Money

laundering
and

The Anti-Money
Laundering Act
of 2001
Republic Act No. 9160, as amended by Republic Act No. 9194

and its
Revised Implementing
Rules and Regulations

May 2005

Money Laundering
and

The Anti-Money Laundering Act of 2001

Republic Act No. 9160, as amended by Republic Act No, 9194
and its

Revised Implementing Rules and Regulations

July 2004

Contents

M O N E Y L A U N D E R I N G D E F I N E D [page I ]
A C T N O 9 1 9 4 [page 3 ]

R E P U B L I C A C T N O 9 1 6 0 [page 2 ] R E P U B L I C

T H E A N T I - M O N E Y L A U N D E R I N G C O U N C I L ( A M L C ) [page 3 )

D E F I N I T I O N S [page 5 ]

H O W T H E S Y S T E M W O R K S [page 6]

P R E V E N T M O N E Y L A U N D E R I N G [page 4]

TERM

S A F E G U A R D S TO

T H E F I N A N C I A L A C T I O N T A S K F O R C E [page 10]

T H E E G M O N T G R O U P [paee I I I T H E A S I A P A C I F I C G R O U P [page 1IJ

MONEY LAUNDERING DEFINED

What is Money Laundering?
Money laundering is a scheme whereby the proceeds of an illegal activity are
transacted and made to appear to have originated from legitimate sources.

How is Money Laundering carried out?

The scheme is carried out in three stages mainly, every step of which is aimed at
disguising the illegal origin of the money that is transacted.

1.

Placement In this stage, the money launderer places the proceeds from illegal
activity into financial institutions, like banks, through deposits, money orders, wire
transfers or other means. The money may be mixed with legitimate deposits, or large
amounts are broken up into smaller sums which are either deposited in various bank
accounts or used to buy monetary instruments. These are then collected and deposited
to another location.

2.

Layering. This stage involves further distancing the proceeds of criminal activity
from their origin through complex and multiple financial transactions. This may be
done through the purchase and sale of investment securities, the wiring of funds
through a number of accounts worldwide, or the disguised transfer of payments for
non-existent goods and services.

3.

Integration. In this stage, the money launderer reenters the funds to legitimate
circulation by investing in, for example, real estate or other business ventures. The
money by then would appear to be entirely clean, hence, money laundering is
consummated.

Why is Money Laundering a problem?

Money laundering allows criminals to preserve and enjoy the proceeds of their crimes,
thus providing them with the incentives and the means to continue their illegal activities. At
the same time, it provides them the opportunity to appear in public like legitimate
entrepreneurs. Organized crime, through money laundering, is known to have the capacity
to destabilize governments and undermine their financial systems. It is thus a threat to
national security.

II.

REPUBLIC ACT NO. 9160

What is Republic Act No. 9160?

RA No.9160, otherwise known as the Anti-Money Laundering Act of 2001 (AMLA)
took effect on October 17, 2001 to enable the country to participate in the global campaign
to fight money laundering. It was the Philippine response to the desire of the Paris-based
Financial Action Task Force to have all countries adopt and implement anti-money laundering
measures.

What are the salient features of AMLA, as amended?

1.

It criminalizes money laundering, meaning it makes money laundering a crime, and provides
penalties for its commission, including hefty fines and imprisonment.

2.

It states dearly the determination of the government to prevent the Philippines from becoming
a haven for money laundering, while ensuring to preserve the integrity and confidentiality
of good bank accounts.

3.

It creates an Anti-Money Laundering Council (AMLC) that i's tasked to oversee the
implementation of the law and to act as a financial intelligence unit to receive and
analyze covered and suspicious transaction reports.

4.

It establishes the rules and the administration process for the prevention, detection
and prosecution of money laundering activities.

5.

It relaxes the bank deposit secrecy laws by authorizing the AMLC and the Bangko
Sentral ng Pilipinas access to deposit and investment accounts in specific
circumstances.

6.

It requires covered institutions to report covered and suspicious transactions and to

cooperate with the government in prosecuting offenders. It also requires them to know
their customers and to safely keep all records of their transactions.

7.

It carries provisions to protect innocent parties by providing penalties for causing the
disclosure to the public of confidential information contained in the covered and
suspicious transactions.

8.

It establishes procedures for international cooperation and assistance in the

apprehension and prosecution of money laundering suspects.

