Source: 2006
Released by the Bureau for International Narcotics and Law Enforcement Affairs
I. Summary
Philippine law enforcement agencies continued to target major traffickers and large clandestine drug labs. Official Philippine government arrest and seizure statistics reflect an overall decline in seizures, except in the case of diverted precursor chemicals, but this may reflect an effort by the Government of the Philippines (GRP) at providing more accurate statistical reporting to correct the inflated claims of previous years, rather than less success in counternarcotics efforts. The Philippine government continues to develop a dedicated counternarcotics capability in the Philippine Drug Enforcement Agency (PDEA), established by the GRP in 2002. Based on the quantity of seizures in 2005, the Philippines continues to be a producer of crystal methamphetamine. Evidence indicates some links between terrorist organizations and drug trafficking activities in the Philippines. Funding for the proposed priority programs identified by the 2005 GRP -- U.S. Joint Law Enforcement Assessment of the Philippine National Police (PNP) could help address systemic problems within the Philippine National Police and implement a reform roadmap in which combined USG and GRP resources could improve counternarcotics programs and overall Philippine law enforcement capabilities in the next few years. The Philippines is a party to the 1988 UN Drug Convention.
II. Status of Country
Domestic production of crystal methamphetamine, locally known as "shabu," exceeds demand, with most of the precursor chemicals smuggled into or illegally diverted after importation into the Philippines from the People's Republic of China (PRC), including Hong Kong. Dealers sell shabu in crystal form for smoking. No production or distribution exists of methamphetamine in tablet form. Producers make methamphetamine in clandestine labs through a hydrogenation process that uses palladium and hydrogen gas to refine the liquid mixture into crystal form. PRC- and Taiwan-based syndicates have established the vast majority of the Philippines' clandestine methamphetamine labs using a network of ethnic Chinese who possess the necessary technical skills. The Philippines also serves as a transshipment point for further export of methamphetamine of foreign manufacture to Australia, Canada, Japan, Korea, and the U.S. (including Guam and Saipan).
The Philippines produces, consumes, and exports marijuana. Philippine authorities continue to encounter difficulties stemming production. Marijuana cultivation is generally in areas inaccessible to vehicles and/or controlled by insurgent groups. Corruption and inefficiency among government officials also complicate eradication efforts. Most of the marijuana produced in the Philippines is for local consumption, with the remainder smuggled to Australia, Japan, Malaysia, and Taiwan.
MDMA commonly known as ecstasy, is gaining popularity as a recreational drug in the Philippines. Philippine authorities report use among young, prosperous adults, particularly in bars and clubs. Anecdotal reports cite increased availability, but enforcement actions against MDMA did not increase in 2005.
The Philippines has also seen a rise in the abuse and illicit conversion of ketamine hydrochloride (ketamine). Ketamine, generally used as an animal tranquilizer, was classified as a "dangerous drug" by the Philippine Dangerous Drugs Board on October 1, 2005, but several illegal ketamine laboratories were dismantled even before this reclassification.
III. Country Actions Against Drugs in 2005
Policy Initiatives. The Administration of President Gloria Macapagal Arroyo continues to concentrate on the full and sustained implementation of counternarcotics legislation and the institution building of PDEA as the lead counternarcotics agency. PDEA conducts investigations and continues to develop a training program. President Arroyo in 2002 created by executive order the Philippine National Police's (PNP) Anti-Illegal Drugs Special Operations Task Force (AIDSOTF). AIDSOTF's mission is to maintain law enforcement pressure on narcotics traffickers while PDEA builds its capacity. The GRP has developed and is implementing a counternarcotics master plan, the National Anti-Drug Strategy (NADS), which is carried out by the National Anti-Drug Program of Action (NADPA). The NADPA contains provisions for counternarcotics law enforcement, drug treatment and prevention, and international cooperation in counternarcotics, all of which are objectives of the 1988 UN Drug Convention. However, GRP efforts in 2005 concentrated chiefly on law enforcement. The major developments in 2005 were counternarcotics policy changes, especially the classification of ketamine as a dangerous drug and the greater emphasis on precursor chemicals in counternarcotics strategy.
