AUDIT TO DETECT FRAUD AND CORRUPTION:EVALUATION OF THE FIGHT AGAINST CORRUPTION AND

MONEY LAUNDERING

Atty. ALEXANDER B. JULIANODirector – Fraud Audit Office

Commission on Audit - Philippines

The 10th ASOSAI Research Project

Assessment of Current Situation of Anti-Corruption in the Philippines

The Philippines Anti-corruption Strategy

Stand-alone anti-corruption program or anti-corruption strategy

The Philippines Anti-corruption Strategy

Umbrella document with separate programs for sectors or ministries

Inter-agency Anti-Graft Coordinating Council

The Philippines Anti-corruption Strategy

• Section in another policy document, e.g. national development or investment program• Strategies are embodied in Anti-

corruption Laws• Specific laws, courts, and

prosecutors dedicated to government anti-corruption

CHAPTERS IN THE ANTI-CORRUPTION DOCUMENT

• Background chapters• Level of implementation of previous strategy• Objectives and priority areas• Chapters on prevention and criminalisation /

law-enforcement measures• Public participation/education• Monitoring and assessment mechanism and

criteria

ACTION PLAN

The anti-corruption strategy has an action plan embodied in the Anti-Corruption Laws

ELEMENTS OF THE ANTI-CORRUPTION ACTION PLAN

• General objectives• Specific measures• Specific institutions• Time-frame• Criteria for assessing implementation• Budget specially allocated• Institution responsible

PUBLICATION

The anti-corruption documents and action plans are published

MEASURES EMPLOYED IN FIGHTING CORRUPTION

• Open and transparency in the operation of agencies• Development and implementation of entitlements, norms and

standards• Administrative reform• Development and enforcement of the code of conduct and

the code of professional ethics • Penalty forms to heads of the agencies in case of occurrence

of corruption• Salary payment via bank account• Declaration of assets and income• Regulation of returning gift by the public officials• Whistle blowing and prohibition of acceptance of

gift/donation

ANTI-CORRUPTION AGENCIES

• The Office of the Ombudsman• Department of Justice• The National Bureau of Investigation

• The Commission on Audit

MAIN RESPONSIBILITIES/FUNCTIONS OF THE ACA

• Monitor and evaluate the implementation of the anti-corruption strategy

• Collect, centralize and exploit the denunciations• Conduct investigations • Disseminate knowledge on anti-corruption activities• Raise public awareness about the fight against corruption• Identify the causes of corruption and to propose to the

competent authorities of measures to help eliminate it• Draw a risk map of corruption in the country• Anti-corruption screening of legal acts• Research and analysis on corruption• Keep a database on the statistics regarding cases of corruption

year by years• Research and analysis on conflict of interest in the public

management

RE-EVALUATION OF BODIES/ AREAS/ ACTIVITIES HAVING HIGH RISK OF

CORRUPTION

The ACAs regularly re-evaluate the bodies, areas and activities with high risk of corruption in order to employ appropriate measures to mitigate corruption

The ACAs have a hotline and website in order to facilitate citizens’ complaint on corruption.

CRIMINALIZATION OF DIFFERENT TYPES OF CORRUPTION

• Special Law• Criminal Law

NEED TO ENACT NEW LEGISLATION

• Abuse of position/power• Influence peddling• Kickback• Nepotism• Political dynasty

RANKING OF CORRUPTION MEASURES

1 Preventive policies and measure2 Detective actions3 Punitive measure

LAWS AND REGULATIONS GOVERNING THE FINANCING OF POLITICAL PARTIES

The Omnibus Election Code

The Philippines have laws and regulations governing code of ethics of and declaration of assets by public officials

The Philippines has “accounting and auditing standards” for both public and private sectors

Our public officials have legal obligation to report corruption-related offence

IMPLEMENTATION RATE OF THE RULES/REGULATION IN COMBATING

CORRUPTIONS

Very poor Poor Fair

1 2 1

THE PHILIPPINES HAS RATIFIED UNITED NATIONS CONVENTION AGAINST CORRUPTION (UNCAC)

Memorandum of Implementation signed on June 14, 2013

The Philippines has begun the UNCAC peer review process

The Philippines is a member of anti-corruption conventions, initiatives or international project (OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions; GRECO etc.)

Yes

3

SUCCESS LEVEL OF INTERNATIONAL COOPERATION

ExtraditionMutual legal assistance

Asset recovery

Cooperation with law

enforcement authorities

Cooperation between national

authorities

Moderate Moderate Low High Moderate

EFFECT OF MEDIA IN FIGHTING CORRUPTION

• To some extent, media have helped public to recognize the real situation of corruption, however the provided information are sometimes inaccurate and subjective

SOCIETY’S PARTICIPATION IN TACKLING CORRUPTION

Actively but not effectively

PRESENT LEVEL OF ANTI-CORRUPTION EFFORTS COMPARED TO

PAST YEARS EXPERIENCE

About the same as past years

PARTICIPANTS TO ANTI-CORRUPTION EDUCATIONAL AND TRAINING PROGRAMS

• Public officials• Non-governmental organizations• Businessmen• Media

FACTORS THAT INHIBIT THE RESULT OF THE FIGHT AGAINST CORRUPTION

• Corrupt people are not severely punished

• The collusion between law enforcers and corrupt people

• Authorized officials lack commitment

• Some superiors cover up for their subordinates

• Afraid of retaliation and victimization

• Have not mobilized well people’s and media’s participation

• Lack of competent and experienced staff

• Lack of capacity and financial resources

• Insufficient pay and benefits to government employees

• Public officials lack political will

• Corruption too ingrained in government institution

THE RESULT OF THE CURRENT FIGHT AGAINST CORRUPTION

Have had positive impact

ROLE OF CITIZENS IN FIGHTING CORRUPTION

• The citizens help to promote public sector transparency and accountability

• Complaint system/ Whistle Blower, and Denunciation

Assessment of Current Situation of Anti- Money

Laundering in the Philippines

Money laundering is a criminal offence in the Philippines

LAW GOVERNING ANTI-MONEY LAUNDERING

Republic Act 9160 - Anti-Money Laundering Act of 2001

R.A. 9160 could not cover all money laundering aspects to deal with this phenomenon

