19 September 2016
SENATE HEARING: ANTI-MONEY LAUNDERING ACT, AGRICULTURAL LAND REFORM CODE, NATIONAL PAYMENT SYSTEM, SECURED TRANSACTIONS ACT

 

     
 



TRANSCRIPT

SENATOR CHIZ ESCUDERO (CHIZ): Committee on Banks and this morning is hereby resume, chair would like to acknowledge and recognize our committee secretary to acknowledge the presence of our guests for the record. Ma'am, please.

COMMITTEE SECRETARY (CS): Good morning, Senator. Good morning, guests! For today's hearing we have Assistant Governor Johnny Ravalo, BSP (Bangko Sentral ng Pilipinas); we have Deputy Governor Nestor Espenilla Jr., BSP also; Deputy Governor Vicente Aquino, also BSP; we have Attorney Roel Bumatay, Bank Officer of Anti-Money Laundering Act; Chairperson of Securities and Exchange Commission, Chairperson Teresita Herbosa; and also Atty. Ela Xavier Padilla; we have for the Chamber of Thrift Banks, Ms. Suzanne Felix, the Executive Director; and the Consultant Mr. Benjamin Yambao; the President of the Rural Bankers Association of the Philippines, Mr. Antonio Pasia; we also have the Deputy Director of Bankers Association of the Philippines, Ms. Connie Justiniani and Mr. Arnel Almaden, the Associate Director; we also have Ms. Alicia Cordero, Association Compliance Officers; for Land Bank of the Philippines we have OIC-EVP, Mrs. Cecilia Borromeo and Attorney Manuel Marquez; for the PDIC, we have President Ms. Christina Orbeta together with Attorney Maria Antonette Bolivar, Legal Counsel; we have for BIR (Bureau of Internal Revenue), Atty. Nina Asuncion.

CHIZ: Good morning. Maraming salamat po sa inyong pagdalo sa aming pagdinig. We will take seriatim according to the sequence. In our agenda, the bills filed by various senators: unahin na po natin Senate Bill No. 45 filed by Senator (Panfilo) Lacson which seeks to amend to a large extent provisions of the Anti-Money Laundering Act. May I hear from Atty. Bumatay. Ma'am Tess are you familiar with this proposed bill? Kagagawan niyo ba ito?

SECURITIES AND EXCHANGE COMMISSION CHAIRPERSON TERESITA HERBOSA (TH): Yes, Mr. Chairman.

CHIZ: Kagagawan niyo ito?

TH: Yes and we believe we have support of everyone and the stakeholders in the efforts of our country to combat money laundering.

CHIZ: May I inquire from the various Bankers Association if you are familiar with this bill in so far it seeks to amend a lot of provisions on the Anti-Money Laundering Law. May I hear from Mr. Pasia first, Sir. Are you familiar with this bill?

RURAL BANKS ASSOCIATION OF THE PHILIPPINES PRESIDENT ANTONIO PASIA (AP): Hindi po.

CHIZ: Hindi niyo pa po nakikita? Ms. Connie, Ma'am are you familiar?

BANKERS ASSOCIATION OF THE PHILIPPINES DEPUTY DIRECTOR CONNIE JUSTINIANI (CJ): I haven't seen the draft bill.

CHIZ: Ma'am?

CJ: We haven't seen the draft of the bill but we are supportive of amending the Anti-Money Laundering.

CHIZ: Hindi niyo pa nakikita, sinusuportahan niyo na. We would like to direct the secretary to kindly furnish or refer our Guests from the ABAP and BAP. Refer them to the corresponding website where they can get and download a copy. Ma'am Tess you will speak for AMLC?

TH: Your Honor will you please Mr. Chairman.

CHIZ: Deputy Governor Aquino can also speak for (inaudible).

TH: Yes, of course. And we also have the other members of AMLC, Commissioner Manny Dooc of the Insurance Commission as well as Atty. Salido is also in charge of the Secretary and Atty. Roel Bumatay.

CHIZ: Also Ma'am, question, these proposed amendments came from AMLC itself.

TH: Yes your, Honor.

CHIZ: Isa-isahin ko po, Ma'am. Inclusion of jewelry dealers. May I ask why?

TH: Actually, your Honor, in the previous amendments or the most recent ones. Dealers of precious stones and metals were already included but they just wanted to separate of two terms of dealers and the jewelry dealers. The jewelry dealers would probably refer to finish products using precious or precious metals.

CHIZ: So hiniwalay ang raw material sa precious stone duon sa jewelry as a finished product.

TH: Yes.

CHIZ: Watches would fall under where?

TH: I supposed jewelry dealers.

CHIZ: Huh?

TH: Jewelry dealers, the ones selling the expensive watches.

CHIZ: Is that an accepted definition, the jewelry includes watches?

TH: I do recall that in the previous deliberations of the Senate, we did say that the only qualifying period will be the amount. It's Php1-M whether a watch because that would be really a precious stone or precious metal.

CHIZ: Ma'am, all protects above Php1-M about half of Rolex watches would be above Php1-M to whether a brand new or vintage. How many transactions would you protect supervising if you include or monitoring, if you include watches and jewelry themselves. Do you have a figure in mind?

TH: I don't have a figure in mind now. But if your Honor please, we dealt with the association of Jewelry Dealers and Makers and they did furnish us the details of how much of this finished products they export, how much they sell here in the Philippines. I don't know if we got to talk to the big dealers of watches and expensive jewelries.

CHIZ: Can you furnish our committee, Atty. Salido? With a copy of that report.

ANTI-MONEY LAUNDERING COUNCIL OFFICER-IN-CHARGE ATTY. VINCENT SALIDO (VS): Surely, Mr. Chair.

CHIZ: We acknowledge the presence of Senator Gatchalian. Out of curiosity, Deputy Governor Aquino, ilang transactions ang bangko na nire-report sa inyo with the Php500,000 threshold? A day?

VS: I'll answer that Mr. Chair. In so far transactions, Mr. Chair more or less 45million transactions.

CHIZ: A day?

VS: Every year Mr. Chair.

CHIZ: A day.

VS: A day so around one million I suppose, Mr. Chair.

CHIZ: So that's one million recorded transactions a day on banks transactions only. How do you even keep track? How do you even keep track? Basta ni-report sa inyo nasa database niyo, OK na 'yun?

VS: Yes, Mr. Chair.

CHIZ: As long as there's a report.

VS: Yes.

CHIZ: 'Pag may nag reklamo or tip or intelligence report dun niyo lang titingnan.

VS: Mostly yes, Mr. Chair. All suspicious transactions also a trigger for us to conduct financial investigation.

CHIZ: How about art dealers? What would be the inclusion? Paintings, sculptures…

VS: Yes Mr. Chair.

CHIZ: What else? What would be other works of art?

TH: What we included here, Mr. Chairman, is art dealers refers to any person into sells otherwise deals in works of fine arts for profit or gain such as galleries, art brokers present agent. And the definition of art is "all original works of art like paintings, sculptures, drawings, and art works produced in multiples such as graphic and photographic works".

CHIZ: So the dealer not the artist himself or herself. It's the dealer that's covered.

TH: Yes, because he is the one who's going to report that work of art has been sold.

CHIZ: So if the artist sells it himself or herself that's not covered.

TH: No, if there's no exchange of money so that's the work of art.

CHIZ: Binenta. Did not go through the dealer. Most of our artists here sell directly or sell through a dealer on about half.

TH: Yes, I don't think it's included because it just says here your Honor: galleries, art brokers and agents.

CHIZ: That's exactly my point.

TH: Yes that's it.

CHIZ: Or is that's the intention? Or talagang dealers lang para malakihan lang hindi naman lahat. So if the artist himself or herself sells her own work of art they are not included in the purview of the proposed amendment.

TH: Maybe the risk of money laundering would not be there if the artist himself would sell the work of art.

CHIZ: Motor vehicle dealers, meaning those selling brand new or second-hand?

TH: Including second-hand, your Honor. In fact, many of this second-hand are the ones come abroad, imported and resold by many dealers all over the country.

CHIZ: Mga parade because uso ngayon they lease out property to people would want to sell those second-hand cars and let them park it there to be displayed, is that person considered a dealer if he is paid a rental to exhibit her showcase that the cars being sold with their respective owners.

TH: If you please, I think the person is just renting the space and will not have anything to do with the sale of the cars or even probably getting the proceeds (inaudible).

CHIZ: A rental or percentage of sale price whichever is higher, he would be a dealer?

TH: Yes, I would consider that a dealer your Honor.

CHIZ: And therefore covered under on quarter reports.

TH: Yes your, Honor.

CHIZ: Next amendment is Trust, what is exactly the meaning of this Ma'am?

TH: Your Honor, the definition or the proposed revision in the definition of the company service provider that would include trust agents similar to what they do in other countries like Hong Kong they hire people to act on behalf of the real owners or the ultimate beneficial owners of the corporate entities.

CHIZ: There are a lot of those in Hong Kong, in Singapore, in Europe, you'd now require this "trust agents" sometimes law firms or financial institutions to report to you?

TH: Yes, your Honor.

CHIZ: What if they are abroad? Or based abroad? Atty. Salido?

VS: Mr. Chair, the financial units there they will be covered.

CHIZ: If they have similar law.

VS: Yes that's correct.

CHIZ: Does Hong Kong have similar law?

VS: Yes, Mr. Chair.

CHIZ: Cover and Trust?

VS: Cover and trust as mentioned by the Chairperson.

CHIZ: Singapore?

VS: Singapore, yes, Mr. Chair.

CHIZ: So sila ang bahala doon? But in so far trust created here as you are concerned sa inyo magre-report?

VS: Yes that's correct, Mr. Chair.

CHIZ: When you say form, dito kinereate ang Trust. Does it refer to the company or the transaction done here because it's possible that it's a Singapore based Trust.

TH: I think your Honor refer to the formation of the company here using any kind of trust arrangement whether formed abroad or here. Because of this purpose if I recall by the FAT-F recommendations that shelf companies are the ones in focus.

CHIZ: So all trust agreements executed by the big law firms in the country will now be required to remain public? At least the companies. Hindi ho ba, let's be frank. You were part of a law firm Ma'am Tess, you formed dummy corporations and there's nothing illegal about it, technically even if under SEC rules. That's why we are pushing for a bill to recognize the formation of a one-person company. Very much like what they have in Singapore for example. Because we know four other guys are dummies. Because our laws require five persons at least to form a corporation. So kung ako man ang secretary mo, driver mo, 'yung kung sino pa para makalima ka nakalagay naman duon 99%. So might as well set up a one person…allow a one person company. So you would now require such a company.

TH: Yes your Honor, I think it will work this way: if the incorporators would go to the bank and deposit money for the paid in capital stock they'll have to declare who are the ultimate beneficial owners of the company. So, if the nominees or those incorporators are just active in behalf of the ultimate beneficial owners they must indicate somewhere that they are just agents or nominees and I know a requirement is attached the agreement, the power of attorney or the trust arrangement.

CHIZ: So wala ng purpose 'yung Trust? It's pointless to form a trust company.

TH: Well, Mr. Chairman.

CHIZ: Why else they require when they divulge anyway?

TH: Even under the Securities' Regulations Code and those who are indicates transactions on our supposed to reveal who is the ultimate beneficial owner. It's not that it will be open to the public or disclose to the public right away. Probably it will just be one of the records of the KYC requirements.

CHIZ: So it's still now illegal but only required to be reported.

TH: Yes your, Honor.

CHIZ: That would be the case. So what if a corporation is formed wherein 95%, 97% owned by the one person. Clearly here she's the biggest stockholder; clearly the others are merely nominees with the corresponding Trust Agreement as far as their shares are concerned. Again, they comply with the five-person requirement. All of them would be required to still report or that's sufficient compliance.

TH: They are requiring reporting, your Honor. In fact, there is a declaration of trust that we suppose in touch. And for the protection only, you should attach the Declaration of Trust.

CHIZ: So the other four dummies are required to present the Trust Agreement. Again, just to clarify Ma'am, it's not illegal. They're just complying with the requirement of the law requiring five persons. Chair would like to acknowledge the presence of one of the authors of the bill that we will be taking up, Senator Bam Aquino.

SENATOR BAM AQUINO (BA): Good morning, Mr. Chair.

CHIZ: Good morning, Sir! Lawyers, notaries, won't this violate lawyer-client relationship?

TH: If your Honor, please.

CHIZ: You require them to report. Transactions states do in behalf of their clients.

TH: Yes but that there is a provision that exempts matters learned by the lawyer or disclosed to the lawyer in the course of our profession as relationship of the client. What part is that? That's, if your Honor please, at Section 10-7 on page 2.

CHIZ: No, this is the provision.

TH: Sorry, yes. The qualification is somewhere in the amendment which passed previously Republic Act 10365.

CHIZ: Which exempts?

TH: That was passed in 2012, your Honor.

CHIZ: Which exempts?

TH: Which exempts those learned in confidence and I'll…

CHIZ: Ma'am, learned in confidence. What if they do something in confidence?

TH: Then the general law jurisprudence, your Honor, that would qualify whether the matter is still covered by confidentiality then becomes a criminal act, your Honor.

CHIZ: Can you read the provision, Ma'am? How will this related the amendment that was passed in the law?

TH: So, if your Honor please in Republic Act 10365 that was passed sometime in 2012, we inserted this qualifying provision in Section 3 and it says, "notwithstanding foregoing the term covered person shall exclude lawyers and accountants acting as independent legal professionals, acting in relation to information concerning their clients or disclosure of information will compromise clients, confidences or the attorney-client relationship. Provided that this authorizes practice in the Philippines and shall continue to subject the provisions of their perspective code of conduct and or professional responsibility in any of this amendments".

