RCBC Senate Inquiry: “Mr Senators, I can account for all the US$81mm”

by Chempo


This is a follow-up to my first article THE GREAT BANGLADESH CENTRAL BANK HEIST and updated to cover the Senate inquiry Apr 5, 2016.

 

Bank hacking:

rcbc-hacker.jpgI was wrong in my initial gut feel that there was no hacking but purely an inside job because I had surmised that BCB did not have a SWIFT interface. Forensic experts have confirmed that indeed BCB was hacked. However, my proviso was spot on. As I indicated, for hacking to take place, then BCB must have a SWIFT interface. Indeed they do use a SWIFT Alliance package, a third party application that connects their accounting system to the SWIFT system, with a bank network exposed to online connectivity. I also pointed to the issue of non-print out of SWIFT “ack” messages and it seemed BCB indeed had printer malfunction.

What is not known is whether it was the accounting system or the SWIFT Alliance app that was hacked into. Outward remittance transactions could have been inserted into the accounting system which are then automatically picked up by the SWIFT Alliance app and sent into the SWIFT system. Or was the SWIFT Alliance app hacked into and the transactions created there. The latter is more frightening because all banks in the world using the same SWIFT Alliance app may be facing a heightened security risk.

 

Failure at RCBC

The first line of defense failed at Rizal Commercial Banking Corp, Jupiter branch. There is nothing much that a bank can do if the front office personnel responsible for certain tasks are in cahoots with the perpetrators.

The second line of defense also failed. These are other departments where the transactions relating to the release of cash passed through. The Chief Cashier did not find the unusual amount of peso requested by the branch worthy of query. The Treasury did not find the large amount of retail FX unusual and worthy of query.

The third line of defense rests on the back office in the form of various reports, such as compliance reports, large transaction reports, large balances reports, etc. The automated reporting includes some form of artificial intelligence. These reporting routines are all post-fact activities running on different schedules like end of day, weekly, monthly etc. It seems that up to evening of Feb 11 there was still no alert raised. It is left to conjecture whether this third line of defense would have flagged these transaction had the AMLC not conduct their investigation on Feb 12.

What is tantamount to RCBC negligence is the nonchalant manner of the treatment of the stop payment message from BCB. Dhaka sent the message on Feb 8 which was Philippines holiday. On Feb 9 the message was relayed by RCBC Head Office (by who?) to Jupiter Branch manager Deguita via email! Don’t people talk to each other any more? She allegedly down-played the message and basically ignored it. All hell should have broken loose on the morning of Feb 9 and top brasses all the way to the CEO should have been alerted by the BCB stop payment request. 5 or 6 senior managers should have swooped down on the branch to find out what it’s all about. RCBC is negligent and cannot escape liability for money released from Feb 9 onward.

The fact that RCBC did not inform the Bangko Sentral of the BCB’s problems on Feb 9 is also a sticky point. It was probably a moment of national embarrassment for the Philippines bank regulator in response to their Blangadesh counterpart’s call for assistance on Feb 11 to say “oh, I’m sorry we didn’t know of that”.

 

Failure by Philippines authority

Philippines bureaucracy and legalistic quagmire cannot cope dealing with a crime in progress. The authorities did not even recognize that before there was money laundering at the casinos, there was a bank robbery. Whilst Anti-Money Laundering Commission did swing into action immediately upon receipt of BCB’s request for assistance on the evening of Feb 11, the Police was nowhere in sight.

The casino part of the investigation is rightly AMLC territory, but the RCBC part is a commercial crime. From the git-go, it was a commercial crime so why was the Anti-Fraud and Commercial Crimes Unit not the initial point of contact. The DILG website spells out the responsibilities of the AFCCU :

“The AFCCU shall be responsible for the monitoring, detection, operation and investigation against crimes involving economic sabotage, commercial crimes and other crimes of similar magnitude. It shall conduct operations against violation of intellectual property rights, optical media piracy and white collar crimes specifically fraudulent and illegal transactions, illegal recruitment, estafa, forgery counterfeiting, bank offenses and credit card frauds.”

Does an AFCCU or AMLC investigation make any difference? I believe so. The two work with a different ethos. AMLC’s approach is very legalistic based, whilst the AFCCU are very action focused and better suited to handle a “hot pursuit” crime. AFCCU investigators would have more staffers versed in commercial and banking affairs and better able to understand the intricacies involved. Lastly and most importantly, AFCCU investigators are likely to be professionally trained in the art of interrogation.

 

Failures by AMLC

rcbc-amlcThe AMLC made one very critical error in their initial inquiry. They felt that Philrem Services Corp, the remittance company, was not complicit and thus did not obtain a court order to freeze their bank a/cs. It was a wrong judgment call which I put down to inexperience. As I wrote in my first article, the devil in all this is Philrem. Not in the sense that they planned the whole thing, but the one who moved the money.

Anti-Money Laundering Act of 2001 (RA 9160) provided for AMLC to enlist the co-operation of other government entities, and the power to freeze accounts without court order :

“Sec 7 (10) to enlist the assistance of any branch, department, bureau, office, agency or instrumentality of the government, including government-owned and -controlled corporations, in undertaking any and all anti-money laundering operations, which may include the use of its personnel, facilities and resources for the more resolute prevention, detection and investigation of money laundering offenses and prosecution of offenders.”

