The Market Monitor Minding the Nation's Business
By Luis Leoncio
A light fine or the equivalent of a slap on the wrist.
This is likely what Rizal Commercial Banking Corp. (RCBC), controlled by the Yuchengco group, will get as penalty for allowing itself to be used as a conduit for the $81 million stolen from the New York deposits of the Bangladesh Bank to get laundered in local casinos.
In the investigation conducted by the Senate Committee of Banks and Financial Institutions on the stolen sovereign funds, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor Espenilla Jr., who is also chairman of the Anti-Money Laundering Council (AMLC), said the maximum penalty that could be imposed on RCBC under the law would be a fine of P30,000 a day since the start of the scandal, or for every transaction involving the laundered funds, depending on what the policymaking Monetary Board decides.
Espenilla said that, based on the BSP charter, the penalties are limited by law, which is even assessed “on a case-by-case basis, depending on the circumstances of the situation.”
Espenilla added, however, that, aside from the fines, the BSP, through the Monetary Board, can also impose “non-monetary sanctions,” which is basically administrative disciplinary actions against the bank or persons found responsible.
Senate President Pro Tempore Ralph Recto said the BSP’s minimal fines are in contrast to penalties imposed on infractions of banks that “run into billions of dollars.”
Espenilla agreed with Recto on the need for Congress to craft in the proposed amendments to the Anti Money Laundering Act (Amla) stiffer fines on banks used in money-laundering activities.
“If the bank’s protocol systems are not proper, then certain penalties should be established—significant. And then, we read all these articles in other jurisdictions, particularly in the United States. Penalties there range all the way up to billions of dollars,” Recto said.
Espenilla said that, just in applying the principle of proportionality in the cyberheist scandal, there is basis for Congress to consider higher penalties on banks.
He added that a pending request under the BSP-charter amendment is also to increase the possible penalties that may be imposed by the BSP.
Recto also explored the possibility of RCBC showing goodwill and reimbursing the Bangladeshi government of the amount that went through the bank’s system.
Recto said RCBC shares in the stock market had taken a hit due to the perceived involvement of the bank, either through negligence or poor monitoring system in the cyberheist.
Four fictitious accounts were opened in RCBC’s Jupiter St. branch in Makati City, where the hacked amounts were deposited before being transferred abroad.
“Prior to this happening, wha t was the market cap of RCBC?” Recto asked RCBC President Lorenzo Tan.
Tan responded that, at the time, the market capitalization of RCBC was about P40 billion to P45 billion, which was about half of the amount last year.
“But you know, the best valuation, (was) last year (when) we brought in Cathay Financial Holdings from Taiwan, the biggest financial services group in Taiwan, and they valued the bank at around P90 billion,” Tan said.
“Assuming, if we try $50 million (of the missing amount, or roughly P2.2 billion), assuming that RCBC gives this to the Bank of Bangladesh, your P5-billion profit, minus P2.2 billion, still gives a P3-billion profit, and then maybe your market price will improve back to what it used to be and you would gain from that, anyway, and maybe your stock price will hit whatever value and you make the protocol corrections and maybe you can gain P90 billion more again,” Recto said.
“(That is) something for the board to consider, I suppose. I don’t know. I am not making a recommendation but it just crossed my mind,” he added.
Tan said that if the bank is found liable, “I would recommend to the board to set aside a certain sum of money.”
Recto also urged Malacañang to lend its hand in returning the “dirty money” to Bangladesh, through the earnings of state firm Philippine Amusement and Gaming Corp. (Pagcor), which is directly under the supervision of the Office of the President, and which derives its income from casinos where the stolen money was supposedly laundered.
“The government should consider returning at least a portion of the P48-million earnings posted by Pagcor during the period when the alleged laundering of the $81 million took place,” Recto said.
Recto broached the idea after being told, during the continuing Senate investigation of the case, that Pagcor could yield its earnings, provided it is given clearance by the Office of the President.
“So you will seek guidance from the Office of the President, if it is possible to return the amount?” Recto asked Pagcor Chief Operating Officer and President Eugene Manalastas.
Manalastas said he and Pagcor officals have been exploring the idea, even long before Recto brought it up, as the same was being asked by Sen. Paolo Benigno “Bam” Aquino IV from them.
“We replied by saying that since we are under the Office of the President, a directive from the President would allow us to return the amount,” Manalastas said.
Recto said Malacañang should approve the request of Pagcor, once it is sought.
Pagcor, as a regulator of casinos operating in the country, receives gross gaming revenue (GGR) of 15 percent, and this represents its share from the winnings and taxes.
After hackers wired the funds in tranches to RCBC bank accounts, huge portions of these were funneled to casinos, where they were later converted into chips for betting in gaming tables.
At present, Pagcor could not determine how much it earned from the laundered chips, as earnings from a particular casino “are intermingled,” Manalastas said in reply to Recto’s query.
Pagcor, however, has given casinos 10 days to submit the amount. A casino representative told senators that they would have to look into player records to determine the amount.
Recto said Pagcor’s actual earnings could be way lower than the ballpark figure of P48 million.
“But even at P48 million, it is still a drop in the bucket of what it earned last year,” he said.
According to Pagcor’s financial statement posted on its website, the government’s third-largest revenue earner raked in P47.21 billion in 2015, up 18 percent from 2014’s gross take of P39.99 billion.
Its gaming income last year, which accounts for more than 90 percent of its annual revenues, grew 45 percent to P43.38 billion from P29.93 billion a year ago.
Pagcor’s earnings from other related services include regulatory fees that it collects from licensed casinos and income share from other gaming activities, such as e-games, commercial bingo and poker.
Pagcor’s license fees range from 5 percent of gross gaming revenues from high roller tables, as well as junket operations, to 15 percent on gross gaming revenues from non-high roller tables, slot machines and electronic gaming machines.