CHIZ: I understand that Ma'am and I agree with that provision. This provision now seeks to further change that and the target will be real estate brokers. Will that be correct? That's what the amendment seeks through?

VS: Sorry Mr. Chair, with more specifics in so far transactions of lawyers pertaining to buying and selling burial estates, managing of client's money, those are the things we want to cover.

CHIZ: Why would that not violate the provision of the law that you just cited?

VS: Because Mr. Chair, basically even anybody can manage client's (money). You don't have to be a lawyer to manage a client's money. So there are the modus operandi of some money launderers is that they take advantage of the lawyer-client relationship to hide the money. So basically if that function can be performed by a non-lawyer is lawyers so can be shielded from this lawyer-client relationship.

CHIZ: Agree but so? Whatever motivation they may have in using a lawyer, gusto niya mas matalino, mas maganda 'yung abogada, he wants to pay more. Why go against the provision of the law and varies in jurisprudence in lawyer-client privilege. I don't know if there is a privilege ng accountant?

VS: Yes.

CHIZ: I wouldn't know; I am not an accountant.

VS: There is Mr. Chair.

CHIZ: Where is it found? Not in their oath but where it is found in the law? Anyone can answer, Atty. Azcueta? Is there a law?

ANTI-MONEY LAUNDERING LAW SECRETARIAT ATTY. JULIUS AZCUETA (JA): Mr. Chair, there in none but it is embodied in their Professional Oath of Conduct.

CHIZ: A Code of Conduct among accountants.

JA: Yes, Mr. Chair

CHIZ: Passed by who?

JA: Actually their complying with the some sort of international standard for all accountants.

CHIZ: Is it binding?

JA: Based on the representation of the head of PICPA when we are conducting Mr. Chair the National Risk Assessment, it was their position that covered by this particular prohibition, your Honor.

CHIZ: Attorney, kindly furnish us with the copy of that, I don't know, oath, agreement, international standard, practice – in what form does it come in, and what document is it contained?

JA: I will furnish you, Mr. Chair, with their position paper on this matter.

CHIZ: Atty. Salido, you would still be violating a lawyer-client privilege. So, if the act can be performed by a non-lawyer, you won't it's your position, you're not violating lawyer-client privilege simply because he hired a lawyer, is that it? Or do you really seek to exempt this lawyer-client privilege. But what's the reason behind for the distinction. Why real estate brokers, why real estate transactions? Why?

VS: There's, Mr. Chair, not only so far real estate transactions but also other forms of transactions like managing a client's money, securities or other assets.

CHIZ: Nandoon na dati 'yun. Nandoon na dati 'yun but persons with supervising these services. You are specifically mentioning lawyers and now accountants.

VS: Under 103635, Mr. Chair, requires not only specifically did not refer to lawyers. It enumerated the covered persons but it did not specify who is performing that particular functions.

CHIZ: I agree with you but why pick-on and specify lawyers and accountants because you cannot? Because they are citing lawyer-client privilege? Is that the reason? Now you want the provision of law which empowers you to so inquire and exempt them from a lawyer-client privilege, is that the purpose?

TH: Mr. Chairman, I think I get your point because if the purpose really is to classify this activities as high-risk when it comes to money laundering like buying and selling real estate, managing the money of others, then it shouldn't refer just to lawyers and notaries but would really refer to the whole.

CHIZ: 'Yun na 'yun provision. It already says, "persons who provide the following services: without specifically mentioning lawyers, accountants and notaries". Again, you are amending it to specifically mention lawyers, accountants, notaries and other legal professionals. Ano ba 'yung other legal professionals, other than lawyers, accountants and notaries? Who else do you want to cover? Ma'am, mic please.

TH: Maybe your Honor, because under the law on professionals like lawyers, even if he is the secretary he is also bound by the confidentiality of the prohibitions. I would think that refer to the paralegals or just to the secretaries.

CHIZ: Ma'am, they are not independent legal professionals. Are secretaries independent legal professionals? Are paralegals independent legal…when you say professional, correct me if I'm wrong you are refer into profession in connection with the way you have to take an exam and swear an oath. This people don't. This people don't. Help us clarify it.

TH: We'll clarify it.

CHIZ: Kasi malamang, actually I'm asking this questions Ma'am because if we pass this in toto, 'yun din ang ibabatong tanong sa akin. Baka hindi ko rin ho masagot. Next casino operators with respect to their gaming operations. What other operations do they have other than gaming? Why not just say casino operators?

TH: Internet casino, yes, but there is another provision that talks about that they cannot do that they cannot (inaudible).

CHIZ: Exchange money. But my question is casino operators with respect to their gaming operations that are covered.

TH: Yes.

CHIZ: What happened to the recent fiasco using or utilizing a casino facility involving a local bank did not involve gaming operations. So, that's exempted from the coverage of the amendment? Hindi ho gaming 'yun, pinalit lang 'yung pera. Nagpalit lang siya ng foreign currency?

TH: But that one the aspect of the whole transaction because eventually a big part of the money did not go to some casinos or played into exchange into chips and used to play. That's why there is admission when recalling one of the hearings by the operators of the casino that they could not trace anymore where the money changed into chips went.

CHIZ: So my question…

TH: You were not able to covered part of the amount.

CHIZ: So your proposal is to cover casino operations only with respect to their gaming operations. What are you exempting? Ano ang ibang casino operation other than gaming that you are not including in your proposal. Cause you specifically limited it to gaming operations. Casino operators with respect to their gaming operations. My question is what are you excluding? Atty. Azcueta, Sir?

JA: Mr. Chair, we are covering the gaming operations only because the current set up of casinos here are they are actually operating resorts and casino. So they are registered as branding and any name however they are also engaged in resorts operation. So we just like to cover their gaming operations that the other business that they are engaged into, Mr. Chair.

CHIZ: So, just the gaming.

JA:Yes Mr. Chair.

CHIZ: Hotel, rental labas na 'yun?

JA: Yes Mr. Chair.

CHIZ: Rental lang ng events place, whatever, restaurants.

JA: Sir, those are excluded, Mr. Chair.

CHIZ: So when you say gaming operations yung may kinalaman lang sa pagsusugal.

JA: Yes, Mr. Chair.

CHIZ: You want Php150,000 per day? Aggregate of transactions exceeding Php150,000 in one gaming day. Can you imagine how many that is?

TH: Per player, your Honor.

CHIZ: I know.

TH: Php150,000 per player.

JA: That's only our proposal

CHIZ: How will you cover slot machines? Pag bumili siya ng token, dun niyo na mako-cover? Pagnanalo siya ng ilang milyon, doon niyo na lang mako-cover? Both betting ba ito and winnings? When you say casino operations does it include both the bet and the win, that's clear?

TH: Yes, your Honor because the money in both instances will be change into cash at the cashier or some of check. But it is now prohibited under our amendments to engage in cash transactions they have to give the winnings in check. And if it is more than Php150,000 then the casino should report.

CHIZ: The check in the name of the player. Is that required or he would be made in payment for cash. Check pa rin?

TH: Yes but we said here at the amendments that no cash transactions anymore.

CHIZ: No pay to cash?

TH: Paid to cash, check. I think that would be okay that's still be reported and maybe we can put it in cash however in our database we could trace where probably that have been deposited.

CHIZ: Mahirap na 'yun.

TH: Kasi its less than Php500,000 that should cover the transaction.

CHIZ: Exactly. It's not consistent anymore. It will be very difficult to look for that check, with that corresponding check member. Kindly look into that matter too. What's that one gaming day, ang alam ko na naglalaro ang gaming day nila hindi 12 am to 11:59 the following night.

JA: Which is a 24-hour period, Mr. Chair.

CHIZ: But when does it start?

JA: It could be any particular time as long as it's 24-hour period time.

CHIZ: What if it is broken? Kumain, nagcheck-in sa hotel after three hours bumaba. Is it broken?

JA: I think, Mr Chair we should address that in our proposition paper.

CHIZ: Atty. Azcueta, You seem to be the person with the core competence on gambling.

JA: No, Mr. Chair. Depending on the casie of operations, Mr. Chair. Some casino operators have really reflected days on when they close the book on the days operations. It might be six to six (6:00AM-6:00PM). So, the 24-hour provision will defend on what is provided for the operations of that particular casino.

CHIZ: Sir, you will adjust? You don't want to put it in your regulations? Para pare-pareho.

JA: It can be done, Mr. Chair.

CHIZ: Consider it. Consider it, please. Senator Gatchalian, please feel free to interject.

SENATOR SHERWIN GATCHALIAN (SG): Ma'am, how about with the advent of the internet. May mga internet gaming, proxy betting. The actual gambling happened here in the Philippines. But the settlement happens outside. Paano po iyong ganoong treatment? And some of them, loans are even extended. So, paano po ang treatment sa ganoon. Mr. Chair, Atty. Azcueta will be the one coordinating with the casino sectors and he is in the position to answer that.

SG: The operations of the junket operations are, medyo fluid iyan. Some of the settlement happened here. Some of the settlement happened outside. But the physical gambling happened here in the Philippines. Same with proxy bets where they stream the dealers dealing cards. But the transaction and settlements happened outside of the Philippines.

CHIZ: Atty. Azcueta, Sir?

JA: Mr. Chair, thank you. We have a meeting with PAGCOR last week and I think they just came also with the press release that they already opened the online casino licensing. So, they will now be providing the same services as what CESA have been providing us well. So, there's quite a concern, yes. Because although they will be providing the services or meaning only foreigners can actually join or play. Foreigners located here in the Philippines cannot actually join. However the issue will now be on how the KYC will be conducted. According to them they will only be partnering with jurisdictions to have already an existing "know your customer" regulations that those who will be providing the services to foreigners will actually conduct their own KYZ or the "know your customer" procedures, your honor. Considering that there will be no domestic players. In effect, there will no players on the jurisdiction, your honor.

SG: I think I read recently in the recent magazine that Macau gaming income has dropped significantly because of the China crackdown on corruption and precisely because a lot of the stolen money are being laundered and rushed in the casinos particularly Macau. But, ever since the crackdown happened in China they are now looking for other restrictions to launder. That gave birth to all kinds of technology to make it convenient for them. That's why 'yung rules even the PAGCOR are not so clear. Even the factor regulator, walang regulations happening. Everyone can come in. Anybody can bet and transact. Hindi natin alam kung galing ba sa drug dealer iyan or corrupt money ba iyan? Or galing sa Africa. Nobody actually regulates that. There are rules to operate but there are no regulations. There's no regulations Iyon po ang hindi klaro ho sa amin. Paano ho natin gagawin iyon?

CHIZ: Atty. Azcueta, who will report? And I think iyon ang basic inquiry ni Senator Gatchalian. Who is obliged to report under the proposed amendment?

JA: If you are still talking about the gambling, Mr Chair. According to PAGCOR there will no financial transaction that will involve the country. Therefore, it appears that reporting should be done by the operators to their respective FIU.

CHIZ: FIU meaning?

JA: Their own AMLC, their own financial intelligence unit, Mr. Chair.

SG: This will be implemented to countries which have the same type of AMLC laws?

JA: We do not have, Mr. Chair. However, according to them based on the representation. They will only accept applicants from jurisdictions who already have an existing AMLC.

SG: For example, with Cambodia. For example lang, Cambodia. Wala silang AMLC. So, PAGCOR will not allow them to operate, proxy betting or internet gaming?

JA: That's the representation Mr. Chair because they will not be required to just like KYC just like us.

CHIZ: Sir, forgive me. I'm relatively familiar with this- the upper online operators have a license from either CESA, no licenses from PAGCOR at all actually. Under the law, those authorized to give such licenses are only either CESA or APECO. Because PAGCOR charter was enacted way before internet was invented. And no amendments to recall PAGCOR charters were made to include online or internet gaming. The fact that they're directly registering with PAGCOR may yet be question before our courts. But my question is, most of these operators are either in Cagayan or nag-locate sila sa RCBC under whatever exemptions they used under whatever law I am not aware. So, they're here. They are not from Cambodia or Laos or Macau. They are here. Some of the payments will be done in the country of origin of the player. He can be from Macau, from Brazil, from Hongkong, from the US. So, what are you talking about that the operators should be from a country that is also a party treaty to whatever laws we have here, such as those required by the PACAP when the accounts settled in the country of the player. And they're not limited to one country, one nationality only.

JA: According to the representation of PAGCOR, Mr. Chair, they will only be providing the platform and who's the server that will have the casino games or the online casino. For example, with Cambodia if they will be applying for license then the financial settlement will be between the operators who is located in Cambodia and the players who will be joining the game wherever they may be located except for from the Philippines.

CHIZ: Sir, rewind sorry. Walang server ang PAGCOR. In fact, there are two types of online gaming. One, the server is only operated by the online internet gaming operator. The other one is licensed by PAGCOR for example, the defunct PHILWEB. Paano iyon?

JA: Mr. Chair, I think the representative of PAGCOR is here and they are in the better position to answer the questions.

CHIZ: Who is the representative of PAGCOR? Attorney?

RESOURCE PERSON (RP): Good morning.

CHIZ: Puro naman kayo abogado. Attorney?

RP: Atienza. Good morning, your honor. As regards the off-shore game we actually we just have a meeting with AMLA considering this is a very new venture at the part of PAGCOR. We are still in the process of formulating the rules and regulations regarding that matter. When we had a meeting with AMLA, we did not provide them with a specific regulations because as a representation if we are still in the process of creating the rules as per the gaming department and regulatory department of PAGCOR. That will suit and definitely protect PAGCOR, not only PAGCOR the whole Philippines from any anti-money laundering.

