With the continuous increase in the use of digital technology to facilitate financial transactions, Congress has passed Republic Act 12010, otherwise known as the Anti-Financial Account Scamming Act (AFASA).

Based on its provisions, this law aims to strengthen the integrity of the Philippine financial system and to prevent persons from acting as accessories to financial crimes.

There are three important features of the AFASA.

First, the AFASA defines and penalizes money muling activities. Based on Section 4 (a) of the AFASA, money muling is when a person commits any of the following acts to receive or transfer proceeds, which are known to be derived from crimes:

1. Using, borrowing or allowing the use of a Financial Account;

2. Opening a Financial Account under a fictitious name or using the identity or identification documents of another;

3. Buying or renting a Financial Account;

4. Selling or lending a Financial Account; or

5. Recruiting, enlisting, contracting, hiring, utilizing or inducing any person to perform the acts mentioned in items 1 to 4 of this subsection.

By virtue of the above definition, persons engaged in money muling act as accessories to the crime by helping the main perpetrators either hide or dispose of funds originating from criminal acts. In effect, persons involved in anti-money laundering activities may not only be charged under Section 4 (a) of the Anti-Money Laundering Act (AMLA), but also under Section 4 (a) of the AFASA.

Second, the AFASA increased the authority of the Bangko Sentral ng Pilipinas (BSP) to investigate financial accounts that may be involved in suspicious transactions.

Under Section 11 of the AMLA, as amended, the Anti-Money Laundering Committee (AMLC), in partnership with the BSP, may inquire into bank deposits only upon order of a competent court in cases of violation of AMLA or when the examination is made in the course of a periodic or special examination by the BSP. Therefore, it has been standard practice by the BSP to go through strict protocols before inquiring into any bank deposits.

On the other hand, Section 12 of the AFASA provides that the BSP shall have the authority to investigate and inquire into financial accounts which may be involved in the commission of money muling and other prohibited activities. Unlike Section 11 of the AMLA, no strict conditions are required to be met before the BSP investigates financial accounts involved in suspicious transactions. That said, Congress ensured that the BSP, by virtue of the AFASA, is able to immediately conduct its investigation into financial accounts involved in suspicious transactions.

To further strengthen the BSP’s investigative powers, the AFASA expressly provides that bank secrecy laws, particularly Republic Act Nos. 1405, 6426, 8367, and 10173, collectively referred to as “Bank Secrecy Laws,” shall not apply to the BSP’s investigations thereunder.

Nonetheless, Congress ensured to protect the public by limiting the use of the information gathered during the investigations for purposes of enforcement of the AFASA, and in the implementation of relevant provisions of Republic Act No. 11765, otherwise known as the Financial Products and Services Consumer Protection Act.

Third, Section 8 of the AFASA provides for a coordinated verification of a disputed transaction. It states that institutions and account owners involved in disputed transactions may initiate a coordinated verification process whether or not the funds remain in the banking system. Most of the time, financial crimes are committed through a web of several bank accounts with different banking institutions. Thus, allowing a coordinated verification process will help our financial entities determine the money trail quicker.

All in all, the AFASA is a good and timely piece of legislation in light of the recent financial crimes afflicting our nation. It provides the government more power and authority to crack down on suspicious transactions at the earliest opportunity and also emphasizes the fact that any person assisting perpetrators in committing financial crimes will be dealt with in a serious manner.

For more of Dean Nilo Divina’s legal tidbits, please visit www.divinalaw.com. For comments and questions, please send an email to cad@divinalaw.com.