credits slips so that the total of each deposit is unremarkable but the total of all the credits is large: Customers who open numerous accounts and pay in amounts of cash to each of them in circumstances in which the total of credits would be a large amount. Company accounts whose transactions, both deposits and withdrawals, are dominated by cash rather than the forms of debit and credit normally associated with commercial operations (e.g. cheques, Letters of Credit, Bills of Exchange, etc.) The Use of Accounts Any individual or company whose accounts shows virtually no normal personal banking or business related activities but is used to receive or disburse large sums which have no obvious purpose or relationship to the account holder and/or his business. Customers who wish to maintain a number of trustee or clients, accounts which do not appear consistent with type of business, and transactions which involve nominee names. Reluctance to provide normal information when opening an account, providing minimal or fictitious information or, when applying to open an account, providing information that is difficult or expensive for the bank to verify. Matching of Payments out with credits paid in by cash on the same or previous day. Paying in large third party cheques endorsed in favour of the customer. Customers who together, and simultaneously, use separate tellers to conduct large cash transactions or foreign exchange transactions. Increased use of deposit facilities. The deposit and withdrawal of sealed packets. Substantial increases in deposits of cash or negotiable instruments by a professional firm or company, using client accounts or in-house company or trust accounts especially if the deposits are promptly transferred between other client company and trust accounts. Customers who decline to provide information that in normal circumstances would make the customer eligible for credit or for other banking services that would be regarded as valuable. Customers who appear to have accounts with several other financial institutions within the same locality, especially when there is a regular consolidation process from such accounts prior to a request for onward transmission of the funds elsewhere. Customers who pay or deposit cash to cover requests for bankers drafts, money transfer or other negotiable and readily marketable money instruments. Customers who seek to exchange large quantities of low denomination notes for those of higher denomination. Large cash withdrawals from a previously dormant/inactive account, or from an account which has just received an unexpected large credit from abroad. Customers who make regular and large payments that cannot clearly be identified as bona fide transactions to, or who receive regular and large payments from countries which are associated with terrorist activity or with the production, processing or marketing narcotics. Money Laundering Using Investment Related Transactions Sales and Dealing Staff New Business Although longstanding customers may be laundering money through an investment business, it is more likely to be a new customer who may use one or more accounts for a short period only and may use false names and fictitious companies or even companies organized as a front. Investment may be direct with an investment business or indirect via an intermediary who "doesn't ask too many awkward questions", especially (but not only) in a jurisdiction where money laundering is not legislated against or where the rules are not rigorously enforced. The following situations will usually give rise to the need for additional enquiries: A personal client for whom verification of identity proves unusually difficult and who is reluctant to provide details. A client with no discernible reason for using the firm's service of your business e.g. clients with distant addresses who could find the same service nearer their home base; Clients whose requirements are not in the normal pattern of the firms' business which could be more easily serviced elsewhere: An investor introduced by an overseas bank, affiliate or other investor both of which are based in countries where production of drugs or drug trafficking may be prevalent. Any transaction in which the counterparty to the transaction is unknown. A Corporate/Trust client where there are difficulties and delays in obtaining copies of the accounts or other documents of incorporation. Intermediaries There are many clearly legitimate reasons for a client's use of an intermediary. However, the use of intermediaries does introduce further parties into the transaction thus increasing opacity and, depending on the designation of the account, preserving anonymity. Likewise there are a number of legitimate reasons for dealing via intermediaries on a "numbered account" basis; however this is also a useful tactic which may be used by the money launderer to delay, obscure or avoid detection. Any apparently unnecessary use of an intermediary in the transaction should give rise to further enquiries. Dealing Patterns & Abnormal Transactions The aim of the money launderer is to introduce as many layers as possible. This means that the money will pass through a number of sources and through a number of different persons or entities. Longstanding and apparently legitimate customer accounts may be used to launder money innocently, as a favour, or due to the exercise of undue pressure. Examples of unusual dealing patterns and abnormal transactions may be as follows: Dealing Patterns A large number of investment transactions across a number of jurisdictions. Transactions not in keeping with the investor's normal activity, the financial markets in which the investor is active and the business which the investor operates. Buying and selling of a security with no discernible purpose or in circumstances which appear unusual, e.g. churning at the client's request. Bearer securities held outside a recognized custodial system. Abnormal Transactions A number of transactions by the same counterparty in small amounts of the same security, each purchased for cash and then sold in one transaction, the proceeds being credited to an account different from the original account. Any transaction in which the nature, size or frequency appears unusual, e.g. early termination of packaged products at a loss due to front end loading; early cancellation, especially where cash had been tendered and/or the refund cheque is to a third party. Transfer of investments to apparently unrelated third parties. Transactions not in