Lanzanas, G. G. (2018). Preventing the usage of bank facilities as conduit for money laundering fiascos: Standardization of internal control mechanism for cross-border wire transfer (Unpublished master's thesis). Public Management Development Program, Development Academy of the Philippines.

Public Management and Development Program Senior Executive Class Batch 6 Thesis (SEC)--Development Academy of the Philippines.

This policy paper is about preventing the usage of bank facilities and services as conduit for money laundering and terrorist financing fiascos by instituting standard internal control mechanism on cross-border wire/fund transfers. Given the vital role of banking sector in the overall financial system of the country, it's products and services become attractive to money launderers. The Philippine Second National Risk Assessment on Money Laundering and Terrorist Financing (NRA) specifically assessed banks as the primary target of launderers to clean the proceeds of their crimes, thus, it is rated to be inherently vulnerable to money laundering and terrorist financing (ML/TF). This paper undertook document review in its analysis and evaluation. Further, it is used primary data gathering, through a survey of targeted universal and commercial banks operating in the Philippines. A key informant interview was also undertaken with the heads of Anti-Money Laundering Council (AMLC) Secretariat, key officials of the Bangko Sentral ng Pilipinas (BSP), and the President of the Association of the Bank's Compliance Officers (ABCOMP). The paper identified three policy options: (1) institutionalized an dependent body that will conduct due diligence review on qualified inward cross-border wire/fund transfers prior to actual crediting of funds to the intended beneficiary through the: (a) creation of centralized settlement department; or (b) functional harmonization; (2) mandating the establishment of Know Your Employee (KYE); and (3) maintain the status quo with suggestions to introduce innovation in the existing processes. Using the cost-benefit analysis (CBA) that considered the Kingdon's policy streams model, AML effectiveness framework, and Pareto efficiency, the option to mandate establishment of KYE policy was selected as policy recommendation. The paper concluded the usage of bank products and services as conduit for money laundering activity is a challenging undertaking as it requires healthy balance between adherence to the statutory obligations under the Anti-Money Laundering Act (AMLA) by ensuring the inflow and outflow of clean funds in the market and at the same time providing an efficient service to clients without compromising the mandates under the Bank Secrecy Act (BSA). To strengthen AMLA, customers will have to sacrifice some bank secrecy. To strengthen bank secrecy, the society, in general, will have to wrestle with the possibility of increasing money laundering in the country. Since AMLA and BSA temper each other, the government, through AMLC and BSP as Financial Intelligence Unit (FIU) and bank regulator, respectively, should give focus on addressing the gaps in the existing policies by mandating the establishment of standard AML control measures that aim to provide assurance on the integrity of bank professionals. In addition, as technology nowadays dictates the delivery of banking services, it was recommended that a comprehensive review and analysis of the administrative and financial costs involved in the institutionalization of an independent body that will conduct transactional review of wire/fund transfer through creation of a centralized department should be undertaken, since the industry found the same to be necessary in the prevention of money laundering activities using bank product and facilities. Finally, this paper recommends the government to seriously consider the pending proposal to amend the BSA as it will have a great impact in the success of the Anti-Money Laundering/Countering Financing of Terrorism (AML/CFT) framework of our country.