House leader asks BSP to draft legislation vs. financial crimes

MANILA – House Ways and Means Committee chair Representative Joey Salceda on Friday said he will request the Bangko Sentral ng Pilipinas (BSP) to draft legislation on the country’s targeted financial sanctions (TFS) framework to combat terrorism financing and proliferation financing.

Salceda emphasized the need for the country to implement more effective targeted financial sanctions to convince the Financial Action Task Force (FATF) to remove the Philippines from its “gray list” by next year.

The FATF flagged the country for supposed inadequacies in the effectiveness of the targeted financial sanctions framework (TFS) for both terrorism financing and proliferation financing.

“I don’t think our current bank secrecy laws would allow for effective targeted sanctions. I’ve been a strong champion of relaxing our bank secrecy laws for tax purposes. It may be time to relax them for targeted sanctions as well,” Salceda told reporters in a message.

Salceda said that until the country’s banking system becomes more transparent, it will always struggle to impose targeted sanctions.

“That means accusations that our banks are a conduit for all sorts of terrorist and illegal transactions will persist. The BSP’s latitude for policy changes can only do so much. We need legislation,” he said.

He is studying the enactment of tax laws that would impose much higher taxes on apprehended illegally accumulated income and allow the use of evidence of tax evasion for the prosecution of other crimes.

Salceda dubbed them as “Al Capone” laws as “the notorious American gangster Al Capone was nabbed not for murder, lawless violence, or any other crime but tax evasion.”

“Money is always the incentive for organized crime. And concealed money means some taxes are being skirted. Tax evasion is always easier to track as a lead for other crimes, because unlike other crimes, where circumstances can attenuate guilt, for tax evasion, the test is pretty simple: if you contrived a scheme to defraud the government, you’re guilty,” he said.

He said the way the tax laws can be used to improve the country’s FATF rating is by allowing the use of evidence for tax evasion in investigations for other financial crimes.

The BSP, for its part, said it is implementing measures to address the three action-plan items relating to implementing the new registration requirements for money or value transfer services, applying sanctions on unregistered and illegal money remittance operators, and enhancing the effectiveness of the TFS framework for both terrorism financing and proliferation financing.

“It will ensure that the remaining action plan items for BSP and BSP Supervised Financial Institutions will be adequately addressed, in line with the country’s strong commitment to address all identified strategic deficiencies to exit from the gray list,” the BSP said in its annual report.

The BSP said it has formed a group that tracks and collates actions and countermeasures seen in other jurisdictions. The central bank, likewise, said it catalogs incidents related to de-risking and correspondent banking, among others.

“The information gathered will be used in implementing appropriate policy responses and other necessary interventions,” it said.

Anti-Money Laundering Council (AMLC) executive director Mel Georgie Racela said that the implications of “gray-listing” entail an increase in the cost of transacting with foreign financial institutions, such as de-risking or de-banking, as well as an increase in fees, borrowing rates, and transaction fees.

Other implications of gray-listing would include a delay in transactions, which means a 2 to 4-percent reduction in annual foreign currency remittances and negative reputational and country risks.