Sec. 10. Authority to Freeze. – Upon determination that probable cause exists that any deposit or similar account is in any way related to an unlawful activity, the AMLC may issue a freeze order, which shall be effective immediately, on the account for a period not exceeding fifteen (15) days. Notice to the depositor that his account has been frozen shall be issued simultaneously with the issuance of the freeze order. The depositor shall have seventy-two (72) hours upon receipt of the notice to explain why the freeze order should be lifted. The AMLC has seventy-two (72) hours to dispose of the depositor’s explanation. If it fails to act within seventy-two (72) hours from receipt of the depositor’s explanation, the freeze order shall automatically be dissolved. The fifteen (15)-day freeze order of the AMLC may be extended upon order of the court, provided that the fifteen (15)-day period shall be tolled pending the court’s decision to extend the period.

No court shall issue a temporary restraining order or writ of injunction against any freeze order issued by the AMLC except the Court of Appeals or the Supreme Court.

AMLC has the right to issue a freeze order on the 5 a/cs at RCBC on Feb 12 when they started investigation, but instead waited till the court order was received on Mar 1. Not that it would have helped because the money was gone from these a/cs.

AMLC investigation hit a dead wall at the casino because they could not obtain banking info due to banking secrecy. They need not go to the bank but to simply request the casinos for their bank statements. Had the casinos refused to co-operate, there are 2 ways to make them do. (1) Threaten to  freeze the a/cs of the casinos which would have crippled their operation, they will put everything on the table for AMLC. (2) Pagkor is a government entity so they could have been roped in as casino regulator to solicit Midas and Solaire’s assistance. The two casinos are under no fiduciary nor statutory restrictions to provide certain critical info.

And here’s the kicker — AMLC should have focused on info relating to Gamblers identity and details of chip encashment by the Gamblers thus allowing for “hot pursuit” of the money trail. Once again, inexperience of a ‘hot pursuit’ investigation is evident as well as knowledge of casino operation.

 

The Senate inquiry – an act of criminal incompetence

The hastily convened Senate inquiry is an act that borders on criminal incompetence. It is a coup de grace to any further criminal investigation by the police.

A cardinal rule in interrogation: All potential suspects must never ever be interviewed in the presence of each other in the same room. The Senate inquiry trampled on this cardinal rule, thereby allowing real time calibration of collaborative answers by all concerned. It also prevented those interviewed of offering answers which they may have been more forthcoming in a private session. (Deguita’s decision for an executive session was a wise move.) With everything out in the open, the Senate has denied Police investigators a trump card. When Police interrogates a suspect, he or she does not know what the other co-suspects will say. It’s an angle that allows the Police to drill into inconsistencies that force suspects into corners.

rcbc-interrogation.jpgThere is a world of difference in investigations by AMLC, the Senate and the AFCCU (Police) and it’s all in the words. AMLC and senate enquire, inquire, ask, and interview. The Police conduct interrogation. (Both collect affidavits and evidence). The Senate invites “resource persons”, the Police treat them as suspects or persons of interest. Philippines police do have the skills in the art of interrogation employing stuff like Reid’s technique, deception, threats, verbal and non-verbal cues, good-cop-bad-cop ploy, etc. AFCCU will also employ other means in their investigation, such as shadowing suspects, speaking to neighbors, friends, observation of body languages, etc. Take for example the evidence of one Agarrado, an RCBC reserve officer, who testified that he saw Deguito loading 20mm pesos into her car. Given the situation, investigators would be wary of any witnesses’ testimony. One would have wanted to know why he happened to be there, what did he say and to who, if he felt something unusual, why did he not report to his superiors etc. Not all such questions were asked, but Senator Rector mentioned something about shifty eyes.

A Senate inquiry is supposedly for the purpose of aiding legislation. Why oh why couldn’t this be timed after Police or AMLC have completed their investigations. That certain information or knowledge has now come to light because of this inquiry should not detract from the fact that AFCCU or AMLC could also have arrived at a better understanding of the matter.

The Senate inquiry is put up on You Tube to teach all potential crooks the inner workings of banking, it’s weaknesses, its trap-doors, and how to evade bank and Philippines authority scrutiny.

The world set down to watch silly lines of questioning such as :

  • Senator Sotto : What does SWIFT stand for? (meaning I never do my homework).
  • Senator Enrile : Do you know who are the hackers? You are investigating, don’t you want to know? (AMLC atty was dumbfounded for a few seconds and who could blame her).
  • Many others : Questions that lead to nowhere.
  • And for a few minutes there was Sen Enrile trying to politicize the matter of who left out the casinos in the AMLA.

I am encouraged by the younger senators Aquino and Angara. Their questions are focused that led to desired objectives. It’s irritating to see senators pop in occasionally instead of committing full time like some others. Bets are on as to whether Senator Ejercito will attend again now that he has attained fame in the Panama Papers.

I give a high score to the RCBC Atty Marcel Estavillo for her absolutely concise responses and contribution which were well articulated. There was an excellent discussion on the problems of banks being put on notice in a stop payment request, something that I touched on in the first article.

 

Other observations

1. The greatest looser is Lorenzo Tan, RCBC President. Deguito’s unverified and unsubstantiated comment of her misplaced trust in the CEO unfairly paints him as a suspect at this stage. He fumbled at several questions and was unable to explain some RCBC processes. In fact, he didn’t even know what SWIFT stands for. All these unfairly reflects his standing in an uncomplimentary way. The fact is that top brass often do not know operations in detail and there is nothing wrong in that. Their responsibility is in the big picture, not tiny details. Often, top managers parachuted into their positions either on the basis of connection or academic brilliance do not know the details. In banking, Operations head often rise from the ranks because a wide and in=depth knowledge of so many aspects of the organization is critical to function effectively.