RATE OF IMPLEMENTATION OF ANTI-MONEY LAUNDERING LAW

Fair Good

2 2

The Philippines has a national Financial Intelligent Unit (FIU) functioning as national center for the collection, analysis, and dissemination of information regarding potential money laundering offences

The Anti-Money Laundering Council (AMLC) is the

official authority in-charge of anti-money laundering

ANTI-MONEY LAUNDERING MEASURES WHICH HAVE BEEN APPLIED EFFECTIVELY

• Identify customer and update customer information

• Report, provide and save information

• Gather, treat and transform information

• Apply temporary measures to adjudge violations

• Investigation of predicate crimes to money laundering

• Institute civil forfeiture proceedings against proceeds of crime

• Cause the filing of complaints for the prosecution of money laundering offenses

OUR AMLC ENJOYS INDEPENDENCE

• Legal

• Functional

• Financial

• Recruitment of employees

OUR AMLC PERFORMS THE FOLLOWING FUNCTIONS

• Developing policies and improving legislation

• Data collection, analysis and evaluation

• Supervision and coordination

• Investigation of the cases

• Raising awareness in the public

• Carry out researches

• Carrying out examination of the cases

• Requesting any kind of information

• Prosecution of money laundering and related cases

RANK OF THE EFFECTIVENESS OF ANTI-MONEY LAUNDERING MEASURES

1 Preventive policies and measures

2 Detective actions

3 Punitive measure

The citizens may inform (denounce) the country’s AML Board about a suspected case of money laundering via website of the AML Board or via letter

UPDATED RULES AND INFORMATION ABOUT ANTI-

MONEY LAUNDERING

Recent amendment to RA 9160

The AMLC requires all financial institutions to have anti-money laundering (AML) & Know Your Customer (KYC) procedures

FINANCIAL INSTITUTIONS HAVE TO COMPLY WITH LEGAL OBLIGATIONS

CONCERNING ANTI-MONEY LAUNDERING LAW • Internal controls

• record-keeping requirements

• Thorough client identification

• Creating and updating list of red flags

• Prohibition of anonymous account

• Employee training programs

• Independent audit/ compliance function

• Monitoring program

• Policies covering relationship with politically exposed persons

• Policy protecting accounts / relations with shell banks

• Policy of protecting employees

FINANCIAL INSTITUTIONS ARE OBLIGED TO COMPLY WITH LEGAL OBLIGATIONS OR ADMINISTRATIVE POLICIES IN TERMS OF CLIENT DUE DILIGENCE PROCEDURES

Implementation systems for the

identification of its customer

Collecting information and assessing its customer’s AML

policies and practices

Screening its customer’s

information against sanction list

Regular updating and verification / validation of customer’s information

MOST COMMON TYPES OF SUSPICIOUS TRANSACTION REPORTS (STR) FROM FINANCIAL INSTITUTIONS

• Inconsistencies with the financial profile• Financial transactions involving the person(s) considered in

the “high risk” category• Unusually large cash transactions• Suspicious behaviours • Unusual use / exchange of cash • Refusals to show identification• Avoiding reporting obligations• Unusual account activities• Cutting large amount of transaction into pieces• Clear evidence of illegal activities linked with a transfer

FINANCIAL INSTITUTIONS ARE OBLIGED TO COMPLY WITH FATF RECOMMENDATIONS

YesAlthough not a FATF Member, Philippine Laws are substantially compliant with FATF recommendations

Rate of AMLC’s ability to cooperate and exchange financial information at international level

Good Very Good

2 2

There are cooperation agreements or protocols among the local institutions in our country to share financial information and financial transfers and if it’s involved with money laundering

ROLE OF CITIZENS IN FIGHTING MONEY LAUNDERING

The citizens help to promote

public sector transparency

and accountability

Civil society is also

engaged in anti-money laundering

efforts

Complaint system/ Whistle

Blower, and Denunciation

The penalties for money laundering incidents are appropriate

FACTORS THAT INHIBIT THE FIGHT AGAINST MONEY LAUNDERING

• Money laundering criminals are not severely punished

• Limited capacity of staff and resources to handle said cases

• The collusion between enforcement officers and money laundering criminals

• Limitation of citizen’s knowledge about money laundering criminal

• Lack of competent and experienced staff to handle money laundering cases

• Inherent difficulty in detecting and investigating money laundering cases

• Laws protecting the depositors and other privacy issues

PARTICIPANTS TO ANTI-MONEY LAUNDERING EDUCATIONAL AND

TRAINING PROGRAMS Public officials but only few /selected

public officials have been

provided with training

schools General Public

NGOs Financial Institutions (bank etc.)

Business associations and private companies

Controlling systems are the keystone and deterrent for fighting against money laundering

Yes

4

There are high institutions providing training workshops for the employees of controlling agencies about methods to detect money laundering

Yes

4

RESULT OF THE CURRENT FIGHT AGAINST-MONEY LAUNDERING

Have had positive impact