Money Laundering under the Anti-Money Laundering Act (R.A. No. 9160, as amended by R.A. Nos. 9194, 10167, 10365, 10927, and 11521)

I. Introduction

Money laundering is the process by which individuals conceal the illicit origins of funds, integrating these proceeds into the legitimate financial system to disguise their source, ownership, or control. The Anti-Money Laundering Act (AMLA) of 2001, under Republic Act No. 9160, provides the legal framework in the Philippines for the prevention, detection, and prosecution of money laundering activities. Amendments through various Republic Acts have expanded its scope, strengthened its provisions, and aligned it with international standards.

II. Key Components of the Anti-Money Laundering Act

A. Definition of Money Laundering

Under AMLA Section 4, money laundering is committed by any person who, with knowledge that funds are derived from unlawful activity, performs acts that facilitate the concealment, transformation, or transfer of the origin or nature of the funds. Key unlawful activities associated with money laundering include:

Predicate Crimes: Specific crimes from which laundered proceeds are derived, such as drug trafficking, terrorism financing, graft, and corruption, among others.
Three-Stage Process:
- Placement: Introducing illicit money into the financial system.
- Layering: Conducting complex transactions to obscure the origin.
- Integration: Merging laundered funds into the legitimate economy.

B. Covered Institutions and Persons

AMLA requires specific entities and individuals, known as “covered persons,” to comply with reporting and customer due diligence measures, including:

Banks, quasi-banks, trust entities, insurance companies, securities dealers, money changers, foreign exchange dealers, and pawnshops.
Other financial institutions, including financial technology (fintech) companies.
Lawyers, accountants, and real estate brokers under specific conditions (e.g., involvement in transactions above certain monetary thresholds).

C. Suspicious Transaction Reports (STR) and Covered Transaction Reports (CTR)

Covered persons must report:

Covered Transactions: Any single transaction above Php 500,000 (or its equivalent in foreign currency).
Suspicious Transactions: Transactions that are out of character, without clear purpose, or involving persons/entities under investigation for illicit activities.

D. Know Your Customer (KYC) and Customer Due Diligence (CDD)

AMLA mandates strict KYC protocols to ascertain client identities, requiring financial institutions to:

Conduct due diligence on clients based on the risk level.
Monitor customer accounts for suspicious transactions.
Maintain records of identification and transactions for a period defined by law.

E. Record-Keeping and Data Retention

Records related to customer identification and transactions must be retained for at least five years from the date of the transaction or account closure.

III. Anti-Money Laundering Council (AMLC)

The Anti-Money Laundering Council is the regulatory body tasked with enforcing AMLA. Its core functions include:

Investigating money laundering activities and potential breaches.
Freezing Assets: The AMLC can issue a freeze order on suspicious assets for a period not exceeding six months, subject to judicial approval.
Filing Civil and Criminal Cases: The AMLC is empowered to file cases before courts.
Monitoring Compliance: Ensuring covered institutions adhere to AMLA requirements.

IV. Legal Obligations and Penalties

The AMLA outlines penalties for violations, including:

Criminal Penalties: Penalties for money laundering include fines and imprisonment based on the severity of the offense.
Administrative Sanctions: Covered persons or institutions failing to report, conduct due diligence, or maintain adequate records may face fines, suspension, or revocation of licenses.
Civil Forfeiture: AMLC may pursue civil forfeiture of assets linked to money laundering, subject to court proceedings.

V. Key Amendments and Enhancements to AMLA

The following amendments have progressively fortified the AMLA:

A. Republic Act No. 9194 (2003)

Expanded the scope of covered institutions.
Strengthened the reporting and monitoring requirements for financial institutions.

B. Republic Act No. 10167 (2012)

Introduced ex parte freeze orders to allow AMLC to freeze accounts without notifying the account holder.
Enhanced the AMLC's authority in financial investigations.

C. Republic Act No. 10365 (2013)

Included casinos and other gaming entities as covered institutions.
Required additional disclosure and transaction reporting obligations.

D. Republic Act No. 10927 (2017)

Regulated casino operations under AMLA.
Established procedures for reporting transactions over Php 5 million within casinos.

E. Republic Act No. 11521 (2021)

Mandated expanded Customer Due Diligence measures, including verifying beneficial owners of accounts.
Included virtual asset service providers (VASPs) to address the rise of cryptocurrency usage.
Enhanced mechanisms for cross-border information sharing and cooperation.

VI. International Compliance and Cooperation

To align with international anti-money laundering standards, especially with Financial Action Task Force (FATF) recommendations, AMLA emphasizes:

Cross-Border Coordination: Cooperation with international agencies to track and control cross-border money laundering.
Enhanced Due Diligence for High-Risk Countries: Financial institutions must implement additional controls for transactions from or to jurisdictions identified by FATF as high-risk.

VII. Recent Developments and Compliance Challenges

AMLA has been continuously updated to address new forms of financial crime, including cryptocurrency laundering and terrorism financing. Compliance challenges persist, especially regarding complex financial instruments and virtual assets that offer high anonymity. Covered persons face increasing scrutiny to keep up with technological advances and the sophisticated tactics used by money launderers.

VIII. Summary

The Anti-Money Laundering Act, with its amendments, underscores the Philippines' commitment to combat money laundering by providing a robust legal and institutional framework. Covered institutions are integral to detecting and preventing money laundering activities through strict compliance with due diligence, reporting requirements, and the adoption of robust anti-money laundering measures. The AMLC, empowered by the law, works to ensure that the Philippine financial system remains secure and compliant with international standards, promoting transparency and integrity within the country’s financial and economic systems.