Law Enforcement Efforts. Counternarcotics law enforcement in the GRP is a high priority, but suffers from a lack of resources. Law enforcement efforts are considered to be effective within the confines of their inadequate funding; there were no significant changes. GRP law enforcement agencies continued to target major traffickers and large clandestine drug labs. In 2005, GRP officials claimed to have seized narcotics worth approximately $85,323,555; arrested 15,268 people for drug related offenses; and ultimately filed criminal charges in 10,241 drug cases. These numbers are all down from previous years, though marijuana seizures have increased. Asset forfeiture is not yet a component of Philippine narcotics enforcement.
Major evidentiary and procedural obstacles exist in the Philippines in building effective narcotics cases. Restrictions on the gathering of evidence hinder narcotics investigations and prosecution. Philippine laws regarding electronic surveillance and bank secrecy regulations also constrain the ability of prosecutors to build narcotics cases. The 1965 Anti-Wiretapping Act prohibits the use of wiretapping as well as the consensual monitoring of conversations and interrogations as evidence in court. Crimes against the State such as treason and sedition are the only exceptions to the Act. There are also no provisions to seal court records to protect confidential sources and methods. Pervasive problems in the law enforcement and criminal justice systems (i.e., rampant corruption, low morale, inadequate salaries, recruitment and retention difficulties, and lack of cooperation between police and prosecutors) hamper narcotics investigations and prosecutions. Perennial backlogs in the judicial system impede further the already slow pace of proceedings in narcotics cases. Under the Comprehensive Dangerous Drugs Act of 2002, only those courts designated as "Special Drug Courts" can hear drug cases, obliging GRP prosecutors to move cases previously filed in other courts into the Special Drug Courts. The Comprehensive Dangerous Drug Act also prohibits plea-bargaining in exchange for testimony; the GRP can reward cooperation with the filing of lesser charges, but not by reducing sentences. Throughout 2005, Philippine authorities continued to link drug trafficking activities to terrorist organizations. The Abu Sayyaf Group (ASG), a U.S. and UN-designated Foreign Terrorist Organization operating in extreme southwest Philippines, runs a protection racket for foreign trafficking syndicates. According to government estimates, the Communist Party of the Philippines/New People's Army (CPP/NPA), also a U.S.-designated Foreign Terrorist Organization with a nationwide presence, receives money for providing safe haven and security for many of the marijuana growers in the northern Philippine and collects "revolutionary taxes" on the sale of drugs.
The DEA Manila Country Office and Joint Inter-Agency Task Force-West (JIATF-W) are developing a network of Information Fusion Centers (IFCs) in the Philippines. The primary facility, the Maritime Drug Enforcement Coordination Center (MDECC), opened in July 2005 and is located at PDEA Headquarters in Metro Manila. Construction of a satellite center at the headquarters of the Naval Forces Western Mindanao, Zamboanga Del Sur (Southern Mindanao), was completed in October; a second satellite center is being built at Poro Point, San Fernando (La Union), and is scheduled for completion in February 2006. Officers from the Philippine Navy, Coast Guard, PNP-Maritime Group, and the PDEA will staff the facilities. The purposes of the IFCs are to gather information about maritime drug trafficking and other forms of smuggling, and to provide actionable target information that the agencies at the IFCs can use to investigate and prosecute drug trafficking organizations.
Philippine authorities dismantled seven clandestine methamphetamine laboratories in 2005, down from 11 in 2004 and 2003. This decline may reflect a diversion of operational resources in the face of the GRP's new emphasis on ketamine. GRP law enforcement officials cite four factors behind the existence of domestic labs: 1) the simplicity of processing ephedrine into methamphetamine on a near one-to-one conversion ratio; 2) the crackdown on drug production facilities and processed methamphetamine in other methamphetamine-producing countries; 3) the lesser danger in trafficking in methamphetamine precursors (ephedrine) compared to the finished product; 4) the lack of law enforcement expertise and statutory power to detect diverted precursor chemicals used in clandestine labs and prosecutions that are limited to finished product rather than the chemical inputs. GRP authorities seized a total of 104 kilograms of methamphetamine, with an estimated value of $3,781,821, and 34,353 kilograms of ephedrine (including pseudo-ephedrine and chlorephedrine), essential precursors in the production of methamphetamine. GRP seizures of precursor chemicals were up significantly in 2005. Philippine authorities dismantled 4 clandestine ketamine labs in 2005, and seized 7.8 kilograms of ketamine hydrochloride, valued at $709,545. According to PDEA, Philippine authorities arrested 15,268 people for drug related offenses, a decrease of 9,953 individuals from 2004. The decline reflects the GRP's continuing strategy, introduced in 2004, of concentrating on larger distributors rather than users and low-level dealers. GRP authorities filed criminal charges in 10,241 drug cases. PRC- and Taiwan-based traffickers remain the most influential foreign groups operating in the Philippines. According to PDEA, Philippine authorities arrested individuals associated with and/or disrupted the operations of 86 out of the estimated 181 local drug rings and syndicates.