keeping with normal practice in the market to which they relate, e.g. with reference to market size and frequency, or at off-market prices. Other transactions linked to the transaction in question which could be designed to disguise money and divert it into other forms or other destinations or beneficiaries. Settlements Payments Money launderers will often have substantial amounts of cash to dispose of and will use a variety of methods. Cash settlement through a financial adviser may not in itself be suspicious; however large or unusual settlements of securities, deals in cash and settlements in cash to a large securities house will usually provide cause to further inquiry. Examples of unusual payment settlement may be as follows: A number of transactions by the same counterparty in small amounts of the same security, each purchased for cash and then sold in one transaction. Large transaction settlement by cash. Payment by way of third party cheque or money transfer where there is a variation between the account holder, the signatory and the prospective investor, must give rise to additional enquiries. Delivery Bearer securities, held outside a recognized custodial system, are extremely portable and anonymous instruments which may serve the purpose of the money launderer well. Their presentation in settlement or as collateral should therefore always prompt further inquiry as should the following: Settlement to be made by way of bearer securities from outside a recognized clearing system. Allotment letters for new issues in the name of persons other than the client. Disposition Payment to a third party without any apparent connection with the investor. Settlement either by registration or delivery of securities to be made to an unverified third party. Abnormal settlement instructions including payment to apparently unconnected parties. Money Laundering Involving off-Shore Activity Customer introduced by an overseas branch, affiliate or other bank based in countries where drug trafficking is rife. Use of letters of credit or other methods of trade finance to move money between countries where such trade is not consistent with the customer's usual business. Regular large wire transfer transactions to tax haven countries. Building up of large balances, not consistent with the known turnover of the customer's business, and subsequent transfer to account(s) held overseas. Unexplained electronic fund transfers by customers on an in and out basis or without passing through an account. Frequent requests for travellers cheques or foreign currency drafts to be issued. Money Laundering Involving Lending Request to borrow against assets held by the bank or a third party, where the origin of the assets is not known or is inconsistent with the customer's trading. Request by a customer to provide or arrange finance where the source of the customer's financial contribution to the deal is unclear, particularly where property is involved. APPENDIX E GUIDELINES ON MEASURES AGAINST MONEY LAUNDERING Scope of Training The effectiveness of procedures must depend on the extent to which staff appreciate the serious nature of the background issues and their own personal obligations under any legislation. They must be encouraged to provide prompt advise of covered transactions. It is, therefore, important that appropriate training measures are provided. The following training should be undertaken: (a) New Employees Training to provide a general appreciation of the background to money laundering, and the subsequent need for reporting of any covered transaction to the appropriate designated point. This should be provided to all new employees who will be dealing with customers or their transactions, irrespective of the level of seniority. They should be made aware of the importance placed on monitoring accounts, on the reporting of the suspicions, of legal requirements to report, and of the importance of these issues. (b) Front Line Staff Training members of staff who are dealing directly with the public and who are the first point of contract with potential money-launderers. They should be made aware of the reporting system. Training should be provided on the factors that may give rise to suspicion and on the procedures to be adopted when a covered transaction is suspected. Staff should be made aware of the vigilance required in dealing with nonregular customers particularly where large cash transactions are involved. (c) Account Opening/New Client Personnel Employees who deal with account opening, or accepts new clients, should receive the training given to cashiers. In addition, the need to verify the identity of the customer must be understood, and training should be given in account opening and customer/client identity verification procedures. Such employees should be aware that the offer of suspicious funds or the request to undertake a covered transaction should be reported to the relevant authorities whether or not the funds are accepted or the transactions proceed. (d) Investment Business Processing Staff Those members of staff who process the settlement of investment must receive appropriate training in the processing and verification procedures. The identity of the investor and matching against cheque received in settlement is, for instance a key process. Such staff should be made aware that the offer of suspicious funds accompanying a request to undertake investment business may need to be reported to the proper parties whether or not the funds are accepted or the transaction proceeds. (e) Sales/Advisory Staff Members of staff who are dealing directly with the public (whether as members of staff or financial advisers) are the first point of contact with potential money-launderers and their efforts are therefore vital to the organization's strategy in the fight against money laundering. They must be made aware of their responsibilities and should be made aware of the organization's reporting system for such transactions. Training should be provided on factors that may give rise to suspicions and on the procedures to be adopted when a transaction is deemed to be suspicious. (f) Supervisors and Managers A high level of instruction covering all aspects of money laundering procedures should be provided to supervisors and managers. This should include internal reporting procedures, requirements for verification and retention of records. (g) On-going Training It will also be necessary to make arrangements for refresher training at regular intervals. APPENDIX F GUIDELINES ON MEASURES