LOCATION: SENATE OF THE PHILIPPINES
SENATOR CHIZ ESCUDERO (CHIZ): We are ready, Mr. President.
SENATOR KOKO PIMENTEL (KP): Session is resumed. The sponsor, senator, has a pending motion to be recognized. So Senator Escudero is recognized and Senator Drilon to interpellate.
SENATOR FRANKLIN DRILON (FD): Thank you, Mr. President. Will the gentleman sponsor yield to few questions in relation to this matter?
CHIZ: Willingly Mr. President, your Honor. But as a preface, we have been discussing with Senator (Leila) De Lima. The point she raised in her interpellation as well as in discussions, with the staff of Senator Drilon, and we have made several adjustments and amendments to the committee report already, and we will be answering based on those adjustments Mr. President, your Honor. And I will inform the good senator as we go along depending on the provisions he will ask. Thank you, Mr. President. Thank you, your Honor.
FD: Thank you Mr. President. Mr. President, to start with, for the record, why are we amending today the Anti-Money Laundering Act? For the record.
CHIZ: Because Mr. President, we met with representatives of the Asia Pacific Group, which is under FATF (Financial Action Task Force), and they made several observations and recommendations in relation to our countries compliance with the APG and FATF Rules and Regulations, hopefully in time for their June meeting of 2017. We took note of those suggestions and recommendations Mr. President, your Honor. Hence, the proposed amendment to the existing AML Law.
FD: If I get it correctly, the good sponsor here, he was mentioning that he met with the Asia Pacific Group and there were certain shortcomings which the FATF would want us to address. Is that correct?
CHIZ: That is correct Mr. President, your Honor. In fact, one of those meetings was held right here in the Senate, in the Senate President’s Conference Room.
FD: Alright. May I know what are these gaps in the law that the Asia Pacific Group would want us to address?
CHIZ: Mr. President, your Honor, number one would be the coverage of casinos and allied casino businesses within the point of view of AMLC. Number two Mr. President, your Honor, the threshold of $10,000, andor, Php500,000 that any other threshold exceeding this amount would be as if there is no threshold in their point of view. The coverage of real estate brokers Mr. President, your Honor, and the inclusion of certain predicate offenses that we enumerated in the proposed bill.
FD: Just to make the record clear. First, there is a proposed amendment on covered persons. Is that correct? When we said casinos?
CHIZ: Casinos and real estate brokers.
FD: Casinos and real estate brokers.
CHIZ: Yes. That is correct.
FD: Now, are there any other persons who would be covered in the amendments other than casinos and real estate developers, brokers or sales agents?
CHIZ: That’s the limit of their recommendation, Mr. President, your Honor. Only casinos and real estate brokers.
FD: Now, in the proposed, in the bill, what other persons we wish to cover, other than casinos and real estate developers, brokers and agents?
CHIZ: Mr. President, part of the amendment would be money service business, or money transfer, which is part of the old law. However, it was only sought to be clarified by a separate enumeration, trust and company service providers, but clarifying only the provisions as well because it was originally in the original AML Law. Dealers in precious stones, jewels, and/or precious metals also were in the previous law but clarified it, Mr. President, your Honor. Dealers in high-value items, we added this Mr. President, your Honor because it was discussed in one of the technical working group meetings that, we discussed for example the Rolex watch, Mr. President, your Honor. The value of the Rolex watch is in the brand, not in the jewels found in the watch. And that therefore, if the value exceeds a certain amount, then it should be covered as well, because not everything is based on the amount of jewelry in a particular good that is being sold in the country. That’s the only thing Mr. President actually that we added, in addition to the clarifications I just mentioned.
FD: So again, just to make it very clear, the proposed amendment will include new covered persons, namely dealers of high-value items, real estate developers and casinos. Is that correct Mr. President?
CHIZ: Mr. President, to clarify, the recommendation of FATF which is not in the original law would be real estate developers and casinos.
CHIZ: The other enumerations we simply clarified it. The only new covered person that came from your committee would be the dealers of high-value items or goods which we defined as anything in excess of Php1-M.
FD: Alright. So the FATF wanted real estate developers and casinos to be included as in the definition of covered persons, the committee in its judgment proposes the inclusion of the dealers of high-value items or goods. And other than this, the inclusion of money service business or money transfer companies, and trust and service providers, the dealers of precious stones are already in the law but the committee report would try to clarify. Is that correct?
CHIZ: That is correct Mr. President, your Honor.
FD: Now, what about covered transactions? What are the proposed amendments on covered transactions?
CHIZ: Mr. President, with our meeting with the APG Group, APG representatives rather, it was made clear to us, that they were only concerned with cash transactions. With the exception of certain entities that deal with banking, and/or other notes. Therefore, the amendment in this particular provision is, we clarified. Only cash transactions will be covered and need to be reported. Those that need to report other than cash transactions would be those supervised and regulated by the BSP (Bangko Sentral ng Pilipinas) and casinos that used other instruments with respect to their transactions. For example Mr. President, your Honor, if a person buys a piece of a real estate, and he/she pays using a check…
CHIZ: The buyer uses a check.
CHIZ: To pay. That is not a covered transaction under our proposed measure. Under the previous law, anything in excess of 500,000 would have to be reported. In our proposed amendment, only when you pay in cash and you are a covered person should you actually report. And only that time will it be covered transaction. If a check is used, that should be covered already by the bank concerned that issued the check, or owns the check.
FD: So that in that case, if it’s a check that is used for the payment of the transaction, the real estate developer would have no obligation to report because theoretically, it is the bank who is supposed to report a covered transaction or a suspicious transaction?
CHIZ: That is correct, Mr. President, your Honor, because we wanted to relieve them of that burden of deciding and evaluating these matters. When in truth and in fact, banks or supervised institutions by the BSP are required to have a certain standard or level of diligence with respect to those transactions. Besides, they’re used to doing it already under the existing law.