Corruption. Corruption among the police, judiciary, and elected officials continues to be a significant impediment to Philippine law enforcement efforts. The GRP has criminalized public corruption in narcotics law enforcement through its Dangerous Drug Act (DDA), which clearly prohibits senior GRP officials from engaging in, encouraging, or facilitating the illicit production or distribution of such drugs or substances, or the laundering of proceeds from illegal drug actions. There were no significant arrests or prosecutions under this law in 2005. There have been a few arrests of PNP and PDEA officers for dealing drugs and selling seized chemicals, both of which are also prohibited under the DDA. The USG has no evidence that any senior officials of the GRP engage in, encourage, or facilitate the illicit production or distribution or illegal narcotics, or participate in the laundering of proceeds from illegal drug transactions.
Agreements and Treaties.The Philippines is a party to the 1988 UN Drug Convention, as well as to the 1971 UN Convention on Psychotropic Substances, the 1961 UN Single Convention on Narcotic Drugs, and the 1972 Protocol Amending the Single Convention. The Philippines is a party to the UN Convention against Transnational Organized Crime and its protocols against trafficking in persons and migrant smuggling The U.S. and the GRP continue to cooperate in law enforcement matters through a bilateral extradition treaty and MLAT. The Philippines has signed, but has not yet ratified, the UN Convention Against Corruption.
Cultivation/Production. Authorities have identified at least 98 marijuana cultivation sites spread throughout the mountainous areas of nine different regions of the Philippines. In 2005, Philippine law enforcement agencies continued to cooperate with units from the Armed Forces of the Philippines (AFP) in launching marijuana eradication operations, some of which took place in territory controlled by armed insurgent groups. New focus on significant drug traffickers, rather than small-scale marijuana farmers, resulted in several large seizures, including 103,257 sticks of marijuana, a 32-fold increase over the previous year. Using manual techniques to eradicate marijuana, government entities claim to have successfully uprooted and destroyed 8,570,099 plants and seedlings, more than triple the number from the previous year. They also confiscated 26 kilograms of seeds, five times the number seized in 2004. The seized and eradicated marijuana crop was valued by the GRP at $31 million. It should be noted, however, that PDEA has no mechanism for confirming these numbers, since the crops are destroyed immediately upon seizure.
Drug Flow/Transit. The Philippines is a narcotics source and transshipment country. Illegal drugs enter the country through seaports, economic zones, and airports. With over 36,200 kilometers of coastline and 7,000 islands, the Philippine archipelago is a drug smuggler's paradise. Vast stretches of the Philippine coast are virtually unpatrolled and sparsely inhabited. Traffickers use shipping containers, fishing boats, and cargo ships (which off-load to smaller boats) to transport multi-hundred kilogram quantities of methamphetamine and precursor chemicals. AFP and law enforcement marine interdiction efforts are hamstrung by deficits in equipment, training, and intelligence sharing. The Philippines is also a transshipment point for further export of crystal methamphetamine to Japan, Australia, Canada, Korea, and the U.S. (including Guam and Saipan). Commercial air couriers and express mail services remain the primary means of shipment to Guam and to the mainland U.S., with a typical shipment size of one to four kilograms. There has been no notable increase or decrease in transshipment activities in 2005.
