23 August 2017
SENATE HEARING: PROBE ON THE ALLEGED ILL-GOTTEN WEALTH OF COMELEC CHAIR ANDRES BAUTISTA

 

     
 







TRANSCRIPT

ESCUDERO: Chair would like to recognize our distinguished majority floor leader Senator Sotto. Our distinguished minority floor leader, Senator Drilon and Senator Grace Poe. For the record, may we ask the committee secretary recognize the presence of our guests.

ComSec: Good morning Mr. Chair, good morning your honors. For our public hearing on Senate Resolution No. 468 we have the following resource persons:

Bangko Sentral ng Pilipinas, Mr. Elmor Capule and Ms. Maria Belinda Caraan

Anti-Money Laundering Council Secretariat, Atty. Mel Georgie Racela and Mr. Alvin Bermudo

National Bureau of Investigation, Atty. Minerva Retanal

Luzon Development Bank, Mr. David Sarmiento Jr., Mr. Norman Aycocho, Mr. Herardo Auson Jr., Atty. Rodolfo Fernandez and Atty. Francis Lim.

That's all your honor.

ESCUDERO: Pwede ko pong hilingin sa mga imbitadong bisita na tumayo para manumpa. Can the secretary kindly. (ComSec administer the oath taking of the resource persons) Maraming salamat po, magandang umaga po sa inyong lahat!

Bilang panimula, ang pagdinig na ito bugso ng resolusyong inihain ni Senator Sotto at Senator Lacson na may bilang 468 kaugnay sa tama at angkop na pagpapatupad ng Anti-Money Laundering Law gayundin ang prinsipyo't konsepto sa ilalim nito kabilang na ang konsepto ng PEP o Politically Exposed Person at dahil dito minabuti naming imbitahan ang BSP, AMLC at mga kinatawan ng LDB o Luzon Development Bank at gayundin din ang NBI dahil sa pagkakaalam namin ay naturn-over na yung mga di umano mga dokumento kaugnay sa isyu nito sa NBI.

Nilimitahan namin ang limitasyon sa mga bisitang ito at kung sino pang karagdagang resource persons na maaring maimbitahan; aming iimbitahan depende sa kagustuhan ng mga miyembro at pangangailangan ng komite.

In accordance with rules on arrivals, Senator Grace Poe has arrived first followed by Senator Drilon then Senator Sotto III, one of the principal authors of the resolution. So at this juncture, may I give the floor to Senator Grace Poe for her intervention. Senator Grace, your recognize ma'am.

POE: Magandang umaga at sa ating mga panauhin ngayong umaga. Alam mo pagdating sa konsepto ng bangko at kaperahan nating mga kababayan ay kasama na rin kami—marami sa amin dito sa Senado ang hindi masyado nakakaintindi kaya siguro mas mabuti na ring umpisahan din natin sa AMLC na ieksplika nila kung ano ba ang ibig sabihin nitong palagi nating sinasabi kasi ito ay gaya nga ng sinabi ni Senator Chiz bugso ng mga nangyari nitong mga nakaraang linggo na di umano isang officer ng gobyerno ay kasangkot sa isang bagay na hindi nararapat. So ngayon ang AMLC—Anti-Money Laundering Council, paki eksplika nga ang ibig sabihin ng PEP or politically exposed persons?

RACELA [AMLC]: Magandang umaga po Mr. chairman and Senator Grace Poe. Politically Exposed Persons po ay isang regulasyon na inisyu ng Financial Action Task Force (FATF) para po ma-identify ang mga covered persons, makilala ng mga covered persons kung sino sa kanilang mga kliyente ang politically exposed persons. Meron po silang pinerescribe na definition ng Politically Exposed Persons and para po hindi po ako magkamali, babasahin ko po sa inyo. "Politically Exposed Persons refers to individual who is or has been entrusted with prominent public position in the country with substantial authority over policy, operations or the use or the allocation of government owned resources, a foreign state or an international organization. The term PEP shall include immediately in family members, close relationships and associates that repeatedly known to have joint beneficial ownership of a legal entity or legal arrangement with the main principal PEP or sole beneficial ownership of a legal entity or legal arrangement that is known to use for the benefit of the main principal PEP.

Ito pong definition na ito ay sinundan po natin as part of our obligation to comply with international standards and naisama po natin 'yan hindi lang sa ating revised Implementing Rules and Regulations of the AMLA, isinama rin po ito sa regulasyon ng Central Bank for purposes of a defining it. So proseso po ng ating regulasyon dalawa po ang requirements ng AMLC atsaka ng Central Bank for purposes of implementing yung PEP. So yun po tulad ng sinabi ko una ay i-identify po nila kung sino ang mga PEP sa mga customers nila pag na-identify na po nila saka po nila i-ririsk profile. Pag sinabi po nating risk profile, diyan na po sila mag-iidentify kung ang PEP ay high risk, normal risk or low risk.

POE: Ang ibig sabihin nito, kaming mga opisyal ng gobyerno halimbawa o kawani ng gobyerno kasama diyan depende kung anong lebel kung high risk; kung ano ang ibig sabihin ng high risk? Mas mataas ang posisyon, ganun ba yun?

RACELA [AMLC]: Hindi naman po, ang high risk po ay depende sa pag risk profile ng covered person ho. Kunwari po ay meron pong tinatawag na mga depende sa assets na kunwari ho; marami ho kasing pag risk profile ng bangko. Kung ang asset po ng bangko ay napakalaki pwede pong maging high risk sa kanila ay yung mga may matataas na posisyon. Pero kung maliit ho yung assets ng bangko, pwede hong high risk sa kanila ay hanggang mayor lamang or sa barangay captain.

POE: So ibig sabihin, yung isa ding termino, Know Your Customer, KYC kailangan talaga inuusisa ng bangko kung sino yung mga depositors nila, anong trabaho, required ba sa opisyal ng gobyerno na hingan ng SALN halimbawa kung hindi masyadong kilala at ito ba'y requirement talaga or prerogatiba ng bangko?

RACELA [AMLC]: Tama po, depende po sa risk profile ng bangko po yun. And yung SALN naman po ay hindi isa sa mga acceptable IDs na kinukuha ng mga bangko pero pagka ho isa sa mga iniwang information na kinukuhaan ng mga bangko sa mga kustomer nila ay source of funds. So pwede hong maging option ng bangko na sabihin para ma-justify na ang kanyang source of fund ay legal; pwede niyo hong hingan ng SALN pero wala po kaming requirement na ganyan.

POE: Ang isa pang gusto kong tanungin, yung LDB [Luzon Development Bank] ba nakakapag comply duon sa pag sumite sa inyo ng mga dokumento ukol dito nga sa mga PEPs. Meron ka bang alam na naisumite na sa inyo or regular ba ito? Ito ba'y parang routine lamang? Kasi hindi lamang pag susumite diba? Kailangan nagrereport din sila kung meron silang medyo namataan na hindi na naayon sa batas. Tama ba?

RACELA [AMLC]: Wala pong requirement ang bangko ay magsa submit ng report kung meron silang PEP na customer sa AMLA.

POE: Hindi pero meron silang requirements kung meron suspicious activity, hindi ba?

RACELA [AMLC]: Meron po silang requirement to file or submit a suspicious transactions report base po sa anim na circumstances.

POE: Okay tanong ko na lang sa iyo. Ang LDB ba meron sa inyong file na na-file na suspicious activity sa kanila?

RACELA [AMLC]: Ipagpaumanhin niyo po Senator Grace Poe and Chairman, meron po kasi kaming provision sa revised Implementing Rules and Regulations na ang mga suspicious transaction reports, yung fact na nagfile ng STRs and CTRs ito po ay confidential.

POE: Okay so kailangan ng court order para ma-release ito? Ano ang kailangan para ma-release yung impormasyon ukol dito sa publiko?

RACELA [AMLC]: Kung nag file po ng STR [Suspicious Transaction Reports] meron po kasing…

POE: So yung bank waiver nung depositor, ganun?

RACELA [AMLC]: Opo.

POE: Pero ito na lang ang tatanungin ko, hindi mo pa naman sinasabi kung sino yung personalidad nay un e. Tinatanong ko lang sa iyo, meron na bang nag file mula sa LDB sa inyo na suspicious activity ukol dito.

RACELA [AMLC]: Kung mararapatan ho ninyo babasahin ko po yung provision ng ating Implementing Rules and Regulations…

POE: Hindi, hindi mo na kailangang basahin e sabihin mo lang sa akin. Meron o meron ba?

ESCUDERO: If I may interject Senator Grace, let me revise the question. Is LDB compliant in so point of view of AMLC insofar as complying with the provisions of the AMLC law insofar as submitting STRs if indeed there are and complying with reportorial reports? From your perspective, are they compliant whether they submitted or not it would depend of course if there is an STR?

RACELA [AMLC]: Yung mandato po to ensure compliance by banks and non-banking financial institutions ay nasa batas po ay nasa Central Bank po yung ganung requirements. Sila po yung nag o-on site exam kung nagko-comply ang bangko for purposes of reporting covered ang suspicious transaction reports.

ESCUDERO: We refer to Ms. Caraan. Ma'am can you respond?

CARAAN [BSP]: Magandang umaga po Senator.

ESCUDERO: Good morning Ma'am!

CARAAN [BSP]: Base po sa ating patakaran sa Bangko Sentral, ang lahat po ng mga bangko o mga institusyon na nasa ilalim ng aming jurisdiction ay sina-subject naming sa assessment at examination kung sila ay tumutupad sa regulasyon ng Bangko Sentral. Kasama po ang mga pinapatupad na regulasyon ng Bangko Sentral yung nabanggit na po ni Executive Director Racela na patungkol po AML regulations. Base po sa assessment ang lahat naman po ng bangko ay nagko-comply sa requirement kung covered o suspicious transaction reports. Ang hindi lang po naming masasabi ngayon, e kung kumpleto po yun o hindi. Sapagkat depende po yun sa assessment ng on site team…

ESCUDERO: Including LDB.

CARAAN [BSP]: Opo lahat po.

ESCUDERO: Thank you.

POE: Sa nangyari ngayon ang NBI ba ay nakikipag usap na sa inyo AMLA halimbawa dito sa mga nangyari ngayon?

RP: Ni-refer na po sa amin ng NBI at…

POE: Meron na kayong ginagawa?

RACELA [AMLC]: Meron na po madam.

POE: So iniimbestigahan na ninyo?

RACELA [AMLC]: Opo, Senator.

POE: At least dun. Ngayon ang tanong ko naman dito sa LDB kung sinuman ang inyong tagapagsalita ukol ditto.

ESCUDERO: I think Mr. Sarmiento will respond.

POE: Good morning Mr. Sarmiento.

SARMIENTO [LDB]: Good Morning ma'am!

POE: Are you compliant with the requirements of AMLA? Have you submitted the documents necessary? Do you find any of your depositors suspicious at this point?

SARMIENTO [LDB]: Mr. chairman, we have a process with regard the AMLA reporting. First would be the covered transactions. This is a system generated so all transactions over 500 are reported automatically.

POE: So, Mr. Sarmiento it's just anything over 500 in deposits or in one deposit? Total deposits or just in one transaction?

SARMIENTO [LDB]: It's a per transaction.

POE: So if a person deposits 499,000 even if he has hundreds of millions in an account; you will not report this?

SARMIENTO [LDB]: With your permission, Madam chair if I can refer it to my branch banking as to the details of the handling.

ESCUDERO: Mr. Auson, you're recognize Sir.

AUSON [LDB]: Chairman and the honorable Senator Grace Poe.

POE: Good morning Sir!

AUSON [LDB]: For 499,000 below 500,000 we have to assess. It's not covered by covered transaction because it only speaks 500 and above. But every transaction below 500,000 we assess the transactions if there are breakdowns and then…

POE: Okay so you do the assessment and it's not just—in my understanding in AMLA, please correct me if I'm wrong that it's not necessarily just because it's below 500,000 but a certain pattern. For example, 499,000 deposited every other day for a total of hundreds of millions. Would that be considered as suspicious account, Atty. Racela?

