New Law Aims to Strengthen Anti-Money Laundering Regulations

Last February 15, 2013, the President signed into law Republic Act No. 10365 or the “Act Further Strengthening the Anti-Money Laundering Law.” True to its name, the third amending law to the Anti-Money Laundering Act (“AMLA”) gave it more teeth and strengthened the government’s ability to prevent and prosecute money laundering. The following discusses the new amendments to the AMLA.

Sections 1, 2 and 3

The first section of the amending law added the following to the list of covered persons under the AMLA. The amendment reads:

“Section 3(a). ‘Covered persons’, natural or juridical, refer to:

(4) jewelry dealers in precious metals, who, as a business, trade in precious metals, for transactions in excess of One million pesos (P1,000,000.00);

(5) jewelry dealers in precious stones, who, as a business, trade in precious stones, for transactions in excess of One million pesos (P1,000,000.00);

(6) company service providers which, as a business, provide any of the following services to third parties:

(i) acting as a formation agent of juridical persons;

(ii) acting as (or arranging for another person to act as) a director or corporate secretary of a company, a partner of a partnership, or a similar position in relation to other juridical persons;

(iii) providing a registered office, business address or accommodation, correspondence or administrative address for a company, a partnership or any other legal person or arrangement; and (iv) acting as (or arranging for another person to act as) a nominee shareholder for another person; and

(7) persons who provide any of the following services:

(i) managing of client money, securities or other assets;

(ii) management of bank, savings or securities accounts;

(iii) organization of contributions for the creation, operation or management of companies; and

(iv) creation, operation or management of juridical persons or arrangements, and buying and selling business entities.

Notwithstanding the foregoing, the term ‘covered persons’ shall exclude lawyers and accountants acting as independent legal professionals in relation to information concerning their clients or where disclosure of information would compromise client confidences or the attorney-client relationship: Provided, That these lawyers and accountants are authorized to practice in the Philippines and shall continue to be subject to the provisions of their respective codes of conduct and/or professional responsibility or any of its amendments.”

It is noteworthy that the amendment excluded lawyers and accountants acting as independent legal professionals with respect to information concerning their clients and privileged communication.

Section two amended the list of unlawful activities enumerated under the AMLA by increasing the number of predicate crimes constituting money laundering from 14 to 34. The following are the new predicate crimes:

Section 3(i). ‘Unlawful activity’ refers to any act or omission or series or combination thereof involving or having direct relation to the following:

(13) Terrorism and conspiracy to commit terrorism as defined and penalized under Sections 3 and 4 of Republic Act No. 9372;

(14) Financing of terrorism under Section 4 and offenses punishable under Sections 5, 6, 7 and 8 of Republic Act No. 10168, otherwise known as the Terrorism Financing Prevention and Suppression Act of 2012;

(15) Bribery under Articles 210, 211 and 211-A of the Revised Penal Code, as amended, and Corruption of Public Officers under Article 212 of the Revised Penal Code, as amended;

(16) Frauds and Illegal Exactions and Transactions under Articles 213, 214, 215 and 216 of the Revised Penal Code, as amended;

(17) Malversation of Public Funds and Property under Articles 217 and 222 of the Revised Penal Code, as amended;

(18) Forgeries and Counterfeiting under Articles 163, 166, 167, 168, 169 and 176 of the Revised Penal Code, as amended;

(19) Violations of Sections 4 to 6 of Republic Act No. 9208, otherwise known as the Anti-Trafficking in Persons Act of 2003;

(20) Violations of Sections 78 to 79 of Chapter IV, of Presidential Decree No. 705, otherwise known as the Revised Forestry Code of the Philippines, as amended;

(21) Violations of Sections 86 to 106 of Chapter VI, of Republic Act No. 8550, otherwise known as the Philippine Fisheries Code of 1998;

(22) Violations of Sections 101 to 107, and 110 of Republic Act No. 7942, otherwise known as the Philippine Mining Act of 1995;

(23) Violations of Section 27(c), (e), (f), (g) and (i), of Republic Act No. 9147, otherwise known as the Wildlife Resources Conservation and Protection Act;

(24) Violation of Section 7(b) of Republic Act No. 9072, otherwise known as the National Caves and Cave Resources Management Protection Act;

(25) Violation of Republic Act No. 6539, otherwise known as the Anti-Carnapping Act of 2002, as amended;

(26) Violations of Sections 1, 3 and 5 of Presidential Decree No. 1866, as amended, otherwise known as the decree Codifying the Laws on Illegal/Unlawful Possession, Manufacture, Dealing In, Acquisition or Disposition of Firearms, Ammunition or Explosives;