CHIZ: I don't disagree with it ha. But, as discussed earlier what is the provision of the law in your charter that authorizes you relate internet gaming?

RP: Your Honor, in the amended charter, it is also expressed that all games are covered by PAGCOR. All games of chance and it is not expressly provided there that internet or offshore gaming is excluded in our regulations.

CHIZ: What amendment are you referring to Ma'am?

RP: The amendment of Presidential Decree 69, your Honor.

CHIZ: Again, Ma'am that is during Marcos' time. Historically, the reason why this online internet license registered themselves in Cagayan and CESA, it's because only CESA that have that specific provision on online gaming which APECO copied verbatim. PAGCOR never had it. That's why PAGCOR never actually licensed anyone. PAGCOR was licensing through CESA. And out of respect, CESA and APECO only giving PAGCOR 1% which they have been accepting for so many decades. Because if PAGCOR could do it directly. PAGCOR could have and would have done it a long time ago, too. That charter of PAGCOR pertains to specific territory. Territorial gaming ang sinasabi nila. It is online and internet gaming. Would you even know where the game is being held? So, if it's held through the internet- I don't know where. Is it covered by PAGCOR? Why do they even want to locate in the Philippines if all of these are foreigners. If all of their players are foreigners, why would they even want to locate here and register with PAGCOR? What do they get out of it? Mabilis ba ang internet natin at mura? Pero, kung mabilis at mura dito, nandito ang player. Why would you assume?

RP: Well, as far as I know sir, as provided by the gaming and regulatory department of PAGCOR. Basically, PAGCOR will just provide facility as to transactions of the financial concerns. It is beyond our jurisdiction. It is actually as provided and as stated a while ago. There will be no financial transactions in the Philippines. And we will only coordinate or we will just have the agreement with the other countries that has also licensed to operate such kind of gaming.

CHIZ: I don't get it, Ma'am. Bigyan ko kayo ng scenario, attorney. Proxy betting, where the dealer is stream live. Nangyari ito let's say, Cambodia and China. Magdedeposit iyong tao, one million dollars tapos kunwari maglalaro kapag naubos magwi-withdraw ulit. Hindi ho ba laundering iyon? Washing rin ho iyon?

RP: Well, as far as PAGCOR is concerned, as I've said a while ago.

SG: Ito naman, nangyari sa internet. Proxy, it was streamed live. The transaction, the settlement happened outside but the broadcast happened here in the Philippines. So, we are party to that washing or laundering. So, how do we set-up a regulation against that. Nakuha ninyo ho, Attorney?

RP: Yes, Sir.

SG: Nangyari na iyan. In fact, you said earlier it's nothing new. It's been happening for a while already. Although hindi nga ho nare-regulate nga ho ito kaya may proliferation this type of activity all over Metro Manila. RCBC Chairman mentioned this one. But, very loose ho kasi, there is no regulation. And it's happening now as we speak. So, how do we prevent that from happening?

RP: Well, as far as the legal is concerned and we have to confer that already with the details of the regulations to the appropriate department. However, your Honor it is our concern that whatever it is that will come to our jurisdiction we have to make it sure that it will fall under or pass through the financial institutions like banks as well so that it will be covered by AMLA. However, your honor as I've made presentations a while ago we are still in the process of creating detailed and more stricter regulations as to that. That's the reason why we cannot provide as of the moment the details of regarding the offshore gaming. Because, this is actually very new creations. In fact, we are still in the process of determining parameters of such gaming that we will offer outside of the country.

CHIZ: Atty. Azcueta, what about the junket operators, are they covered?

JA: We tried to include them, Mr Chair. Unfortunately, Mr Chair our current set-up is that junket operations are not actually registered. These are just individual who enters into an agreement with casinos.

CHIZ: Did you provide the bulk of the payment institution settlements ha. For the information of the junket or for someone who has a long list of clients na nagsusugal. Dadalhin niya rito. Pwede niyang dalhin dito. Pwedeng online, dadalhin niya rito, pagsusugalin niya kasama na itong pamasahe, hotel. Lahat. Wine and dine them. Then, ang usapan whatever they lose here they will pay him whatever. In exchange for bringing the players, the casino operators in honors will repay him a fixed percentage of winnings of the casino. Not in the loses. Most of the big players go to the junket operators that's why junket operators becomes a hit is they got one of the best junket operators. Kaya bumabagsak ang ibang casino, lumipat dahil mas malaki ang offer ng junket operators. So, nothing is settled here. If they are not included, if they are excluded. You're excluding a big chunk of what is going on the big casinos here.

JA: In the initial draft of the proposed bill of the casino, Mr Chair. The junket operators will actually include. Unfortunately, we were told that the junket operators are merely acting as an agent of the casinos and actually registered as players. But, when we went into details, we found out that players are actually shielded by the junket operators.

CHIZ: Exactly.

JA: Because the previous representation is that when funds are transferred into accounts of the casino. They already identified who will be the players. Unfortunately, that was not the case. We can only monitor the transaction between the sender and the junket operator. But, we are blind as what the actual players are so.

CHIZ: If the player or junket operators belongs to a country that has the same rules as we do. If you don't even know who they are paano na natin maga-guarrantee iyon?

JA: Perhaps, your Honor we should follow the legislation of other jurisdictions or we go back to include the junket operators as covered persons as well.

CHIZ: No, I have no objections kung sino man ang gusto ninyong isama. Ang sinasabi ko lang why are you including some and excluding some others. And also on the part of PAGCOR, Atty. Atienza kindly check on that. I also read in the newspaper that you're registering, issuing online gaming licenses. Look into it. Someone might bring it to court.
Because I remember reading the charter about ten years ago when we were investigating it. Clearly, it was not in PAGCOR's power to issue licenses other than those of conducted here within the territory of the Philippines. Just to be sure, they cover all bases. Real estate, three million. How many transactions do you project. Sa dami nang condo unit dito. Utang na loob, tig-23 square meters iyon. One bedroom pa iyon. How many transactions do you project? And is it really part of your interest to sole cover it kung ganoon naman kaliit ang kita. Meaning, you're talking of the condo unit being sold by the SMDC by any developers and it's approximately Php3-M. Most of the buyers are OFWs. Unless siguro lima, bente,trenta, singkwenta ang binili but individual. Do you really want that? It will not be the threshold, as we go along Ma'am, real estate prices will go up. And you will be swamped with so many reports on three million transactions that who knows in the future will just be equivalent to- actually right now, in Makati or Quezon City. Magkano po ang square meter? Quezon City, mga isandaan? At Php100,000 per square meter, you're talking what? 30 square meters? If you will launder money, you will buy at least a thousand or five hundred at least. So, you're talking already a Php500,000 at Php100,000. We are talking about Php20-M. Look into the amount or perhaps await to amend the amount without having to come back to congress to ask us to change it. There might be a way. I mean, using inflation or CPI as a basis kung magkano man ang halaga ng Php3-M na ipinapasa natin. Magkano na ho ang halaga ngayon para hindi na kayo balik nang balik sa kongreso. Should the amount change? Deputy Governor Aquino in page four. The purposes of this act: the BSP is designated as an authority for foreign exchange dealers, money changers, remittance and transfer business. Under Section 3 Article 1.

BA: Yes, Mr Chair.

CHIZ: Bakit isiningit ito bigla dito?

BA: Mr Chairman, as the position of the BSP as one of the supervising authority shared under the AMLA to include…

CHIZ: It should be here or in your charter amendment?

BA: Well, this can be in the charter amendments Mr. Chairman but we see no harm in the actually fortifying BSP position by also reflecting this or by including this in the proposed AMLA amendments, Mr. Chairman.

CHIZ: But either way, it can be here or it can the BSP Charter amendment. Right, it's the same thing? So, if we put it here can we exclude it already in your charter?

BA: We prefer that it be in the BSP Charter, Mr. Chair.

CHIZ: That's my preference, too. Can we just include it in your charter. Might it also be considered as a rider of some sorts that we're adding to the powers of the BSP outside- although you remember I'm part of AMLA outside of the yes, Deputy Governor Espanilla, Sir.

BANGKO SENTRAL NG PILIPINAS DEPUTY GOVERNOR NESTOR ESPENILLA JR (NE): Mr. Chairman, the approach being taken by BSP- first of all the manifest conduit experience, Mr. Chairman. The original AMLA is that they are registered. There are some examination powers but the enforcement powers of the BSP can take against this particular entities are limited. The amendment like this, Mr. Chairman, will enable the BSP to bring to bear its full enforcement power with respect to this type of entities. But we agree, Mr. Chairman that if in the BSP charter amendment – they are already included then this will not be necessary. But, at this point of time Mr. Chairman, there are two bills of course being considered by congress. We don't know.

CHIZ: You're betting on two horses?

NE: Yes, Mr Chair, it's a practical matter because the rest is real. We already seen that Mr Chairman so we better bet on two horses.

CHIZ: The KYC rule is basically based on the fact the person involve is the among other are PEP, a "politically-exposed person". KYC, PEP report. Out of curiosity Ma'am, under your regulations, when will a person become a PEP and how long will he remain as a PEP? I'll give an example: someone who run as mayor, PEP? What if he loses? Iyong panalo lang? Paano kung sa susunod na eleksyon natalo siya after serving as mayor for 15 years. Does he sees to be a PEP or is he still a PEP? You have your rules.

NE: Mr. Chairman, though I have been away on the money laundering area for more than three years now already. But, based on my recollection na I experienced, the person may still be considered a politically exposed person even after he resigned from public service or he is no longer employed in the government where he still has this influence of power over a number of person which are themselves are involved in possible money laundering or financial activities, Sir.

CHIZ: For how long Sir David? For life?

NE: Not necessarily for life.

CHIZ: When it will end kapag wala na siyang power?

NE: Well, if he has no power or influence over others.

CHIZ: Sir, how will you know that? FVR, is he still a PEP?

NE: Well, as I have see-

CHIZ: He's been out of office for- I don't know.

NE: With due respect he may still be considered a PEP.

CHIZ: Who gets to decide that, Sir?

NE: Well, the banks and other institutions who are considered covered under the AMLA.

CHIZ: So, if they exclude him, AMLC can tell the bank you've committed an error. You should have been included him, why are you not including him? Ganoon ba iyon?

NE: The agency task to implement the AMLA, Mr Chairman. The AMLC can do that.

CHIZ: The AMLC can do that?

NE: Yes, Mr. Chairman.

CHIZ: With the corresponding predicate crime of course. So, Ma'am Tess Herbosa is a PEP?

TH: Yes.

CHIZ: She is for life already?

TH: Including my siblings and their families. But, I notice your honor that banks are imposed their own standard. So, foreign banks are usually very strict that they would require even in my case; my siblings to come and sign and sort of acknowledge that you are related to a PEP. But, in other banks Philippine banks, usually they just fill in what to disclose there and as to when you're status PEP ends that's also very relative. In the case of AMLC, I guess what we could use really as whether investigations caps up. And it shows that a person is still connected to a predicate crime. So, even if it has been PEP before we could take the chance probably in the base of AMLC. There would be transactions of his report.

CHIZ: At that time?

TH: Yes. Whether suspicious or covered.

CHIZ: If it's up to the banks and same as with Ms Connie, you can answer Ma'am. If it's up to the banks. When does a PEP sees to be a PEP?

TH: Mr. Chairman, may I refer you to the association of banks compliant officers?

CHIZ: Yes, Ma'am. Ms. Alicia, when this a PEP cease to be a PEP?

BANKERS ASSOCIATION OF THE PHILIPPINES ASSOCIATE DIRECTOR ALICIA CORDERO (AC): Your Honor, if PEP is if the person remains as a national influence, the name of the person remains in the database.

CHIZ: Mayor, PEP ba siya? Wala siyang national influence.

AC: Sir, there are certain layers that have national influence.

CHIZ: Like a big city? A small city, no? The mayor of Davao City or Cebu City is covered the mayor of the, I don't know the Magallanes, Sorsogon or Tabuk not a PEP?

AC: Sir, it depends on the transactions confronted by the Mayor and what is the implication to the national influence.

CHIZ: So, kung walang national, hindi siya PEP?

AC: Sir, the classification of PEP is synonymous to a person that has to be closely monitored as to the source of funds and reasons of their banking transactions.

CHIZ: So, it's relative?

AC: Sir, just like any customer, all transactions are closely monitored as to the source of funds and the economic reason of the transaction.

CHIZ: Example, Ma'am.

AC: Sir, we do not discriminate PEPs.

CHIZ: Again Ma'am?

AC: We do not discriminate PEPs.

CHIZ: Do you have a list of PEPs?

AC: We get it from, let's say the database from the public website. We do not discriminate. We treat them like regular customers.

CHIZ: Is there a list of PEPs?

AC: Sir, the bank has a database.

CHIZ: Each individual bank has its own list. Wala 'tong parang list ni President Duterte na ganyan kakapal?

AC: Sir, hindi po classified po 'yung…

CHIZ: Walang ganoon?

AC: Wala pong ganoon.

CHIZ: And how long the person will remain in that PEP list is totally subject to your discretion.

AC: Sir, from my banking experience, there are concerns from the international market if you are part of, let's say candidates, you become part of the list and then after a year parang pulling off period, you are already taken out. So, it really depends Sir on the national influence of the person.

CHIZ: And there's no standard.

