Updated March 06, 2011 12:00 AM  

http://www.philstar.com/Article.aspx?articleId=663496&publicationSubCategoryId=63

MANILA, Philippines –  The Philippines’ financial intelligence unit (FIU) investigations are severely constrained by limited authority to access bank information, according to the US State Department 2011 International Narcotics Control Strategy Report released Friday.

The second part of the report on Money Laundering and Financial Crimes in the Philippines indicated that the requirement of obtaining a court order to freeze assets, including those of terrorists and terrorist organizations placed on the United Nations (UN) 1267 Sanctions Committee and lists of foreign governments, is “inconsistent” with the international standard.

Except in instances of serious offenses such as kidnapping for ransom, drugs and terrorism-related activities, the FIU is required to secure a court order to examine bank deposit accounts related to unlawful activities enumerated in the Anti-Money Laundering Act.

A Supreme Court ruling prevents ex parte inquiry into bank accounts. The FIU can, however, seek an ex parte freeze order from the Court of Appeals before seeking authorization to inquire into bank deposits.

The FIU also must obtain a court order to freeze assets, including those of terrorists and terrorist organizations placed on the UN 1267 Sanctions Committee’s consolidated list and the lists of foreign governments.

“This requirement is inconsistent with the international standard, which calls for the preventative freezing of terrorist assets without delay from the time of designation,” the report said.

The US government urged the Philippines to enhance the FIU’s access to financial records, and ensure it can rapidly freeze terrorist assets.

Terrorist financing is not a stand-alone offense under Philippine law and therefore not a predicate crime under the Anti-Money Laundering Act.

A person who finances the commission of terrorism may be prosecuted as a terrorist either as a principal by inducement pursuant to Article 17 of the Revised Penal Code or as an accomplice pursuant to Section 5 of the Human Security Act.

“However, this approach requires a terrorist act to have occurred and does not encompass general financial support to terrorist entities for other purposes (recruiting, training, social welfare projects, etc.). The (Philippine government) should criminalize terrorist financing as a stand-alone offense, and enhance training on its connection to money laundering,” the report said.

Although the Philippine government has cooperated with the US government to share assets, the report said the Philippines should formalize asset sharing arrangements, and clearly designate which agencies have authority over this process.

Despite its developed financial system, the Philippines, not a regional financial center, is still a heavily cash-based economy, with substantial remittances from its large expatriate community, it said.

“Nonetheless, money launderers generally use formal financial institutions to conceal proceeds of crime, and the weak national ID system makes implementing a robust ‘know your customer’ system difficult,” the report said.

The report also cited human and drug trafficking, official corruption and investment scams as principal sources of criminal proceeds.

With the Philippines’ geographic position attractive to human and narcotics traffickers, and relatively open sea borders complicating enforcement of currency controls, the Philippines continues to experience an increase in foreign organized criminal activity from China, Hong Kong, and Taiwan, the report said.

Insurgency groups operating in the Philippines partially fund their activities through local crime and the trafficking of narcotics and arms, and engage in money laundering through ties to organized crimes.

Smuggling, including bulk cash, continues to be a problem.

There are free trade zones and four offshore banking units (OBUs). The Central Bank exercises regulatory supervision over OBUs and requires them to meet reporting provisions and other banking rules and regulations, it said.