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Anti-Money Laundering Contract Clauses in Financial Institutions

A Comparison between the Philippines and the United States

 

STUDENT PAPER

By Kimberly Mae Escalera

SKEMA Business School

Paris, France

 



Abstract

Money laundering is a major case worldwide and different countries are finding ways to combat this serious issue of washing dirty money. The Philippines is confronted with a major money laundering case in 2016 and the purpose of this research is to compare the anti-money laundering contract clauses of financial institutions in the Philippines and United States as to formulate recommendations to strengthen the Anti-Money Laundering Act. Comparison of the anti-money laundering clauses are done using multi-attribute decision making analysis with non-compensatory and compensatory methods. Anti-money laundering contract clauses in financial institutions in the United States present greater scope and provisions to fight money laundering. It includes a detailed suspicious account reporting and relaxed bank secrecy act. Hence, a recommendation was formulated for the anti-money laundering act of the Philippines which is to add covered institutions, lower threshold for covered transactions, and clearer and stronger enforcement of sanctions.

Key Words: Covered Institutions, Covered Transactions, Unlawful activities and Fraudulent Practices, Consequence and Prevention Programs

Introduction

A huge anti-money laundering case in 2016 almost put the banking system of the Philippines in jeopardy when 81 million dollars was stolen from the Bangladesh bank account in the US Federal Reserve Bank in New York and was transferred to Rizal Commercial Banking Corporation (RCBC), a local bank in the Philippines. The stolen money was later on transferred to casinos and junket operators. This situation led to questions how the financial institutions in the Philippines play part in upholding the Anti-Money Laundering Act which is a major issue worldwide.

Money laundering is defined to be as the method of “washing” the money from illegal means as to appear it to be a clean money which can be through depositing in banks or using other institutions/businesses to circulate the dirty money. Anti-Money Laundering Act was created to combat this way of generating income from illegal means. Prevention of money laundering is a major responsibility of financial Institutions as it is generally the means to launder money from crimes. Anti-money laundering is included in many financial institutions’ contract clause to support the Anti-Money Laundering Act and there are certain consequences for both parties who fail to uphold the said act.

Figure 1: Process of Money Laundering retrieved from http://www.onestopbrokers.com/2015/01/12/stages-money-laundering/

This paper will analyse the contractual clauses of anti-money laundering in different financial institutions in the Philippines and compare it to the United States as the United States is one of the major countries who suffered from money laundering cases and made significant advances to combat this. The United States was once confronted by numerous cases of money laundering. According to statistics, for every year, there is $ 500 to trillion of dollars that are laundered money generated through financial institutions which is half of this laundered money is carried out in the United States. In response to the 2001 terrorist attacks in US, the country strengthens its measures to fight money laundering and terrorist financing. Moreover, the Federal Reserve Bank of New York is a major central bank where most bank accounts worldwide are kept.

From this analysis, a recommendation for the anti-money laundering contract clauses in the Philippine financial institutions will be formulated as to strengthen and create new programs to strengthen the Anti-Money Laundering (AML) Act.

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To read entire paper, click here

 

Editor’s note: Student papers are authored by graduate or undergraduate students based on coursework at accredited universities or training programs.  This paper was prepared as a deliverable for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director [email protected].

How to cite this paper: Escalera, K. M. (2018). Anti-Money Laundering Contract Clauses in Financial Institutions: A Comparison between the Philippines and the United States, PM World Journal, Volume VII, Issue VI – June. Available online at https://pmworldjournal.net/wp-content/uploads/2018/06/pmwj71-Jun2018-Escalera-anti-money-laundering-comparison.pdf



About the Author



Kimberly Mae Escalera

Philippines

 

 

 

 

Kimberly Mae Escalera is a graduate student at SKEMA Business School in Paris specializing in Project and Programme Management and Business Development, originally from the Philippines. She graduated from University of the Philippines Diliman and was an exchange student at Seoul National University. She is a former bank officer in one of the leading banks in the Philippines and the oldest bank in Southeast Asia. She can be contacted at [email protected] or https://www.linkedin.com/in/kimberlyescalera/