AC: So, they're still active then there is a requirement that you just have to closely monitor the source of funds and the economic reason of the transactions.

CHIZ: Actually, I don't have qualms or complains. I'm just curious when the person graduates from that list. So, it's totally up to you? Deputy Governor Aquino?

BA: Yes.

CHIZ: Again, not that there is any discrimination. Only that of course if you're a PEP, your transactions are all subject to scrutiny and report.

AC: Sir, all banking transactions in accordance to banking regulations are subject to close monitoring as to the source of funds and to the economic reason of each banking transaction, Sir.

BA: Mr. Chairman, just to clarify and for the record, the politically exposed person does not mean that the bank or rather the person is licensed to discriminate against this politically exposed persons. There are certain classes or categories of PEPs or even the PUPs, even the politically exposed persons related to the PEPs. These are high risk, medium risk, or low risk at all, this doesn't mean that you're a politically exposed person, you'll already be subjected immediately to enhanced due diligence.

CHIZ: Those categories are coming from AMLC already, not the banks?

BA: Well, the banks also have this and there is a BSP regulation or policy to the effect that it's a policy of non-discrimination against politically exposed persons.

CHIZ: My concern is only the uniformity of the rule because if each individual bank determines it on their own and there are no guideline emanating from AMLC as to who, what, when, where – there is?

BA: There is this BSP memorandum circular, Mr. Chairman. It's a BSP Memorandum N. 2015, this was issued by the BSP.

CHIZ: Last year lang pala 'yan.

BA: Mr. Chairman, this is in 2015.

CHIZ: Last year nga po.

BA: Yes, so this actually embodies this policy non-discriminatory policy against certain politically exposed persons. 2015-019, Mr. Chairman.

CHIZ: Subpoena power, why do you need it? Why do you want it? Why wasn't it given to you to begin with? Anyone from AMLC? Attorney Salido? Bakit wala sa original na batas? Bakit niyo hinihingi ngayon, at bakit kailangan niyo?

VS: During the investigation, Mr. Chair, of the RCBC bank heist. We encountered several situations where we cannot obtain some evidence against some of the officials and personalities involved. For instance, in so far as the recovery of the CCTV footages along the area of RCBC, we had to get the assistance of the National Bureau of Investigation (NBI) to get those CCTV footages for us. That's why it took a while for us to secure those CCTV footages, that's why when the NBI requested these establishments around the area, the footages were already deleted. Had we have this power to subpoena on the very same day that we knew about this, we could have already secured the CCTV footages. But then again, we did not have the power to issue the subpoena, Mr. Chair.

CHIZ: 'Yun lang 'yun? Because of that experience? I mean if NBI was not sleeping on that job too at that time they could have gotten and obtained it too. They were investigating it too at that time. Other than AMLC ha? Kung CCTV lang 'yan ha? Because theoretically that's already law enforcement, not part of your job really. And wouldn't that be outside the purview AMLC already to obtain, bonus yun why not? But what other type of object or documentary evidence do you need and you will use your subpoena powers on? What evidence? Because supposed to be the transactions were reported to you already by the bank.

VS: For other instance Mr. Chair of course is like the computer hardware of the personalities involved. Had we have given the power; we could have already issued the subpoena to require them to submit those information containing those hardware or the software. Because we could not secure the emails between the parties involved. Had we given that power, I mean we could have actually obtained.

CHIZ: Is that still part of your powers as AMLC?

VS: Yes, Mr. Chair.

CHIZ: To open the emails? To subpoena, to get a copy of the emails of the subject persons?

VS: To determine Mr. Chair the relationship of the… because you know we have to relate the crime to the proceeds of the unlawful activity. So, the only way for us to do that is that had we known Mr. Chair of the communication between the personalities involved here, we could have strengthen further our cases and could have filed immediately the cases.

CHIZ: Chair, acknowledges the presence of Senator Zubiri. Good morning, Sir. Let's discuss it further. So, this is subpoena ad testificandum, subpoena duces tecum, right?

VS: Yes, Mr. Chair.

CHIZ: You mentioned the RCBC Case. Do you have any proposals for higher penalties? None?

VS: I think it's Php1-M, Mr. Chair. Originally, Php500,000 per transaction.

CHIZ: That's the funny part. Let's talk of RCBC for the moment, Sir. Sino nang naparusahan? May naparusahan na ba? May kinasuhan na ba para maparusahan?

VS: We have already filed cases, Mr. Chair, of course against the…

CHIZ: Against who? The bank manager?

VS: The bank manager, the Chinese personality.

CHIZ: Who?

VS: Mr. Wong, Sir.

CHIZ: What about the other Chinese personalities?

VS: In so far as the other Chinese personalities, Mr. Chair, we have not yet filed nay cases against them.

CHIZ: What about bank officers? Why pick on…

VS: The bank officers, Mr. Chair, in due time we'll already have our recommendation to the council. We will more or less in the next two weeks, we will also file it.

CHIZ: So, mas kumpleto yung ebidensiya sa bank manager kaysa sa bank officers? When in fact, when you are talking of these transactions such huge transactions, you and I both know na imposibleng hindi alam nung mga opisyal ng bangko 'yun, una. Pangalwa, it was all cleared at the main office. My fear, Sir, is you're handling the bank officers with kid gloves simply because perhaps you know them, I mean personally, not that you're biased but you probably think that they have more integrity but I think they're equally liable if the bank manager is, because they all dipped in it.
And speaking of the penalty for the bank, we discussed this Sir in one of our private meetings. I want it on the record too. It's a five hundred peso penalty, right? So, what penalty was imposed on RCBC?
VS: Mr. Chairman, with respect to the administrative aspect of RCBC sa non-compliance with implementing rules and regulations, the monetary board imposed already enforcement fine of Php1-B, Mr. Chairman.

CHIZ: Sir, let's clarify that. Under the law, what should they pay? Under the existing law, whether in your charter or in the AMLC law. How much would they have paid? Lower than a billion?

VS: Yes, Mr. Chair, because under the current BSP charter the maximum penalty that we can impose is reckoned on a per day basis. It's Php30,000 per day.

CHIZ: So, how much would they have paid under your charter?

VS: Mr. Chairman, the penalty that was imposed is more than the Php30,000 per day.

CHIZ: Again, I'm asking how much is the maximum penalty you can impose on RCBC under your charter? The point, Sir, is that the Php1-B is a compromised amount that came from RCBC which the Bangko Sentral merely said yes to, right? Because you are not empowered by your won charter to impose that high of a penalty.

VS: That's correct, Mr. Chairman.

CHIZ: So, my question is, ano ba yung maximum penalty na pwede niyong i-impose? At ano ba 'yung pinanggalingan ng RCBC nung nag-alok sila ng Php1-B because we might have gotten Php5-B or Php10-B, who knows? I don't know. You simply accepted it because you couldn't have imposed a higher penalty and that is more than what you could have imposed. But I do not know and I wonder where that came from? Because if I were the bank, why will I pay more than what you are asking for?

VS: Mr. Chairman, because under the existing law and regulations Mr. Chairman, the BSP can impose a combination of both monetary penalties and what's called non-monetary administrative sanction which could be things like restriction of businesses and also action against some individual persons. So, Mr. Chairman, in the case of that bank, if we were just to compute in terms of daily monetary.

CHIZ: Mababa?

VS: We will never reach Php1-B, Mr. Chairman.

BA: Yes, Mr. Chairman, there is a provision in the BSP that enable the…

CHIZ: On penalties, ha?

BA: Under Section V of the BSP charter Mr. Chairman, we compromise…

CHIZ: That's the general rule. Actually, I'm not familiar with the charter but the mere fact that it's in Section V, means it is part of the general powers of the BSP and not a specific provision to compromise imposition of penalties you're going to impose. Correct?

BA: It's a general provision on the ability of the BSP.

CHIZ: Which says what, Sir?

BA: If I may read, Mr. Chairman.

CHIZ: Just that portion.

BA: Yes. "The Bangko Sentral may compromise, condone, or release in whole or in part any claim or settled liability to the Bangko Sentral regardless of the amount involved, under such terms and conditions as may be prescribed by the monetary board, to protect the interest of the Bangko Sentral".

CHIZ: Sir, that pertains to compromising a penalty, meaning you will impose a lower penalty and not a higher penalty. In this case, you accepted a higher penalty perhaps in exchange for not imposing non-financial penalties on the bank. Is that possible?

BA: That's part of the…

CHIZ: Deal.

BA: …part of the decision, Mr. Chair.

CHIZ: Again, that's part of the deal. But my question again, just out of curiosity, you might want to include that in your charter amendment too because I doubt if you're authorized by your charter right now to compromise with non-banking penalties that should naturally attach to a banking malpractice. The fine is fine, the penalty is fine, but for you not to impose a non-banking restriction or penalty on the bank simply because they offered a bigger amount way above the penalties we can offer, I think that should be covered by a specific provision in your charter that would authorize you to do that. Otherwise, anong pinagkaiba sa binili niya diba? Binili niya o binayaran niya para hindi siya maimposan nito kapalit pera na lang. Kaysa mabawasan yung kita niya.
Again, I am not saying it's immoral or illegal right now but you might want to clarify it already and include it in your powers within the Bangko Sentral. That you can compromise in certain penalties as long as there should be a threshold and a safe guard, as long as you don't put at risk the entire banking or financial sector in so doing in exchange for a billion.

BA: Yes, Mr. Chairman, we will definitely look into that and consider a possible proposal. But just to be complete about the case of the bank, Mr. Chairman, it doesn't end with the Php1-B penalty. In the language of the regulatory framework there are enforcement actions that are also in place for which the bank has committed to fulfill and address the underlying concerns, Mr. Chairman. So, the Php1-B is just, in a way the headline.

CHIZ: One final question before we transfer to the other bills. Ma'am, bakit niyo sinama ang prohibited transactions for casinos dito? Isn't it off in this bill? For casinos, page seventeen. Isn't this off? Under an AMLC amendment, you're limiting what a casino can or cannot do? Shouldn't that be contained in their franchise from PAGCOR or license from PAGCOR?

TH: Mr. Chairman, actually these transactions for casinos we would probably have to admit that we got this from the experience of other countries and from other financial action task force, the Asia Pacific Group against Money Laundering. And in other countries it prohibited transactions not only for casinos but for all covered persons like for example in Romania, you can no longer engage in cash transactions above $10,000 equivalent.

CHIZ: Exactly.

TH: Because cash is where money laundering goes, more often than not. So, in this proposed amendment, we're only trying to clog loopholes.

CHIZ: Pangit lang pakinggan na 'yung AMLC Law, casinos lang ang nakalagay? Why just casinos? Or if you want talk to PAGCOR through Attorney Atienza, sa lahat ng lisensiyang in-issue nila sa mga casinos. Ipagbawal nila itong mga transactions na ito so that they will be violating license and PAGCOR can cancel their license. Or include everyone else, not just casinos. Parang alanganin lang na may casinos bigla. We just included them all of a sudden in the prohibited acts, it might even be a rider at marami hong pera ang mga casino, Ma'am. Baka kwesitiyunin sa Supreme Court 'to, ma-strike down lang ito for being a rider not being covered in the title or subject matter of the actual bill of AMLC.
Before we leave the subject, can I request Deputy Governor Aquino and probably a representative of Ma'am Tess or Attorney Salido? Can we sit down on it before we finalize it while we're waiting for the comments? Unless all of the banking industry is in agreement with all of the provisions here after looking at the website and looking at the bill, can we sit down on it and go through it one by one perhaps on whole afternoon?

BA: Our pleasure, Mr. Chairman.

CHIZ: Yes. Senator Zubiri, you are recognized, Sir.

SENATOR MIGZ ZUBIRI (MZ): Thank you very much. For clarification, this is still the topic on AMLC amendments? Yes, because I filed a bill Senate No. 1124. I just want to ask the AMLC, Mr. Chair, probably this was asked earlier on but my apologies for being late. But I would like to ask the AMLC, Mr. Chairman, how come there's no moving on cases on deposits over Php500-600,000. In the United States, we all know if you deposit in your account over $10,000, the account is automatically closed. Until you can actually prove to the fact that you are actually have the capability and capacity to pay or to earn this amount of money. I ask this question because in the news recently, we have seen a lot of politically exposed persons – PEPs, but are part of the drug or anti-drug campaign that have deposits in their bank account amounting to millions of pesos. Wouldn't that have raised red flags to the AMLC? I mean, I'm sorry no? But maybe I haven't been reading the newspapers page one and to the other, I have rarely seen AMLC running after councilors, congressman, senator, mayor, in this case there are several drug personalities with children who are with supposedly tens and hundreds of millions of pesos. Would you like to comment, Attorney?

VS: Yes, Mr. Chair, the function of AMLC is to conduct financial investigation and in the conduct of our financial investigation we must link the proceeds to the unlawful activity to the predicate crime. In the absence of the predicate crime or the unlawful activity, the AMLC cannot file any cases for bank inquiries or freeze unless again there is a predicate crime. The investigation is so far as the predicate crime is concerned is the function of our law enforcement authorities. That's why we regularly coordinate with our law enforcement authorities on the cases they are investigating, the cases that they have filed. Now, unless and until they are investigating and they have filed cases, we cannot conduct financial investigation in the sense that we cannot file any cases for bank inquiry.

MZ: So, this is defect of your original charter?

VS: It's not actually a defect, Mr. Chair, it's actually a requirement because there is no money laundering if there's no unlawful activity.

MZ: In other countries Attorney, it's simple, what country was that you just mentioned? That if you have any transaction over $10,000, it's already red flag.

VS: No, Mr. Chair.

