Cyber theft a blow to efforts to lure investors

THE PHILIPPINES’ failure to address loopholes in anti-money laundering safeguards could affect even foreign investments in the infrastructure space, a conduit for which is the Aquino administration’s flagship Public Private Partnership (PPP) program.

PPP Center executive director Andre Palacios said there was concern over how a recent $81-million cross-border money laundering scandal that hit the country could hurt efforts to lure foreign investors.

The scheme involved the theft of funds from Bangladesh’s central bank, which passed through the Philippine financial system through Rizal Commercial Banking Corp. (RCBC) and was then laundered in local casinos.

The worries come as the program pushes a pipeline of 37 deals worth P1.31 trillion to build or modernize crucial airports, trains and expressways, apart from power, water and social infrastructure projects.

“There will be some negative implications on investor interest,” Palacios said.

He clarified that the PPP Center was not directly involved in the matter and would not take an active lead in pushing for reforms in the law.

One lawmaker already warned that a blacklisting by Paris-based Financial Action Task Force (FATF) places the country’s financial sector and credit ratings at risk. Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said he was open to easing the bank secrecy law that was perceived to be hampering a probe launched by the Senate.

The cyber theft prompted the resignation of the central bank governor of Bangladesh and has placed the spotlight on the Philippines as a weak spot in the global battle to curb money laundering activities. Casinos in the Philippines are not covered by the Anti-Money Laundering Law.

Palacios said the PPP Center would do its part in explaining and allaying investor fears should the issue be raised in investment briefings and roadshows.

For his part, Astro del Castillo, First Grade Finance Inc. managing director, downplayed risks that the country would be demoted to the “gray” list of the FATF as both the government and private sector were cooperating to “plug the leaks.”

But he noted that risks remained as a probe was still ongoing and the “real picture” has yet to emerge.

Luring foreign investors with deep pockets and technological expertise is a key part of sustaining the country’s PPP program, whose projects continue to grow larger in scale and complexity.

Local conglomerates in the PPP space have already tapped global railway and airport companies in previous and ongoing bids.

In 2014, the world’s biggest airport operators joined the auction for the Mactan Cebu International Airport contract, which was eventually bagged by Megawide Construction Corp. and India’s GMR Infrastructure.

source: business.inquirer.net

Bangladesh heist exposes Philippine dirty money secrets

When mystery hackers launched a stunning raid on Bangladesh’s foreign reserves, a plot worthy of a John le Carre spy novel was sparked in the Philippines, exposing the Southeast Asian 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, 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 rules altogether aimed at preventing money laundering.

“The Philippines is very attractive (for dirty money) because our laws have gaping holes. It’s easy to launder money here,” Senator Sergio Osmeña, who is pushing for stronger anti-money laundering laws, told AFP.

Still, if the thieves were to get away with their audacious 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,” the manager, Maia Deguito, 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 cyber-heist, 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 this 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.

The Senate inquiry and another probe by the Philippines’ Anti-Money Laundering Council have hit several major hurdles, including a security camera at the bank not working when the money was shifted.

Accusations and counter-accusations between Deguito and RCBC management have further confused investigators.

‘Money trail’

A final roadblock has emerged at the casinos, with the money apparently vanishing in mountains of gambling chips and mysterious middlemen.

“Our money trail ended at the casinos,” Julia Abad, deputy director of the anti-money laundering council, told senators Tuesday.

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 businessmen, 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.

Senator Osmeña said the case was likely just the tip of the iceberg.

“This could have happened hundreds of times already,” he said.

“We discovered this one only because someone complained. But normally, if a drug dealer from Burma (Myanmar) or China would send money here, no one would complain.”

source: globalnation.inquirer.net

Bangladesh central bank chief forced to resign over $81-M heist

DHAKA—Bangladesh’s central bank chief has resigned after hackers stole $81 million from the nation’s foreign reserves in one of the biggest bank heists in history, the finance minister announced on Tuesday.

The audacious cybertheft has embarrassed the Bangladesh government, triggered outrage in the impoverished country and raised alarm over the security of the country’s foreign exchange reserves of over $27 billion.

On Tuesday, the finance minister said he had asked Atiur Rahman to resign following revelations that the governor of Bangladesh Bank—the country’s central bank—had failed to inform authorities of the theft for a month.

“He called me Tuesday and I’ve asked him to resign. And he has resigned today,” Finance Minister A.M.A. Muhith told Agence France-Presse (AFP), adding that the government has ordered an investigation of the heist.

On Feb. 5, hackers stole $81 million from a current account that Bangladesh Bank held with the Federal Reserve Bank of New York and transferred the cash electronically to accounts in the Philippines.

The hackers attempted to steal almost $1 billion, but they were prevented from taking more because of a basic typing error, the Bangladesh Bank’s deputy governor told AFP last week.

Before his resignation, an emotional Rahman said he was alarmed by the hack, but he did not comment on why he took so long to report the missing money.

“This event was almost like a militant attack, almost like an earthquake. I did not realize how it happened, from where it originated and who had done it,” he said, choking back tears.

“When I was informed I was so puzzled. Fearing that it might destroy our economy, I quickly took opinion of the experts. I brought them to the country from abroad and ensured security so that it did not occur again,” he added.

Due to retire

Rahman, a 64-year-old economist and former university professor, was appointed governor of Bangladesh Bank in 2009 and had been due to retire in August.

As details of the scandal emerged last week, he flew to India to attend an International Monetary Fund meeting, leaving junior officials scrambling to explain how the hackers managed to take such large sums from Bangladesh Bank.

Some of the funds have been recovered and Philippine authorities have frozen the stolen money following court orders. Bangladesh Bank suspects the hackers were Chinese.

The thieves, who bombarded the New York bank with dozens of transfer requests, attempted to steal a further $850 million, but the bank’s security systems and typing errors in some requests prevented the full theft.

The hack took place on a Friday, when Bangladesh Bank is closed, while the Federal Reserve Bank in New York is closed on Saturday and Sunday.

The US reserve bank, which manages the Bangladesh Bank reserve account, has denied its own systems were breached.

The $81 million was transferred to four accounts at Rizal Commercial Banking Corp. (RCBC) in the Philippines—and were then transferred to fictitious bank account.

The money was then transferred to Philippine casinos, Julia Bacay-Abad of the Philippine Anti-Money Laundering Council told a Senate hearing on Tuesday.

The RCBC account has been frozen.

Mystified by attack

Rahman launched a series of populist policies to take bank services to the doorstep of millions of rural poor in Bangladesh.

But his tenure was marred by a spate of high-profile banking scams in which state-owned banks lost hundreds of millions of dollars in bad loans.

On Tuesday, Rahman said authorities were still mystified by the attack as he defended his decision to delay informing the government.

He added that making the news public earlier would have risked tipping off the hackers.

“I don’t deny that I took time [to inform the finance minister]. It was a cyberattack and even today we don’t know from where it originated,” he said. AFP

source: globalnation.inquirer.net