RCBC money laundering scandal

Lala Rimando

5 things I learned in Day 3 Senate probe on the US$81 million (~Php3.8 billion) money laundering scandal

1. Brave casino vs. play-safe bank

It appears Solaire has defied the popular claim that casinos are the “blackhole” in anti-money laundering efforts. Solaire’s Atty Benny Tan told the senators that as soon as their attention was called that some of the millions-dollar-worth stolen Bangladesh funds found their way into their casino gaming tables, the company officials acted quickly.

“We have frozen the P107,350,602 balance in their chips. We have also confiscated various denominations of cash in their rooms amounting to P1,347,069,” Tan said mid-way into the 5-hour long Senate hearing on March 29, 2016.

Senators Serge Osmeña and Teofisto Guingona III were pleasantly surprised and commended the Ricky Razon-controlled Bloomberry Resorts, the owner and operator of Solaire casino.

This came after the senators, particularly Osmeña and Guingona, got exasperated after grilling the RCBC top officials over the same issue. RCBC president Lorenzo Tan and legal chief Macel Estavillo who insisted they cannot just unilaterally freeze their clients’ bank accounts without a court order. (A court order did come weeks after but by then, the $81 million funds have long been withdrawn.)

Anti-money laundering officials have long complained that casinos should be among those institutions covered since officials said they become blind once the illegal funds enter the casino system. Banks and remittance firms, on the other hand, are covered and subjected to intense regulation…yet the dirty money was successfully laundered thru these two.

2. Junket agents play major role in cleaning or washing illegal funds via casinos

I loved it that details of how the different roles in a casino business are played were discussed at the hearing. I’ve always believed that casinos have to be a willing participant to pull off a heist. Apparently not. Junket agents are key.

Junket agents are the ones who bring in the foreigner high-rollers to, in this case, Manila casinos. Two casinos were used: High-end Solaire and the modest Midas Hotel and Casino, both in Manila City. Macau agents are an easy prey (or willing heist participants) since business in that island is dying.

Junket agents earn from commission whether the gambler wins or loses (rules depend per casino). Agents can monitor how their players are doing via the “dead chips,” or those plastic round chips that they get pieces of after paying for their equivalent in cash (or via credit line from junket operator) at the casino counter.

These are “dead” since there are rules on how they can encash it. Winning chips are easily encashable, but the dead chips, which is in effect the player’s capital, cannot be encashed immediately. In Solaire, the agents have a “rule” that the dead chips can only be cashed in after they have been “rolled” (used for gambling) at least 6 times. The agents can monitor that thru the casino’s digital records of the activity of the chips.

But Sen. Osmeña said the agents—not the casinos—can change that “rule” and just allow the player to cash the chips even if the player hasn’t played 6x yet. That way, that player, assuming he is in on the heist, can more easily “wash” the dirty, illegal money and off he goes with the cash.

In this case of a heist, it does seem that the junket agents have to be working closely also with the junket operators. The latter are businessmen who usually advance money or extend credit to high rollers, as well as provide the hotel rooms, logistics of going to the Manila casinos from, say Macau, and the VIP rooms where the private gambling away from the prying eyes of mere mortals happens (no, we’re not talking about baccarat or some lowly gambling machines here. Those are for the masses.) VIP rooms are only for gamblers who play with a minimum of P25,000 to maximum of P1.5 million bets each game, at least in Solaire. Consider these “services” that the junket operators provide as insurance and, well, convenience.

3. Connecting the dots: Who knows who

Some names mentioned: Wei Kang Xu is an agent, as well as Dingxi Zi from Macau. Kim Wong, who was present at the Senate hearing, is a junket operator.