2. As a paying banker, the FEDS owe no responsibility to BCB on whether the payment is correct. They only concern themselves if they are authentic, which as far as SWIFT messages were concerned, they were. When they felt something was wrong, FEDS suspended payment and requested BCB for various additional details. I hope bankers here have taken note and passed on the lessons to their staff. What the FEDS did was anti-money laundering gear kicking in.

3. All the $850mm blocked by the Feds were destined for RCBC for the same 4 fictitious beneficiaries. That is good news in that there is no industry problem. The cancer is isolated at RCBC.

4. It boggles the imagination to think that almost $1 billion of funds was planned to come in and out of RCBC in one day. How could they shield a foreign exchange conversion of that magnitude? The Philippines daily peso/US$ FX volume is only about US$650mm. However, one underestimates the conspirators’ intelligence at one’s peril. One thing is for sure, the involvement of higher level management across several banking depts is a certainty.

5. The question of Philrem. From day one, I have seen Philrem’s role as dubious. It is not even a money changer, but a pure remittance play. Even though banks are big institutions, they deal with money changers fairly regularly. Banks carry very little foreign cash, so on the occasion when the need arises, they deal with money changers as an intermediary. In the case of Inward Remittances, there is absolutely no necessity for RCBC to deal with a third party remittance company. Only Senator Angara questioned this redundancy of Philrem.

What then was the role of Philrem? It was simply to take out the funds from RCBC quickly, arrange for the conversion to pesos, and obfuscate the delivery to final beneficiaries by layering. Smart as they are, Philrem’s grave error was to go back to RCBC to do the FX thereby creating an additional money trail. That demonstrates Philrem’s lack of capacity to convert the large sum of US$ currency outside of the banking system because they are not money changers.

RCBC-cash.jpgPhilrem declared in the first inquiry they converted US$63mm to peso and remitted Php 1,473mm to Solaire, Php 1,000mm to Eastern Hawaii, and handed to Weikang Xu in cash Php 0.6mm + US$18mm. If this is correct, they handed over US$ 63mm (US$81-US$18) in peso equivalent of Php3.073mm. That would mean they converted the US$63mm at a rate of 48.8 which means they would have lost their pants as market rate is about 46.2. Their loss would be Php 308mm, but Philrem said their profit was Php 10 mm which they are prepared to return to Bangladesh. The mathematics do not add up.

Solaire said they received Php 1.365mm and Wong confirmed Eastern Hawaii received Php 1,000mm and he (not Weikang Xu) received cash Php 0.4 mm and US$5mm. That makes a total of Php 2,765mm converted from the US$63mm. The rate would have been about 43.9 compared to market rate of 46.2 which means Philrem made a whopping profit of Php 146mm. This is a more believable accounting. However, that leaves the question of a missing cash of US$ 13mm (US$18 mm – US$ 5mm) that Philrem handed to Xu/Wong.

Philrem and Wong presented different versions of not only quantum of cash handed over but the manner of the delivery. It reminds me of movies where, after a successful robbery, the team members cannot agree on loot sharing and started shooting each other.

For a conspiracy involving almost $1 billion, there must have been an elaborate plan. The unfortunate event that only $81mm came in must have frustrated that plan somewhat, leading to an untidy way of moving the funds out of RCBC and inconsistencies in statements given to investigators.

Rappler report described Philrem’s involvement in other cases of notoriety.

6. On Pagcor : The greatest stink of money laundering legislation is not the exclusion of casinos in the Anti-Money Laundering Act 2001. It is the fact that Pagcor is both the industry regulator and a casino operator. Conflict of interest is written all over and it is so strange that a country with great predisposition to legal correctness never addressed this. When Pagcor lobbied for the exclusion of casinos in AMLA were they doing it as a regulator, or as casino operator?

At the inquiry, a person no less than the chair of Pagcor attempted to deride the perception of ease of money laundering at casinos. He pointed out that in VIP Rooms they use dead chips which cannot be exchanged for cash. But he was not pushed to give a full explanation, which would have exposed his folly and lack of understanding. The world reels in horror to see the chair of a regulating body unable to discern the avenue of money laundering in a casino VIP room.

 

Casino VIP Room Operation

It seems many in the anti-money laundering investigation do not even really understand the operation of the VIP Room of the casinos. It is incumbent upon investigators to understand the game, and to know the roles of all those named in the inquiry (Kim Wong, Eastern Hawaii, Bloomberry, Weikang XU, Gao and Ding). An explanation here is in order so you can see clearly how money can be laundered.

The VIP Room Operation is a business model of casinos in Macau. Casinos have the usual mass market part of the business where customers register-in, buy cash chips and play. When they are done, the customers exchange their cash chips in return for cash. The VIP rooms are dedicated for the high-volume international players and are run more on a personal network basis. Basically you can view a VIP room as a mini casino within a casino, with its own cages and tables, although the game variety will be limited, mostly to just baccarat.

Philippines casinos adapted the Macau model, with variations as to profit sharing and commission schemes, but basically similar. Between Promoter and Casino there is obviously some profit-sharing scheme. Junket Operators earn commissions, with bonuses for high volumes. In Macau, Malaysia, Singapore the commission is in the region of 1% – 1.25%.

VIP does not necessarily mean the Gamblers are all high rollers in the Las Vegas sense. It’s just Promoter-recruited gamblers (through his Junket Operators) gaming in their private room, with a process and systems mechanism that allow for tracking individual Gambler’s game for the purpose of facilitating profit and commission computation.

