Anti-Money Laundering Act of 2001 (R.A. No. 9160, as amended)

The Anti-Money Laundering Act of 2001 (AMLA), or Republic Act No. 9160, as amended by subsequent legislation (R.A. Nos. 9194, 10167, 10365, 10927, and 11521), is a cornerstone of the Philippines’ regulatory framework designed to combat money laundering and related financial crimes. Enacted to prevent the use of the Philippine financial system in facilitating illicit transactions, the AMLA imposes significant requirements on financial institutions and prescribes severe penalties for violations. Here is a comprehensive review of the law and its amendments, focusing on the critical aspects of obligations, covered institutions, penalties, and regulatory mechanisms.

1. Definition and Scope of Money Laundering

Money laundering is defined under the AMLA as a crime whereby the proceeds of an unlawful activity are transacted or attempted to be transacted to make them appear to have originated from legitimate sources. This includes acts of placement, layering, and integration. The goal is to disguise the true origin of illicit funds.

The law applies to a broad range of "unlawful activities" listed under Section 3(i), which includes crimes such as drug trafficking, graft and corruption, kidnapping for ransom, terrorism, and other serious offenses.

2. Covered Institutions and Individuals

The AMLA imposes strict obligations on various financial and non-financial entities referred to as "covered institutions." These include:

Banks and financial institutions, including rural banks, thrift banks, Islamic banks, and quasi-banks
Non-bank financial institutions, such as insurance companies, securities dealers, investment companies, and pawnshops
Jewelry dealers and dealers in high-value goods (added under R.A. 10365)
Real estate developers and brokers involved in single transactions above certain thresholds
Casinos and online gambling operators, including Internet-based and ship-based casinos, (added under R.A. 10927), requiring them to report suspicious transactions
Virtual asset service providers (as amended by R.A. 11521), reflecting the need to monitor cryptocurrency transactions

Covered institutions must implement AMLA requirements, such as customer identification, record-keeping, and reporting of covered and suspicious transactions.

3. Key Compliance Requirements

a. Customer Identification and Verification

Covered institutions are required to implement Know-Your-Customer (KYC) procedures. This includes verifying the true identity of clients and obtaining information on beneficial owners in cases where customers are corporate entities or legal arrangements.

b. Record Keeping

Covered institutions must maintain records of transactions for at least five (5) years from the transaction date or the closure of the account. This is necessary for facilitating audits and investigations.

c. Reporting of Covered and Suspicious Transactions

Under the AMLA, financial institutions must report:

Covered transactions: Any single transaction involving an amount in excess of PHP 500,000 (for certain industries and entities, different thresholds apply).
Suspicious transactions: Transactions that, based on available information, raise suspicions regarding the source, purpose, or beneficiary of the funds, regardless of the amount.

Reports should be submitted to the Anti-Money Laundering Council (AMLC) within five (5) working days from the occurrence of the transaction.

4. The Anti-Money Laundering Council (AMLC)

The AMLC is the primary regulatory body responsible for enforcing the AMLA. It is an independent financial intelligence unit composed of representatives from:

The Bangko Sentral ng Pilipinas (BSP) - represented by the Governor
The Securities and Exchange Commission (SEC) - represented by the Chairperson
The Insurance Commission (IC) - represented by the Commissioner

The AMLC is empowered to receive and analyze suspicious transaction reports, investigate money laundering offenses, and file civil or criminal complaints against violators.

Key Powers of the AMLC:

Freezing of Assets: The AMLC can issue a freeze order, valid for twenty (20) days, which may be extended upon petition.
Inquiries on Bank Deposits: With court authorization, the AMLC may examine deposits and investments related to unlawful activities.
Civil Forfeiture: Under R.A. 10167, the AMLC can pursue civil forfeiture of assets derived from unlawful activities even without a criminal conviction.

5. Amendments and Key Changes

The AMLA has undergone several amendments to enhance the scope and effectiveness of the law:

a. R.A. No. 9194 (2003)

Lowered the threshold for covered transactions.
Authorized the AMLC to examine deposits with court approval, without notifying the account holder.

b. R.A. No. 10167 (2012)

Enhanced the AMLC’s powers to seek freezing orders and conduct inquiries on bank deposits.
Introduced civil forfeiture provisions, allowing for the recovery of assets without a criminal conviction.

c. R.A. No. 10365 (2013)

Expanded the list of covered institutions to include dealers in high-value goods and other non-financial businesses.
Increased the AMLC’s power to investigate and prosecute money laundering cases.

d. R.A. No. 10927 (2017)

Included casinos (including internet and ship-based casinos) as covered institutions.
Requires casinos to report transactions exceeding PHP 5 million (or its equivalent in other currencies).

e. R.A. No. 11521 (2021)

Further extended the AMLA’s reach to include virtual currency exchanges and service providers.
Strengthened penalties and compliance standards, especially for emerging financial technologies.
Allowed the AMLC to directly coordinate with foreign financial intelligence units without going through diplomatic channels.

6. Penalties and Sanctions

Violations of the AMLA carry severe penalties, which may be imposed on individuals, institutions, or both. Key sanctions include:

Criminal Penalties: Money laundering is punishable by imprisonment (up to 14 years for the most severe offenses) and fines, ranging from PHP 1.5 million to twice the value of the laundered amount.
Civil Penalties: Failure to comply with reporting requirements or breach of client confidentiality can lead to fines imposed by the AMLC.
Administrative Sanctions: Covered institutions found non-compliant may face suspension or revocation of licenses or permits, hefty fines, or reputational consequences.

7. Confidentiality and Protection Mechanisms

The AMLA includes provisions to protect client confidentiality, only allowing inquiries and investigations with the court's authorization. However, in cases of terrorism financing, the AMLC has broader powers for immediate action. Additionally, whistleblowers and institutions reporting suspicious activities are protected from liability when acting in good faith.

8. International Cooperation

As part of the Financial Action Task Force (FATF) compliance, the AMLA includes provisions to cooperate with international counterparts in sharing information and coordinating investigations on transnational money laundering activities. Through bilateral and multilateral treaties, the AMLC collaborates with global financial intelligence units.

9. Anti-Terrorism Financing Provisions

The AMLA also addresses terrorism financing, especially in alignment with the Terrorism Financing Prevention and Suppression Act (R.A. No. 10168). This amendment allows the AMLC to freeze accounts suspected of being used for financing terrorism activities, enhancing the law's reach against terrorism-related financial crimes.

10. Recent Developments and Challenges

The latest amendments under R.A. 11521 align the AMLA with international anti-money laundering standards. This includes regulating cryptocurrency and virtual asset transactions, closing gaps in compliance among non-financial businesses, and emphasizing the importance of risk-based assessments. Challenges remain, especially in balancing data privacy with AML obligations, as well as addressing sophisticated schemes that evolve with financial technologies.

Summary

The AMLA is critical in maintaining the integrity of the Philippine financial system and preventing money laundering, terrorism financing, and other financial crimes. Through its amendments, the law has adapted to emerging challenges, including digital currencies and cross-border transactions, underscoring the country’s commitment to international standards. Compliance with the AMLA is essential for covered institutions, and violations are met with substantial penalties, reinforcing the importance of strict adherence to anti-money laundering regulations.