Predicate Crimes/Unlawful Activity | Money Laundering | Anti-Money Laundering Act (R.A. No. 9160, as amended by R.A. Nos. 9194, 10167, 10365, 10927, and 11521) | BANKING

The Anti-Money Laundering Act (AMLA) of the Philippines, originally codified as Republic Act (R.A.) No. 9160 and subsequently amended by R.A. Nos. 9194, 10167, 10365, 10927, and 11521, is a comprehensive legal framework targeting the crime of money laundering in the Philippines. One of the critical components of AMLA’s enforcement is identifying and understanding predicate crimes or unlawful activities, which serve as the basis for a money-laundering offense.

Definition of Money Laundering

Under AMLA, money laundering is defined as the process by which individuals or organizations attempt to disguise the origins of proceeds obtained from criminal activities. The law criminalizes actions that involve transacting, converting, transferring, disposing, moving, acquiring, possessing, using, or concealing money or property known or should have been known to be derived from unlawful activities.

Predicate Crimes/Unlawful Activities

A predicate crime, or unlawful activity, is any criminal offense that generates proceeds that could be laundered. In the Philippines, the Anti-Money Laundering Council (AMLC) oversees and enforces AMLA. The Council has identified specific crimes and offenses that qualify as predicate crimes under the AMLA, which means that the laundering of proceeds derived from these activities constitutes a punishable offense.

Enumerated Predicate Crimes under AMLA

Under the amendments to AMLA, a comprehensive list of offenses has been designated as predicate crimes. This list includes, but is not limited to:

1. Kidnapping for Ransom (R.A. No. 8353) – Kidnapping and serious illegal detention for the purpose of extorting ransom.
2. Drug Trafficking and Related Offenses (R.A. No. 9165) – Involvement in illegal drug trade or any related illegal drug activities.
3. Graft and Corruption (R.A. No. 3019, as amended) – Any form of corruption or graft involving government officials.
4. Plunder (R.A. No. 7080) – Accumulating wealth through corrupt practices, especially by government officials.
5. Robbery and Extortion – Any robbery or extortion offense committed to obtain proceeds that could be subject to laundering.
6. Jueteng and Masiao (Illegal Gambling) – Engaging in illegal gambling operations such as jueteng or masiao.
7. Piracy (Presidential Decree No. 532, as amended) – Acts of piracy committed within or outside Philippine territory.
8. Qualified Theft – Theft with aggravating circumstances, qualifying it as more severe.
9. Swindling (Estafa) (Revised Penal Code) – Deceptive practices or schemes intended to defraud others.
10. Smuggling – Importation or exportation of goods without proper customs declaration and approval.
11. Fraudulent Practices and Other Violations of the Securities Regulation Code of 2000 – Offenses involving securities fraud, insider trading, and manipulation.
12. Forgery and Counterfeiting – Producing counterfeit currency, securities, or other financial instruments.
13. Human Trafficking (R.A. No. 9208) – Engaging in trafficking of persons, especially minors or for sexual exploitation.
14. Environmental Crimes (e.g., R.A. No. 9147, Wildlife Resources Conservation Act) – Violations against the protection of wildlife, forestry, or marine resources.
15. Terrorism and Conspiracy to Commit Terrorism (R.A. No. 9372) – Engaging in acts of terrorism or conspiring to commit terrorism.
16. Financing of Terrorism (R.A. No. 10168) – Providing funds or resources intended for terrorist acts.
17. Violations of the Anti-Trafficking in Persons Act of 2003 – Related offenses involving trafficking in persons, especially vulnerable individuals.
18. Cybercrime Offenses (R.A. No. 10175) – Including but not limited to fraud, identity theft, and cybersex.
19. Crimes of Terrorism and Other Offenses under the Human Security Act – Offenses related to acts that threaten the public’s security and safety.
20. Tax Evasion – Failure to pay correct taxes as determined by law.
21. Violations of Intellectual Property Rights – Infringement, counterfeiting, and piracy of intellectual property.
22. Financing of Proliferation of Weapons of Mass Destruction (WMD) – Direct or indirect financing of activities involving WMDs.
23. Other Crimes Punishable by More than Four (4) Years Imprisonment – The law provides for the inclusion of other crimes with penalties of over four years of imprisonment, enabling flexibility in AMLA’s scope.

Legal Implications of Predicate Crimes

When a person is charged with a money-laundering offense, the government must prove that the proceeds involved were derived from one of the predicate crimes or unlawful activities. The inclusion of these predicate crimes allows law enforcement agencies to track and investigate funds derived from illicit sources, even if the money is moved through complex financial systems. This means that a successful conviction for money laundering requires establishing a link between the accused's actions and one of the specific offenses identified as unlawful under AMLA.