FD: Alright. Now in other cases where the threshold, what is the threshold for other transactions which may be deemed covered?
CHIZ: We made the threshold uniform, Mr. President, you honor. There is only one mention of threshold. Now, only Php500,000. Because as I said earlier, any amount in excess of Php500,000 will be as if no threshold from the point of view of the APG and the FATF.
FD: Yes. Now, under the current law the amount in excess of 500,000 within one working day is considered a covered transaction which will prompt any court. Now, the one-banking day rule has been removed. What is the intention? In other words, it is no longer a requirement in the Php500,000 deposit be made in one-banking day?
CHIZ: It was removed, Mr. President because the reckoning point would be per transaction. No single transaction should exceed Php500,000. Otherwise, reportorial requirements would kick in.
FD: So that if he deposits in one-banking day, Php100,000 five times, is that a covered transaction?
CHIZ: No ,Mr. President, your Honor.
FD: No. And therefore, no reporting would be required? Are we certain about that?
CHIZ: That is correct Mr. President, your Honor. However, the bank can identify it as a suspicious transaction if that is how you do your business on a daily, as a matter of course, rather. It may be identified as a suspicious transaction or attempt to circumvent the provisions of the AMLC Law.
FD: If it’s not a suspicious transaction, if depositing Php100,000 per transaction is in the normal course of your business.
CHIZ: Exactly Mr. President, your Honor.
FD: Now, if you deposited Php100,000 suddenly four times in one day or four times in one day, is that a suspicious transaction?
CHIZ: Not automatically Mr. President, your Honor. The law requires that, if for example, banking institution had risks analysis in identifying what a suspicious transaction is or will be. But it does not necessarily mean that it is automatically tagged as a suspicious transaction; simply because it is not in the ordinary course of your day to day banking transactions.
FD: We just want all of these opinions on record so that we can really determine whether the banks are complying on their obligations under the law. Now this threshold of Php500,000, the Anti-Money Laundering Council is being empowered to set or amend these thresholds?
CHIZ: Yes Mr. President, your honor. That is not, I will clarify Mr. President, your Honor, that is not an APG, FATF.
FD: That is correct.
CHIZ: That came from your committee already because every once in a while, they come to us and we have to meet, agree and both pass another law in compliance, so we tried to establish a guideline by which adjustments can be made without need of congressional action.
FD: Setting the amounts is a matter of law, when we set Php500,000 as the threshold for reporting and in excess of Php100,000 as a basis for flagging a suspicion transaction. These are an amount which is set in exercise of function as legislators. Would the gentleman agree with that?
CHIZ: We agree Mr. President, your Honor and we submit with the proper time. Either the gentleman can propose the amendment or we can do it ourselves Mr. President, your Honor. It was simply a facility that we try to propose but upon again, consulting with other members of the Senate. Indeed, or some constitutional bars and restrictions on us delegating this power to AMLC.
FD: Well and just for the record, we are willing to examine the proposition that will give to the AMLC the power provided appropriate standards are identified in the law. So that there will be no abuses of such delegated authority.
CHIZ: We will propose Mr. President, your Honor. Such standard of the gentleman would be amenable to it, but again just to clarify this is not one of the recommendations of APG-FATF.
FD: Very well, as we said earlier under the present law a covered transaction is a transaction in cash or other equivalent monitoring instrument involving a total amount in excess of Php500,000 within one banking day. And we have deleted one banking day, but when it is a suspicious transaction account the same standard would be followed in the reporting requirement of bank account.
CHIZ: Yes Mr. President, your Honor but to clarify the other monetary equivalent, monetary instrument only applies to agencies, to entities, to corporations supervised by the BSP and casinos. Not to everyone else, for example; it is not applied to real estate brokers. It is not applied to dealers, dealers in precious metals, in high value items. It only applies to those regulated or supervised by the BSP and casino.
FD: Alright and in certain instances, transactions only transactions in cash would be deemed as a common transaction as in the case of the real estate developers.
CHIZ: That is correct, Mr. President.
FD: What is the rational for this Mr. President, the FATF is providing for thresholds as far as we know we use the term financial transactions and did not limit the same to cash transactions.
CHIZ: We clarify this with them Mr. President, your Honor in fact even those, even the members of the Senate who participated in the amendments earlier, were shocked to hear this form APG and FATF that they were actually just concerned with cash transaction – except for, as I said banks and all casinos. They usually use monetary instruments. I asked that of them, actually more than three times, over and over just to clarify it. And for my point of view Mr. President your honor this is less burdensome on the part of covered persons if we introduce this dichotomy between purely cash and those using the equivalent monetary instruments.
FD: I just want to swipe into the record in relation to this.
CHIZ: For the record Mr. President your Honor, this is compliant with APG, FATF this dichotomy even if we make it to lighter for some covered persons.
FD: Now what is the threshold in so far as the casinos are concerned in terms of the amount?
CHIZ: Same amount Mr. President, your Honor.
FD: How much?
CHIZ: Php500,000 or its equivalent.
FD: We leave the FATF, correct me if I am wrong, insufficiently the threshold of the FATF €3,000? In other words, transactions €100 or €3,000 in equivalent to local currency would put it at a level of a reporting requirement?
CHIZ: The €3,000 requirement Mr. President, your Jonor is only for the CDD or customer due diligence.
CHIZ: CDD, Customer Due Diligence that anyone who bets in excess CDD or Customer Due Diligence they should know who the bettor or player is. But for reportorial purposes it is still $10,000 or its equivalent. That’s what they use in other jurisdiction Mr. President. But here we only have one threshold, Php500,000.
FD: Can the good sponsor spread into the record, how that will work, in terms of the obligation to report? If I got the sponsor correctly you said if the single bet is Php500,000 it would be a covered transaction?