RCBC-VIP-roomThe parties involved :

  • The Casinos: (Midas Casino, Bloomberry operated Solaire Casino)
  • VIP Room Promoter: (Eastern Hawaii – owned by Kim Wong) This may be a private individual or a corporate entity. The Promoter and Casino has a contractual agreement which spells out various terms and conditions, such as the tenor. The Promoter operates the VIP room and engages their own Junket Operators.
  • Junket Operators: (Gao Shuhua and Ding Zhige) They bring in the customers for their respective Promoters. They target their prospects mostly through network introductions, thereby indirectly doing promotion for the Casinos.
  • Gamblers: (????) They play in the particular VIP room of the Junket Operator who brought them in.

Credits or loans:

The Casinos do not grant loans to players. Promoters maintain certain deposits with the Casinos as security for their normal business operation. Junket Operators offer credits to their Gamblers, hence they are the ones that bear the credit risks.

The dead chips :

These are special chips used as bets only in the VIP Rooms. They cannot be exchanged back for cash. The sole purpose is to enable the casino to track a Gambler’s play. It is also to ensure that Gamblers have played. That is because when these Gamblers come to play, they are feted like VIPS — free accommodation, meals, and maybe some un-mentionables. So they are not going to get freebies on the house without playing.

How the game is played:

  • Obtaining the dead chips:
    • Casino loans dead chips to Promoter. Promoter loans the chips to their Junket Operators. Junket Operators loan chips to their Gamblers.
    • When big games are played, most likely the dead chips are sold COD.
  • Playing the game:
    • The game is played between the Gambler and the Casino. All bets are placed in dead chips. If the Casino wins the round, it collects the dead chips. If the Gambler wins, he retains the dead chips that were placed as bets, and the Casino pays his winnings in cash chips. So it is a process by which all the dead chips end up with the Casino, and the Player accumulates cash chips. The cash chips cannot be used as bets.
    • All the dead chips that the Casino wins back from the Player are said to have been “played”. The Junket operator commission is based on these “played” chips.
  • “Dealing” or “Rolling” by Junket Operator:
    • During the game, the Gambler will find his Junket Operator often by his side, like a good pal. Actually, his job is to encourage the Gambler to play and continually roll his chips. As the Gambler builds up his cash chips and his dead chips diminish, his Junket Operator will encourage him to exchange his cash chips for more dead chips to play. If he has no more dead chips and no cash chips, the Junket Operator is more than willing to loan him more dead chips.
  • Paying for the dead chips:
    • At the end of the session, the Gambler exchanges the cash chips for cash (or cheque if it’s a large amount), pays his Junket operator for the dead chips. Junket Operator pays Promoter for the dead chips. Promoter in turn pays the Casino for the dead chips.

All games are statistically stacked in favor of the Casino, so more often than not, the Gambler makes a loss and creates a debt to his Junket Operator. He goes licking his wounds in the free hotel room, orders his free meal, have a free massage (all on the Casino)…. later on he strategizes how to explain to the wife for the losses.

 

Money laundering at the casino VIP Room

So how is money laundered? Dirty money is brought in to pay for the dead chips. These are money that you cannot explain to the bank when you deposit them, such as proceeds from drug sales. In the casino, the money launderer uses the dirty money to buy dead chips, which are all “played”, and he ends up with lots of cash chips. He exchanges all the cash chips for a cheque from the Casino, then goes to the bank to deposit as gaming wins. For larger sums, he probably has the casino wire transfer for the money to a foreign account. Obviously, money launderers expect heavy losses in their casino games, such is the cost for cleansing their money.

 

Where is Bangladesh Central Bank’s money?

According to Solaire, Philrem remitted Php 1,365mm to their bank a/c for the a/c of 2 Junket Operators the names of which they refuse to divulge for client confidentiality. Php 107.8mm of this is left. The rest have been ‘played’..

Kim Wong said the Php 1,000mm remitted to Eastern Haiwaii’s bank a/c and Php 400,000 and US$5mm cash he received, came from 2 Junket Operators (Ding Zhige and Gao Shuhua). Of this sum, Php 450 mm was loan repayment by Gao to him and there is a balance of US$4.63mm left at Eastern Hawaii. The rest has been “played”.

Philrem says they hold Php 10mm as their profit for their remittance services.

By my account, about Php 2,260mm dead chips were played. How much cash chips did the Gamblers win? Who were the Gamblers and how did they encash the cash chips — by cash, cheques or wire transfer? The figures are unclear at the moment. Chances are the money has been wire-transfered out to Hong Kong long ago. It is not likely to be in China because of restrictions of movement of capital there. Very unfortunately, with all these delays in the investigation, the money transfers would have been layered beyond recognition and most probably into the final stage of money laundering  — re-institution into normal economic activity. Bangladesh ambassador said he had high hopes of early recovery of the money from Philippines. Sorry to disappoint.

To summarise, BCB’s US$81mm can be accounted for as follows :-

  1. Php 450mm used to repay loan to Kim Wong
  2. Php 10mm FX profits retained by Philrem (according to them)
  3. Php 107.8mm balance in deposit money at Solaire Casino
  4. US$4.63mm balance deposit money at Eastern Hawaii (Kim Wong)
  5. Php ??? share of net profits of Midas Casino
  6. Php ??? share of net profits of Eastern Hawaii
  7. Php ??? net profits of Solaire Casino
  8. Php ??? commissions to Junket Operators
  9. Php ??? gaming tax paid to government
  10. Php ??? cash chips won by Gamblers (probably ended up in Hongkong)
  11. US$ 13mm missing (discrepancy between Philrem and Wong’s accounting for cash handed over).
  12. Php 136mm suspected foreign exchange earned by Philrem (Php146 – Php10 declared in (2))

Items (5) to (10) figures can be provided by the casinos. Dis-regarding the overheads charged in arriving at the casinos’ net profits (remember the Gambler’s free massage etc?) and give and take 5% error, that would probably be where all those money went into.