RACELA [AMLC]: Ang technical term po natin diyan is structuring, Senator Grace. Pero po ang intention kailangan ng structuring ay the intention is not to be able to be covered—to be the subject of covered transactions report. Ibig sabihin ho, nag iistructure ka para hindi ka ma-covered transaction reporting. Covered transaction reporting po ay yung more than 500…

POE: So ganun nga. So pwede talagang masama yun?

RACELA [AMLC]: Pwede po masama.

POE: Oo di ba nasa discretion na nung bangko kung talagang gusto nilang maging above-board. Unang-una kasi hindi lamang yung deposito. Mr. Auson, did you actually make an effort to ask if the depositors the source of the funds that have been coming in or have been deposited.

AUSON [LDB]: From the very beginning, all our depositors before we open their account there would be preliminary verification on the source of income.

POE: So preliminary verification is once you have done then you don't do it again?

AUSON [LDB]: We do regular monitoring of the accounts because initially let's say its ordinary person which is not a PEP when we could monitor kasi pwede hong itaas yung risk profile ho niya from reduce pwede maging in-house kapag napapansin ho naming biglang lumalaki, maari po i-reclassify but on the on-site hindi po—wala naman ho kaming nakikita halimbawa meron hong regular source of income na nakikita ho naming katulad ng business at sa tingin ho namin ay tumutugma ho yung koneksyon niya at pumapasok sa bangko halimbawa ho ay gasolinahan na maaring araw-araw.

POE: So nandun na tayo. Pero matanong ko lang sa inyo ewan ko kung masasagot ninyo ito pero itong hindi natin nababanggit na pangalan dito, alam naman natin kung sino, di umano siya na ang pinakamalaking depositor sa bangko ninyo, totoo o hindi?

AUSON [LDB]: It's not I don't want to comment or help the committee, meron ho tayong batas po kasi Republic Act 1405 or the secrecy of the depositor kaya ayaw ko pong…ipagpaumanhin po ninyo ayaw ko pong…

POE: Sige 'wag na muna natin sagutin 'yan pero hindi ba magkano ba yung—alam niyo hindi naman ako bangkero pero ang masasabi natin dito sa kanyang—dito sa inyong bangko na ito, hindi naman kalakihan ang bangko. Hindi naman natin minamaliit ang mga rural banks, meron din silang purpose sa ating lipunan or thrift bank pero ang nais ko lang sabihin kasi kung tama ba itong aking nakalap na impormasyon ukol dito sa inyo—yung inyong non-performing loans ay 620-M tapos ang return on equity is (-)38% last year. Tama po ba yun, Mr. Auson?

AUSON [LDB]: Tama po yung nakalap po ninyo pero ang basehan ho—una pala po madam senator yun pong nasabi ho ninyo kanina ang bangko ho namin ay hindi lang rural bank o isang thrift bank at isa ho sa yung walang mother na commercial bank e pang-11 po kami so hindi naman ganun kaliit ho yung…

POE: So kung ako ho ay isang magdedeposito, bakit ko pipiliin ang bangko ninyo? Mas mataas ba ang interest na binibigay ninyo ikumpara sa iba? Magkano yung regular interest na binibigay niyo sa mga deposito?

AUSON [LDB]: Ang savings account po ay .125.

POE: So average po yun?

POE: Sa ordinary savings account po yun, madam senator.

POE: E yung iba pa, ano ang pinakamataas na binibigay niyo?

AUSON [LDB]: Meron po kaming 2.75 sa mga posibleng mas mataas depende ho sa laki ng deposito. At may iba-ibang produkto ho kasi.

POE: Okay, so tatanungin ko na lang kayo ulit. Wala kayong nakikitang suspicious activity or source ng income dito sa mga nagdedeposito sa inyo?

AUSON [LDB]: Madame Senator, could I consult it with my colleagues before answering that one?

POE: Because you're not going to divulge the actual depositor but if you can just… yes, please go ahead and discuss with your companions.

ESCUDERO: Let me abbreviate the proceedings para hindi na kami magsilbi ng lunch mamaya. COMELEC chairperson Andy Bautista already admitted publicly on TV that he has accounts with Luzon Development Bank so that's not a secrecy anymore because the depositor himself admitted to the existence of deposits. To what extent, how many, now that maybe the subject matter of the secrecy laws. So sorry I just had to break the ice because para namang the name who cannot be mentioned, okay lang ho 'yun I mean it's an open, even the resolution mentioned the name of chairman Bautista.

POE: Thank you, Mr. Chair for breaking the ice on that, I think that without necessary referring to him because he hasn't waived his rights regarding the bank secrecy, if you can just please tell me if you can find any depositors suspicious at this point, and have you made any effort not just to submit the requirements required of the bank by AMLA but actually made a report?

AUSON [LDB]: It is basic on the assessment of our bank officers if there's a suspicious transaction we will report.

POE: So far you have not found any suspicious transaction, Sir?

AUSON [LDB]: Base on the assessment, base on our review of my people wala kaming… may mga narereport po na suspicious pero at this point e hindi po pwedeng i-divulge po.

POE: Pwede naman, nagsubmit ba kayo ng report sa AMLA o hindi? Pwede naman ninyong sabihin 'yon e, hindi pa naman ninyo sinasabi kung sino in particular. And especially, we are here now in the Senate you can discuss this without even mentioning the name of the depositor.

AUSON [LDB]: With your permission Madame Senator and Chairman, can we first seek the guidance of our counsel?

POE: Go ahead, Sir.

SARMIENTO [LDB]: Madame Senator, under certain provisions of the AMLC, we cannot just divulge our reporting as to suspicious transaction if the community will allow Madame Chair, I will ask that concern to provide the details.

ESCUDERO: With the permission of Mr. Sarmiento and Senator Grace, to the question, do you regularly and consistently submit reports in compliance with the AMLC rules and BSP regulation? You can answer that, Sir.

SARMIENTO [LDB]: Yes, Mr. Chairman.

ESCUDERO: To the general question to that without referring to any particular depositor, I'm sure in the banks existence since 1961 although wala pa hong AMLC nun, since the AMLC law was passed in accordance with your compliance with BSP regulations and the AMLC law, you have submitted on occasion STRs and deposits or transactions that exceed 500,000.

SARMIENTO [LDB]: Mr. Chairman, I think in the past we have submitted STRs. Thank you.

POE: So, in the past not the recent past?

SARMIENTO [LDB]: I would not know the details Madame Chair but I have been told that indeed the bank has submitted in the past suspicious transactions we have filed.

POE: And also this is no secret, Chairman Bautista admitted or he mentioned that he's close to the owners of the bank or the members of the board that's why he has full trust in the bank and that's why he deposited supposedly the large amount, not just of himself but of his family members, which by the way I'd like to point out family members of a politically exposed persons are covered with this regulation. So, I would like to ask you who are the owners of the bank?

SARMIENTO [LDB]: Excuse me Senator, the majority owners of the bank are the Limcaoco family. If I may if you will allow me Madame Senator, the bank was founded in 1961 and we have over 56 years of serving the banking community. We were the first bank in San Pedro, Laguna, we were likewise the first bank in Tanuan, Batangas but over the years from the time it started as Laguna Development Bank, we now have changed our corporate name to Luzon Development Bank so now we're not only in the Calabarzon but as well as Metro Manila. We have about 40 branches and 55 ATMs. I know that we also have other stock holders being an old bank in fact I get to meet sometime last year during my first stock holders meeting, I saw people that used to be depositors residents of Calamba – Cabuyao, Laguna as likewise stock holders of the bank.

POE: I understand that you have to protect your depositors but of course as you mentioned, the bank has been in existence since 1961 and I'm sure you have provided service to many so I would also like to remind you that your responsibility is not just to your one depositor but your others and anything that tarnish your reputation, I think we should be really be able to comply with the government. I know that if you've been in existence that long it won't be difficult for you to determine if something looks suspicious kasi nga naman alam ninyo, Chairman Bautista admitted that he has deposits in that amount but maybe not necessarily an exact amount that he mentioned but supposedly investments of his family, but you know that he has been in government for many years. How much do we earn in government? I mean it's actually the senators would earn only a specific amount, I'm sure his is not that far-off from how much we make. What legitimate source of income does he have? I am sure these things would come up every now and then. Wouldn't you want to verify the sources of deposit from here, because any transaction coming from a government official should be subject to scrutiny. Hindi ba dapat binubusisi ninyo 'yan? Hindi ba ninyo natatanong si Chairman Bautista?

SARMIENTO [LDB]: Madame Senator, we have a process from the account opening to the monitoring, so these are all taken into consideration by the bank and let me assure you that we strictly adhere to the banking standards. We are compliant to all regulations.

POE: Okay, thank you Mr. Sarmiento. I understand you can compliant, minimum compliance but in the Anti-money Laundering Law, there is the commission and omission. If you know, for example, that there's a suspicious activity, not only are you supposed to submit reports regularly, you're supposed to report. Am I correct Attorney Racela?

RACELA [AMLC]: Yes Senator Grace, in fact one of the money laundering offense is failure to file a suspicious and covered transaction.

POE: Yun na yung maliwanag. Kasi ganito po Sir Sarmiento, I'm sure I don't have to lecture you on this but for the benefit of the public listening, pwede naman kasi sabihin na ito yung report namin, bahala na kayo dyan maghanap kung may makikita kayo. Syempre ang AMLC, isang tambak din ang trabaho, hindi na nila basta-basta makikita 'yan. They're relying in good faith also to how you are conducting your business and transactions. Therefore, it is your responsibility; responsibilidad po ninyo na kapag may nakita kayong mukhang hindi yata tama hindi lamang ninyo isusumite, irereport ninyo. So ngayon sa pagdinig na ito, hindi ninyo inaamin sapagkat sinasabi ninyo may proseso kayo pero doon pa lamang ay may kaduda-duda na para sa akin, sa tingin ko. Kasi akalain mo kahit na ubod ng yaman ng isang tao, hawak niya ang pera ng kanyang pamilya, siya pa naman ang nasa gobyerno, siya pa ang pinagkatiwalaan. Ilalagay niya sa isang bangko na katulad ng sa inyo na hindi naman ganoon din kalaki so hindi niya rin kami mapagbibintangan, mag-iisip kami talaga na meron talagang hindi nararapat dito at hindi naaayon. So, Mr. Chair just to make it clear, LDB supposedly said they're compliant but this is my position, minimum compliance doesn't necessarily mean that they've done everything they could to prevent money laundering if ever or a violation of our rules. And I feel, it is my position that they should have at least reported anything that seemed out of the ordinary and I think that a succession of deposits consistently done every other day or within a certain pattern exceeding hundres of millions, I think they should have raised a red flag. So, that's all Mr. Chair.

ESCUDERO: Thank you, Senator Grace. While waiting for Senator Sotto, the chair would like to… with the permission of Senator Drilon, the chair would like to just wrap up a few points. Attorney Racela, PEP kaming lahat diba?

RACELA [AMLC]: According to the definition, Mr. Chair, yes.

ESCUDERO: Yes. In fact, from the president down to the barangay captain, all elected officials are PEP.

RACELA [AMLC]: That will depend on the risk appetite of the covered person, Mr. Chair.

ESCUDERO: So, hindi automatic na kapag pulitiko o elected, PEP?

RACELA [AMLC]: Hindi po automatic.

ESCUDERO: So, may mayor na hindi PEP?

RACELA [AMLC]: Depende rin po sa kung saan siya mayor, Mr. Chair. Kung mayor po siya sa municipality, pwede pong hindi siya maging PEP in so far as a big bank is concerned.

ESCUDERO: In so far as a big bank is concerned. Kung maliit, pwedeng PEP siya.

RACELA [AMLC]: PEP po yun.

ESCUDERO: So, hindi ho automatic 'yon? Yung mga opisyal ng BSP na nandito, PEP ba sila? Are you PEP?