CHIZ: If it is in excess of Php500,000.
FD: In excess of Php500,000. But under the, is it correct that under the FATF standard, any transaction Php160,000 is a covered transaction which should trigger a report?
CHIZ: Mr. President, your Honor, each individual bet for example in a baccarat table, if it exceeds Php500,000 it is not a covered transaction yet. It is when they exchange the chips and the exchange of chips exceeds 500,000 then that is the report that we will have to make. Kasi may naglalaro ho ng casino isang buong araw. Gagawa siya ng pusta one million, two million, hindi pa ho covered.
FD: Hindi pa covered iyan? It is when the cash exchange.
CHIZ: Yes that it exceeds Php500,000 that’s when it will trigger report Mr. President, your Honor.
KP: Senator Recto wishes to intervene.
SENATOR RALPH RECTO (RR): Yes with the permission of the two gentlemen.
KP: Senator Recto is recognized.
RR: That it should be that when a brother comes to the casino and he brings the cash to exchange for chips. Again, ang exchange niya kapag kumuha siya ng chip doon pa lang.
CHIZ: Kumbaga matutunan natin sa cage. Noong nagte-testify dito iyong mga nasa casino, it is the cage transactions that need to be reported so when it gives cash in exchange for chips that will be reported. If he exchanges his chips for cash, that will be reported to.
FD: Or other monetary instruments.
CHIZ: Or other monetary instruments, that is correct. Hindi iyon kada game. So in other words to clarify your Honor, every cage transaction. I am using cage, technical iyon.
FD: Yes, yes.
CHIZ: Every cage transaction in excess of Php500,000 will trigger the reportorial requirement.
RR: Including when he exchanges chips for cash?
RR: What if he went to the casino and he paid through check?
CHIZ: Monetary instrument covers casinos Mr. President, your Honor. Hindi lang siya cash.
RR: That is reported?
CHIZ: That will be reported to.
RR: So if he exchanges his chips for a check that will also be reported?
CHIZ: That will also be reported because the extension of cash transaction Mr. President, your honor as we enumerated in the proposed dichotomy would be entity supervised by the BSP and casinos.
RR: So if it is a supervised by the BSP?
CHIZ: Like money changers, banks, anyone who gives, who receives a check should be reported.
RR: So hindi lang cash iyon pati tseke.
CHIZ: Hindi lang cash pati tseke.
RR: Thank you, thank you for that answer.
CHIZ: Including wire transfers your honor, because usually wire transfers used for casinos.
FD: Thank you sponsor. I will just go for one specific example and I’ll ask the question whether it is a covered transaction, which would trigger a report; either a regular report or a suspicious transaction report. Either a customer or the cage would have Php300,000 in cash exchange for chips.
FD: For chips, what is the obligation of the casino?
CHIZ: He is not obliged to report it but the proposed bill Mr. President, your Honor requires that all covered personnel including casinos that a CDD, Customer Due Diligence.
FD: So it is not only amount? But on the CDD?
CHIZ: The fact that he is a covered person Mr. President your honor requires him to have CDD. Equivalent of that is what they know call the know-your-client tool.
FD: I know.
CHIZ: They are not changing it.
FD: I have no problems with whatever amounts you place it. I was just interested in making sure that this bill that we are working on we will consider as compliant with the standards set worth. That is what interesting; from what I see the FATF recommendation is that the threshold is € 3,000. That is roughly equivalent to Php160,000 as a covered transaction in the casino. So that if, so you have interpreted it to me that this is a transaction in the cage. So that if I surrender amounts the standard will be, is it in the threshold or not in the threshold? There are two thresholds that I see one is the FATF which is roughly Php160,000 and the proposal found in the bill that we are debating on Php500,000. So I want to swipe into the record that if the player goes to the cage and classes purchases chips to the amount of Php300,000. The Php300,000 is within the threshold amount imposed by the FATF. But that is outside of the threshold above we have indicated in the bill. So what is the obligation of the casino?
CHIZ: Mr. President your Honor, may I clarify, my technical team here. As I said earlier the CDD threshold is €3,000 euro roughly Php160,000. That is the FATF, APG standard. In the proposed bill we seek to use only one standard. So the standard for, the reportorial standard, we also apply to the CDD standard, which is in excess of what the FATF and APG actually require. Just to clarify where we are coming.
FD: But precisely if it is in excess of what the FATF requires then you will come back to us and say, your amendment is non compliant.
CHIZ: No we are over compliant Mr. President, your Honor. Mr. President, because the CDD.
FD: Just to put my point across and I will accept your information. I am not, I am not disputing the amount. I am just interested Mr. President, what is the obligation of the casino. In so far a casino is concerned, what is the threshold, assuming that we pass the bill in the form that you have raised us that the gentleman has reported out. If the amount is below Php500,000 there is no reporting requirement if the amount is Php500,000 and above there is a reporting requirement. However the FATF in its recommendation said that the threshold amount is €3,000 or roughly Php160,000. My question is just to place of record, I am not disputing, whatever you. Whatever is the proposal I am just interested in making sure that what we are doing, spending time is in compliance with FATF standard.
CHIZ: Mr. President, your Honor. In other jurisdictions they have two thresholds amounts, $10,000 for reportorial obligations of covered person and €3,000 as you cited earlier for the CDD rule to apply. In the Philippines, as we are proposing Mr. President your honor. We are only proposing one threshold for both Php500,000; although, the FATF recommendation is only €3,000 for CDD. We we don’t have a threshold for CDD. In fact, any customer covered person we are requiring them to do CDD, without any threshold. So, the CDD over compliant, with what the FATF was requiring. Mr. President, FATF simply recommends that if the transaction exceeds €3,000 you have to have CDD on him. In the Philippines what we’re proposing is regardless of the transaction if you are a covered person you should have CDD on all of your customers.