Domestic Programs. The Comprehensive Dangerous Drugs Act of 2002 includes provisions that mandate drug abuse education in schools, the establishment of provincial drug education centers, development of drug-free workplace programs, and other demand reduction clauses. Abusers who voluntarily enroll in treatment and rehabilitation centers are exempt from prosecution for illegal drug use. While 2005 figures are not yet available, residential and outpatient rehabilitation centers reported 5,787 admission cases in 2004. Statistics from rehabilitation centers highlight the following: 1) the majority of patients are in the 20-29 age group; 2) 84 percent of the patients report methamphetamine is their drug of abuse; 3) a significant number of patients report abusing inhalants such as glue, and over-the-counter cough and cold preparations; 4) the ratio of male to female users is now 9:1 (compared to the reported 11:1 last year).
In its 2005 World Drug Report, the United Nations Office on Drugs and Crime (UNODC) estimated that 8.3 percent of the Philippine population abuses cannabis (marijuana) and amphetamine-type substances. The GRP's Dangerous Drug Board (DDB) conducted a detailed study in 2004 to determine the number of addicts or abusers involved in each drug category, but the results have never been released.
IV. U.S. Policy Initiatives and Programs
U.S. Policy Initiatives. The USG's main counternarcotics policy goals in the Philippines are to: 1) work with local counterparts to provide an effective response to counter the burgeoning clandestine production of methamphetamine; 2) cooperate with local authorities to prevent the Philippines from being used as a transit point by trafficking organizations affecting the U.S.; 3) promote the development of PDEA as the focus for effective counternarcotics enforcement efforts in the Philippines; and 4) develop an improved statutory framework for control of drug and precursor chemicals.
Bilateral Cooperation. The U.S. tries to assist Philippine counternarcotics efforts with training, and has been discussing assistance to the police and justice sectors.
The Road Ahead. The USG plans to continue work with the GRP to promote law-enforcement institution building and encourage anti corruption mechanisms via our JIATF-West presence as well as ongoing programs funded by Department of State (INL and S/CT, and USAID). Strengthening the counternarcotics bilateral relationship serves the national interests of both nations.
The Philippines is a regional financial center. In the past few years, the illegal drug trade in the Philippines reportedly has evolved into a billion-dollar industry. The Philippines continues to experience an increase in foreign organized criminal activity from China, Hong Kong, and Taiwan. Reportedly, insurgency groups operating in the Philippines fund their activities, in part, through the trafficking of narcotics and arms, as well as engaging in money laundering through alleged ties to organized crime. The proceeds of corrupt activities by government officials are also a source of laundered funds. Most of the narcotics trafficking transiting through the Philippines is exchanged using letters of credit. There is little cash and negligible amounts of U.S. dollars used in the transactions, except for the small amounts of narcotics that make it all the way to the United States for street sale. Drugs circulated within the Philippines are usually exchanged for local currency.
In June 2000, the Financial Action Task Force (FATF) placed the Philippines on its list of Non-Cooperative Countries and Territories (NCCT) for lacking basic anti-money laundering regulations, including customer identification and record keeping requirements, and excessive bank secrecy provisions.
The Government of the Republic of the Philippines (GORP) initially established an anti-money laundering regime by passing the Anti-Money Laundering Act of 2001 (AMLA). The GORP enacted Implementing Rules and Regulations (IRR) for the AMLA in April 2002. The AMLA criminalized money laundering, an offense defined to include the conduct of activity involving the proceeds from unlawful activity in any one of 14 major categories of crimes, and imposes penalties that include a term of imprisonment of up to 14 years and a fine no less than 3,000,000 pesos (approximately $54,000); but no more than twice the value or property involved in the offense. The Act also imposed identification, record keeping, and reporting requirements on banks, trusts, and other institutions regulated by the Central Bank, insurance companies, securities dealers, foreign exchange dealers, and money remitters, as well as any other entity dealing in valuable objects or cash substitutes regulated by the Securities and Exchange Commission (SEC).
However, the FATF deemed the original legislation inadequate and pressured the Philippines to amend the legislation to be more in line with international standards. The GORP subsequently made important progress in developing its anti-money laundering and terrorist financing regime, with the enactment of amendments to the Anti-Money Laundering Act of 2001 in March 2003. The amendments to the AMLA lowered the threshold amount for covered transactions (cash or other equivalent monetary instrument) from 4,000,000 pesos to 500,000 pesos ($80,000 to $10,000) within one banking day; expanded financial institution reporting requirements to include the reporting of suspicious transactions, regardless of amount; authorized the Central Bank (Bangko Sentral ng Pilipinas or BSP) to examine any particular deposit or investment with any bank or non-bank institution in the course of a periodic or special examination (in accordance with the rules of examination of the BSP); ensured institutional compliance with the Anti-Money Laundering Act; and deleted the prohibitions against the Anti-Money Laundering Council's examining particular deposits or investments opened or created before the Act.
