QUESTIONS OF SENATOR RECTO ON THE LOW PENALTIES PAID BY BANKS FOR MONEY LAUNDERING

SEN. RECTO:   I’m sorry, Mr. Chairman, just to follow up on this. Maybe we should ask the BSP governor, or deputy governor in this case. What is the possible penalty of RCBC?  What are the range of penalties?

MR. ESPENILLA:   For what, Mr. Chairman?  For this situation?

SEN. RECTO:  Yes.

MR. ESPENILLA:   Well, there are several things that are applicable here, Mr. Chairman.  With respect to the BSP’s charter, our penalties are limited by law, that is 30,000 maximum per day or per transaction.  So that is assessed on a case-by-case basis, Mr. Chairman, depending on the circumstances of the situation.  

In addition to monetary penalties, the BSP, through the Monetary Board, can also impose what we call “non-monetary sanctions” which is basically administrative disciplinary actions against persons responsible and also on the bank.  But beyond that, under the Anti-Money Laundering Law, there are also provisions of law that may be applicable with respect to monetary penalties, Mr. Chairman.

SEN. RECTO:  So, Mr. Espenilla, with regard to penalties, it is possible that the penalty for RCBC is P30,000.

MR. ESPENILLA:   That’s per day, Mr. Chairman.

SEN. RECTO:  Yes, still, mababa.

MR. ESPENILLA:   Yes.  

SEN. RECTO:  So would you recommend to this Committee that— well, later on, aside from the charter of the BSP but maybe in the AMLA Law, that we increase the penalties also for banks who may have been involved or maybe involved in anti-money laundering. 

MR. ESPENILLA:   Yes, Mr. Chairman.

SEN. RECTO:  I mean, whether or not they knew.  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 US.  Penalties there range all the way up to billions of dollars.  Is that correct?

Could you provide the Committee what other jurisdictions have since we’re talking about following international standards?

MR. ESPENILLA:  Just applying the principle of proportionality here, I think there is certainly basis for the Senate and Congress to consider higher penalties that is currently under the law. Your Honor also mentioned about the pending request under the BSP charter amendment to increase the possible penalties that may be imposable by the BSP, and this is because the economy has grown and the transactions have grown so I think there should be flexibility there so that—

SEN. RECTO:  Could you provide specific recommendations in the future?  You can think about it—what the penalty ranges should be, not only in the BSP charter I suppose but in the AMLA Law itself, hindi ba?

MR. ESPENILLA:   Yes, Mr. Chairman, that could be part of the submissions.

SEN. RECTO:  Something specific.  Because in the past—in all the recommendations of AMLC brought to Congress, mababang-mababa in the past iyong penalties.  

I remember having debates on this before, way back in 2001 insofar as penalties are concerned.  Is that correct?

MR. ESPENILLA:   Yes, Mr. Chairman.

SEN. RECTO:  Mababang-mababa pati iyong recommendations.  But now, you can come back to us and make the specific recommendations.

MR. ESPENILLA:  Yes, Mr. Chairman, we will do that.

ON THE TIMETABLE  OF THE RELEASE OF BANGLADESHI MONEY

SEN. RECTO:  With the permission of the Chair, just another item on civil forfeiture because I think we left that in the last hearing.  Mayroon nang perang inabot sa inyo, nasa AMLC na or safekeeping with the BSP or AMLC.  Okay?  At iyong tanong ngayon ay—apparently, there was an acknowledgment receipt signed also by the ambassador of Bangladesh, if I correctly remember.  Having said that, gaano katagal ba iyong civil forfeiture cases and who should be filing these civil forfeiture cases?

MR. ESPENILLA:   Mr. Chairman, may I defer to the AMLC representative, Director Julie Bacay-Abad?

SEN. RECTO:  So that we can help guide the government of Bangladesh here also.

THE CHAIRMAN:   Yes, MS. ABAD,  Please apprise us of the latest developments with regard to this issue.

MS. ABAD:    Your Honor, to answer the question of Senator Recto as to how do we file petition for civil forfeiture, well, petition for civil forfeiture is filed in the name of the Republic of the Philippines as represented by the AMLC.  As to how long it takes for the court to resolve a petition for civil forfeiture, it depends on the nature of the case filed before the courts.  If it’s just simple, let’s say, just one bank account involved in the petition, that it will not take long before the court can render its judgment.

SEN. RECTO:    No, in this case, the money is already with you.

MS. ABAD:    Yes, Your Honor.

SEN. RECTO:    There is no bank account.  At least with the 4.6 million and the P38 million, possibly the 107 million with Solaire, hindi ba?  If there are no oppositors, how long will that take?

MS. ABAD:    It will not take that long.  Probably, we’ll just comply with the procedural process like the service of notice to the public probably by publication.  And then, of course, if there are other known claimants to the property subject of petition, then we will also serve notices to those known or identified claimants.