AGAINST MONEY LAUNDERING Definitions Money laundering The conversion or transfer of property for the purpose of disguising its illicit origin. Suspicion of money laundering Impression given by a set of circumstances that customer activity is possibly connected with money laundering. Relevant criminal activity Refers to any acts or omission or series or combination thereof involving or having relation to the following: ECcTaH a. Kidnapping for ransom under Article 267 of Act No. 3815, the Revised Penal Code, as amended; b. Robbery and extortion under Articles 294,295,296,299,300,301 and 302 of the same Code; c. Qualified theft under Article 310 of the same Code; d. Swindling under Article 315 of the same Code; e. Piracy on the high seas under the same Code and Presidential Decree (P.D.) No. 532; f. Destructive arson and murder as defined under the same Code and hijacking and other violations under Republic Act (R.A.) No. 6235, including those perpetrated by terrorists against non-combatant persons and similar targets; g. Jueteng and Masiao punished as illegal gambling under P.D. No. 1602; h. Smuggling under R.A Nos. 455 and 1937; i. Section 3, paragraphs B,C,E,G,H and I of R.A. No. 3019, the Anti-Graft and Corrupt Practices Act, as amended; j. Section 3,4,5,6,7,8 and 9 of Article Two of R.A. No. 6425, the Dangerous Drugs Act of 1972 as amended; k. Plunder under R.A. No. 7080, as amended; l. Violations under R.A. No. 8792, the Electronic Commerce Act of 2000; m. Fraudulent practices and other violations under R.A. No. 8799, the Securities Regulation Code of 2000; and n. Felonies of offenses of a similar nature that are punishable under the penal laws of other countries. Competent authority Designated officer, Local, Regional or Group Head of Investigations, the Compliance Officer, Bangko Sentral ng Pilipinas, The Anti-Money Laundering Council. APPENDIX G _____________________ Name of Institution REPORTING STAFF: Name ________________________ Tel __________________________ Branch/Dept ___________________ Position _______________________ CUSTOMER/CLIENT Name Occupation/Employer or Business Address Account No. Contact/Tel Type of Account Passport No Account Balance Other ID As at date Date account opened INFORMATION/SUSPICION Information/Transaction: Date of Transaction: Nature of Transaction: Reason for suspicion REPORTING STAFF'S SIGNATURE ___________________ Date _____________ (You should not advise the customer/client or anyone else of your suspicion and report.) Notes: Attach copies of the following documents: account opening Form customer's identification documents or certificates of incorporation/registration Documents supporting suspicion APPENDIX G-1 (Name of Institution) MONEY LAUNDERING SUSPICION EVALUATION RECORD Date Customer/Client Evaluated by Branch/Dept ENQUIRIES UNDERTAKEN DOCUMENTS RESEARCHED/ATTACHED DETERMINATION/DECISION _____________________________ SIGNATURE APPENDIX H September 29, 2001 REPUBLIC ACT NO. 9160 AN ACT DEFINING THE CRIME OF MONEY LAUNDERING, PROVIDING PENALTIES THEREFOR, AND FOR OTHER PURPOSES SECTION 1. Short Title . This Act shall be known as the "Anti-Money Laundering Act of 2001." IASEca SECTION 2. Declaration of Policy It is hereby declared the policy of the State to protect and preserve the integrity and confidentiality of bank accounts and to ensure that the Philippines shall not be used as a money laundering site for the proceeds of any, unlawful activity. Consistent with its foreign policy, the State shall extend cooperation in transnational investigations and prosecutions of persons involved in money laundering activities wherever committed. SECTION 3. Definitions For purposes of this Act, the following terms are hereby defined as follows: (a) " Covered Institution " refers to: (1) banks, non-banks, quasi-banks, trust entities, and all other institutions and their subsidiaries and affiliates supervised or regulated by the Bangko Sentral ng Pilipinas (BSP); (2) insurance companies and all other institutions supervised or regulated by the Insurance Commission; and (3) (i) securities dealers, brokers, salesmen, investment houses and other similar entities managing securities or rendering services as investment agent, advisor, or consultant, (ii) mutual funds, close and investment companies. common trust funds, pre-need companies and other similar entities, (iii) foreign exchange corporations, money changers, money payment, remittance, and transfer companies and other similar entities, and (iv) other entities administering or otherwise dealing in currency, commodities or financial derivatives based thereon valuable objects, cash substitutes and other similar monetary instruments or property supervised or regulated by Securities and Exchange Commission. (b) " Covered transaction " is a single, series, or combination of transactions involving a total amount in excess of Four million Philippine pesos (Php 4,000,000.00) or an equivalent amount in foreign currency based on the prevailing exchange rate within five (5) consecutive banking days except those between a covered institution and a person who, at the time of the transaction was a properly identified client and the amount is commensurate with the business or financial capacity of the client; or those with an underlying legal or trade obligation, purpose, origin or economic justification. It likewise refers to a single, series or combination or pattern of unusually large and complex transactions in excess of Four million Philippine pesos (Php 4,000,000.00) especially cash deposits and investments having no credible purpose or origin, underlying trade obligation or contract. (c) " Monetary instrument " refers to: (1) coins or currency of legal tender of the Philippines, or of any other country; (2) drafts. checks and notes; (3) securities or negotiable instruments, bonds, commercial papers, deposit certificates, trust certificates, custodial receipts or deposit substitute instruments, trading orders, transaction tickets and confirmations of sale or investments and money marked instruments; and (4) other similar instruments where title thereto passes to another by endorsement, assignment or delivery. (d) " Offender " refers to any person who commits a money laundering offense. (e) " Person " refers to any natural or juridical person. (f) " Proceeds " refers to an amount derived or realized from an unlawful activity. (g) " Supervising Authority " refers to the appropriate supervisory or regulatory agency, department or office supervising or regulating the covered