If you believe the Php 450mm was for loan repayment to Kim Wong, you must most likely have been born yesterday. I contend that items (1), (2), (11) and (12) are now the subject of great intense squabbling. Local co-conspirators now battle it out for a share of the loot, but after accounting for the payolas or payoffs for a band of fringe actors playing out the sub-plot scripts planting innuendos — I saw her there, she offered me millions, he was with them, he know him — so many sub-plots to unravel.

Adding items (1), (2), (11) and (12) the total is roughly 25% of the US$81mm. This is an interesting number. The often touted going rate for money laundering is about 30%. Senator Osmena in fact also mentioned this figure.

 

A China story

Could the release of the RCBC funds be stopped had it occurred in another country? Yes I believe so. Probably not all but a substantial part of it. Commenter Joe Can contributed a story of an illegal funds transfer by Mattell from Los Angeles USA to a bank in China was frustrated by Chinese police dashing to the bank on the basis of what? – an FBI request.  You can argue all the legalities, the end result was Mattel got their money back. That’s what mattered.

 

Comments
80 Responses to “RCBC Senate Inquiry: “Mr Senators, I can account for all the US$81mm””
    • chempo says:

      Thanks Irineo
      Hindi ko maintindihan Filipino, but I can see Cayetano surprisingly coming on strong against BB.

      • BFD says:

        Since you’ve brought this up, look and see what Leni did during the question hour, Yes or No, Have you engaged in any corruption? Tada, and Leni’s answer is pointing to Bongbong Marcos. This woman got balls.

  1. karlgarcia says:

    No laws can be legislated and they will never pin down RCBC or there goes banking industry.
    The good result is a fraction of the money will be returned.Small change.

    • chempo says:

      Deguita will most likely be the only one left hanging on the laundry pole. Other RCBC possibilities depends on whether Deguita has any evidence, but I doubt it. If she did’nt take a single peso as she mentioned, then she has been absolutely stupid. I had a friend who is a chartered accountant (that’s a big title in British Commonwealth countries) who was once asked to approve an inventory valuation of an annual stock count which he refused because it was way off the mark. He simply resigned because he could not go along with corporate big wigs on that course of action. He said he was’nt going to smear his accountancy academia on a/c of company shenanigans.

      As for the other perpetrators, nobody’s going to jail. Guys who acted on the funds are all Junket Operators. It’s their clients money, how were they to know where it came from. As for Gamblers — casinos will check, only to find registered names using fake passports.

      • Bill in Oz says:

        Chempo in Oz an incident like this would have the Banking Prudential Regulator involved. A bank’s license to operate could be challanged and cancelled. Are there ways that this could happen in the Philippines ? RCBC has been a party to massive theft and not cooperated with the initial request to stop payment. That indicates that RCBC staff were involved in the theft. And that indicates corporate incompetance because they employed staff willing to cooperate with the theft….

        Sucha step would restore global confidence n the Philippines banking system…( maybe ? )

        • chempo says:

          I very much doubt it.
          I know in the US they would be facing punitive fines of hundreds of millions.
          The last incident I know of — they closed down Banco Filipino due to bad management but nobody was punished. Depositors suffered.

          • Bill in Oz says:

            Then the only alternative is for the international banking system to boycot ( meaning no dealings at all ) RCBC completely. That would put RCBC quickly into the ground.. As for depositors there is some Gov’t deposit guarrantee.

  2. karlgarcia says:

    According to RHiro,the closure of the remittance centers is for cutting costs snd has nothing to do with Bangladesh.
    Methinks because of Bangladesh costs will sky rocket.More remittance shops will close down and black market days are back.

    The fitch ratings was good news or is that a delayed report.

    Speaking of Bangladesh,we are lucky we can speak freely here,in Bangladesh,Al Qaeda hunts bloggers down if they go against Islam.

    • chempo says:

      I think the Italians closed down those Filipino bank operated remittance companies on grounds of consistent failure to comply with reporting requirements. Filipinos have to learn that other people take certain things very seriously.

      I’m not quite sure if remittance cost will sky-rocket because of this Bangladesh episode. But one thing is for sure, OFWs will expect much more inconveniences. On top of that, anybody overseas dealing with Filipinos whether for business or otherwise (a fiancee sending a big chunk of money etc) will be put under the microscope when they wire transfer money in. In other words, you’re not going to like this — Filipino will be tagged, flipped, checked and double-checked. You’re going to feel discrimination.

      • karlgarcia says:

        DOF says more closures are feared.

        http://www.rappler.com/business/industries/209-banking-and-financial-services/127652-dof-remittance-shops-italy-rcbc

        “If foreign banks continue to close down more accounts, the cost of remitting money for our OFWs can double,” he added.”

      • R.Hiro says:

        Filipino banks in Europe are primarily for remittance operations. The requirements for keeping them open had become prohibitively expensive.

        Kindly note that total trade (good and services) + remittances + short term portfolio investments would have provided a cover for a well organized criminal heist of one billion.