FD: Mr. President, I submit this for further deliberation by the sponsor of the technical staff. But, for the record, I believe that we are not compliant. The purpose of this bill is to comply because from what we understand the threshold amount is Php500,000. If the transaction indicates is less than Php500,000 under this bill once it passes into law. Under this bill there is no reporting requirements because there is less than Php500,000. But if it exceeds Php160,000 then under the FATF recommendation it should be a covered transaction. Now, I leaved that on the record and for the sponsor to look at it and study it again. If the sponsors are incompliant we will accept that as the rule and I hope that it is accepted by the FATF but if not, then we have to go back again and debate on it again. That’s all my point. I’m not in love with either of Php160,000 or Php500,000. I just want to be clarified.
CHIZ: We will revisit, Mr. President your Honor and clarify with the representative of the FATF and clarify the matter with the good senator as well, Mr. President.
FD: On section 3, Mr. President of the bill of the measure which is found on page 3, line 31 which proposes to amend Section 3 D-1. The suspicious transaction is defined as regardless of the amount involved where the covered person suspects or has reasonable ground to suspect that the monetary instrument of property proceeds of or is any related to predicate offense. Under this act that amount is bound to be or being has being committed or and this is more wearisome, Mr. President – or a suspicious transaction is one where there are circumstances determined to be suspicious by the Anti-Money Laundering Council (AMLC). It is suspicious transaction because it is so declared by the Anti-Money Laundering Council as suspicious. It should be a little wearisome and a little vague. What is a suspicious transaction? The answer is where that is considered suspicious by the AMLC. Isn’t that a little vague, Mr. President and therefore could be attack because it lacks a comprehensible under the common intelligence would require an interpretation what it all means. I would repeat, the way I read the proposal is that a suspicious transaction is a transactions which are determined to be suspicious by the AMLC.
CHIZ: We agree, Mr. President, your Honor. That is one of the topics of the discussion with Senator De Lima when she interpellated this representation. And in the amendments we are making your honor. We will be deleting number 7.
FD: Alright, thank you
CHIZ: Isa po iyan sa mga suggestions ni Senator De Lima.
FD: Thank you, Mr. President. I’m glad to hear that from the good sponsor. Now, predicate offenses under section 3-1 of the present law is ought to be amended by including other crimes or offenses as predicate offenses. Now, if the amendment simple enumerates the laws the violation of which will be considered as a predicate offense? I’m a little bit concerned because one of those laws that one of the laws enumerated here is the National Internal Revenue Code. Any violation of the internal revenue code would be considered as a predicate offense. Filing a tax returns which could be the subject of a audit or whatever or there were entries which are disallowed for a tax refund in a broad sense that is a violation of the National Internal Revenue Code. Will now that be considered as a predicate offense which will trigger the authority of the AMLC to go to this court of appeals and petition for a freeze of the account of the tax payer?
CHIZ: Mr. President, your Honor, one of the enumerations of the FATF-APG and I will used exactly the words they used, “fact’s crimes related to direct and indirect taxes, however, Mr. President, your Honor in so far as your committee is concerned, again I prefixed our interpellation by the fact that we are making amendments to the bill we will be specifying. In fact, we already have the versions specifying which particular sections only of the laws enumerated will be considered as a predicate offense and not the entire law including the declaration of the policy. We enumerated already in the proposed amendments the exact specific provisions. Now in so far as the NRRC is concerned it would only cover in our proposed amendment by your committee Mr. President, your Honor. Sections 254 -265 only and I can give the gentleman the enumeration of the specific titles of each section. Hindi po iyong buong NIRC.
FD: This is a very crucial provision. Will the gentleman kindly provide us with the amendment that is proposed on Section 4 of the bill so that we can closely examine at? As we said, this will trigger the powers to examine and even to freeze. This is very critical that’s why need the coverage of the predicate offenses so that we will be able to suggest amendments if we do not agree.
CHIZ: We will do that, Mr. President.
FD: So, we’ll just await that submission and suspend our interpellation to in so far as Section 4 of the bill is concerned if that is in order.
CHIZ: Yes, Mr. President. In fact they have a copy here that I can give it to him after the gentleman’s interpellation
FD: Yes, we will need that specially because under Section 10 of the proposed measure. A freeze order is authorized against any monetary instrument property that is quote in any way related to any predicate offense. So, imagine how broad this is, Mr. President. I would repeat. It opens as a freeze order. Any monetary instrument of property that is quote in any way related to a predicate offense. The predicate offense is so broad that then any relation to that predicate offense will subject to the powers to freeze and settle. That is why we are very concerned about the predicate offenses that are enumerated because, otherwise we must be careful about this over breadth doctrine will apply here. That’s why it is so broad that it becomes constitutionally inferior.
CHIZ: Mr. President, your Honor my apologies to the gentlemen. I listened intently to his suggestions while we were talking on the side and that is one of your committee’s proposed amendments to remove the motu propio power of the AMLC to issue a freeze order for 30 days given the (inaudible0 in due process hindrances that it may face. And also because, Mr. President, your Honor this is a recommendation any way.
FD: And for that matter, Mr. President. Talking about that, what are the predicate offenses as recommended by the FATF?
CHIZ: If I may spread into a record your honor: 1) participation in an organized criminal group and racketeering; 2) terrorism including terrorist financing; 3) trafficking in human beings and migrant smugglings; 4) sexual exploitation including sexualize exploitation of children 5) elicit trafficking in narcotic drugs and psycho tropics substances, elicit arms trafficking, elicit trafficking in stolen or rather goods including bribery, fraud, counterfeiting currency, counterfeiting of products. Environmental crime, murder, bodily injury, kidnapping, illegal restraining and hostage taking. Sorry, I missed the numbers: 15) robbery or theft; 16) smuggling including in relations to customs, excise duties and taxes. Tax crimes related to direct taxes. Extortion, perjury, piracy and insider trading and market manipulation. That is the extent of the list that they gave us, Mr. President, your Honor.