TH: You are not allowed to pay in cash if the transaction would involve $10,000 or more.

MZ: For example, a friend of mine told me that when the mother had to go through an operation in the United States, they sent money to another kamag-anak doon na galing dito na I think it was $15,000 for the operation there. Right away, Bank of America closed that account until that person could actually prove where the money came from and second, what it was going to be used for. That's so strict there in other countries. And that's my fear in the Philippines has become now a proliferation of money laundering similar to what happened to RCBC. I can understand why if I have a transaction, I issued a check over a hundred thousand, my bank which is by the way Land Bank called me up saying; may we get a confirmation for this check and all this? I mean these billions of pesos of transactions na hindi na-red flag. Kaya there must be defect in your charter because in other countries, they're very serious and I take this up with all of you and I don't know if you've seen my statements, because the way to fight the anti-drug war, we need to find the money. You look for the money, when you find the money; you'll find the drug lords.
Namamatay na yung mga petty pushers, sinong nagfi-finance sa kanila, milyun-milyon 'yung pera nila sa bangko. Ang problema, I would feel that unexplained wealth is also a predicate crime. I mean we've seen a general with Mercedes Benz. I've seen generals with Php2-M watches on their wrist. I mean does not that raise red flags for decent people in the banking community at least in the AMLC? That's why in here in aid of legislation, Attorney, tell us what other powers, what other amendments we could place? Because I filed a bill to not exempt public servants whether elected, appointed, judiciary, executive, or legislative, they are open to bank secrecy. Because if we don't do that it's so easy to hide money in this country.

TH: Your Honor, thank you for what you just said, because what we have proposed two amendments to the AMLA Law. One is that the banks now would have the power to suspend transactions for two days if they have suspicions that there's something fishy going on. And that may have helped during the time of the Bangladesh incident, RCBC would have probably been able to not allow the transaction to proceed because that's the general rule, you cannot bank transactions, it would really destroy the economy.

CHIZ: But Ma'am, in that case the bank wanted it, or at least some bank officials wanted it.

TH: Right now, the banks would at least feel maybe safer that they could look further into any transactions beyond a certain amount or in the presence of suspicious circumstances. So they're now being given at least two days to be able to suspend and the parties to the transaction cannot complain against the bank being slow in processing their transactions.
The other one is the power now that we are proposing to give to the AMLC to immediately freeze accounts because in my case like I am the SEC Chair, and security law violations are predicate crime, you know when this comers dupe so many investors to put money into their accounts, we'd like to be able to freeze right away without having to go to Court of Appeals through the AMLC. Because then we could immediately get hold of the money and then file the necessary civil forfeiture or the formal order.

CHIZ: For a fixed period.

TH: Yes, because we still have to have that confirmed by filing with the Court of Appeals a petition for order.

MZ: Mr. Chairman, I am bringing this up because I also wrote an article the other day that Sec. Aguirre of the DOJ has having the difficult time coordinating with AMLC. You guys are giving him a hard time. Is that correct?

VS: Mr. Chair, I mentioned this to the Secretary that you know we must first establish that there's a predicate crime. If there's no predicate crime, we cannot conduct any financial investigation. That's under the definition of the money laundering, that's under the Anti-Money Laundering Act. Without the predicate crime, we cannot conduct any bank inquiry; we cannot file any case with the Court of Appeals for freeze or inquiry.

CHIZ: Atty. Salido, an allegation of a predicate crime or to prove a predicate crime? You're talking to the DOJ Secretary, isn't it that all he has to do is alleged that the predicate crime is involved and he can now ask for your help? You cannot require him to prove it at that time that he asked for your help. When you say dapat na may predicate crime, 'di ba? Does the DOJ Secretary have to prove it to you already?

VS: No, not necessarily, Mr. Chair. What's important is that they are already conducting an investigation.

CHIZ: Exactly.

VS: It's already sufficient that they give us a copy of the investigation report. Not necessarily the finding that the person, there's already probable cause, that the person is guilty of drug trafficking. What's important is that an investigation alone would suffice to allow us to go to the Court of Appeals, to file a bank inquiry.

CHIZ: Again, just to clarify for the benefit of Senator Zubiri, isn't it sufficient to the DOJ Secretary and his official capacity shares with you an investigation quote and quote or I would put it as an allegation. Not coming from a private individual, ha? From the DOJ Secretary himself presumably backed up by whatever investigation they have because what essentially are you looking for? A two-three page document saying NBI investigation report.

VS: No, Mr. Chair, because when you file cases before the Court of Appeals we must be able to establish that the accounts involved here are again related to that unlawful activity. The commission on that crime, the proceeds realized from that crime must have been related to the funds or to the account.

CHIZ: So, what do you need from the DOJ Secretary? Again, should it be an NBI investigation report that says we are investigating this personality for the alleged commission of certain acts that are part of the list of predicate crimes under AMLC?

VS: Yes, Mr. Chair.

CHIZ: Kung ano man 'yon, gaano man kababaw 'yun, again not equivalent to probable cause that would be enough.

VS: Yes, Mr. Chair, that's a trigger for us.

CHIZ: Senator Zubiri?

MZ: Ako, personally Mr. Chairman, I don't think the Anti-Money Laundering Council has been actually very effective in helping whether this corruption, whether this anti-drugs. Because I have not heard the Anti-Money Laundering come up with particular cases on corruption or even with the politicians in the past. I don't know; would you cite certain examples where you utilized the Anti-Money Laundering Council on cases on corruption involving politicians?
I mean, I'm bringing this up because there was an account of a drug lord who is connected to a mayor, actually the son of a mayor. Supposedly in the report, it said he had Php500-M in his account. OMG, how can you have 500-Million in your account when you're a son of a mayor in a town? Isn't that red-flag enough? I mean, it boggles the mind. In other countries, you cannot do that. In other countries, they would have gotten you for an IRS – for income tax evasion. AMLC would have stepped in to close the account, investigate you right away. In the Philippines it is just OK, if you know the bank manager you can deposit the billion pesos. It's as simple as that.
Please correct me if I am wrong, but I mean this is the unwritten rule. It seems that everybody knows about this, we just don't want to put it on record. And I am sick and tired of all this baloney that comes out. We have to have an honest to goodness response system for this type of corruption or corrupt activities. Attorney?

VS: Mr. Chair, the AMLC, we have no access to those bank accounts now whether there is a red flag or not, you know the covered persons are the banking institutions, our first line of defense to determine whether there is a red flag or not. OK, so once that there's a red flag and that is reported to us, that we will be able to conduct our financial investigation. But if there is no red flag, we cannot, we are not. We have no access; we cannot go to every bank and find out all the daily transactions. It's the function of the covered persons, or the bank they our first line of defense in the fight of money laundering that is why it is important for them to determine whether there is a red flag or not. So that will be reported to us. Perhaps in that case Mr. Chair the mayor you are referring to, there is no red flag whatsoever. In so far, we don't know why the banking institution didn't classify there is a red flag, but in so far as our data basis is concerned, we have no red flag.
MZ: So is this true that the bank coddled that kind of money and it was unexplained. You need also to investigate the bank. I mean I don't know are you investigating the particular case? Has that case reached you?

VS: Yes in fact Mr. Chair, every time we conduct a financial investigation we also look at the how, when was the amount withdrawn? How come it was withdrawn right before we file our bank inquiry? How come it was withdrawn before the freeze was issued? Those things we also consider in our financial investigation.

MZ: Question Atty. Salido, are you familiar with this case and are you doing something about it? It is the one in Leyte, the Leyte Case?

VS: In so far as the AMLC, that's totally confidential at this time.

MZ: But then there Mr. Chairman I am not going to let this point. I already made my point earlier. Maybe there are certain deficiencies in the law, maybe, obviously kakunstaba nila iyong banko walang mangyayari hindi ba? So this is the end point here. Kung kakunstaba nila iyong banko, walang mangyayari.

VS: Mr. Chair, in fact, the typical typology in so far as the money laundering is that one if they are in cahoots with the bank officers. That's the number one, one of the reasons why there is a rampant money laundering.

MZ: May we ask Mr. Chair, I think somebody from the banking community would like to give a comment.

AP: Ah kapag ho…

CHIZ: Mr. Pasia is recognized, Sir.

AP: Mr. Chair, Senator kapag ka ho may sinasabi naman ho sa amin ang mga bangko. Inerereport kaagad ho iyan, sa AMLA ho. So talaga hong hindi lumalampas sa amin kasi ang higpit higpit rin ng audit palagi kaming hahanapan niyan. Kung bakit hindi naming na-ano so as far as the bank is concerned napakaingat po naming na ireport lahat iyan sa AMLC, sinusunod po naming 'yan.

MZ: Yes, Ma'am. Mr. Chair.

CHAMBER OF THRIFT BANKS SUZANNE FELIX (SF): Thank you Mr. Chairman. I'd like to support what Mr. Pasia said ano because it is definitely reported by the banks under both covered and suspicious transactions. Now the question is when a bank reports to AMLC assuming let's go back to the bank that we were discussing earlier the big bank, what does, the question is what does the AMLC do about it? Because on the part of the banks definitely it is reported, either under covered or suspicious. So once reported, what does AMLC do? That is the question?

BA: Yes but clearly Ma'am, like what happened in the RCBC kung hindi lumabas sa news iyan then it could have all been covered up. Because really if it wasn't caught in the transaction in Germany and it became an international incident, RCBC would not have reported it. So clearly there is a possibility that on the ground there could be corrosion. You have to admit, maraming bank manager kaibigan nila iyong pulitiko, kaibigan nila iyong drug lord, kaibigan nila iyong sindikato. Mga ano mga smugglers. Oh my gosh! I know smugglers who buy buildings in cash.

CHIZ: Iyon kasi ang nakakamit ng quota.

BA: Iyon nga so we are back to square one, we are back to square one Mr. Chair that really it seems that the Philippines. That the Philippines seems to be a haven for money laundering, let's face it. So wrong hindi ba? The problem is what can we do about it? Hindi ba? So that is why we have several Senate bills here and I don't wanna delay the point any longer. We have several Senate bills here that will try to address that with Senator Lacson's, Senator De Lima, I myself, Senator Koko Pimentel and the gentlemen that are here today. But we need the support of the banking sectors as well. Kasi iyon ang lumalabas, hindi United States, I believe the AMLC has a more pro-active role with transactions. The US Fed kasi controls the distribution of funds. Dadaan iyan sa US Federal Banking System makikita nila kaagad. Tayo ang dami pang, dami pang dinadaanan halos. So thank you, Mr. Chair I am just so frustrated that we, these had gone through our, slip to our fingers. Thank you, Mr. Chair.

CHIZ: Thank you Senator Zubiri again subject to, yes Mr. Senator Aquino.

BA: If I can if I may.

CHIZ: Prior to Senator Bam Aquino.

BA: I just want to jump up in the point of Ms. Felix and Mr. Pasia. So ang sinasabi nila all transactions are reported to ALMC hindi ba? So that's seen as the red flag? Iyon na ba iyong red flag na sinasabi?

BA: OK so when it is a red flag? Kasi ang alam ko ang lahat ng banks they report anything above Php500,000 if I am not mistaken. So ang sinasabi po nila nire-report naman nila. Totoo naman iyon hindi ba? Everything gets to AMLC Php500,000 right?

RP: No, not it is discretion of the bank manager.

FELIX: Discretion on a suspicious transaction Mr. Chairman, Senator. I understand also based on recent publication and statements I read ano. RCBC did report it as a suspicious transaction but somebody asked me what did AMLC do about it. That is why.

VS: So I would like to clarify.

BA: Attorney, before you answers now. I would just likely clarify, if you kindly clarify it, if everything is reported to AMLC, iyan ang sinasabi ng ating banking industry. Hindi pa iyan ang red flag na pwede kayong mag imbestiga o iyon na ba ang red flag na pwede na kayong mag imbestiga. What will constitute the red flag?

VS: The red flag under the law, there is a several red flags actually, Mr. Chair. Where the transaction says is not commensurate with the financial capacity of the client among others. Another instance would be where; you know the threshold is over Php500,000. Now discretion would want to structure that transaction. Instead of depositing over Php500,000 in one single banking day he would deposit let's say Php100,000 for a 9 o'clock in the morning, Php200,000 in the 10 o'clock in the morning he will try to structure it to avoid the reportorial requirements among others.

BA: Sino iyong nagsasabi na who determines if it's red flag or not? Is it the AMLC or the bank?

VS: It is the bank, Mr. Chair.

BA: OK, Ms. Felix earlier you said lahat binibigay ninyo naman sa AMLC. Let me ask iyong lahat does it mean red flags are given to ALMC and then you feel na wala pa ring ginagawa or you are just noting transactions, but it is not a necessarily a red flag with the AMLC?

SF: Mr. Senator, with regards with the specific I understand, it was reported.

BA: No not the specific bank but in general. Because earlier you were speaking in general hindi ba? About the banking industry sabi ninyo ibinibigay naman lahat. Ibinibigay lahat, you indicate that these are red flags? Or suspicious?

SF: Suspicious siya, supposedly red flag na iyon, kapag suspicious.

BA: Let me clarify Atty. Salido, the bank submit to you their suspicious transactions and red flags. What percentage of that is actually investigated?

VS: Well, classify Mr. Chair depending on the priority of course of the suspicious transactions. Usually it depends on the person's involve, the amounts involve or the crime committed. We have some classifications and I am afraid that I cannot disclose it here.

BA: Well, if you can give us the general numbers lang. Or do you get a thousand a day?