Burden of Proof and Due Process

The prosecution carries the burden of proving that the funds in question are derived from predicate crimes. The AMLA permits the government to apply for freeze orders, civil forfeiture, and bank inquiries without informing the account holder, but these measures require judicial approval. However, the accused also has the right to due process and can contest claims against them.

Recent Amendments to Predicate Crimes

The amendments to AMLA have introduced additional predicate crimes and broadened the scope to align with international anti-money laundering standards. For instance:

• R.A. No. 10927 introduced requirements for casinos, identifying them as covered institutions, ensuring their compliance with AMLA in monitoring high-risk financial activities.
• R.A. No. 11521 further refined the definitions and scope of predicate crimes, specifically addressing gaps in cybersecurity, terrorism financing, and international financial obligations.

Regulatory Mechanisms

The AMLC is the principal body responsible for enforcing AMLA. Its powers include issuing freeze orders, inquiry orders, and conducting investigations. Covered institutions such as banks, casinos, insurance companies, and other financial institutions are obligated to report suspicious transactions (STRs) and threshold transactions (cash transactions exceeding ₱500,000 within one business day) to the AMLC.

Sanctions for Money Laundering Related to Predicate Crimes

Under AMLA, penalties for money laundering offenses vary depending on the offense severity:

• Imprisonment from seven to fourteen years, depending on the role of the accused in the laundering scheme.
• Fines that could amount to the value of the laundered property or the transaction itself.
• Civil Forfeiture allows the government to seize and forfeit assets related to money laundering upon conviction.
• Administrative Sanctions for financial institutions that fail to comply with reporting requirements, ranging from fines to suspension or revocation of licenses.

International Cooperation and Compliance with Global Standards

The Philippines, as a member of the Financial Action Task Force (FATF), has made these amendments to address global anti-money laundering and counter-terrorism financing standards. Compliance with FATF recommendations includes the continued expansion of predicate crimes and the enhancement of reporting and enforcement mechanisms to prevent the misuse of the financial system.

Conclusion

The designation of predicate crimes under the AMLA establishes a comprehensive framework to combat money laundering by targeting the proceeds of specified unlawful activities. This mechanism enables the AMLC and other government agencies to investigate and prosecute individuals engaged in laundering funds from criminal activities. The Philippine AMLA, with its numerous amendments, remains a crucial legal tool in aligning the country’s financial systems with international anti-money laundering norms and in protecting the integrity of the financial sector against abuse by criminal elements.

How Committed | Money Laundering | Anti-Money Laundering Act (R.A. No.9160, as amended by R.A. Nos.9194, 10167, 10365, 10927, and 11521) | BANKING

Money Laundering Under the Anti-Money Laundering Act (R.A. No. 9160 as Amended)

I. Definition of Money Laundering

Money laundering is the process by which criminals attempt to hide or "launder" the origins of illegally obtained money to make it appear as if it were legally acquired. The Anti-Money Laundering Act (AMLA), or Republic Act No. 9160, as amended by R.A. Nos. 9194, 10167, 10365, 10927, and 11521, criminalizes money laundering and outlines specific acts that constitute the offense.

II. Elements of Money Laundering

The primary elements of money laundering under the AMLA are as follows:

1. There must be an unlawful activity that generates proceeds.
2. The accused performs certain acts involving these proceeds.
3. The acts are intended to conceal, disguise, or mask the origin, source, or ownership of the illegal proceeds.

III. How Money Laundering is Committed

Money laundering is committed by any person who knowingly performs any of the following acts with respect to proceeds generated from unlawful activities:

A. Transactions Involving Illegal Proceeds (Section 4(a))

• Definition: A person is deemed to commit money laundering if they knowingly transacts or attempts to transact money or property that represents, involves, or constitutes the proceeds of unlawful activity.
• Objective: The transaction aims to hide the true origin of the funds or give an appearance of legitimacy.

B. Conversion, Transfer, Disposition, Movement, Acquisition, Possession, Use of Illegally Obtained Assets (Section 4(b))

• Definition: Any person who knowingly converts, transfers, disposes, moves, acquires, possesses, or uses any money or property known to be from unlawful activity is guilty of money laundering.
• Objective: This act may involve using illicit funds to acquire assets, thus concealing their criminal origin.

C. Attempting to Hide the Origin of Illicit Funds (Section 4(c))

• Definition: Money laundering is also committed if a person attempts to conceal, disguise, or mask the origin of the proceeds, such as through layering (passing funds through multiple transactions) or integration (mixing illicit funds with legitimate money).
• Objective: The goal is to make the illegal source of the funds untraceable by creating layers of complex transactions.