FD: Our custom really new predicate crimes that the FATF now requires to be included?
CHIZ: Yes, Mr. President, that’s why we embodied that proposed bill. Bago lamang po ito na listahan nila. Mr. President, your honor this was given in 2012 but some adjustments were made after that.
FD: That’s correct.
CHIZ: And we are simply adapting in the propose measure they now recommended. But there is a catch-all-phrase, Mr. President, if I may finish the enumeration. And if I may quote, “when deciding on the range of offenses covered as predicate offenses under each of the categories listed above: each country may decide in accordance with each domestic law”. How will it define with those offenses and the nature of any particular elements of those offenses that make them serious offenses.
FD: Anyway, Mr. President we would be awaiting the proposed amendment of the Gentleman and as we earlier manifested once a copy of the précised amendment that will be submitted to plenary; we will see if there are still doubts in our mind and we can ask questions on the proposed amendment at that point.
CHIZ: We will do that Mr. President, your Honor and we eagerly await the suggestions of the good gentleman on how to improve the bill even further.
FD: Thank you Mr. President. Next question Mr. President, can a private person file a complaint with the AMLC?
CHIZ: Yes, Mr. President, your Honor according to the technical team here.
FD: I’m sorry.
CHIZ: Yes Mr. President, your Honor according to the technical team.
FD: But where is that in the bill, Mr. President?
CHIZ: It’s not in the law or in the bill Mr. President your Honor, according to the technical team behind me that’s what the AMLC has been doing since it was created.
FD: So anybody can go up to the AMLC and complain that Senator Drilon committed a predicate offense and under the bill proposed the AMLC would have the authority to freeze my accounts?
CHIZ: Mr. President, your Honor, yes anyone can just complain but it has to be under oath very much like how when you file complaints in the Office of the Ombudsman. But it’s not in the law Mr. President, your Honor, it is how AMLC has been transacting or doing its business when it was created. But Mr. President to continue, it does not include a freeze order and as I said we will moving that provision if a toll will trigger at an investigation of AMLC, if a toll. But not a freeze not anything further than an investigation.
FD: While it trigger a petition for a freeze order filed in the Court of Appeals.
CHIZ: Only after finding probable cause Mr. President they can file a petition with a Court of Appeals. We will be removing rather, it was contained in the originally proposed bill on the motu propio freeze order of the AMLC.
FD: Mr. President, this is a very sensitive issue it involves properties which could be subjected to restraint and therefore we would want that the law is very clear so that every citizen is informed of what the law is. Now, the gentleman said on the record that AMLC has been entertaining complaints from the private sector and on this basis probably investigate; is this proper Mr. Chairman? Mr. President? It appears that there is no authority.
CHIZ: Mr. President, your Honor, according to them again how they have been doing things; a complaint may be filed and that will trigger the AMLC to perhaps investigate it. In fact, in the past they have even used media reports as a trigger to investigate. According to them, Mr. President your Honor the legal leg they are standing on and I am not necessarily agreeing with them. The legal leg they are standing on is the power of the AMLC to investigate even without the number seven earlier in the original law the power of AMLC to investigate suspicious accounts. Iyon ‘yung basis daw nila na kapag may nag reklamo o ‘pag may news or media reports na may ganito, they investigate it.
FD: Well, at least it’s according to record if somebody challenges this authority that matter is part of our debate today. Now, the bill likewise empowers the AMLC to investigate issues of subpoenas and administer oath for more effective and efficient production of witnesses and documents. First, would a bank deposit can be the subject of a subpoena?
CHIZ: Mr. President, can we get that again?
FD: The proposed measure would grant to the Anti-Money Laundering Council the power to issue subpoena.
CHIZ: That is correct, Mr. President.
FD: Now, the question that we want to put on record is: will the power to issue subpoena into the power to subpoena my bank accounts.
CHIZ: According to them Mr. President, no.
FD: Is there anything here in the law which says that Mr. President? Well, as far as I read the proposed measure is simply says power to issue subpoenas. There is no limitation in other words, the question is: it’s too broad in my view it does not be interpreted as exception to the Bank Secrecy Law.
CHIZ: We agree Mr. President, your Honor according to them it is still covered by the Bank Secrecy Law and therefore would not be covered by the subpoena powers and we would be open to clarifying this provision, Mr. President, to make sure that there is no overbreadth and that there will be no abuse of this particular provision, in so far as directly issuing a subpoena to produce bank records of any person that might issue a subpoena against.
FD: So we will await that amendment if the good sponsor accepts that this is a broad power granted to the AMLC and the proposed measure.
CHIZ: Mr. President, just to clarify, in our proposed amendments to be made that is not yet a part of it the one I will give the good Gentleman because he will still craft that provision.
FD: Alright as long as there is an agreement. Because this power to issue a subpoena in the view of this representation, Mr. President is akin to a search warrant.
CHIZ: We agree Mr. President, your Honor, we will craft the corresponding amendment to clarify this particular issue or matter. But to be fair to the AMLC, that is not their intention as well being to require the production of bank records or bank accounts.
FD: Alright, as we said that is not the intention, well and good. We are confident that intention would be reflected in the amendment that the good gentleman has promised. Now my set of questions is in relation to the freeze order, the authority to issue freeze orders on the part of AMLC which the Gentleman said will be subject to amendment so…
CHIZ: Tatanggalin na po namin ‘yun, Mr. President. The person that I will be giving the gentleman after this interpellation he will see that it is no longer there. The only difference Mr. President in our proposed amendment is they can directly file a petition and not necessarily always through the Solicitor General’s office. It has to be issued by a court.