        But the criminals did not paper over the transfer properly. I would question the New York bank also on the fact that these funds are with the Public Sector Department of these banks. The word public sector says it all. It did raise suspicions finally for the larger transfers to four individual retail bank accounts. The volumes of monies moving out and in the Fed District Banks in NY is humongous.

        The gatekeeper at the RCBC main branch did put a hold to the transfer to the branch on Feb 5. They did call the branch and spoke with the manager who gave them her assurance that all was well and to proceed to transfer all funds to the branch accounts. They did. $81 million from public sector to retail banking department had raised questions at RCBC then. RCBC also has a Wealth Management /Private Banking Department which may or may not be attached to their Corporate Banking Unit. Hence the questions from head office.

        Who would question a valid transfer coursed through Federal Reserve District of New York Banks. However the balance did not go through simply because of the size of the transfer requested to four individual accounts.

        The bank manager did try to get a Chinese businessman to participate in the diversion. It is obvious they needed a account holder whose accounts were normally used for large payments and receipts. Obviously they had to use a poor plan B.

        The question for the authorities really would who among the big money men involved would have known the source of the funds. I think the sloppiness of the diversion shows clearly that the real crooks were not prepared that the heist actually occurring.

        Bank managers are the biggest patsies since it is their job to raise deposits. Unfortunately the guys with the biggest deposits are almost always those that need the special favors.

        It is the nature of the beast.

        A theft of $1 billion could have been papered over with much better preparation.

        An investment fund could have been organized one or two years ago with some seed money and the diversion could have been covered up nicely and cleanly.

        • chempo says:

          “Filipino banks in Europe are primarily for remittance operations”

          I read they are not bank branches but bank owned remittance companies and Italians say they dont comply with reporting requirements. But if they are in fact bank branches, then obviously you are right, cost is a big issue unless they can get enough banking business..
          ———————
          “…who among the big money men involved would have known the source of the funds”

          Actually Kim Wong said he was told by his junket operators they are bringing in the funds (the assumption it’s their customers funds) But the line of questioning never went on to ask how much were you expecting, and Wong is only involved in Hawaii Leisure how does he know anything about Solaire’s side.
          ————————
          “An investment fund could have been organized one or two years ago with some seed money and the diversion could have been covered up nicely and cleanly.”

          I quite agree with you. The offshore tax havens are a better way to go. They should have asked Imee Marcos. The Chinese are not that sophisticated yet.
          —————————-
          “The gatekeeper at the RCBC main branch did put a hold to the transfer to the branch on Feb 5. They did call the branch and spoke with the manager who gave them her assurance that all was well…”

          I’m not quite sure this happened, perhaps I missed this out in tagalog. I remember hearing Atty Marcel and the Ops guy saying it’s normal transactions for them that’s why HO did not stop it. But if they did, well and good. But I still doubt it because if that were so, like you mentioned, the private banking dept sure as hell want to chip in. They will want to know if the bank can get hold of these big value customers.

  3. karlgarcia says:

    If Panama papers are pinning all the oligarchs in Russia and all the people they have dealt with,they should also look at China next,they are the main culprits in the cyber heist.

    Next years ICIJ report will be worth waiting for.
    Bong bong is denying any wrong doing, maybe he already forgotten,the Manotocs are supposedly involved in the Panama papers,but suddenly news about it went pffffft.

  4. karlgarcia says:

    man that Philrem guy Concon Bautista was my Highschool batchmate. He should change his nickname soon.

  5. Bill in Oz says:

    Chempo, the posts are flying thick & fast ! hard to keep up !!

    But I did read your blog late last night. Again thank you. WE are fortunate to have your expertise and gift for exlaining this so clearly.

    Your remarks about Senators will probably be ignored. They want their unwise elderly solonic faces on TV for the voting punters.

    But what other changes in law do you suggest. here in Philippines ?

    By the way the heist from Bangladesh Central Bank is now forgotten in media elsewhere in the world…

    • chempo says:

      Thanks Bill for your kind comments.

      Changes in other law — haha Bill that’s a sweeping statement. Hav’nt thought of that. But I would like to look into the secrecy laws a bit more closely.

      Bangladesh quiet in media elsewhere — they are keeping a tight lid on the forensic investigation, as well they should. Alas $81mm is peanuts, if it’s $1 billion would probably have been different.

  6. VSB says:

    All I can say is half the people there do not belong in a Senate hearing but in jail.. Philrem traces its history and capital to the favored contractor of – yes – you guessed it right- Binay! then you have this Triad member who found refuge in the arms of Ping and Fred Lim name Kim Wong- instead of treating him like a hero for “returning” the money- this notorious underworld figure should be locked up and deported to China where he has to pay for the government issued bullet that will be used to execute him- entertaining to watch these people routinely perjure themselves but then makes you want to cry when you realize the degree of Impunity these big time criminals enjoy in Las Islas Filipinas…

  7. NHerrera says:

    To me the most important message I get from chempo’s blog — current and the previous one taken together — is the negative consequences in its wake. The alleviation of these consequences is the crux. The Filipinos can do well to start the essential steps with doing right in May 9.

  8. chempo says:

    Interestingly, I was doing another bit of mathematics.

    The total of the loans to Wong Php450mm, + suspected FX earnings of Philrem Php 146mmm + the missing US$13mm = roughly 25% of $81mm. This is significant because the going rate for money laundering has often been touted as 30%. Even Sen Osmena mentioned this rate.

    I’ll edit the article and insert this poser.