III.

REPUBLIC ACT NO. 9194

What is Republic Act No. 9194?

RA No. 9194 is an Act that amends certain provisions of the Anti-Money Laundering
Act of 2001 or RA No. 9160. It remedies the serious flaws noted in the law after just one
year since its enactment. It took effect on March 23, 2003.
The amendments are as follows:
1.

It lowers the threshold amount for covered transactions from P4 million in RA No.
9160 to P500,000.00. Any financial transaction in excess of this amount done
within one banking day must be reported to the AMLC.

2.

It expands the reporting requirements to include suspicious transactions regardless

of the amount involved.

3.

It authorizes the AMLC, upon order of a competent court, to examine any particular
deposit or investment in any bank or non-bank financial institution once it is
established that these transactions are related to an unlawful activity. However, it
provides that no court order is required in cases involving kidnapping for ransom,
drug trafficking, hijacking, arson and murder including those perpetrated by
terrorists against non-combatants. This indicates the high level of concern that
the law gives to these crimes.

4.

It authorizes the Bangko Sentral ng Pilipinas (BSP) to examine any deposit or

investment in any bank or non-bank financial institution when the examination is
made in the course of its periodic and special examinations of financial institutions.
The Implementing Rules and Regulations (IRRs) of RA No. 9160 were revised
accordingly after the passage of RA No. 9194 and took effect on September 7,
2003.

IV. T H E A N T I - M O N E Y L A U N D E R I N G C O U N C I I (MMC)
Who are the members of the AMLC?
TheAMLC is composed of the Governor of the Bangko Sentral ng Pilipinas as Chairman,
and the Chairman of the Securities and Exchange Commission and the Insurance
Commissioner as members. TheAMLC is supported by a Secretariat headed by an Executive
Director who has a term of five years and must be a lawyer. All the members of the Secretariat
must have had at least five years experience in either the BSP, the SEC or the Insurance
Commission. They hold full-time permanent positions in the BSP upon their appointment.

What are the functions of the AMLC?

The Anti-Money Laundering Council is authorized to:
1.

Require and receive covered or suspicious transaction reports from covered

institutions.

2.

Issue orders to determine the true identity of the owner of any monetary instrument
or property that is the subject of a covered or suspicious transaction report, and
to request the assistance of a foreign country if the Council believes it is necessary.

3.

Institute civil forfeiture and all other remedial proceedings through the Office of
the Solicitor General.

4.

Cause the filing of complaints with the Department of Justice or the Ombudsman
for the prosecution of money laundering offenses.

5.

Investigate suspicious transactions, covered transactions deemed suspicious,

money laundering activities and other violations of the AMLA.

6.

Secure the order of the Court of Appeals to freeze any monetary instrument or
property alleged to be the proceeds of unlawful activity.

7.

Implement such measures as may be necessary and justified to counteract money

laundering.

8.

Receive and take action on any request from foreign countries for assistance in
their own anti-money laundering operations.

9.

Develop educational programs to make the public aware of the pernicious effects
of money laundering and how they can participate in bringing the offenders to the
fold of the law.

10. Enlist the assistance of any branch of government for the prevention, detection
and investigation of money laundering offenses and the prosecution of offenders.
In this connection, the AMLC can require intelligence agencies of the government
to divulge any information that will facilitate the work of the Council in going after
money launderers.
11. Impose administrative sanctions on those who violate the law, and the rules,
regulations, orders and resolutions issued in connection with the enforcement of
the law.

V. T E R M D E F I N I T I O N S
What are the "covered institutions"?
The institutions covered by the AMLA are the following:
1.

All those supervised and regulated by the Bangko Sentral ng Pilipinas, including
banks, offshore banking units, quasi-banks, trust entities, non-stock savings and
loan associations, pawnshops, and their subsidiaries and affiliates.

2.

All those supervised and regulated by the Securities and Exchange Commission,
including securities dealers, brokers, pre-need companies, foreign exchange
corporations, investment houses, trading advisors, and other entities administering
or otherwise dealing in currency, commodities or financial derivatives based thereon.

3.

All those supervised and regulated by the Insurance Commission, including insurance
companies, insurance agents, insurance brokers, professional reinsurers,
reinsurance brokers, and holding companies.

What is a "covered transaction"?