SEN. RECTO:   In this case, mayroon bang claimant?

MS. ABAD:    In this case, we have to implead the person who turned over the money because he has an interest in the money that is subject of the forfeiture.  So we have to comply with the procedural requirements, Your Honor, on services of notices.            

SEN. RECTO:  Correct. 

MS. ABAD:    And then, of course, the court would set the case for hearing and we cannot tell when the court would set the case for hearing.  But under the Rules, once the case is submitted for resolution, I mean, after all the parties have been heard and all the required pleadings are submitted and all pieces of evidence have been presented in court, then under the rule on civil forfeiture, the court has 30 days within which to render judgment from the time the case is submitted for resolution, Your Honor.

SEN. RECTO:  So, kung walang oppositor, mabilis lang ito?

MS. ABAD:  If there is no oppositor, Your Honor, the case may be set for ex parte presentation of evidence.  Meaning, the court will allow the AMLC to present its evidence ex-parte, Your Honor.

ON THE POSSIBLE RETURN OF PAGCOR EARNINGS  FROM THE LAUNDERED MONEY

SEN. RECTO:  Yes, thank you for that. To Pagcor, may I ask Pagcor?  Doon sa mga nilaro sa casino, may share ba ang Pagcor doon in so as part of the winnings, taxes and all of that?

MR. MANALASTAS:  Yes, Your Honor, by way of—

SEN. RECTO:  Magkano naman ang kinita ng Pagcor doon sa mga nilaro?

MR. MANALASTAS:  For Midas, 15 percent of the GGR, meaning gross gaming revenue.

SEN. RECTO:  And how much was that?

MR. MANALASTAS:  Our branch manager for Midas may be—

MR. DE GUZMAN.  Sir, the average share of government from Midas’ junket operations is from the average of 35 to P50 million a month, sir.

SEN. RECTO:  No, no.  I am talking about this amount of money that was played in Midas, for example.  How much did you make?

MR. MANALASTAS:  Sir, offhand, we cannot—

SEN. RECTO:  Why not?  You are the regulator… the treasury.

MR. MANALASTAS:  Yes but—

SEN. RECTO:  So, magkano ang kinita?

MR. MANALASTAS:  It’s all intermingled with other winnings of the junket operator.

SEN. RECTO:  Ulitin natin ha.  Magkano ang pumasok sa Midas?  Eastern Hawaii, P1 billion, ‘di ba?  Let’s say iyong 450 hindi nalaro kasi bayad utang iyon, if I’m not mistaken; 550 iyong nilaro.  Magkano ang kinita n’yo doon?

MR. MANALASTAS:  May I refer you to Attorney—Kat, can you give the details, please?

MS. NEPOMUCENO:  Your Honor, actually, for the whole month of February, what is actually declared to us by Eastern Hawaii is the total gross gaming revenue for that whole month.  So, we have to determine which portion of that gross gaming revenue actually pertains to the Gao playing account.

SEN. RECTO:  Until now you have not determined that?

MS. NEPOMUCENO:  Your Honor, we’ve been looking at it for the whole weeks since Senator Bam raised that the last hearing.  And we have to look at the player records.

SEN. RECTO:  So, you have not done that yet?

MS. NEPOMUCENO:  We have done that, Your Honor.

SEN. RECTO:  But you don’t have the answer yet.

MS. NEPOMUCENO:  We don’t have the exact amount, Your Honor, because we don’t want to give you a guess work…

SEN. RECTO:  How long will it take?

MS. NEPOMUCENO:  … so we want to give you the accurate.

SEN. RECTO:  Yes, how long will it take?

MS. NEPOMUCENO:  Your Honor, that is actually the same question that is actually being asked of us by the AMLC.  So, we have asked Pagcor to give us about 10 working days to look at it. 

SEN. RECTO:  Okay.  I have one question.  Why is it—LRWC is a private corporation?

MS. NEPOMUCENO:  It is a publicly listed corporation.

SEN. RECTO:  Publicly listed.  It’s private.  Publicly listed, right?  Okay.  But the regulator here and the operator is Pagcor?

MR. MANALASTAS:  Your Honor, the junket operations are subcontracted to PIKI.

SEN. RECTO:  Who subcontracted it?

MR. MANALASTAS:  Pagcor, sir.

SEN. RECTO:  O, di tama, you are the operator and the regulator.

MR. MANALASTAS:  We operate the regular gaming tables but for the junket tables—

SEN. RECTO:  Yes, but you subcontracted it.  Kayo rin.  Not only that.  You’re not only the operator but the regulator, correct?

MR. MANALASTAS:  Yes, sir.

SEN. RECTO:  And you mean to tell me you don’t know how much you made?  You cannot answer the question.