(27) Violation of Presidential Decree No. 1612, otherwise known as the Anti-Fencing Law;

(28) Violation of Section 6 of Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995, as amended by Republic Act No. 10022;

(29) Violation of Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines;

(30) Violation of Section 4 of Republic Act No. 9995, otherwise known as the Anti-Photo and Video Voyeurism Act of 2009;

(31) Violation of Section 4 of Republic Act No. 9775, otherwise known as the Anti-Child Pornography Act of 2009;

(32) Violations of Sections 5, 7, 8, 9, 10(c), (d) and (e), 11, 12 and 14 of Republic Act No. 7610, otherwise known as the Special Protection of Children Against Abuse, Exploitation and Discrimination;

(33) Fraudulent practices and other violations under Republic Act No. 8799, otherwise known as the Securities Regulation Code of 2000; and

(34) Felonies or offenses of a similar nature that are punishable under the penal laws of other countries.”

Aside from the first two amendments, new definitions were also provided in the amending law:

“Section 3(j). Precious metals’ shall mean gold, silver, platinum, palladium, rhodium, ruthenium, iridium and osmium. These include alloys of precious metals, solders and plating chemicals such as rhodium and palladium plating solutions and potassium gold cyanide and potassium silver cyanide and silver cyanide in salt solution.

(k) ‘Precious stones’ shall mean diamond, ruby, emerald, sapphire, opal, amethyst, beryl, topaz, and garnet that are used in jewelry making, including those formerly classified as semi-precious stones.”

Sections 4 and 5

Republic Act No. 10365 also amended the provisions of the AMLA on the ways by which money laundering may be committed as well as the manner of its prosecution. Firstly, money laundering may now be committed through the following:

“Section 4. Money Laundering Offense. – Money laundering is committed by any person who, knowing that any monetary instrument or property represents, involves, or relates to the proceeds of any unlawful activity:

(a) transacts said monetary instrument or property;

(b) converts, transfers, disposes of, moves, acquires, possesses or uses said monetary instrument or property;

(c) conceals or disguises the true nature, source, location, disposition, movement or ownership of or rights with respect to said monetary instrument or property;

(d) attempts or conspires to commit money laundering offenses referred to in paragraphs (a), (b) or (c);

(e) aids, abets, assists in or counsels the commission of the money laundering offenses referred to in paragraphs (a), (b) or (c) above; and

(f) performs or fails to perform any act as a result of which he facilitates the offense of money laundering referred to in paragraphs (a), (b) or (c) above.

Money laundering is also committed by any covered person who, knowing that a covered or suspicious transaction is required under this Act to be reported to the Anti-Money Laundering Council (AMLC), fails to do so.”

Parts (b), (c), (d), and (e) are new additions to the law. Hence, knowingly converting or concealing a monetary instrument, including an attempt thereof, and assisting in the commission of money-laundering now constitute the crime. Prior to the amendment, only the act of transacting the monetary instrument or property is made criminal in its attempted stage.

Secondly, the prosecution for the crime of money-laundering may now proceed simultaneously with the case relating to the unlawful activity. The amending law provided that both cases are now independent of each other.  Prior to the amendment, the case involving the unlawful activity was given precedence.

Sections 6 and 8

The Anti­-Money Laundering Council (“AMLC”) was also a given new function under the amending law. Section 7 now reads:

“Section 7. Creation of Anti-Money Laundering Council (AMLC). – … The AMLC shall act unanimously in the discharge of its functions as defined hereunder:

(12) to require the Land Registration Authority and all its Registries of Deeds to submit to the AMLC, reports on all real estate transactions involving an amount in excess of Five hundred thousand pesos (P500,000.00) within fifteen (15) days from the date of registration of the transaction, in a form to be prescribed by the AMLC. The AMLC may also require the Land Registration Authority and all its Registries of Deeds to submit copies of relevant documents of all real estate transactions.”

In addition to this, the power of the AMLC to apply for a freeze order before the Court of Appeals now includes monetary instruments or properties alleged to be laundered as well as instrumentalities used in or intended for use in any unlawful activity. Prior to the amendment, the AMLC may obtain a freeze order only for monetary instruments or properties alleged to be the proceeds of an unlawful activity.

More on the freeze order, R.A. No. 10365 also extended its maximum effectiveness period to six months provided that if no case is filed against the person whose account has been frozen within the period determined by the court, the freeze order will be automatically lifted. Note that the freeze order was previously effective only for 20 days unless extended by the court. This new rule, however, shall not apply to cases already pending before the courts.