RACELA [AMLC]: Occupying a prominent position Mr. Chair so opo.

ESCUDERO: PEP sila. Si Attorney Retanal?

RACELA [AMLC]: Siguro po hindi po.

ESCUDERO: Hindi. So not necessarily PEP porke nasa gobyerno ka.

RACELA [AMLC]: Hindi po Mr. Chair.

ESCUDERO: Hanggang kanino aabot ang PEP, asawa kasama?

RACELA [AMLC]: Kasama po ang immediate family members so asawa, ang mga anak, mga magulang and in-laws.

ESCUDERO: Nanay, tatay, in-law, kapatid.

RACELA [AMLC]: Kapatid po ay hindi kasama doon sa immediate family members pero pwede po siyang maisama doon sa associate na definition.

ESCUDERO: Lalo na kung joint account if ever.

RACELA [AMLC]: Opo, Mr. Chair.

ESCUDERO: Obviously kung ka-joint account ng isang PEP covered na kaagad 'yon.

RACELA [AMLC]: Opo, Mr. Chair.

ESCUDERO: Senator Sotto, you are recognized Sir. Manong Frank of course, our minority leader.

DRILON: Just so I will not forget this point. The law defines Politically Exposed Person as an individual entrusted with prominent public position with substantial authority over policy operations or use of allocation of government owned resources. This definition is so broad, Mr. Chairman, that it can cover anyone, point every public officials appointed or elected because what is substantial authority over policy operations or use of allocation of government resources can be so broad that anyone can qualify. The second one is, includes immediate family members. Let me relate to you Mr. Chairman that I am a victim of this or my wife is. Before my wife got married to me she had a deposit in a bank, when she got married to me the bank closed the account.

ESCUDERO: Closed the account?

DRILON: Closed the account because she became a spouse of a Politically Exposed Person. I think this is you know, the definition is so broad it is open to abuse, abuse or misinterpretation so that maybe we can tighten this definition so that it will achieve its purpose for which it was crafted. In fact now I hear the Central Bank representative, Ms. Caraan, saying that all the financial deposit taking institutions are compliant. You know if I ask how many deposit taking institutions are supervised by the Central Bank immediately we would see how difficult it is to make that judgement because they are just so many. And the definition of PEP, of Politically Exposed Person is so broad that it can include millions of accounts and therefore the matter of compliance really becomes more of a just a matter of compliance without any significant purpose. In any case, Mr. Chairman, I will ask questions later in the meantime I will just keep on listening and before I give up the floor, I'd like to go on record just for full disclosure that I am a retired managing partner of a ACCRA Law Office of which Attorney Lim is affiliated as counsel and is a counsel for one of the resource persons, just for full disclosure. Thank you.

ESCUDERO: I'll even go a step further, while the BSP and AMLC are considering what Senator Drilon has said. Manong Frank, in fact, you being a PEP will not cease after you leave office. It subsists and persists I think within a reasonable time, that's broad too.

RACELA [AMLC]: Mr. Chair, the definition refers to an individual who is or has been entrusted, Mr. Chair.

DRILON: I did not even notice that, has been entrusted? So, how long would I have retired from public service for me to be still considered as PEP, is this perpetual?

RACELA [AMLC]: The tagging as PEP or identification as PEP is different from the risk profiling, Mr. Chair. You can be PEP low risk, PEP high risk, or PEP normal risk.

DRILON: I am relating to you. I didn't care that the bank closed that account but just to emphasize to you the abuses that can be committed or the abuse of authority that can be committed because of the very broad and very loose definition of PEP. That's what I am driving at, which may require some review as to how to make the definition effective by having a more precise definition so that a barangay chairman 15 years after he has left office can still be considered a PEP. And yet there are drug lords who because they've never held public office are not PEPs, and yet they use the bank as laundering machines or you have a trees of a casinos who are not PEPs and yet they are using our banking system. So something is—we must review this and see how we can make the definition really consistent with the purpose for which the PEP definition has been crafted. Thank you, Mr. Chairman.

ESCUDERO: Thank you, Senator Drilon. At this juncture, Chair will now recognize Senator Sotto, our majority leader for his intervention. Senator Sotto, you are recognized Sir. Good morning.

SOTTO: Thank you. Good morning. Mr. Chairman. Good morning to everyone. For the record, I had the same experience with Senator Drilon when it comes to the issue of PEP. Now, let me be very direct. First, I would like to inform our resource persons that my questions are based on the common questions of common tao on the issue of money laundering, definitions of PEP, definitions of the Anti-Money Laundering Law, The Bank Secrecy Law. As a matter of fact after this hearing it might help us in crafting the law that will repeal the Bank Secrecy Law, once and for all. Alright, so let me lay -out the predicate first on why we have to file a resolution for the Committee on Banks to look into this particular issue of the AMLA and the AMLC which we will now include the BSP and the Luzon Development Bank. On August 01, 2017 an affidavit was executed by Patricia Paz Bautista, wife of the Commission on Elections Chair Bautista alleging, among others, that the Comelec Chair has undeclared assets; Statements of Assets, Liabilities and Net Worth then the contents and attachments of the said affidavits remain known to the public last August 07, 2017. Among the allegations of Mrs. Bautista was that the Comelec Chair has 35 separate accounts with Luzon Development Bank, 30 accounts at the Fort Bonifacio, Taguig City branch and five accounts in the Makati City branch totaling to 329 million pesos. The bank accounts were said to be under the name of Chair Bautista jointly with some of his family members. Now, according also to the affidavit, "the substantial deposits and withdrawals in each of these banks accounts were made within the last two years. And of course, Chair Bautista was then Comelec Chair already. And well, within the 2016 national elections. Furthermore, Patricia Bautista states that most of the deposits are made below the 500 thousand thresholds probably to avoid any AMLA detection."

"And of course the deposits and/or withdrawals were made almost every day as if in a distinct order." Now, because of these allegations we believe that Senator Lacson and I; that's why we author the resolution believe that the Anti-Money Laundering Law deserves a second law. And if it is being executed properly or implemented properly, I need not read into the records and the contents of the Anti-Money Laundering Law, you're all familiar with this. So, let me go straight to some of the points we would like to raise and ask about. For the Anti-Money Laundering Council, I hope I don't repeat some of the questions that were asked by Senator Poe earlier but let me, just to make sure that I have laid out my predicate also. In the past five years, I would like to ask the Anti-Money Laundering Council, have you receive any reports from Luzon Development bank that some their clients could possibly have violated or violating the Anti-Money Laundering Act?

ESCUDERO: To clarify Senator Sotto, Senator Sotto may be referring to STRs (Suspicious Transaction Reports). So, the question is for the past five years, has Luzon Development Bank filed STRs? Earlier, Mr. Sarmiento said they have so in the past. I think Senator Sotto limited the tier to five years.

RACELA [AMLC]: Again, Mr. Chair I want to read the provisions of the revised implementing rules and regulations of the AMLA which states, "when reporting over a suspicious transactions covered persons and their officers and employees are prohibited from communicating directly or indirectly in any manner or by any means to any persons or entity or the media the fact of the covered transactions as being raised about or to be reported. The contents of the reports on any other information in relation there to. Any information about such reports shall not be published or aired in any manner or form by the mass media or through electronic mail or any similar devices. In case, there is a violation in concerned officer or employee of the covered and media shall be held criminally liable."

SOTTO: When you interpret entity sa mga definitions ng mga hindi ninyo puwedeng pagbigyan ng impormasyon, you include the Committee on Banks of the Senate and the Philippine Senate?

RACELA [AMLC]: Considering that it is a criminal liability, Mr. Chair I apologized that I cannot divulge such information.

SOTTO: No, I am just asking if you are including the Senate, Committee on Banks when you call, when you define the word 'entity.' Because there is nothing there that says Philippine Congress or the Philippine Senate. May media ka, may everything perhaps you are lumping us into the entity. Is that right?

RACELA [AMLC]: Yes, Mr. Chair.

SOTTO: Alright. Thank you for that answer. That's one of the sections that we are going to repeal or amend in the Anti-Money Laundering Law. Next, let me try a different approach. Are you currently investigating any possible violation of the AMLA by the Luzon Development Bank?

RACELA [AMLC]: Yes, Mr. Chair.

SOTTO: You are? Thank you. What prompted that investigation?

RACELA [AMLC]: We receive a referral from the National Bureau of Investigation, Mr. Chair dated August 09 and August 16, Mr. Chair. Referring to the Anti-Money Laundering Council Secretariat the affidavit of Ms. Patricia Baustista.

SOTTO: I see, thank you very much. Therefore, my next few questions are irrelevant already because you have answered it actually. So, you are indeed conducting an investigation. An audit, perhaps also or the bank?

RACELA [AMLC]: Strategically, Mr. Chair we don't want to duplicate what Sentral Bank has already done which is the on-site examination so we just do paper analysis and investigation and then we institute due process before we impose sanctions, Mr. Chair.

SOTTO: Alright. Now that you mention the BSP, there is a BSP Circular 760: 'Only universal and commercial banks are require to have an electronic and reporting system to detect money laundering that's link to AMLC system. Is it true that thrift banks such as LDB or any other type of bank not required having an electronic system?

CARAAN [BSP]: Mr. Senator, the regulation you mentioned has been amended already by Circular 950.

SOTTO: 950? And what does 950 say?

CARAAN [BSP]: In that Circular, I believe that the provisions states that while universal and commercial banks are required to have automated systems for the AML compliance. Thrift banks should have at least a manual system; a manual system to comply with the requirements.

SOTTO: So is LDB or the Luzon Development Bank now under the radar so to speak?

CARAAN [BSP]: As we do for all banks, Sir.

SOTTO: As you do for all banks. So, noong araw itong 760 ngayon 950. Thank you. Just this August 08, I understand that the rules on the imposition of the administrative sanctions under 9160 or the Anti-Money Laundering Act took effect. It was said that the purpose of this amendment is to further ensure the compliance of he covered entities to AMLA. Under this rules, what is the highest penalty imposed for a violation for AMLA particularly the failure to report over the suspicious transactions?

RACELA [AMLC]: Depending on the assets, Mr. Chair if the bank has—the maximum is 500 thousand, Mr. Chair but depending on the assets the maximum can vary.

SOTTO: The highest penalty?

RACELA [AMLC]: 500,000 pesos per violation. Mr. Chair.

SOTTO: Gano'n lang? That was another thing that should amend. Thank you for that. May imprisonment ba?

RACELA [AMLC]: What we published Mr. Chair that was the one that you are referring to is the admin sanctions and it's separate from the criminal aspect, Mr. Chair.

SOTTO: And that is a possibility for a criminal action?

RACELA [AMLC]: Well one of the the criminal offense for Money Laundering is failure to file a covered or suspicious transaction report, Mr. Chair, so there is a possibility also.

SOTTO: By the way, did the Luzon Development Bank report, I did not hear it earlier e, if it's accurate or did I hear it accurately. Did the Luzon Development Bank report Chairman Bautista as PEP?

RACELA [AMLC]: There is no such requirement, Mr. Chair on whether or not a customer is a PEP for the covered person to report it to the AMLC. Wala pong ganoong requirement.

SOTTO: Did you report, did you categorize for the Luzon Development Bank, did you categorize Chairman Bautista as a PEP?

SARMIENTO [LDB]: Mr. Chair may I request our-is it possible to request the committee for our concern to address the committee?

SOTTO: Well, the Chairman is here but if there is no objection from my colleague. Okay, we'll listen to the answer. We just want to know if you have categorized Chairman Bautista as a PEP?

LIM [LDB]: Mr. Chair, honorable Senators, I am from Francis Lim, external counsel for the bank. Having observed the proceedings I think the banks has bind in this case. The one render is the Republic Act 1405 on the Bank Secrecy and the General Banking Act--

SOTTO: Attorney Lim, forgive me, I am sorry. I beg your indulgence but we do not give the lecture. I would just want to know if it's yes or no. That was my only question. If you categorize that Chairman Bautista was a PEP or not because there is a next question coming from Senator Drilon.

