When hackers launched an audacious raid on Bangladesh’s foreign reserves, a plot worthy of a John le Carre spy novel was sparked in the Philippines, exposing the nation as a dirty money haven.
The $81 million stolen from the Bangladesh central bank’s American accounts last month was immediately sent via electronic transfer to the Philippines’ Rizal Commercial Banking Corp. (RCBC) bank, with the thieves deliberately targeting their laundering location.
The Philippines has some of the world’s strictest bank secrecy laws to protect account holders, while its casinos are exempt from anti money laundering rules altogether.
“The Philippines is very attractive because our laws have gaping holes. It’s easy to launder money here,” said Senator Sergio Osmena, who is pushing for stronger anti-money laundering laws.
Still, if the thieves were to get away with their heist, the money had to be moved quickly through the banking system and into the casinos.
And it did.
Authorities took four days to order a recall of the money.
But by then it had vanished — leaving in its place a tale of death threats, bribes, shady business figures and a bank manager who could be the villain or a victim.
“I did not do anything wrong. If this is a nightmare, I want to wake up now,” Maia Deguito, the manager of RCBC bank, told ABS-CBN television this week after authorities stopped her at Manila airport from trying to leave the country. “I live everyday in fear.”
With authorities in Bangladesh and elsewhere bamboozled over who masterminded the cyberheist, Deguito’s role as manager of the bank that accepted and shifted the money has come under intense scrutiny.
She has accused the bank’s president, Lorenzo Tan, of ordering her to move the money. He has fiercely denied the accusations.
Philippine senators who launched an inquiry last week into the affair are yet to determine whether she was a scapegoat or not, but are convinced she was not the mastermind.
“It’s a big operation. This could not have been done out of the Philippines alone,” Senator Ralph Recto said.
On February 5, the same day Bangladesh Bank was hacked, the money was sent electronically to four accounts in Deguito’s RCBC branch in the financial capital of Makati, according to testimony to the Senate inquiry.
Those accounts appeared to have been set up solely for that purpose because they were done using aliases, the Senate inquiry heard.
After that, the bulk of the money was transferred into accounts of a local ethnic Chinese businessman, William Go, who has since protested his innocence. He said his signature was forged to set up the accounts.
From there, the money was briefly held by Philrem, a foreign exchange brokerage.
Philrem President Salud Bautista told the Senate inquiry $30 million went to a man named Weikang Xu.
He was described as a casino junket operator but senators have said they know little more about him other than he is of Chinese origin.
The anti-money laundering council said another $29 million ended up in Solaire, a casino on a glittering Manila bayside strip that the Philippines hopes will become one of the world’s biggest gambling destinations.
That money was exchanged into chips but could only be turned back into cash after being played in the casino, its management told the Senate inquiry.
Another $21 million was sent to Eastern Hawaii Leisure, which runs a sparsely furnished casino with Chinese-only television in Santa Ana, a sleepy town in the far northern Philippines, according to the council.
In February 2013, the Philippines was up against a deadline to amend its Anti-Money Laundering Act and get itself off the “gray list” of a global watchdog, and lawmakers were bickering over whether to include casinos under the legislation.
With one day to go, a congressional committee heard repeated pleas not to hamstring an industry that could rival other Asian gambling meccas by obliging casinos to report suspicious transactions. Finally, the senator chairing the meeting agreed “with a heavy heart” to exclude them, a transcript of the proceedings shows.
That same senator, Teofisto Guingona, now heads the panel trying to fathom how the stolen money wound up with the two casinos and a junket operator.
Guingona, said last week that fierce lobbying by the gaming industry over the law had left the Philippines one of the world’s softest targets for money launderers, putting the financial system at serious risk.
“It can wreak havoc on the economy,” he said. “Any money coming in and out of the country will come under scrutiny. People might just say ‘to hell with it, it’s not worth doing business with the Philippines.’ ”
The Philippines depends heavily on remittances from workers abroad, which account for about 10 percent of its GDP.