One of Wong’s clients is Shuhua Gao, who owes Wong P450 million after a series of loses in Solaire. Gao was going to sell his land in Beijing to pay Wong, but Gao reportedly said he needed to open a dollar bank account in Manila to course the funds from Beijing. Wong, who has been pestered by RCBC branch manager Deguito for business, referred Gao to the aggressive bank manager. The three–Wong, Gao and Deguito—met at Wong’s office at Midas Hotel in May 2015, and the RCBC branch manager suggested Gao opens a corporate account instead of an individual account. A corporate account needs 5 individuals. (Note: So far, there seems to be no corporate account opened.) Wong said Deguito promised to “take care” of the account opening. The 5 individuals in that account opening exercise turns out to be all fake, the RCBC and Anti-Money Laundering Council would later discover, citing IDs used in what was supposed to be the most basic part of the required know-your-client bank process.

Meantime, Gao, who has referred about 18 players to Solaire already, introduced Wei Kang Xu and Dingxi Zi who are supposedly planning to invest in the Philippines. They alerted Wong and Deguito that a large amount is coming soon. Indeed, in early February, a series of inward remittances to those fake accounts would receive a total of $81 million. Wong said he was not surprised but that only required that all the funds are used to play in the casinos, Solaire and Midas.

4. Where the $81 million funds went

What we know so far:
The $81 million that reached the RCBC bank accounts in the bank’s Jupiter branch where the manager is Deguito were sent to remittance firm Philrem owned by couple Michael and Salud Bautista to be converted from dollars into pesos. Philrem coursed the convertion thru RCBC’s Treasury via its bank account in another branch (not in Jupiter branch).

This means the illegal funds entered the RCBC system twice: as an inward remittance from the New York account of Bangladesh central bank, and as a forex transaction by Philrem, a 3rd party.

Of the $81 million, $63 million went thru Solaire and Midas. Here’s a breakdown based on Wong’s account:
>> $29 million went to Solaire.
>> $21 million went to Midas.
>> Php400 million and $5 million via Kim Wong.

The balance of $17 million remains unaccounted for. Wong said Philrem still has the amount, but the Bautista couple said they delivered everything to the Chinese group (Xu, Zi and Gao) in Solaire.

Unfortunately, there are no more CCTV footages of this “delivery” since Solaire keeps them only for 14 days, as required by Pagcor.

Wong says he has in his possession some $4.63 million due him as the “bangka” when his players lose while gambling in the casino.

5. The P1 billion threshhold

RCBC says the head office gets a trigger if some P1 billion funds go thru their system (as a deposit or withdrawal), prompting an elevation of any transaction, suspicious or not, to the more senior officials. But the frontline officials have their own discretion and may use their instinct when dealing with these big amounts.

Lorenzo Tan and Atty Macel Estavillo stuck to their message: the rogue branch manager made bad judgement calls.

Grace’s China response

B00 Chanco

Frontrunner Grace Poe is usually well briefed by her panel of expert advisers. But the second debate revealed she needs a little more polish on how to respond to the China question. Not that there is a really good answer to how to respond to the regional bully, but a future president must show savvy that can elicit respect here and abroad.

Read on…

JOVITO SALONGA (1920-2016)

with deepest thanks to his children
ricky, steve, patty, eddie, and rina (victoria :)
for sharing their dad with nation.

back in 1965 when the brilliant lawyer jovito salonga first ran for the senate, my parents campaigned for him like mad.  not only was jovy’s wife lydia the sister of salvador “badong” busuego, a very close friend of theirs since UST medical school in the ’30s (the same batch as eva macaraeg macapagal, who would speak only in spanish with my mother), but salonga had also impressed them as a nationalist and followed news of his stint as congressman of rizal province in 1961 when he chaired the committee on good government, holding inquiries on graft & corruption in aid of legislation, and trouncing dynasties to boot.  my parents were  always politically engaged and, in the time of marcos, were ardent supporters of salonga and the liberal party, and then also of ninoy (who first ran for the senate in ’67).

i wasn’t into politics yet, not even during my years in UP diliman when it was the hotbed of kabataang makabayan (KM) activism.  fresh from convent school, and forewarned about “communists,” i took a while to figure out, listening to rallies happening on the AS steps, what the “ibagsaks” were all about, and yes naman!  no to imperialism and feudalism, and no to US bases!  but meanwhile i had met and was barkada for a while with the salonga sibs steve and patty who weren’t into politics either  — our group used to hang around francis lumen’s VW van (hypo, we called it) under the trees across  (but far from) the AS steps, and i remember the music best of all, steve playing guitar and singing the protest songs of dylan and baez, peter paul and mary, with patty singing second voice, what a high.  and the times they were a-changing indeed, on so many fronts.