Section 7

The provisions of the amending law on prevention of money laundering include the following amendments:

(1)  Covered persons must report covered and suspicious transactions to the AMLA within five working days from the occurrence thereof, unless the AMLC prescribes a different period not exceeding 15 working days. Before, the maximum period provided by law was 10 days.

(2)  Lawyers and accountants acting as independent legal professionals are exempt from the reporting requirement if the relevant information was obtained in circumstances where they are subject to professional secrecy or legal professional privilege. This is a new provision.

(3)  Covered persons as well as their officers and employers are prohibited from communicating to any person or entity including the media the transactions about to be reported to the AMLC. Prior to the amendment, the confidentiality clause applied only to transactions already reported to the AMLC.

Sections 9 and 10

These sections amended the penalties under the AMLA and made them harsher and more refined. Firstly, section nine provided specific rules on the penalty of forfeiture unlike before when the law merely made reference to the Revised Rules of Court on civil forfeiture.

With the new amendments, other monetary instruments or properties having an equivalent value to that of the monetary instrument or property found to be related in any way to unlawful activity or a money laundering offense may now be forfeited as an alternative. This arises when the latter, with due diligence, (1) cannot be located, or (2) it has been substantially altered, destroyed, diminished in value or otherwise rendered worthless by any act or omission, or (3) it has been concealed , removed, converted or otherwise transferred, or (4) it is located outside the Philippines or has been placed or brought outside the jurisdiction of the court, or (5)  it has been commingled with other monetary instrument 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.

If no other monetary instrument or property may be located, the court can order the convicted offender to pay an amount equal to the value of the monetary instrument or property instead.

Secondly, as regards the penal provisions of the AMLA, Section 14 has been amended to read as follows:

“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), (b), (c) and (d) 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(e) and (f) 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 the last paragraph of Section 4 of this Act.

(e) The penalty of imprisonment ranging from four (4) to seven (7) years and a fine corresponding to not more than two hundred percent (200%) of the value of the monetary instrument or property laundered shall be imposed upon the covered person, its directors, officers or pesonnel who knowingly participated in the commission of the crime of money laundering.

(f) Imposition of Administrative Sanctions. The imposition of the administrative sanctions shall be without prejudice to the filing of criminal charges against the persons responsible for the violation.

After due notice and hearing, the AMLC shall, at its discretion, impose sanctions, including monetary penalties, warning or reprimand, upon any covered person, its directors, officers, employees or any other person for the violation of this Act, its implementing rules and regulations, or for failure or refusal to comply with AMLC orders, resolutions and other issuances. Such monetary penalties shall be in amounts as may be determined by the AMLC to be appropriate, which shall not be more than Five hundred thousand Philippine pesos (P500,000.00) per violation.

The AMLC may promulgate rules on fines and penalties taking into consideration the attendant circumstances, such as the nature and gravity of the violation or irregularity.

(g) The provision of this law shall not be construed or implemented in a manner that will discriminate against certain customer types, such as politically-exposed persons, as well as their relatives, or against a certain religion, race or ethnic origin, or such other attributes or profiles when used as the only basis to deny these persons access to the services provided by the covered persons. Whenever a bank, or quasi-bank, financial institution or whenever any person or entity commits said discriminatory act, the person or persons responsible for such violation shall be subject to sanctions as may be deemed appropriate by their respective regulators.”

While the amending law did not increase the penalties already provided for the crime of money laundering, it nevertheless introduced penal sanctions for covered persons, its directors, officers and personnel who knowingly participated in the commission of the crime. Administrative sanctions are now also imposable upon persons responsible for the violation of the AMLA.

Significantly too, the last provision of section 14 is not a penalty but a qualification. Although new penalties have been introduced, nothing in section 14 should be construed as favoring discrimination against certain customer types. It appears that the law is gearing towards a policy of non-discrimination.

Section 11

The last provision of R.A. No. 10365 added two new provisions to the AMLA:

“Section. 20. Non-intervention in the Bureau of Internal Revenue (BIR) Operations. – Nothing contained in this Act nor in related antecedent laws or existing agreements shall be construed to allow the AMLC to participate in any manner in the operations of the BIR.”

Section. 21. The authority to inquire into or examine the main account and the related accounts shall comply with the requirements of Article III, Sections 2 and 3 of the 1987 Constitution, which are hereby incorporated by reference. Likewise, the constitutional injunction against ex post facto laws and bills of attainder shall be respected in the implementation of this Act.”

R. A. No. 10365 introduced major amendments to the AMLA and made it more aggressive in tackling money laundering. Whether these measures will actually address the problem and plug the loopholes of the earlier laws remains to be seen.

(Teng and Tanya Justine R. Baldovino co-authored this post.)

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