LIM [LDB]: That is precisely where I am leading to Mr. Chairman if I can help you indulgence.

ESCUDERO: Please go to the point. Go directly to the point, Attorney Lim.

LIM [LDB]: We cannot. As much as we would want to answer that question, we cannot Mr. Chairman, in light ofthe Bank Secrecy Laws and the AMLA provisions, your honor. Particularly, Section 9 of the Anti- Money Laundering Act.

POE: Mr. Chair, I think it's pretty obvious that with the requirements that somebody from the government, I think it will be harmless for you to just say that under normal circumstances of course he is a PEP. He works in government and he has a high position bakit pati iyon ay masyadong ninyong iniiwasan sagutin, attorney. Siyempre, kaunting goodwill naman. Kailangan pa ba natin magkaroon pa ng executive session para sa mga ganyang uri ng tanong?

LIM [LDB]: Hindi naming hinihingi ang executive session, Mr. Chairman but we take note of the fact as correctly observe by the committee that Chairman Bautista has submitted to the resistance and his wife of the bank deposit. Unfortunately, under the law that is not enough for the bank to answer the questions on the details of the transactions including the reporting.

POE: I am not asking about the details of the transactions about him. I think Senator Sotto has just asking if he is a PEP?

LIM [LDB]: Under the law, yes. He is as explain a while ago.

POE: Okay. Thank you.

SOTTO: Okay, Thank you, that's a simple answer to a simple question. He a PEP. Senator Drilon has a follow up on the issue of the PEP.

DRILON: So, two questions: Number one, is there any law which requires the reporting of who are- a person being considered PEP. In other words, if I apply for an account, opening an account, I am a PEP. Is there anything in the law which compels the bank to report me as a PEP? Number two, what is the consequence of being declared a PEP? I have a personal experience where my wife whose account she maintain when she was not yet married to me was close when she married to me because he is now an immediate family member of a PEP. I am confused as to what is the consequence of being declared a PEP? Who determines that the depositor is a PEP. What is required of the bank under the law if I am declared a PEP. And what is the consequence of being declared a PEP?

ESCUDERO: Attorney Racela, I think you can respond. I think earlier you already responded to the first question? Is there any obligation for the bank to report and list the names of the PEP that have deposits in their bank?

RACELA [AMLC]: There is no requirement, Mr. Chair.

ESCUDERO: Now, what are the consequences of being a PEP?

RACELA [AMLC]: As mention ago, Mr. Chair. This is an international requirement by the Financial Action Task Force to which we are under obligation to comply. For the purpose of our technical compliance, we regularly evaluated and our regulations, our laws are evaluated by the international body. If we don't comply with the international standards, Mr. Chair.

ESCUDERO: Sir, just the consequences of being a PEP? Ano ang epekto kung PEP ka? Ano ang pagbabago sa pagtrato ng bangko sa iyo? Ano ang higher level of diligence na kailangan kung mayroon man depende kung high, moderate or low ka, just that.

RACELA [AMLC]: Wala pong consequence, Mr. Chair. Kaya po iyong mga PEPs ay—iyong mga covered person ay binibigyan din po sila ng requirement risk profile kung sino po ang mga high risk, normal risk at no risk. Iyon din po ang mga requirements sa mga regular na customers.

ESCUDERO: With the permission of Senator Drilon, so kung high risk PEP ka? What does that mean? How will the bank treat you if you are a high risk PEP?

RACELA [AMLC]: Iyan po ay papasok na po iyong enhance due diligence kung tawagin kung kayo po ay mag-o-open ng bank accounts mas marami pong requirements na hihingin like additional information. Hihingi rin po ng senior management approval kapag ho kayo ay tatanggapin as customer.

ESCUDERO: So, pagtanggap pa lamang iyon?

RACELA [AMLC]: Sa pag-onboard na po iyon?

ESCUDERO: Sa pagtanggap pa lang? Ngayon, kapag may deposito ka na, ano ngayon ang ibig sabihin no'n?

RACELA [AMLC]: Kapag enhance due diligence, Mr. Chair, ang monitoring po ay mas mahigpit kaysa doon sa ang customer ay normal. Ang tawag po natin diyan ay 'risk-based monitoring,' Mr. Chair.

ESCUDERO: Pero kada bangko may kanya-kanyang risk-based monitoring din? Ire-require na may ganooon sila pero ang iba't-ibang bangko ay may kanya-kanyang paraan ng risk-based monitoring?

RACELA [AMLC]: Opo, Mr. Chair.

ESCUDERO: Kasama ba doon sa pagtanong sa isang high risk PEP, saan galing itong perang ito?

RACELA [AMLC]: Opo.

ESCUDERO: Di'ba, kasi high risk nga siya di'ba. Kasama ba diyan ang paghingi sa kanya ng dokumento para suportahan kung saan galing iyon pera? Halimbawa, nagbenta k aba ng lupa? Pahingi nga ng kpya ng deed of sale, kuwari.

RACELA [AMLC]: Tama po iyon, Mr. Chair.

ESCUDERO: Senator Drilon?

DRILON: Just to follow-up again on your question. The rules of AMLA provides that—while recognizing the Politically Exposed Person also prohibits the banks from discriminating against certain persons including Politically Exposed Persons. In other words, what the banks really discriminates, for no other reason than the fact that you would fall under that classification. For no other reason, basta ikaw ay Senator Drilon ay hindi namin puwedeng tanggapin ang deposito mo dahilan lang sa PEP ka. Isn't that discriminaton?

RACELA [AMLC]: Tama po iyong sinabi ninyo, Senator on the provision on discrimination.

DRILON: Yes.

RACELA [AMLC]: iyan po ay na-assert ng Republic Act 10365 as early as 2013 so iyon pong non-discrimination ay kapag po ang requirement ay if that is used as a sole basis for denying banking relationship.

DRILON: Well, I was rejected or my wife was rejected. Hindi naman kami smuggler. Hindi naman kami drug dealer. There is no other reason, except that I am a Senator. Is that considered a discriminatory act which should subject the bank to sanctions?

RACELA [AMLC]: Based doon sa facts na nai-present, Mr. Chair. Since, parang iyon po ang ginawang basis for denying bank account relationship. Kapag nangyari po iyan after ng 2013 puwede pong maging basis for discrimination.

DRILON: Well, obviously I got married before 2013. Of course there are so many banks here. If you don't want to accept the depositor we can go to another bank but that in itself a little irritating and embarrassing when you got rejected simply because you are a PEP. This privilege can be abuse. On the other hand, many banks can also ignore this provision in the desire to increase their deposit based. In other words, this rule in PEP is something that is just…therefore the cohesion for compliance for standard is never applied in any case. I am relating, I am asking these questions because we want to see how we can amend or propose amendments to this law. Now, is it possible Mr. Chair to touch on the – sige, that's all Mr. Chair.

ESCUDERO: With the permission of Senator Drilon, Senator Sotto is recognize.

SOTTO: So let me just be very direct about it, if you have a client who is classified as a PEP you must exercise due diligence, enhanced due diligence is required, I understand, I heard that from you.

RACELA [AMLC]: If I may clarify Mr. Chair, PEP high risk requires enhanced due diligence, PEP normal risk just the regular due diligence and PEP low risk reduced due diligence.

SOTTO: So what are the difference in your requirements or procedure in handling a client which must be exercise enhanced due diligence vs. a client which only requires reduced due diligence?

RACELA [AMLC]: Depending on the risk profiling Mr. Chair. So the same risk profiling covered person will apply to regular customers. They will also apply two PEPs the only additional requirement is for them to identify who are PEPs.

SOTTO: So pagka PEP, pag enhanced doon ba kasama yung pamilya o associates? Or pareho lang?

RACELA [AMLC]: Pag PEP po kasama po yung identification ng immediate family members and associates.

SOTTO: Kasama pa rin?

RACELA [AMLC]: Opo.

SOTTO: Just one or two more points sa inyo, sa AMLC. If we're going to based your examination on allegations against the certain individuals na probably violating the AMLA, like for example 35 accounts or less than P500,000 deposits is this classified as a--tawag nila dito sa banking community— amateur or professional category. Do you detect such schemes?

RACELA [AMLC]: Ang structuring po ay hindi madedetect ng AMLC kasi po ang requirement is for covered persons to submit more than P500,000 per transaction. Kung ang structuring po ay less than 500,000 yun po ay trigger para ng bangko ay magfile ng suspicious transaction report. Pag hindi po sila nagfile ng suspicious transaction report, hindi po makikita ng AMLC 'yun. So para po sagutin kung …

SOTTO: Kung AMLC and BSP will feel to detect pagka mga ganon?

RACELA [AMLC]: Opo, kasi po less than the threshold amount po of more than P500,000.

SOTTO: Well Mr. Chair dapat siguro yung current system natin e talagang tignan natin ang efficiency because baka kaya yung katulad ng big money launderers involved in Bangladesh Bank was able to transfer their loot to Philippines dahil ganon yung ano natin e.

POE: Mr. Chair, with Sen. Sotto's permission in relation to his line of questioning. So ibig sabihin nga na hindi nagfile ng suspicious account report itong bangko pero kung ngayon na lumabas na nga itong issue na ito, nakita natin na may pagkukulang ang bangko ang bangko ba ay may liability rin dito?

RACELA [AMLC]: Part po yan ng evaluation namin Mr. Chair kasi po kailangan natin ma-establish yung kung tawagin natin ay criminal intent po.

POE: Kaya nga so kung may nakita kayong pagkukulang sa bangko ngayon, lahat itong pag-uusap natin ngayon nakikita nga natin gaya ng sinabi ni Sen. Sotto na merong kakulangan sa batas kasi hindi natin matutunton agad itong mga ganitong uri ng aktibidad. Masasabi ba ninyo halimbawa kung tatawagin natin ang mismong depositor ng account na yan, si Chairman Bautista, nasa kanyang kamay ngayon patotohanan ang mga alegasyon na ito o depensahan ang kanyang sarili di ba? Hindi ninyo mailalabas yan pero kung nandito siya at sabihin niya, kagaya ng sinabi ni Sen. Sotto, sinabi na niya mismo na meron siyang mga account doon. So kung wala naman siyang tinatago, pwede nyang siya mismo ang magsabi o ilabas ninyo yan.

RACELA [AMLC]: I submit po to the discretion of the committee chair.

POE: I guess Mr. Chair, being a lawyer you can expound on this if he waives his...

ESCUDERO: Well if the depositor waives his rights under the secrecy of bank deposits; it will untie the tongues of the officials of LDB. It will relieve them from any suit whatsoever as well and I believe the chairman has already stated in previous interviews that he is more than willing to clear, defend and explain these allegations against him although I have not yet heard him, I haven't heard him say that he will waive his rights to secrecy of bank deposits. Although at some point in time perhaps Atty. Lim can help us out. The bank deposits, the passbooks have all been shown on TV, both the wife and Chairman Bautista showed list of bank accounts. Although under the secrecy under bank deposits law, the waiver should be expressed to certain degree these bank deposits and accounts given that shown to media, it's not the bank revealing them anymore, it's actually in part the depositor himself showed his own list and in part of the depositor passbooks obtained by the wife under whatever circumstances. We will approach that point later on. But again to respond to Sen. Grace, malaking kailangan sa komite kung titignan ito gayundin siguro para sa NBI at sa AMLC kung magkakaroon ng ganong uri ng waiver.

POE: Kaya nga so Mr. Chair siguro nararapat na kung magkakaroon tayo ng pangalawang pagdinig, marahil ay mas makakatulong sa ating imbestigasyon kung ang mismong pinag-uusapan nating depositor dito ay maimbitahan. Sapagkat lahat naman ng ito, sinabi niya sa telebisyon na hindi ko alam, yung iba dyan closed account na, yung iba dyan baka hindi. So pagkakataon niyang depensahan ang kanyang sarili at sabihin kung alin ba dito talaga yung kanya at alin ang hindi at sinabi naman niya galing yan sa lehitimong hanapbuhay ng kanyang pamilya. Pagkakataon niyang pakatotohanan yun sa pagdinig kung saka-sakaling mamarapatin ninyo na imbitahin siya.

