THIS is an account which has no clear beginning and in which the end, if it is ever reached, is also uncertain.
For the past year or so, Bangko Sentral ng Pilipinas (BSP) has been upbeat about the safety and security of our banking system. This optimism is not confirmed by the limited knowledge that we have, and which is outlined below.
The issue is the alleged $2.1 billion (P100 billion) fraud at the German financial technology and payments services firm Wirecard AG.
Wirecard’s 2019 financial statements were subject to scrutiny from their auditors, Ernst and Young. This is standard procedure. All companies, worldwide, are subject to annual audit. Very seriously, and unusually, Ernst and Young refused to approve Wirecard’s statements because it could not verify the existence of 1.9 billion Euros ($2.1 billion) supposedly held by M.K Tolentino Law Office, Manila, Philippines. The missing funds were reportedly deposited with BPI and BDO. Both banks denied that Wirecard had any deposits with them. It transpired that officials from BPI and BDO created fake documents which purported to show the deposited funds.
Leading the way with investigations in the Philippines is the National Bureau of Investigation (NBI).
BSP and the Anti-Money Laundering Council (AMLC) both said that there is no evidence that any of the missing $2.1 billion (P100 billion) ever reached the Philippines.
Nevertheless the NBI confirmed that a BPI employee based in its Malate, Manila Branch, admitted to receiving P10 million from the Tolentino law office for issuing bogus bank certification documents.
The existence of the P10 million payment constitutes prima facie evidence that the Tolentino law firm has received funds, possibly from German sources, to be used to provide false information suggesting that Wirecard or its representatives did, indeed, have funds in the Philippines.
Both Ernst and Young in Germany, and NBI in the Philippines have helped to ensure that Wirecard was not able to falsely claim that it owned the missing $2.1 billion.
Less apparent is whether BPI and BDO are blameless. They attribute misconduct to their employees, but it is not clear that they were quick to recognize that document falsification was involved.
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The Philippines currently ranks 115th (out of 172 countries) in Transparency International’s corruption league table.
My own experience is that the Philippines should also rank around 115th if a financial sector corruption league table were developed. The problem, as I see it, is the inability of relevant entities charged with the responsibility of ensuring the existence of a properly regulated financial system.
We saw this in 2016 when the $81 million ‘cyberheist’ took place. It was never clear to me that the necessary fact-finding was ever completed properly, or that the appropriate culprits were ever caught.
We must do better./PN
