WE HAVE recently been put on the international ‘gray list’. This means that our financial institutions are considered to be not as reliable as in most countries. This is disappointing and, for me, unexpected.
Some years earlier it seemed possible that we would be put on the gray list. This was because we were deemed vulnerable to illicit money laundering activity. In turn, this was because we did not, allegedly, have a sufficiently robust legal framework which should make money laundering difficult, if not impossible.
We had received due warning that a downgrading into the gray list was likely if we did not make the requisite improvements. Eventually, we did make the necessary improvements which provided ample protection against money laundering so we were ‘promoted’ back to the top tier banking environment.
On this recent occasion, however, the demotion onto the gray list came as a surprise. As far as I know, we did not receive warning that this might happen. Therefore, we could deduce that the demotion did not take place due to a general inadequacy in our banking environment. Instead, we might conclude that the demotion took place due to a single but substantial offence to properly controlled banking practice.
What offence? The only one I can think of is the Philippines’ significant contribution to the horrendous Wirecard AG $2.1 billion accounting fraud. This German company suffered the fraud as a result of false documents emanating from the Bank of Philippine Islands (BPI) and Banco de Oro Unibank (BDO). Both banks blamed junior staff for perpetuating the fraud. But did the banks react quickly enough when major fraud was suspected? Was accurate and timely information provided by the banks? If not, then our banking environment may be perceived to be weak since we cannot identify fraudulent documents promptly.
I believe that since being put on the gray list may cause perfectly legitimate customers to be inconvenienced due to enquiries relating to, for example, Overseas Filipino Workers (OFWs) transfers of their earning to the Philippines, we are entitled to know precisely what has gone wrong. This information is unlikely to be forthcoming. Instead, those who are accused of misconduct will have their cases heard by our excruciatingly slow justice system.
We cannot expect to be removed from the harmful gray list until this process is completed and we have convinced the Financial Action Task Force (FATF) that we have sufficient controls in place to prevent this happening again.
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Quite rightly, those responsible for a reliable banking system have associated the Wirecard AG fraud (if indeed this was responsible for our demotion) with the various problems that can occur for the banks’ customers.
This seems likely to engender a more robust consumer protection environment which would be most welcome.
My own experience is that banks are extremely reluctant to admit to any wrongdoing even if such wrongdoing is likely.
For example, by 2014, many customers were seriously inconvenienced by ATM fraud even though Bangko Sentral ng Pilipinas (BSP) had been issuing instructions since 2012 that bankers should make their ATM environments safer by introducing technologically more advanced ATM cards which would make the frauds impossible.
But banks were slow to comply with BSP instructions which caused inconvenience to many customers.
For the future, we need legislation which ensures that banks implement BSP instructions promptly.
Otherwise our gray list sojourn will last many years which may cause unnecessary inconvenience to OFWs and others./PN