LIM [LDB]: Just for the record Mr. Chairman, if the depositor's concern gives the written permission as required by law, the bank is more than willing to talk about the deposits.

POE: So hinihintay nalang natin na si Chairman Bautista ang magsabi, sige i-release niyo yan dahil wala akong tinatago?

LIM [LDB]: Yes your honor and the other concerned depositors.

POE: Maraming Salamat po.

ESCUDERO: On that point, if the chairman executes a waiver and it's a joint account, to what extent will the waiver of the chairman apply? It will include all the accounts that he is a joint account holder of, right? Or you need the consent of the other joint account holders before, meaning from your interpretation of the law, before you can release the details of those accounts.

LIM [LDB]: If it's an OR account my personal opinion Sir on that, the waiver of one depositor is enough.

ESCUDERO: And that's that bank will do?

LIM [LDB]: And that because of the uncertainty in the law, we strongly suggest your honor that the waiver of all the depositors are concerned because this is open questioning for which we will be criminally have liable by the courts your honor.

ESCUDERO: So what will the bank do in that case? You're will be on conservative side or the more liberal side?

LIM [LDB]: As counsel your honor for the banks and officers, I will be on the conservative side your honors.

ESCUDERO: So from your point of view, if it is joint account all depositors must execute the waiver.

LIM [LDB]: To be safe your honor, yes your honor.

ESCUDERO: In this case to include his siblings and relatives?

LIM [LDB]: Yes your honor.

SOTTO: Thank you Mr. Chair, well I hope you have another hearing because I have many questions on the BSP but I will jump then continue to some of the points…

ESCUDERO: Before we proceed Sen. Sotto, Sen. Grace do I take it with Sen. Grace made a motion to invite or to ask a waiver from him?

POE: Perhaps also with due respect to the one that filed the resolution, perhaps it will help the resolution if we do so, with Sen. Sotto's permission.

SOTTO: No, I have no objection. Mr. Chairman, we have given resolution already to the Committee on Banks. So it is now in the hands of the Committee on Banks what to do.

ESCUDERO: There being a motion, hearing no objection, the chair directs the committee secretary especially given the fact that mentioned to invite Chairman Bautista to shed light on this issue or matter or in the absence thereof to submit a written waiver. Kanino ba binibigay yun? Sa bangko? To the bank so that the hearings can proceed without any legal stumbling blocks, so ordered.

DRILON: Mr. Chairman you raised a very valid point, if you and I are holding joint account, which were not.

ESCUDERO: Buti nalang po baka machismis. (laughs)

DRILON: But if you and I are holding joint account and I issue a waiver in writing, is that to give authority to the bank to disclose our joint account? You also a depositor, for all you know I have only one peso in joint account and you have 100,000 I mean, you know you can push it so that's why raised this question because it is something that must be resolved if this is a joint account.

ESCUDERO: As also in relation to the SALN law Sen. Drilon because if it is joint account, as lawyers we know that it's inquorate unless they present contract as to sharing. Each depositor, each joint account holders considered to have inquorate share in that account. And on the part of the PEP or public official, to what extent now, can or will he declare in his SALN the contents of that joint account absent any proof as to who owns what and how much. We will cross the bridge when we get there. Sen. Sotto…

SOTTO: So in that case I will reserve my questions to Luzon Development Bank and the BSP at the later time. Let me now just whine up, wrap up with Anti Money Laundering Council. Therefore, based on what we have been hearing, well not therefore, do you think the use of multiple accounts is a glaring red flag for money laundering activities?

RACELA [AMLC]: There can be various reasons Mr. Chair and using multiple account is not a one of the circumstances for finding suspicious transactions. It could be because there are 6 circumstances…

SOTTO: So you don't think it's a red flag for a person to PEP to have a more than two dozen bank accounts?

RACELA [AMLC]: Sometimes Mr. Chair, if you have several time deposits and you want to monitor the interest income, you may want to open several accounts and distribute this to the accounts. So…

SOTTO: And who will be able to see that? Mamomonitor niyo?

RACELA [AMLC]: Not the interest income but the termination of the time deposit and the placement of the time deposit.

SOTTO: Alright. On the issue of waiver, finally for the AMLC yung SALN namin lahat kami pumipirma ng SALN, meron kaming waiver doon e that allows the Ombudsman and his or her representative can obtain and secure from all appropriate agencies such documents that may show his assists, net worth including those etc-etc. Are you or have you been used by the Ombudsman as his or her representative ever?

RACELA [AMLC]: We have an existing memorandum of agreement with the Ombudsman Mr. Chair and they would normally refer their case to the AMLC Secretariat for assistance in regard to financial investigation.

SOTTO: Practically a senator or a chairman of any constitutional commission has waived and you are authorized. Waived yan, pwede niyo talagang tignan. So walang bank secrecy kami.

RACELA [AMLC]: In accordance with our memorandum of agreement Mr. Chairman, there should be a predicate offense or unlawful activity. There should be anti-graft corrupt and practices act violation or a plunder violation before we can act on financial investigation. That waiver Mr. Chair is pursuant to the Ombudsman's authority previously before the Supreme Court's decision in the case.

ESCUDERO: Just another point Sen. Sotto, has the Ombudsman communicated with you with respect to their intention plan or plan to investigate this particular case?

RACELA [AMLC]: We have not received any request Mr. Chair from the Ombudsman.

ESCUDERO: So wala pa, hindi na umaaksyon ang Ombudsman dito? Insofar as you're concerned?

RACELA [AMLC]: No referrals yet Mr. Chair.

DRILON: Just on that point, let's not forget that the Supreme Court has a rule that people are subject to impeachment or who can only be removed by impeachment cannot be sued criminally during his tenure. Because according to the Supreme Court, the only way you remove a public official who is removable by impeachment is through impeachment proceeding and not a criminal case for a conviction can resolve in removal from office of that impeachable officer. Just for the record?

ESCUDERO: Also to add to what Sen. Drilon said, but also for the record while an impeachable officer cannot be sued criminally by expressed provision by the Ombudsman, he can be investigated at any time by the Office of the Ombudsman. And that applies to all impeachable officers.

SOTTO: Don't you think Mr. Chair we should include also my resolution looking into the do's and don'ts of the SALN. We should, if you'll not mind on Tuesday I will move that the resolution be also referred to your committee. So that we can fix this like for example itong waiver na ito, kung walang predicate crime like Sen. Drilon said, an impeachable officer lang walang predicate crime; hindi niyo pwedeng-- hindi kayo pwedeng umaksyon, hindi kayo pwedeng gamitin ng Ombudsman.

ESCUDERO: More than willing Sen. Sotto, because we will only have one pending resolution in our committee that we have not yet act upon that we will act upon this morning. We have enough time.

DRILON: I would join in the motion of the majority leader because indeed, based on previous discussion in SALN there is really need to review the way in which public officials report their assets and liabilities under the law requiring us to file our SALN because as the chairman pointed out, in case of a joint account how does the public official report the inquorate portion of that account. Certainly he can correct the thing I will not report that because I am only one peso to that account and so but not reporting to that account can constitute a violation of SALN or it can be argued that since it's a joint account at least you should include it in your report. But you do not know what value to include in your report. So maybe we can consider reviewing the SALN and I would join the majority leader on that point. So that we can study whether or not a range of reporting of the asset or liabilities would be more appropriate than what it is to be that you have to report the exact amount till the last centavo.

ESCUDERO: We will be more than willing to take that up once it's referred to us Sen. Drilon.

SOTTO: Thank you Mr. Chairman. So finally to the NBI, are you currently conducting investigations on the allegations made by Mrs. Bautista?

RETANAL [NBI]: Yes your honor. We've already coordinated with several government agencies with respect to the investigation and particularly with involving the accounts on Luzon Development Bank. And as an update to that, we also discovered that sequestered companies are surrendered companies under PCGG maintained accounts with Luzon Development Bank.

SOTTO: So PCGG itself?

RETANAL [NBI]: No your honor. Sequestered and surrendered companies of managed by PCGG maintained accounts with Luzon Development Bank.

SOTTO: And you're investigating this also?

RETANAL [NBI]: Yes your honor we actually made coordination with the BSP with respect to the financial statements of LDB and study and make analysis on the deposit liabilities increases their off because we noted something that could be considered red flag on that.

ESCUDERO: On that point Ma'am, sorry that's an insinuation that we would like to clarify. In fairness to LDB, sequestered companies have accounts with LDB. The only relation that may have would be, because the chairman Bautista used to be chair of PCGG is that the reason why you, sorry it was bit off for me…

RETANAL [NBI]: Yes because we have to make a financial analysis on historical basis. Because he entered the government in year 2010 then we have to review the transactions particular to that. And because of those bank accounts, the sequential numbers of bank accounts with respect to Luzon Development Bank, we made an analysis that it is in sequence and we tried to find out what entities also the possibly deposited on that particular period. And we were able to discover that sequestered companies also deposited at Luzon Development Bank.

ESCUDERO: During the incumbency of chairman Bautista as PCGG chair?

RETANAL [NBI]: Yes your honor.

ESCUDERO: In other words, bago nun sa ibang bangko o walang account dati?

RETANAL [NBI]: Previously it was in another bank.

ESCUDERO: And during his term, transfer to LDB?

RETANAL [NBI]: Yes.

ESCUDERO: Up to now, it's still there?

RETANAL [NBI]: No, has already closed sometime in 2016.

ESCUDERO: Presumably nilipat din sa ibang bangko dahil bago na yung PCGG Chair?

RETANAL [NBI]: We will still clarify on that.

ESCUDERO: That's one thing we should look into as well Senator Sotto because its common practices. Pag bago yung mayor nalilipat yung depository bank. Pag bago yung chairman nalilipat yung depository bank. I mean at the end of the day it should be in the interest of government to put it in one usually a government bank instead of giving any share of any GOC or any agency that leeway to decide which bank deposits the monies of that GOC or a sequestered company maybe to a bank of their choice. You can proceed Senator Sotto.

SOTTO: Thank you. So I understand that you are in position, of course the affidavit of Chairman Bautista ano.

RETANAL [NBI]: Yes.

SOTTO: Together with his attachments.

RETANAL [NBI]: Yes your honor.

SOTTO: Are there copies of the bank books or passbooks, the attached affidavit of Luzon Development Bank?

RETANAL [NBI]: There are documents attached to it your honor.

SOTTO: Can you provide the committee copies?

RETANAL [NBI]: Your honor because of the, because of the confidentiality nature and we are considering the possibility of violating the bank secrecy law with respect to the bank deposits. Thus, we are in no position to--until we have come out with the report that we divulge to these documents your honor.

ESCUDERO: With the permission of Senator Sotto. Ma'am, confidentiality of the pieces of evidence submitted to you? I understand, media personalities who interviewed both Chairman Bautista and Tisha Baustista took photos of the documents they have. And they still have it in their phones. In fact it was also shown on TV by both parties. So what would be the basis of the confidentiality that you were citing?

RETANAL [NBI]: Because there are transactions involved your honor with respect to the bank accounts and it is going into the details already and thus the investigation should, should not be hampered on that. Your honor.

ESCUDERO: No just to clarify. If you are saying your investigation maybe hampered if these documents will be made public, that's entirely a different issue. But you are not citing the secrecy of bank deposits law on the basis for you not to submit it to us.

RETANAL [NBI]: Yes your honor, with due respect to the details of these bank accounts.

ESCUDERO: Huh? May I ask the BSP or AMLC? I will go to Atty. Lim later but he might be a bias source although he is also a lawyer. Is the NBI or other private person covered by the bank secrecy law?

RP: Yeah, all who violates the bank secrecy law.