The FATF deemed those amendments to have sufficiently addressed the main legal deficiencies in the original Philippines anti-money laundering regime, and decided not to recommend the application of countermeasures. The FATF removed the Philippines from its Non-Cooperating Countries and Territories (NCCT) List in February 2005.
The AMLA established the Anti-Money Laundering Council (AMLC) as the country's financial intelligence unit (FIU). The Council is composed of the Governor of the Central Bank, the Commissioner of the Insurance Commission, and the Chairman of the Securities and Exchange Commission. By law, the AMLC Secretariat is an independent agency responsible for receiving, maintaining, analyzing, and evaluating covered and suspicious transactions. It provides advice and assistance to relevant authorities and issues relevant publications. The AMLC completed the first phase of its information technology upgrades in 2004. This was a significant milestone that allowed AMLC to electronically receive, store, and search CTRs filed by regulated institutions. Through 2005, the AMLC had received more than 1,760 suspicious transaction reports (STRs) involving 8,144 suspicious transactions, and had received over 44 million covered transaction reports (CTRs). AMLC is currently in the process of acquiring software to implement link analysis and visualization to enhance its ability to produce information in graphic form from the CTRS and STRs filed electronically by regulated institutions.
AMLC's role goes well beyond traditional FIU responsibilities and includes the investigation and prosecution of money laundering cases. AMLC has the ability to seize terrorist assets involved in money laundering on behalf of the Republic of the Philippines after a money laundering offense has been proven beyond a reasonable doubt. In order to freeze assets allegedly connected to money laundering, the AMLC must establish probable cause that the funds relate to an offense enumerated in the Act, such as terrorism. The Court of Appeals then may freeze the bank account for 20 days. The AMLC may apply to extend a freeze order prior to its expiration. The AMLC is required to obtain a court order to examine bank records for activities not listed in the Act, except for certain serious offenses such as kidnapping for ransom, drugs, and terrorism-related crimes. The AMLC and the courts are working to shorten the time needed so funds are not withdrawn before the freeze order is obtained.
The Philippines has no comprehensive legislation pertaining to civil and criminal forfeiture. Various government authorities, including the Bureau of Customs and the Philippine National Police, have the ability to temporarily seize property obtained in connection with criminal activity. Money and property must be included in the indictment, however, to permit forfeiture. Because ownership is difficult to determine in these cases, assets are rarely included in the indictment and are rarely forfeited. The AMLA gives the AMLC the authority to seize assets involved in money laundering operations that may end up as forfeited property after conviction, even if it is a legitimate business. In December 2005, the Supreme Court issued a new criminal procedure rule covering civil forfeiture, asset preservation, and freeze orders. The new rule provides a way to preserve assets prior to any forfeiture action and lists the procedures to follow during the action. The rule also contains clear direction to the AMLC and the court of appeals on the issuance of freeze orders for assets under investigation that had been confused by changes in the amendment to the AMLA in 2003. There are currently 88 prosecutions underway in the Philippine court system that involved AMLC investigations or prosecutions, including 34 for money laundering, 24 for civil forfeiture, and the rest pertaining to freeze orders and bank inquiries. Although some of these cases may conclude shortly, to date the Philippines has not had a money laundering conviction.
The GORP is quick to respond when new terrorist entities are added to the list of suspected terrorists and terrorist organizations listed on the UN 1267 Sanctions Committee's consolidated list. Upon notification that the UN 1267 Sanctions Committee has approved an additional name to the consolidated list, the AMLC takes immediate steps to inform the local banks and issue orders to freeze the assets in the banking system. Under the AMLA and the bank secrecy act, officers, employees, representatives, agents, consultants, and associates of financial institutions are exempt from civil or criminal prosecution for reporting covered transactions. These institutions must maintain and store records of transactions for a period of five years, extending beyond the date of account or bank closure. The AMLC has frozen funds at the request of the UN Security Council, the United States and other foreign governments. Through November 2005, the AMLC has frozen funds in excess of 500 million Philippine pesos ($ approximately $9,700,000).