The country’s central bank chief said last week financial markets had shown no signs of distress over the scandal, but added: “We have to recognize there is a risk that is associated with this.”
Security researchers blamed malware and a faulty printer for the initial breach of the computer systems of the Bangladesh central bank but said officials were also responsible because of weak security procedures. The bank’s governor and two deputy governors quit their jobs over the scandal last week.
Bangladesh said on Saturday it had formally sought the assistance of the U.S. Federal Bureau of Investigation.
Public hearings on the heist in the Philippine Senate last week focused on Deguito, the manager of a Manila branch of RCBC. Her bank received the stolen money on Feb. 4 and transferred it to a foreign exchange broker who passed it on in tranches, including $30 million in banknotes that officials say would have weighed 1,500 kg.
A colleague of the manager testified he saw her drive off in her car with 20 million pesos ($431,000) in cash from one of several fictitious accounts to which the money was wired. The branch manager declined to give evidence in public.
According to an Anti-Money Laundering Council (AMLC) document seen by reporters, on Feb. 8 Bangladesh Bank sent RCBC several messages via the SWIFT interbank communications network requesting transactions be stopped and the funds returned.
However, five withdrawals were made from the accounts in 73 minutes the next morning. When RCBC responded to the SWIFT message later that day, all that remained of the $81 million was $68,305.
RCBC President Lorenzo Tan told the Senate he could not discuss what happened because of the country’s bank deposit secrecy law, one of the world’s strictest and a legacy of the martial-law era of President Ferdinand Marcos in the 1970s.
“Prevention of . . . money laundering is being hampered by the very strict bank deposit secrecy law,” central bank Gov. Amando Tetangco told reporters. “Once the funds go into a bank deposit account, that’s it. The trail turns cold.”
Sergio Osmena, another senator probing the bank heist, has pressed for years to amend the bank laws. He made no headway, he said, because secrecy suits businesses that want to evade taxes and can bribe lawmakers to resist legislative change.
“I am quite happy that a scandal like this has happened,” Osmena said, explaining he believes the Bangladesh case is the tip of an iceberg alerting people to hundreds of money laundering crimes going unreported every year.
In a March 2 report, the US State Department said only 49 anti-money laundering cases have been filed since the AMLC began operating in 2001. The number of prosecutions and convictions has been virtually nil.
Recent efforts to include casinos in the law have been held up because of forthcoming elections and extensive lobbying from the gaming industry, which the report said was “a weak link” in the Philippines’ anti-money laundering regime.
“Money laundering is a serious concern due to the Philippines’ international narcotics trade, high degree of corruption among government officials, trafficking in persons, and the high volume of remittances from Filipinos living abroad,” the US report said.
With ambitions to become one of Asia’s gaming hubs alongside Macau and Singapore, the government opened a tract of reclaimed land near Manila airport for casinos. Two world-class resorts now operate there, counting Chinese high rollers among nearly half of their VIP clients, and two more are under construction.
The Senate hearing was told $29 million of Bangladesh’s money was transferred to one of these casinos, Solaire, owned and operated by Bloomberry Resorts Corp.
“We did not know it was dirty money,” Silverio Benny Tan, corporate secretary of Bloomberry Resorts, told reporters.
The Philippine Amusement and Gaming Corp., which regulates the industry, says that to prevent laundering, money transferred to casinos for players must be exchanged for ‘dead chips’ that can only be cashed in from winnings.
But, for Guingona, the disappearance of such large sums into casinos underlines the weakness of Manila’s anti-laundering regime and could push the country back into the “gray list” of the Financial Action Task Force (FATF).
A spokeswoman for FATF, a Paris-based intergovernmental organization that combats laundering and terrorist financing, said an Asia-Pacific body was responsible for reviewing Manila.
“We cannot comment on the current case being reported in the media,” said Alexandra Wijmenga-Daniel. “However, ongoing deficiencies in the anti-money laundering and counterterrorist finance regime of the Philippines would be of concern.”