institutions enumerated in Section 3(a). (h) " Transaction " refers to any act establishing any right or obligation or giving rise to any contractual or legal relationship between the parties thereto. It also includes any movement of funds by any means with a covered institution. (i) " Unlawful activity " refers to any act or omission or series or combination thereof involving or having relation to the following: (1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code, as amended; (2) Sections 3,4,5,7,8 and 9 of Article Two of Republic Act No. 6425, as amended, otherwise known as the Dangerous Drugs Act of 1972; (3) Section 3 paragraphs B, C, E, G, H and I of Republic Act No. 3019, as amended; otherwise known as the Anti-Graft and Corrupt Practices Act; (4) Plunder under Republic Act No. 7080, as amended; (5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the Revised Penal Code, as amended; (6) Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602; (7) Piracy on the high seas under the Revised Penal Code, as amended and Presidential Decree No. 532; (8) Qualified theft under Article 310 of the Revised Penal Code, as amended; (9) Swindling under Article 315 of the Revised Penal Code, as amended; (10) Smuggling under Republic Act Nos. 455 and 1937; (11) Violations under Republic Act No. 8792, otherwise known as the Electronic Commerce Act of 2000; (12) Hijacking and other violations under Republic Act No. 6235; destructive arson and murder, as defined under the Revised Penal Code, as amended, including those perpetrated by terrorists against non-combatant persons and similar targets; (13) Fraudulent practices and other violations under Republic Act No. 8799 otherwise known as the Securities Regulation Code of 2000; (14) Felonies or offenses of a similar nature that are punishable under the penal laws of other countries. SECTION 4. Money Laundering Offense . Money laundering is a crime whereby the proceeds of an unlawful activity are transacted, thereby making them appear to have originated from legitimate sources. It is committed by the following: (a) Any person knowing that any monetary instrument or property represents, involves, or relates to the proceeds of any unlawful activity, transacts or attempts to transact said monetary instrument or property. (b) Any person knowing that any monetary instrument or property involves the proceeds of any unlawful activity, performs or fails to perform any act as a result of which he facilitates the offense of money laundering referred to in paragraph (a) above. (c) Any person knowing that any monetary instrument or property is required under this Act to be disclosed and filed with the Anti-Money Laundering Council (AMLC), fails to do so. SECTION 5. Jurisdiction of Money Laundering Cases . The regional trial courts shall have jurisdiction to try all cases on money laundering. Those committed by public officers and private persons who are in conspiracy with such public officers shall be under the jurisdiction of the Sandiganbayan. SECTION 6. Prosecution of Money Laundering . (a) Any person may be charged with and convicted of both the offense of money laundering and the unlawful activity as herein defined. (b) Any proceeding relating to the unlawful activity shall be given precedence over the prosecution of any offense or violation under this Act without prejudice to the freezing and other remedies provided. SECTION 7. Creation of Anti-Money Laundering Council (AMLC) . The Anti-Money Laundering Council is hereby created and shall be composed of the Governor of the Bangko Sentral ng Pilipinas as chairman, the Commissioner of the Insurance Commission and the Chairman of the Securities and Exchange Commission as members. The AMLC shall act unanimously in the discharge of its functions as defined hereunder.; (1) to require and receive covered transaction reports from covered institutions; (2) to issue orders addressed to the appropriate Supervising Authority or the covered institution to determine the true identity of the owner of any monetary instrument or property subject of a covered transaction report or request for assistance from a foreign State, or believed by the Council, on the basis of substantial evidence to be in whole or in part, wherever located, representing, involving, or related to, directly or indirectly, in any manner or by any means, the proceeds of an unlawful activity; IDCcEa (3) to institute civil forfeiture proceedings and all other remedial proceedings through the Office of the Solicitor General; (4) to cause the filing of complaints with the Department of Justice or the Ombudsman for the prosecution of money laundering offenses; (5) to initiate investigations of covered transactions, money laundering activities and other violations of this Act; (6) to freeze any monetary instrument or property alleged to be proceed of any unlawful activity; (7) to implement such measures as may be necessary and justified under this Act to counteract money laundering; (8) to receive and take action in respect of, any request from foreign states for assistance in their own anti-money laundering operations provided in this Act; (9) to develop educational programs on the pernicious effects of money laundering, the methods and techniques used in money laundering, the viable means of preventing money laundering and the effective ways of prosecuting and punishing offenders; and (10) to enlist the assistance of any branch, department, bureau, office, agency or instrumentality of the government, including government-owned and controlled corporations, in undertaking any and all anti-money laundering operations, which may include the use of its personnel, facilities and resources for the more resolute prevention, detection and investigation of money laundering offenses and prosecution of offenders. SECTION 8. Creation of a Secretariat . The AMLC is hereby authorized to establish a secretariat to be headed by an Executive Director who shall be appointed by the Council for a term of five (5) years. He must be a member of the Philippine Bar, at least thirty-five (35) years of age and of good moral character, unquestionable integrity and known probity. All members of the Secretariat must have served for at least five (5) years either in the Insurance Commission, the Securities and Exchange Commission or the Bangko Sentral ng Pilipinas (BSP) and shall hold full-time permanent positions within the BSP. SECTION 9. Prevention of Money Laundering; Customer Identification Requirements and Record Keeping . (a) Customer