Questions remain regarding the covered institutions fully complying with the Philippine anti-money laundering regime. For example, the BSP does not have a mechanism in place to ensure that the financial community is adhering to the reporting requirements. Banks in more distant parts of the country, especially Mindinao where terrorist groups operate more freely, may feel threatened and inhibited from providing information about financial transactions requested by AMLC. While bank secrecy provisions to the BSP's supervisory functions were lifted in Section 11 of the AMLA, implementation still appears to be incomplete. Due to the Philippines' "privacy issues," examiners of the BSP are not allowed to review documents held by covered institutions in order to determine if the covered institutions are complying with the reporting requirement. BSP examiners are only allowed to ask AMLC, as a result of their examination, if a STR has been filed. If AMLC determines one was not filed, then the AMLC has the responsibility to make inquiries of the covered institution. This process is slow and cumbersome; AMLC is working with the BSP to find ways of streamlining the process.
An important development in 2005 was the AMLC's effectiveness in including foreign exchange offices as covered institutions subject to the money laundering provisions. The Monetary Board issued a decision in February 2005 defining the 15,000 exchange houses as financial institutions and instituting a new licensing system to bring them under the provisions of the AMLA. Under this decision, all exchange dealers were to have received training from the AMLC by July 2005 to obtain licenses and ensure compliance with the Act. With so many dealers and with continued misunderstanding of the new regulations, only 2,500 exchange dealers were trained and registered by the end of July. Training teams from the AMLC have held over 1,000 classes for dealers and bankers throughout the country to implement this decision. By the end of November, an estimated half of the foreign exchange offices still in operation have received the mandatory training and have been registered. This requirement reduced the number of foreign exchange dealers dramatically; as less reputable offices chose to close down rather than seek licensing.
There are still several sectors operating outside of AMLC control, under the revised AMLA. Although the revised AMLA specifically covers exchange houses, insurance companies, and casinos, it does not cover stockbrokers or accountants. Although covered transactions for which AMLC solicits reports include asset transfers, the law does not require direct oversight of car dealers and sales of construction equipment, which are emerging as creative ways to launder money and avoid the reporting requirement. The AMLC has the authority to request the chain of casinos operated by the state-owned Philippine Amusement and Gaming Corporation (PAGCOR) to submit covered and suspicious transaction reports, but it has not yet done so.
There is increasing recognition that the nearly 20 casinos nationwide offer abundant opportunity for money laundering, especially with many of these casinos catering to international clientele arriving on charter flights from around Asia. Several of these gambling facilities are located near small provincial international airports that may have less rigid enforcement procedures and standards for cash smuggling. PAGCOR is the sole franchisee in the country for all games of chance, including lotteries conducted through cell phones. At present, there are no offshore casinos or Internet gaming sites.
The Philippines has over 5,000 non-governmental organizations (NGOs) that do not fall under the requirements of the AMLA. Charitable and non-profit entities are not required to make covered or suspicious transaction reports. The SEC provides limited regulatory control over the registration and operation of NGOs. These entities are rarely held accountable for failure to provide year-end reports of their activities, and there is no consistent accounting and verification of their financial records. Because of their ability to circumvent the usual documentation and reporting requirements imposed on banks for financial transfers, NGOs could be used as conduits for terrorist financing without detection. The AMLC is aware of the problem and is working to bring charitable and not-for-profit entities under the interpretation of the amended implementing regulations for covered institutions.
There are nine offshore banking units (OBUs) established since 1976. At present, OBUs account for less than two percent of total banking system assets in the country. The Bangko Sentral ng Pilipinas (BSP) regulates onshore banking, exercises regulatory supervision over OBUs, and requires them to meet reporting provisions and other banking rules and regulations. In addition to registering with the SEC, financial institutions must obtain a secondary license from the BSP subject to relatively stringent standards that would make it difficult to establish shell companies in financial services of this nature. For example, a financial institution operating an OBU must be physically present in the Philippines. Anonymous directors and trustees are not allowed. The SEC does not permit the issuance of bearer shares for banks and other companies.
