BIR: Philrem not paying correct taxes

MANILA, Philippines – The remittance company embroiled in the $81-million money laundering case has not been paying the correct taxes for years, Bureau of Internal Revenue (BIR) Commissioner Kim Henares said yesterday.

At the Senate Blue Ribbon committee hearing yesterday where she was a resource person, Henares said Philrem has not been registered as a remittance firm since 2005 and thus has not been paying the right taxes.

“We looked at the registration of Philrem with us. I think there’s something wrong with their registration because their registration with us is as other land transportation transaction and not as money changer and remittance company,” she said in reply to a query from Sen. Vicente Sotto III.

She pointed out that Philrem last amended its Articles of Incorporation with the Securities and Exchange Commission (SEC) in 2005 but did not update its registration with the BIR.

This means, she said, Philrem should be classified as a non-bank intermediary and should therefore pay the five percent gross receipts tax (GRT) instead of the value added tax (VAT).

GRT should be paid on top of the corporate income tax of 32 percent.

The BIR chief also explained the issuance of acknowledgement receipt by Philrem to Chinese high roller Weikang Xu was a violation of the National Internal Revenue Code (NIRC) since the receipt it issued was not registered with the tax agency.

“Philrem’s issuance of receipt is a clear violation of the regulation. It is not a legitimate and right receipt,” Henares said.

Asked by Sotto how much taxes Philrem had paid, she said it was “much much less than six figures.” 

Philrem is at the center of the probe on the $81-million bank heist as it handled the conversion of the money allegedly stolen by hackers from the accounts of the Bangladesh Bank in the Federal Reserve Bank of New York. The money was coursed through the Rizal Commercial Banking Corp. (RCBC) before ending up in casinos.

The amount stolen from Bangladesh Bank was converted into pesos by Philrem and delivered to Xu and junket operator Kim Wong.

Henares told reporters after the hearing the BIR would look into the liability of Philrem.

“I’m not saying that but we are looking into it because saying we are going to file a tax evasion case would mean we are already making a judgment,” she said.

Philrem president Salud Bautista said the company has been paying the correct taxes as a VAT registered company.

Sen. Serge Osmeña III asked Bautista about the financial statements submitted by Philrem to the SEC over the past years.

Senators also chided Bautista for apparently keeping Philrem messenger Mark Palmares from attending the Senate investigation. Bautista claimed Palmares was sick.

The Senate panel wants to know from Palmares himself if he saw Xu when he delivered cash to him at the Solaire casino.

Sen. Paolo Benigno Aquino IV recommended issuing a subpoena to Palmares to compel him to attend the next committee hearing.

Ex-bosses blamed

Dismissed RCBC branch manager Maia Santos-Deguito, for her part, told the committee she tried to stop the release of the $81 million but failed because of the lack of cooperation from her superiors.

She claimed the funds were still with RCBC as late as Feb. 9.

Based on her recollection, Deguito said the funds were credited to her branch in the afternoon of Feb. 5.

As soon as the funds started coming in, Deguito said she asked the branch’s customer relations officer, Angela Torres, to get in touch with RCBC’s settlements department to ask for documents to support the remittances, specifically the so-called MT103 SWIFT (Society for Worldwide Interbank Financial Telecommunication) messages accompanying the transfers.

She explained the MT103 contains all the information about the transfer such as the origin, amount, beneficiary and the purpose of transfer. She said the settlements department replied via email before 6 p.m. on Feb. 5.

That same night, she said she got a call from one of her bosses asking for information about the accounts.

Deguito told her boss that the accounts were opened in May 2015 and that she was waiting for a huge volume of funds to go to her branch.

RCBC’s district head Nestor Padilla then called her up to ask if she could put the funds on hold.

Later, regional sales director Brigitte Capiña informed Deguito there should be no reason to hold the funds because these were “cleared funds.” 

A few hours after the funds were transferred, Deguito said a messenger from Kim Wong arrived at her branch with withdrawal forms and instructions on what to do with the funds.

Deguito said the instructions were for the conversion of the first tranche of funds to dollars, which would be remitted to Bloomberry Resorts Corp., the operator of the Solaire casino, and the Eastern Hawaii Leisure Co. Ltd., which operates a casino complex in the Cagayan Economic Freeport Zone.

It was only on Feb. 9 that the branch received an email from the settlements department regarding the recall of funds.

“I told Capiña that I had a problem, there was a recall of funds emailed but I could not recall anything from the four beneficiaries that were credited, but I know where the funds still are, with William Go and some of which were still with Philrem. I was hoping they could still do something about it. The money was still there,” Deguito said.

Bangladesh’s problem

At this point, Capiña handed the phone over to RCBC’s treasury head Raul Tan who, she said, told her “Hindi na natin problema yan, problema ng Bangladesh yan (It’s not our problem, it’s Bangladesh’s problem).”

RCBC, said its legal and regulatory affairs department head Ma. Celia Fernandez-Estavillo, received a total of four requests from the Bank of Bangladesh to freeze the accounts containing the funds.

Estavillo said that there were a total of 790 messages from SWIFT received on Feb. 9, but none of those from the Bank of Bangladesh were considered priority.

Based on the SWIFT system, Estavillo explained that what RCBC received from the Bank of Bangladesh were MT999 messages or unauthenticated free format messages. These messages were comparable to plain chats, she said.

In the message, Estavillo said the Bank of Bangladesh informed RCBC “this is a doubtful transaction” and “you are requested to stop the payment and if you already made the payment, then freeze the account of the beneficiary for proper investigation. We think this is contradictory to the Anti-Money Laundering Law.”

What would have prompted immediate action on the part of RCBC were MT192 SWIFT messages or a formal request for cancellation or stop payment, she said.

At the time, Estavillo said that there was no way for RCBC to know that it was the central bank of Bangladesh that was making the request in the MT999 messages.

Estavillo claimed Deguito “rushed to expedite the withdrawals” even after she received the first message from the Bank of Bangladesh.

Estavillo said that during the end of day audit by the operations group of RCBC last Feb. 5, they saw that the amounts were rather large and proceeded to place the accounts on hold. But Deguito reportedly vouched for the accounts.

Return the money

RCBC president on leave Lorenzo Tan said the bank is willing to return the balance of the missing amount to the Bangladesh Bank if found liable in the money laundering scandal.

“If we are found liable, I would recommend to the board to set aside certain money,” Tan said in reply to a query from Sen. Ralph Recto.

Tan said the bank made about P5.2 billion in profits last year while its total assets stood at P534 billion while its capital reached P56 billion as of end 2015.

Bangladesh Ambassador John Gomes said his government is mulling over the filing of charges against individuals involved in the laundering of the $81 million.

Before attending the Senate hearing, Deguito appeared before the Department of Justice (DOJ) to request – through lawyer Ferdinand Topacio – for more time to answer money-laundering charges filed by the AMLC.

Investigating Asstistant State Prosecutor Gilmarie Fe Pacamarra gave her until the next hearing on May 3 to file her answer.

In an interview after the hearing, Topacio questioned the AMLC complaint for singling out his client.

“We are puzzled by this piecemeal filing of AMLC. Why was it only Ms. Deguito who was charged? Where are the other bank officials of RCBC?”

AMLC officials led by deputy director Vencent Salido also attended the hearing as complainants. – Marvin Sy, Edu Punay, Pia Lee-Brago