Identification . Covered institutions shall establish and record the true identity of its clients based on official documents. They shall maintain a system of verifying the true identity of their clients and, in case of corporate clients, require a system of verifying their legal existence and organizational structure, as well as the authority and identification of all persons purporting to act on their behalf. The provisions of existing laws to the contrary notwithstanding, anonymous accounts, accounts under fictitious names, and all other similar accounts shall be absolutely prohibited. Peso and foreign currency non-checking numbered accounts shall be allowed. The BSP may conduct annual testing solely limited to the determination of the existence and true identity of the owners of such accounts. (b) Record Keeping . All records of all transactions of covered institutions shall be maintained and safely stored for five (5) years from the date of transactions. With respect to closed accounts, the records on customer identification, account files and business correspondence, shall be preserved and safely stored for at least five (5) years from the dates when they were closed. (c) Reporting of Covered Transactions . Covered institutions shall report to the AMLC all covered transactions within five (5) working days from occurrence thereof, unless the Supervising Authority concerned prescribes a longer period not exceeding ten (10) working days. When reporting covered transactions to the AMLC, covered institutions and their officers, employees, representatives, agents, advisors, consultants or associates shall not be deemed to have violated Republic Act No. 1405, as amended; Republic Act No. 6426, as amended; Republic Act No. 8791 and other similar laws, but are prohibited from communicating, directly or indirectly, in any manner or by any means, to any person the fact that a covered transaction report was made, the contents thereof, or any other information in relation thereto. In case of violation thereof, the concerned officer, employee, representative, agent, advisor, consultant or associate of the covered institution, shall be criminally liable. However, no administrative, criminal or civil proceedings, shall lie against any person for having made a covered transaction report in the regular performance of his duties and in good faith, whether or not such reporting results in any criminal prosecution under this Act or any other Philippine law. When reporting covered transactions to the AMLC, covered institutions and their officers, employees, representatives, agents, advisors, consultants or associates are prohibited from communicating, directly or indirectly, in any manner or by any means, to any person entity, the media, the fact that a covered transaction report was made, the contents thereof, or any other information in relation thereto. Neither may such reporting be published or aired in any manner or form by the mass media, electronic mail, or other similar devices. In case of violation thereof, the concerned officer, employee, representative, agent, advisor, consultant or associate of the covered institution, or media shall be held criminally liable. SECTION 10. Authority to Freeze . Upon determination that probable cause exists that any deposit or similar account is in any way related to an unlawful activity, the AMLC may issue a freeze order, which shall be effective immediately, on the account for a period not exceeding fifteen (15) days. Notice to the depositor that his account has been frozen shall be issued simultaneously with the issuance of the freeze order. The depositor shall have seventy-two (72) hours upon receipt of the notice to explain why the freeze order should be lifted. The AMLC has seventy-two (72) hours to dispose of the depositor's explanation. If it fails to act within seventy-two (72) hours from receipt of the depositor's explanation the freeze order shall automatically be dissolved. The fifteen (15)-day freeze order of the AMLC may be extended upon order of the court, provided that the fifteen (15)-day period shall be tolled pending the court's decision to extend the period. No court shall issue a temporary restraining order or writ of injunction against any freeze order issued by the AMLC except the Court of Appeals or the Supreme Court. SECTION 11. Authority to Inquire into Bank Deposits . Notwithstanding the provisions of Republic Act No. 1405, as amended; Republic Act No. 6426, as amended; Republic Act No. 8791, and other laws, the AMLC may inquire into or examine any particular deposit or investment with any banking institution or non-bank financial institution upon order of any competent court in cases of violation of this Act when it has been established that there is probable cause that the deposits or investments involved are in any way related to a money laundering offense: Provided , That this provision shall not apply to deposits and investments made prior to the effectivity of this Act. SECTION 12. Forfeiture Provisions . (a) Civil Forfeiture . When there is a covered transaction report made, and the court has, in a petition filed for the purpose ordered seizure of any monetary instrument or property, in whole or in part, directly or indirectly, related to said report, the Revised Rules of Court on civil forfeiture shall apply. (b) Claim on Forfeiture Assets . Where the court has issued an order of forfeiture of the monetary instrument or property in a criminal prosecution for any for money laundering offense defined under Section 4 of this Act, the offender or any other person claiming an interest therein may apply, by verified petition, for a declaration that the same legitimately belongs to him and for segregation or exclusion of the monetary instrument or property corresponding thereto. The verified petition shall be filed with the court which rendered the judgment of conviction and order of forfeiture, within fifteen (15) days from the date of the order or forfeiture, in default of which the said order shall become final and executory. This provision shall apply in both civil and criminal forfeiture. (c) Payment in Lieu of Forfeiture . Where the court has issued an order of forfeiture of the monetary instrument or property subject of a money laundering offense defined under Section 4, and said order cannot be enforced because any particular monetary instrument or property cannot, with due diligence, be located, or it has been substantially altered, destroyed, diminished in value or otherwise rendered worthless