FD: I have no problems with that the AMLC be directly authorized to directly file the petition not going through Solicitor General that is amended which is most logical Mr. President and no longer objection to that. Now on page 9, we have added as a power of the Anti-Money Laundering Council to check compliance with this Act by covered persons not under any supervising authority for this person, Mr. President, for the record.
CHIZ: Mr. President, yes we added this because for example, it is only in the proposed amendment to the money changers for example, Mr. President, before was not specifically supervised by the BSP. You are only required to register but added to the proposed BSP amendments we are adding money changers as one of the supervised entities of the BSP. But we don’t know yet that will be passed. So if there’s no supervising authority for a particular covered person such as for example, dealers in high-value goods; the AMLC can check its compliance directly given that there is no supervising authority it can coordinate with.
FD: Alright but those particular businesses are covered as covered persons; money service business or money business companies. There are already covered.
CHIZ: Yes, Mr. President.
FD: Dealers of precious stones, jewelries, company services.
FD: Dealers of high value items, real estate developers, who would like to know who are the persons not covered of not any supervising authority, who AMLC can include under its wings?
CHIZ: We will give you the list Mr. President, specifically but according to them right now, one would be those dealing with monetary instruments until the amendment is passed, they are covered Mr. President your honor but they have no supervising entity yet. In fact the Bangko Sentral simply requires them to register but under the proposed bill in BSP’s chartered amendments they will clearly now under the supervision of the BSP. But that is not law yet.
FD: OK, let’s give specific examples, money changers they are covered as covered person?
CHIZ: Yes Mr. President.
FD: If they are covered person, they are not among those in lines 10 and 11 on page 9?
CHIZ: Mr. President, your Honor you referring to line 19 and 20, to check compliance by covered persons?
FD: My copy says page 9, lines 10 and 11: ‘the power of the AMLC to check compliance with this Act by covered persons not under any supervising authority’. Just for clarify, who are these persons?
CHIZ: The gentleman is correct Mr. President, your Honor. Money changers would fall under this because they are not yet specifically under the supervisory authority of the BSP.
FD: But they are covered persons?
CHIZ: Covered person.
FD: So if there are covered person the AMLC would have that authority.
CHIZ: Mr. President, your Honor, usually the AMLC merely coordinates with the supervising authority to ask for compliance of entities they are supervising. But if there is no supervising authority, then the AMLC directly will monitor their compliance. That’s the reason behind this provision.
FD: Example of non-covered person.
CHIZ: Non-covered. (inaudible)
FD: The question should be: who are covered persons, who are not under any supervising authority?
CHIZ: Numbers 7, 8, and 9, Mr. President, your Honor, in the enumeration of covered persons namely: dealers in precious stones, jewels and precious metals wala po silang supervising authority. Dealers in high-value items or goods wala rin po silang specific supervising authority. Real estate developers, according to them too, wala rin pong iisang supervising authority sa kanila. They’re required to register like money lenders or money traders but they are not supervised by any specific government agency or supervising authority.
FD: Alright. Can we go to page 12, Mr. President? We note that line 19 which refers to the petition to that the filed with the court, Court of Appeals. The phrase, by the AMLC is bracketed which appears to me to delete the authority of the AMLC exclusively to file a petition with the court. It is in bracket, for the record, is it the intention to authorize other petitioners?
CHIZ: No, Mr. President, you Honor.
FD: So, why are we deleting, by the AMLC, Mr. President?
CHIZ: Mr. President, your honor, this is part of what we are clarifying. Earlier, I mentioned to the good senator that we are authorizing the AMLC to file directly. Because this section, Mr. President, and that deletion were in line with the motu proprio freeze order – power to issue freeze order by the AMLC – which we are removing. So, we are reverting to this particular, retaining rather this particular provision and adding directly filed by the AMLC.
FD: So, we will restore the phrase, by the AMLC at the appropriate time?
CHIZ: That is correct, Mr. President, your Honor. Kasi tinatanggalan namin sila ng power to issue a freeze order as proposed in the bill.
CHIZ: OK, thank you Mr. President. In other jurisdictions in the United States, in Canada, in Australia, the anti-money laundering authorities do not have the power to freeze accounts. This is always a judicial action because of the deprivation of property which is a judicial function rather than an administrative function. So, again for the record, on page 12 line 32 and page 13 lines 1-3, and the rest of page 13, it will be appropriately amended because which refers to the grant of power to the AMLC to freeze.
CHIZ: That is correct, Mr. President, your Honor.
FD: So, we’ll just await that amendment. One minute suspension.
FD: Mr. President, we go now to section 9, this is found on page 14 of the bill. And section 9 of the bill proposes to amend section 11 of the existing law. Now, under the proposed amendment, the Anti-Money Laundering Council may inquire into or examine any particular deposit or investment including related accounts with any banking institution or non-bank financial institution upon order of the Court of Appeals based on exparte application in cases of violation of this act, when there is reasonable ground to suspect that the deposits or investments including related accounts involved are related to a predicate offense. My first question is, now the amendment would only authorize the Court of Appeals to issue or to approve the application of the AMLC, no other court, no lower court?
CHIZ: Only the Court of Appeals, Mr. President.
FD: Only the Court of Appeals, alright. Now, we notice that the standard or probable cause is changed to the standard of reasonable ground to suspect. In fact, the establishment of probable cause is bracketed and therefore presumably it will be deleted and in lieu thereof the phrase, there is reasonable ground to suspect. First, can we find out for the record, what’s the difference between the two?