A transaction in cash or other equivalent monetary instrument involving a total amount
in excess of P500.000.00 that is done with a covered institution, within one banking day, is
a covered transaction that must be reported by the covered institution.

What is a "suspicious transaction"?

A transaction is suspicious and must be reported as such by the covered institution
concerned regardless of the amount involved when any of the following circumstances
exists:
1.
2.
3.
4.
5.
6.

The individual making the transaction is not properly identified.

There is no underlying legal or trade obligation, purpose or economic justification
for the transaction.
The amount involved is not commensurate with the business or financial capacity of
the individual making the transaction.
The transaction is structured in a manner that invites suspicion that it is trying to
avoid the reporting requirements under the AMLA.
Any circumstance relating to the transaction which is observed to deviate from the
client's past transactions.
The transaction is in any way related to an unlawful activity under the AMLA.

What are considered unlawful activities under the AMLA, as amended?

There are 14 unlawful activities or predicate crimes covered by the AMLA. These are
KDG FPJ SSS HERPQ
in the order enumerated in the law:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

Kidnapping
Kidnapping for ransom
Drug offenses
Drug offenses
Graft and corrupt practices
Graft and corrupt practices

Plunder
Felonies of similar nature
Plunder
Robbery and extortion
Jueteng and masiao
Jueteng and masiao

Piracy on the high seas
Swindling
Qualified theft
Smuggling
Swindling
Securities fraud
Smuggling

Hijacking
Electronic Commerce crimes
Electronic
commerce
crime
Hijacking, destructive arson and murder,
including those
perpetrated
against nonRobbery and extortion
combatant persons (terrorist acts)
Piracy
Securities fraud
Qualified theftt

13.
14. Felonies or offenses of a similar nature punishable under penal laws of other
countries.
These are crimes that, in the view of Congress, generate huge amounts of money for
money launderers. Under the AMLA, a person can be prosecuted and punished for both the
underlying unlawful activity and the money laundering offense, and the proceeds thereof
can be confiscated or forfeited in favor of the government.

VI. H O W T H E S Y S T E M W O R K S
How are cases litigated?
1.

The process basically begins with the submission of the covered transaction and
suspicious transaction reports by the covered institutions to the AMLC. The reports
must be filed within five working days from the occurrence of the transactions.

2.

When the AMLC finds that there is probable cause to charge any person with a
money laundering offense under the AMLA, it causes a complaint to be filed with the
Department of Justice or, in cases involving public officers or employees, the Office
of the Ombudsman, which then conducts the preliminary investigation of the case.
Probable cause is determined on the basis of facts and circumstances which, in the
words of the Implementing Rules and Regulations, "would lead a reasonably discreet,

prudent or cautious man to believe that an unlawful activity and/or a money laundering
offense is about to be, is being or has been committed."
3.

Under the implementing rules, all the elements of every money laundering offense
must be proved by evidence beyond reasonable doubt, "including the element of
knowledge that the monetary instrument or property represents, involves or relates
to the proceeds of any unlawful activity."

4.

When the AMLC after an investigation finds it necessary, it may request the Court
of Appeals through an ex-parte application to issue a freeze order on any monetary
instrument or property involved in a case. The freeze order is effective for 20 days
unless extended by the Court of Appeals.

5.

With a court order, the AMLC may inquire into or examine any particular bank deposit
or investment related to an unlawful activity or a money laundering offense. However,
no court order is necessary in cases involving kidnapping for ransom, narcotics
offenses, hijacking, destructive arson and murder including those perpetrated by
terrorists against non-combatants.

6.

The Regional Trial Courts have the jurisdiction to try all cases on money laundering.
Those committed by public officers and private persons in conspiracy with them are
tried by the Sandiganbayan.
KDHAM

Kidnapping
offenses
What is the effect of the Bank Deposit Secrecy Laws on theDrug
implementation
Hijacking
of the AMLA, as amended?
Arson (destructive)
Murder
When reporting covered or suspicious transactions to the AMLC, covered institutions

and their officers and employees are not deemed to have violated the Bank Deposit Secrecy
Laws (RA Nos. 1405 and 6426), RA No. 8791 and other similar laws. However, they are
strictly prohibited from disclosing such transactions to any person in any manner or by any
means. Violation of confidentiality makes them criminally liable.

How is money laundering committed and what are the penalties?

Money laundering is committed by the following:
1.