Despite the efforts of the GORP authorities to publicize regulations and enforce penalties, cash smuggling remains a major concern for the Philippines. Although there is no limit on the amount of foreign currency an individual or entity can bring into or take out of the country, any amount in excess of $10,000 equivalent must be declared upon arrival or departure. Based on the amount of foreign currency exchanged and expended, there is systematic abuse of the currency declaration requirements and a large amount of unreported cash entering the Philippines.
The problem of cash smuggling is exacerbated by the large volume of foreign currency remitted to the Philippines by Overseas Filipino Workers (OFWs). The amount of remitted funds grew by 25 percent during the first ten months of 2005, and should exceed $10 billion for the year, equal to 11 percent of GDP. The BSP estimates that an additional $2-3 billion is remitted outside the formal banking system. Most of these funds are brought in person by OFWs or by designated individuals on their return home and not through any alternative remittance system. Since most of these funds enter the country in smaller quantities than $10,000, there is no declaration requirement and the amounts are difficult to calculate. The GORP encourages local banks to set up offices in remitting countries and facilitate fund remittances, especially in the United States, to help reduce the expense of remitting funds.
The Philippines is a member of the Asia/Pacific Group on Money Laundering and became the 101st member of the Egmont Group of FIUs in July 2005. The GORP is a party to the 1988 UN Drug Convention, the UN Convention against Transnational Organized Crime (2002) and to all 12 international conventions and protocols related to terrorism, including the UN International Convention for the Suppression of the Financing of Terrorism (2004). The Anti-Money Laundering Council is able to freeze funds and transactions identified with or traced to suspected terrorists and terrorist organizations listed on the UN 1267 Sanctions Committee's consolidated list and the list of Specially Designated Global Terrorists designated by the United States pursuant to E.O. 13224, and other foreign governments.
For several years, the GORP has realized the need to enact and implement an antiterrorism law that among other things would define and criminalize terrorism and terrorist financing, and give military and law enforcement entities greater tools to detect and interdict terrorist activity. President Arroyo declared in her State of the Nation address in June 2005 that the passage of such a law was one of her priorities for the remainder of the year. The Philippines legislature took steps to achieve that result in fall 2005 in consolidating bills and bringing them to the floor for full consideration. The Senate tabled its version of an antiterrorism bill (SB 2137) in October and the house calendared its own Bill (HV 4839) in November. The Senate and house held hearings in late 2005; the bill passed its second reading in the house in December with the third and final reading expected in mid-January 2006.
Reportedly, the GORP remains optimistic that both houses will pass a comprehensive law addressing terrorism in 2006. In lieu of specific counterterrorist legislation, the government has broadly criminalized terrorist financing through Republic Law legislation, which defines "hijacking and other violations under Republic Act No. 6235; destructive arson and murder, as defined under the Revised Penal Code, as amended, included those perpetrated by terrorists against non-combatant persons and similar targets" as one of the violations under the definition of unlawful acts. The Revised Implementing Rules and Regulations R.A. No. 9160, as amended by R.A. No.9194, further state that any proceeds derived or realized from an unlawful activity includes all material and monetary effects will be deemed a violation against the law.
The Government of the Republic of the Philippines has made significant progress enhancing and implementing its amended anti-money laundering regime. To fully comport with international standards and become a more effective partner in the global effort to staunch money laundering and thwart terrorism and its financing, it should enact and implement new legislation that criminalizes terrorism and terrorist financing. Additionally, the Central Bank should be empowered to levy administrative penalties against covered entities in the financial community that do not comply with reporting requirements. Stockbrokers and accountants should be required to report CTRS and STRs and AMLC should use its authority to require all casinos to file CTRs and STRs. The GORP should enact comprehensive legislation regarding freezing and forfeiture of assets that would empower AMLC to issue administrative freezing orders to avoid funds being withdrawn before a court order is issued. The creation of an asset forfeiture fund would enable law enforcement agencies to draw on the fund to augment their budgets for investigative purposes. Such a fund would benefit the AMLC and enable it to purchase needed equipment. Finally, AMLC should consider clearly separating its analytical and investigative responsibilities and establish a separate investigative division that would focus its attention on dismantling money laundering and terrorist financing operations.