MANILA In February 2013, the Philippines was up against a deadline to amend its Anti-Money Laundering Act and get itself off the 'gray list' of a global watchdog, and lawmakers were bickering over whether to include casinos under the legislation.
With one day to go, a Congressional committee heard repeated pleas not to hamstring an industry that could rival other Asian gambling meccas by obliging casinos to report suspicious transactions. Finally, the senator chairing the meeting agreed "with a heavy heart" to exclude them, a transcript of the proceedings shows.
That same senator now heads a panel trying to fathom how $81 million hacked last month from the New York Federal Reserve account of Bangladesh's central bank wound up with two casinos and a junket operator in the Philippines - and then disappeared.
It is one of the biggest cyber heists in history, and since the money trail has gone cold in the Philippines, the perpetrators may never be identified.
The senator, Teofisto Guingona, told Reuters after a public hearing on the case last week that fierce lobbying by the gaming industry over the law had left the Philippines one of the world's softest targets for money launderers, putting the financial system at serious risk.
"It can wreak havoc on the economy," he said. "Any money coming in and out of the country will come under scrutiny. People might just say 'to hell with it, it's not worth doing business with the Philippines'."
The Philippines depends heavily on remittances from workers abroad, which account for about 10 percent of its GDP.
The country's central bank chief said last week financial markets had shown no signs of distress over the scandal, but added: "We have to recognize there is a risk that is associated with this."
Unknown hackers breached the computer systems of Bangladesh Bank in early February and attempted to steal $951 million from its account at the Federal Reserve Bank of New York, which it uses for international settlements.
Some attempted transfers were blocked, but $81 million wound up in the Philippines.
Security researchers blamed malware and a faulty printer but said Bangladesh central bank officials were also responsible because of weak security procedures. The bank's governor and two deputy governors quit their jobs over the scandal last week.
Bangladesh said on Saturday it had formally sought the assistance of the U.S. Federal Bureau of Investigation.
BANK SECRECY LAW
Public hearings on the heist in the Philippines' Senate last week focused on the manager of a Manila branch of Rizal Commercial Banking Corp (RCBC) (RCB.PS). Her bank received the stolen money on Feb. 4 and transferred it to a foreign exchange broker who passed it on in tranches, including $30 million in banknotes that officials say would have weighed 1,500 kg.
A colleague of the manager testified he saw her drive off in her car with 20 million pesos ($431,000) in cash from one of several fictitious accounts to which the money was wired. The branch manager declined to give evidence in public.
According to an Anti-Money Laundering Council (AMLC) document seen by Reuters, on Feb. 8 Bangladesh Bank sent RCBC several messages via the SWIFT interbank communications network requesting transactions be stopped and the funds returned.
However, five withdrawals were made from the accounts in 73 minutes the next morning. When RCBC responded to the SWIFT message later that day, all that remained of the $81 million was $68,305.
RCBC President Lorenzo Tan told the Senate he could not discuss what happened because of the country's bank deposit secrecy law, one of the world's strictest and a legacy of the martial-law era of President Ferdinand Marcos in the 1970s.
"Prevention of ... money laundering is being hampered by the very strict bank deposit secrecy law," central bank Governor Amando Tetangco told reporters. "Once the funds go into a bank deposit account, that's it. The trail turns cold."
Sergio Osmena, another senator probing the bank heist, has pressed for years to amend the bank laws. He made no headway, he said, because secrecy suits businesses that want to evade taxes and can bribe lawmakers to resist legislative change.
"I am quite happy that a scandal like this has happened," Osmena told Reuters, explaining he believes the Bangladesh case is the tip of an iceberg alerting people to hundreds of money laundering crimes going unreported every year.
CASINOS A 'WEAK LINK'
In a March 2 report, the U.S. State Department said only 49 anti-money laundering cases have been filed since the AMLC began operating in 2001. The number of prosecutions and convictions has been virtually nil.
Recent efforts to include casinos in the law have been held up because of forthcoming elections and extensive lobbying from the gaming industry, which the report said was "a weak link" in the Philippines' anti-money laundering regime.
"Money laundering is a serious concern due to the Philippines' international narcotics trade, high degree of corruption among government officials, trafficking in persons, and the high volume of remittances from Filipinos living abroad," the U.S. report said.
With ambitions to become one of Asia's gaming hubs alongside Macau and Singapore, the government opened a tract of reclaimed land near Manila airport for casinos. Two world-class resorts now operate there, counting Chinese high rollers among nearly half of their VIP clients, and two more are under construction.
The Senate hearing was told $29 million of Bangladesh's money was transferred to one of these casinos, Solaire, owned and operated by Bloomberry Resorts Corp (BLOOM.PS).
"We did not know it was dirty money," Silverio Benny Tan, corporate secretary of Bloomberry Resorts, told reporters.
The Philippine Amusement and Gaming Corporation, which regulates the industry, says that to prevent laundering, money transferred to casinos for players must be exchanged for 'dead chips' that can only be cashed in from winnings.
But, for Senator Guingona, the disappearance of such large sums into casinos underlines the weakness of Manila's anti-laundering regime and could push the country back into the 'gray list' of the Financial Action Task Force (FATF).
A spokeswoman for FATF, a Paris-based inter-governmental organization that combats laundering and terrorist financing, said an Asia-Pacific body was responsible for reviewing Manila.
"We cannot comment on the current case being reported in the media," said Alexandra Wijmenga-Daniel. "However, ongoing deficiencies in the anti-money laundering and counter-terrorist finance regime of the Philippines would be of concern."
(Additional reporting by Neil Jerome Morales in Manila and Leigh Thomas in Paris.)