Any person knowing that a monetary instrument or property is related to the proceeds
of an unlawful activity, enters or attempts to enter into a transaction
using the said monetary instrument or property (the money launderer
himself).
The penalty is 7 to 14 years imprisonment and a fine of not less than P3 million but
not more than twice the value of the monetary instrument or property.
7

2.

Any person, knowing that a monetary instrument or property involves the proceeds
of an unlawful activity, performs or fails to perform any act as a result of which he
facilitates the offense of money laundering (the person who assists the money
launderer).
The penalty is 4 to 7 years imprisonment and a fine of not less than P1.5 million but
not more than P3 million.

3.

Any person, knowing that a monetary instrument or property is required under the
AMLA to be disclosed and filed with the AMLC, fails to do so (those required to
report covered and suspicious transactions).
The penalty is 6 months to 4 years imprisonment or a fine of not less than P100,000.00
but not more than P500.000.00, or both.

What are the other offenses punishable under the AMLA, as amended?
1.

Failure to keep records is committed by any responsible official or employee of a

covered institution who fails to maintain and safely store all records of transactions
for 5 years from the dates the transactions were made or when the accounts were
closed.
The penalty is 6 months to 1 year imprisonment or a fine of not less than P100,000.00
but not more than P500,000.00 or both.

2.

Malicious reporting is committed by any person who, with malice or in bad faith,
reports or files a completely unwarranted or false information regarding a money
laundering transaction against any person.
The penalty is 6 months to 4 years imprisonment and a fine of not less than
P100,000.00 but not more than P500,000.00. The offender is not entitled to the
benefits of the Probation Law.

3.

Breach of confidentiality. For this offense, the penalty is 3 to 8 years imprisonment

and a fine of not less than P500,000.00 but not more than P1 million. In case the
prohibited information is reported by media, the responsible reporter, writer, president,
publisher, manager, and editor-in-chief are held criminally liable.

4.

Administrative offenses. The AMLC, after due investigation, can impose fines
from P100,000.00 to P500,000.00 on officers and employees of covered institutions
or any person who violates the provisions of the AMLA, as amended, the IRRs, and
orders and resolutions issued pursuant thereto.

V. SAFEGUARDS TO P R E V E N T M O N E Y LAUNDERING
What are the preventive measures provided by the AMLA, as amended?
1

The Know-Your-Customer Rule (KYC). Covered institutions are required to give a

record of the true and full identity of their clients based on official documents and to
maintain a system of verification. In the case of corporate clients, a system is
required to verify their legal existence and organizational structures as well as the
authority and identification of persons purporting to act on their behalf.
Covered institutions should not allow the opening or creation of new accounts
without face-to-face contact and should require the production of minimum information and original documents to prove identity.

2.

AMLA also prohibits the opening of anonymous accounts, accounts under fictitious names and numbered checking accounts. Peso and foreign currency nonchecking numbered accounts are allowed provided that the true identity of the
owner is satisfactorily established and all proof identity is recorded and kept by the
covered institutions.

3.

Record Keeping Rule. Covered institutions are required to maintain and safely
store all records of all their transactions for five (5) years from the dates of said
transactions. With respect to closed accounts, the records on customers identification, account files and business correspondence, shall be preserved and safely
stored for at least (5) years from the dates when they were closed.

4.

Transaction Reporting Rule. Covered institutions are required to report to the AMLC
all covered transactions and suspicious transactions within five (5) working days
from occurrence thereof, unless the Supervising Authority prescribes a longer period not exceeding ten (10) working days.

5.

The AMLC is required to develop educational programs to inform the public about
the pernicious effects of money laundering, the methods and techniques used by
the perpetrators, the viable means of preventing money laundering, and the effective ways of prosecuting and punishing offenders.