by any act or omission, directly or indirectly, attributable to the offender, or it has been concealed, removed, converted or otherwise transferred to prevent the same from being found or to avoid forfeiture thereof, or it is located outside the Philippines or has been placed or brought outside the jurisdiction of the court, or it has been commingled with other monetary instruments or property belonging to either the offender himself or a third person or entity, thereby rendering the same difficult to identify or be segregated for purposes of forfeiture, the court may, instead of enforcing the order of forfeiture of the monetary instrument or property or part thereof or interest therein, accordingly order the convicted offender to pay an amount equal to the value of said monetary instrument or property. This provision shall apply in both civil and criminal forfeiture. SECTION 13. Mutual Assistance among States . (a) Request for Assistance from a Foreign State . Where a foreign State makes a request for assistance in the investigation or prosecution of a money laundering offense, the AMLC may execute the request or refuse to execute the same and inform the foreign State of any valid reason for not executing the request or for delaying the execution thereof. The principles of mutuality and reciprocity shall, for this purpose, be at all times recognized. (b) Power of the AMLC to Act on a Request for Assistance from a Foreign State . The AMLC may execute a request for assistance from a foreign State by: (1) tracking down, freezing, restraining and seizing assets alleged to be proceeds of any unlawful activity under the procedures laid down in this Act; (2) giving information needed by the foreign State within the procedures laid down in this Act; and (3) applying for an order of forfeiture of any monetary instrument or property in the court: Provided , That the court shall not issue such an order unless the application is accompanied by an authenticated copy of the order of a court in the requesting State ordering the forfeiture of said monetary instrument or property of a person who has been convicted of a money laundering offense in the requesting State, and a certification of an affidavit of a competent officer of the requesting State stating that the conviction and the order of forfeiture are final and then no further appeal lies in respect of either. AEDISC (c) Obtaining Assistance from Foreign States . The AMLC may make a request to any foreign State for assistance in (1) tracking down, freezing, restraining and seizing assets alleged to be proceeds of any unlawful activity; (2) obtaining information that it needs relating to any covered transaction, money laundering offense or any other matter directly or indirectly, related thereto; (3) to the extent allowed by the law of the Foreign State, applying with the proper court therein for an order to enter any premises belonging to or in the possession or control of, any or all of the persons named in said request, and/or search any or all such persons named therein and/or remove any document, material or object named in said request: Provided , That the documents accompanying the request support of the application have been duly authenticated in accordance with the applicable law or regulation of the foreign State; and (4) applying for an order of forfeiture of any monetary instrument or property in the proper court in the foreign State: Provided , That the request is accompanied by an authenticated copy of the order of the regional trial court ordering the forfeiture of said monetary instrument or property of a convicted offender and an affidavit of the clerk of court stating that the conviction and the order of forfeiture are final and that no further appeal lies in respect of either. (d) Limitations on Request for Mutual Assistance The AMLC may refuse to comply with any request for assistance where the action sought by the request contravenes any provision of the Constitution or the execution of a request is likely to prejudice the national interest of the Philippines unless there is a treaty between the Philippines and the requesting State relating to the provision of assistance in relation to money laundering offenses. (e) Requirements for Requests for Mutual Assistance from Foreign States . A request for mutual assistance from a foreign State must (1) confirm that an investigation or prosecution is being conducted in respect of a money launderer named therein or that he has been convicted of any money laundering offense; (2) state the grounds on which any person is being investigated or prosecuted for money laundering or the details of his conviction; (3) gives sufficient particulars as to the identity of said person; (4) give particulars sufficient to identify any covered institution believed to have any information, document, material or object which may be of assistance to the investigation or prosecution; (5) ask from the covered institution concerned any information, document, material or object which may be of assistance to the investigation or prosecution; (6) specify the manner in which and to whom said information, document, material or object detained pursuant to said request, is to be produced; (7) give all the particulars necessary for the issuance by the court in the requested State of the writs, orders or processes needed by the requesting State; and (8) contain such other information as may assist in the execution of the request. (f) Authentication of Documents For purposes of this Section, a document is authenticated if the same is signed or certified by a judge, magistrate or equivalent officer in or of, the requesting State, and authenticated by the oath or affirmation of a witness or sealed with an official or public seal of a minister, secretary of State, or officer in or of, the government of the requesting State, or of the person administering the government or a department of the requesting territory, protectorate or colony. The certificate of authentication may also be made by a secretary of the embassy or legation, consul general, consul, vice consul, consular agent or any officer in the foreign service of the Philippines stationed in the foreign State in which the record is kept, and authenticated by the seal of his office. (g) Extradition . The Philippines shall negotiate for the inclusion of money laundering offenses as herein defined among extraditable offenses in all future treaties. SECTION 14. Penal Provisions . (a) Penalties for the Crime of Money Laundering . The