VS: Since the amendment in 2013 when the predicate crimes were increased from originally from 14 to 34, it went to 34. In 2013 we had 97,000 suspicious transactions reports. In 2014 we had 97,000 suspicious transactions and in 2015 we had 115,000.

BA: So largely, palaki. Palaki siya. Let's say it is a 150,000 already what percentage of that can you actually looked into?

VS: Well, it actually it depends on the, we have the priority again Mr. Chair it depends. Because some of them are actually similar in instance like for example a pyramid scam. A pyramid scam, the transactions amount to more or less about 100 or 200 transactions, so we classify that into one both transaction and that's when we investigated.

BA: I think the concern of Senator Zubiri is kung kaya rin ninyo ba talaga ba mainvestigate iyong mga suspicious transactions. We are talking about amending your charter, maybe providing moral support. I think the intention is really to make sure that AMLC is able to fulfill its mandate. So out of 97,000 or 100,000 ano ba talaga iyong naiimbestigahan natin number one and number two maybe even on a post audit ano, what percentage of that are suspicious and yet legal and suspicious but illegal. Because not all suspicious are illegal ano? So out of a hundred thousand for example what percentage would be illegal and what percentage would be legal? Attorney?

VS: Right now, Mr. Chair, I don't have the figures.

BA: Iyong past ninyo na lang, iyong past experience? Or you don't know because you weren't able to really look at everything.

RP: Around 30%. 30%, Mr. Chair.

BA: Ang ano? Ang legal o illegal?

VS: We would go into further investigation, Mr. Chair.

BA: OK, so ano 30% would go into further investigation. But do you have any previous data on whether these transactions are legal or illegal. Or you are saying the 70% is legal or illegal?

VS: We have, Mr. Chair.

BA: You do. So ano ang porsyento ang legal at illegal?

VS: In so far as the around 30% also Mr. Chair.

BA: 30 to 40 ang illegal?

RP: Yes.

BA: So let us say it is a 100,000 so it is a 30,000 transactions per year which would probably be illegal transactions ano? Of this 30,000 how many are we able to put into court, investigate further? Kasi iyong concerns ni Senator Zubiri na may mga drug transactions on corruptions they would be part of the 30,000 also. Iyong 30% of the transactions ano. So ano pong porsyento doon ang naiimbestigahan? Ako I am asking to the point of view. These are amendments to your Charter to try to make you more effective ano, more pro-active, more effective. So let's take it as an opportunity to actually take these, these as opportunities to be able to do your job better ano. So of the 30,000 do you want the capacity to actually, you know file cases, looked into them. Course it to the proper agencies and so forth?

VS: Yes, Mr. Chair. Kaya naman.

BA: Kaya naman.

RP: We interject. Clarification Mr. Chair, in so far now, when we say 150,000. We refer most of them to our law enforcement authorities. Because you know when they filed suspicious transactions, clearly they do not indicate the particular crime committed. OK so we have to simply seek assistance of the NBI and the PNP to determine exactly what crime was committed or related to that suspicious transaction. Because suspicious transaction will not indicate the crime committed so we have seek assistance of the law enforcement authorities to determine that. Once they get back to us that indeed the transaction is related to a particular drug activity. That is when we file the bank inquiry, Mr. Chair.

BA: The bank inquiry in the Court of Appeals? OK so the process is the banks submit to you all the suspicious transactions to check whether they are suspicious or legal ba o illegal. Hindi legal, it falls to the law enforcement agencies for further investigation. Because you wouldn't know with the name of the bank account number, you would know kung drugs ba iyan, smuggling ba iyan or what. And then you wait for the law enforcement to come back to you before you file in the Court of Appeals to seize that money. So that's the process. OK now along the process iyong 30,000. So 150,000 magiging 30,000, ano doon talaga iyong nagpoprosper into an actual seizing of money from these illegal sources? (inaudible) a year or even less

RP: Around 30, Mr. Chair.

BA: 3-0?

RP: 30 cases.

BA: OK and if things were better I am sure you would want it to be more than 30?

RP: Of course.

BA: So ano iyong concern? Ano iyong kakulangan kung bakit iyong 150,000 at the end of the year 30 na lang siya? Is it personnel, is it budget or is it your charter. Bakit you know kasi I want to find out also. I am actually here for other bills but since we are talking about it I would like to find out.

RP: Mr. Chair to be honest, in so far as the compliance investigation group is concerned this is the group that conducts the financial investigation. This is the group that coordinates with the law authorities. In so far as the compliance and investigation group is concerned we only have about 22 financial investigators.

BA: 22 handling 30,000 cases?

RP: Yes Mr. Chair.

BA: So talagang.

RP: As an example Mr. Chair when we handle the RCBC bank case, 10 financial investigators handled that case. So basically it left, I was, the compliance group was only left around 12 other investigator to handle the other cases. So that is how we do it. Say for instance, in so far as the drug cases are concerned. When the president announced the matrix and all the personalities involved they are about 15 investigators handling those cases. So it basically left only about seven other investigators to handle only the other cases, to the other law authorities.

MZ: Let me check, Mr. Chairman, Mr. Chairman this really a lot of. Maraming butas ano, this is the one of those in anti-money laundering campaign. Because going back to Ma'am Felix, Ma'am Suzanne with all due respect it is not automatic that the Php500,000 is actually reported. It is not automatic it is up to the discretion of the manager? Is it correct?

RP: Mr. Chair?

MZ: Under the law, it is but ang dami kong kilalang tao na hindi inirereport ng managers.

VS: Mr. Chair, there are some institution covered persons, particularly universally commercial banks. They have a system there where the transaction exceeds Php500,000 automatic it is reported to the AMLC. But there are some and several covered persons where they do not have that system where there are some intervention that's needed before they file with the AMLC. But we don't know the system itself, the system.

CHIZ: No, is it the system or is it the violation of the law. Which in relation (inaudible).

VS: If you do not file it…

CHIZ: Is there instance you know who are not reporting?

MZ: I know for example, for example a corrupt mayor or a congressman, kukuha ng kick-back iyan sa contractor. Bibigyan siya ng Php5-M ang idedeposit diyan sa probinsya, sa banko niya. Close siya sa bank managers kakausapin niya iyong bank manager, ito sa negosyo ko ito galing ganyan. So that is a violations, but nakakalusot, nakakalusot because I don't know of any cases unless you. I don't know of any cases with the politicians at this point in time I was deputy governor.

RP: Yes, Mr. Chair .

CHIZ: Hold on there are two deputy governors. Deputy Governor Espenilla.

NE: Mr. Chairman, to add to that discussion, Mr. Chairman, the enforcement of our Anti-Money Laundering Law is actually organized in layers. The Anti-Money Laundering Council is primarily focused on the investigation part. Under the AMLA, Section 11 actually with respect to banks. BSP is involved in enforcing compliance with the anti-money laundering law. So under that context, there are rules and regulations that mandate banks to report all transactions of Php500,000 and above and also suspicious transactions report.
There is also an affirmative obligation on the part of the banks that if an account moves in a way that doesn't make sense, cannot be justified. They have an obligation to terminate the transaction, Mr. Chairman. But putting it in regulation in law is one thing, having the ability to enforce and check the compliance of institutions, is another. And those are important gaps in Anti-Money Laundering Law, Mr. Chairman and the proposed bill there are recommendations there that strengthen the ability. Let's say the Banko Sentral ng Pilipinas to check on the faithfulness of compliance of banks as reporting institutions in fulfilling their anti-money laundering obligations. Just case in point, Mr. Chairman, there are gaps, there are challenges in looking into deposit accounts. Inside deposit accounts, Mr. Chair, as you know that under existing laws there's a lot of safeguards in deposit accounts and even a regulator, like the BSP has real difficulty into pro-active into looking into this Mr. Chairman. So if the law can be amended in a way that gives more flexibility to the financial regulators then we would have a better chance in preventing this kind of transactions that you are referring to, Mr. Chairman.

BA: Mr. Chairman, the AMLC has 22 financial investigators handling 30,000 probably 30 to 50,000 cases a year that's obviously not enough. What is your (inaudible) or is it the BSP? So maybe this is the opportunity with all of these reforms and some of us are supportive in amending the bank secrecy. Kasabay siguro nito is also to strengthen our AMLC ano. So is there a move to actually increase the 22 to…

VS: We already made proposals, Mr. Chair.

CHIZ: What is the proposal? To how many financial investigators?

VS: Like, financial investigators additional 20 Mr. Chair. So that is 42 financial investigators.

BA: Baka kulang pa rin iyon.

VS: Well, that is our conservative numbers but we have proposed about 56, an additional 30 Mr. Chair.

BA: In fact, well obviously the thrust of the government now is really on the drug menace. You might even want to have financial investigators just focus on how drug money flows within the country. Because alam ko country like the US have been working with South American country that is really how they. Apart from their enforcement side, apart from their how do you call it, physical enforcement side. There is also a lot of enforcement ban with regard to the monies, hindi ba? So you know, all of these reforms in the purpose on this issue. In the same way, we asked DOH (Department of Health) now is the time to budget for rehab centers and budget for anti-drug programs in the barangays. Maybe this is the time for you to also look at increasing your financial investigators to address the problems as well.

VS: We submit to the management of the BSP so.

BA: We hope you take note of that.

CHIZ: Deputy Governor (inaudible)

RP: Thank you, Mr. Chair and with the utmost respect to Senator Zubiri. I'd like to respectfully respond to your statement about the AMLC, in fairness to the Anti-Money Laundering Council, the executive director of its secretary at in my capacity then as the AMLC Secretary at Executive Director, from (inaudible) up to Junuary 27, 2013 and even until the present, Mr. Chairman, even if I am already out of the AMLC.
I'd like to state for the record for everyone to hear that the AMLC has more than justified its creation and its existence and the concrete proofs of these are among other things than the following: the successful prosecution of (inaudible), cases of (inaudible) operators. The pyramiding cases involving multi case whose had been languishing in jail for many years now. The Amman we've been successfully prosecuting the brains behind this. And we insert the extradition of Mr. Amalilio from the Malaysia, then the Fertilizer Fund Scam cases. We close all the assets of the personalities involved here. These were actually political (inaudible) so to speak. And then this military corruption cases which culminated even in the (inaudible) of one high military officer. We are also able to freeze all their assets, the PDAF cases. I don't want to elaborate any more of these. Because some legislators are also involved and actually put freeze the AMLC secretary personnel involved in the investigation.
And then this huge impeachment case, we are also successful in helping the Senate in the conduct of the impeachment process. And the conviction of several personalities of a bank manager, and a kidnapper responsible for kidnapping of a Japanese national. He was also convicted of money laundering aside from having been prosecuted from kidnapping for ransom. And then big drug personality who is now in the bilibid. It was the AMLC who expose all his assets, deposits, luxury cars and even those his two wives. I won't mention his name.

CHIZ: Why not?

RP: Well, he has been convicted Buratong.The Pasig shabu laboratory owner, the tiangge. And then the branch manager involved in the, yeah, was charged with money on laundering for helping Buratong facilitate. The laundering of this drug money and so many other cases, Mr. Chairman. During my time, during my watch and after my watch in the AMLC secretary, the council as I said has been very effective. But the AMLA itself has amended, needs further amendments to pluck all the holes and loopholes still existing in the law. And as I am saying this Mr. Chairman, it was a very difficult to hang up my anti-money laundering gloves but I would still continue this crusade to help the AMLC continue to combat money laundering and even terrorism in financing in my different capacity. Thank you, Mr. Chairman.

MZ: Mr. Chairman, just a quick reaction, we are not putting any doubts on the AMLC in terms of their effectivity. What we are trying to do here is we are trying to help you. Kung kulang ang budget ninyo, ng tao. Kaya nandito kayo sa Senado were part of the budget process of government, we'll add your additional investigators if need be. We want a law that is both pro-active kasi gusto po namin pro-active. We notice most of those cases would happen after the investigation of the Senate or (inaudible) in the news. Hindi ba? Sana mas pro-active. Kasi what we really need this time, it could have been avoided. We could have been saved a lot of people from investing all his money to these pyramiding scam from the very beginning pa lang red flag na siya. Kapag nakakakuha siya ng milyun-milyong transaction. In other words we are trying to help you. Hindi ba we appreciate the cases that you filed because during the budget hearing we will also require that, kasi we would want to show that either effective or ineffective through the cases you give actually filed. It was all, Mr. Chairman, ang akin lang gusto naming kayong tulungan, gusto naming maging mas pro-active. Kasi lumabas na naman ng listahan si Mayor President Digong isang libo na. So isang libo na ng mga drug personalities so I hope that is a red flag. I hope that now be taken as a red flag.

RP: Yes in fact, Mr. Chair…

CHIZ: Let me cut you, we have to move forward. During the budget deliberations perhaps Senator Zubiri can make corresponding motions to add to the budget of AMLC and then the points raised by Deputy Governor Aquino and his capacity as former AMLC secretary are noted. But question Sir, may nakulong na ho ba sa Fertilizer Fund Scam?

RP: That's no longer the house of the AMLC. Mr. Chairman, it is before the Office of the Ombudsman and the Sandiganbayan.

CHIZ: To your knowledge, may nakulong po bas a fertilizer fund scam? Joc-Joc Bolante, I don't think, never, he never landed in jail.

RP: Some of these cases are still pending Mr. Chairman but I have lost track of this.

