Criminals use real estate transactions in PH to wash dirty money — anti-money laundering body

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Criminals are using real estate transactions to launder dirty money in the Philippines, a top official of the Anti-Money Laundering Council revealed. (FILE PHOTO)

Metro Manila (CNN Philippines, October 29)— Criminals are using real estate transactions to launder dirty money in the Philippines, a top official of the Anti-Money Laundering Council revealed.

AMLC Executive Director Atty. Mel Racela confirmed this during a Senate hearing on Wednesday after lawmakers asked him why real estate developers and brokers should report cash transactions worth ₱1 million to AMLC.

AMLC has been proposing to include them as covered persons under the Republic Act 9160 or Anti-Money Laundering Act (AMLA).

“There are also several estate assets found to be related to terrorism financing which are the subject of existing freeze orders,” Racela told senators during the hearing on the proposed amendments to AMLA.

Racela cited as an example the Maute Group that attacked Marawi City and clashed with state forces in 2017.

He said the AMLC has earlier frozen the ISIS-inspired armed group’s 120-hectare training ground in Lanao del Sur.

The AMLC chief said real estate transactions allow integration of illicit funds into the legal economy, while serving as a safe investment.

Racela added that real estate provides a “veneer of respectability, legitimacy, and normality” to the criminal funds.

“Real estate is as attractive to criminals as it is to any investor, prices being generally stable and likely to appreciate over time,” Racela explained, adding that the property also can be used as a second home or rented out to generate income.

AMLC data showed real estate assets account for 22% of total assets and properties that are subject of AMLC civil forfeiture proceedings.

Racela said these assets have an estimated value of ₱861 million (US$17.71 million) as of October 22.

The AMLC has confiscated so far, through civil forfeiture, ₱26.78 million (US$551 thousand) worth of real estate assets.

He explained most of these are connected to drug trafficking cases of the Parojinog political clan in Ozamis City.

A looming deadline

The Philippines is racing against time to avoid being “grey-listed” by the international body Financial Action Task Force.

FATF periodically reviews and grey-lists nations considered to be high-risk when it comes to money laundering.

The Philippine government has until February 2021 to implement and prove that its anti-money laundering reforms are effective.

FATF members then have four months to assess and decide if the Philippines did enough to counter money laundering.

Racela said if the Philippines is grey-listed, financial institutions overseas will be stricter on transactions involving Filipinos.

He added Filipinos abroad may have to spend more when sending cash remittances to their families here, among other repercussions.

“For OFWs, higher cost of remittance means less money for the family. A five- to 10-day delay will mean two to four percent reduction of annual foreign currency remittances,” the AMLC said.

Among the gray-listed countries are Southeast Asian neighbors Cambodia and Myanmar, as well as Pakistan, Syria, and Yemen.

Other countries on FATF’s gray list are Albania, The Bahamas, Barbados, Botswana, Ghana, Iceland, Jamaica, Mauritius, Nicaragua, Panama, Uganda, and Zimbabwe.

‘Too much of a burden’

Senate Minority Leader Franklin Drilion, however, said the Registry of Deeds should be one to report these transactions to AMLC.

The RD stores records of all original land titles in a city or town, while the current property owner keeps a duplicate certificate.

Drilon explained that mandating real estate professionals to report cash transactions of at least ₱1 million to AMLC is too much for a task.

“Ito po mga individual practitioners, maliliit po ito. Housewives who would engage in real estate brokering to earn additional income on the side. Can you imagine the burden on this industry?” Drilon told Racela. “Wala na pong gagawin itong mga real estate agents kung hindi mag-report sa AMLC.”

[Translation: These individual practitioners are small. Housewives who would engage in real estate brokering to earn additional income on the side. Can you imagine the burden on this industry? These real estate agents won’t do anything but report to the AMLC.]

The veteran senator added that the AMLC, which has over 100 employees, can’t track each and every transaction reported to them.

He also said potential customers may get scared of buying properties in the country due to the said “intrusion” on their privacy.

Senator Imee Marcos meanwhile added that FATF’s requirements are too much for a sovereign country like the Philippines.

Marcos suggested the AMLC instead focus on running after cash smuggling and other kinds of money laundering activities.

“Parang napakahirap naman, palawak na ng palawak itong coverage nila [FATF] na makakapinsala na sa ating taumbayan,” Marcos said.

[Translation: It’s very difficult, their coverage is now bigger and might affect the community.]

Post-transaction reporting ‘not enough’

Racela responded by saying they have put up an online system where brokers can report these deals in a matter of minutes.

He added that the Land Registration Authority is already obligated to report real estate transactions of over P500,000 to the AMLC.

The FATF, however, still found this method of tracking potential money laundering schemes as ‘insufficient,' Racela explained,

He said the same goes for the RD since it is only a repository of transactions that have been done already.

“They [FATF] included in our recommendation that real estate agents and developers be included as covered persons in the Anti-Money Laundering Act,” Racela said.

The FATF assesses countries’ anti-money laundering efforts based on both technical compliance and effectiveness of reforms.

He said FATF is very specific that the Philippines’ technical compliance is based on whether or not the amendments are passed.

“If we do not specifically include real estate agents and developers, then the FATF will not definitely consider our compliance if we just impose on the Register of Deeds as an obligation,” he added.