Category: banks

PH awash with cash

Tony Lopez

… It is not for lack of money that the government cannot institute drastic reforms and alleviate poverty. This government and this country are awash with cash. The economy is awash with cash.

Where is that money?  To start with, the savings rate is 30 percent of the value of output of goods and services or GDP.  GDP is P15 trillion.  So 30 percent of that is P4.5 trillion.   With that, we can finance the entire government’s operations for one year and still have P1 trillion of excess money.

We have $27 billion in annual OFW remittances. That’s P1.35 trillion.  It can finance the entire government infrastructure program in 2019.  The P1.35 trillion is 1.6x the infra budget of P847.2 billion this year. This P1.356 trillion is orphan money because nobody marshals it for productive purposes.  The P1.35 trillion thus is marooned inside elegant malls and in forests of condos where a square meter is overpriced at least five times its real value.

In addition, we earn $25 billion from our call centers and business process outsourcing (BPO).  That’s another P1.25 trillion.

Moreover, right at the central bank, private banks have parked P3 trillion of private deposits— money the banks are too lazy or too afraid to lend (because the BSP is a much better borrower and you talk to only one guy).  If the banks were to lend out the P3 trillion, they would have to employ entire bureaucracies—processing loan applications, interviewing loan applicants, visiting or assessing properties used as collateral, and holding so many meetings to approve the loans.

… Additionally, the Philippines has $81.8 billion in foreign reserves—money that can pay for importations for a year.  That’s another P4-trillion money.

So why do your bureaucrats keep courting credit rating agencies to get an investment grade credit rating?  We don’t need to borrow abroad.  We don’t even need foreign investments.

We have so much money locally.  So why does Duterte go around the world panhandling?  The Philippines is capital-surplus.  In fact, the country has been exporting capital, rather than importing, in the past 10 consecutive years.

Duterte has appointed a new central bank governor, Nestor Espenilla, 58.  He is an economist and a 36-year veteran at BSP. Our central bank is supposed to be among the world’s best. Outgoing BSP Governor Amando Tetangco Jr. has been cited world’s best no less than eight times.

So again I ask this:

If the Philippines is awash with so much money and our central bank is that good and (it is among the oldest central banks in Asia), how can you explain the fact that in Asean, with the possible exception of Indonesia, the Philippines has the highest inflation rate, the highest interest rates, the highest unemployment, the highest poverty incidence, and the lowest foreign investment inflow and the lowest ranking in Asean in Human Development Index or a measure of people’s well-being.

How come out of 1,500 towns, 600 towns  do not have a bank branch?  How come more than 60 million Filipinos do not have a bank account?

Amid so much liquidity (the techspeak for so much cash), how come 25 million Filipinos wallow in abject poverty?

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.

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The rising crescendo of bickering and acrimony within Europe might seem to outsiders to be the inevitable result of the bitter endgame playing out between Greece and its creditors. In fact, European leaders are finally beginning to reveal the true nature of the ongoing debt dispute, and the answer is not pleasant: it is about power and democracy much more than money and economics.

Read on…

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