THE ISSUES IN MONEY LAUNDERING

 

So much has been said about money laundering, including much analysis about the system that all banks use for bank-to-bank international fund transfers pretty much worldwide as of this time. But the bottom line: What are the real issues at stake?

Money laundering is resorted to legitimize money that has escaped the tax dragnet of governments, which would involve simple cases of tax evasion. This is probably the largest part of the money laundering resorted to. The second are earnings from the drug trade — which has destroyed many, many persons young and old — and other illegal or criminal activities, such as profits skimmed by ‘Mafia-type organizations’ from what may be legal activities, such as garbage collection contracts, construction projects, bribes to government officials, given and received in consideration of lucrative contracts etc.

When money laundering takes place, the participation of commercial or universal banks is indispensible. Even money-changers, large or small, have to have a bank where they park their funds, profits and operating capital, etc. These banks then execute the instructions of the account holders to pay this or that party, or to receive funds from other banks for credit to their account, or else withdraw some monies from their accounts to make payments in cash or manager's checks, but mostly in cash.

Money laundering is lucrative and often provides a 30% profit to the one that makes the arrangements with the bank, because they are known to the bank or have made arrangements to "share" with the bank concerned the 30% profit from the transaction. The size of the transaction and/or its continuing nature can provide very substantial gains. There is enough to share with the powers that be in the bank. There is no direct obligation to report, and the nature of the reporting requirements leave much discretion to the bank officials concerned. It might be appropriate to mention that the issue that was raised was that some $17 million is missing. Could that be the profit motive that had made this transaction pass so easily in the bank concerned?

The other question is: How high did that transaction have to go up? It would seem to me that such a huge transaction was arranged in a verbal manner and like prudent executives, they could find refuge in deniability and the bank secrecy law.

It is interesting to note that while balances in accounts may be considered protected by the secrecy law, what the probers should look at is the manner in which the bank concerned received the funds and how they handled it, and not pretend that the branch manager alone was solely responsible. They did not have to disclose the name of the account holder, but such funds entering their books would have to involve other departments that are all equally called upon to be prudent. Four remittances of similar amounts are certainly not normal, even for a bank of the size of the bank involved. So, the defense that this is ordinary for them sounds rather thin, if not ridiculous.

The department which receives the instructions from their correspondent bank of the transactions involved, the treasury or cash management part of the involved bank should have been questioned, because the movement of such huge amounts of money to the branch requires close coordination and special security arrangements, and should have raised questions about the transactions. Eighty-one Million US Dollars translate to over Four Billion Pesos, an amount no branch carries in its safe without asking their head office to provide.

The Senate could have asked the bank to give them a list of telegraphic remittances for the last 30 to 60 days to determine how routine these transfers were. They should have summoned the one in charge of the foreign exchange position of the bank, and asked what inquiries he had made when advised of these inward telegraphic transfers. The person in charge of cash management should have likewise been invited to give a testimony.

If they give nothing but vague answers, or answers seeking to minimize their accountability in the matter, then a cover-up is involved. If the CEO denies awareness, then he should be asked if those in his team, who were involved, had anything to do with this set of transactions and why. If he had done nothing, I would not accept an excuse that he did not know anything or was caught sleeping on the job. Evidently, a common line of defense had been adopted so that no one could be pinned down, except the branch manager.

In any event, it is obvious that the system of management was loose and fancy-free, totally inappropriate in this day and age.

What underlies the whole set of transactions is that there was very evident connivance within the bank, with others outside the bank, and with very likely promise of great rewards that they couldn't earn in 10 years or a lifetime of working.

If the funds were not hacked from the Central Bank of Bangladesh, no one would have complained or be any wiser.

Sayang at sorry na lang!

I am just as convinced that other banks probably have their own secrets. They just haven't come to light. BSP's desire to "minimize" the consequences and take the problem out of the limelight is just unfortunate. The same goes for the Senate.

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Monday, 16 December 2019
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