CHIZ: Tumakbo pa nga. At least PEP na siya ngayon tumakbo siya. Moving forward, the further discussion on deliberation of the Senate Bill No. 45, seeking to amend the AMLA law is hereby suspended. Moving forward, who wants to be exempted and needs to go? Unless you are part of the National Payment Scheme and Security Transactions Act, still part of it? Moving forward we'll take briefly Senate Bill No. 263 and Senate Bill No. 342 of Senator (Ralph) Recto and Senator (Grace) Poe. Ms. Borromeo, Ma'am pinag-usapan na natin ito noong nakaraan. Chair would like to acknowledge the presence of Secretary of Agrarian Reform Paeng Mariano as well from the Department of Agrarian Reform. Ms. Borromeo, question you read the two bills?

LAND BANK OF THE PHILIPPINES OIC-EVP CECILIA BORROMEO: Yes we read Mr. Chair

CHIZ: The bill of Senator Recto is seeking to appropriate 80% of your monies to the agriculture sector. You said as of now your lending 17% of what available amount you have.

CB: Yes, Mr. Chair.

CHIZ: The current agri-loan requires how many percent?

CB: 10%, Mr. Chair.

CHIZ: So you're more than complaint with Agri-Agra Law?

CB: Yes, Mr. Chair.

CHIZ: Can I relate that to the bill of Senator Poe which seeks to put up an Agri-Bank, is that referring to Land Bank?

CB: It would appear that the characteristic of the Agri Bank would be very similar to Land Bank, Mr. Chair, and the 5% minimum share of the…

CHIZ: But you did not mention that it's taking the place of Land Bank?

CB: It's not specific in the bill, Mr. Chair.

CHIZ: Instruct the secretary to kindly communicate with office of Senator Poe to inquire what her intentions are with respect to the Agri Bank. Noting that Land Bank as of now is in compliant with the Agri-Agra Law on the amounts belongs to the agriculture sector. Going now to the bill of Senator Recto, Sec. Mariano Sir, 80% of Land Bank funds to go to agriculture particularly land reform.

DEPARTMENT OF AGRARIAN REFORM SECRETARY RAFAEL MARIANO (RM): For now Mr. Secretary, 'wag lang sana bababa doon sa strict compliance nung kung ano ang tinatadhana ng umiiral na batas kaugnay sa dapat na pautang na dapat ay naa-access ng ating agrarian reform from beneficiaries. Kasi Mr. Chairman, sa ngayon, base sa 2012 Census of Agricultural Fisheries at sa system for basic sectors in agriculture, may 6.6 million tayong mga magsasaka at 4.5 million ang tinuturing na small farmers at 'yung 2.7 million na ngayon ay agrarian reform beneficiaries na sinasabing napamahagian na ng 4.7 ay kumakatawan sa 41% ng kabuuang 4.5million na small farmers. 'Yun lang po sa Caguiat ang magkaroon ng tuwirang access, Mr. Chairman, na matitiyak na umiiral na batas at itong mga panukalang batas ay malaking bagay na po at malaking tulong sa mga mga magsasaka. Ibig sabihin ay kung sa minimum at least itong atin ngayong small farmers na 6.6 million ay maaabot ng agriculture and agrarian credit facility ay malaking bagay na po, Mr. Chairman.

CHIZ: Actually, the question is, of course you would want more funds to be part of agriculture whether under the land reform or not.

RM: Yes.

CHIZ: Ang tanong lang siguro, in connection with the bill directly of Senator Recto, can Land Bank do that? Will there be limitations on the part of BSP regulations or circulars if Land Bank will do that? And are there limitations on the part of PDIC on its ability to guarantee certain deposits if they will tie the hands of Land Bank again to simply lend to agriculture to 80%, anyone from Land Bank? From BSP?

CB: As we mention the last time this committee had a public hearing on proposed bill, the better practice being recommended by the BSP is that no single to industry should capture more than 20% of the bank's loan portfolio. In other words, Mr. Chair, management would be better if the portfolio of the bank is diversified.

CHIZ: Is that a suggestion? Regulation?

CB: I believe it's a regulation, MR. Chair.

CHIZ: Mr. Espenilla? Anyone can answer.

NE: Yes, Mr. Chairman, generally diversification is a prudent practice recommended of all banks as standard of the BSP.

CHIZ: When you say diversification, does it pertain to a sector, a field or a person or a company? All I presume.

NE: It covers, it can cover companies, excessive concentration on companies or industries, particular the classes of borrowers.

CHIZ: Agricultural will be considered as one.

NE: That can be a sector Mr. Chairman.

CHIZ: Is it or is it not?

NE: Is it a sector? Agricultural lending. In fact we can subdivide into particular classes of agricultural borrowers, example small farmers or large corporates.

CHIZ: Within the sector we call agriculture, is there a BSP regulations that says a bank cannot lend more than 20% of its loanable amounts to the agriculture sector?

NE: None Mr., Chairman. There is no limitation imposed by the BSP regulations. Mr. Chairman, if I may just explain further, BSP is basically promoting safety and soundest of a bank and to be able for a bank to achieve that, the bank is really discretion…

CHIZ: No Sir. Sorry for cutting you. So there is no regulation?

NE: None, Mr. Chair.

CHIZ: But your adviser suggestion is the 20% thing that you are talking about a while ago. Pero wala rin ganoon?

NE: There is no specific number, Mr. Chairman, because we recognized that banks can specialize in certain business. They may lend more to a particular sector but they are also bringing more knowledge and more expertise into that. So that's were the risk management comes into place Mr. Chairman. BSP does not say, does not specifically say, you can only lend up to any given sector.

CHIZ: There's this bill, are you in favor of this bill? Allocating 80% for agriculture?

NE: Mr. Chairman.

CHIZ: The total amount of loans granted for programs and sectors, other than agri is 20%. Therefore 80% should be in agriculture. Do you endorse it? Are you in favor of it?

NE: Mr. Chairman, I think the way to explain the position of the BSP on this is that we recognize that the government by law will specify certain public policy.

CHIZ: It's OK, you don't have to be that polite. Are you in favor of that? Would the BSP as an institution being favor of this or not? Meaning from your perspective of maintaining sound banking practices, preserving financial stability, would you be in favor for it? We're asking you, we're the policy-makers, we craft and approve the laws. Will you endorse it or are you in favor of it? If not, we would like to ask you to submit something to explain why, even if you don't explain it now or if you are, let us know too.

NE: Chairman, we will have to qualify our position there because concentrating to a particular market like that generally increases the risk to a bank. So they will have to take appropriate action to manage that risk. So from that perspective, we would have to be qualified in our position.

CHIZ: So Congress can do this but you might have to impose certain regulations on Land Bank if indeed we require to do this?

NE: Land Bank itself needs to take measures so that they will know exactly what they're doing to manage their risks that are associated to agriculture. That's one consequence. The other consequence is if there are losses we know that agriculture is subject to other kinds of risk like weather, its owner, the government should stand ready to recapitalized Land Bank periodically should it ran in to losses, Mr. Chairman.

CHIZ: I agree, can you for our information sir, can you roughly give us a checklist or list from the top of your head, what would be the additional requirements or things that Land Bank should do, should Congress decide to pass this bill? Just for us to have an idea. What it involves, what it expected, should we pass this bill? Kamukha nung binaggit niyo, that we already to fund Land Bank again, how much and how often do you think if you have projections? That certain adjustments should by Land Bank, what are those adjustments? Just let me know what youre going into. Sir, submit it to us.

NE: Yes Mr. Chair, we can submit those.

CHIZ: Thank you, Sir.

BA: We have a position paper for the BSP regarding this bill and we have sir some reservations on second provisions in the bill.

CHIZ: That's the bill of Senator Recto.

BA: Yes, Mr. Chairman, the BSP has reservation in the provision (inaudible) proposes special socialized credit window from the BSP and also in lending. We're also recommending that the comment of Commission on Audit, they sought on the proposed exemption of this socialized credit window.

CHIZ: Nakalagay po 'yun?

BA: Dito po sa….

CHIZ: 'Yung binabanggit niyo saan nakalagay?

BA: Dito sa Senate Bill No. 342. I don't have the page.

CHIZ: No. We're referring to Senate Bill No. 263. Not the bill of Senator Poe. The bill of Senator Poe is different, it seeks clarification and seeks on totally new bank or if she is referring to Land Bank? Because there is no provision to capitalization if it is totally new bank.

BA: My statement si different Mr. Chairman.

CHIZ: Yes Sir, so can you refer, can you submit comments on the bill of Senator Recto?

BA: We will, Mr. Chairman.

CHIZ: Senator Gatchalian.

SG: Thank you, Mr. Chair, it such a basic questions lang po, I remember talking about this during the last hearing but, Deputy Governor, 'yung other commercial banks, universal banks, are they mandated? Meron bang ibang under their charter or under any law, are they mandated to lend to the agri sector?
NE: Yes Mr. Chairman, we still have Republic Act 10000 which is the Agri Agra Law 25, 10-15% is mandated by loanable portfolio.

SG: 10-15% and that is being practiced?

NE: Yes chairman, the BSP is charge in enforcing this.

SG: Or they rather pay the penalty? So, I just want to get the industry overview, so none of the universal or commercial banks lend to the, or fulfill this 15% requirement…

CHIZ: I think its only Land Bank who complies with the 10% minimum; correct me if I'm wrong. Some banks attempted to comply but cannot and do not reach 10%. Is that a fair statement, Ma'am?

CB: No, Mr. Chairman, other banks are able to comply also depending on their niche rural banks with that matter, given the BSP statistics, they actually over complied. So in so far as our industry sector data are concerned, for the KBs were under complied. I think were under complied in Agra but not in Agri or vice-versa. But if I may also, because Mr. Chairman my understanding based on the last hearing is that we're also supposed to establish absorptive capacity of the sector. All these years, all these Congresses, we haven't had figures to that effect. But in the last hearing, we also express our support for the bill of Sen. Recto. And with regard to the, since Land Bank is a policy bank and if I may read the charter under the law, they are supposed to provide timely and adequate financial support in all phases involved in the execution of needed agrarian reform. Well, maybe since this is a policy bank, they may need a different set of regulations also. In the same manner that micro finance banks are specialized banks and certainly their only niche, their only market is market finance. So what we're saying is perhaps this can be done in so far as Land Bank is concerned also.

SG: How come the universal and KBs are not complying or they have hard time complying. Ano po 'yung nagiging hindrance?

RP: Well, speaking on behalf of BAP and also with regard to some thrift banks, the problem is that the infrastructure is different when you lend to agriculture and some banks…

SG: When you say infrastructure, the branches, mode of collection.

RP: Yes and also the people, the orientation. The foreign banks for instance, because I also have under my membership of subsidiary of commercial banks, they're not geared; they're not geared for lending such sector.

SG: So it's not practical for them to venture into that sector because…

RP: It's not, that's why they were forced to pay penalties. Because under the new law, the 10000 while there are indirect modes of compliance its been limited, and one of them I think for the Department of Agriculture to issue the necessary bonds which up to now, it is absent. So as much we want to comply, we are unable to and also because there's not enough demand for that kind of loan.

SG: Governor, I just want you to ask a quick question. In your experience on agriculture, historically what type of risk are we looking at? Is it a risky industry? Anong klaseng risks are we looking at the historical experiences?

NE: Yes Mr. Chairman, agricultural lending has quite a number of risk factors that are not present or are greater than in other kinds of lending whether it's a number one risk factor for agriculture Mr. Chairman. So to the extent that weather conditions are not payable and leads to poor harvest and the lack of ability….

SG: Do you considere lending to agriculture a high risk or a medium risk? Anong klaseng risks are we looking at? Because definitely part of your mandate was to manage to spread the risk for particular industry.

NE: Yes Mr. Chairman, I think it's also important to make certain distinction, that's why agricultural lending is a classified into certain category. Some can, the rest can properly controlled with the way it manages but others…

SG: In general po, in general, this type of loan portfolio, do you considered this as high risk proposition?

NE: It is generally riskier than commercial.

SG: In your experience for a universal bank or commercial bank, what is the maximum loan portfolio that a bank can take? Considering that this risk is higher and riskier proposition compared to in your experience po as a banker….

NE: Mr. Chairman, we're really regulators.

SG: I mean regulator.

NE: Actually, the answer to that is a, its generally cast in terms of proportion of the capital of the bank. Because the bank's capital basically defines its ability to take on risk.

SG: Assuming they are all capitally adequate, they're all compliant to the capitalization requirements, I mean typically lang po, is a 50% agri or 80% agri portfolio, very risky proposition because above risk nga ho ito. So kung 80 ito above risk obviously the long term viability of the bank becomes a questions. In your experience as regulator, I just want to understand po.

NE: 80% is a very high concentration of risk Mr. Chair. So that would expose Land Bank significantly to the risk associate…
SG: So what is acceptable loan portfolio or loan ratio into agri? 20%? Half? More or less po from your professional experience?

CHIZ: Assistant Governor Ravalo?