except that, as it turned out, the changes shaping up were for the worse.  fast forward to the first quarter storm of jan 1970 by which time marcos had been re-elected amidst cheating allegations and youth org KM had morphed into a new communist party led by joma sison that was increasingly radical, bent on destabilizing, and toppling, the fascist and corrupt marcos government.  came plaza miranda, the bombing, in august 1971, that killed nine and injured more than a hundred, among them the leading lights of the liberal party, including senator salonga who was the most gravely hit but who, against all odds, lived to continue the fight and with ninoy kept the opposition alive here at home and in america all through martial law, AND when freedom was won, investigated and became convinced that it was joma sison who ordered the plaza miranda bombing that played right into marcos’s hand, gave him grounds to suspend the writ of habeas corpus, crack down on the radical left, and eventually declare martial law.

during that dark reign of greed and terror, every time senator salonga’s name would come up in the news in connection with anti-marcos events and/or elements, my parents would remind each other about packing a bag just in case they were picked up by the military; they were certain they were on a list of staunch jovy salonga and ninoy aquino supporters.  and like many others in the opposition, they started breathing easy again only after the glorious, if fleeting, triumph that was EDSA.

for a while there, things were looking up for nation and for salonga.  after a year as chair of the pcgg, laying the legal groundwork for the recovery of ill-gotten wealth, salonga ran again for the senate and, as in ’65 and ’71, topped the race.  as expected, he was elected senate president — no one deserved the distinction more.  and a lesser mortal would have been inadequate to the heroic task of presiding over a split senate, withstanding intense pressure from cory and america, and casting the deciding vote that spelled the end of US bases – another fleeting triumph — never mind that it doomed, too, his run for the presidency.  read randy david’s Salonga and the Senate that said no.

Salonga’s acute sense of history kept him focused on what he felt he needed to do. He set aside all personal considerations—something that, in our culture, was hard to do without appearing rude and arrogant. But, the closing of the American bases in the Philippines took precedence over everything. It was to him a necessary condition for our emergence as a fully sovereign nation—something we needed to do for the sake of future generations, even if it meant displeasing an important and powerful ally.

He was painfully aware that his active opposition to the treaty would adversely affect his political plans. The presidential election of 1992 was just around the corner. Many influential leaders and businessmen who had supported him in his long political career and wished to see him succeed Cory, warned him against playing an assertive role on the issue.  But Salonga would not be deterred. For him, the time had come to close this colonial chapter of our history, and it fell on him to lead the Senate to that final moment.

papa didn’t live to see the bases kicked out.  when senator salonga ran for president in 1992, mama and i rooted for him, even getting into arguments with family and friends who agreed with anti-salonga propaganda that he was too old, even disabled, or that harked back to allegations of questionable deals with marcos cronies when he led the pcgg.  i had a sinking feeling that america, along with our very own amboys, had drawn a line, anyone but salonga.  but maybe that’s just me.  read randy david’s Jovito Salonga, the scholar-politician.

… in the 1992 presidential election, President Cory was torn between two loyal allies who both wanted to be president—Speaker Ramon Mitra Jr. and Defense Secretary Fidel V. Ramos. Endorsing Jovy Salonga was out of the question. The Americans could not forgive him for the humiliation he had dealt them on the bases question. Big business did not like him for the uncompromising stance he had taken against US interests. Like Diokno, he was the best president we could not have.

I had the privilege of moderating the 1992 presidential debate for the Commission on Elections and television station Channel 5. Blind in one eye, his right hand a deformed mass of skin and bones, the 72-year-old statesman beamed like a professor conducting a graduate class. He was the most erudite and most accomplished person in that pack. Speaking in a measured tone in fluent Filipino and English, he never switched from one code to the other to complete a thought.