CHIZ: Mr. President, it is an easier and lighter standard. But having said that this was the subject matter of Senator De Lima’s interpellation as well, and she suggested either to revert to probable cause or to simply use the phrase, for her it was better, reasonable ground to believe which is tantamount or equivalent to probable cause. So, in the latest version of the bill, Mr. President, your Honor, we are using the phrase, reasonable ground to believe which we define to mean equivalent or tantamount to probable cause. But this was upon the suggestion of Senator De Lima.
FD: If it is equivalent to probable cause anyway, why don’t we just retain the existing provision?
CHIZ: Sinabi ko din ‘yun sa kanila actually Mr. President, your Honor. We will do that Mr. President, your Honor.
FD: So, we will retain the old provision. Now, next issue is on page 15, starting with line 18, the AMLC is given the power to randomly inquire into or examine any deposit investment trust or other accounts. What do you mean by randomly inquire? The word randomly is something synonymous to arbitrary?
CHIZ: Mr. President, your Honor, just to clarify, this applies to the BSP and not to the AMLC.
FD: Fine, whether AMLC or BSP, they’re both government institutions.
CHIZ: That is correct Mr. President, your Honor. Just to clarify that point, Mr. President, we used randomly to mean they cannot use their supervisory powers to look into a specific account, targeting a specific depositor. The intention of the use of the word randomly was to make it a requirement that they cannot look or target a specific depositor or account holder but simply part of their sampling or supervisory powers. Parang survey po na random sampling if there is a better way of saying it we are open Mr. President but that was the intention. The BSP cannot use this power to supervise, to look into a specific account or deposit.
FD: Whether or not it is the power to look into specific account, whether or not there is a prohibition to look into a specific account, or a broad power to randomly inquire or examine any deposit. We’re not comfortable with this; there are no standards that are indicated. It is even more problematic and to broad considering the definition of suspicious transaction, includes anything suspicious by the AMLC. So, I do not know why we grant this power to the central bank or the BSP. And we even deleted the phrase from line 14 to line 16 which indicates the period on which the examination can be made. Dini-delete po ‘yung phrase from lines 14 to 16. For the record, what does this mean?
CHIZ: Mr. President, your Honor, this was not an FATF imposition, this was a suggestion emanating from the BSP itself, which is part also of their proposed amendments to the BSP charter. We amenable and open, Mr. President, to revisiting this provision since it is not a compliance requirement of the FATF anyway.
FD: OK, thank you very much Senator. On the next page, page 16, section 10 of the law amending section 12 by adding a new paragraph: retention of forfeited assets. The AMLC is authorized to retain 20% of the forfeited assets. First of all, how much would this be if we base this for example in 2016? What was the forfeited asset in 2016?
CHIZ: What I have, Mr. President, your Honor, is a running balance. The total value of criminal proceeds civilly forfeited as a result of AMLC action is equivalent to 887,940,874.35, this is as of December 2016. Given the enormity of the account that they may possibly forfeit Mr. President, that’s why we put a cap, they can only retain the equivalent of twice the higher budgetary priority in the past two years. So, last year the budget of AMLC was at Php40-M and this year their budget is Php48-M. So, the 20% will not apply to the entire amount of 887-Million given the cap that we placed.
FD: But the cap will entitle AMLC, in that example, to roughly Php90-M?
CHIZ: Yes, Mr. President.
FD: Now, in other words, we authorize the retention of Php90-M in that example without scrutinizing for what use this will be?
CHIZ: Retention or use of income, Mr. President, your Honor.
FD: Yes, the retention or us of income. These are actually public funds which are retained by the agency and Congress will no longer have any authority to look into how the retained income will be used. Because this is an authority to use without any check on the part of Congress how this will be used.
CHIZ: Well, Mr. President, as your former chairman of the Committee of Finance, I would of course be always in favor of any budgetary appropriation or use passing in through Congress but I do not also take it away from agencies to want an own use or use of income provision kung papayagan po ng Kongreso to a certain degree or limit. We would be open, Mr. President, to amendment to this section if the gentleman thinks that it is too much or if it’s not appropriate to your earmark certain funds from forfeited assets. This is not a FATF recommendation. Although Mr. President, your Honor, nilagay namin na ‘yung use lang, kung hindi man sapat na standard ‘yun for AMLC operation and capacity building only. But it will be amenable Mr. President to any suggestions coming from the good gentleman.
FD: On page 17, under the title administrative sanctions, which is on line 9 which seeks to amend, section 15 on the existing law, what we noticed is that in the imposition of administrative sanctions, the entire two paragraphs is being deleted but most significant part of the two paragraphs is the requirement of due notice and hearing before the AMLC can impose sanctions including monetary penalties. In fact, in the proposed amendments, the 9-26 it says the AMLC may at each discretion imposed upon any covered person, for any violations etcetera, the following administrative sanctions warning or fine. Now, why are we deleting the phrase ‘after due notice and hearing’? And some will, a full discretion on the part of AMLC?
CHIZ: May I request for minute suspension?
FD: One minute suspension.
CHIZ: Mr. President, they were surprised as well. We thank the gentleman for his input, it should be included when they deleted the entire section, Mr. President however, my excuse will be, it was an oversight when it was not included and it’s not a question of it being an imposition or not. It is required by our due process of laws provision in the constitution to provide this otherwise; we will run a foul to the Bill of Rights. We will make a corresponding adjustment Mr. President; we thank the gentleman for pointing it out. It was an oversight in our part.
FD: Thank you, Mr. President. Now just going back on section 9, this is on page 14, which we earlier touch, a matter which this representation skipped, the provisions of section 9, would allow the Anti-Money Laundering Council to inquire into bank deposits even without a court order in cases involving Kidnapping, Comprehensive Dangerous Drugs Act, the Anti-Graft, Plunder, Swindling etcetera. There are about 18 offenses which wherein the AMLC is authorized to inquire into the bank deposits even without a court order. Does the gentleman confirm my reading of this?
CHIZ: We added 12 offenses to the existing enumeration of five offenses Mr. President, your honor.