BANGKO SENTRAL NG PILIPINAS ASSISTANT GOVERNOR JOHNNY NOE RAVALO (JNR): If I may allowed, one minute to step back. The requirement is 25%: 15% agri, 10% agra. There was a time when the gross value added contribution of agri to GDP was about 18-19%, the banks were doing complaints about 23%. Sadly, agriculture has dropped to roughly just below 10% today based on latest available data. The banks are doing about 14.5%. Out of that 14.5%, 13.5% po ang agri. So ang pagkukulang po natin, kung titignan natin sa kabuuan, 13.5% po yung agri out of 15 pero doon po sa 10% agra, medyo 1 % lang po ang napupuno out of required 10%.
So the point that is Senator Gatchalian was raising is the number that we can sort of proposed, the difficulty there Mr. Chair is that different banks has different capability. So rural banks in agricultural areas have the comparative advantage to do so. So doon po sa Republic Act 10000, tinanggal na po doon yung lahat ng alternative compliance. There are only five ways a bank can actually comply the Agri-Agra. Two most direct ones will be either invest in the rural bank, bibili po kayo, mag-iinvest po kayo into equity shares. Pero hindi po basta basta rural bank. Kailangan po ma-accredit 'yung rural bank na 'yun. Ang requirement po nung regulasyon, the majority ng kanyang balance sheet ay nasa lending, wala po sa investments. At ang pinaka-dominant na lending niya, agriculture. So, para po tayo makasigurado, 'yung bangko na 'yun talagang nakalaan sa agricultural sector. As of today, sampung bangko lang po ang nag-apply at nabigyan ng accreditations sa registered rural ban for purposews of Agri- Agra rural financial institution. So meron po talaga tayong, the alternative mechanism Mr. Chair is to provide, purchase those accredited banks by the ACPC.
So ang isyu po dito, babalik tayo sa punto noong numero, magkano po ba talaga ang credit demand ng agricultural sector? Lahat naman siguro tayo dito supportive ng agriculture, otherwise hindi po tayo kakain. Otherwise wala po tayong mga mae-enjoy na family time outside on a weekend for example in a small restaurant or 'yung ating pambili sa pang-araw araw. So importante po sa kahit anong ekonomista ang agriculture, siya po ang pinakamalaking forward linkage na tinatawag natin. But at the end of the day Mr. Chair, kung ang GDA po ay bumabagsak from 18%, it used to be one-fifth, its now barely one-tenth of the gross domestic product of the country.

CHIZ: In real terms, how much is that?

JNR: I don't have the exact number. I can get it for you quickly Mr. Chair.

CHIZ: It's about Php1.4-T, Php14-T?

JNR: The nominal GDP is about Php13-T.

CHIZ: I'm using 14 pa nga. Sa 14 is 1.4, 13 is 1.3.

JNR: Opo.

CHIZ: How much is the total loanable amount of Land Bank? Were just talking of Land Bank here and not the total loanable amounts of the entire banking sector has. How much is the total loanable amount of Land Bank?

CB: Mr. Chair, our total loan portfolio as of July 31 this year amounted to Php448-B but we do have some funds invested in government securities that we can also use.

CHIZ: How much should that be?

CB: About Php120-B more Mr. Chair, so were looking at about 550.

CHIZ: Governor, were talking about 80% of Land Bank, that's clearly far less if you're talking absorptive capacity or loanable amount from agriculture that's clearly farless of what agriculture can absorb their needs. Anyway, if you factor in Agri-Agra law, perhaps you will be correct. But if you just talk of Land Bank, again whether its 30, 80, 50, 60, two rin naman 'yung 80. Ang tingin ko doon, I don't know if there's a study were 80 came from? But there will be 70. That can be graduated, meaning after certain benchmark are met, then you bring up accordingly.

RM: Mr. Chair?

CHIZ: Yes?

RM: Mr. Chairman, para po sa DAR at para po sa agrarian reform beneficiaries, very welcome po itong panukalnag batas ni Sen. Ralph Recto na naglalaan, sinasabi dito provided by the total amount of loans granted, in general terms po very welcome po ito. Ito pong nagsasaad na provided by the total amount of loans granted for programs and projects, in sectors added in agriculture are not exceed 20% of the banks total loan portfolio. Ito po 'yung napanukalang amyenda section 75 ng Republic Act 3844. Ang itatanong ko lang po sana kung dito sa sinasabi ng agriculture ay saklaw na ba dito yung mandated sectors, pati 'yung fisherfolks natin, agrarian reform beneficiaries.

CHIZ: It's not mentioned in the bill sir but I presume it should be and we can clarify that.

RM: At totoo po naman na 'yung bahagi ng mandated sectors sa loan portfolio o exposure ng Land Bank ay masasabi nating mababa kumpara sa iba. Dahil mga nagrarate ng 7.5-7.6% of the total.

CB: Mr. Chair, if I may.

CHIZ: Ang interes ang sinasabi niyo?

MARIANO: 'Yung share Mr. Chairman ng mandated sectors – farmers, fisherfolks.

CHIZ: I think, it's 17.

RM: Opo. Gayunman, mainam po din na, ito hindi naman po sa dahilan at ako po ay hindi naniniwalang dapat laging inaccessible ang agriculture and agrarian credit sa ating mga magsasaka dahil Land Bank o malaki ang risk. Baka kakailanganin din dito kung sakali at 'yung mga sectors natin, agriculture fisheries, agrarian reform beneficiaries ay talagang tinamaan ng kalamidad, ano pong gagawing intervention ng national government? Willing po ba mag increase ng equity sa Land Bank kung sakali? 'Yun po ang mga bagay na para sa ganon at all times at accessible 'yung agriculture, agrarian…

CHIZ: (inaudible)

RM: Dahil nga po sa kalagayan ng ating mga magsasaka, walang siguradong kita o inaani dahil alam naman po natin kahit agrarian reform beneficiaries ay hindi po nalilihisan yan ng kalamidad.

CHIZ: Bubuuin ko na po, baka pwedeng isali na sa report ni Deputy Governor Espenilla o BSP o galing sa Land Bank, bigyan niyo po kami ng panukala kung maari total package na, gusto niyo ang portion mag set aside ng guarantee fund, may guarantee fund na ginagamit ang Land Bank, 'di ba? Mag-set aside ng guarantee fund in order to minimize risk of a lending to agriculture, in excess of that funds, sige abswelto na kayo. But you still have to use your own asset in order to lend to other people and let the other people borrow subject to the approval of guarantee fund that would be one. Number two, pakisilip na rin po, wala naman collateral na mabigay ang magsasaka o agrarian reform beneficiaries dahil yung lupa hindi niya pwedeng ibigay na collateral dahil hindi naman po niya binabayaran, wala pong nagbabayad, at kahit mabayaran niya, correct me if I'm wrong, sampung taon.

RM: Ang totoo po, Mr. Chairman, talagang nasa batas kasi 'yung 10-year holding period at kung hindi fully-paid 'yung ating agrarian reform beneficiaries ay syang kalaban Mr. Chairman, out of 906, 997 ARD's natin , dapat ay naghuhulog ng amortization 120,000, 123,000 ang hindi naghuhulog. Ano ang gagawin natin? Ang Land Bank maaring iforeclose 'yung lupa na sinasaka.

CHIZ: Agree, pero sang-ayon din sa batas, i-foreclose man nila yun, dapat ipasa uli sa inyo para idistribute uli para may magbayad uli. Ilang porsiyento po ba ang magbabayad ngayon?

RM: Sa data po, out of 906,997 dapat na naghuhulog na magsasaka, ang nakafully paid lang 25.6% Mr. Chairman.

CHIZ: Ang fully-paid?

RM: Ang naka fully-paid. So almost 75% ay either hindi talaga naghulog ng land amortization plus 6% interest per annum at partially nakahulog.

CHIZ: 25% lang ang fully-paid?

RM: 'Yun po 'yung sa datos po ng Land Bank as of March 31, 2016.

CHIZ: I think that's a high number?

CB: It's actually 25% Mr. Chair.

RM: 'Yun po Mr. Chairman out of 2.27 million.

CHIZ: May nag-graduate na po ba sa programang 'yan? Meaning may naka-comply na ba ng 10-year holding period? Matapos mafully paid? When was the earliest time that a farmer beneficiary was actually able to fully-paid?

RM: Fifteen years after October 31, 1972.

CHIZ: Wala na po 'yun. Wala na po.

RM: Thirty years after ng Repuablic Act 6657, that was June 15, 1988, Mr. Chair.

CHIZ: No but from the time that it is fully paid, it has 10-year holding period right?

RM: Yes Mr. Chairman.

CHIZ: After 10-year holding period, pwede nang titulohan sa pangalan ng beneficiary?

RM: Mr. Chairman, kung fully-paid talaga.

CHIZ: After 10 years.

RM: Magkakaroon ng emancipation patterns 'yun or certificate of honorship award.

CHIZ: Pero may 10 years pa na holding period na hindi niya pwedeng ibenta o isangla?

RM: Yes. From registration Mr. Chairman.

CHIZ: May ganon na po ba tayo? Kaya niyo po akong pakitaan. Kasi kaya tinatanong ko ito, tatlong budget ko na yata hinahanapan ang DAR.

RM: Ako mismo Mr. Chair, noong ako'y nasa Kongreso 'yun din ang tinatanong ko, imbentaryo. So kaya po Mr. Chairman, nung ako po ay natalaga nahirang bilang kalihim ng DAR isa po sa pangunahing ginagawa ng DAR ay mabilisang validation ng imbentaryo nung ating mga lupang naipamahagi sa mga magsasaka para po matiyak natin na ang lupang distributor ay nasa kanila o 'yung magsasaka benepisyaryo sa lupa ay nandoon pa sa lupa na ipinamahagi sa kanila. Ginagawa na po natin ng mabilisan 'yan.

CHIZ: When will you finish it and in the meantime, hinahanap niyo nga noon, hinahanap ko rin, presentahan niyo naman ako ng isa lang, isa lang. Yung nabayaran niyo na yung lupa, sampung taon na ang nakalipas, nakatitulo na sa pangalan niya at nagamit na niya yung lupang yun to borrow money from a bank using his title as collateral for the loan.

RM: Pagtutulungan po 'yan ng DAR at Land Bank Mr. Chairman. At isusumite po namin sa inyo ang pinakamabilis naming matitipong datos.

CHIZ: Ang fully-paid? Pero baka recently lang hindi pa naglalapse 'yung 10 years. But this one, this has been going on for how many decades?

RM: Presidential Decree 27, Mr. Chairmain, is 1972, mahigit na po ng 40 na taon.

CHIZ: Forty years na.I think its reasonable, 'di ba?

RM: Under Comprehensive Agrarian Reform 1988.

CHIZ: I think it's reasonable to ask for one for the past 40 years.

RM: Totoo po 'yun.

CHIZ: I bring this up kasi ang problema 'yung risk na binabanggit ni DG Espenilla, wala kasing collateral. So walang guarantee fund o kung walang gagarantiya ng crop insurance pambayad ng premium para atleast may proteksyon naman, kung papasok 'yung binabanggit ni Senator Bam Aquino mamaya pag-uusapan natin na pwedeng collateral ang PO o purchase order o contract rolling na may prosesong parang ganon, baka pwedeng collateral pa rin 'yun.
It should be a total package in so far as increasing the loanable amount to agriculture and what the banks can hold on too? By way of collateral or insuring payment for the amounts they will loan to the agriculture sector. Susubukan natin buuin ang picture. One more question for Land Bank, Ma'am, kung 17% kayo at gagawin naming 80 or 50 or 60, anong transitory provision ang dapat namin ilagay? Because we have to move from 17 to 80 hindi naman pwedeng pagpasa ng batas comply agad kayo. So hindi naman pwedeng bigla niyong dagdagan para magcomply. Can you submit to us a proposed schedule perhaps or if you have an idea how you will go about it and how long the transition period will be? In real terms or if it is from the current amout of 25 from Agri-Agra moving to 30? Your moving to 50 in increment of 5 or 10 %. How long would it take? What would it tell and how will you go about it?

CB: We will do that Mr. Chair but may I also mention something about the absortive capacity of the sector because the size of Land Bank, if we allocate 80% of portfolio to this sector, to the agri sector, that would be very hefty increase from the 72-billion that we already have to about Php380-B and as some of the resource person speakers mention there's really an issue on absorptive capacity.

CHIZ: So as that if ever in writing if possible. Meaning, there is an issue but what exactly is the issue? Baka kasi chicken and egg, baka kaya bumababa ang parte ng agriculture sa GDP dahil wala ngang gumagastos doon. Pero nananatiling marami ang mga Pilipino na umaasa sa sektor na 'yun para sa kanilang kabuhayan. So namaliit yung parte o share niya sa GDP should not only the basis of the sectors absorptive capacity. Kasi baka mamaya kulang lang talaga 'yung nilalagak na pondo at puhunan kaya hindi ganon kalaki yung parte at share niya. It might be chicken or egg situation on so far that is concern. So kindly show us and convince us that that is indeed the case. Ma'am?

CB: Yes, Mr. Chair.

CHIZ: Briefly, DG Espenilla?

NE: Mr. Chair, if there's a law that requires a Land Bank to increase the lending for agriculture. There two ways that Land Bank can fulfill that. One is to run up that lending so that they will hit the 80%. That can be potentially risky to Land Bank in the short period of time. The other way that Land Bank can do it is to shrink their balance sheet. They will reduce agricultural lending so that they will – the percentage Mr. Chairman, I just wanted to point out that there, whether that is the intended consequences on the matter.

CHIZ: Pero 'yung una is clearly compliance proposed law, whatever person it may be. The second one is clearly the convention of the law, it might be tantamount of falsification if there will alter their balance sheet just to comply the provision of the law. Babawasan na lang? Mag i-invest nalang kayo? Liliwanag namin sa batas na hindi ganon 'yung computation na gagawin nila. Because it will be another loophole. We will see each other again because we have to clarify and amend the law to plug that loophole. But thank you for that point. Ang subject to submission of clarifications from the BSP, the Landbank as from the witness from agrarian reform department and the clarification of the office of Senator Poe. Further discussion of this bill is hereby suspended to the next hearing date.

 

 

<BACK>

 

 

 

Copyright 2016. ALL RIGHTS RESERVED Office of Senator Chiz Escudero