But, beside the most prominent pre-martial law politicians, there were other stars in that room that had captured the imagination of a fickle public. One of them was the feisty and outspoken Miriam Defensor Santiago, a former judge, Cabinet member, and immigration commissioner. The other was businessman Eduardo “Danding” Cojuangco, who had fled the country with the Marcos family in 1986. The broad support that this soft-spoken Marcos crony was getting during the campaign, just six years after the overthrow of the dictatorship, showed that the political winds were ominously shifting.

senator salonga ranked 6th in a race of 7, bested by fvr, miriam, danding, mitra, and imelda, and besting only doy laurel.   yes, danding and imelda, back so soon to reclaim their ill-gotten wealth, got more votes than salonga.  it was the saddest thing.

fast forward to 2016.  it’s even more toxic now.  the marcos son bongbong is running for VP under the banner of the nacionalista party that saw his dad elected president twice.  the salonga son steve is running for governor of rizal but, no, not under the banner of the liberal party that saw his dad topping three senatorial races, rather, he is running for governor as an independent candidate because the liberal party cares more about compromising with local dynasties and trapos, what a shame.  read Jovito Salonga’s son laments LP snub, steve’s story just before his first run for the same seat in 2013.

“Tuwid na daan may be true in the elective posts on the national level, but not on the local level,” he said.

Salonga was quick to say that he did not think President Aquino was aware of the compromises on the ground, but insisted that this was a reality he had to contend with in next month’s elections.

The “disturbing and aggressive alliances” with dynasties, warlords and traditional politicians began during the 2010 elections, he said.

Salonga said at that time, his father questioned such deals but got nowhere. He said that his father’s letters and phone calls were ignored.  “He was very disappointed,” said the son.

when senator salonga lost the race for the presidency in ’92, i felt like i did when they killed ninoy in ’83.  what a loss for nation.  six years of a salonga presidency certainly would have taken the nation to a place vastly different from, and more desirable than, where we are now.

it’s great that he was also a prolific author — there should be a university course on good government using his books and journals as bibles — who also wrote his own speeches.  this, from a speech he gave in UP in 1962 when he was rizal congressman and chairman of the committee on good government, resonates to this day, regardless of matuwid-na-daan.  to this EDSA freak, it even seems like he already saw glimmers of people power at play.

DEMOCRACY, as one writer puts it, cannot be saved either by slander or by silence.

And in the Philippines, the word “silence” can never be over-emphasized for here, particularly in places where the high and the mighty have the run of things, the poor and the lowly are so afraid to give their evidence. Entire communities are terrorized into silence and prospective witnesses are rendered mute by the forces of physical violence. Hence, it is true to say we cannot clean up the mess in the world of crime and vice unless we are also willing to clean up the civic and political life of the community in which we live. And who is going to do that? Only we, the people. It is not merely the public officials. For as Bernard Shaw puts it very aptly— “Democracy is a device that insures we shall be governed no better than we deserve.”

We can’t have a good government and at the same time have a double standard of law observance. We can’t validly complain of corruption, if we are only too prepared and willing to bribe our way through to get what we want.

And so, if you ask me: how do we attain a higher standard of ethics in government? I answer:

When we refrain from exerting pressure on our public officials for selfish, narrow ends; when we give positive applause and encouragement to the guy who is playing it straight even though we may not agree with him; when the public official gets the help he needs from people who don’t want anything from him except to be good; and when we, the people, organize and give real, solid backing to those who lead the attack on mass dishonesty and graft.

The Supreme Court and the Poe disqualification case

Raul V. Fabella

The Philippine public has been treated to many erudite and well-reasoned treatises on how the Supreme Court (SC) should decide on Senator Grace Poe’s disqualification case. The legal issues are either involved and lengthy or simple and open-and-shut depending on who is making the case. Should the SC display judicial restraint, follow precedents, and hew closely to the letter of the law? Or should it display judicial activism and blaze a new judicial trail in pursuit of some perhaps new principle of jurisprudence? The SC did display a considerable capacity for judicial activism in allowing Juan Ponce Enrile to post bail though the charge against him is legally and constitutionally non-bailable. The new principle of jurisprudence, “humanitarian grounds,” which law students now have to learn has no accepted definition and one can drive an oil tanker through its portals. Be that as it may, not being a lawyer myself, I’d rather leave that to the legal eagles.