FD: For the record, can we list the five offenses?
CHIZ: The one in the existing law is Kidnap-for-Ransom, Dangerous Drugs, Anti Graft and Corrupt Practices. May I require a one minute suspension.
CHIZ: Under the existing law, those covered or included already are the following: KFR or Kidnap For Ransom, Dangerous Drugs, Hijacking, Destructive Arson and Murder, Terrorism and Conspiracy to commit terrorism and Financing of Terrorism. In the proposed bill, Mr. President, your Honor, we are adding Anti-Graft and Corrupt Practices, Plunder, Swindling, Bribery, Malversation, Human Trafficking Migrant Workers Act , Anti Child Pornography, Child Abuse, Violations of Circulation Code, Cybercrime and Data Privacy which was part of the inclusion in the predicate offenses suggested by AFTF but I will be forthright to Mr. President, your Honor. But it is not part of AFTF recommendations for it to be part of the Money Laundering Council’s power to look into the bank accounts.
FD: So which of the additional twelve are included in the AFTF recommendations or none of them?
CHIZ: None Mr. President, your honor, according to them since this were added as predicate offenses. In the proposed bill, they suggested that this will be added here to.
FD: Who they Mr. President?
CHIZ: The AMLC Mr. President, your Honor.
FD: Would the Gentleman sponsor agree that this is in a nature or kin to a search warrant? Inquiring into bank deposits?
CHIZ: A minute suspension, Mr. President.
CHIZ: Mr. President ready to resume.
KP: Session is resumed.
CHIZ: Mr. President, try to simplify the answer, according to the AMLC, they do not considered this as equivalent or tantamount to a search and seizure which requires a court order. Sa simpleng salita, pwede lang silang tumingin, hindi sila pwedeng humipo o kumuha – according to them.
FD: Sa ating Saligang-Batas, tingin man na hindi kasama ang hipo ay kailangan pa rin ang utos o pahintulot ng husgado.
CHIZ: We submit Mr. President, your Honor, although both of us are not engage in that anymore Mr. President. But we will submit to the gentleman some wisdom on this matter of course especially for former DOJ Secretary.
FD: We have checked the constitution on this Mr. President. And if it is in the nature of a search warrant because you inquire into the deposits of a depositor. Now, we do not know how to classify it, if it is not in nature or kin to a search warrant. What is it if it’s not a kin to a search warrant? When it starts to examine the bank deposits, when it start to search the bank records? What is it if it’s in the nature of a search warrant, there are certain standards provided in our constitution in order to allow the search of one’s property, the privacy in one’s property is inviolable.
CHIZ: Mr. President, your Honor, if I may, the authority they are citing is the Supreme Court decision in the case Republic versus Eugenio, GR 174629 dated Valentine’s Day pa, February 14, 2008. Let me quote ‘in a addition bank inquiry order under the AMLC is an extra ordinary provisional relief which the AMLC may avail of to effectively combat and prosecute money laundering offenses. Clearly, the quantum of evidence required for bank inquiry order should not be compared with the requirements of search or arrest warrant because they are not of the same nature’. Considering the foregoing, the lower quantum of evidence required for the issuance of the bank inquiry order in this case is proper but this might apply also just to this case so we will compare notes with the authorities of the good gentleman as well Mr. President, your Honor, in order to be sure that we are not violating the constitution on this point.
FD: Yes, we will therefore await the final position that the gentleman will take in so far as this particular issue is concerned especially considering that this is not among the provisions which is required of us in order to be compliant with standards set for by the FATF. So we will await that position of the gentleman.
CHIZ: But just for the record Mr. President, your Honor, it’s an existing provision, with respect to certain predicate offenses the proposed amendment simply seeks to expand or include additional predicate offenses in the list. The provisions itself Mr. President, your Honor, and at only the additional predicate offenses.
FD: Well, Mr. President, there is an amendment that we change the standard from probable cause to reasonable ground to suspect and that is why we ask earlier what is the difference between the existing law and the proposed amendment because from our own research, a reasonable ground to suspect is a lower quantum of proof required. In fact, reasonable suspicion is the standard required before a police officer stop and questions an individual against their will. This is the decided cases on this point and therefore, when we lowered the standard, it allows more power to the AMLC. The Anti-Money Laundering Law, Mr. President, is to make sure that we align our financial system to the international standards. If the international standards, we should align ourselves no questions about it that’s why I’m not objecting to the bill itself. Because indeed we need this otherwise, we will get into problems again in terms of our being aligned with the international standards. But I hope that the AMLC will carefully look at the constitution which provides for the protection of the citizens as against the power of the state. The state has all the remedies, the constitution precisely is a limitation on the otherwise unbridled power of the state as against the individual liberties. So that is why we’re quite concerned and we should always be concern about the ability of state to exercise its vast power versus the protection of the rights of the citizen under the constitution. One of those is the right against (inaudible).
CHIZ: We agree Mr. President, your honor but again forgive this representation but in one of our proposed amendments to our bill we are reverting back already to either reasonable ground to being or probable cause and not anymore reasonable ground to suspect. In fact, mentions of the phrase unlawful activity we all made it uniform to simply refer specifically to predicate offenses to remove any doubt what we are exactly referring to. And to make the powers more limited in a sense to only specific offenses or crimes.
FD: So we were eagerly await the proposed amendments and in the meantime suspend our interpellation. We may have questions; we may have none once we see the proposed amendments. Thank you very much, Mr. President.
CHIZ: Thank you Mr. President, I would like to thank Senator Drilon for his inputs and suggestions and for sharing with us his experience and his wisdom with respect to this bill with the view of course to improving the same. And make him compliant not only with the AFTF but with the constitution provisions as well. Thank you Mr. President, Thank your Honor, thank you Mr. President.