MR. MANALASTAS:  No, we do.  But right now, with the field in question—

SEN. RECTO:  What is the ballpark figure?  What is that 15 percent?  Because I will ask a follow-up question.  What could that number be?  We will not hold you accountable for that number na specific, iyon na iyong amount na iyon.  What could that ballpark figure be?  If you don’t know how much you’re making, approximately—

MR. MANALASTAS:  Approximately for that month alone, it’s about P48 million.

SEN. RECTO:  So, from this transaction, roughly P48 million.

MR. MANALASTAS:  Yes, Your Honor.

SEN. RECTO:  Okay.  So, what is the disposition of Pagcor here?  Iyan ba posibleng masauli?  I’m just wondering.  Iyan ba posibleng masauli din?  Are you thinking about it or not even thinking about it?

MR. MANALASTAS:  No.  In fact, we were asked by Senator Bam Aquino last hearing and we replied by saying that since we are under the Office of the President, a directive from the President will allow us to return the amount.

SEN. RECTO:  Okay.  So, you will seek guidance from the Office of the President kung posibleng isasauli iyon.

Okay, thank you for that.

Let me continue, with the permission of the chair, you know my questions are really with Philrem as well.  But since they are not here yet and the messenger—because they are key to this as well, ‘no, very important that’s why we asked the messenger to be here too.  But since they are not yet here, maybe I can ask this question to Mr. Kim Wong.

You said in your testimony na kulang pa, may natitirang pera sa Philrem, is that correct?

TO RCBC, ON THE POSSIBLE RETURN BANGLADESH’S FUNDS

SEN. RECTO:  Isang tanong na lang sa RCBC. I know that this is a difficult question to answer but let me lead to that. How much was your profit last year?

MS. FERNANDEZ-ESTAVILLO:  Last year.

SEN. RECTO:  Yeah. Seven billion more or less?

MR. L. TAN:  That’s about 5.2 billion.

SEN. RECTO:  Five point two. So, more or less, you make about five billion a year on the average, ‘no? 

MR. L. TAN:  Yeah, around that—

SEN. RECTO:  And the total assets is about half a trillion?

MR. L. TAN:  We ended 2015 with 534 billion total assets.

SEN. RECTO:  Okay. And the total capital of RCBC is?

MR. L. TAN:  About 56 billion.

SEN. RECTO:  Fifty-six billion. The market cap of RCBC is? 

MR. L. TAN:  Probably around 40 to 45 billion today. I haven’t looked at the stock price today. 

SEN. RECTO:  Okay. But prior to this happening, what was the market cap of RCBC?

MR. L. TAN:  Probably a few billion higher than 40 to 45.

SEN. RECTO:  More or less?

MR. L. TAN:  Probably around 45 billion. But you know, the best valuation, Your Honor, last year we brought in Cathay Financial Holdings from Taiwan, the biggest financial services group in Taiwan and they valued the bank at around P90 billion.

SEN. RECTO:  Ninety billion pesos. And the market cap today or yesterday was what, 42 billion. 

MR. L. TAN:  Around 40 to 45 billion, more or less.

SEN. RECTO:  So, kung valuation-wise, you’re 50 percent less of what it should be?

MR. L. TAN:  Yes, Your Honor.

SEN. RECTO:  So, you have taken a hit because of this issue?

MR. L. TAN:  Well, you can see the fluctuation of the stock—

SEN. RECTO:  So, you’ve lost 40-50 billion on paper?

MR. L. TAN:  Well, it’s not entirely because of this issue, Your Honor. I think the general Philippine stock market corrected after May of the—

SEN. RECTO:  I understand. I understand all of that.

MR. L. TAN:  Yeah. 

SEN. RECTO:  But it’s significant. I mean, kahit papaano natamaan in that sense?

MR. L. TAN:  Yes.

SEN. RECTO:  Now, assuming lang, just to put on record. If we try about $80 million and 30 million masasauli, assuming lang, natira $50 million at roughly P2.2 billion–assuming that the RCBC gives this to the Bank of Bangladesh, your five billion profit minus 2.2, kita pa rin kayo ng three billion? 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 90 billion more again.

I have something for the board to consider, I suppose. I don’t know. I am not making a recommendation but it just crossed my mind.

MR. L. TAN:  Well, you’re correct, Your Honor. I think our business is an actuarial business. Again, we have 16 products or 16 services that we sell to every corporate or consumer/customer. And we either lose money on bad loans, bad trades or operational losses like this one. On the average, we provision one to two billion a year on those types of losses.

SEN. RECTO:  Correct.

MR. L. TAN:  So, if we are found liable, yes, I would recommend to the board to set aside certain sum of money.

SEN. RECTO:  Correct. Hindi ba? 

So, thank you for the very candid response. And I hope you don’t mind me asking that question.

MR. L. TAN:  It’s okay, Your Honor.