Miriam wants stricter monitoring of politicians’ bank accounts

MANILA, Philippines - Sen. Miriam Defensor-Santiago has filed a measure seeking to mandate banks to practice enhanced due diligence and stricter monitoring of accounts beneficially owned by politically exposed persons.

“Politically exposed persons, or PEPs, in banking parlance, refer to individuals who are, or have been, entrusted with prominent public functions and their family members and close associates,” said Santiago in Senate Bill No. 2438.

Santiago noted that PEPs are prone to conceal and prevent recovery of assets illegally obtained.

Corrupt government officials use their relatives and close associates to act as nominees, dummies or fronts. These dummies then form corporate entities and open bank accounts in their own name. But the corporations and the bank accounts are actually controlled by the corrupt official.

Santiago said that under this arrangement, the government official is the “beneficial owner” of the assets. The beneficial owner is the real person who ultimately owns, controls or benefits from a corporation, trust fund or bank account and the income they generate.

The term “beneficial owner” is used to contrast with the nominee or dummy, who might be registered as the legal owner of an asset without actually possessing the right to enjoy its benefits.

Under Santiago’s bill, PEPs refer to current or former senior officials in the executive, Congress, the judiciary or the military; a senior official of a major political party; a senior executive of a corporation, foundation or entity formed by or for the benefit of any such individual; the spouse, parents, siblings and children of such individual, or the spouse’s parents or siblings; and any individual publicly known, or actually known by the relevant financial institution, to be a close personal or professional associate of a PEP.

Santiago’s bill provides that at account opening, banks should require customers to complete a written and signed declaration identifying themselves, the legal entity for which the person is opening the account, and any beneficial owners associated with the legal entity.

Banks are also required to maintain a system of verifying the true identity of their clients.

In case of corporate clients, banks should have a system to verify their legal existence and organizational structure, as well as the authority and identity of all persons purporting to act on their behalf.

“While some criminals are unlikely to be deterred by the written declaration on beneficial ownership, their family members and close associates will be less inclined to lie to banks if they face individual criminal liability for issuing false statements,” Santiago said.

Under Santiago’s bill, once the beneficial owners of a bank account are identified as politically exposed persons, the bank must continually monitor transactions of the client.

The bank must combine knowledge of the customer profile, source of wealth and source of funds, and all applicable risk factors and evaluate whether the account activity is consistent with these factors.

Santiago has also co-authored an anti-dummy bill with Sen. Jinggoy Estrada. If approved, the bill will amend Republic Act No. 6713 to prevent public officials from placing assets in the name of dummies.

Under the bill, violators will be removed from public office and will forfeit ownership of such assets in favor of dummies. The bill will also bar public officials from acquiring property from their relatives within 20 years from the time they left civil service.

Santiago said the proposed laws are “defense measures against the far-reaching effects of corruption.”