  9. manuelbuencamino says:

    chempo,

    AMLC should run a check on all the transactions that went through Deguito from the time she was a branch manager of East West Bank to her tenure as branch manager of RCBC. This money laundering scam does not appear like a first and one time thing for her. Why would criminals trust her with such a huge transaction if she did not have the “right” credentials?

    She was a “hot” branch manager because of the amount of business she brought to both her banks. She knew how to set-up fake accounts, was familiar with bank procedures on “suspicious” transactions, was discounting checks as a sideline, fished for clients in shady circles.

    This particular transaction could just be the proverbial tip of the iceberg. Money-laundering is common among local banks not necessarily to hide money from criminal activities but also for tax evasion because nobody likes to pay taxes. So when someone makes a sale and declares, let’s say, only 70 or 80 percent of the sale amount, banks will gladly help the tax evader find safe haven for the undeclared amount.

    AMLC should also look into banks that own casinos. or have substantial shares in them, or carry their notes because those are pretty cozy relationships, aren’t they?

    This money laundering scandal is just the tip of the iceberg. It’s a serious problem, maybe that’s why the BSP called all the heads of the big banks for a private meeting. Something has to be done but it has to be done without damaging the banking industry.

    • chempo says:

      We all have lots of misgivings about what’s going on, but you can’t ask for a Herculean clean up of the stables based on suspicion.

      Here’s the thing you need to accept — corruption in Philippines is systemic. It goes into the core of every institution, every economic activity. Based on my personal experiences, and tales I’ve been told, practically each time there is a project or something that needs to be done, the guy in charge is quickly figuring out how he can cut into a deal. He is not thinking in the best interest of his employer, or the govt, or fellow countrymen. What are the benefits derived — kickbacks or get family business involved, EG when DOTC says get rid of Sumitomo, arrange for new MRT maintenance provider — Vitangcol goes out to get his uncle. At my condo — when they replaced the admin manager, the new guy lost no time to change water supplier — now we are paying more from new supplier (guess where the price difference go to).

      How do you change something like this? I have no answers.

      Like Karl said, it’s palm slapping the forehead.

      • manuelbuencamino says:

        chempo,
        Not prescribing a Herculean clean-up of the stables. Just saying that Deguito’s previous transactions in both banks have to be looked into. Secondly, because the senate hearing is in aid of legislation they Senate should look into the links between casinos owned by families who own banks, and banks who own sizable shares in casinos, or extend sizable credit to them

        • chempo says:

          Checking into her clientele base may throw up something, sure I quite agree. Not sure if they can proceed on this from the legal perspective.

          Are there owners of banks who also own casinos? That is strange to me. It’s morally unacceptable in some countries.

    • Adrian says:

      Interesting… Chempo’s first article was mentioned by an INC dissenter’s blog. https://incsilentnomore.wordpress.com/2016/03/27/a-breed-of-extremely-intelligent-criminals/

      I think Mr. Ebanghelista is insinuating that Deguito is an INC. Very suspicious.

  10. Bert says:

    “Then the only alternative is for the international banking system to boycot ( meaning no dealings at all ) RCBC completely. That would put RCBC quickly into the ground.. As for depositors there is some Gov’t deposit guarrantee.”—Bill in Oz

    Good one, Bill, and I totally agree. That will serves the Yuchengcos right for doping my daughter with their Eternal Pension Plan racket that they closed when the plan was due and never pay.

  11. andrewlim8 says:

    @chempo, @Joe

    I bumped into the Bangladeshi ambassador this morning in a Makati coffee shop. Seriously.

    I informed him of this blog and this article, scribbling the link into his calling card, since he didn’t have mobile internet.

    Hope he gets to read it and finds it useful.

    • Joe America says:

      You circulate in fine coffee shops. I’m sure he’ll read it, and I also hope he finds it useful.

    • chempo says:

      Small world Andrew. Bet he looked dejected. Don’t know whether you did him a favour, cos the view here is don’t get hopes too high to get anything back. Perhaps he can get his govt to nudge the govt here….stop this circus, just get us the info of the Gamblers so they can go directly to China for help.

      • Bill in Oz says:

        No Chempo : He should brief his own country’s Central bank on the role that RCBC in the theft….

        The Bangla Desh Central Bank and other national central banks will know how to the squeeze on RCBC….A very simple message “Pay up ! Clean Up or get Fried ! “

        • chempo says:

          Bill, let’s go after the money first. Revenge can come later.

          • Bill in Oz says:

            I’m sure that the Bangla Desh Ambassador will make suggestions to his own government that are the best for Bangla Desh as a sovereign state. As for RCBC….it seems likely that they are unable to see what is in the banks best interests in the short, medium or long term….

            • Bill in Oz says:

              PS How’s the RCBC share price moved recently ?

            • chempo says:

              Bill, read the link that Adrian posted above…the first one. There is a possibility of something even more explosive if the INC whistleblower is right. Hope there’s nothing in that angle.

              • Bill in Oz says:

                Ok Chempo : The INC minister has reprinted your article about the heist in his own blog..But so far that is all….No factual assertions about INC involvemnet that I can see..Or am I missing something here ?

              • chempo says:

                Bill I googled a bit and I notice that article was re-posted in many INC commentary-related blogs. Don’t know why. My apologies to Gian if the article is played into mis-information spreading agenda of others.

  12. josephivo says:

    Just came back from my bank, had to cool down, so I opened Joe’s blog to read something, than a most interesting banking article!