penalty of imprisonment ranging from seven (7) to fourteen (14) years and a fine of not less than Three million Philippine pesos (Php3,000,000.00) but not more than twice the value of the monetary instrument or property involved in the offense, shall be imposed upon a person convicted under Section 4(a) of this Act. The penalty of imprisonment from four (4) to seven (7) years and a fine of not less than One million five hundred thousand Philippine pesos (Php1,500,000.00) but not more than Three million Philippine pesos (Php3,000,000.00), shall be imposed upon a person convicted under Section 4(b) of this Act. The penalty of imprisonment from six (6) months to four (4) years or a fine of not less than One hundred thousand Philippine pesos (Php100,000.00) but not more than Five hundred thousand Philippine pesos (Php500,000.00), or both, shall be imposed on a person convicted under Section 4(c) of this Act. (b) Penalties for Failure to Keep Records . The penalty of imprisonment from six (6) months to one (1) year or a fine of not less than One hundred thousand Philippine pesos (Php100,000.00) but not more than Five hundred thousand Philippine pesos (Php500,000.00), or both, shall be imposed on a person convicted under Section 9(b) of this Act. (c) Malicious Reporting . Any person who, with malice, or in bad faith, report or files a completely unwarranted or false information relative to money laundering transaction against any person shall be subject to a penalty of six (6) months to four (4) years imprisonment and a fine of not less than One hundred thousand Philippine pesos (Php100,000.00) but not more than Five hundred thousand Philippine pesos (Php500,000.00), at the discretion of the court: Provided , That the offender is not entitled to avail the benefits of the Probation Law. If the offender is a corporation, association, partnership or any juridical person, the penalty shall be imposed upon the responsible officers, as the case may be, who participated in the commission of the crime or who shall have knowingly permitted or failed to prevent its commission. If the offender is a juridical person, the court may suspend or revoke its license. If the offender is an alien, he shall, in addition to the penalties herein prescribed, be deported without further proceedings after serving the penalties herein prescribed. If the offender is a public official or employee, he shall, in addition to the penalties prescribed herein, suffer perpetual or temporary absolute disqualification from office, as the case may be. Any public official or employee who is called upon to testify and refuses to do the same or purposely fails to testify shall suffer the same penalties prescribed herein. (d) Breach of Confidentiality . The punishment of imprisonment ranging from three (3) to eight (8) years and a fine of not less than Five hundred thousand Philippine pesos (Php500,000.00) but not more than One million Philippine pesos (Php1,000,000), shall be imposed on a person convicted for a violation under Section 9(c). SECTION 15. System of Incentives and Rewards . A system of special incentives and rewards is hereby established to be given to the appropriate government agency and its personnel that led and initiated an investigation, prosecution and conviction of persons involved in the offense penalized in Section 4 of this Act. SECTION 16. Prohibitions Against Political Harassment . This Act shall not be used for political prosecution or harassment or as an instrument to hamper competition in trade and commerce. No case for money laundering may be filed against and no assets shall be frozen, attached or forfeited to the prejudice of a candidate for an electoral office during an election period. SECTION 17. Restitution . Restitution for any aggrieved party shall be governed by the provisions of the New Civil Code. SECTION 18. Implementing Rules and Regulations . Within thirty (30) days from the effectivity of this Act, the Bangko Sentral ng Pilipinas, the Insurance Commission and the Securities and Exchange Commission shall promulgate the rules and regulations to implement effectively the provisions of this Act. Said rules and regulations shall be submitted to the Congressional Oversight Committee for approval. Covered institutions shall formulate their respective money laundering prevention programs in accordance with this Act including, but not limited to, information dissemination on money laundering activities and its prevention, detection and reporting, and the training of responsible officers and personnel of covered institutions. SECTION 19. Congressional Oversight Committee . There is hereby created a Congressional Oversight Committee composed of seven (7) members from the Senate and seven (7) members from the House of Representatives. The members from the Senate shall be appointed by the Senate President based on the proportional representation of the parties or coalitions therein with at least two (2) Senators representing the minority. The members from the House of Representatives shall be appointed by the Speaker also based on proportional representation of the parties or coalitions therein with at least two (2) members representing the minority. The Oversight Committee shall have the power to promulgate its own rules, to oversee the implementation of this Act, and to review or revise the implementing rules issued by the Anti-Money Laundering Council within thirty (30) days from the promulgation of the said rules. SECTION 20. Appropriations Clause . The AMLC shall be provided with an initial appropriation of Twenty-five million Philippine pesos (Php25,000,000.00) to be drawn from the national government. Appropriations for the succeeding years shall be included in the General Appropriations Act. SECTION 21. Separability Clause . If any provision or section of this Act or the application thereof to any person or circumstance is held to be invalid, the other provisions or sections of this Act, and the application of such provision or section to other persons or circumstances, shall not be affected thereby. HTCISE SECTION 22. Repealing Clause . All laws, decrees, executive orders, rules and regulations or parts thereof, including the relevant provisions of Republic Act No. 1405, as amended; Republic Act No. 6426, as amended; Republic Act No. 8791, as amended and other similar laws as are inconsistent with this Act, are hereby repealed, amended or modified accordingly. SECTION 23. Effectivity . This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2) national