ESCUDERO: No, no, no, no, no. They happen to have it legally because it was submitted to them although there is a case for robbery or whatever. But as of now, is legal. And they're looking at those bank accounts, right now. So are you saying even the wife of Chairman Bautista violated the bank secrecy law? I think it only applies to the bank if ever. Should it apply to any person who happens to see it so. So it the media person took a picture of it and these are joint accounts ha. And according to Atty. Lim it makes the waiver of the other person or co depositors as well. Then Chairman Bautista violated the bank secrecy law too? By revealing the accounts? Of his co-depositors to other people and vice versa. I don't think it should be stretch that much.

DRILON: Mr. Chairman if you read the bank secrecy law, if I recall it correctly. The prohibition is on the officials, employees of the depository bank.

ESCUDERO: Exactly.

DRILON: ...of the depository bank. If I recall, that is why the bank secrecy law provides. Now this is a peculiar case because the bank accounts were revealed by someone, who is not even an account holder. If I recall correctly the bank, in other words, Mrs. Bautista, if I recall correctly; is not an account holder. She made a revelation on his in public now it's a part of the public domain. What is the different situation?

ESCUDERO: Exactly my point, part of the public domain. Even Chairman Bautista, joined her, showed his own account ofwhat the banks contain. Even the name, the account numbers of the banks.

DRILON: I'm sorry. I'm just telling the--so at least the bank officials, I mean the Luzon Development Bank can claim they are not liable because they were not the ones who reveal it. And the prohibition and the bank secrecy law is on the officials of the depository bank.

SOTTO: Section 3 of the Bank Secrecy Law, Mr. Chairman is really specific. It applies only to officials or employees of the banking institution. So the… yes, Senator Drilon is right. NBI is not covered.

RP: Actually…

ESCUDERO: I'll read it verbatim, Section3; it shall be unlawful for any official or employee of the banking institution to disclose to any person other than those, mentioned in Section 2 here of, it may be court order or impeachment etcetera. Any information concerning deposits. It applies to the bank that is why we haven't been pressing the banks. E di ba wala naman kayong, may consent ng depositor wala namang court order, wala namang impeachment and you are looking to those accounts right now.

RETANAL [NBI]: Your honor. Let me clarify, because this document has to be still validated and verified with the bank itself. Because it is there, allegedly, these are passbooks issued by the aforementioned by the bank and of course that would mean inquiry to the bank.

ESCUDERO: Actually ma'am. We were going there, have you presented to LDB the bank, the passbooks?

RETANAL [NBI]: Not yet your honor.

ESCUDERO: That's, as much as possible I want to be fair here. One of the complaints of Chairman Bautista is that, some of those document were fake or fabricated. Actually, direction perhaps Senator Sotto is going towards this. If you have the passbooks right now and he says, they were stolen. I don't know which ones are real. Which ones are fabricated and it's a golden opportunity quite frankly to show those passbooks to the bank for them to identify not the contents. If indeed those passbooks and we are not even going to the deposits yet. And the depositor himself has admitted that he has deposits in that bank. In fact he is claiming some of those passbooks are fake. It would be a perfect opportunity to show these passbooks to LDB and a cursory observation would reveal whether if these are genuine passbooks issued by LDB. Not even reading the name, not even reading the contents just the genuineness of the passbooks. Ma'am that can establish a lot fo things already.

DRILON: Mr. Chairman just on the point, yes we, a confirmation or a denial from the bank if these bank books are genuine…

ESCUDERO: Or fake.

DRILON: Or fake would not violate the bank secrecy law. But let us be reminded that the bank would violate the bank secrecy law if the deposits are revealed except in cases would the depositor give the written consent. In case of an impeachment or only upon court order. Outside of this, then the bank officer can be subjected to prosecution if he now participates and gives his views or reviews on the existence of and correctness of the accounts of the authentic deposits. Because they are not supposed to make any revelation and the NBI is not a court that can make this inquiry.

ESCUDERO: Agreed. The chair agrees with Senator Drilon that is why we have been very careful about this too and that is why it is only on the extent of authenticating the passbooks.

DRILON: As authenticating the passbooks is okay.

ESCUDERO: Yeah.

DRILON: In other words, is the bank book, your bank book or not?

ESCUDERO: Pwede din naming malaman iyon?

DRILON: You can say yes or no. But beyond that, I would like to think that yes for the protection. Not only of a particular Mr. Bautista, but all the depositors including you and me. You know the NBI cannot bring our bank book to the bank concerned under the guise of investigating would require the bank now to comment on the deposits entirely. Because they are not court and under the law only the court can require an examination.

ESCUDERO: The chair agrees on Senator Drilon but that is why we also, we will be reporting out a bill seeking to repeal the secrecy of bank deposits act. Because according to the information given by the BSP. There are only two countries with such a law; the Philippines is one them and Lebanon is the other. Hindi yatang magandang grupong mapabilang ang Pilipinas doon. So we are in the process of repealing that law. So Senator Sotto, the question is, are the passbooks with you?

SOTTO: Is it with you? Is it with your possession now? Or is it in the NBI?

RETANAL [NBI]: No. It is not with me, I mean this time.

SOTTO: You are in the process of asking the LDB to validate…?

RETANAL [NBI]: Sir with respect with the form, with the respect with the form of the passbook, yes but not on the details.

SOTTO: We don't need that so... Do you have a specific unit that investigates the AMLA violations?

RETANAL [NBI]: The Anti-fraud division your honor is the anti-money laundering test of the National Bureau of Investigation.

SOTTO: Alright so from 2001, where the AMLA was enacted. How many cases, how many violation cases have you investigated?

RETANAL [NBI]: We refer, we refer cases your honor with the respect to the reason of our investigation and the predicate crimes to money laundering. It is the AMLA's jurisdiction to conduct the money laundering investigation aspect and we assist them as a result of our evidence gathered during the investigation of the predicate crimes.

SOTTO: But you have already investigated, fixed syndicates, high risk money launderers,?

RETANAL [NBI]: Yes your honor.

SOTTO: Drug lords?

RETANAL [NBI]: Yes your honor. Those violations of the RA 9165, the RA 3019 corruptions and some of the predicate crimes.

SOTTO: Can the committee have the copy of the at least a list of the investigation? Or the cases you have already investigated?

RETANAL [NBI]: The ones we referred to AMLC your honor.

SOTTO: Yes. Thank you Mr. Chairman. I have a series of question for the LDB and BSP but time constraints and the other colleagues are here so I will suspend my questions at this point Mr. Chairman.

ESCUDERO: Thank you Senator Sotto. Senator Drilon is recognized first interventions.

DRILON: Mr. Chairman, may I the representative, Attorney?

ESCUDERO: Retanal.

DRILON: Retanal okay. Atty. Retanal, we recently passed the new charter of the NBI. Are you aware of that?

RETANAL [NBI]: Yes your honor.

DRILON: Now in that charter the powers of the NBI, is clearly defined, would you recall?

RETANAL [NBI]: Yes your honor.

DRILON: Now in that definition of the powers of the NBI does it include the examination of bank accounts?

RETANAL [NBI]: Sir examination of bank accounts is part of the investigative process.

DRILON: No, no I am asking you specifically. All of those powers granted to the NBI to investigate it? It's part of the investigative process but, we clearly define what should be investigated by the NBI because prior to that law. There was always a question of, who has the right to investigate the PNP or the NBI? One of the policy issues that the law applies to us, we clearly define, what is the definition. What are the cases that can be investigated by the NBI? But we cover it with the general clause. Other cases, or the secretary of justice or the president of the Philippines can direct the NBI to investigate other cases. Now so my question is, under what authority in your law, in your charter, would the NBI go into the examination of bank accounts? In general?

RETANAL [NBI]: Your honor if it is directive from the secretary of justice or the president.

DRILON: This is very important because to our countrymen in our, you know we must protect the citizen's from undue harassment. And undue harassment or harassment can emanate from an examination of bank accounts. And that is why the law is very clear. You have the bank secrecy law, wherein you can only examine the bank accounts under certain circumstances as when the depositor given the permission or in case of the impeachment or in cases of the court order. The bank secrecy law does not allow the NBI to examine bank accounts, whether or not the NBI can examine a bank account pursuant to the instruction of the Department of Justice secretary is something debatable in my mind. In other words, the power of the secretary of Justice should be taken to account the provisions of the banks secrecy law. And this is very important, because my next question is who authorize the NBI to examine the accounts?

RETANAL [NBI]: Your honor may I clarify?

DRILON: Yes.

RETANAL [NBI]: It's not an authority to examine the bank accounts. It is an authority to investigate, to conduct investigation.

DRILON: Authority to conduct an investigation which involves examination and investigation of bank accounts.

RETANAL [NBI]: Because sir if we will conduct either forensic accounting and financial analysis on the transactions, and necessarily if the evidence warrant that there are a pieces of evidence that would warrant examination. That would be, either referred to the anti-money laundering council for the call of the money laundering investigation.

DRILON: Shouldn't the rule of law require you to get court authority to examine these bank accounts as required by the bank secrecy law? We have not read the investigative power of the NBI as an exception to the bank secrecy law. Therefore a reasonable interpretation is that before you conduct an investigation to the bank accounts. You must either get the consent of the depositor or a court order. It's another reasonable limitation on the powers of the NBI? Because the NBI, whether it's an investigative agency, you cannot investigate every thumb you can have and very critical is that you must not use the powers of the NBI to harass a citizen of this country. In fact, in other jurisdictions, the independence of the NBI is so well guarded. Because the law made it very clear that the intention is not to allow the powers, to use the extended powers of the NBI to harass citizens. Let me relate it to why I am taking this position. When I was a secretary of justice, I had supervision over the NBI. What I discovered that time, because it was in the 1990's was that the NBI cases generally involved bouncing checks. What does that mean? The NBI was being used as a collection agency by those, by the creditors. Who refused to go to court or does not want to go to court, would go to the NBI, and use the power of the NBI to harass one who is perceived has a debtor.

That is why I was very active and I think I authored the law which redefined the jurisdiction of the NBI very clearly. Not because of anything but number one in order to clear the distinguish, the NBI's investigatory power from that of the Philippine National Police and number two so that the NBI's power being attached to a political department. And a political appointee, being under the supervision of a political appointee cannot be used to harass the ordinary citizen. And it is in this context that I am asking you, Atty. Retanal if you examine closely. Is it not a reasonable conclusion that before you can look into bank accounts? Whether, even if it's justified, as part of your authority to investigate. Seek the authority of the court to examine these accounts because of the prohibition.

RETANAL [NBI]: Let me clarify your honor, the evidence or the information or leads that we have at hand will be the basis of our investigation. It doesn't necessarily mean that we are examining. Because, when you mean examine, all the transactions, the entries in the transactions entered into with that particular account is part of the examination or inquiry to the account. The NBI is not conducting that, in that manner. We are actually investigating, conducting financial analysis based on the information and the evidence or documents available at hand. We are not inquiring into the banks or examining the actual details of that particular account. Because as I have said in the principle of fairness and legality we have to comply with that and in doing so, we have to validate and verify. We don't take the statement of the complainant, like in the case of one or creditor harassing a debtor. Because we have to examine the complainant himself, we don't take their statement who (inaudible) because what we are protecting is that we should not be used as a tool for harassing individuals because we respect their rights.

DRILON: Compaňera, number one it is very obvious that the limits of your investigation in the present circumstance. And in the circumstance probably in other cases, you are saying, it is in our discretion. Because you are trying to make a distinction, you say are investigating but not examining. I cannot see the distinction. You are investigating but not examining. Let me make it very clear. I am not saying that you should not investigate; I am not saying that you should not examine. I am not saying that because here you were authorized and you were instructed by the secretary of justice to investigate. So that is consistent with the law. Whether or not, it's motivated by something else is not for actual examination, just on the surface and on paper you are indeed authorizing on that. What I am just saying is that insofar as the examination or investigation of the bank accounts. You should seek an authority from the court. Because that is what the Bank Secrecy Law provides. Seek an authority. I am not saying you should stop. I am just saying comply with the Bank Secrecy Deposits Law which says that you get a court authority. Because if you do not do that, if the NBI does not do that, that may put on record, that you could be violating the Bank Secrecy Law. Your distinction that you are not examining but we are just investigating is a distinction which a reasonable mind will not accept as valid.