    Why was I so furious? My regular pension transmission from Europe was stopped. A normal transmission takes 1 or 2 days, I thought in these heated times 4 days would be enough so last Friday I went to my regular bank to check. Nothing, only the wrong information that I could consult my Euro-account via e-banking, what is not the case. Today still no money, wanted to see the manager, she was absent so I met a “higher” officer. She found a mail that my account was stopped last Thursday and that the branch manager had to give it free.

    For 5 years I follow the same routine, same e-mail to my Belgian bank with same SWIFT number, account number, branch address… I usual wait until I can transfer a reasonable amount to reduce the transaction costs, so 3 to 4 transactions a year. When did I set up the system with the previous bank manager I had to proof that the money was regular, so I had to submit 3 monthly statements of my Belgian account that clearly stated the transactions from my pension fund. After this RCBC debacle it seems they are addressing the wrong targets. (A few thousand Euro seem much more important than 20 million dollars – again it proofs that most Filipinos have zero understanding of an order of magnitude)

    And as usual, customers without special connections are treated as a burden. On Thursday the branch got the restraining e-mail, they didn’t care to tell me on my Friday visit where I complained that the transfer took longer than normal, they tell on Monday and are so nice to mention that the branch manager was out of office and that I had to come back tomorrow.

    • chempo says:

      I’m sorry you had to endure this Jose. Like I said, it’s not so much higher cost of remittance for OFWs, but the difficulties and hustles you will all now probably have to face. Once again, I’m spot on. I understand this kind of stuff.

    • Joe America says:

      ‘What’s the difference between a dead cat on the motorway and a dead banker on the motorway? There are skidmarks around the cat.”

      A London banker dies in poverty and so his local pub decides to raise funds for his funeral. One day a man walks into the pub and is asked to donate 20p for the fund. “What’s it for?” he asks, and the landlord tells him. So he reaches into his pocket, hands him a £5 note and says, “Here, go and bury 25 of them.”

      What’s the problem with banker jokes? Bankers don’t think they’re funny, normal people don’t think they’re jokes.

    • josephivo says:

      Got my money.

      Same big problem. My last Christian name was spelled completely by the Belgian bank but BDO has only space for 18 characters for the first name(s), so they abbreviated my fourth Cristian name from Maria to M. (Same happened two years ago for a visa transfer to my new passport, then I needed an affidavit of a shaggy notary in Tondo to proof that me was me.) This time the BDO treasury couldn’t take the risk anymore, so the branch manager had to take full responsibility to assure that I am who I said I am. Just imagine the risk that tomorrow someone with the same account numbers, the same addresses, the same kind of transactions since years, the same passport with the same fingerprints, born in the same place at the same date but with the only difference that his last Christian name is Maria instead of M.! And you dare to talk about a futility as 81 million dollars transferred to 4 sleeping accounts?

      (For Irineo: my mother is Dutch and in the old days in Holland you had to pay extra for every additional Cristian name. So the Protestants, being very frugal, had only one first name. Catholics however believed that every extra name gave you the protection of an extra Saint, so they gave as many as they could afford and most also have Maria at the end, getting Her support considered invaluable.)

  13. josephivo says:

    Order of magnitude.

    In a previous life l worked briefly for a bank that had taken over the management from a contractor after a major corruption case (a German / Belgian consortium with the Berliner Bank and a Belgian bank as guarantors). $6 million kickback money had left Belgium on a private plane and the Saudis complained that it never arrived. The books of the huge project, 2 military bases, were full of abnormalities, to set some priorities we concentrated first on “home-runs”, those who might have stolen enough money to live comfortable for the rest of their life. (P.S.: Ireneo, some senators from the Berlin senate were involved and therefore in 1981 the SPD lost its majority what led to a CDU major.)

    Here in the hearing in the same sentence people talk about Php 20,000 and 10 million dollar. If you can survive on PHP 1,000,000 a year and intend to live 40 more years, then Php 20,000 is sufficient to live 1 week and 10 million dollar is enough for more than 10 “home-runs”.

    Who will have made a home-run on the money laundering case? I think that the negotiations are still going on who hides what and how to share.

  14. Bill in Oz says:

    @Chempo..Re the INC repostings, it could be genuine interest in your article ..But there is nothing I can see which pints the finger at them. ( yet ) But setting trackers on wild goose chases is a way of confusing the pursuit.. This could be what is happening…

    • chempo says:

      You are probably right. Anyway, I’m not interested in all these subplots of detractions. I know Philippines criminals are experts in throwing all these red herrings.

      • Bill in Oz says:

        Niether am I Chempo..Your effort and energy are far better employed in what you are doing to enlighten us here on this matter. .Again thank you.

  15. josephivo says:

    “In aid of legislation.”

    Give me a break. Why do the senators need an inquiry with outsiders when they have some of the world class elite between them? Marcos, Enrile are top or Nancy with some help of her father, each of them knowing much more about money laundering than all these witnesses together. Also some other senators are not all that green, a Drillon, Osmea, Villar or JV Ejercito must have some workable knowledge, I guess. Or they could call in Bong Revilla or Jinggoy Estrada to plug some more loopholes in the legislation. During the hearings they must have been amused with the naivety of some of the resource people and some on their younger colleagues.

  16. Last week, over $120 million in bank notes went missing from the Bank of Tianjin..

    http://www.businessinsider.de/bank-of-tianjin-missing-bank-notes-2016-4

Trackbacks
Check out what others are saying...
  1. […] Stampa “chempo”, pseudonimo di un analista del sistema bancario internazionale che ha scritto alcuni dei post più informati e dettagliati sul caso Bangladesh-Filippine. «Se il sistema di pagamento di una […]



Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s