V I . T H E F I N A N C I A L A C T I O N T A S K F O R C E (FATF)
What is the FATF?
The FATF is an international body formed by the leading industrial countries in the
world, collectively known as the Group of Seven (G7), during a G7 Summit meeting in Paris
in 1989. Its mission is to pave the way for the prevention and detection of money laundering
worldwide by requiring all nations to take effective countermeasures.
The FATF now has a membership of 31 countries and two international organizations,
namely, Argentina, Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France,
Germany, Greece, Hong Kong (China), Iceland, Ireland, Italy, Japan, Luxembourg, The
Netherlands, Mexico, New Zealand, Norway, Portugal, Russian Federation, Singapore, South
Africa, Spain, Sweden, Switzerland, Turkey, The United Kingdom, The United States of
America, The European Commission and the Gulf Cooperation Council.
In 1990, the FATF prepared a set of Forty Recommendations which provides a
comprehensive plan of action needed to fight money laundering. The Forty
Recommendations have come to be recognized as the international standard against which
the capability of each country to fight money laundering is measured. At minimum, the
FATF expects countries to criminalize money laundering, to have a system of reporting
suspicious transactions with a centralized financial intelligence unit to receive and analyze
the reports, the removal or relaxation of bank secrecy laws, and the institution of a system
of cooperation with other countries in the apprehension and prosecution of money launderers.
Thereafter, the FATF issued 8 Special Recommendations to cover terrorist financing
and revised its Forty Recommendations.
On 22 October 2004, the FATF issued Special Recommendation No.9 which requires
countries to have measures in place to detect the physical cross-border transportation of
currency and bearer negotiable instruments, including a declaration system and other
disclosure obligation.

What is the NCCT List?

This is a list of so-called Non-Cooperative Countries and Territories in the fight against
money laundering. The FATF has made this list, which it updates from time to time, to
ensure countries put in place an effective anti-money laundering mechanism. It was the
inclusion of the Philippines in the list in year 2000 that prompted Congress to enact the
AMLA, apart from the fact that it was time the Philippines joined the fight against this devious
and dangerous crime.

10

On 11 February 2005, the FATF removed the Philippines from its list of Non-Cooperative
Countries and Territories after the FATF Asia Pacific Review Group confirmed that the
Philippines is effectively implementing anti-money laundering measures.
According to the FATF, the Philippines has an AML system that includes customer
identification, suspicious transaction reporting, bank examination, and legal capacity to
investigate and prosecute money laundering, as well as a developed financial intelligence
unit that analyzes financial data, co-ordinates national effort and facilitates international
cooperation.

VII. T H E E G M O N T G R O U P
Who comprise the Egmont Group?
The Egmont Group is an international organization of Financial Intelligence Units (FlUs)
to provide a forum for them to discuss ways to improve their individual capabilities to fight
money laundering and terrorist financing, as well as avenues of cooperation, especially in
the exchange of information about cross-border offenders. The name was derived from the
venue of its first meeting in 1995 - The Egmont-Arenberg Palace in Brussels, Belgium. The
Philippines is a candidate for membership in the Group.

VIII. THE ASIA PACIFIC GROUP (APG) ON MONEY LAUNDERING

What is the APG on Money Laundering?
The APG is an organization of countries in the Asia Pacific region participating in the
fight against money laundering and terrorist financing. It conducts mutual evaluations of its
members to ensure that their efforts come up to FATF standards and holds workshops to
keep track of trends in dealing with the crime of money laundering. The Philippines is a
founding member of the APG and attends its meetings regularly.

PUBLIC REPORTING
For additional information, inquiries and assistance, please feel free to contact:

The Executive Director

Anti-Money Laundering Council Secretariat
5/F EDPC Bldg., BSP Complex, Malate, Manila
Email: vaquino@bsp.gov.ph
Tel. No. (63)(2) 523-4421
Fax No. (63)(2) 524-6085
AMLC WEBSITE:
www.amlc.gov.ph

THE A N T I - M O N E Y L A U N D E R I N G C O U N C I L
HON. RAFAEL B. BUENAVENTURA
Chairman
Governor, Bangko Sentral ng Pilipinas
HON. FE B. BARIN
Member
Chairperson, Securities and
Exchange Commission

HON. BENJAMIN S. SANTOS

Member
Commissioner, Insurance
Commission

SECRETARIAT
ATTY. VICENTE S. AQUINO
Executive Director
ATTY. CELIA E. SANDEJAS
Bank Officer VII
Legal Evaluation Staff

ATTY. RICHARD DAVID C. FUNK II

Deputy Director
Compliance and Investigation Staff

MS. RUBY R. CRUZ

Deputy Director
Information Management and Analysis Staff

MR. SALVADOR S. ZANTUA, JR.

Manager I
Administrative and Financial Services Division

ATTY. FRANCIS JAMES M. SANCHEZ

Technical Assistant to the
Executive Director

ATTY. ARNOLD G. FRANE

Council Secretary