And I will repeat, we are not asking you to stop your investigation, even if there could be other motives. Especially that it does not fall squarely within the powers or the scope of the authority of the NBI. But you are authorized because of the directive of a political officer of this administration, the Secretary of Justice. But in order that we follow the rule of law, I would strongly suggest, to protect yourselves against charges of violating the Bank Secrecy Law, which do not include the NBI investigation as an exemption transaction, you get an authority from the court. Thank you Mr. Chairman.

ESCUDERO: Thank you Senator Drilon. Picking up from that point. Ma'am, you are examining pieces of documents submitted to you by Mrs. Bautista? Which includes passbooks, among others?

RETANAL [NBI]: Yes your honor.

ESCUDERO: So when you say you're investigating, you're looking at the passbooks? Right?

DRILON: Yes.

ESCUDERO: You are. Of course.

RP: Yes your honor.

ESCUDERO: You're doing a financial analysis. Now, I think the line will be crossed, Manong Frank, when they obligate, order or coerce the bank to answer whatever questions they may have without securing first a court order to that effect. But given the documentary evidence are with them nothing prevents them from looking at it and analyzing it.

DRILON: I think an opposite view. Even if the documents are with you.

ESCUDERO: They cannot look at it?

DRILON: Even if you look at it. You just look at it and keep your opinion to yourself before acting on that because the Bank Secrecy Law requires you to get the permission of the court before you make an inquiry into the bank deposit.

ESCUDERO: I think I hope Manong Frank will support my bill to repeal the Secrecy of Bank Deposits because clearly, without making any conclusion, sometimes it is used as a refuge to hide certain violations of the law or corrupt activities that have been done in the past. And we have encounter this even in previous cases or impeachment cases. And at a proper time, we will be presenting that bill on the floor.

DRILON: I agree Mr. Chair. I will support you on that. But we must balance it with policy consideration that this power to inquire into bank deposits should not be used to harass, even I, can use politically-exposed persons, expose to the administration.

ESCUDERO: Indeed there are competing interests. On the other hand, one it should not be used to harass, on the other hand hindi rin tamang gamitin na sangkalan o paldang pagtataguan ng sinuman lalo na kung may ginawa siyang kamalian. At ang masakit din po Senator Drilon, kung saka-sakali, not necessarily applicable to this case, ninakaw na nga iyung pera, gusto pang kumita ng interest. Sobra naman na yata iyun. Kung ninakaw mo, itago mo sa kama. Baka nakawin. Baka masunog. Pero hindi na dapat pakitain ng interest at protektado siya ng Bank Secrecy Law.

DRILON: Tama po iyun Mr. Chair. Kung ninakaw ang pera, dapat walang Bank Secrecy Law. Pero kung wala namang ebidensiya na ninakaw, dahilan lang po sinabi mo iyan e may extrajudicial killings ditto sa ating bansa, ay iyan ay naging basehan para i-examine ang bank account natin. So as you correctly said Mr. Chairman, there must be a balance between protecting the interest of the public. As in kung ninakaw iyung pera, you should not hide in the Bank Secrecy Law. But kung wala ka naman ginawang masama, e dapat naman right to privacy, protects your bank deposits. That's all Mr. Chairman.

ESCUDERO: Thank you Senator Drilon just a few interventions from the chair. May I direct my questions to Mr. Sarmiento. According to Chairman Bautista, he knows the owner of your bank. In fact, he is quite close to them. And I do not know if you know that personally. But he said that. Nothing wrong with that. Now my question is with respect to how you now treat a PEP particularly Chairman Bautista? If the owners know him or if you know him too, I don't know if you do, do you know Chairman Bautista personally sir?

SARMIENTO [LDB]: No. Mr. Chairman. I don't know him personally.

ESCUDERO: Procedurally in so far as handling a PEP and exercising enhanced due diligence, hindi ba kung kilala ko iyung tao, kaklase ko mula nung college hanggang high school, and I know him to be a man of integrity, I know him to be an honest man, will that suffice or take the place or enhanced due diligence that the banks should be doing on a PEP, can that take the place?

SARMIENTO [LDB]: Mr. Chairman, we have the process in place. So if PEP will go through our process whether you know, he knows somebody in the bank, or whatever.

ESCUDERO: Kasi nung natanong si Chairman Bautista, kinuwestiyon siya sa isang pahayag niya kung bakit siya naglagay ng napakalaking pera? His deposits alone, if true, would be a substantial percentage of the bank's total demand deposits. Bakit siya maglalagay ng napakalaking pera sa isang bangkong ganyan, ang LDB, na narining lang sa kauna-unahang pagkakataon sa akin halimbawa, ang sabi niya, kasi kilala ko iyung may-ari at may tiwala ako. So that was indeed one of his considerations in opening an account with your bank, straight from his mouth. That's what he said. So the question I'm asking is, would that have given him any benefits, any advantages? Like, kakilala ko nga e, I can vouch for him. I'm an officer of the bank, I'm the owner of the bank, I will vouch for him. Matino 'to. That's not enough? Right? Under the rules, under BSP rules, under AMLC rules, that should not be enough.

SARMIENTO [LDB]: Yes Mr. Chairman. And that applies to all our depositors Mr. Chairman.

ESCUDERO: And he would be placed under the same scrutiny as any PEP high, normal or low risks could be?

SARMIENTO [LDB]: Yes Mr. Chairman. That's very clearly indicated in our process.

ESCUDERO: Now next question. This is hypothetical but you may not consider it hypothetical too. But for you it's hypothetical but I'm basing it on the accounts given by, information rather given by both Mrs. Tish and Chairman Bautista, P400,000 deposits daily, let's say for two weeks, that's below the radar's screen because that's below the threshold amount. But if it's daily for let's say two weeks, would that fall under, again this is a hypothetical question sir, not necessarily relating to, a daily deposit of P400,000 for about two weeks, would that generate suspicion, or would that generate an STR based on your own rules even if it's below the threshold amount of P500,000.

SARMIENTO [LDB]: Mr. Chairman, with your permission, can I refer that to our head of branches because this is something that is procedural already. Mr. Chairman, we have process already.

ESCUDERO: He's more familiar?

SARMIENTO [LDB]: Yes Mr. Chairman.

ESCUDERO: Mr. Joson. Again, my question is hypothetical. So not to put you in hot water. Hypothetically, if a depositor makes a daily deposit below the threshold amount and is extraordinary, given his long-time deposits with you that would be an STR? That would generate, rather, an STR?

JOSON [LDB]: It may generate STR but of course we have to analyze the source of the fund. Assuming that even a PEP, assuming that he is also a businessman at the same time then as long as we could justify the amount assuming it's P300,000 daily that proceeds or sales of the day for a gasoline station, that would have not be reported as an STR because of the nature of the business, Mr. Chairman.

ESCUDERO: Agreed. Not necessarily. But if it's outside the day to day business of the depositor it would generate an STR? Hindi naman siya gasolinahan e, kunwari.

JOSON [LDB]: Yes Mr. Chairman.

ESCUDERO: Thank you sir. Next sir. Again, sorry for confronting you with these questions but it are not meant to impugn your credibility or integrity or anyone any other person just to clear the air. Chairman Bautista said too, that these deposits have been accepted by the banks and therefore you'll exercise enhanced due diligence and accepted deposits. So you would ask any depositor, Chairman Bautista included, saan galing iyung pera? Di ba normal yun. Kailangan ninyong gawin iyun especially if he's a PEP right? So he would present to you, in theory, whatever basis of the money would be deed of sale, referral fee, kinita. You would have those documents or is it just a verbal thing? Tatanungin lang ba o ire-require ninyong mag-submit ng dokumento?

JOSON [LDB]: Tatanungin at magre-require din ho ng dokumento.

ESCUDERO: Which you will keep on file? Do you keep that on file if you have a separate file for all of these documents? In case you're asked by the BSP? Hindi ba? Hoy PEP ito and enhanced due diligence ito. Saan ho galing ito? You should be able to answer, right? It's not only verbal. There should be documentary evidence to support it.

JOSON [LDB]: Papakunin din ho namin ng dokumento na magus-substantiate ho doon.

ESCUDERO: Will you keep a copy?

JOSON [LDB]: Normally we keep a copy Mr. Chairman.

ESCUDERO: And it's kept on file for each PEP or each suspicious transactions, magkaksama sila sa mga STRs? Yes?

JOSON [LDB]: Yes Mr. Chairman. Pero hindi na ho lahat ng kwan, halimbawa, let me qualify. Kung again, kung iyung PEP na iyun ay alam namin kung ano ang nature ng business niya, kaya babalikan ko palagi iyun, e hindi ko na kailangang hingian pa ng additional documents.

ESCUDERO: Now, would the nature of business of a depositor I really want to know the answer, be covered by the Secrecy of Bank Deposits Act? Meaning, in the course of the exercise of your function, you've yet to find out the nature of the business of a person. Di ba? Is that covered by the Bank Secrecy Law? To your mind?

JOSON [LDB]: Ang tingin ko po, basta iyung pumasok sa deposito ng isang depositor, ay covered po ng…

ESCUDERO: Kung magkano?

JOSON [LDB]: Regardless of the amount po.

ESCUDERO: Tinatanong ko, to your knowledge, I'll be more direct to the point, what is the business or the source of whatever deposits, I'm not even going to the amounts. If I ask you that question, si Atty. Lim oh nakatingin na kaagad, kanina nakayuko lang (laughs), would that be covered by the Secrecy of Bank Deposits Law? I'll even go a step further. Chairman Bautista said, all of these money, most of it at least, came from earnings from foreign currency trading. Will you advice your client to answer or no, Atty. Lim? Yes or no? Is that covered by Bank Secrecy? While you're whispering to each other, again my premise is Chairman Bautista the depositor himself admitted that he has deposits in your bank. And as you said earlier, he is a PEP. Please sir.

JOSON [LDB]: Hypothetically sir, any information relative to the deposit, source of fund of the depositor would be covered by well of course it would be covered by the Secrecy of Deposits, Republic Act 1405 under the General Banking Act.

ESCUDERO: I will respect that. As you said, as Atty. Lim has said earlier, I'll try to stretch this point sir that I know what the extent is, and Atty. Lim is there to guide us anyway, is the bank foreign currency trader on top of being a bank? I'm talking about LDB.

JOSON [LDB]: As a thrift bank, we have not; we don't have FCDUS [Foreign Currency Deposit Unit] sir.

ESCUDERO: You don't have FCDUs?

JOSON [LDB]: Yes sir.

ESCUDERO: So you only have peso accounts?

JOSON [LDB]: Yes sir.

ESCUDERO: And if you have peso accounts only, you are not allowed to trade in foreign currencies?

JOSON [LDB]: We are not allowed to transact in foreign currencies.

ESCUDERO: But you can of course, exchange? Not even?

JOSON [LDB]: No. Our business would be all in peso.

ESCUDERO: So, ni hindi ako pwede magpapalit, bumili ng dollar sa inyo?

JOSON [LDB]: Hindi po.

ESCUDERO: Hindi rin kayo pwedeng bumili ng dollar?

JOSON [LDB]: Hindi rin po.

ESCUDERO: Thank you. Now this is where I stretch the point. May I know how many closed accounts Chairman Bautista has with LDB?

JOSON [LDB]: I'm sorry Mr. Chairman but I cannot, the question may be covered by Republic Act 1495.

ESCUDERO: Thank you with may be. Because it is a may be. The Secrecy of Banks Deposits Law, I'm sure Atty. Lim is familiar with, makes mention of secrecy with respect to all deposits. Right sir? And how are deposits defined? Please sir. How are deposits defined?

LIM [LDB]: Mr. Chairman, there are two laws that are involved here. The Secrecy of Bank Deposits Law under 1405 and with respects to deposits. The other one is the General Banking Law particularly Section 55.

ESCUDERO: …which says.

