Cleaning Up After Cyber Heist a Test for Next Philippine Leader

  • Some officials call for broadening of dirty money law
  • Such laws currently don't extend to Philippine casino sector

Whoever succeeds Benigno Aquino as Philippine president will get the job of mopping up after a multi million dollar cyber heist that put the country’s safeguards against money laundering under global scrutiny.

Shaken by the hacking theft in February of $81 million from the Bangladesh central bank, lawmakers have launched an investigation into how the Bangladesh funds were routed from the U.S. Federal Reserve to Philippine bank accounts and then through local casinos.

Presidential candidate Grace Poe
Presidential candidate Grace Poe
Photographer: Ted Aljibe/AFP via Getty Images

Some of the five candidates for the May election have recently begun commenting on the case that has riveted the Philippines for weeks with lurid headlines and a partially-televised Senate inquiry. Senator Grace Poe has spoken publicly in favor of bringing casinos under the anti-money laundering law and improving transparency in the banking sector.

“The Philippine financial system is now under a cloud of doubt," former budget secretary Benjamin Diokno said by phone. "The whole world already saw the weakness in our anti-money laundering law. The next government will really have to bite the bullet and solve this.

Diokno, who held the post in the late 1990s and is now a professor at the University of the Philippines School of Economics, said the next president must make banks more transparent and amend the law to include casinos -- even if that means antagonizing the burgeoning gaming industry.

Presidential candidate Jejomar Binay
Presidential candidate Jejomar Binay
Photographer: Mark R. Cristino/EPA

At stake are Aquino’s credentials in stamping out graft and, with economic growth running at its highest levels since the 1970s and national debt low, his effort to transform perceptions of the Philippines as the so-called “sick-man” of Asia. Transparency International’s Corruptions Perception Index for 2015 ranked the Philippines at 95th, a deterioration from 85th in 2014.

“Most people who are invested in the Philippines have a fairly good idea that the financial system is not as transparent and that the regulations are not as strict as they are as in other jurisdictions,” said Tim Condon, head of research for Asia at ING Bank NV in Singapore. “Most people will be looking at this as a sort of a learning experience. That this is something that happened is unfortunate and hopefully measures are taken so that it doesn’t happen again.”

Still, University of Asia and the Pacific economics professor Cid Terosa said presidential contenders "do not pay much attention" to anti-money laundering policies because they are not "popular and populist" concerns.

Presidential candidate Rodrigo Duterte
Presidential candidate Rodrigo Duterte
Photographer: Noel Celis/AFP via Getty Images

"There are more urgent socioeconomic issues that have to be dealt with," Terosa said. "Poverty, underemployment and unemployment, health and sanitation, structural diversification, and countryside development appear to require immediate action."

Senate President Franklin Drilon, who oversaw the passage of the so-called “dirty money” law in 2001, said Aquino’s successor would need significant political will to withstand lobbying from casino owners.

“The passage of amendments to the anti-money laundering act will need principled leaders with integrity who will push for them and not bow down to lobbying,” Drilon said in a statement.

Central bank governor Amando Tetangco said last month there’s a need to strengthen the law against illicit funds and to relax deposit secrecy.

Presidential candidate Mar Roxas
Presidential candidate Mar Roxas
Photographer: Veejay Villafranca/Bloomberg

Poe, a narrow front-runner based on opinion polls, told reporters on March 16 that casinos should be covered by the law. “I think that we should really consider that because, otherwise, everyone will just channel in a particular industry that is not covered by the bank disclosures,” she said.

Of the other candidates:

  • Vice President Jejomar Binay is open to including casinos among those required to report suspicious transactions, said Jay Layug from his policy team
  • Davao City mayor Rodrigo Duterte would support amendments to the anti-money laundering law and bank secrecy act, a spokesman said
  • Mar Roxas, the former interior secretary who has Aquino’s backing, said he favors expanding the law to include casinos, but banks should stay the "first line of defense" against dirty money

Despite opposition to such moves in the past, Bloomberg Intelligence senior industry analyst Tim Craighead said casino operators may decide that new rules could be a good thing for everyone.

"The operators don’t want exposure as being susceptible to money laundering operations," he said. "They are working to transform gaming into an integrated-resort tourist destination with Entertainment City, and the money laundering issue is bad press."

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