newspapers of general circulation. The provisions of this Act shall not apply to deposits and investments made prior to its effectivity. Approved: September 29, 2001. July 7, 2000 BSP CIRCULAR NO. 251-00 Pursuant to Monetary Board Resolution No. 1116 dated July 6, 2000, the following rules and regulations for banks and non-bank financial institutions under the supervision and regulation of the Bangko Sentral ng Pilipinas (BSP) are hereby issued in order to combat money laundering: 1. When establishing business relations or conducting transactions (particularly opening of deposit accounts, accepting deposit substitutes, entering into trust and other fiduciary transactions, renting of safety deposit boxes, performing remittances and other large cash transactions), banks/Non-Bank Financial Institutions (NBFIs) should take reasonable measures to establish and record the true identity of their clients. Said client identification may be based on official or other reliable documents and records. In cases of corporate and other legal entities, the following measures should be taken, when necessary: a. Verification of the legal existence and structure of the client from the appropriate agency or from the client itself or both, proof of incorporation, including information concerning the customer's name, legal form, address, directors, principal officers and provisions regulating the power behind the entity. b. Verification of the authority and identification of the person purporting to act on behalf of the client. 2. In case of doubt as to whether their purported clients or customers are acting for themselves or for another, reasonable measures should be taken to obtain the true identity of the persons on whose behalf an account is opened or a transaction conducted. 3. Unless otherwise prescribed under existing laws, anonymous accounts or accounts under fictitious names should not be kept/allowed. In case where numbered accounts is allowed (i.e. foreign currency deposits), banks/NBFIs should ensure that the client is identified in an official or other identifying documents. 4. The identity of existing clients or beneficial owners of deposits and other funds held or being managed by the bank should be renewed/updated at least every other year. 5. All necessary records on transactions, both domestic or international, should be maintained for at least five (5) years. Such records must be sufficient to permit reconstruction of individual transactions so as to provide, if necessary, evidence for prosecution of criminal behavior. Records on customer identification, account files and business correspondence should be kept for at least five (5) years after the account is closed. SaAcHE 6. Special attention should be given to all complex, unusual large transactions, and all unusual patterns of transactions, which have no apparent or visible lawful purpose. The background and purpose of such transactions should, as far as possible, be examined, the findings established in writing, and be available to help supervisors, auditors and law enforcement agencies. If there is reasonable ground to believe that the funds are proceeds of a criminal or other illegal activity, they should be reported to competent authority, without violating any law. If the fund is held as deposit, the account should be closed. 7. Other suspicious transactions not involving deposits should be reported to competent authorities. 8. Banks/NBFIs should not, or should at least avoid, transacting business with criminals. Reasonable measures should be adopted to prevent the use of their facilities for laundering of proceeds of crimes and other illegal activities. 9 Programs against money laundering should be developed. These programs should include, as a minimum: a. The development of internal policies, procedures and controls, including the designation of compliance officers at management level, and adequate screening procedures to ensure high standards when hiring employees; b. An ongoing employee training program; and c. An audit function to test the system. This Circular shall take effect immediately. (SGD.) RAFAEL B. BUENAVENTURA Governor July 31, 2000 BSP CIRCULAR NO. 253-00 Pursuant to Monetary Board Resolution No. 1243 dated 21 July 2000, the following rules and regulations are hereby issued: SECTION 1. Banks and non-bank financial institutions (NBFIs) shall report in the prescribed form (copy attached) to the Bangko Sentral ng Pilipinas, through the appropriate supervising and examining departments of the Supervision and Examination Sector, the following transactions: 1. Outward remittances without visible lawful purpose; 2. Inward remittances without visible lawful purpose or without underlying trade transactions; 3. Unusual purchases of foreign exchange without visible lawful purpose; 4. Unusual sales of foreign exchange whose sources are not satisfactorily established; 5. Complex, unusual large transactions, and all unusual patterns of transactions, which have no apparent or visible lawful purpose; 6. Funds being managed or held as deposit substitutes if there is reasonable ground to believe that the same are proceeds of criminal and other illegal activities; and 7. All other suspicious transactions/activities which can be reported without violating any law. The report shall provide the following minimum information: a. Name or names of the parties involved. b. A brief description of the transaction or transactions. c. Date or dates the transaction(s) occurred. d. Amount(s) involved in every transactions. cDHAES e. Such other relevant information which can be of help to the authorities should there be an investigation. SECTION 2. Deadline of Report . The report shall be submitted within five (5) banking days from the date of the transaction or from the date the bank/NBFI concerned gained/acquired information/knowledge that the transaction is being resorted to for the purpose of laundering proceeds of criminal or other illegal activities, or from the time the bank/NBFI had reasonably suspected that said transactions were entered into for the purpose of laundering proceeds of criminal and other illegal activities. ADCTac SECTION 3. Penalty for delayed submission . The report shall be considered a major report (Category A-2) and every delay in its submission shall be subject to a penalty of P1,200 per business day for EKBs/KBs; P600 for TBs and QBs; and P180 for RBs/CoopBanks and other NBFIs. This Circular shall take effect immediately. FOR THE MONETARY BOARD: (SGD.) ARMANDO L. SURATOS Officer-in-Charge