LIM [LDB]: Which says, "no director or officer, employee, or agent of any bank shall without order of a court of competent jurisdiction, disclose to any unauthorized person any information relative to the funds or properties in the custody of the bank belonging to private individuals, corporations, or any other entity" Mr. Chairman. So we have to contend with two laws here.

ESCUDERO: I agree sir. In fact in our repeal of the Secrecy of Bank Deposits Law, we intend to address that too including…but sir, you mentioned, again, any and all…

LIM [LDB]: Any information relative to the funds or properties in the custody of the bank. So it's much broader than the Bank Secrecy Law your honor.

ESCUDERO: I agree sir but a closed account does not obtain funds in your custody. Closed na nga eh. Wala nang pondo yun eh. In fact, the PDIC charter defines deposits to mean a non-paid balance of money received by the bank.

LIM [LDB]: Yes.

ESCUDERO: Again ha. Don't worry. It's a theory essentially but I'm stretching it. If it's a closed account, wala na kayong deposito, wala na kayong funds na hinahawakan so even the General Banking Law pertains to funds or properties in your custody. I am referring to an account that contains no funds. Again, the law is Secrecy of Bank Deposits. And deposits are defined as a fund given to you and held entrust by you in behalf of the depositor. A closed account does not contain any funds anymore. And the law does not say Secrecy of Bank Depositors Act. It speaks of Secrecy of Bank Deposits Act. So it attaches to a particular deposit not depositor.

So, I go back to the question. Is it your position and the position therefore by the bank as well since you are advising them that even if it's a closed account? It is still covered by the Secrecy of Bank Deposits, whether or not the depositor still has an account with you, that's irrelevant. Sir please.

LIM [LDB]: Construing the purposes of the Bank Secrecies Law your honor, I think that privilege survives the account. In other words, whether or not the account is still open or is closed, then the bank is prohibited and its officers are prohibited to disclose any information with respect to that closed account Mr. Chairman.

ESCUDERO: Again, that would be a conservative position.

LIM [LDB]: I think in view of criminal liability that is attached to the violation of the law Mr. Chairman.

ESCUDERO: We may test that theory sir.

LIM [LDB]: Yes.

ESCUDERO: And it would be a ripe issue to bring up in order to clarify this. Personally I think it's limited only to existing deposits. Because given the policy reasons behind the Bank Secrecy Law, wala na e. Closed account na e.

LIM [LDB]: Yes.

ESCUDERO: Hindi ba? Ano ikakatakot pa ng depositor? Matagal nang sara iyun eh. What if it's closed in 20 years, would it matter? If it was closed yesterday, would it matter? Perhaps but still, I would take the position that closed account is no longer covered by the Bank Secrecy Law nor by the provision of the General Banking Act given the absence of funds or deposits in the custody of the banks.

LIM [LDB]: We welcome that interpretation by the court Mr. Chairman.

ESCUDERO: Kung saka-sakaling isa-submit.

LIM [LDB]: Or better still if you can amend the law because anyway, that's within your power.

ESCUDERO: We intend to repeal it sir. No less I have the support of the minority leader already.

Now, on the part of the NBI. Ma'am, what documents can you turn over to us, that you are comfortable with?

RETANAL [NBI]: Let me confer your honor with the, with Patricia Bautista. And she said she is willing to, the copies of the documents.

DRILON: Mr. Chairman, it does not depend on Ms. Bautista.

ESCUDERO: I was about to go there.

DRILON: It depends upon how we interpret the law, as to whether it is within your authority Madam NBI to examine and look into these accounts without the authority of the court. I keep on emphasizing that. You can investigate. But seek the prior approval of the court. Because here, you already made a statement for example, that you, I'll check what exactly you said, you said that you confirmed or you went to an examination that there were PCGG accounts in Luzon Development Bank?

RETANAL [NBI]: Your honor, because our research…

DRILON: I'm sorry?

RETANAL [NBI]: Because we don't have to examine the accounts. What was provided initially were the account numbers.

DRILON: So?

RETANAL [NBI]: And then we made a research based on the account number.

DRILON: You made an examination of the bank account numbers?

RETANAL [NBI]: No your honor.

DRILON: What did you do?

RETANAL [NBI]: We confer these bank account numbers as historical analysis with respect to this position, the position of the subject, who entered the government service in 2010. We then confer with the PCGG regarding for any possible transactions entered into by then Chair Bautista. And then, to confirm with the financial analysis based on his salaries and other documents like purchase vouchers, we were able to made a research that accounts are open in behalf of the sequestered companies or surrendered companies which are already closed as of this time. And then we compared it with the account number listed in the affidavit. And based on the sequence, we made a determination that because the bank accounts of the sequestered companies were open sometime in 2012 until it was closed in 2016. That's why we made an analysis on the Luzon Development Bank demand deposits, initially a scrutiny because there are substantial increases in their deposit liabilities in years 2012, 2013 and 2014, and those accounts are existing during those times. And with respect to the amount deposited by the sequestered companies, it would deem substantial.

DRILON: You call that.. I'm sorry.

RETANAL [NBI]: We examine sir the closed accounts of the sequestered company initially so that we can make an analysis with respect to the deposits made to Luzon Development Bank.

DRILON: It's quite obvious that you are undertaking an examination of a bank deposit. And let me repeat to the point of being redundant, we are not saying that you cannot do this. What we are saying is take the conservative approach. Get a court authority to examine this account because that is what is provided in the Bank Secrecy Law. Certainly, you can look at these accounts as part of your examination. But the Bank Secrecy Law requires you to get a prior authorization from the bank. In fact, the Anti-Money Laundering Council before they examine bank accounts they go to court seeks authority to examine. And at the same time, freeze it if necessary. If AMLC is doing that I cannot see why by what authority you are examining without court authority?

I'm just asking you to be more careful because your investigation of the bank accounts can lead you to into violations of the law and could put you into trouble. The evidence that you can gather maybe tainted or maybe objected to when it gets to court. And therefore what I am advising you get a court authority so that you can strengthen your case. And that applies not only in the case of Mr. Bautista, let me emphasize, but in all cases similarly situated all the citizens who are similarly situated would be protected with what is stated in law in so far as Secrecy of Bank Deposits are concerned.

RETANAL [NBI]: Yes your honor. That's why we are careful in our investigative process with respect to the bank accounts enumerated in the affidavit. That's why we went out of those particular accounts and then we try to verify with other government agencies with respect to the historical analysis on the financial aspect. That's why right now there is an impending request of a waiver on the part of the sequestered companies with respect to the inquiry and examination in their bank accounts.

DRILON: Because without that waiver, you cannot look into those accounts.

RETANAL [NBI]: Yes.

DRILON: That confirms our position that if you do not get that waiver in order to perform your job, get a court authority. Because the waiver is the will of the depositor. And if you do not get that waiver in order that you can continue your investigation, get a court order. In the absence of a waiver or court order, I am afraid that your effort may go to naught.

RETANAL [NBI]: Yes yor honor. That's why it is still very early for us to make a conclusion on the matter because we have been authorized only for about two weeks.

ESCUDERO: Did you also request a waiver from Chairman Bautista? Only the sequestered banks?

RETANAL [NBI]: Only to the officers of the sequestered and surrendered companies. It would entail a lot examination to be done.

ESCUDERO: I think Senator Drilon would agree with me that clearly the Bank Secrecy Law poses a big hindrance. Malaking hadlang yung Bank Secrecy Law at ang tanging paraan para malampasan iyun, even on the part of the banks, I'm sure they would be more than willing to answer a lot of our questions. Maliwanag na kailangan ng court order, impeachment case o mag-waive yung depositor. At hinihiling ko siguro at nakikiusap ako kay Chairman Bautista, 10 ng kanyang mga kamag-anak para magkaroon ng malayang imbestigasyon at nang makapagbigay ng mga angkop na kasagutan at nang hindi nagmumukhang parang ayaw sumagot o may itinatago or natatago yung bangko na magbigay siya ng waiver. Nakapagsabi na rin naman siya na pabor siya sa anumang uri ng inquiry ng NBI man, ng BIR, o legislative inquiry man specifically binanggit niya iyun.

Senator Grace asked for his presence but actually on the part of the chair, he is welcome to attend, given the fact that his name was mentioned. But off hand even if he does not attend, I would be more than satisfied with his submission of a waiver again to the bank, right? Copy furnish to who else? Copy furnish the committee so that we can all ventilate the issues involved in this case without any worries of violating the Bank Secrecy Law or holding accountable or liable officers or officials of the Luzon Development Bank. Would that relieve you too, Atty. Racela of any… ay may AMLC ka pa ano? Pwede ba mag-waiver din iyong subject of investigation?

RACELA [AMLC]: Criminal liability, Mr. Chair…

ESCUDERO: No. If he says, I waive my rights in so far as the AMLC's investigation is concerned. You reveal it to…you can even specify this to the legislative inquiry or to the NBI. Is that possible?

DRILON: Mr. Chair, if I may?

ESCUDERO: Yes.

DRILON: I don't think AMLC would need a waiver. By law whether it's a predicate crime the AMLC can examine.

ESCUDERO: No but for them to answer specific questions about their findings because they're prohibited or barred e from sharing your findings? Right?

DRILON: They are not a depositor.

ESCUDERO: Not by virtue of Bank Secrecy Law.

DRILON: I'm sorry not a depositor or a bank. The Bank Secrecy would apply to depository banks. So I don't see the use of waiver.

ESCUDERO: Can you tell your findings with us?

RACELA [AMLC]: By virtue of the Bank Secrecy waiver Mr. Chair, I believe we can already share the findings.

ESCUDERO: If there is a waiver? Again, I'm asking Chairman Bautista to do so. Para naman hindi malagay sa alanganin yung mga opisyal ng bangko at hindi sila masyado mahirapan. At nang hindi na rin mahirapan sumagot si Atty. Lim kaka-advise sa kanyang mga kliyente. With that, ma I ask the NBI rep. to kindly whatever clearance, kindly get it and return to us in the next hearing with respect to only what you can divulge. Kung sinuman ang papaalaman mo but at the end of the day, you will be accountable to us not to whomever you will ask. On the part of Luzon Development Bank, I perfectly understand where you are coming from. Again, no insinuations of wrongdoing and we hope that your client your depositor will indeed give you that waiver to your hands. So that you would be more free to speak and discuss with us these specifics with a view to enable us to amending the law and hopefully plugging all the loopholes that there may be in the AMLC Law. Tulad ng pangako ko, hindi tayo aabutin ng lunch. With the persmission of Senator Drilon, the hearing…yes ma'am? You want to say something Atty. Retanal?

RETANAL [NBI]: Your honor.

ESCUDERO: Hindi tayo aabutin n ala-una diyan ha?

RETANAL [NBI]: Yes your honor.

ESCUDERO: Yes ma'am.

RETANAL [NBI]: There are other financial institutions that are involved I this case.

ESCUDERO: Like?

RETANAL [NBI]: Other banks like Banco De Oro, RCBC, HSBC.

ESCUDERO: As soon as we get that waiver, we will invite them perhaps. But the answer of a waiver, we will just face the same brick wall we face with right now. But we will try unless we can pass the law immediately repealing it. But we will do so. We will include them as well ma'am. But I think its best that we get that waiver first from him. And I hope he would be more than willing to do that as he has initiated and stated in media. Thank you very much ma'am. Thank you Senator Drilon. Thank you to our invited guests. And as promised we will end before lunch. As I understand, some of you have previous engagements. I do too.

Before we adjourn, with the permission of Senator Drilon, chair would like to take up this one bill. Senate Bill No. 1495 filed by Senator Aquino and the chair hereby directs the secretary to consolidate this with similar bills on the subject of matter particularly on the repeal of the Secrecy of Bank Deposits Law to be consolidated with the Senate Bill No. 47, 115, 116 and 1124. So ordered. There be no other matters, the chair hereby declares that the hearing of the Committee on Banks is suspended. Maraming salamat po at magandang hapon sa inyong lahat. ###


 

 

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