D. Aiding or Assisting in Money Laundering (Section 4(e))

• Definition: A person who knowingly assists, abets, or conspires with others to commit money laundering is considered a principal by direct participation.
• Objective: This includes facilitating transactions, providing advice, or introducing intermediaries for money laundering purposes.

IV. Modes of Knowledge or Intent in Money Laundering

• Direct Knowledge: The person is aware that the proceeds are from unlawful activity and intentionally engages in actions to launder them.
• Willful Blindness: Even if the individual does not have direct knowledge, willful blindness to the unlawful origin can fulfill the element of knowledge.
• Negligence: Financial institutions and covered persons are required to exercise due diligence. Negligence in failing to detect or prevent money laundering may constitute liability.

V. Covered Transactions and Suspicious Transaction Reporting

• Covered Transactions: Transactions in excess of PHP 500,000 within a day must be reported to the Anti-Money Laundering Council (AMLC).
• Suspicious Transactions: These are transactions that, although not reaching the threshold, raise suspicion due to:
  1. Absence of economic or lawful purpose.
  2. Unusual circumstances or patterns that may indicate an attempt to avoid detection.
  3. Lack of personal or business relationship.
  4. Transactions that may involve a series of complex and large sums of money.

VI. Unlawful Activities Generating Proceeds Subject to Money Laundering

• Predicate Crimes: Under Section 3(i), predicate crimes include offenses such as corruption, illegal drug trafficking, human trafficking, fraud, terrorism financing, and environmental crimes, among others.
• Expanded Predicate Crimes (R.A. 10927 and R.A. 11521): Recent amendments have expanded the list of predicate crimes to include tax evasion and violations of environmental laws.

VII. Penalties for Money Laundering

• Penal Liability: Violators are subject to imprisonment ranging from 7 to 14 years and a fine that could be from PHP 500,000 to PHP 10,000,000, depending on the gravity and amount involved.
• Corporate and Financial Institution Liability: Covered institutions that fail to comply with reporting requirements face administrative penalties, including revocation of licenses.

VIII. Special Provisions and Recent Amendments

A. Expanded Powers of the AMLC (R.A. 10167)

• Authority to Freeze Assets: The AMLC can freeze assets without prior court approval for up to 20 days in cases involving probable cause.
• Bank Inquiry Powers: The AMLC can directly access bank records without a court order under specific circumstances, particularly for violations related to terrorism financing.

B. Inclusion of Casinos and Virtual Assets as Covered Persons (R.A. 10927 and R.A. 11521)

• Casinos: Included as covered institutions to regulate large transactions and prevent laundering through betting.
• Virtual Assets: With the rise of digital transactions, virtual assets such as cryptocurrencies are now within AMLA’s scope.

C. Administrative Sanctions for Non-Compliance

• The AMLC imposes fines, suspensions, and other sanctions on institutions that fail to report or comply with AMLA’s stringent reporting and due diligence requirements.

IX. Procedural Safeguards and Legal Recourses

• Right to Due Process: Entities and individuals affected by AMLC actions can seek judicial review and avail of remedies like injunctions.
• Provisional Remedies: The AMLC may impose provisional measures like asset freezes and preventively suspend individuals suspected of money laundering activities.

X. Compliance and Due Diligence Requirements

• KYC (Know Your Customer): Financial institutions must establish customer identity, origin of funds, and nature of the business to detect and prevent suspicious activities.
• Record-Keeping: Financial records, such as transaction histories and customer details, must be retained for at least five years.

XI. International Cooperation

• Exchange of Information: The AMLC cooperates with international anti-money laundering bodies and has extradition treaties to ensure the enforcement of AMLA on a global scale.
• Mutual Legal Assistance: The AMLA provides a framework for seeking and providing legal assistance with other jurisdictions, especially on criminal offenses involving transnational money laundering.

XII. Conclusion

The AMLA, as amended, imposes significant obligations on both individuals and financial institutions, backed by strict penalties and extensive investigative powers of the AMLC. The law is intended to provide robust defenses against money laundering while balancing due process rights, compliance costs, and the need for international cooperation in combatting transnational financial crime.

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

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:

1. Predicate Crimes: Specific crimes from which laundered proceeds are derived, such as drug trafficking, terrorism financing, graft, and corruption, among others.
2. 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:

1. Criminal Penalties: Penalties for money laundering include fines and imprisonment based on the severity of the offense.
2. Administrative Sanctions: Covered persons or institutions failing to report, conduct due diligence, or maintain adequate records may face fines, suspension, or revocation of licenses.
3. 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.

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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.