The purpose of this piece is not how the SC “should have decided” on the Poe case but what could be expected from revealed SC decision making in general.

Three theories on the decision making of the SC are salient and competing (see, e.g., Pacelle, Curry, and Marshall, 2011): (a) the legal theory — that what governs SC decision making are no more and no less than legal precedents and the Constitution; (b) the attitudinal theory — that what governs the SC decision making are the substantive prior preferences and ideologies of the justices; (c) the strategic theory — that SC decision making is governed by strategic considerations, especially in relation to outside forces, say, the other branches, especially elected branches of government. The President, the Senate, and Lower House have the power to retaliate (as, for example, through the budget allocation) in case of open display of contempt. Granting Juan Ponce Enrile the right to post bail on an unbailable charge clearly violates the legal theory. It may be understood as flowing from ingrained preferences (or biases as sometimes it is called) or from strategic considerations (or future payoffs as sometime it is called).

Pacelle, Curry, and Marshall (2011) tried to compare how these three theories perform as explanatory (proxied) variables in actual decisions of the US Supreme Court. Their logit regressions showed that none of the three theories can be rejected as correlates of SC decisions. I prefer to dwell on the strategic motives for decision making.

What appears to be a salient instance of strategic decision making by the US Supreme Court occurred during the New Deal Era. Then-US President Franklin D. Roosevelt — frustrated by repeated rebuffs by the US Supreme Court of New Deal legislations — threatened in 1937 to emasculate the SC with his Court Reorganization Plan. Known also as Roosevelt’s court packing plan, it came in the form of the Judicial Procedures Reform Bill of 1937.

It sought to grant the President the power to appoint an additional justice of the Supreme Court for every member of the Supreme Court over the age of 70 and 6 months and up to a maximum of six new associate justices.

Since it was Congress — not the Constitution — that established the composition of the SC, it can recompose it. Soon after Roosevelt won a sweeping victory in November 1936, the SC decided 5-4 upholding a Washington minimum wage law which the New Deal (in keeping with the Keynesian view of putting purchasing power in the pockets of the poor) favored. The tie was broken by, of all people, Justice Owen Richards who had previously opposed New Deal legislations.

In 1938, Justice Harlan Fiske Stone opined in the US vs Carolene Products that the SC should show deference to the elected branches in matters involving economic policy though not in matters of civil rights and civil liberties. The SC seemed to have acted to ease the political pressure and protect its identity (exemplified by the court packing plan).

Although the Judicial Procedures Reform Bill never became law, the message seemed to have been heard loud and clear in the halls of the US SC. But that is the US SC. We are in the land of “only in the Philippines.”

The question is what strategic considerations bore on the SC’s decision on the Poe disqualification case? We may never know.

But consider that candidate Rodrigo R. Duterte has said he will cure every ill in three months. Although that is mostly campaign bluster, to accomplish within his term what he promises implies realistically that he becomes a dictator, which calls for a clash with — and eventual dismantling of — the Supreme Court.

If Poe was disqualified, it is likely that Duterte is the only alternative to Vice-President Jejomar C. Binay, Sr. whose own defense being “No court has found me guilty” fools nobody, let alone the SC justices. If Poe was not disqualified, she will likely win (she was still leading the polls as of March 6 despite the case hanging over her campaign) and the Supreme Court should feel safer in her hands than in either Duterte’s who will not stand judicial obstacle or Binay’s who will need to judicially extricate himself. That is one possible strategic motive bearing on the SC decision. There may be others.

And, of course, their own beliefs about the suitability of the candidates for president should be factored in. One thing is sure: Poe being allowed to run is nowhere near the judicial activism displayed in the doctrine of “humanitarian considerations.”

Raul V. Fabella the chairman of the Institute for Development and Econometric Analysis, a professor at the UP School of Economics, and a member of the National Academy of Science and Technology.